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10.15 pm
Mr. John Bercow (Buckingham): The challenge my hon. Friend poses the Paymaster General is entirely unexceptionable, so I assume that she will be able to answer it. However, does my hon. Friend agree that the hon. Lady does not have to look into the crystal ball when she can read the book? Given that, in answer to my hon. Friend the Member for Rochford and Southend, East (Sir T. Taylor), the Paymaster General said that this tax had not only been incurred legally, but had been paid by the relevant sector in previous years, should she not be able to tell us how much was paid in the financial year 1998-99, and do so immediately?
Mr. Letwin: My hon. Friend is absolutely right. We are discussing an opportunity loss for the Exchequer and, since we can know what revenue came to the Exchequer
through pet food VAT last year, the Paymaster General should be able to estimate what the opportunity loss would be were the new clause not added to the Bill--always assuming it had any value in the first place.
My next question is whether the drafting is now right. I should not bother to ask were it not for the fact that the whole thing is so incomprehensible that it defeated all the draftsmen to begin with, and it might be that there is a mistake this time.
I should also like to know what is a packaged food for birds. Packaged foods for birds will be caught, but packaged foods that happen to be eaten by birds but are not for birds will not be caught. This is just like the Medicines Control Agency: a great deal of fuss and bother has been caused by the difficulty of determining what something is for before one has eaten it. Whether the thing in question is caught depends to a great extent on whether one is a bird or a human being.
I hope that the Paymaster General can tell us that she is confident that, this time around, she and her officials have got the drafting right, because what we have here is legislation that is a dreadful mess. That is nobody's fault--the blame must be spread across the past 50 years--but the situation has been greatly worsened by the sixth VAT directive. What we should have been dealing with this evening is a proper clearing up of some ghastly architecture; unfortunately, what we have is just another piece of patchwork.
I hope that the Paymaster General will tell us, first, that the provision yields some serious revenue and, secondly and crucially, that it has been correctly drafted this time.
Dawn Primarolo:
The answer to the hon. Gentleman's second question is that I sincerely hope that the provision is correctly drafted this time and that the transcription error has now been corrected. The yield is £185 million a year, which is not an insignificant sum, so it seemed to be a good idea that the Government should maintain the revenue.
I know that it is late, but I think that the Opposition should consider calming down, and agreeing that the new clause makes sense and represents sensible management. I apologise to the House for the previous Government having made the error, and I hope that the Opposition will now agree to its being corrected.
Question put and agreed to.
Clause read a Second time, and added to the Bill.
Brought up, and read the First time.
Mr. Quentin Davies:
I beg to move, That the clause be read a Second time.
Madam Speaker:
With this, it will be convenient to discuss the following: New clause 18--A pensioner's tax exemption certificate--
Amendment No. 2, in clause 19, page 9, line 12, leave out '20' and insert '10'.
Mr. Davies:
I remind the House that I have interests that are listed in the register, but none of them is relevant to this debate or to earlier debates.
This is a crucial point in the proceedings. There is no need for any political banter or point-scoring. In tabling new clause 3 and amendment No. 3, we contend that the Government, in only two years, have inflicted immense damage on our income tax system. They have brought about a disreputable shambles by making changes that bear no relationship to the principles that ought to characterise a tax system. In a fair, just and economically sensible and successful society, a tax system ought to be based on the principles of justice, clarity and rationality. We now have an income tax system that is brutally unfair, discriminatory--particularly against the most vulnerable people--and incomprehensibly irrational and opaque.
I turn first to the callously unfair aspects of the tax system, as modified by the new Labour Government. The result of their measures is that people at the bottom of the income scale, whose incomes are so low that they do not even reach the income tax threshold, are now subject to income tax. That is already having a devastating effect on the finances of extremely--indeed, I would say almost pathetically--poor people.
Let us consider someone whose total income is £5,000 a year, which is derived from dividends. That person might be one of those widows whom the Government have decided, in other measures, to deprive of their widows pension. We debated and, I regret to say, unsuccessfully opposed that vicious measure only a few months ago. That person might be somebody who has no pension or other source of income, but who has saved from a lifetime of self-employment a small amount of money that now yields £5,000. That person might be someone who had to leave employment because of disablement, and we know how the Government have now cruelly restricted the eligibility criteria for incapacity benefit and are means-testing that benefit.
Those people are at the bottom of the income scale. A few months ago, their income was £5,000. What is their position now, following the Government's measures? It is almost inconceivable. Most people in this country, who are not in that category, have not even begun to face the reality of what has happened to people on the
lowest incomes. The result of the Government's measures is that people who had £5,000 to live on now have only £4,000. Those people, who are extremely vulnerable, have lost £1,000 a year, which is an income reduction of 20 per cent.
Mr. Bercow:
My hon. Friend is expounding the case with great force and eloquence. Is he aware that during the proceedings on last year's Finance Bill, the hon. and learned Member for Dudley, North (Mr. Cranston)urged the then Paymaster General to reconsider the Government's position on the tax treatment of dividends as it affected people of pensionable age? The hon. and learned Gentleman, having made that suggestion as a Government Back Bencher to the beleaguered Paymaster General, was subsequently promoted to the post of Solicitor-General. Sadly, despite his promotion, the Government have not shifted their position. Is not it about time that they did so, or that the Solicitor-General relinquished his post?
Mr. Davies:
My hon. Friend makes two telling points--one about an hon. and learned Member who certainly ought to be considering his position in the new Labour Administration. I hope that the Financial Secretary to the Treasury, who is about to respond to me, is also considering not just her position, but whether she feels proud to serve in a Government who press on the poorest people in our society in such a malicious and devastating fashion. That is exactly what has occurred.
As my hon. Friend the Member for Buckingham (Mr. Bercow) rightly said, the former Paymaster General, the hon. Member for Coventry, North-West (Mr. Robinson), felt sufficiently ashamed by what his Government had done to express his embarrassment in Committee and to hold out the prospect that something would be done. Nothing, of course, has been done.
This is part and parcel of a campaign waged by this new Labour Government against the new poor--people who are at the bottom of the income scale, but who have a small amount of savings and therefore do not qualify for the Government's means-tested benefits. They are being clobbered over and again by these vicious tax measures.
One thing is quite extraordinary: the Government have protected certain categories of people from the impact of the abolition of the dividend tax credit. They have protected the higher taxpayers--people who would have been paying a marginal 40 per cent. tax on their dividend income and who continue to pay a marginal 40 per cent. on other sources of income. They have a new dividend tax rate of 32.5 per cent. The Government have protected overseas holders of British equities, so that Americans who receive a dividend stream from this country will still receive a cheque--a tax credit--from the Treasury.
'Nothing in the Income and Corporation Taxes Act 1988 shall have the effect that any tax payer whose total income is below the personal allowance threshold for income tax purposes shall pay income tax.'.--[Mr. Quentin Davies.]
'.--(1) The Inland Revenue shall be given the power to issue tax exemption certificates to taxpayers who, at any time within that year are of the age of 65 or upwards, whose income does not exceed £6,000 (Tax Exemption Certificate Limit), and is likely not to exceed that limit in the three following years.
(2) The Tax Exemption Certificate shall:
(a) entitle the taxpayer to receive income from all sources without deduction of income tax
(b) exempt the taxpayer from dealings with the Inland Revenue, save to confirm the level of income when renewing the Tax Exemption Certificate
(c) require the taxpayer to notify the Inland Revenue by 5th October following the end of the tax year where their income has exceeded the Tax Exemption Certificate limit
(d) be granted for a period of four consecutive years.
(3) The Tax Exemption Certificate limit shall be automatically uprated every year in accordance with section 257 of the Taxes Act 1988.'.
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