Finance Bill

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Mr. Hammond: The hon. Gentleman makes his point, but it will not surprise him to hear that I disagree entirely. It is difficult to understand how anyone could think that £5 billion per year could be taken out of pension funds, making a £5 billion hit on their income, not once, but every year, without that having a negative impact on the value of those funds and the future security of retirees who depend on them.
Stephen Hesford: The hon. Gentleman knows that this is not the first time that the House has debated this bogus issue.
Mr. Hammond: It is not a bogus issue.
Stephen Hesford: It is a bogus issue. On one of the last occasions that the matter was debated, it became clear that the policy—the withdrawal that the then Chancellor, now Prime Minister, continued—was started under the Conservative Government. The reason that it was started under the Conservative Government was that it was thought to be—and was, based on the knowledge at the time the decisions were taken—affordable.
Mr. Hammond: The problem with the hon. Gentleman’s argument is that it is very clear now, but was not clear then, in 1997, that Treasury officials identified the problems that would be caused to pension funds, the Chancellor was advised of them, and the suggestion that the measure was expected to be positive is itself bogus. We saw that when eventually, after a two-year legal battle fought with public money, the freedom of information request made by The Times was finally acceded to. However, I suspect, Sir Nicholas, you would not want me to divert into a debate that, as the hon. Gentleman rightly says, we have had before in this House. Indeed, I had the privilege of winding up a debate on the disclosures under the Freedom of Information Act to The Times last April or May. We had a very good debate on that occasion.
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The point that the hon. Gentleman would not disagree with me about, given the disclosures that have now been made, is this: there were impacts on pensioners, people over 60, as a result of that measure. Those impacts were not well understood at the time. We did not understand them. He and I were both brand new Members at the time, and I do not think that he understood them either. If we had a principle that when measures were proposed in the Finance Act, the distribution of the impact on different groups of the population, particularly vulnerable groups, would be set out in a report to Parliament then the debate would be informed and hon. Members representing constituents who were to be disadvantaged, as with the 10p changes, would hear the views of those constituents and could in turn make those views known, either through unofficial contact with Ministers and the Treasury or through open debate in Parliament. That would be a good thing.
Mr. Field: My hon. Friend is making some sensible points. Does he agree that it is also a salutary lesson that any incoming Government should not restrict their room for manoeuvre? To a large extent, what happened in 1997 was that the Government came in—
The Chairman: Order. I really do not want to go back over history. Can hon. Members please deal with the Finance Bill that is in front of us, not what happened in 1997?
Mr. Hammond: The only reason I am raising the events of 1997 is to show that there are cases—we had one last year, we had one in 1997 and there have been others of a less significant nature—where the absence of a requirement to report to Parliament on the distributional impact of a measure means that it goes unnoticed.
Justine Greening: I certainly know the impact of there not being such an obligation on the Government. I have been trying for nearly six weeks to find out what the impact of vehicle excise duty is on those on a low income, many of whom will be elderly, and I have singularly failed to get one parliamentary question answered that I tabled at the beginning of May. I have written specifically to the Ministers on this and had no response yet, so I know well why the new clause is needed.
Mr. Hammond: I was just going to refer to my hon. Friend’s difficulty as another example. The vehicle excise duty debate, which we have already had, is another example—
The Chairman: Order. I am sorry, but I really must ask the Opposition to deal with the Bill, and not vehicle excise duty, which is not relevant to this particular debate.
Mr. Hammond: With respect, Sir Nicholas, this debate is about a new clause that would require the Treasury to report on the distributional impact of any measure included in the Finance Bill. If new clause 13 were in effect now, the proposals in the Bill on vehicle excise duty would have been reported on in terms of their distributional impact on people over the age of 60 and, under the terms of new clause 14, their impact on people in the lowest income decile. My hon. Friend has been seeking that information from the Government for some time, through parliamentary questions, which is the only route available to us, and the Government simply ignored her request for information. As we do not have such information about the impact on particular groups, it is impossible for us to make the case fully against measures that we believe are extremely unhelpful and wrong in the current environment. That is why the new clause has been tabled.
Figures released only last week show that pensioner poverty has risen by 300,000 both before and after housing costs. The need to address the concerns and problems of people over the age of 60 is therefore even more acute. As they face the rising pressure of price increases from which we all suffer, and some of the burden of the taxation changes that the Government are making, it is incumbent on us in the House to ensure that the impacts on that vulnerable group of people are known to us, are manageable and are not excessive. The number of pensioners living in poverty now stands at 2.5 million before housing costs, and 2.1 million after housing costs, and we all share the objective of ensuring that those numbers do not increase. We must keep a close handle on such matters.
I have dealt with pensioners under new clause 13, and I shall speak now about new clause 14 and explain why it is important for us to have an analysis of the impact on those in the lowest income groups. We have phrased the new clause in terms of people in the bottom income decile, but I should be happy to consider a suggestion from the Government that it might be targeted differently. The right hon. Member for Birkenhead sought in his amendment to the Finance Act 2007 to look at the impact on the lowest quintile of the income spectrum, and it would be perfectly legitimate for us to debate which group we need to focus on given the position today.
We are in a shocking situation. The United Kingdom has a higher proportion of its children living in workless households than any other EU country. The poorest fifth of households in the UK pay a higher proportion of their income in taxes than any other group. Surely that in itself is a reason why we must study carefully the distributional impact of taxation measures proposed under the Finance Bill.
Social mobility in this country is the lowest of any country in the developed world. It has declined to the extent that a poor child born in Britain in 1970 is less likely to escape the poverty of its upbringing than one born in Britain in 1958. That is partly because of the Government’s insistence on tackling poverty by attacking the symptoms rather than by attacking the causes, which are largely social and family breakdown, addiction, debt and worklessness.
Why focus on the need to identify the impact now? Again, in this year’s Finance Bill, the interests of the poor were sacrificed on the altar of political expediency. It was a shameful attempt, and it ultimately backfired on the Government. Clearly, when the now Prime Minister announced his measures in the 2007 Budget, he expected to have had the general election before the impact of the abolition of the 10p tax rate became apparent to people. If new clause 14 had been in effect, he would have had to set out precisely what the impact was and explain the measures, so that low-income families would have seen the impact and made their concerns known to their Members of Parliament. Those worries would have been transmitted back, and we might not have had all the problems that we have had subsequently.
The case for considering the impact on those groups makes itself. The Select Committee on the Treasury, in its report on the 2008 Budget, said that
“the group of main losers from the abolition of the 10 pence rate of income tax seem an unreasonable target for raising additional tax revenues to fund these and other initiatives.”
We all know that the parliamentary Labour party agreed with the Committee’s view. I could—but I will not—give you innumerable quotes on the issue, Sir Nicholas, from people of undoubted stature who understand the importance of considering the impact of such measures in general, and this measure in particular, on those at the bottom of the income scale.
We still do not know whether the measures announced by the Chancellor a few weeks ago to mitigate the impact on the 4 million adversely affected are temporary and for this year only or permanent. If the Financial Secretary can throw any light on that, it will be enormously helpful—mainly, I suspect, to those members of the Committee from her own party. It will prevent such a situation from ever arising again. It will prevent people such as the hon. Member for Blyth Valley (Mr. Campbell) from having to pop up and say things such as:
“I don’t know where we’re going hitting the working man at every corner”,
or the hon. Member for Great Grimsby (Mr. Mitchell) from having to say, as he did on the BBC news on 27 May:
“It is a bombshell that will explode when it comes into force. We are warning this will hit people and will hit the Government.”
That is what happens when people discover after the event, and after the opportunity for them to have their say has passed, that measures will negatively affect ultra-vulnerable groups in a way that they did not anticipate when those measures were first announced. In an effort to be helpful, I am skipping some points that I wanted to make, but I realise that the hour is pressing, so I shall not detain the Committee for much longer.
I understand fully that the Minister may not accept the new clauses. She may argue against accepting them. That is fine, but it is difficult to see in principle how one can make a case against a transparent official analysis of the distributional impact of proposed legislative measures. I believe that it is normal practice in many other jurisdictions. We are considering measures to change how we make tax law. We have announced a review under the chairmanship of Lord Howe to look at how we make and scrutinise tax law in the House. There is a widespread feeling, and not only on the Opposition Benches, that the Finance Bill and the supply estimates, which are important parts of the machinery of government, are not properly or adequately scrutinised. They are at the heart of what we do in Parliament, and a necessary part of ensuring that they are properly scrutinised is to make adequate information available to all Members of the House—information that can be relied upon and quoted in debate, because it is official information.
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I would like to ask the Financial Secretary a specific question. Whether she chooses to accept the new clauses, and whether she accepts the case for the publication of the distributional impact of tax measures, will she at least assure the Committee that the Treasury makes such a distributional impact assessment? It is one thing to understand that the Treasury has done the work but chooses not to share it with Parliament, so that Parliament cannot scrutinise the Bill properly, but wholly another to suggest that the Treasury has not done the work at all.
In the debate on the abolition of the 10p tax rate—perhaps I should call it the doubling of the 10p rate—I think that we got an acknowledgement from the Treasury that it had done the analysis and identified the number of people who would be losers, and how that total number broke down into various sub-groups such as couples without children, young people on low earnings, and people between the ages of 60 and 64 who were not able to benefit from pension credit. However, it would be useful to be reassured that the Treasury does the work. Therefore, we are asking, through the new clauses, for the publication of information that is already held in the Treasury, not for additional work or costs to the public purse. We want that information to be placed in the public domain so that Parliament has the opportunity to hold the Executive to account.
You may not agree with me on everything, Sir Nicholas, or even on much, but I am sure that you will agree that it is our basic duty in this place to hold the Government to account, and that we can do so only if we are provided with the proper information and tools. It is not acceptable, in the 21st century, with a Prime Minister who says that he wants to strengthen the power of Parliament, for analysis to be made in the Treasury and kept there so that Parliament has to guess. The evidence of history is that Parliament, on all sides, sometimes fails to identify the impact of measures on those groups that most need our protection, most look to us to defend their interests, and most need us to identify and protest about measures that have a negative impact on them and their families.
I look forward to hearing what the Financial Secretary has to say. If she feels that the principle is acceptable, but the precise definition of income groups targeted in new clause 14 is wrong, we have no philosophical commitment to the lowest income decile—it could be a wider group that she feels is important. When she rises to respond, perhaps she will bear this in mind: opposition is difficult, whether from the Government Back Benches or from the official Opposition. Perhaps the lesson of what has happened over the past six months is that sometimes, what the opponents of a measure have to say, whether on the Government side or the other side, has value and validity. She might think about how difficult opposition is, because she might have the opportunity to practise it some time in the not-too-distant future.
The Chairman: Before I ask the Minister to reply, I wish to say that I am gravely concerned about the way in which the proceedings are being carried forward today. I am conscious that, in the Chair, I have a responsibility to hon. Members on both sides of the Committee. We have already lost the Scottish National party Member, who has had to return to Scotland. I am conscious of the position of the hon. Member for South-East Cornwall, who needs to get back to the west country. Looking at the Government side of the Committee, I see hon. Members who need to get back to the north-west of England and the west midlands. I was given a fairly clear undertaking by the Whips on both sides of the Committee that we would be able to conclude our deliberations on the Bill at a reasonable time today, and I mean at about 4 o’clock.
Mr. Hammond: No.
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