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Kate Hoey (Vauxhall) (Lab): I rise to ask a question in a spirit of genuine openness. This time last year, my right hon. Friend the Member for Birkenhead (Mr. Field) moved an amendment, which eight of my colleagues and many Liberal Democrat Members—and, I think, one Conservative—voted for. Why did the hon. Gentleman not vote for this last year, when we had the opportunity that was led by eight of my colleagues—and myself, I have to say?
Mr. Hammond: I will answer that question genuinely—as, in fact, I answered the same question last Monday. We flagged this tax on the poorest within an hour of the then Chancellor sitting down at the end of his 2007 Budget speech. The amendment in question sought to impose an ongoing restriction on Governments, Chancellors and the Treasury in dealing with income tax changes. We felt that that was not the best way to deal with the problem. This specific issue is in this year’s Finance Bill, and we are addressing it by tabling amendments that will deal with the problem before the House today.
Mr. Jim Devine (Livingston) (Lab): If the Conservatives were in power today, would they reintroduce the 10p rate?
Mr. Hammond: We have not said that we would introduce the 10p rate, and it is clear that the Labour Members whose position was critical in forcing the Government’s climbdown were not necessarily seeking to reinstate the 10p rate. [Interruption.] The hon. Gentleman says, “Ah”, but perhaps he would care to ask the right hon. Member for Birkenhead (Mr. Field), who is sitting not 3 m along the Bench from him. Those Labour Members were seeking to get the Government to go away and look at this package again, and make sure that those on the lowest incomes who lose out from the proposals were compensated. That is also our objective tonight.
Lyn Brown (West Ham) (Lab): Will the hon. Gentleman give way?
Mr. Hammond: No, I shall make a little progress now, if I may. [Interruption.] Well, let me tell the hon. Lady what the Labour party manifesto of 1997 said. It said:
“Our long-term objective is a lower starting rate of income tax of ten pence in the pound.”
When the then Chancellor introduced it in 1999, he described it as a measure
“that will make work pay and help people, especially those who are low-paid, to keep more of the money that they earn”
“When we make promises, we keep them”.
I was therefore surprised to see in what can only be described as the “slippery letter” of the Chancellor to the Select Committee Chairman issued last Wednesday, that the 10p rate championed by Labour in 1997 as a long-term objective is now described as having been
“introduced in 1999 as a transitional measure.”
8.15 pm
My hon. Friend the Member for Worthing, West (Peter Bottomley) also noticed that change of tone, and asked the House of Commons Library to check
whether there had ever been any reference to the 10p rate being transitional prior to the 2007 Budget. The Library’s answer was clear:
“No. It does not appear to have been described that way.”
Therefore, it is not any longer a “long-term objective”, and not any more a step
“that will make work pay and help people...to keep more of the money that they earn”,
but now, after the Government have abolished it, it was apparently a mere transitional measure. This is not so much a question of,
“When we make promises, we keep them”,
but more a question of, “When we make promises, we’ll spin and we’ll twist and we’ll duck and we’ll weave to cover our tracks as we break them.”
In fact, the statement that the rate was introduced in 1999 as a transitional measure is, to put it bluntly, a terminological inexactitude. If it had been uttered in this Chamber, rather than in a letter, the Chancellor would have been forced to withdraw it. It is a rewriting of history that would make Stalin blush; a long-term policy objective has been airbrushed out to become a mere footnote—a transitional measure of no lasting importance.
Mr. Philip Dunne (Ludlow) (Con): My hon. Friend is giving a forensic analysis of the machinations that the then Chancellor, now the Prime Minister, has had to go through to get this proposal through the House. Is my hon. Friend aware that earlier this afternoon, in response to some penetrating questions from a Labour Member, the permanent secretary was forced to admit that the Treasury was, as long ago as the Budget of last year, completely clear about and aware of who would be losers under the abolition of the 10p rate?
Mr. Hammond: I was not aware that that admission had occurred this afternoon, but I am not surprised by what my hon. Friend says and I can tell him this: 5.3 million low-income households know to their cost that the Prime Minister does not keep his promises, and that he was prepared to betray them for his own short-term political interests.
Lyn Brown: Will the hon. Gentleman give way?
Mr. Hammond: Yes, I will give way to the hon. Lady.
Lyn Brown: I am very grateful to the hon. Gentleman for giving way. About 40 per cent. of my constituents earn less than £19,000 a year. That means they will lose out from the 10p rate. However, the vast majority of them will gain substantially because of the way in which the moneys have been redistributed through working family tax credits, child care tax credits and housing benefit. [Interruption.] No, not clients of the state; people who work hard for the state, and who receive only the minimum wage in return for their labour.
Mr. Hammond:
From what the hon. Lady says, it appears that she represents a constituency where earnings are below the national average. The figures, from the independent Institute for Fiscal Studies, are clear: 5.3 million households will, after taking into account all the other factors in the Budget package, be worse off.
That is the group of people we are addressing today. Also, in addition to those 5.3 million people, there are millions more people—including some of her constituents —who have benefited from this package and who are equally disgusted that a Prime Minister, especially one who poses as the protector of the poor, could so cynically betray those who have placed their trust in him.
What is the Prime Minister’s response? As recently as a week last Friday, he was insisting that there was no problem and that no one would be worse off, despite the independent evidence mounting all around him, the threats of resignation from some within his own Government, the comments of his own senior Ministers, the figures produced by the Institute for Fiscal Studies and the rising tide of public anger reflected in the views and mood of his Back Benchers.
Instead of listening and responding as the furore mounted, the Prime Minister and the Chancellor dug in with their few remaining loyalists in the bunker. The Prime Minister said that there was no problem and that no one would be worse off, the Chancellor said that he could not reopen the Budget and the Secretary of State for Children, Schools and Families told The Daily Telegraph that the tax rise on the poor was part of the process of
“taking forward the fairness agenda.”
The Minister for the Cabinet Office dismissed the fate of the 5 million or so losers as a “matter of regret”.
Senior Downing street sources were briefing like mad to The Guardian on Saturday 19 April, saying:
“The idea that someone is going to stand up...and pull a rabbit out a hat is just not possible”.
On 20 April, The Sunday Telegraph reported having been told:
“We are not doing anything. We are not going to change our policy”.
The Exchequer Secretary was slapped down when she dared to suggest—with some prescience, as it now seems—that there might be some movement, and the Chief Secretary’s Parliamentary Private Secretary, the hon. Member for Sheffield, Hillsborough (Ms Smith), got a blast of transatlantic vitriol when she sought to express her constituents’ concerns.
The position was clear: the Prime Minister out of touch—and, indeed, out of the country at the critical time—was on top of it. He said:
“I am satisfied that once people understand the scale of the good things that we’ve been able to do in reforming the tax system ...then whatever questions people have about these changes can be answered”.
Everybody else—Members who were reading their e-mails, opening their postbags, doing their surgeries and talking to their constituents during the recess—were all, apparently, hopelessly out of touch. Alternatively, in the view of those in the bunker, the others were perhaps just too stupid to understand what the great genius in Downing street had achieved.
Mr. Gummer:
Is not the real sin of this the Government’s failure to admit that people were worse off? How does my hon. Friend think the Prime Minister would explain things to a pensioner involved in the Royal National Lifeboat Institution who, at the opening of a new lifeboat in my constituency, pointed out that she would be £2.50 a week worse off because of the proposals?
The thing that really made her angry was that the Government in general, and Ministers on the Treasury Bench in particular, pretended that that was untrue. She objected to being told that she was a liar.
Mr. Hammond: Once again, this is a case of the Prime Minister treating people as if they were fools. He knew exactly what he was doing, as did we, and, in the end, as did Labour Members. The Government only last Wednesday came kicking and screaming, dragged to admit the truth.
Every parent explains to their children that the only way to deal with a bully is to stand up to him. This Prime Minister is a bully, make no mistake—one need only ask the hon. Members for Sheffield, Hillsborough or for Hyndburn (Mr. Pope) about that. To their credit, a significant number of Labour Back Benchers rallied behind the initiative of the right hon. Member for Birkenhead in demanding compensatory measures for those who were to lose out, before the measures were implemented. I am not talking about a scrapping of the plan to double the l0p rate, but a revisiting of the wider package to restore the £700 million or so that was going to be taken from the pockets of those on the lowest incomes. They stood up to the Prime Minister and, true to form, he bottled it.
The Prime Minister offered no apology, no explanation and no recognition of the enormity of the policy that he had pursued, defended and sought to justify. The protestation that everything was cast in stone, that nothing could be revisited and that it was all in the long-term best interest of the country was forgotten in an instant. Faced with defeat, he ran up the white flag. He did so not because he had been persuaded of the argument or because he acknowledged that he was wrong, but simply to avoid a humiliation on the Floor of the House tonight. His was a tactical manoeuvre, and the right hon. Member for Birkenhead promptly claimed a victory—a victory it certainly was. The Prime Minister was humiliated. He was forced to climb down on a key proposal in the Budget that he had introduced a year earlier and in respect of which he had refused to countenance any form of compromise.
However, the top-level message that the demands of the rebels would be met, is not supported by the wording of that “slippery letter” from the Chancellor to the Chairman of the Select Committee, which is full of prevarication and procrastination. It talks about
“taking forward work to look at how we can help families without children”
“actively looking at ways to help these groups”.
“in hard work to see if those households who have lost out.. .can be helped through the mechanism that already exists”
“on potential changes to the tax credits system to allow the average losses from the removal of the 10p starting rate ... to be off-set” .
“on what changes could be made to the minimum wage regime .”
The right hon. Member for Birkenhead sent an e-mail to those Back Benchers who had supported his amendment, telling them that the Prime Minister had committed to compensation in full for all those who lost out and that
compensation would be backdated to the beginning of this tax year. We know what it said because Jeremy Paxman helpfully read it out on “Newsnight” to the Chief Secretary, who then pointedly refused to confirm that all those affected would be compensated, that they would be compensated in full or that compensation would be backdated.
The following morning on the “Today” programme, the right hon. Member for Birkenhead, in magnanimous mood, put the Chief Secretary’s prevarication down to a lack of briefing on the deal. I find that unlikely, given her usual diligence and attention to detail and given the fact that this was the life-critical issue for her Government at that point in time. We note with interest that she has decided this evening that discretion is a more attractive option than valour.
Linda Gilroy (Plymouth, Sutton) (Lab/Co-op): On prevarication, will the hon. Gentleman remind the House whether his party has finally arrived at a decision about whether it will restore the 10p tax rate?
Mr. Hammond: We have already dealt with that one; the hon. Lady was obviously thinking about something else at the time.
The hon. Members for Norwich, North (Dr. Gibson) and for Merthyr Tydfil and Rhymney (Mr. Havard) both popped up on our television screens expressing the slightly heretical thought that perhaps the right hon. Member for Birkenhead had been a little too hasty in accepting the Prime Minister’s vague assurances. They have clearly both noticed, as have Conservative Members, that when shaking on a deal with the Prime Minister, it is a sensible precaution to make sure one has got all one’s fingers back in one’s possession before counting the deal as done.
There is no doubt that the combined determination of the Opposition and a core of courageous Labour Back Benchers scored a great victory last week and exposed the Prime Minister, once again, as weak and indecisive. Nothing will detract from that achievement, but now it is our job, as the Opposition, to ensure that what has been promised is delivered. Today, the Prime Minister has not exactly reassured those of a nervous disposition, saying at lunchtime:
“We have sorted out the problems that existed which were the under-65s and we are sorting out the low-paid by looking at what we can do to help them”.
I must have blinked, because I missed the announcement on how precisely the under-65s are to be helped. For the Prime Minister’s information, “looking at” how to help someone is not the same as “sorting out the problem”.
Mr. Devine: Will the hon. Gentleman give way?
8.30 pm
Mr. Hammond: No, I am going to make some progress. The hon. Gentleman has already had one go.
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