Previous SectionIndexHome Page

Mr. Bercow: Will my right hon. Friend confirm that the Select Committee's request was not spectacularly radical? It was merely asking the Chancellor to revert to the proper practice that was operated by Conservative Governments for 15 successive years, from 1981 to 1996.

Mr. Heathcoat-Amory: My hon. Friend is right. We are not asking for the impossible or the unusual. We are merely asking the Government to revert to previous practice.

I can give my hon. Friend another example. The Select Committee pointed out that the Government had dropped the previous practice of reporting on the effects of indirect taxes on households of various sorts. That was the subject of one of its recommendations. We all remember that in

18 Jul 2000 : Column 267

previous years that information was routinely published by Conservative Governments. However, it was dropped immediately and without explanation, because the results would be embarrassing. That is wrong, and conflicts with the Finance Act 1998.

My final example is the working families tax credit, which is now being treated as a deduction from taxation, although it is part of the sum of social security expenditure. That fact is confirmed half way down page 220 of the Red Book, admittedly in small print:

Despite that, in every other reference to working families tax credit in all other documents, and elsewhere in the Red Book, it is wrongly, confusingly--and, in my view, deceitfully--described as a deduction from income tax.

I have provided some examples, and the new clause is designed to prevent the situation from becoming worse. It would require the Government, by law, to have one policy for uprating the various taxes and duties, and to stick with it. This is not simply a question of honesty in the presentation of the national accounts, important though that is. It is also about protecting the country from further damage. If the clause had been implemented last year, the Government could not have raised fuel duties or other indirect duties by 3.4 per cent. I will not say that they got away with it, because what they had done was discovered, but the 3.4 per cent. increase has made petrol and diesel in the UK the most expensive in Europe.

If by some lucky chance the new clause is accepted this evening, the Government could find a way of paying back at least the windfall element in the money that they have netted since the Budget. Revenue from road fuel comes from hydrocarbon duty and value added tax. The Government's latest excuse for the rise in petrol prices is that the world price of oil has risen. However, that, too, nets the Government a great deal of extra revenue. It is calculated that VAT on the higher oil price since Budget day is netting the Government an extra £150 million a year.

6.15 pm

That is bad for taxpayers, particularly for those who have to have cars. It is also bad for the haulage industry and for manufacturing. However, it is good for some. We are told that it is very good for the racketeers and paramilitary organisations in Northern Ireland. I have often asked the Treasury whether it has any estimates of the smuggling that takes place across the land border between Northern Ireland and the Republic--another EU member state. It always replies that it has no such estimates. That shows an extraordinary degree of complacency.

Some other people have been doing some work. The Petrol Retailers Association has noticed that official deliveries of petrol in Northern Ireland have fallen from more than 160,000 tonnes in the last quarter of last year to less than 110,000 in the first quarter of this year. More than that, it has counted that more than 70 petrol stations in Northern Ireland have closed as a result of the smuggling. It believes that this is providing funds for racketeering and paramilitaries of various sorts.

It is extremely disturbing that that should have been worked out by an outside organisation and not by the Government. I ask the Government and the Treasury, in

18 Jul 2000 : Column 268

all sincerity, to consider again the damage caused by the escalation in petrol prices. The Chancellor said this afternoon that he had come off the fuel duty escalator, but I have described a situation where he has done anything but that. There is no justification for the past increases and the extra budget that he has had in the past three years, which means that the cumulative effect will be even more damaging. In addition, he increased duty by 3.4 per cent. this year, which made a bad situation worse.

The new clause, which I commend to the House, is designed to put some honesty and transparency back into the method of calculating duty rates. It would be good for the country if it helped to unwind the entirely unjustified duty increase on 21 March.

Mr. Malcolm Chisholm (Edinburgh, North and Leith): I shall make only two points given the pressure of business. The right hon. Member for Wells (Mr. Heathcoat-Amory) cannot get away with taking the high moral ground on such a spurious basis. First, we heard the nonsense about fuel duty. We have been hearing about it also in recent weeks from the Scottish National party in Scotland, and in a few minutes we may hear about it again from the SNP. There was a change because of the general election and a Budget soon afterwards.

As the right hon. Member for Wells knows, the last Conservative Budget in November 1996 used the September 1996 uprating. Therefore, in July 1997, the Labour Government had to use September 1997 in accordance with the fuel duty escalator.

Mr. Heathcoat-Amory: Why did they not use the prices index up to June 1997?

Mr. Chisholm: What they used was similar to that. September is the point that is always used for these indexes. It was natural to use September for the first Budget.

Secondly, the right hon. Gentleman has praised previous practice. He knows that there were two different upratings under the Conservative Government. There was one for the headline rate of inflation for pensions and similar benefits, whereas income-related benefits have always been the subject of the Rossi index, as he knows. It would have been far better if he had acknowledged that fact. Perhaps he has forgotten because there is complete confusion in the new clause, in which he asks for tax credits to be governed by the retail prices index, when income-related benefits have always been governed, even by Conservative Governments, by a different index.

Mr. Edward Davey (Kingston and Surbiton): New clause 7 relates to the timing of the announcement of the increase in income tax allowances. It is a modest new clause, but it would provide real benefits to pensioners who pay income tax. At the moment, because of the problems that there have been with the announcement in the past two years, pensioners are effectively paying an interest-free loan to the Chancellor between April and May. The new clause would reduce the Inland Revenue's administration costs when it sends out the various codings. Perhaps the most important benefit that it would bring would be to end the confusion and anxiety felt by many pensioners when they receive their changed tax coding later in the year.

18 Jul 2000 : Column 269

When the Budget was in March, the longstanding practice was for tax codings to be sent out to all income tax payers in January and February, based on the income tax allowance for that year. Then, after the March Budget, when the new income tax allowances had been announced, a new coding would be sent out to all taxpayers. That was the usual practice with which everyone became familiar, and it did not create a problem because it was done in time for the forthcoming financial year. But there has been a change which has gone unnoticed by many. When the Chancellor rightly aligned class 1 national insurance contributions with income tax, he decided that he would announce the following year's allowances in the November when he announced the changes to the national insurance system. The changes to the allowance for the following year for employed people--the non-pensioner income tax-paying community--were announced in November. The correct PAYE codes could be sent out in January and February, so there was no problem for them.

However, because pensioners do not pay national insurance contributions, the Chancellor has not announced in the pre-Budget report of the previous two years the increases in the pensioner allowances. Therefore, the tax codings for pensioners have gone out in January based on that year's level of allowances, and when the Chancellor has announced the increases in the pensioner income tax allowances in the following March Budget, another tax coding has had to be sent out, in the main just to pensioners. That has meant that pensioners, for the months of April and May, have paid too much income tax, and the extra bureaucracy from the Inland Revenue has caused them concern and anxiety. They have had to ask their tax advisers what on earth it is all about, and when it has been explained to them, they have been flabbergasted. They wonder why on earth the Government are behaving in such a way, why all that bureaucracy is being created and why, they, the pensioners, have to have too much tax deducted from them during the month of April.

New clause 7 would resolve that problem once and for all. It amends the famous section 257C of the Income and Corporation Taxes Act 1988, which was introduced by the Rooker-Wise amendment. The new clause would ensure that the announcement of the upratings for the income tax allowances was made by the latest by 31 December of the year before the tax year to which those upratings apply.

I raised the matter in the House in an Adjournment debate on 9 June 2000. The Paymaster General was kind in replying to that point and to others. She admitted that the Government recognised that this was an issue. She said:

She went on:

I was grateful for that positive reply from the Paymaster General.

New clause 7 is the solution to which the Government should be looking. The Minister may say that it would tie the Chancellor's hands, but it would not because the

18 Jul 2000 : Column 270

Chancellor would still be free in the March Budget and the future Finance Bill to announce changes over and above what was announced in December to the future uprating of income tax allowances, either up or down. The clause would not tie the hands of the Chancellor or restrict Parliament; it would simply make for good administrative practice. It would mean that low-income pensioners did not make interest-free loans to the Chancellor, which cannot be right.

I hope that the Minister will consider this minor administrative matter, which is important to tens of thousands of pensioners and possibly more. I tried recently to elicit how many by various parliamentary questions, but I was unable to obtain exact figures. However, many are affected by this. It cannot be right that we and other taxpayers are spending money on bureaucracy for something that is completely unnecessary and further disadvantages some of the most disadvantaged people in our society.

If the Government do not accept new clause 7 tonight, I hope that they will go away and make sure that the problem is addressed in the way in which the Chancellor makes future uprating statements for income tax allowances for the employed and for pensioners, and that they will provide statutory protection to prevent such a mistake from happening again.

Liberal Democrats have nothing against new clause 2. It is one way of changing the uprating of the allowances and duties. The Conservative Government had more than one way of doing that, and this Government have more than one way. There is nothing sacrosanct about any particular process for uprating allowances and duties, so Liberal Democrats have no problem in supporting the new clause. There is a genuine case for it in the sense that the uprating would be based on a reality--a figure which could be proved, analysed and agreed upon, rather than a forecast figure, which might not be the eventual inflation figure for that period. One need not waste a huge amount of time on it. It is a relatively simple measure concerning a technocratic issue.

The right hon. Member for Wells (Mr. Heathcoat- Amory) made a few political points, some of which were well made. There is no doubt that the two upratings in the Government's first year were rather stealthy. There is no doubt that pensioners think it rather odd that their pensions have gone up by 1.1 per cent. while fuel duty has gone up by 3.4 per cent. and council tax often by far more than that. People on incomes that are increasing only modestly are concerned. New clause 2 may be one mechanism by which to address that unfairness and ensure that people do not perceive that this Government or other Governments are treating them unfairly.

However, new clause 2 is only a tiny measure to get rid of that unfairness. What we really need are higher basic state pensions for the ordinary pensioner. Unfortunately, we did not see that in today's statement or last April, and that is a shame. It is about time that the Government addressed that issue, which is a matter of a great deal more substance than new clause 2. However, as I said, Liberal Democrats have no problem with it.

Next Section

IndexHome Page