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“I would stop the tax rises on families.”
But we know that he will do nothing of the sort, because the Conservative party is committed to precisely the same levels of overall taxation as the Labour party. In fact, the Conservatives have two criticisms of the Labour Government: the first is that they tax too much, spend too much and waste too much, and the second is that they have not done what the Conservatives would do, which is exactly the same. The Conservative party and the Labour party have morphed into a single entity. Every time the Conservatives criticise Labour tax rises, we should remember that they must have a secret extra tax rise in mind to make up for the one that they are criticising.
The Conservatives feign concern about those who will be harmed by the doubling of the 10p rate, but at the Conservative party conference last autumn, what was the party’s main priority for helping those who were struggling with their tax burden? Was it helping the people on the lowest incomes—the people whom I mentioned earlier, the farm labourers, hotel receptionists and hospital porters cited by the hon. Member for Runnymede and Weybridge (Mr. Hammond)? Was it single people under the age of 25 on modest incomes? No; they were completely ignored by the Conservatives. Was it pensioners between the ages of 60 and 64, who will be adversely affected by the Government’s proposals? No, it was not them either. The group singled out for special assistance by the Conservative shadow Chancellor—
Mr. Graham Stuart: First-time buyers?
Mr. Browne: —were people who owned houses worth around £990,000 to £995,000 and had paid off their mortgages. Those people were considered to be a more deserving target for the largesse of the Conservative party than people, in my constituency and elsewhere, on incomes of £11,000, £12,000 or £13,000 a year.
Mr. Stuart: What about first-time buyers?
Mr. Browne: Many members of the shadow Cabinet bought their first house for about £1 million, but they are not entirely typical of the people whom I represent, although they may be entirely typical of the people at the dinner parties attended by the shadow Chief Secretary of the Treasury. It was the shadow Chief Secretary, who is so out of touch not just with public opinion but with the mood in his own party, who said recently that the Conservative party would not be able to introduce any tax cuts until 2015. Unfortunately, over the recess he was overruled by the shadow Chancellor, who indicated that it might not be possible to reduce the tax burden until 2018 at the earliest. No wonder the chairman of the Conservatives’ own tax commission, the former Cabinet Minister Lord Forsyth, said only last week that the Conservative tax policies were “mad”.
Stewart Hosie (Dundee, East) (SNP): I intervene only for the sake of clarity. I am quite enjoying the hon. Gentleman’s speech. Can he tell us by what proportion of gross domestic product Liberal Democrat tax policy would reduce overall taxation?
Mr. Browne: That is an intelligent intervention. The answer is that we shall see at the time— [Interruption.] Let me answer the question. We know for certain that for the purposes of the next general election the Conservative party is committed to taxing the same proportion of GDP as the Labour party. I hope—although it will depend on the economic circumstances and on what GDP is at the time—that the Liberal Democrats may be able to introduce a tax cut aimed at people on low earnings who, in my view, are currently paying too large a proportion of those earnings in tax. If we could do that and, as a consequence, reduce the proportion of GDP that is taken by the Government in overall taxation and help people on low incomes, it would be fantastic, but we need to make our overall calculations to see where we can afford to make the savings. We know that the Conservative party is committed to not doing that. For those who want an overall net reduction in taxation in the United Kingdom, there is only one party that can potentially offer that at a general election: the Liberal Democrats.
On 15 April, the political editor of the Daily Mail wrote a story beneath the headline “Cameron plans his own night of long knives in Shadow Cabinet clear-out”. The right hon. Member for Witney—overlooking his own fallibility when it came to identifying the most damaging parts of the Government’s agenda—had identified what were described as a “magnificent seven” members of the shadow Cabinet out of a 30-strong team. The article went on to say
“He is, however, preparing a purge of under-performers”.
I regret to say that the hon. Member for Runnymede and Weybridge was not one of the “magnificent seven”, and is therefore in the firing line. I for one am extremely disappointed, because I think that the hon. Gentleman made an excellent speech this afternoon which identified many of the Government’s failings. I regret that his efforts are not appreciated more by the leader of his party.
Rob Marris: Talking of purges, the hon. Member for Falmouth and Camborne (Julia Goldsworthy) has been purged over these Treasury matters. Last year she committed the Liberal Democrats to producing a Finance Bill only once every two years. Is that still Liberal Democrat policy?
Mr. Deputy Speaker: Order. This is a Second Reading debate and a fair amount of latitude is allowed, but I remind the hon. Gentleman that we are discussing the Second Reading of the Finance Bill.
Mr. Browne: I am grateful for your guidance, Mr. Deputy Speaker.
Everything that has been said by my hon. Friend the Member for Falmouth and Camborne (Julia Goldsworthy) is eminently sensible. I commend it, in its entirety, to the hon. Gentleman. Just as Labour Members would have benefited from hearing my right hon. and learned Friend warn them of their impending doom, every time my hon. Friend speaks she can offer them guidance that will prove extremely useful as they seek re-election against a very unfavourable political backdrop.
Like the Budget, this Finance Bill fails all the tests of leadership. It has no great purpose, it has no great vision, and it flunks all the big challenges. Worst of all, the proposals that we will scrutinise in depth in the months ahead have no soul. It is now impossible to work out what the Labour party exists to achieve. The abolition, or doubling, of the 10p rate sends out the signal that the end of the empty hologram that was new Labour has finally arrived. It was Harold Wilson, who won four out of five elections while leading his party—four more than will be won by the current Prime Minister—who said that the Labour party
“is a moral crusade or it is nothing”.
Many Labour Members seem finally, but far too late, to have realised that with the doubling of the 10p rate their party is now nothing.
6.28 pm
Sir Stuart Bell (Middlesbrough) (Lab): It is a pleasure to follow the hon. Member for Taunton (Mr. Browne). He reminds me of a former Member of Parliament, Bob Woof, whom many Members may recall. Each year he made a Budget speech, but about the previous year’s Budget. He read the previous year’s Budget carefully, and then made his speech. Having listened to all of today’s debate so far, I have a feeling that this too is a debate on last year’s Budget, and on last year’s abolition of the 10 per cent. tax rate.
I remind the House that last year, as now, there was a Budget statement, followed by publication of the Red Book, which has been mentioned. It was followed by a Budget debate which continued for about five days, a debate on Second Reading of the Finance Bill—such as we are having now—a Committee stage, and Third Reading. Where the House went wrong in not picking up the fact that the 10 per cent. rate was to go must be a mystery to most of us. It seems to me that the reason why we are having a debate on that particular aspect is the Institute for Fiscal Studies and the figure of 5.3 million net losers, and I am not sure that the IFS report actually said that.
I remind Labour MPs who are signing early-day motions and carrying their consciences on their sleeves that, in the 11 years of the Labour Government—to get on to the “vision thing” that the hon. Member for Taunton talked about—our vision has been clear. We believed in a fundamental and irreversible shift in the balance of wealth and power to workers and their families. Over those 11 years, we have brought in a national minimum wage, against great hostility in this House from the Opposition, who said that it would cost jobs, and increased it to more than £5 an hour. We introduced tax credits, of which we have heard some criticism, to which I shall refer in a moment. We have signed the social chapter; the Conservatives not only did not support it, but have said that they will repeal it when they come to power. We have brought in specific measures for the elderly, of which the increases in winter fuel allowances are one. Over 11 years, we have moved the balance of power towards workers and their families.
If I may spend a moment on the 10 per cent. rate, the tax package last year was designed to target extra support to help many of those who only paid the 10p rate. For those aged 65 and above, age-related
allowances were increased by £1,180 above inflation, meaning that 600,000 pensioners paid no income tax at all. For families with children, the child tax credit child element increased by £175 above earnings indexation from £1,845 to £2,085, providing additional financial support for families and further reducing child poverty.
For those in work on low incomes, the first income threshold of working tax credit rose significantly from £5,220 to £6,420. Supporting work is the best route out of poverty through increasing the gain from work for many low income households. That is the background to the abolition of the 10 per cent. rate.
We do not want to go back over history or to recite poetry:
“see how dark the backward stream!
A little moment passed so smiling!”
It is a long time since we had a Conservative Government, but under the Conservatives the basic rate of tax was 23p in the pound with no tax credits other than the limited benefit from family credit. That meant that even the poorest taxpayers paid 23p in the pound. Under Labour, the basic rate is now 20p in the pound and there has been a major increase in tax credits, particularly for those with children but also for those without.
The reforms overall meant that all income tax payers have benefited compared with 1997. Those on lower and middle incomes have benefited the most. Giving low-income families a negative income tax rate—that is to say a tax credit—is better than leaving in place the 10p rate; that was the philosophy and reasoning behind the Government’s decision, which was not picked up throughout last year’s Budget proceedings.
The tax credits system—a minus rate of income tax—is the best way to help people out of poverty. Each year, the Labour Government have put more and more resources into tax credits. The 10p rate is not a targeted tax measure as all taxpayers benefit from it, including higher earners, such as those on £100,000 a year who would still only pay 10p in the pound on the first £2,230 of their taxable income.
As my hon. Friend the Member for Dumfries and Galloway (Mr. Brown) and my right hon. Friend the Member for West Dunbartonshire (Mr. McFall) said, it is because of these tax credits that we have been able to deliver historic achievements such as taking millions of pensioners and children out of poverty. The tax credits mean that we have rates of 40 per cent. and 20 per cent. for income tax, but that we have effective tax rates of minus 1 per cent. right up to minus 200 per cent. through tax credits, so that the tax and benefits system pays more to people on low and middle incomes.
While the House is focused on this matter, we must not overlook the basis of our economy. Part of the Bill calls for the promotion of access to finance and resources for small and medium-sized enterprise and for the enterprise management incentive schemes. In this respect, I refer to David Smith’s economic outlook column in The Sunday Times yesterday. The hon. Member for Taunton gave us a great review of the press over the last 10 days, but David Smith said that our
“job market remains extraordinarily strong, with a rise of 152,000 in employment in the December-February period. In the past year, employment has climbed by 456,000 to a record 29.51m.”
Twenty nine million of our fellow citizens are in work. As my right hon. Friend the Member for West Dunbartonshire said, there were 21 million beneficiaries from last year’s Budget—something that must be repeated. There are nearly 700,000 job vacancies and the unemployment claimant count is at its lowest since June 1975.
We have had forecasts on growth; my right hon. Friend the Member for West Dunbartonshire referred to them, as did the hon. Member for Runnymede and Weybridge (Mr. Hammond). In conjunction with the hon. Member for Taunton, I thought that the hon. Member for Runnymede and Weybridge made an excellent speech from the Front Bench. It was a strong Opposition speech and he should be congratulated on it. We will not go into his facts or polemics, but the manner of the speech was worthy of the House of Commons and for that he deserves congratulations.
The growth rate forecast by the Treasury is about 1.85 per cent. It may be that the forecast will go down to 1.5 per cent., but I remember being an Opposition Member and asking Lord Lamont, as he now is, at that Dispatch Box whether we were in a recession. The answer was yes, we were; we had had three months of negative growth. We are not in a recession and we are not likely to go into one. We are holding the line in a very difficult and turbulent financial world.
We read a lot about consumer confidence. The newspapers make a great thing about the loss of consumer confidence, but whatever the newspapers tell us—to get back to the hon. Member for Taunton and his diligence in reading newspapers—total retail sales in our country, including new floor space, were up in March on a year earlier. The rise was 1.1 per cent., while Tesco reported a 12 per cent. increase in sales in the past financial year. By the way, over the same period cash was used for 60 per cent of all retail sales, up from 54 per cent. in 2006. If we are moving away from a credit card economy to a cash economy, that is all to the good.
The Chancellor said that the theme of the Budget was stability. We live in an unstable world and I shall not repeat all the arguments on the sub-prime mortgage crisis. I commend my right hon. Friend the Member for West Dunbartonshire on his excellent Treasury Committee report on the subject. We have moved over the last 10 years to economic stability and growth. We are faced with unprecedented turmoil in the financial markets, but in those 10 years of stability, we have been able to deliver real change in our economy.
The national minimum wage, to which I referred earlier, has increased by 23 per cent. in real terms to £5.73 in October 2008, which has helped 1 million low earners, many of them women working part-time. We have lifted 600,000 children out of poverty since 1997 and action since the Budget of 2007 will lift an additional 500,000 out of poverty. Child poverty, which doubled in the 20 years up to the mid-1990s, has been reversed under the Government. What we can see is a strong economy underlined by great stability.
Mr. Graham Stuart:
The Government set the target of halving child poverty by 2010-11. The Treasury
Committee has said that if they do not put in place the policies and funding to ensure that that is met, it will
“represent a conscious decision to leave hundreds of thousands of children in poverty for longer than is necessary or desirable.”
Does the hon. Gentleman believe that the Government are on track to halve child poverty by that date, or have they abandoned that aim as they are no longer wholeheartedly committed to it?
Sir Stuart Bell: It would be a great help if the Conservatives were to match our commitment on child poverty. The point has been frequently made today that the Opposition are not the Government, and I fully accept that. I accept that the Government must make decisions and bring forward policies, but when we do have policies that are in the national interest it would be helpful if they were supported, and the Conservative Opposition should support our child poverty aims. We have heard about stability repeatedly from the Chancellor today, and also in the Budget—stability for the country as a whole. The Opposition are right that we have difficulties with consumer prices; wheat and fuel prices have risen. The price of a loaf of bread has risen in this country at the same level as in France and Italy. That is currently a problem for all such countries.
Mr. Stuart: I am grateful to the hon. Gentleman for giving way again. No other countries are putting taxes up at present, as they know that they need to support those with least in their societies now when they are being hit with those price rises. Only our country’s Government are hitting millions of poor people. That is why so many Labour Members are so uneasy about the Budget and the Bill.
Sir Stuart Bell: Clearly, rising food and fuel prices will trouble the economy, and the Government must look at those matters and deal with them as they can. Making changes to last year’s Budget this year might not be the appropriate way forward. Instead, the appropriate way forward might be that suggested by my right hon. Friend the Member for West Dunbartonshire and the Minister, which is to see how we might accommodate the changes being forced upon us by exterior events.
The hon. Member for Taunton asked about the vision thing. There have been answers from the Labour Benches on the national health service and climate change, but the vision is also present in the Budget and the Budget statements. It is a value vision based on opportunity, fairness, efficiency and equilibrium between all strands of society. We are frequently coming across that vision. A reference was made to this being a managerial Budget. It was not managerial, but it was intended to accommodate a difficult financial situation and to be a steady-as-she-goes Budget—the words of Stanley Baldwin many years ago.
There are difficulties, therefore, but within them there are also opportunities, and this Budget reflects those opportunities, as do the Labour Government. Our business is to maintain stability in our society in what is an unstable world, and this Budget does that. The measures announced today by the Bank of England, supported by the Chancellor, will assist that stability, and as time goes by we will see that the British public will come to understand that and will support us.
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