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Clause 2 - Personal allowance for 2013-14 for those born after 5 April 1948

Part of Finance (No. 2) Bill – in a Public Bill Committee at 2:15 pm on 23rd April 2013.

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Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East 2:15 pm, 23rd April 2013

I thank my hon. Friend for his comments, which are helpful in trying to make the assessment we want the Government to make. If we are wrong and the Government are right, any review would presumably show that the overall impact of their Budget measures on the living standards of basic rate taxpayers was positive. They will have a good news story to tell if they are correct, so their resistance to a review is not clear. It may be because they suspect that the studies that have been done by the IFS and others are right, and that basic rate taxpayers, particularly those at the bottom of the income scale, have not benefited as much as they would like people to believe.

Every time we say that people have dropped out of tax, we should remember that once they are out of tax, they get no further benefit. It is like the myth of the council tax freeze. The council tax freeze is always supposed to help the most hard-pressed. However, because of council tax benefit, and even with the changes that are coming in England this year—not yet in Scotland—a lot of people in all our communities are not paying any council tax because we previously considered that they did not have enough income to do so. They get no benefit whatsoever from the council tax freeze. In Scotland that is almost six years of the people on the lowest income having no benefit whatsoever, including a lot of pensioners because many of them receive council tax benefit. Because they are the greatest users of council services, they have seen the downside of all that, which is that councils find it more difficult to provide the level of service they would like to provide. In some cases, they are putting up charges. Social care has been reduced in quality and time. That is happening in Scotland as well. Anybody who believes that we have somehow cracked the issue of social care in Scotland is completely and utterly wrong, and if this was a debate on social care I would go on down that line.

We have a situation where something regressive is being portrayed as a great benefit to everyone. If people do not pay council tax at all—no benefit. If they are on the lower bands of council tax they get proportionately much less benefit than people on the higher rates of council tax. If we really want to help the worst-off who depend most on council services, the council tax freeze is not a progressive way of doing it. However, if the Government keep saying it, perhaps people will think it is. Sometimes those who do not pay council tax say how wonderful it is in the same breath as complaining about some aspect of council services that is letting them or their families down.

That is why we need to look at a much wider picture of how all these measures interrelate. We can have a philosophical discussion about whether it is better for people to receive effective assistance from the state through the level where we pitch tax allowances, or whether it is better to target people who are in most need. We can have, and have had on a number of occasions, debates about whether tax credits are a good or a bad thing; they were certainly a good thing for many single parents who were able to get back to work as a result.

There are philosophical differences, but in the end, what really matters to people is the money in their pocket, and their income and living standards. If you  are worse off, it is not enough to say “We’ve empowered you. We’ve left you with your own income.” It is nice to feel empowered, but many people are simply being empowered to be worse off than they were before. A lot of people would prefer to have the money in their pocket.

I hope that the Government will review their policies, as they surely want to do. Ministers often tell us that they are reviewing policy all the time and do not need an amendment. We do not want something that goes on in the Treasury with an inconvenient outcome that is not published. Taxpayers generally, and basic rate taxpayers in particular, deserve a proper analysis and the outcome reported, so that future decisions will be well informed and not made on the basis of prejudice. We all have prejudices about what we think are the best measures and levers. The only way to test them out is in reality. We know from our constituents where people are finding it difficult. Study after study has shown that living standards are falling for many people.

The argument is always thrown to us that people who are much better off are taking a bigger hit. I find that slightly strange. In order to balance my newspaper reading, I buy The Sunday Times. I do not normally buy The Times but we buy the Sunday edition. We buy The Guardian during the week and think we should give ourselves a different point of view so that we can educate ourselves. I was interested to see in the business section of The Sunday Times this week that David Smith, the economics editor, said that perhaps low wages had gone too far. As I am sure most Committee members know, David Smith is on the whole supportive of Government policy, but even he was beginning to think that driving down wages and living standards may be harmful to the economy.

In the same edition of The Sunday Times we had the rich list, with the rich getting richer. They are not taking a hit; they are getting richer. In the homes section—I read a lot of The Sunday Times—there were two or three pages describing how property at the higher end of the market was taking off again. Prices are rising and houses that stuck on the market a couple of years ago are now selling more quickly and for higher prices. It appears that some are not suffering in this recession.