Previous Section Index Home Page

However, the problem is that it is hard to do that precisely. What the Government came up with, in their
7 July 2009 : Column 880
emergency mini-Budget, was a £2.7 billion package, which, extraordinarily, gave money to people earning £20,000, £25,000 or £30,000 a year. Indeed, somebody earning £35,000 a year would have gained from the emergency proposals, whereas somebody on a much lower income would still have been a net loser as a result of those changes. The Government found that £2.7 billion out of nowhere and then blew the vast majority of it on people who were not net losers as a result of the change from 22p to 20p in the basic rate, coupled with the doubling of the 10p rate. That was the most extraordinary act of extravagance, but it was very badly targeted. The proposal was simple to implement, which was its one merit, but it otherwise failed in its objectives.

Where does that leave us now? It leaves us in an interesting position, questioning the Prime Minister’s judgment and the party of government’s overall strategy and direction; it also leaves us doubting Labour’s ability or desire to help the poorest in our society. Indeed, one interesting thread that runs right through the Bill is the number of measures that it contains that are disadvantageous to people who, in other circumstances, might have thought that the Labour party was on their side. It is interesting, for example, that the group targeted for gambling taxes are the people who play bingo, that there is extra duty on a pint of beer and that people at the lowest end of the income scale have not been compensated for the changes that we are discussing in relation to new clause 1. It is hardly surprising, when one looks at those measures, that so many people across the country are concluding that the Labour party, despite its historical record of commitment to them, no longer appears to be particularly interested in helping them in future.

That brings me neatly on to amendment 37, which is the sort of enlightened, progressive measure that people may have thought the Labour party would have championed in the past, but which they have long since given up hoping it will support in future. However, amendment 37 has been put forward by the progressive voice of British politics, which is me and the Liberal Democrats. It is a straightforward measure of the kind that would find favour with the right hon. Member for Birkenhead, who spoke about the need to cut taxes for people on low earnings, which is precisely what we seek to do.

Amendment 37 would raise the personal allowance—the segment of one’s income on which one pays no income tax at all—from the current figure of £6,475 in a financial year to £10,000. That would effectively implement a cut in income tax of £705 for anybody earning more than £10,000 a year, but it would also take out of tax altogether 4 million people whose income is above the current threshold but below £10,000. I do not pretend that amendment 37 is a cheap measure. It would cost billions of pounds to implement, which is why my party has identified a range of different ways of funding it. I could go into those at length, but as I talked about them in Committee, perhaps I will not detain the House today.

Before I conclude, however, let me talk about the motive, which is the important feature. In supporting new clause 1 and tabling amendment 37, my party is trying to do two things. The first is to help people on low incomes to stand on their own feet and be less reliant on the state. We realise that everyone needs assistance, and that people on low incomes need it
7 July 2009 : Column 881
most, but it is perverse to take money away from people in taxes and then reimburse them through some complicated mechanism elsewhere in the system. Our desire is for people to have an incentive to work because they get to keep more of their income, and to be more self-reliant than they would otherwise have been. We feel that that goes with the grain of human nature and that it is good for people in those circumstances. In the present recessionary environment, it is particularly desirable for people to have greater incentives to work and for those at the bottom end of the income scale to be able to keep a bigger share of their earnings.

Mr. Bone: Is there not a problem with the new proposal, in that it would not reimburse the people who lost out as a result of the abolition of the 10p tax rate, because it is not targeted in that way? The only way to reimburse those people is to reinstate the 10p tax rate. An advantage of the 10p rate was that people would go from paying no tax to paying 10p in the pound to paying 20p in the pound. The problem with this proposal is that they would go from paying no tax to paying 20p on the marginal rate.

Mr. Browne: The hon. Gentleman is right to say that, under my proposal, people would go from paying no income tax at all to paying a marginal rate of 20p in one leap. However, he is wrong to say that the people who lost out as a result of the doubling of the 10p rate would still lose out under my proposal. That is because the threshold that I am suggesting is higher than the top of the threshold for the 10p rate would have been. Of course, there would be extra costs involved, because many other people would benefit from my proposal. I went through the funding implications at some length in Committee.

The measure that I am proposing in amendment 37 is strongly compatible with new clause 1, and it has a similar objective. I said earlier that there were two aspects to our objective. The first is to incentivise people to work and to be self-reliant. The second is to create a fairer society. At the moment, many people on low incomes pay a very large proportion of their income in tax, partly because some of their consumer preferences are highly taxed. However, it is undesirable to levy income tax on people who are earning less than the minimum wage, only to try to reimburse them through an elaborate system of compensation. That is inefficient, and it reduces their ability to be self-reliant and their incentive to work. For all those reasons, we are keen to support new clause 1 and I urge hon. Members to support amendment 37.

Ms Keeble: I strongly support new clause 1 because it deals with an issue about which I have been concerned. I want to make some remarks about a particular group of people—namely, women between the ages of 60 and 64. I very much welcomed the introduction of the 10p starting rate of tax because it seemed an extremely progressive move. It represented a good stepping-stone on the way to paying the full rate of tax, and provided a welcome tax reduction for a large number of people on low incomes. It also seemed to provide a real incentive for people to go out to work, because they would not lose all their money to tax. Given that it was so successful, it is a great shame it was not retained as a proper part of the tax system.

7 July 2009 : Column 882
6.15 pm

The decision to scrap the 10p rate did two things. First, it caused real practical difficulties, because people’s tax went up. For people in a certain band, it doubled. Secondly, for the group of women I have mentioned, it produced a massive grievance. It is that second point that I want to deal with. The sense of grievance is as much a problem for them as the practical one of paying more tax, and it has persisted even though the Government have taken steps to deal with some of the practical issues.

I had exactly the same experience as the hon. Member for Fareham (Mr. Hoban), in that women came to see me with letters telling them that their tax was going to double. In some cases, their husbands came to see me and said that their wives were worried because their tax was going to double. They asked me whether I could look into the matter. Those women had worked hard all their working lives, sometimes starting out paying the married women’s stamp. They had brought up their children and they had done everything right. Their real grievance was that, having retired, they found that part of what they thought was going to be their retirement income was going to be eaten up by the extra tax.

I recognise that single working people on low incomes also have a problem, but it is much harder for people on fixed incomes. People who have been retired for a while, or who are about to retire and are trying to plan for the rest of their lives, do not have so many options. It is hard for them to come out of retirement and go back to work. They do not have the same options for increasing their income. It is also harder now because work is harder to find. If people see that their family income is going to go down, they will try to increase their work by taking on extra shifts or doing something else to get the family income up to the level they need. However, that is obviously much harder for those who are retired and on a fixed income.

A figure of 300,000 has been cited as the number of women in that position. I am sure that it would have been much higher, but women have had a real problem getting any substantial income in retirement at all. That has been well documented by Lord Turner and others. For women in this position, the problem is, in a sense, a result of their success. They have worked hard to make the necessary provisions and arrangements, and now find they are being hit precisely because they have been careful to ensure that they have an adequate income in their retirement, which is liable for income tax.

I do not know whether the hon. Member for Fareham wrote to the Chancellor, but I did. I have to say that the consequences of my doing so were even worse than the problem I had in the first place. The letter that came back said, in terms, “Yes, we recognise that the tax will double. However, please tell your women pensioners that they don’t have to worry, because their husbands will get an increased allowance.” That is because their husbands are mostly older than they are, and they will get a higher personal tax allowance once they reach 65.

That response intensified the sense of grievance. If there is one thing worse than telling a woman she is being discriminated against because she is a woman, it is telling her that everything will be all right because she will be able to depend on her husband to look after her in her old age. That was about the worst idea the Chancellor ever had. I cannot even remember whether I
7 July 2009 : Column 883
sent those letters out—I was so appalled at the idea of having to tell my women constituents that they were going to have to depend on their husbands in their retirement. That was not a sensible thing to say at all. Those women are very independent-minded. They have spent all their working lives working and providing for themselves and their families, and they often took life much more seriously than their husbands did.

I fully recognise that real progress has been made on a practical front. I also strongly suspect that, while a lot of thought was given to tackling poverty, the impact of the abolition of the 10p rate on women pensioners simply was not properly thought through. The House has spent a long time arguing for the position of women pensioners. A number of women Labour Members have argued that the position of women pensioners must be properly respected and that some thought should be given to ensuring that proper arrangements are in place for women to have a reasonable income in their retirement. I suspect that the matter was not thought through too carefully. None the less, while some of the practical issues have been resolved for this group of women, the sense of grievance is still there.

Although I have a great deal of sympathy with and am grateful to my right hon. Friend the Member for Birkenhead (Mr. Field) for introducing the new clause, I will not vote for it tonight. I wanted to raise this issue and discuss it because it has not been properly debated so far. Furthermore, I do not think that my constituents would thank me for the unforeseen difficulties that the Budget would face if the new clause were passed. We have to look at the practical side, as well as at the issue of what happens to women pensioners.

I hope that Treasury Ministers will look again at this issue; we are talking about only a small group of people, although I wish it were bigger. Given how much women work and provide for their retirement, more of them should have a pension income sufficient to be liable for tax. It is only because of the position women have faced—earning part-time wages, lack of access to occupational pensions and difficulties in securing private pensions—that more of them are not in that category.

Mr. Bone: The hon. Lady is making a sensible speech. I notice that her name appears on the amendment paper as a signatory to new clause 1, so is she really saying she is not going to support it?

Ms Keeble: No, which is exactly why I have explained my position on this amending provision and pressed Treasury Ministers on the issue of women. I have also explained why, if I am asked whether my constituents would thank me for causing the problems that would occur if the Budget did not go through, I do not think they would. [Interruption.] No, it is not unbelievable. As the hon. Member for Wellingborough (Mr. Bone) knows perfectly well, Members frequently table probing amendments so that they can flag issues up and get them debated. Plenty of Members do that. I am standing here to explain why I signed up to the new clause and why I am going to vote in the way I have indicated.

Mr. Roger Godsiff (Birmingham, Sparkbrook and Small Heath) (Lab): I have listened to what my hon. Friend has said. Will she explain what she thinks would happen if the new clause were accepted this evening?

7 July 2009 : Column 884

Ms Keeble: I think we can hear about that from Ministers.

Mr. Godsiff: I was going to ask them later.

Ms Keeble: I am very clear that if we start delaying the arrangements for tax and other payments, the consequences could well be problematic. If I asked my constituents whether they wanted the country run properly or not, I suspect that they would side with what I am doing.

A number of Members, including my hon. Friend the Member for Birmingham, Selly Oak (Lynne Jones), have said that this is all about poverty. For some, that is absolutely true—it is about the poorest in our society—but the people who have lobbied me most on this issue, particularly the women in the age category I mentioned, suggest that it is not just about the depth of poverty. A number of those women were not in the poorest groups; they were on modest and reasonable incomes. I am thinking in particular of a woman whose door I knocked on some time ago. What grieved her most was that although she could afford to pay tax, she had worked really hard all her life and budgeted for a certain income in her retirement, yet suddenly saw it being hit. She will be hit because although the tax threshold has been raised, she has not been fully compensated.

Mr. Jeremy Browne: Will the hon. Lady write to that very constituent to tell her that she had an opportunity to right that wrong this evening but decided not to, or will she send her a copy of the new clause signed by herself and say that the constituent can be reassured that the issue was raised through her MP in the House of Commons?

Ms Keeble: I will be completely honest and send her a copy of what I have said, so she can see for herself. If she disagrees with my judgment, that is fine; it is her decision. The hon. Gentleman is completely wrong if he thinks that simply voting for the new clause and seeing it through would produce all the consequences he has talked about. There are ways of dealing with the problems of the group I am most concerned about—looking at differences in tax rates for income from pensions, for example—and other ways of ensuring that retired women pensioners on fixed incomes get the same tax advantages as their husbands, who might be older and also retired. We do not want this false position whereby women retire earlier, only to find that they are clobbered at a time when they cannot vary their earnings and are stuck with it.

What most concerned my constituent was the fact that she was being discriminated against because she was a woman pensioner and had to pay an increased tax rate, even though she had retired at the proper age. I ask my right hon. Friends on the Treasury Bench to deal with that point. My right hon. Friend the Member for Birkenhead has spoken about the generality, and many Members have spoken about different groups in poverty. Will Ministers focus on women aged 60 to 64 who have retired, striven hard to provide a pension and made arrangements to secure a decent income, only to find that they are affected by the higher tax rate? As I have said, they have a profound and abiding sense of grievance at being hit by that tax increase in their retirement.

7 July 2009 : Column 885

Mr. Cash: It is said, “For whom the bell tolls”—well, there is no question but that the bell tolls for new Labour on this proposal. The Government have turned the values of new Labour and old Labour upside down by what they have done. To those who think that the vote by the Conservative party has an element of cynicism about it— [Interruption.] No, not at all. To those people I say that one of our greatest Prime Ministers, Disraeli, wrote a tale of two nations in the book “Sybil”, which set out for its time the way in which Governments, as in our own time, create divisions in society by arrangements of this kind. The Government’s proposals are totally unacceptable.

Many people in our constituencies are deeply affected by those proposals. People in rural areas, for example, suffer from increasing poverty; dairy farmers in my constituency are similarly affected. Small businesses and individuals are going bankrupt under the burdens they are suffering under the present economic recession. It has been suggested today that the number of unemployed might be as many as 3.2 million next year. That is the reality of the direction in which the economy is going, as taken by this Government.

While the Government bail out the bankers, the poor are battered by the proposals on the Government’s agenda. There are broken promises, and it is down to Parliament to deal with them.

The hon. Member for Stoke-on-Trent, Central (Mark Fisher) said that it was time to put Parliament first. Let me add to what he said: it is time to put people and Parliament first. That is what we must do, and that is what the proposal from our Conservative side of the debating Chamber must deliver tonight. The good and honest Members on the Labour Benches have evaluated the meaning of Labour for their own people, and we will do the same for our people. We have constituents who are equally poor and who need to be protected, and I believe profoundly that we have a duty to support them tonight.

6.30 pm

In an intervention earlier, I referred to the big landscape against the background of the actual figures of debt. The Government continually insist on a figure of £1 trillion, but according to the Office for National Statistics, and as I have said since 7 October last year—ably supported by other Conservative Members who insisted that the Government’s figure was a complete fabrication—it is £3 trillion. The impact on the economy will be huge, and hence the impact on the very people whom we are trying to protect tonight will be all the greater, given bankruptcies, increased unemployment, greater rural poverty, and greater problems for the elderly. We must give help to those people, in conjunction with the help that can be provided by credit unions and the like, which I hope to encourage in my constituency. It is no good bailing out the banks when the people at the lower end of the scale will be worse off.

It is essential that we vote tonight, and show the less well-off in our constituencies that we are prepared to protect them. The other day, my right hon. Friend the Leader of the Opposition talked about the potential for riots. When the scale of a problem presented by proposals such as this causes such a reaction among the people who will be affected, we can be in no doubt that there will be serious trouble by the middle of next year. It is
7 July 2009 : Column 886
therefore essential for us to introduce remedial measures to ensure that the poor are not affected by the Government’s proposals.

The landscape of the total debt figure is so huge, and the impact that it will have on the man in the street at the lower end of the income scale is such, that we must do all in our power to ensure that we protect people. By voting as we will this evening, we will guarantee that protection.

Kate Hoey (Vauxhall) (Lab): I support new clause 1, which bears my name. If my right hon. Friend the Member for Birkenhead (Mr. Field) presses his motion to a vote, I will support it, because I believe that this is our last opportunity to say clearly to the Government that what they did initially was wrong. We then thought that they had accepted that it was wrong, because they made some changes which we welcomed. However, 1.3 million people—according to figures from the Library and the Institute for Fiscal Studies, which I believe to be correct—are still waiting for help. If the new clause is not accepted tonight, there is no chance that anything will be done to help them before either the next Budget or the next general election.

Given that we have a Treasury team and many civil servants and highly paid officials and consultants working on Treasury matters, it is sad that during the period between the previous changes and the current Budget, they could not come up with a solution to compensate 1.3 million people for their loss. Admittedly that number is very small as a proportion of the overall population, but it nevertheless represents some—although not all, as my right hon. Friend said—of the poorest paid people in the country. We would have loved to table an amendment or new clause tonight that did come up with a solution, but the nature of debates such as this makes that impossible.

Notices have been delivered, and the Government Whips have told us how terrible it would be if the new clause happened to be passed. I find that strange. We have been told that the new clause is dangerous: that it would restrict the Government from collecting any income tax for 2009-10, with an estimated cost of £140 billion. We have been told that the services on which the public depend will be put at risk. Do we really believe that if this measure were passed, the Government could not go off and do what they did when the banks were collapsing? The Chancellor was up all night—all weekend—sorting things out and finding a solution. Are we really saying that that could not be done if this measure were passed this evening?

Stewart Hosie: There was such a situation in the United Kingdom earlier this year, when a budget was not passed in the Scottish Parliament. The Opposition worked out quickly what needed to be done, and a week later the budget was passed unanimously with, I believe, one exception. Of course action can be taken to cause a budget to be passed in exactly the way in which the hon. Lady has described.

Next Section Index Home Page