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.
6
pm 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.
I say to the
Financial Secretary that even after the Government’s volte-face,
when they rewrote the Budget after telling us that they could not
rewrite it and found
£2.7 billion after telling us in the run-up to the Crewe and
Nantwich by-election that they had no money—not that it did them
much good; the cost was £213,000 per vote cast—1.1
million households are still worse off as a result of the measure. We
know who they are now, but only because of work done by organisations
such as the Institute for Fiscal Studies, not because of official
analysis by the
Government. 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.
6.15
pm 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.
| 
