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Mr. Gummer: In asking that of those on his Front Bench, will the right hon. Gentleman also ensure that the Financial Secretary accepts that she was wrong to give the impression in an earlier debate that there were not significant numbers of people who were affected by the measures? She specifically said that she did not accept the figures that were presented by our party. However, the Government now admit that the right hon. Gentleman and the Opposition were right, and have had to change their views.
Mr. Field: I thought it was quite clear to us all that the Government now accept that there are significant numbers of losers. Because the Treasury Committee is starting an important inquiry on this point, it would help us all, when we think of the evidence that we wish to give that Committee, if the Government at some stage—perhaps not tonight, but soon after this evening’s debate—brought us up to date on how many losers they expect. What is the age of those losers? Where are the losers in the totality of the income distribution? How many of those losers are in households in which the other member gains from the cut from 22 to 20 per cent., so that the household is better off, although that individual loses?
Before any of us thinks that that is a satisfactory way of advancing, I would remind my colleagues that we are committed to individual taxation. To be told that husbands might gain from the measure but wives lose is not much comfort, either to the wives or to those of us on the Labour Benches.
David Taylor: Does my right hon. Friend agree that the suggested method of reimbursement for sizeable groups using the working tax credit is seriously flawed, given that fewer than one in four households without children that are entitled to the working tax credit actually claim it? That has to be taken into account.
Mr. Field: I shall come to that point in a moment.
9.15 pm
Paul Holmes (Chesterfield) (LD): Before the right hon. Gentleman tries to pin the Government down on their vague promises, will he give his opinion on how we got into this appalling state? He mentioned that the proposals were put forward by the then Chancellor just over a year ago; 13 months later, the Prime Minister has said several things within the space of a week. First, he said that nobody would lose out, then he said that some people would lose out, but that the Budget was too complicated to unravel. Then he said that people would lose out and that the Government would try to unravel it, but that it would take six months to work out what to do. Is that the result of staggering incompetence or of outright cynicism and their belief that they could treat the poor as badly as they liked and those people would still vote Labour?
Mr. Field: That is a very good question, which the hon. Gentleman should ask the Prime Minister. Much as I would like to be answering from the Dispatch Box, I am not; I am speaking from the Back Benches.
I want to get on to what I understood the agreement to be about. The first and most important point was that the Government wished to devise a package of
compensation that was as comprehensive as possible. There may be doubts about the numbers, but I did not doubt for a moment that once the Government adopted a new position, there would be compensation. My understanding was that they were not going to take a mean-minded approach that excluded people, and that there would be efforts to make the package as comprehensive as possible. They were going to consider two ways in which to achieve that: through tax credits or using the Revenue.
I agree with my hon. Friend the Member for North-West Leicestershire (David Taylor) that there are real difficulties with using the tax credit structure as a means of achieving that objective. The Government were to look at the Revenue and national insurance systems to see how packages of compensation could be paid, and the compensation package was to be made up of several factors. There is clearly a definable group of people who will be affected—those aged over 60 but under 65. In the Budget, the Government have substantially increased personal allowances for those aged 65 and over, which covers that group for losses owing to the abolition of the 10p rate. Some of the funds in relation to the reduction of the rate from 22p to 20p will also be used.
Ms Sally Keeble (Northampton, North) (Lab): Does my right hon. Friend agree that that 60 to 65 group concerns women pensioners in particular, especially those who have made provision for private pensions, which is a minority of women? Does he agree that those who have made provision for their retirement will feel particularly aggrieved about losing it?
Mr. Field: I agree totally. They are one of the many groups whom we should wish to salute, rather than kneecap, when we pass measures in this place. The Government are considering compensating that very group, which my hon. Friend has mentioned on a number of occasions. One mechanism for paying that group might be the one that is used to pay the winter fuel allowance. That is not to say that it would be a winter or summer fuel allowance, but that such a mechanism might be one of a number of ways in which the Government could reach and compensate groups that have suffered.
Joan Walley (Stoke-on-Trent, North) (Lab): Does my right hon. Friend agree that another group that we need to ensure is represented to the Treasury Select Committee is people in manufacturing areas and heartland constituencies who have taken early retirement? Many of them are ex-miners from our former coalfields, and they are particularly concerned about how they will be identified and how their tax increase of about £240 per annum will be compensated in full and backdated.
Mr. Field:
I agree totally. That leads neatly to my third point. My understanding is that there will be an effort to seek out people who are aged under 60 but in work, and to find means by which to compensate them. That brings me back to the point made by my hon. Friend the Member for North-West Leicestershire that there are different ways of doing that. Once again, however, let us not kid ourselves that this is going to be an easy exercise; but when we say that, let us also remember that no party is advocating the reintroduction of the 10p rate. We are in difficult terrain and I, for one,
do not doubt the Government’s wish that the final package—it may be produced in stages—should be as comprehensive as possible.
Mr. Field: I give way to the hon. Member for Northavon (Steve Webb).
Steve Webb: I am grateful to the right hon. Gentleman, who is hugely respected on these issues. On the issue of 60 to 64-year-old women, will he tell the Committee his understanding of what he was promised? In principle, that is the simplest group to deal with, so if it has lost, say, £200 in round figures, is it sufficient for the right hon. Gentleman if the winter fuel payment or whatever it is called is £200, or should it be the average loss of the group? What is he expecting?
Mr. Field: I am about to come on to that very point, as I think we need to grow up on that aspect of what we can realistically expect from the Government.
The fourth part of the package was—
Mr. Philip Hammond: I am grateful to the right hon. Gentleman for giving way; my point is directly pertinent to what he was saying. Will he tell the Committee more about what he was promised in respect of time scale? A few minutes ago, he said that his hon. Friends would have an opportunity to revert to the matter on Report, the implication being that that would happen if the Government failed to deliver. Does that mean that the right hon. Gentleman has a commitment that the concrete proposals will be available before the House considers the Bill on Report?
Mr. Field: If only hon. Members would let me conclude, Sir Alan, I could answer all these questions.
The fourth part—not necessarily a central part—of the package is that the Government will look further into the minimum wage. That does not necessarily mean, as many people have interpreted it, changing the rates. The hon. Member for Esher and Walton (Mr. Taylor) talked about imposing costs on employers, but I suspect that all hon. Members who are avid readers of the reports from the minimum wage commission will know that a number of recommendations were made, including lowering the age at which the adult rate should start. Recommendations have already been made, which the Government have not accepted in the past, so it is not true to say that somehow the Government are going to go in with their boots to the minimum wage commission and make it set rates or change its attitudes. The Government may be just a little humble, read the reports and act on them.
Linda Gilroy (Plymouth, Sutton) (Lab/Co-op): Does my right hon. Friend agree that that could well address the concerns of some students in constituencies such as mine? They work part time for the minimum wage at the moment, so their needs would be addressed if the age level were raised.
Mr. Field: I am always pleased to give way to my hon. Friend, who reminds me that people might benefit from more than one part of the package. Some will benefit if, as we hope, there is movement on the minimum wage, while others might benefit from revenue changes or tax credits if that route is followed.
Mark Lazarowicz: Will my right hon. Friend give way?
Mr. Field: No. I am sorry, but I am anxious for others to contribute to the debate.
The fifth part of the package was about the payments. I have always understood—I apologise if I have misled anyone—that a Government starting from scratch and trying to affect 5.3 million people would not be able to strike an overall deal on the basis of 5.3 million personalised deals; whatever is done will be done to groups and to averages. The hon. Member for East Dunbartonshire (Jo Swinson), who is no longer in her place, spoke earlier, but what she said about the extent of the losses was not true, unless there are more weeks to the month in Scotland than we have south of the border.
If hon. Members look at the evidence given to the Treasury Select Committee, they will see that the distribution of losses is narrow and that many losses are of about £2 a week. Therefore, I was under no illusion that—starting from scratch—there could be a personalised losses service. Average payments would be made to groups. Some would gain marginally and others would marginally lose, but for most people it would be practically the sum that they lost. That is what the agreement would be about.
As important as that, I understood that all the different components of the package, when they were announced—they may be announced at different times during the year, as the Government are able to do so—would be backdated to 1 April this year. Those are the six points that I thought were in the package and that I believe will be in the package.
My concluding comments are to tell the Committee that I have no intention of voting for the Tory amendment. I am not beguiled by it; I am not fooled by it. Although I am pleased about the Tories’ new position in defending our poorer constituents, the move to ensure that the Government developed their policy—let us euphemistically put it like that—came from this side of the House. We should remain in possession of this package.
I know that the Financial Secretary to the Treasury, my very right hon. Friend the Member for Liverpool, Wavertree (Jane Kennedy)—who was the first person from the other side of the river to stand up publicly and fight Militant and who was not scared at all of some of the worst fights that we have had to face in our region and beyond—does not need any threatening from our side.
My final comment is not a threat. I want to say that any Minister, however good, needs as much force as they can have behind them when they are dealing with officials. We on this side would hope to have quite a lot of the information available before we reach consideration on Report. We will have the Select Committee reporting by then. We should have the outlines of how the Government are going to develop that. My right hon. Friend can be as tough as possible with her officials
and say that we have another chance to return to our amendment, although I do not expect someone as tough as her to be overcome by any resistance in the Treasury. Should she be, we will be behind her and moving that amendment on Report.
Dr. Richard Taylor (Wyre Forest) (Ind): It is a pleasure to follow the right hon. Member for Birkenhead (Mr. Field), for whom I have a very high regard.
The problem of the abolition of the 10p band was brought home to me with devastating clarity at my constituency surgery just last Friday. How is a single childless disabled man, unable to work and under the age of 60, on an income of less than £8,000 per annum whose tax has gone up from just £4 to nearly £10 a week—from £200 to £500 a year—to be compensated immediately? That is why I support the remark made by the right hon. Gentleman that we need answers now for those of our constituents.
I was pleased to hear a Labour Member moot the possibility that perhaps it would be right to go back to the 10p band. One need only have read yesterday’s edition of The Sunday Times to be aware that under the present Government the richest people in the country have become astoundingly richer, and to feel that it must be possible to find the money from some of our richest people to compensate people such as my constituent, on a pitiful wage.
9.30 pm
Mr. Kenneth Clarke (Rushcliffe) (Con): I find this an extremely unhappy debate. It follows a period in which we have seen several Budgets dominated rather more by politics than by any great economic common sense or sense of social justice. In a way, two of them have been conflated. The Budget that introduced the 10p rate was, in my opinion, based on a mistake, and the Budget that has tried to remove it has made a mistake as well. Listening to today’s debate, I find myself uncertain about how the House as a whole—if there is, temporarily, a majority in the House that wants to repair the damage—will emerge from this, and what exactly is supposed to result from the Government’s package to restore the position.
I always opposed the introduction of the 10p rate, and I therefore do not think that we should argue for its reintroduction. It was introduced in 1999 because the Government had got themselves into a political commitment to reduce the starting rate of tax to 10p in the pound. That was a mere electoral slogan, produced to give the impression to people paying the standard rate that they would all start paying the 10p rate, because then, as now, the Government—particularly the present Prime Minister—constantly ran scared of the Conservatives’ reputation for tax-cutting. Although the present Prime Minister was not going to cut taxes, he gave the impression that the 10p rate would be the new starting rate and introduced it, which caused unnecessary complication to the tax system and did not benefit anything like the number of people that some Labour speeches had given the impression it would.
I always worried about how some Government would manage to get rid of the 10p rate. I assumed that sooner or later a Labour Government would get rid of it—just as a Conservative Government would: we do
not want too many income tax rates, because it over-complicates the system—but I thought that it would be difficult to get rid of it, because it would not be possible to raise taxation on precisely the group who have been hit now. I must admit that the only solution that occurred to me was that over the years it might be possible to fix, and not raise, the ceiling for the 10p rate and let the threshold creep up over time, so that one day, mirabile dictu, it would vanish; but it might have taken a very long time to do it in that way.
What I never expected was that the very Chancellor of the Exchequer who had introduced the 10p rate would, many years later when faced with another political imperative, abolish it in the most clumsy and insensitive fashion by trying to bury it in a Budget dominated—he hoped—by other headlines, and smartly increase the effective tax rate on some of the lowest earners in the country. That brings me to last year’s Budget, which was the cause of our problems.
Mr. Philip Hammond: Their problems.
Mr. Clarke: The country’s problems, and, as my hon. Friend correctly points out, the present Government’s problems.
The Chancellor wished to go out on a grand note. As we now know, he was contemplating a possible general election in the autumn after he had established his leadership. Given his alarm about our party—which I am glad to say I think we currently justify, although there have been times in the past when his permanent fear of the Conservative party as an Opposition has been a little exaggerated—he was worried last year, and decided to pull off the master coup of cutting the standard rate of income tax, stealing all the Tory clothes and running away with them, as he saw it, with considerable enthusiasm.
The trouble was that because of the state of the public finances, the Chancellor could not conceivably afford to cut the standard rate. It was not sensible to do so when he was presiding over deteriorating public finances and a borrowing requirement that he was not even capable of forecasting correctly, let alone financing in any responsible way. So he did not find all the money from the 10p rate; he found some from business. He presented as a tax-cutting Budget what of course turned out to be a tax-raising Budget. That was a frequent performance of the present Prime Minister when he was Chancellor of the Exchequer. Too much of the money was raised by abolishing the 10p rate, so there was an extraordinary transfer of money from some of the poorest earners in the country to quite a lot of the better-off.
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