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Dawn Primarolo: I will not go down that road, Mr. Gale, because I am sure that you would rule me out of order, except to say that what the hon. Gentleman says is a load of rubbish. He does not want to acknowledge the rising level of incomes in our society and the fairer distribution and share of the growing wealth that has taken place since the Government were first elected.
I have no problem in discussing elsewhere with the hon. Gentleman definitions of poverty. When parents cannot afford to buy their children a new pair of shoes because they do not have enough money, that is a pretty good indication. However, I welcome the hon. Gentleman's unequivocal pledge that he is prepared to join a campaign to eradicate child poverty, and I hope that his colleagues will join him.
Mr. Jack: Will the Minister give way?
Dawn Primarolo: I hope that the right hon. Member for Fylde (Mr. Jack) is about to make the same commitment.
Mr. Jack: I wanted to pick the hon. Lady up on her point about the distributional effects of the Government's tax policies. As an exercise in the clarity and transparency of the Government's policies and to enable us to understand some of the things to which she has referred, will she commit to answering again the question first tabled in 1981 by the then hon. Member for Blackburn (Mr. Straw), now Secretary of State for Foreign and Commonwealth Affairs, on tax—direct and indirect—so that we might gauge the effect of the measures through the deciles of income that used to be at the centre of that question, or will she explain once and for all why she will not answer it?
8.15 pm
Dawn Primarolo: As the right hon. Gentleman knows, because this has been debated in the House many times, the distribution of indirect tax is imprecise and difficult to measure. Are we to assume that every household smokes or consumes a certain amount of beer, whether from a small brewery or not?
Mr. Laws: Will the Paymaster General give way?
Dawn Primarolo: I will be happy to give way to the hon. Gentleman, but I should like to finish one point before giving way on the next.
In advancing the 10p tax rate, reducing the basic rate of tax and designing our tax measures, whether they be tax credits or changes to the tax system, to ensure that maximum benefit goes to those on the lowest incomes, the Government have substantially increased those incomes. When I have given way to the hon. Gentleman, I will give some examples of how significantly incomes have been increased.
Mr. Laws: On the non-continuance of the previous series of figures on the tax burden, although I heard the Paymaster General's criticisms of the previous methodology of deriving the tax burden, does she recall using precisely the same figures, to great effect, in opposition?
Dawn Primarolo: I admit that I remember being in opposition, but it has no glowing attraction. I much prefer being in government and taking decisions. I will give the hon. Gentleman some figures to consider.
A single person aged 25 or over, working 35 hours a week on the national minimum wage—which was opposed by both the Conservative and Liberal Democrat parties—will be £21.55 a week better off as a result of the working families tax credit. A single-earner family on half male mean earnings, with two children, will be £3,490 better off since 1997.
Lynne Jones: Will the Minister give way?
Dawn Primarolo: If my hon. Friend will wait a moment, I will give way to her.
These are hardly the actions of a Government who do not care about those on low incomes. As I have said, we must contrast our record with that of the Conservative party when in government.
I know that I should return to the clause before you reprimand me, Mr. Gale. I will give way to my hon. Friend and then return directly to the clause.
Lynne Jones: The question is whether those who cannot afford to buy shoes for their children, to use the Minister's example, should be paying tax at all.
Dawn Primarolo: If my hon. Friend will bear with me, I will come to indexation, the Rooker-Wise amendment and the true cost to families in each tax bracket.
Clause 28 freezes the personal allowances for those under 65. Along with the freeze on the national insurance threshold, that will raise £700 million for the Exchequer next year and £850 million the year after, helping to fund
the increase in investment in the national health service. It spreads the burden of contributions wider than simply being placed on earners. As I have said, clause 29 will extend the age-related personal allowances for those aged 65 or over beyond indexation.Conservative Members oppose the clause. They made great play of ignoring the Rooker-Wise principles. I took the precaution of reading the debate that took place in 1978. It is a very important debate, and I hold both hon. Members who moved the amendment, especially the late Audrey Wise, in great respect as regards their intentions in doing so. In the debate, Audrey Wise made it clear that a Government who were freezing the allowances would have to come to this House to explain why automatic indexation was not taking place. That is exactly what we are doing in relation to this year. We are not talking about indexation having gone for ever, but about what happens as result of this Budget.
As the hon. Member for Yeovil (Mr. Laws) pointed out, Conservative Members showed no hesitation and expressed no worries about the poor when they froze personal allowances in 1993–94, nor when they did it again in 1994–95. They were not freezing allowances, as are this Government, to use the money to spend on investment in public services—quite the reverse. Hon. Members may recall that I reminded the right hon. Member for Charnwood (Mr. Dorrell) that his Government's Budget in 1994 cut £10 billion from public expenditure. The Conservatives were paying the cost of economic failure. The breathtaking argument advanced by the hon. Member for Fareham (Mr. Hoban) was that we should not be raising any more tax because the economy was looking quite good—we should just borrow more if we wanted to invest. That would be a return to exactly the policies that got the last Conservative Government into such a dreadful mess.
Conservative Members said that they were concerned that the increase meant that higher rate taxpayers would pay more.
Mr. Jack: The Paymaster General rightly drew our attention to the fact that a decision had to be taken about the suspension of the Rooker-Wise amendment, and said that the Committee would require an explanation. So far, she has announced that a sum of money is being raised and told us what it will be used for, but she has said neither why that particular mechanism—the freezing of the allowance—was the chosen vehicle for raising the money, nor what others were rejected.
Dawn Primarolo: If the right hon. Gentleman will be patient, I am coming to that. I am trying to deal with questions in sequence rather than making my comments, then answering all the questions at the end out of sequence.
The Chancellor made it clear that he believed, based on the Beveridge principles, that all members of the community should make a contribution to increases in spending in the public sector. I shall give the figures so that hon. Members know exactly what we are talking about before their imaginations run riot. The changes resulting from freezing the allowances will be equivalent to 28p for the starting rate taxpayer, 49p a week for the basic rate taxpayer and 80p a week for the higher rate taxpayer. Surely, Conservative Members do not expect us
to believe that 80p a week will force millions of people into the upper rate tax bracket. Of course, that is not so, as they know full well. Freezing personal allowances— I absolutely acknowledge that that is the impact—spreads the burden of the contribution widely, as the Chancellor wanted to do in line with the Beveridge principles. Those on the lowest incomes will be greatly assisted by the interaction between the family tax credit and the working tax credit, to the point where there will be no extra charge to them.Great play was made of the higher rate of income. The higher rate threshold is £34,515 in 2002–03. That hardly qualifies as a low income. The Government have considered where to raise the money for investment in first-class public services. We are increasing non-health spending by 2.5 per cent. in real terms in 2004–05 and 2005–06. We want to place the national health service on a sustainable long-term financial footing, as do all members of our community. We are increasing the UK's health spending by 7.4 per cent. a year in real terms over the next five years, and by more than £40 billion between 2002–03 and 2007–08. My constituents and people I meet on the doorstep tell me that they are prepared to invest that money in their health service. They do not say, "Our incomes are lower, so we don't want to make a contribution."
My hon. Friend the Member for Birmingham, Selly Oak (Lynne Jones) asked about people on low incomes. I remind her that 50 per cent. of families with children are better off in terms of actual income and will be better off as a result of the improved quality of the health service when the investment is made. Single people aged 25 or over working 35 hours a week on a minimum wage are better off and will have access to improved public services. Because of the tax and benefit reforms that we have made since 1997, the poorest fifth of families will on average be £2,400 a week better off—[Interruption.] I am sorry. They would love me to say that, but I think that the Chancellor would have something to say about it. They will be £2,400 a year better off as a result of our changes, better public services and higher investment. If we said to those people, "You are not to contribute even a small amount to your health service, even though you have vastly improved your financial position as a result of this Government's investment in your future", they would find that bizarre, as they would find it bizarre to hear hon. Members suggesting that they are not prepared to pay.
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