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Mr. Mark Field: Mr. Gale, you have missed an enthralling debate on this matter over the past three quarters of an hour. However, I shall not detain the Committee for long.
Most of the important points on this matter have been made by those of my hon. Friends who have contributed to the debate. The hon. Member for Birmingham, Selly Oak (Lynne Jones) also made a helpful contribution. The hon. Member for Glasgow, Cathcart (Mr. Harris) is not present at the moment, but his contribution was also helpful, albeit rather more inadvertently.
Many people are worried that the proposal is too complicated. As has been noted by hon. Members of all parties, some people earning relatively small sums of money will find that they have to pay extra tax. I accept the point made by the hon. Member for Preston (Mr. Hendrick) that the tax credits scheme comes into play in this regard. People earning modest sums—say between £12,000 and £14,000 a year—will end up paying a large proportion—£2,000 or more—in tax, but they will get more than that amount in tax credits.
It is nonsensical to have so complicated a system. We need to be more honest in our approach to taxation, and the Chancellor's plans for tax credits are based on the fact that they do not count as public expenditure because of how they are implemented. That also muddies the waters of public spending.
I agree too with the hon. Member for Yeovil (Mr. Laws), who said that the complication introduced into the system over the past two or three Budgets results from the Government's pledge not to increase the headline rates of income tax at the basic and higher rates. However, although the strict letter of that pledge has been kept, one consequence of not increasing the allowances even to take account of inflation—they are not going to be indexed in any way—is that, in effect, tax rates will be increased.
As my hon. Friend the Member for Arundel and South Downs (Mr. Flight) pointed out, one effect of the Government's tax policy over the past five years is that
the number of people paying the highest rate of 40 per cent. has risen from about 2 million to about 3 million. To that extent, the spirit of the 1997 pledge not to increase taxes has been broken, if not the letter.
Mr. Hoban: My hon. Friend represents a London constituency. As salaries rise to keep pace with living costs, will not more and more people in London fall into the 40 per cent. band?
Mr. Field: My hon. Friend is right. I do not want to indulge in special pleading, but that is a problem facing all hon. Members with London constituencies. The electorate of the hon. Member for Wimbledon (Roger Casale) is probably even more middle class than mine in Cities of London and Westminster. Hon. Members with seats in London and the south-east increasingly find that people in those constituencies on incomes that are comparatively modest find themselves in the upper tax rate band.
That is a real problem. My hon. Friend the Member for Epsom and Ewell (Chris Grayling) spoke earlier about how it affects people working in the public services. Nowadays, it is very difficult to attract people into the public services—or even into relatively low-paid jobs in private hospitals or private schools, or in shops—without paying some sort of London weighting. That could be the public sector London weighting, or a private sector weighting. All too often, people facing the very high costs of housing and of living in London and the south-east find themselves heading inadvertently for the upper tax rate.
I am sorry that the hon. Member for Glasgow, Cathcart is not present, as I thought that his comments about the NHS—about which he talked at great length—were a little rich. To a large extent, health matters as they affect his constituents are out of his hands, given the role of the Scottish Parliament. The pro rata tax expenditure on health in Scotland and Wales is much greater than it is in England, and it is ironic that there should be so little satisfaction about that. This is supposed to be a Budget for the NHS, but the Government must give close consideration to the question of how effectively the money may be spent.
Mr. Hoban: I should hate my hon. Friend to sit down without saying more about tax credits and low pay. Every low-paid person will be affected by the tax increases that will flow from the freezing of personal allowances. However, does my hon. Friend agree that an unusual aspect of the proposal is that not everyone will benefit from the system of tax credits? The take-up rate for tax credits is something like two thirds of all those who are eligible. Many people will therefore lose out as a result of the provisions in the Bill. Does my hon. Friend agree that they will not catch up through the tax credit system, as it is quite complicated?
Mr. Field: My hon. Friend makes an interesting point, and I shall be interested in what the Minister has to say in response. My hon. Friend is a former chartered accountant, and therefore a greater expert than I on these
matters. I am afraid that I am one of those hon. Members who used to belong to the legal fraternity, but my hon. Friend can crunch the figures.
Mr. Boateng: The hon. Gentleman does not have to apologise.
Mr. Field: The Financial Secretary is another former member of the legal profession. I served only as a solicitor, but I understand that the right hon. Gentleman was a barrister.
Mr. Hoban: He was a distinguished barrister.
Mr. Field: He was a distinguished barrister, so perhaps I should refer to the Financial Secretary as the right hon. and learned Member for Brent, South—but perhaps not.
Roger Casale: I am grateful that the hon. Member for Cities of London and Westminster (Mr. Field) has not tried to build his remarks on the crocodile tears of a Conservative defence of the low paid. The hon. Gentleman is basing his argument on the complexity of the tax system, and he has raised some interesting points. He is opposed to freezing the thresholds, but what would he propose instead? If he were to develop his argument further, I am sure that we would find him proposing something even more complex than what is contained in the Bill.
Mr. Field: That is a fair comment, and I thank the hon. Gentleman for complimenting me on touching on the question of complexity. I feel strongly that there should be indexation. The system has become increasingly complicated but, as my hon. Friend the Member for Fareham (Mr. Hoban) pointed out, roughly one third of those who qualify for tax credits do not claim them. There is a real risk that a significant number of people who pay tax by PAYE—they often do not realise just how much they are paying, as the money is taken straight out of their pay packets—will not claim the tax credits for which they qualify. I hope that the Minister will say something about that.
One thing that the Government can do is increase advertising to ensure that people are aware of the benefits to which they are entitled. Many elderly people, in particular, are unaware of the credits as they may not have been part of the work force for some time. None the less, this seems to be an idiotic system. If we had a blank sheet of paper before us, we surely would not design an income tax system in which millions of people on low incomes pay tax and can then claim even more than that in various credits.
Dawn Primarolo: I have been a little startled at some of the assertions made by Conservative Members, but it has nevertheless been extremely refreshing to hear how deeply concerned some of them are about the plight of those on low incomes, families trapped in poverty and the crucial issue of ensuring that people are aware of their entitlements and rights. However, I was particularly startled by the speech of the hon. Member for Cities of London and Westminster (Mr. Field) when I recall that social security legislation under the Conservative party, when in government, meant that there was no obligation on the Department of Social Security to notify people of
their rights. Instead, they had to guess them. Therefore, it will be of enormous benefit if all Members of all the political parties in the House can agree that eradicating child poverty from our society is a principle to which every Member is committed, even if we disagree on the methods of doing so.Whenever I have challenged Conservative Members, outside the Chamber, to make such a commitment, they have declined to do so.
Mr. Mark Field: Will the Minister give way?
Dawn Primarolo: I am more than happy to give way if the hon. Gentleman will put on record his pledge to see the scourge of child poverty eradicated from our society, even though his party doubled the number of children living in poverty.
Mr. Field: Everyone on both sides of the Committee is in favour of eradicating child poverty, but one difficulty with child poverty is definitional. In the past—certainly prior to 1 May 1997—I recall that Labour Members were keen to ensure that statistics were bandied around when child poverty was seen as a relative value. Obviously, with many families becoming more affluent, relative values are almost meaningless. If there is an absolute rather than a relative value, I will be only too happy to join the Minister in her crusade to end child poverty.
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