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I long for a chancellor who stands up and introduces a Budget which abolishes all of Browns endless reliefs and creditsand uses the money to cut tax rates at the same time. My Budget has no title, the peroration would go, its your money, spend it as you choose. Am I alone?
We now know that he is not alone, as my right hon. Friend the Member for Birkenhead (Mr. Field) would agree with a lot of those statements, but we would not. We do not accept that that is the way to help the poorest families in this country.
As the next stage in the process, the package announced in the 2007 Budget changed the tax and benefits system to offer further support for work, families and pensioners. The changes removed the 10p starting rate of tax, reduced the basic rate of tax to 20p, increased the allowances for pensioners aged 65 and over, increased working tax credits to help low-income households and increased child tax credits to provide additional support to families with children. As a result of the changes, child poverty will affect 200,000 fewer than otherwise and households with children in the poorest fifth are, on average, £340 a year better off. Some 600,000 fewer pensioners will pay income tax.
In the 2008 Budget, the Government were able to go even further, with additional increases in child tax credit and child benefit that remove another 250,000 children from poverty. We will provide additional support to pensioners through the winter fuel allowance.
Sir Robert Smith: Some time ago, when I attempted to intervene, the Financial Secretary was making the point that under the Governments system it is crucial to encourage people where possible to take up the means-tested benefits, such as tax credits and pension credits. However, it is sometimes difficult to persuade someone to apply after they have been through the nightmare of the seesaw between reclaims, overpayments and underpayments. As others have said, if the Government are going to rely on that encouragement as the safety net and think that it will solve the problem, that is quite a dangerous presumption.
Jane Kennedy: The tax credit system, as a result of changes made as long ago as 2005, is vastly improved, and I continue work, as does Her Majestys Revenue and Customs, to improve customer experience of the service. The hon. Gentleman will know, because he will have heard me say so on previous occasions, of the changes that we are working to introduce that will help claimants, particularly those who have had problems in the past. We know who they are, and we can work with them to make their experience better.
The 10p starting rate of tax to be removed in clause 3 was introduced in 1999 as part of long-term reforms, and was part of the initial process to help support low-income households. However, with the measures that have been introduced since 1999, particularly the introduction of the national minimum wage and the subsequent introduction of tax credits, we can now better target our resources on low incomes.
Mr. Gummer: In our discussions over the past 10 days, the Minister told my hon. Friend the Member for Mid-Sussex (Mr. Soames) that she did not accept his figures for people who would lose out as a result of the changes. Will she now give confidence to the House by admitting that he was right, and she should have accepted those figures, which the Government now accept are correct?
Jane Kennedy: It was not clear at the time exactly what the figures were to which the hon. Member for Mid-Sussex was referring. I have dug out the answer I gave in the House in October to my right hon. Friend the Member for Birkenhead. It set out in detail those people who would benefit from the changes and those people who would lose: it set out the numbers, and the amounts per week anticipated for changes in income. That is quite clear, and I have never sought to deny it, so I do not know what the right hon. Member for Suffolk, Coastal is referring to.
Removing the 10p rate has enabled us to introduce further measures that reduce child poverty and remove pensioners from tax, but we have also produced a tax system with only two main tax rates applying to the same income as the two main rates of national insurance. This is now one of the simplest personal tax systems in the developed world. Having set out the benefits of the changes that we have made, I acknowledge that, as a consequence of redirecting resources as I have described, some households have less income as a result, and that those households are often on a low income. I regret that that is an effect of those changes, which is why we would have looked to help such households in the future anyway, and we intend to do that very thing in the next days and weeks.
I am grateful to my right hon. Friend the Member for Birkenhead for his kind comments, particularly his thoughtful and constructive contribution to tonights debate. He has rightly put Ministers on their mettle,
and he will want to see that progress has been made, as will other right hon. and hon. Friends. I can assure him and others listening that that work is being taken forward with great seriousness, and we are looking to respond to the concerns that have been expressed.
Mr. George Osborne: Will the Minister answer a specific point? The right hon. Member for Birkenhead (Mr. Field) said that he received an assurance from the Prime Minister and the Chancellor in private that compensation for all the groups affected would be backdated. The Chief Secretary and the Chancellor have been unable to give that commitment in public, but can she now do so?
Jane Kennedy: I do not wish to be drawn on the outcome of this further work. I say that advisedly, not intending in any way cynically to avoid the question that is being put, but it is only right and proper to undertake the work of reviewing what can be done properly and seriously, and to ensure that the Government can bring forward their commitment to do more, in particular for low-paid workers without children and pensioners under 65.
Mr. Frank Field: When my right hon. Friend reports back on the debate, I am sure that she will report that Labour Members attach huge importance to the fact that all groups will be compensated back to 1 April, and that is an issue that we hope we will not have to return to on Report, but if need be we will.
Jane Kennedy: As I have said, my right hon. Friend made a thoughtful and constructive response to the debate. I am grateful to him for the way in which he has contributed, and we will be working with him and others to take the work forwards. The Chancellor made a commitment in his letter that there are households that we want to do more to help. It would not be appropriate for the Government to commit at this stage to the detail of what measures we may consider before the report is delivered. However, I have taken note of the concerns that have been raised on the issue today and I will ensure that they are considered as part of the progress.
We know that there is still more to do for the future. The measures in the Finance Bill, including the removal of the 10p rate and the review that is now under way are part of that continuing process. I ask the House to reject the amendment and I commend the clause to the House.
Mr. Philip Hammond:
As the right hon. Member for Birkenhead (Mr. Field) said, we have had some clarification in the debate, but unfortunately none of it has come from the Financial Secretary, who has treated us to a history lesson and not much else. My right hon. and learned Friend the Member for Rushcliffe
(Mr. Clarke) commented on the right hon. Gentlemans achievement in that the Government have agreed to do something. The problem for the House and the right hon. Gentleman is that no one is clear what that something is. The right hon. Gentleman, in his e-mail to his fellow Members who signed the amendment last Wednesday, said that the deal involved everyone being compensated in full and would be backdated to 6 April.
Mr. Frank Field: Let us be quite straight about this. The Government have changed their position and they are starting to work. Had the hon. Gentleman and his colleagues supported the Labour amendment last year that we should work for the whole year on a programme of compensation, we would not be having this debate now.
Mr. Hammond: I am sorry that the right hon. Gentleman keeps raising the issue of his amendment last year, because it was not specific to the problem. It was an attempt to impose an ongoing constraint on the Treasury and future Chancellors of the Exchequer for all time.
Mr. Hammond: If the right hon. Gentleman will just allow me to make the point that his clarification tonight makes it clear that that package is not what has been promised to him, let alone what has been delivered. Although he was clear tonight that he has been promised backdating to 6 April for all this compensation package, the Financial Secretary, by contrast, was unable to confirm the Governments commitment to that aspect of the package.
Mr. Field: The amendment last year was about the House instructing the Government to bring forward a package of compensation to take effect with these tax changes in this Budget. That is what the Opposition did not vote on.
Mr. Hammond: As I recall the amendment, it required the Government to bring forward a package of compensation measures whenever they made proposals that negatively affected the tax position of the lowest quintileand to do so not just once, but every time.
Mr. Hammond: If the right hon. Gentleman will allow me, I shall address some of his other points. As I understand his comments this evening, he has said that the average loss for the group of people losing as a result of the measures is £2 per week, but the maximum loss is £256 per year. However, as I understand his comments this evening, the commitment that he thinks he has achieved from the Government now is to compensate only at the average loss of £2 per week. So there will still be people out there who have lost as much as £152 a year as a result of the measures, even if the Government deliver on the possibility of compensating them all at the average rate.
The right hon. Gentleman hoped that quite a lot of the information would be available by Report, but
nothing that we have heard from those on the Government Front Bench gives us any confidence that we will have a clear picture of the total package of compensation by that time. He has urged Labour Members not to be beguiled by the Conservative amendment, which the Financial Secretary has referred to as a wrecking amendment. I say to her and the right hon. Gentleman that it is not a question of being beguiled and that it is not a wrecking amendment.
The amendment should appeal as much to those who have confidence in the Prime Minister as it does to those who do not. It is an insurance policy for the House. It is a mechanism that would allow the House a guaranteed way of coming back to this issue if it is not resolved satisfactorily. The amendment would require the Government to tell the House what they have done, and they will not be in a position to do that by Report. I suggest to the House that it needs this insurance policy to ensure that the deal that the right hon. Gentleman, to his great credit, sought to do with the Prime Minister is delivered on by the Prime Minister and is not reneged on by the Government once this weeks elections are out of the way and the immediate inconvenience of a Labour Back-Bench rebellion is off the books.
We need to hold the Government to account and it is the job of the Opposition to put in place the mechanism for holding them to account. That is what the amendment does, and I urge my right hon. and hon. Friends to vote for it this evening.
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