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We have talked about some of the unanswered questions, such as who will get the backdated proposals and those about the issue of cash flow, and we have not yet heard an answer, although we hope that we will later. Furthermore, we have not heard about how long the compensation
packages will last. Will they apply for one year only, as some Government measures do? For the people affected, losing the 10p rate is not just for Christmas, but for life.
Not only low earners are involved. Many in the London media commentating classes make the mistake of thinking that anybody who earns £14,000 to £17,000 a year is a low earner. For many constituents of mine, that is a typical wage. People who work as hotel receptionists or on farms or who have secretarial jobs do not regard themselves as low earners or as people who need to be beneficiaries of the largesse of the state. They want to get on with paying a reasonable proportion of their salaries in tax to fund public services, but they also want to be able to provide for themselves and their households. The issue affects millions of people—including, but not exclusively, the poorest.
Stewart Hosie: I thank the hon. Gentleman for giving way; he is being very generous. He has been talking a lot about Liberal Democrat policy and what might happen at a general election in two years’ time, but my constituents are struggling now. The reason for the concern on the Labour Benches and elsewhere was that all our constituents are struggling now. No one is going to reinstate the 10p band at a cost of £7 billion; we are looking for mitigating procedures that cost about £700 million. Will the hon. Gentleman support the Conservative amendment, which seeks a guarantee that the right hon. Member for Birkenhead (Mr. Field) got the guarantee that he thought he got, and that as much as possible is done as quickly as possible for the people who are struggling today?
Mr. Browne: Yes, is my answer to that. [Interruption.] Well, I have never claimed anything else. People were asking what the Liberal Democrats were going to propose at a general election in two years’ time, and I was doing my best to say that our instincts are that people with low earnings should be assisted and pay a lower proportion of their wages in tax than they currently do.
The Government have not addressed a fourth point to our satisfaction. They have all this talk about compensating people who are “average” losers, which seems an entirely nebulous concept. If one person has no money and another is a millionaire, their average wealth is £500,000, but that figure does not reflect the circumstances of either person. The Government talk about “average” losers, but some people may be overcompensated and end up with more money as a result of the package than if the 10p rate had been kept in place. Other people will not be adequately compensated. We need to hear further details about precisely how the compensation will work.
Furthermore, we need to know how the mechanisms will work—full stop. We seem to have a new concept for compensating pensioners called the summer fuel allowance, which will run from April until September or October and make sure that pensioners stay warm enough in July and August. That seems a strange and blunt instrument. The minimum wage is talked about as a way of addressing problems, but that is not necessarily entirely in the Government’s hands to deliver. The Low Pay Commission has a say, and the burden is borne by employers and not by the Government in the form of the taxpayer.
On face value, the package of proposals put before us as a result of the lively meeting between the right hon. Member for Birkenhead (Mr. Field) and the Prime
Minister leaves far too many questions unanswered to be satisfactory to any self-respecting Labour MP.
David Howarth (Cambridge) (LD): Another problem with using the minimum wage is that it will not help two obvious groups of people: first, those whose overall pay is low because they are part-time, even though their hourly rate is greater than the minimum wage; and, secondly, self-employed people such as jobbing builders and low-paid freelancers of various sorts—window cleaners, for example—who will not be benefited by an increase in the minimum wage.
Mr. Browne: My hon. Friend is right in both regards. The hundreds of thousands of people who fall into those categories will not be satisfied with the proposals that have been put forward, despite the fact that so many Labour MPs instantly leapt at them as the solution to all their woes.
Mr. Ian Taylor (Esher and Walton) (Con): The hon. Gentleman is making a good case against the Government. Does he accept, first, that movement of the minimum wage would not have an impact until 2009 in any event; secondly, that it is an unwarranted interference with the Low Pay Commission by the Government; and, thirdly, that it is an attempt to make industry pay for the Government’s cock-up?
Mr. Browne: I will make this short by saying that I agree with all three points that the hon. Gentleman makes.
Susan Kramer: Is my hon. Friend aware that the proposal will not help many people in London, because firms have gradually been encouraged to move to the London living wage of just in excess of £7? A movement in the minimum wage does nothing for those people, who are in effect living close to the poverty line because of London prices.
Mr. Browne: My hon. Friend makes an excellent point. The national minimum wage has less effect in London, where wages and the economy as a whole are geared at a higher level because the cost of living is greater. Raising the minimum wage by, for example, 50p will therefore have a less profound impact in this part of the country than it would elsewhere.
Many questions remain unanswered. The truth is that Labour MPs have been fooled twice on the 10p rate. They were fooled on 21 March 2007, when they waved their Order Papers and decided that the Prime Minister was somebody they could place their faith in to lead their party, and they were fooled again last Wednesday when the Prime Minister wobbled in the face of their threats and they thought that they had achieved a victory, which has turned out to be built entirely on sand.
Two claims were made about the Prime Minister prior to his taking office, one of which was that he cared deeply about the poor. We now discover that his main obsessions are positioning and political manoeuvring. He is making fumbling attempts to appeal to middle England, which he does not understand. Let us have no
doubt about this. After all, what was the motivation for cutting the basic rate from 22p to 20p, paid for in large part by doubling the 10p rate? It was so that the Prime Minister could say to the Daily Mail and to other representatives, as he saw it, of middle England, “Don’t believe for a moment that Tony Blair leaving as leader of the Labour party means that new Labour is dead as a concept. I am still able to carry new Labour—the election-winning coalition that has got us through the last three general elections and can still be held together with me as leader of the Labour party. My demonstration of that is that I am able to trump the Conservative party on the basic rate of tax.” That was the motivation—it had nothing to do with the poor.
David Taylor: Will the hon. Gentleman carefully consider what he has just said and retract it in the interests of accuracy? He is repeating what the hon. Member for Runnymede and Weybridge (Mr. Hammond) said a few days ago—that the cost of reducing the standard rate from 22p to 20p was being met largely by the impact of the reduction of the 10p rate on the less well-off. That is not the case. The cost of reducing the standard rate is £7,000 million or thereabouts; the cost, and the impact on the 5.3 million people affected, is £600 million or thereabouts, which is less than 10 per cent. of that.
Mr. Browne: I am grateful for the hon. Gentleman’s intervention, but it is based on an inaccuracy. It is not often that I stand up for those on the Conservative Front Bench, but their analysis is right. The people who are net losers from the doubling of the 10p rate—
David Taylor indicated dissent.
Mr. Browne: Listen, and I will explain. Compensating only the people who are net losers because of the doubling of the 10p rate would cost about £700 million—the figure mentioned by the hon. Gentleman. The total increase in revenue from doubling the 10p rate is far greater than that because someone who is earning £100,000, £150,000 or £200,000 a year will also be affected by the 10p rate. We are talking about two separate measures. The 2p reduction in the basic rate was paid for in large part—I did not say entirely—by the doubling of the 10p rate. A lot of people are net beneficiaries of that change because the 2p reduction in the basic rate more than compensates them for the doubling of the 10p band, which is quite narrow. However, some people on lower incomes—those who are, depending on their circumstances, earning up to £18,000—are net losers. The hon. Gentleman is confusing two separate points.
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I will, however, meet the hon. Gentleman halfway on this point. I find it galling to listen to the Conservatives professing great concern about the poorest in our society. We remember, in March 2007, the current Prime Minister’s final Budget as Chancellor of the Exchequer, and the misplaced euphoria of the Labour MPs who thought that this was a man capable of winning a general election. We remember the heightened excitement in the autumn of last year, when there was a possibility that a general election would take place and when it still seemed plausible that the Prime Minister could deliver a victory for the Labour
party. The Conservatives had their conference at that time, and the shadow Chancellor made a speech that was extremely well received by large parts of the media.
Mr. George Osborne (Tatton) (Con): And the Treasury Front Bench!
Mr. Browne: I am being generous to the hon. Gentleman—to some extent his speech changed the political dynamic. Many people felt that it had a significant effect on the Prime Minister.
The shadow Chancellor identified in his speech what the priorities for the Conservatives would be, were they able to cut taxes. We have to cast our mind back and ask ourselves who the beneficiaries of the Conservative tax-cutting package were. Were they the people I mentioned a while ago—those on typical wages, such as people working on farms, hotel receptionists or secretarial staff? No, they were completely overlooked. Were they pensioners on modest incomes between the ages of 60 and 64? No, they were completely overlooked. Were they people on low wages under the age of 25 without children? No, they were completely overlooked, as well. The people whom the Conservative party thought had the most acute needs in our society, and were therefore most deserving of an easing of their tax burden, were people who lived in houses worth somewhere in the region of £1 million, who had entirely paid off the mortgage on their house. I regarded that as an extraordinary prioritisation, although I do not doubt that it was effective in preventing the Prime Minister from calling a general election.
Mr. Osborne: I am grateful to the hon. Gentleman for giving way, and for talking about my conference speech. One of the consequences of that speech was the introduction by the Labour Government of clause 8, which increases the inheritance tax allowance available to married families. I presume that since the hon. Gentleman has mounted such a vitriolic attack on helping people with inheritance tax bills, his party will vote against clause 8.
Mr. Browne: I am not launching a vitriolic attack on anything. I think that there is a place for inheritance tax, as does the hon. Gentleman, because he does not want to abolish it altogether. At the moment, because of rising house prices the threshold at which people start to pay inheritance tax is too low. The point of dispute is whether it should be raised as high as the hon. Gentleman is proposing, or whether there are people who need that assistance more. I would argue that my constituents and others who earn £11,000, £12,000, £13,000 or £14,000 a year are more deserving of Government assistance than those who live in houses worth £1 million who have paid off their mortgages entirely. We shall have to agree to differ on that.
Mark Lazarowicz (Edinburgh, North and Leith) (Lab/Co-op): In the interests of clarity, do the hon. Gentleman’s colleagues who represent London constituencies agree with his views on inheritance tax and the limit at which it should come into effect? Do they agree—
The Chairman of Ways and Means (Sir Alan Haselhurst): Order. It is an interesting little diversion, inheritance tax, but we should return to the subject of the amendment before the Committee.
Mr. Browne: I have not checked with all my hon. Friends, but I am sure that they agree with me on the matter. Given that our position is logical, consistent and principled, it would be odd if a lot of logical, consistent and principled people did not agree with it. However, I shall move on, as instructed.
There were two myths about the Prime Minister before he took office and was exposed. The first was that he put the needs of the poor at the top of his agenda. That has been proved emphatically not to be the case. He is far more interested in political positioning and manoeuvring, especially if he is trying to outmanoeuvre the Conservative party, even if some of the poorest people in our society constitute the collateral damage.
The second myth about the Prime Minister was that he was the master strategist, a chess player who thought several moves ahead. That claim now appears laughable. Indeed, the Secretary of State for Justice, who was the Prime Minister’s campaign manager when he stood in the uncontested election for leader of the Labour party, now apologises for the Prime Minister’s errors. He said—in a way that I suspect has led to another icy meeting behind the scenes—that the Government’s “best brains” had not managed to work out that there would be more than 5 million losers as a result of doubling the 10p rate. The best brains are clearly not good enough to help those on the lowest incomes.
At the weekend, Lord Levy told us that Tony Blair is alleged to have said that the Prime Minister did not have the necessary skills to win a general election and that he lacked the personality and the strategic skills necessary to be in No. 10—
The Chairman: Order. The hon. Gentleman has been dilating considerably beyond the terms of the amendment. He has been speaking for more than half an hour in a debate, for which the time, I understand, is likely to be limited. Perhaps he will now conclude.
Mr. Browne: I am sorry, but I was distracted in part by a wide range of interventions.
The point I was seeking to make about the motivation behind the doubling of the 10p rate was that we have a Prime Minister who lacks the necessary moral compass and strategic skills to have a policy that is consistently able to help—
The Chairman: Order. I thought that I had encouraged the hon. Gentleman to desist from that line of debate. We must come back to the substance of the amendment.
Mr. Browne: I will conclude, Sir Alan, by saying that Labour Members have an opportunity to show this evening that they have not been fooled by the concessions that were made on Wednesday, which will not achieve what the Government claim: that millions of people on low to middle incomes who have been adversely affected by the doubling of the 10p rate will be compensated. Those hon. Members who have expressed their concerns through early-day motions, media interviews and other forums need to put their money where their mouth is and vote accordingly.
Mr. Frank Field: Mr. Haselhurst—
The Chairman: “Chairman” will do.
Mr. Field: Chairman Haselhurst, thank you for calling me.
It has already been an extraordinary debate in that the public have learned something that they did not know before today—that no party proposes the reintroduction of the 10p tax rate. The debate is about the way in which we compensate those on low incomes who have lost out through the abolition of the 10p rate. It does not help matters for hon. Members to get up and declare that they were always against or always in favour of the 10p rate. We are dealing with the reality that the amendments do not try to overturn the Budget but are massively concerned about how it protects the poorest who lose out.
The second issue that we have to decide tonight is whether we accept the line that the Conservative Opposition are following in their amendments, which is that they are greatly concerned about the circumstances of our poorest constituents. Again, it does not help very much that, as I remind the Committee, when we debated whether we should bring forward a package of amendments to last year’s Budget that would have given the Government a whole year to work out how it might work, only one Conservative Member supported the lead amendment. Since then he has been expelled from the Conservative party—he is the hon. Member for Castle Point (Bob Spink). We are assured, as the right hon. Member for Suffolk, Coastal (Mr. Gummer) will no doubt confirm, that there is great rejoicing in heaven over one sinner who repents. There are 192 of them repenting tonight, so clearly there will be a great big party up there at the results of this conversion.
Given the length of the debate already, it would be helpful if I outlined what I thought the agreement was that was made by the Prime Minister and the Chancellor. It would also help if that could be confirmed by my right hon. Friend the Financial Secretary when she speaks. We all know that if we are not to be beguiled by the Tory Opposition, we have a right to take the measure back into our hands when the Bill comes back on Report.
Jeremy Corbyn (Islington, North) (Lab): I commend my right hon. Friend for his work on the matter. Despite whatever is said this evening, does he feel that the reintroduction of the 10p rate would be a better and fairer way of ensuring that the lowest paid pay less in tax than a complicated form of compensation through a multiplicity of means?
Mr. Field: No doubt, but I still long to see a simplified tax system that abolishes all allowances other than the personal allowances and that gets the standard rate way below 15 per cent. and heading to 10 per cent. for us all. That would send out the most powerful message; indeed, I offer that proposal to the Opposition, who like to say that they will be radical. If they start sniffing at that one, I am sure that those on the Treasury Bench will become more interested in it.
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