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The tax credit system has to be improved; that may be the best way of putting it. In an intervention on my right hon. Friend the Member for West Dunbartonshire (John McFall), I made the point that far too many families have fallen foul of the system and ended up having to repay some of the tax credit that was awarded to them. Let us imagine someone on a low income, earning barely more than the national minimum wage, working hard and taking the opportunity to do a little bit of extra overtime. Months down the line, that may put their figures out of kilter, and it may mean that they receive an overpayment. In some cases, such people have unfortunately fallen foul of the tax credit system. They are then very reluctant to go back to it. That is a tragedy, because tax credits have removed so many families and children from poverty. I raised that issue with the former Chancellor shortly after the Budget statement last year, and I have also raised it twice in the past three months or so with the current Chancellor. He understood, and made it abundantly clear that he had been lobbied on the issue, particularly as regards the issue of women pensioners under the age of 65.
I am somewhat perturbed by some of the stories that the press have run. As well as dealing with constituents through correspondence, I have also taken the time to pick up the phone and call them in the evening, so that I can understand what their difficulties are. I have been astounded by the number of pensioners over 65 who have believed everything that has been in the press. They have not recognised the fact that there has been an increase in their personal allowance, which will more than likely take many of them out of the tax-paying bracket. That has not been helpful. I tell my right hon. Friend the Financial Secretary to the Treasury that I suspect that in many working households, people in the low-earning bracket, who have not yet received their April salary, do not yet realise the impact that the measures may have on them.
How did we get where we are? The figure of 5.3 million has been quoted regularly today, but I am not desperately concerned about the exact figure, because I come from a background where if people on low incomes are being adversely affected, we have to do something about it. Whether we are talking about 5.3 million people or a few hundred, it matters. There are people who will find it much more difficult to make their household budget meet their needs. I tell my right hon. Friend that we have a problem, and we, as a Labour Government, need to put it right. It really does not matter how we try to dress things up, or what the facts are. If a pensioner pays an extra £1 a week, or £52 a year, we may try to offset that with a winter heating allowance increase, but the reality is that that does not matter to them. All that they are concerned about is the fact that they are paying additional income tax.
I am greatly concerned by the fact that our problemI do see it as a problemis not easily resolved; there is no quick fix. Earlier, the hon. Member for Buckingham (John Bercow) suggested that an increase in the national minimum wage would help low-wage earners. Yes, it would, but that is no good for women pensioners under 65 years of age, or anyone who has retired early on the grounds of ill health. The matter is much more complex than that. Supporting an
amendment next week is not the answer, either. The question of how the situation arose is of deep concern to me. I see that the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) has left his place; I do not agree with any of the conspiracy theories that he put forward.
Mr. Mark Hoban (Fareham) (Con): Given that the Treasury knew at the time of the previous Budget that 5.3 million households would be net losers from the change, why does the hon. Gentleman think the Treasury went through with it?
Mr. Brown: I was about to come to a point that may provide the hon. Gentleman with some answer. I am not absolutely convinced on the subject, but I am prepared to give those involved the benefit of the doubt. I would like to know whether someone got their calculations wrong. Or was bad advice given, and taken?
Mr. Brown: I am not saying that at all, and the hon. Gentleman should know better than to try to put words into my mouth from across the Chamber. There has been an error that affects many people in this country. As I say, it is the duty of this Labour Government to put that right.
Mr. Hoban: The hon. Gentleman was not able to explain why the former Chancellor made the change, and he ruled out incompetence. Let me ask the hon. Gentleman another question: given that the problem was known a year ago, why has it taken the Chief Secretary to the Treasury so longa yearto suggest that a review be undertaken? Is the timing down to the imminence of next Mondays vote?
Mr. Brown: I am not convinced that the hon. Gentleman is right. We have to look. Undoubtedly, there were a number of Membersprobably on both sides of the Housewho knew that there was an issue. Has the hon. Gentlemans party, knowing that there was a problem, merely sat quietly and brought the issue to the fore only in the run-up to the local and mayoral elections? We can all have conspiracy theories. Many on the Labour side had deep concerns, which they raised hoping that the matter would be corrected. It has not been. That is why I am saying that any amendment next week will not put the issue right.
Mr. Brown: No, I am not giving up. The comments made have been to the effect that the issue can be reviewed and looked at. I urge the Chancellor and his team to consider seriously the offer made this afternoon by my right hon. Friend the Member for West Dunbartonshire: an answer may be found by working with the Treasury Committee. That answer must be found sooner rather than later.
Mr. Brian Binley (Northampton, South) (Con): It is a pleasure to follow the hon. Member for Dumfries and Galloway (Mr. Brown), who always speaks with care on behalf of his constituents. I am sure that many of them would listen to his concern about fuel prices, which is shared by many Members.
I was disappointed earlier at the words of the Chief Secretary to the Treasury. Given that she represents a Yorkshire constituency, I would have thought that she would have known a little more about how to judge a wicket. It seems to me that she was on a particularly sticky wicket today, and I expected her to respond accordingly. However, my judgment of her words was that she thought that the wicket would take a bit of spin, and I found that disappointing.
I want to talk about what is missing from the Finance Bill and what should be put in on Report. I want to concentrate on three issues: the rising costs of regulation faced by business generally; the increasing tax burden borne by small and medium-sized enterprises, particularly small ones; and the personal debt faced by many of the poorest in our community, for whom the cutting of the 10p tax rate will cause considerable hardship.
I have spoken about regulation on a number of occasions and the issue is well rehearsed among many other Members. It is almost a truism now to say that the cost of regulation is hitting business hard. Much of that regulation is increased tax regulation, with which the Bill is particularly concerned. The Chancellors inabilityor unwillingness; call it what you willto simplify that tax burden for business generally is a sizeable omission. I do not need to repeat that the British Chambers of Commerce recognises that the cost of regulation under this Government has now risen to £66 billiona massive burden for business, given the global challenge that is emanating from Brazil, India and China. In addition, the statutory instrument statistics for 2007 made it clear that 14 new regulations were enacted by the Government every working day. Many of them impact on business. Finally, the Federation of Small Businesses said that, on average, small businesses spend seven hours a week on red tape and paperwork.
Those are tremendous burdens on a business economy to which we are looking to provide the real challenge on which our children and grandchildren will rely for their well-being in 20, 30 and 40 years time. This House does not often think in terms of such lengths of time, but it behoves us to do so. Otherwise, we shall find our decline down the table of well-being continuing and accelerating. I find that a fearful prospect.
I do not need to talk too much about the need for tax changes because the Treasury Committee report on the 2008 Budget made that plea on a number of occasions. I could read them out, but I do not think that you, Mr. Deputy Speaker, would want me to do so, given that time is limited. However, the Treasury Committee grabbed on to the fact that we need to simplify our tax system and get burdens off the backs of businesses, particularly small ones.
The National Audit Office looked at small businesses in 2006. I have not seen any changes as a result of that audit, although the Government should have taken notice and created change. That is a fine example of
how the Government, in my humble opinion, are going wrong. The National Audit Office said that the monitoring regulations for small schemes were not well developed and that there was no assessment of the impact of Small Business Service expertise on the development of regulation. Indeed, the Government went on to argue that they would cut the number of small business support schemes from the estimated 3,000 in existence at that time to 100.
Way back in March last year, I asked the Treasury how many schemes had been cut, how many had been consolidated and how many were in existence then as a result of the reduction. Secondly, I asked what assessment had been made of the effectiveness of the schemes, but I am afraid that I got no answer. I tabled a written question on the issue on 3 April this year, which means that I was due an answer this morning. Sadly, I did not receive an answer to the important question of how many schemes have been reduced, how many are now in existence and the Governments assessment of their effectiveness. My guess is that I will not receive an answer, although I hope that the Minister will give me it tonight. Unless the Government effectively assess what they do, they cannot do anything effectively; the premise is simple. My concern about the Bill is that nothing in it tells me that the Government are assessing properly. I shall talk more about that in a little while.
I move on to taxation. I can say from my own experience that the business sector is not getting the message that the Government are business friendly. In fact, it is becoming increasingly concerned about the Governments attitude when it comes to real measures rather than words. There has been a capital gains tax increase from 10 per cent. to 18 per cent.an 80 per cent. increase. I welcome entrepreneurial relief, but many entrepreneurs are still being put off from starting, developing and growing businesses. We need to recognise the impact of such increased taxation on small businesses particularly. What assessment has been made of that increase, and what effect do the Minister and the Government generally feel that the increase will have on small business start-ups and on the businesses that might leave these shores as a result of increased taxation? Capital gains tax plays a particular role in that respect. It is estimated that the Exchequer yield from increased capital gains tax will be £250 million in 2008-09, £300 million in 2009-10 and £500 million in 2010-11. However, it does not seem to assess what the cost impact will be in real terms. If it does, I will be happy for the Minister to prove me wrong later, but I bet that I do not get a proper answer.
An example of the impact of Government thinking on small businesses is that of income shifting. Many small businesses run by husband and wife teams will recognise the value of consultation undertaken by the Government after due pressure and will be equally pleased that this measure has been put off until 2009, but there is fear about the bureaucracy that will be enacted at that time. Anybody who has been involved in a small business and knows about the impact of such bureaucracy will understand that fear. It will mean all sorts of double accounting for husband and wife teams.
My main concern, however, is that the Government seem to believe that every small business is out to twist the taxman. That is the impression that they give. One need only read what the Chancellor said in his Budget
speech to recognise that that was the underlying theme of this move. The truth of the matter is that most people in small businesses are, frankly, too damn busyI apologise if that is unparliamentary language, Madam Deputy Speakerearning a living and creating and developing their businesses to have the time to think about dishonesty with the taxman. In fact, they are quite fearful of the taxman and want to be honest because they do not want him on their backs. I do not understand why the Government think that small businesses are out to cheat them. Again on assessment, it would be nice to know what is the economic advantage to the Treasury. Has that figure been worked out? Are we putting a massive burden on small business generally for very little return to the Treasury simply because this Government do not trust business? If so, business knows the answer and will know how to act.
The Bank of England has estimated that around half the people who describe debt as being a serious burden are from a low income group...People living in housing provided by local authorities or housing associations are more than twice as likely to have been in debt than the average person...Debt and a number of other serious social problems are interdependent on each other both in terms of cause and effect...Those out of work are more likely to have experienced serious personal debt problems...Those who left school early, or came from single parent families, or whose parents were unemployed are more likely to have been in debt.
There is a massive debt problem for people at that level; I do not want to talk about loan-sharking today, but that has an impact. It is all about weekly cash flow, and the problem is that the Governments proposals will affect that. There lies the hidden problem that they have not understood. I wonder whether they have assessed the impact of that weekly necessity to repay debt and how that relates to the abolition of the 10p tax rate. If so, perhaps the Minister will tell me what it is. That is a serious matter that has not been considered and needs to be.
The Budget, as represented in this Finance Bill, has not helped many sectors of the community. It has created massive concern for home owners, as indeed has the Prime Ministerthe previous Chancellor over a period of years. It has brought despair to would-be first-time buyers, because there was no help for them. It has turned off entrepreneurs and depressed business managers. It has made the poor poorer. Sadly, all this is from a Minister who has bailed out bankers who have caused their own problems, and caused problems for this country, not only by allowing increased personal debt but by acting in the most irresponsible manner imaginable. There are parameters to controlling any sector of business, and, by golly, there is an immediate need to look at the finance sector.
Stephen Hesford (Wirral, West) (Lab):
I would categorise the position of the official Opposition as follows: opportunistic, contradictory and wrong. So far, we have had crocodile tears from Conservative Members, although I do not necessarily include the hon. Member for Northampton, South (Mr. Binley) in that. I have to say to some of my own colleagues that
there is an element of naivety in the approach to the 10p tax rate conundrum. That has two parts: the issue itself, and all that it means, and the context in which this Finance Bill and the Budget were producedthat of the global economy. We cannot unpick those two elements. It is all much of a muchness in relation to the stability package that the overall Budget was designed to address.
We would not double the 10 pence tax rate for five million of the lowest-paid families.
He went on to list a litany of unfunded tax-and-spend promises to the value of about £20 billion. However, having stated that he would not double the 10p tax rate, he did not say what he would do on that issue. The shadow Chief Secretary did not say that either. He hid behind the technical defenceI think, Madam Deputy Speaker, that you were asked about it in several repetitious points of orderthat the Opposition cannot table amendments to make positive suggestions on the Budget. That is not what the Opposition are duty bound to do if they are suggesting, as the right hon. Member for Witney suggests, that the abolition of the 10p tax rate is wrong. What the Opposition can do, and I invite the hon. Member for Fareham (Mr. Hoban) to do this in his winding-up speech, is tell us their policy. I know that they cannot put it down in a technical amendment and affect the Finance Bill in that way, but they could tell us their policy on the 10p tax rate, and what they would do about the £7 billion it would cost to vote against the measures in the Bill.
The contradictory nature of what has been said comes from the hon. Member for Tatton (Mr. Osborne). I do not know the gentleman who wrote an article recently in The Parliamentary Monitor describing the hon. Member for Tatton as petulant and unremarkable. Whether he meant that personally or with regard to policy is for hon. Members to decide, but I want to address policy. In a recent article on 8 April, the hon. Gentleman said:
Todays generation of bankers, economists and politicians across the Western world are also confronting problems that few had imagined possible even a year ago.
Mr. Colin Breed (South-East Cornwall) (LD): Is the hon. Gentleman saying that it was perhaps a mistake to announce such a radical change to the tax situation a year before it took place, when the Government could not possibly know the economic circumstances in which that change would take place?
We must not rush to rash judgment or premature solutions,
but that is exactly what the Opposition seek to put forward. The right hon. Member for Witney did so, among a litany of other issues, in the article to which I referred earlier. However, the hon. Member for Tatton
went on to contradict himself in his article. Having said that the crisis was not foreseeable even a year ago, he goes on to say:
But the warning signs were ignored because under...the old economic consensus all was well.
Stephen Hesford: The hon. Gentlemans memory is short. During the 10 years that my right hon. Friend the Prime Minister was in post as Chancellor, there were a number of pauses in the global economy, to say the least: the dotcom collapse, the Asian collapse and American problems in the early 2000s. One of the only economies that survived and prospered was this one. The Chancellor was entitled to take some credit for the stability and growth that this Government brought forward from 1997.
The hon. Member for Tatton, having said that the credit crunch could not have been foreseen, and having claimed that we should have foreseen it, said that we cannot rush to judgment and that not every problem
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