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Mr. Peter Lilley (Hitchin and Harpenden) (Con): The Chancellor has not spelled out where he will obtain the welcome £3 billion, almost, that he was not able to find at the time of his Budget. In the past he has always said that any tax cut translates automatically into a reduction in the number of nurses, doctors and teachers. If he is not saying that that consequence follows in the case of his tax cuts, why does he say it of other tax cuts?
Mr. Darling: I am glad the right hon. Gentleman does not want to see any reduction in the numbers of doctors, nurses and teachers. As I said in my statement, I promised the Select Committee that I would return to the matter in the pre-Budget report. The reason that I am announcing the step today is so that we can legislate in the Finance Bill that is before the House, to get the changes in place so that the extra money can be in the hands of taxpayers from September onwards.
John Battle (Leeds, West) (Lab): I thank my right hon. Friend for his patient efforts to tackle and resolve the matter. That clearly demonstrates that even in difficult circumstances, it is this Chancellor, this Prime Minister and this Government who are clearly on the side of the people on low pay and middle incomes. Will my right hon. Friend also deal with the abysmally low take-up of tax credits? Could his Department initiate a take-up campaign so that people get the income that is justly theirs?
Mr. Dai Havard (Merthyr Tydfil and Rhymney) (Lab): On a point of order, Mr. Speaker.
Mr. Speaker: After the statement.
Mr. Havard: I would like to read it—
Mr. Darling: On the point made by my right hon. Friend the Member for Leeds, West (John Battle), I agree that we need to do more to encourage the take-up of the working tax credit. The take-up of the child tax credit is quite substantial. I am grateful to my right hon. Friend overall for the welcome that he has given.
Mr. Speaker, if my statement is not now in the Vote Office, it ought to be, and I will take steps to make sure that it is.
Mr. Speaker: It has been put to me, Chancellor, that those in the Press Gallery have the statement— [Interruption.] Order. I take a dim view of the Press Gallery having information before the House. I hope that that information is wrong.
Mr. Darling: From the moment I sat down, my statement should have been available. Steps are being taken to find out why it is not in the Vote Office, because it ought to be there.
Mr. Darling: Mr. Speaker, I understand that there actually are copies of my statement outside.
Mr. Iain Duncan Smith (Chingford and Woodford Green) (Con): Can the Chancellor confirm that the 1.1 million losers of whom he spoke earlier are from the lowest income brackets—those earning between just under £7,000 and £8,000 a year? Those people will lose up to £120. Will he confirm that that is the case? Will he now take the opportunity to apologise to them— as his right hon. Friend the Member for Birkenhead (Mr. Field) has done—right now at the Dispatch Box, for all the trouble and fear that he has caused them?
Mr. Darling: As I said in my statement, the overall effect of what I am proposing is that 4.2 million households will receive as much as or more than they lost. The 1.1 million people to whom I think the right hon. Gentleman referred will see that their losses are at least halved. He asked about the distribution of those people. The position is that there are people at different stages of income who do not benefit as much as others. I said that I will return to that matter at the pre-Budget report this autumn.
Mr. Russell Brown (Dumfries and Galloway) (Lab): I most sincerely congratulate the Chancellor on the steps that he is taking today. I do not wish to be pedantic, but I sincerely hope that in the pre-Budget statement he takes steps on the issue of families who still find themselves £2 or £3 a week worse off; £2 or £3 a week is precious to people on extremely low incomes. I hope that he will further rectify the situation with a second announcement in the pre-Budget statement.
Mr. Darling: I said in my statement that I wanted to concentrate help in future years particularly on those with lower incomes. Today I have been able to propose a measure that will benefit not just people on low incomes, but a substantial number of my hon. Friend’s constituents and others who face increased bills at this time. It is right to do that, having regard to the current uncertainties in the world economy and the rising prices that people face here at home.
Stewart Hosie (Dundee, East) (SNP): In his statement, the Chancellor said that he would deal with the issue this year, that he would offset the average losses and that he has brought forward the increase in the allowance to £600. I give that a very, very guarded welcome—first, until I read the small print, and secondly, because 1 million-plus individuals will still be worse off.
Will the Chancellor confirm, however, that the change to the allowances on earnings will have no bearing on the abolition of the 10p rate on savings income, and that those households that may lose up to £460 a year in additional tax because of the abolition of the 10p tax rate on their savings income will not be compensated in any way as a result of the measures announced today?
Mr. Darling: Last year, when the changes were proposed, the savings rate was not changed at all. If the hon. Gentleman was raising a slightly different point or I misunderstood him, I will be happy to deal with that in correspondence. However, I think that he will find that the savings rate was not changed.
Mark Durkan (Foyle) (SDLP): I join other hon. Members in welcoming the Chancellor’s statement. The remedy that he has announced today is clearer and has come earlier than previous statements had indicated. As well as the welcome remedy that he has provided for the 4.2 million households—in some cases, it is better than a remedy—will he give us an assurance that the figure of 1.1 million in respect of those who will see their loss reduced by at least half is accurate? Will he tell us who, typically, those remaining losers are and why they could not be better helped?
Mr. Darling: As I explained in my statement, I am proposing to increase the personal tax allowance that everyone gets. To that extent, the benefit is a flat-rate one that will go to all basic-rate taxpayers. As a result, 80 per cent. of people will find that their loss is completely offset or that they will do better than that. There are others whose loss is at least halved. At the pre-Budget report, when I set out proposals for future years, I want to do more, particularly for people on low incomes.
When I looked at how we might deal with the problem, I saw that the difficulty of trying to isolate actual losses or set up a rebate system that took account of individual circumstances was such that doing those things would have taken a very long time. I also suspect that it would have been a very blunt-edged instrument. The approach that I have set out is more straightforward and simpler and has the benefit of getting money into the hands of people at an early opportunity, rather than our having to wait right up until the end of this financial year.
Mr. Michael Fallon (Sevenoaks) (Con): But why should 1.1 million still be losers? At a time of rising prices, why should any low-paid people pay more tax?
Mr. Darling: I said when I wrote to the Select Committee—and this was certainly a theme taken up by many Members of the House—that what I wanted to do quickly was offset the average loss that was sustained by people following the withdrawal of the tax rate. That is what I sought to do, and that, I think, is the right thing to do. If the hon. Gentleman thinks that we should be doing something different or more, then no doubt he will advocate that course to his own Front Benchers. As far as I can see, however, they have no intention of doing anything more, just as I suspect, if left to their own devices, they would have absolutely no intention of helping people on low incomes at all.
Judy Mallaber (Amber Valley) (Lab): I very much welcome the statement, because it would be very cumbersome to try to recalculate for individuals. It also recognises that although taking children out of poverty has been very welcome, those without children or whose children have grown up have lost out because of this. Will my right hon. Friend still consider some of the proposals that he previously suggested he would consider, such as the minimum wage for young people and the tax credits system generally, in looking forward to the next pre-Budget statement?
Mr. Darling:
Yes, I can. I said that one of the things that we needed to consider was the minimum wage and its inclusion of younger people. Equally, in relation to tax credits, I think, unlike the Conservatives, that tax
credits have gone a long way towards boosting the incomes of people on low and middle incomes and have made substantial changes. As my right hon. Friend the Member for Leeds, West (John Battle) said, we need to ensure that take-up of the working tax credit is improved, but tax credits are a much better way than we have had in the past of helping people who particularly need help. The answer to my hon. Friend is that those are both areas to which I will return.
Julia Goldsworthy (Falmouth and Camborne) (LD): There are still 1.1 million low-income households that will lose out as a result of today’s announcement, even though all the people who had previously been paying the basic rate of tax will gain. Why does the Chancellor consider that this group remains the least deserving poor, in his opinion?
Mr. Darling: As I said earlier, I wanted to introduce a system that was simple, that was quick to get on to the statute book, and that, above all, was quick to get the money into the hands of as many taxpayers as possible. The problem with the sort of scheme to which the hon. Lady refers—a rebate scheme, because that is the only way in which one could do individual calculations—is that it would be cumbersome and complicated. I suspect that if we set it up, she and her party would be the first to criticise it.
Jeff Ennis (Barnsley, East and Mexborough) (Lab): The Chancellor will know that in my constituency there are many former miners who took early retirement in the 1990s, mainly because the Tories closed all the pits in south Yorkshire. Many are now above pensionable age and have been adversely affected by the removal of the 10p income tax rate. What are the implications of the Chancellor’s statement for constituents of mine who fall into this category?
Mr. Darling: As I said in my statement, the changes that I propose affect people over the age of 60 to 65. That is why I decided that the personal tax increase should apply to them rather than making a payment through the winter fuel payment mechanism. In 2007, when my right hon. Friend the Prime Minister made his original proposal to reduce the basic rate of tax to 20p, he raised the age-related allowances for the over-65s in order to look after them. The answer to my hon. Friend is that his constituents of pensionable age will benefit from this in the way that I described.
Bob Spink (Castle Point) (UKIP): I welcome the Chancellor’s statement. For the future, will he consider introducing a fairer, simpler flat tax system removing 4.5 million low-income people from paying tax, which is another sound UKIP policy?
Mr. Darling: I am grateful for the hon. Gentleman’s welcome, but I cannot go along the road with him in relation to his flat tax proposal, although it was at one time the stated policy of the shadow Chancellor.
Sir Stuart Bell (Middlesbrough) (Lab):
May I recall to the Chancellor’s mind the noble Lord Lamont? When Lord Lamont pushed interest rates up to 15 per cent., Britain was required to withdraw from the exchange rate mechanism and it took us years to recover, which
we did only with the onset of a Labour Government. I congratulate the Chancellor on assisting low and middle-income earners and all tax-paying families, as we have done over the past 11 years, in contrast with the record of the Tory Government from ’92 to ’97.
Mr. Darling: My hon. Friend is quite right. The whole country has benefited from high levels of employment, and from the fact that we have historically low interest rates and—even given today’s figures—historically low inflation rates, which are lower than those in America and Europe. During the past 11 years, because we have had such a strong and stable economy, we have been able to do far more to lift children out of poverty, lift pensioners out of poverty and help people on low incomes as well as those on middle incomes. I believe that my announcement today will go a long way in helping people who do not have children, or whose children have grown up—a group of people whom many in my party feel strongly we ought to support, especially at the moment.
Anne Main (St. Albans) (Con): I am somewhat disappointed that we cannot have an accurate profile of those who will still lose out, apart from describing them as having their average losses halved. The Chancellor says that he has used a system that is simple and quick—some might say he has done so for expediency—but that indicates to me that those lowest-paid workers will have a system that will be slow and complicated, in which case they will be hard to target and to recompense, and my constituents will not find that acceptable.
Mr. Darling: My proposal means that through the tax system, assuming the House agrees to the amendments that I have proposed, from September taxpayers will receive a payment of £60, followed by a monthly payment of £10 for the rest of the financial year. I would have thought that that was pretty simple. The hon. Lady would be on stronger ground if she were putting forward an alternative, but as I understand it, the Conservative party does not have a position. It has no idea what it would do.
Geraldine Smith (Morecambe and Lunesdale) (Lab): Credit where credit is due: people often say that politicians do not listen, but the Chancellor has shown that he has listened and he has acted very quickly to help low-paid people in my constituency. I am very grateful for that, but does he agree that it is difficult out there at the moment? People are struggling with the rise in food prices and the price of fuel, which are due to world economic circumstances. Will he give me an assurance that he will continue to look out for the interests of those on modest incomes?
Mr. Darling:
I strongly agree with my hon. Friend, which is why this year my proposal will help not just people on low incomes—below £20,000—who were affected following the withdrawal of the 10p rate, but crucially, people on middle incomes of up to £40,000 as well. I agree with her that people, especially those without children, are finding it difficult. They have to meet higher fuel and food bills because of what is happening throughout the world, and it is right that we should help them. That is why my proposal is deliberately designed to help a far wider range of people than was anticipated
when we were simply talking about the starting rate of tax. I welcome what my hon. Friend says; I am sorry that the Conservatives cannot do so.
Paul Holmes (Chesterfield) (LD): I welcome the Chancellor’s partial attempt to undo the damage caused by the previous Chancellor to the poorest earners. I regret, however, that more than a million, including many in my constituency, will still be losing out. I ask the same question that I asked three weeks ago: why did it take 13 months for the Government to realise what their policies would do? Did they not analyse the figures 13 months ago and realise what the impact would be on the poorest, or did they have a cynical belief that they could do this to the poorest because they would still vote Labour?
Mr. Darling: Last year, my right hon. Friend introduced a number of changes to the tax credit system, raising the age-related allowances, but it is clear that others had lost out and we needed to help them. I am sorry that the hon. Gentleman cannot welcome what I am proposing today, but it is infinitely better than what I am beginning to detect might be the Liberal Democrat policy, at least for today, which is a policy relating to rebates. I do not think that that would be the right way to proceed.
Mrs. Joan Humble (Blackpool, North and Fleetwood) (Lab): I welcome the simplicity of the scheme that the Chancellor announced because it will enable a speedy response, which is what my constituents want. They want the money in their pocket as soon as possible. Will he therefore tell me how he intends to let them know about this good news? Sadly, there are many 60 to 64-year-old pensioners and people on the lowest of incomes who do not read newspapers and who do not see television news. Will he write to them directly or work through the voluntary organisations that have links with them to let them know that relief is at hand?
Mr. Darling: There is always a chance that my hon. Friend’s constituents will read about the announcement in the newspapers or see it on the television, but I will consider ways in which we might better tell people what is happening. The advantage of my proposal is that the payments will be made through the PAYE scheme, with which most people are familiar and which is simpler and easier to operate.
Mr. Oliver Letwin (West Dorset) (Con): May I ask the Chancellor to check whether the Government’s announcement of a one-year tax rebate during a by-election is consistent with electoral law?
Mr. Darling: I think that my proposal is entirely sensible and the right thing to do. I am sorry that the right hon. Gentleman, who I am sure is concerned about people on low and middle incomes, cannot welcome it.
Rob Marris (Wolverhampton, South-West) (Lab): I welcome my right hon. Friend’s revised proposals for the 10p tax rate. When might the House expect him to introduce revised proposals for vehicle excise duty rates for next year?
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