Question proposed, That the clause stand part of the Bill.

The clause sets the income tax basic rate limit for 2016-17 and 2017-18. The changes deliver the Government’s commitment to support and reward those in work. In the last debate I set out the Government’s record on cutting taxes. On top of that, we also want to support middle-income households and to reward individuals who want to work hard and progress. That is why we have committed to increasing the higher rate threshold—the point at which the higher rate of income tax is applied—to £50,000 by the end of the Parliament. The clause takes the first step in delivering that commitment.

Clause 6 increases the basic rate limit from £31,785 in 2015-16 to £32,000 in 2016-17 and £32,400 in 2017-18. That is the income on which 20% tax is due. The income tax higher rate threshold, which is the sum of the personal allowance and the basic rate limit, will therefore increase from £42,385 in 2015-16 to £43,000 in 2016-17  and to £43,600 in 2017-18. Above that level, 40% tax is due. This is the first above-real-terms increase in the higher rate threshold since 2010, taking 130,000 people out of the higher rate of tax by 2016-17. By 2017-18, that will rise to more than 160,000 individuals. Since 2010, a typical higher rate taxpayer will have gained £818 by 2016-17 and £918 by 2017-18.

As in previous years, the national insurance upper earnings and upper profits limits will remain aligned with the higher rate threshold in 2016-17 and 2017-18. I noted on Second Reading of the National Insurance Contributions (Rate Ceilings) Bill earlier this week that a number of Labour MPs suggested that the link should be broken and that national insurance contributions should be charged at 12% above the higher rate threshold. Clause 6 allows the Government to support those in work, enabling people to keep more of the money they earn by paying less income tax. That helps us to move towards a high wage, low tax and low welfare society.

I note the Minister’s point about the comments of Back-Bench MPs, but as I said earlier, all parties in the House have Members who do not share the views of those on the Front Bench. That is the way it is, and I could certainly quote all kinds of thing that have been said by Conservative Members on matters dear to my heart.

Clause 6 sets the income tax basic rate limit for the 2016-17 and 2017-18 tax years. It will rise to £32,000 in 2016-17 and £32,400 in 2017-18. We are in favour of tax cuts for those on middle incomes and we support the increases in both the personal allowance and the basic rate limit for 2016-17. However, as inflation, pay and living costs increase, we need to ensure that the basic rate limit for income tax reflects that change. That will prevent families and individuals from being dragged into a higher tax bracket and paying a higher proportion of their income in taxes, despite them seeing no real-terms increase in their living standards or disposable income. Many people feel that is the situation they are in today.

We must also bear in mind how many people will benefit from the increase in the basic rate. In the most recent annual survey of hours and earnings, which used 2013 data, the median gross annual earnings for an individual was just over £22,000. The majority of basic rate taxpayers earn much less than the basic rate limit and are unlikely to benefit from the increase. It will only benefit people with earnings towards the top of the basic rate of tax and will disproportionally benefit people who earn much more than the average income of an individual in the United Kingdom.

As always, we must look at the package of measures outlined in the summer Budget to understand the true impact of the change for working people. Although the Government are altering the tax system to help to ensure that people are rewarded for work, this still does not help to tackle low-paid insecure work. On 2 September, the Office for National Statistics released its figures for zero-hours contracts, which we have already touched on today. Those figures showed that zero-hours work is on the rise, with the total number of contracts rising to 1.5 million and the number of people reporting zero-hours contracts as their main source of employment rising by almost 20% since last year.

At the same time, there are now more than 1.2 million people working part time because they could not find full-time work. That is 200,000 more people than when the Conservative party took office in 2010. John Philpott, director of the Jobs Economist, has raised concerns that the new national minimum wage will mean that employers could stop offering full-time permanent contracts to avoid paying the steep rise in the national living wage for the over-25s, which comes into force next April. He has stated:

“In an otherwise very lightly regulated UK labour market the forthcoming large hike in the minimum wage when the national living wage (NVL) is introduced next year might act as a further incentive to employers to increase their use of zero-hours contracts—which are already very prevalent in sectors where the NVL will bite hardest—in order to minimise the impact on total labour costs.”

We welcome the introduction of the higher limit for basic rate taxpayers. Although basic rate taxpayers will be protected from a rise in living costs, the Government’s freeze in working-age benefits will mean that benefit recipients will not receive the same assurances. In fact, taking into account inflation forecasts, the Institute for Fiscal Studies has estimated that the freeze in working-age benefits is equivalent to a 4.8% cut to working-age benefits over the four years. That will result in 13 million families losing £260 a year on average in benefits.

Although a basic rate rise will be welcomed by those who will benefit from the increase, we must bear in mind that many workers will not benefit from the rate rise. It will not help to solve the problem of insecure work nor will it make up for the other changes to welfare payments and tax credits that go to people who earn significantly less than the threshold.

The hon. Lady supports the measures that we are discussing, although I note that she is keen to dismiss the opinions of Back-Bench MPs—

Not at all.

I retract that. The hon. Lady is not dismissing the opinions of Back Benchers; she just does not like them being quoted. I can understand why she holds that position, given the circumstances in which she finds herself.

The hon. Lady makes the point that the changes will not help individuals who do not pay income tax, or those who do not pay higher rate income tax. Under the circumstances, however, we believe that it is right to increase the higher rate threshold. This is the first above-inflation increase for some years. We have set out our intention to have a higher rate threshold of £50,000 by the end of the Parliament, and I hope that the hon. Lady will support that.

It is right that we support work. I sat in similar debates during the previous Parliament and listened while Front-Bench Labour spokespeople made the point that some nurses, policeman and others would benefit from bigger increases in the higher rate threshold, but that we were not increasing it fast enough. I hope that she will welcome the fact that we are making that progress and that the Labour party will continue to support such measures, which are all part of our move towards a low tax, low welfare and high wage economy.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.