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Mr. Gardiner: Would it be Liberal Democrat party policy to abolish that fuel payment?
Mr. Davey: We would put the £100 on the pension, so we would give pensioners exactly the same amount but
save the country millions in administration costs.The Labour party is the party of bureaucracy and complexity, not just in the tax system but in the benefit system.
Mr. David Taylor (North-West Leicestershire): Will the hon. Gentleman give way?
Mr. Davey: I shall continue, if the hon. Gentleman will allow me.
We have a targeted pensions policy, which has been ably developed by my hon. Friend the Member for Northavon (Mr. Webb). It is now becoming the accepted wisdom. Recently, the right hon. Member for Birkenhead (Mr. Field) wrote an article in a newspaper backing up Liberal Democrat policy for targeted increases in pensions.
Let me tell Labour Members what that policy is. For over-75s, we would increase the basic pension by £3 a week. For the over-80s, instead of the derisory 25p a week that they get, we would give them an increase of £5 a week. Yes, that is targeted, because the poorest pensioners are the oldest pensioners. [Interruption.] Some Labour Members shake their heads, but the figures for income distribution among pensioners and elderly people show a clear correlation between poverty and age. The older one gets, the poorer one is. That makes it essential to target extra resources in a very administratively efficient way, through the basic pension system.
Pensioners in my constituency feel completely betrayed by the Labour party. They hear that there is a minimum pension guarantee, but, when they read the small print, they realise that they are not eligible, and that it is no guarantee at all--not worth the paper that it is written on. Instead, some pensioners in my constituency are having the dividend tax credits that they used to get every year from the Inland Revenue taken from them.
The official Opposition were quite right, last year, to use an Opposition day to debate that issue, and we joined forces with them. We were very glad that some Labour Members actually criticised Ministers. Unfortunately, the Government were not to be moved on that, but we shall return to the issue during the Bill's passage--and we warn the Government that we shall return to the issue repeatedly. We shall not support a policy that has taken, on average, £75 a year from the poorest pensioners in our country.
Mr. Burnett:
Does my hon. Friend recall that in the previous Budget a series of measures was introduced that directly penalised the less well-off, not least the change in capital gains tax retirement relief?
Mr. Davey:
My hon. Friend is exactly right. Small business men in my constituency, and small business women, were using the capital growth in their business as part of their pension. They were looking forward to retirement relief on the first £250,000 of that capital growth--a provision which the Government abolished--to fund their retirement. The Government have hit those people, but they have provided new capital gains tax loopholes for the super-rich. We have calculated that partners at Goldman Sachs will cash in to the tune of £500 million That is what happens when a Government go for complexity in the tax system, rather than simplicity. They
The main theme of my speech is that the Budget and the Bill will add extra complications, and I have referred to the policies that affect pensioners. During the debate, however, Ministers and some Labour Back-Bench Members have lauded their policies on children. We support their move to give more money to families. A revolution is taking place in terms of how much money will be put into the hands of families with children. Of course, there are different ways of doing that. The Government have introduced four separate support mechanisms. We have child benefit, which all parties support. In addition, we have the working families tax credit and the child care tax credit, and we shall have the children's tax credit, which is being introduced in clause 27 and schedule 3.
We must ask ourselves why there are so many mechanisms. Why are they all needed? It is partly because, as my hon. Friend the Member for Northavon can more ably explain to the House, the Government are fixated with the untested dogma that helping people through the tax system is somehow better than helping them through the benefit system. That is part of their rationale, although we do not agree with it.
The Government also have a plethora of mechanisms for helping families for presentational reasons. There is the desire to fudge the social security spending figures so that they appear to be channelling support through the tax system, thereby getting away with not admitting to the people that they are spending more on social security. If they believe in that approach, why do they not tell the people?
There is another presentational reason. The Government want to disguise their U-turn on their proposal to tax child benefit paid to higher-rate taxpayers. That is what the children's tax credit is all about. It would have been much simpler to go down the road that the Government opted for previously. That would certainly have been far more honest.
There is a real problem with having a plethora of mechanisms. First, there is the complexity of having four support mechanisms for families and children. Secondly, there is the cost element. The children's tax credit will mean that tax authorities will become directly involved with the marriages of and relationships between men and women. I would have thought that the Government had learned from the experience of the social security system, and more significantly from the experience of the Child Support Agency. We have seen what happens when Government bureaucracies become involved in the minutiae of relationships between men and women. However, the Government are now suggesting, through clause 27 and schedule 3, that the Inland Revenue will become involved. They will come to regret that. Labour Members will have people saying to them, "I do not understand how this is happening. I do not understand why my husband"--or wife--"is getting more of this tax credit."
The Government have used four pages of schedule 3 to try to describe how they will work out the different demands of men and women. The right hon. Member for
Fylde quoted from those pages, and those Members who were present will understand how complex the proposals are.
It is not just the bureaucracy surrounding those proposals that is complicated, but the new marginal tax rate of 46.7 per cent. that is to be introduced between the low £30,000s and the high £30,000s as the tax credit is clawed back. Such complexity has a cost for our constituents. There is a lack of comprehension about where the support to which they are entitled is coming from. That is bound to lead to a problem of take-up and a waste of resources.
This morning, I was at the Playbox playgroup based at Kingston Methodist church, painting a picture with the help of two young children. It was interesting to speak to people who work at the playgroup. They were worried that the Government's policies were pushing up the fees that they had to charge. They did not realise that extra help would come from the working families tax credit.
The Government have become stuck on their own presentational fork. In trying to make things easy for themselves in the hothouse of Westminster, they are failing to present their policies properly to the people out there. They are shooting themselves in the foot. I do my best to explain the Government's policy for them. My constituents say, "That is a bit complicated," and I advise them to come and see me. I am more than happy to help them out, but, if the Government want to get the benefits of their own policies, they should make them simpler.
I remember when Labour Members were in opposition. They used to complain about the Tory Government and say that they were fiddling the figures, with 21 changes to the employment statistics--[Interruption.] Indeed, I believe the correct figure is 22. They used to complain that the Tories used to cut taxes nationally and load the tax on to the local taxpayer by increasing the council tax. Now the Labour Government are doing the same thing. Not only have they stolen the tricks of the Tories, but, worse, they have added a bundle of their own.
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