First, I want to talk about what my hon. Friend the Member for Pontypridd (Owen Smith) referred to as the constitutional shenanigans. For many centuries, it
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has been a convention in this House that only a Minister of the Crown can lay a charge or an amendment to a Finance Bill that increases or changes a charge and thereby adds a duty to the people of this country, but that is a mistake. The myth that we have a Budget needs to be exploded, too. We do not have a Budget. What we have is a speech by the Chancellor of the Exchequer, followed by a Finance Bill and some Ways and Means resolutions. In addition, we have a separate process whereby Supply is granted. That system does not result in our properly evaluating whether we are raising money properly and fairly and whether we are spending it properly. I know many of these processes have existed for a very long time, but they lead to profound confusion in most ordinary voters’ minds about how we in this House conduct our business.
Andrea Leadsom (South Northamptonshire) (Con): Does the hon. Gentleman therefore join Members on my side of the House in applauding the Government for establishing the Office for Budget Responsibility, which is conducting independent forecasting and analysis of the Budget, and for putting far more information than before in the Red Book about the distributional impact of tax changes on the people of this country?
Chris Bryant: Broadly speaking, yes, I do, just as I supported making the Bank of England independent at a time when the Conservative party was opposed to doing so. However, my point remains that this House does not really vote properly through the expenditure of the Government; we do not, in any sense, analyse it line by line. We also do not match expenditure with the raising of taxes, unlike nearly every other legislature in the world. Most countries that have based their system on ours have now amended their processes and have better processes than we do for budgetary matters.
Mark Field: I entirely associate myself with the comments made, because the hon. Gentleman is absolutely right, and I hope that most Government Members would also agree with what is being said. He might also point out that it is probably difficult, given that we have a deficit of £126 billion, to match that expenditure with tax, and going down that route might well lead to the significant reduction in the deficit that many Government Members very much support.
Chris Bryant: I do not entirely disagree with the hon. Gentleman. However, if the Government want to take the country with them as they are taking through enormous cuts, it is important that they have a process in Parliament that people can understand. We simply do not have that, which is one reason why people are so angry about some of the cuts that are happening.
Mark Reckless: I commend the hon. Gentleman on what he says and associate myself fully with his remarks. May I ask whether the Opposition Front-Bench team would support amendments to Standing Orders to put our tax and spend process on the proper basis that he describes?
Chris Bryant:
That is way above my pay grade. I am just speaking for myself in this regard, and I hope that hon. Members will take my comments in that sense, but
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I have made this argument for a very long time and tried to do the same when I was Deputy Leader of the House.
I just say to the hon. Member for South West Norfolk that my constituents do not particularly want very high rates of tax, either for themselves or for wealthy people. There is no sense of bitterness and a determination to grind the wealthy down among my constituents, many of whom have very noble aspirations to be wealthy themselves. They hope one day to be paying higher rates of tax, so the point for them today is not about whether a 50p rate of tax is ever the right thing; it is about whether that is the right thing now. I say to her that my constituents feel that the past few years have been very tough, not just the Conservative years, but the last two years of the Labour Government, because of the global financial crisis. People such as my constituents have suffered the most in that time and they do not see people in the City of London suffering—the sales of champagne have still been pretty good—but they do feel themselves suffering. In that situation, it is all the more incumbent on us to think very hard before lessening the tax rate for the wealthiest.
Chris Bryant: I will give way to the hon. Member for South West Norfolk, because I referred to her directly.
Elizabeth Truss: The point that the hon. Gentleman makes is a political one. Is not the crucial issue here the economics and what will actually benefit his constituents? Should he not be considering the issues of whether they will have jobs, whether new businesses will flourish and whether people will aspire to work harder? Rather than the political presentation, should he not be considering the economic case?
Chris Bryant: I will deal with the economic case, but this is where I fundamentally disagree with the hon. Lady ideologically. I do not think we can put economics and politics into separate boxes; the one drives the other. If we want a happier country, where people prosper because they feel that the whole of society is engaged in the same endeavour, we have to make sure that it feels as if everyone has equally got their—I am going to get my metaphors all mixed up—shoulder to the grindstone. I say to Government Members that in my constituency it does not feel that that is the case at the moment. It feels as if the poor are having a very rough time, and there is very little prospect of changing that. I believe that my hon. Friend the Member for Pontypridd said that 2,700 unemployed people in his constituency were going for 200 jobs. The statistics are even worse just up the road in my constituency. It is not a question of someone getting on their bike and going somewhere else to find a job, which is why the politics matter. I am talking not about party politics, but about the sense of whether we are genuinely all in this together.
Alun Cairns:
The hon. Gentleman has made a powerful point in comparing the incomes of people in his constituency with those of some in the City of London. But in order to raise the wealth and prosperity of people in his constituency and in every other constituency across the UK, particularly those in the north, Wales and Scotland, do we not need to attract investors and to
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attract the best brains in the world? That 50% rate is extremely important in respect of providing investment to his constituency, my constituency and others of hon. Members across this House.
1.45 pm
Chris Bryant: I do not want a 50p rate to last for ever and I accept that the City of London plays a very important role in the whole UK economy, but I tell the hon. Gentleman that I feel anxious that this country’s economy depends far too much on what happens in London and the south-east. My fear about the way in which this policy has been developed in the past few months is that the Government intend to increase that dependency, rather than undermine it. I know that there are logical arguments to say that we should have different pay rates for public sector jobs in different parts of the country—
Richard Harrington (Watford) (Con) rose—
Chris Bryant: Just one moment. However, I say to Government Members that if they do that, they will further exacerbate the gap between peripheral parts of the economy—places such as the Rhondda and the Vale of Glamorgan—and the south-east of England and London. That will undermine the very competitiveness that the hon. Member for South West Norfolk is trying to advance.
I also disagree with the move that the Government are making because, politically, it sanctions the process of avoiding paying tax, in which some wealthy people have engaged. I have not been in this place for that long—just for 11 years—but in that time I have heard an awful lot of Chancellors say, “The solution to this is to close a tax loophole.” However many times we try to close these loopholes, wealthy people will still employ accountants to try to minimise how much tax they pay. I would prefer to live in a country where the vast majority of wealthy people said, “You know what, I am a wealthy person and I want to contribute my fair share. However easily I can legally avoid paying tax, I actually want to pay my fair contribution.”
Chris Bryant: If hon. Members bear with me, I will give way. I have already promised to give way to the hon. Member for Watford (Richard Harrington), so I will do so in a moment. I just say that the message coming out of this is, “Frankly Mr Wealthy Person or Mrs Wealthy Person, if you have not got an accountant and you are not trying to minimise how much tax you are paying, you are pretty daft.” That is a bad place for us to be in ethically.
Richard Harrington:
I apologise for stopping the hon. Gentleman in mid-flow on two occasions, but I would like to ask him whether he accepts that for people in business, who are creating wealth and—we hope—employing a lot of people and investing money, a very high personal income tax rate is a disincentive to doing that. Does he accept that however public-spirited business people are—in my experience, most people do take the
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view that he put forward and they are prepared to pay a reasonable rate of tax; they do not try to avoid paying every penny and they want to contribute to society—a high tax rate is a disincentive and would lead to a lot of people saying, “I am just not going to do the extra and employ more people”?
Chris Bryant: Broadly speaking, of course I agree with the hon. Gentleman; a very high tax rate could act as a disincentive to many people and, as the hon. Member for Vale of Glamorgan (Alun Cairns) was intimating, could make this country uncompetitive compared with other countries. However, I just ask two questions in return, the first of which is: what counts as a “very high” tax rate? That is a judgment call; it is about our rate relative to that of others and whether we have the balance right. My second question is: given that, when is the right time to change? I just say to hon. Members that now is not the time, because this country will gird our economic loins and start seeing economic growth only if everybody does genuinely feel we are all in it together. This move undermines that precise point.
Nadhim Zahawi: The hon. Gentleman is making a thoughtful speech and some serious points. He talks about the relativity of the level at which we set income tax, but of course we must not forget that it is not just 50p because there is national insurance on top, taking one over the 60p mark to 62p. Some of the things we need to look at are the behavioural changes we saw when income was moved to avoid the 50p rate when it was first brought in, and the disparity between corporation tax and capital gains tax. When income is taxed at 62% but capital gains and corporation tax rates are much lower, those very wealthy individuals who are creating wealth have options to move money around, so there will be behavioural change as we go up the income tax scale and create that differential.
Chris Bryant: I am grateful to the hon. Gentleman for giving way. Broadly speaking, I agree with elements of what he said. For example, it is a mistake, as hon. Members have said, to seek to tax people solely via their income because that is not the sole determinant of wealth and therefore of what one should put into the national pot. Similarly, I am quite critical of those in my constituency who say, “Mrs Jones down the road—she’s never paid tax.” Nobody never pays tax because everybody pays VAT in some shape or form; everybody makes some kind of contribution. My fundamental point is that now is not the right time to change the top rate. We are living in austere times and if the country is to gird its economic loins, we need everyone to be on the same side, but this measure is relatively divisive.
Chris Bryant: I am not going to give way to the hon. Member for Stratford-on-Avon (Nadhim Zahawi) again—[ Interruption. ] No, he gestures that his intervention would be short but the last one went on for ever, so I am going to give way to my hon. Friend the Member for Wirral South (Alison McGovern) instead.
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Alison McGovern: May I draw my hon. Friend back to his remark about the ethics of this issue? The ethics of whether people feel as though we are all making a contribution turn very much on what is happening around this rate of tax. Paul Johnson from the Institute for Fiscal Studies has said:
“The truth is we still do not know the true effect of the 50p rate on revenues.”
Does not this make it extremely difficult to make the right political and ethical choice at this time?
Chris Bryant: My hon. Friend is absolutely right. In fact, I think she must have been reading my notes, which were very close to her face, because they say that it is completely uncertain how much this will cost. That is, as my hon. Friend the Member for Pontypridd said, at the nub of this. The Government have no idea how much this is going to cost them or how much would have been raised had we continued with the 50p rate of tax for another five years. That rate has not been in place long enough for us genuinely to see how it has affected people’s behaviour. Sometimes, when a new rate of tax is brought in it has a sudden impact that then evaporates two or three years later. There is absolutely no certainty and I say to Government Members, who I am sure are going to march loyally through the Lobby with the Exchequer Secretary this afternoon not because he is persuasive but because they believe in this—[ Interruption. ] He may be persuasive, but I do not think he is going to persuade me. I say to them that I think this will end up being a divisive measure.
Chris Bryant: The hon. Gentleman cannot have another go, but the hon. Lady can.
Andrea Leadsom: I am very grateful to the hon. Gentleman. I want to draw his attention and that of the hon. Member for Wirral South (Alison McGovern) to a point about ethics. Does the hon. Gentleman accept that the Government intend to increase the tax take from the wealthiest in this country? Where ethics are concerned, it is appalling that people have deliberately used a company to buy a multi-million pound house simply to avoid paying stamp duty. Does he accept that taking measures to ensure that people pay what is a reasonable and acceptable level of tax is a better method than trying to enforce something that is very easily avoidable for many people?
Chris Bryant:
Well, I am really impressed by the hon. Lady. I can understand how my hon. Friend the Member for Wirral South read my notes but not how the hon. Lady managed to read them from over there. I was going to come to exactly the point she makes but not quite in the same way. Yes, there is an ethical clash about whether this is the right time to introduce this measure for political and economic reasons, but my concern is that because the Chancellor had, I think, personally decided that he was going to cut the 50p rate to 45p, so many other elements of the Budget had to follow that change. A prime example is the fact that the Prime Minister and the Chancellor wanted to be able to say that the rich would pay five times more tax after the
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Budget than before—I think that is, broadly speaking, the point that the hon. Lady is making. I am not opposed to some of the measures that will increase the amount of tax paid by people who have wealth in a variety of circumstances, but I think that some of the measures in the Budget and the Finance Bill ended up there only to try to shore up that argument, and I do not think that due diligence was done around them.
Let me take one example—I note the look in your eye, Mr Hoyle, and I shall bring my remarks to a close very soon. I think that the measure about capping the tax relief available for people giving money to charities is in the Budget solely so that the Government can argue that the rich will pay more. It is not based on fact or research. There might be perfectly good things we could do on whether charities outside this country that are not covered by the Charity Commission should be removed from the system or on whether greater powers should be given to the commission, but I think that the only reason that the measure was in the Budget was so that the Government could say that tax has increased. This has left the Chancellor and the Prime Minister somewhat double-faced—I shall not say two-faced, because obviously I could not. On the one hand they are saying that the top rate of tax should go down and the rich should not pay so much and, on the other, they are saying that the rich should pay more.
I hope that I have persuaded all the hon. Members on the Government side to change their mind. I see that I have persuaded the reckless Member over there, the hon. Member for Rochester and Strood (Mark Reckless), to support the amendment in the name of my hon. Friend the Member for Pontypridd.
Mr Christopher Chope (Christchurch) (Con): I do not think it is necessary for me to speak to amendment 1 because my hon. Friend the Member for South West Norfolk (Elizabeth Truss) and others have, in their interventions, destroyed the Opposition’s argument. I recall that the TaxPayers Alliance organised a wonderful celebratory dinner not long ago, in the Guildhall I think, at which the guest of honour was none other than Dr Laffer of the Laffer curve. I am delighted that the Treasury is now paying more attention to the principles behind the Laffer curve, which, in my view, are well represented in the argument for reducing the top rate of tax back to 40%, rather than 45%. I hope that in due course my hon. Friend the Minister will explain why someone like me should not be tempted to vote for amendment 1 on the basis that it would reduce the level to 40%.
Owen Smith: When Dr Laffer attended the dinner at the Guildhall, did he bring with him the famous cocktail napkin on which he sketched the curve?
Mr Chope: Dr Laffer did not bring any visual aids with him; he was able to command his audience without them. I remember being surprised by how relatively youthful he was—it seemed that his principles and his curve had been talked about for so long that I had assumed he was going to come in with a walking stick, but he did not. He was very lively in mind, body and spirit so I think he is someone we can continue to listen to in the months and years ahead.
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I want to use my short speech to comment on amendment 62, which is in my name and that of my hon. Friend the Member for Rochester and Strood (Mark Reckless). It calls on the Treasury to
“within two months of Royal Assent, make an assessment of the relative administrative costs of…making an additional charge to income tax payable by all individuals with an adjusted net income above a certain amount; and…the measures in section 8 of, and Schedule 1 to this Act.”
2 pm
The background is my concern that the provisions in clause 8 and schedule 1 relating to child benefit—the income tax charge for those on higher incomes—introduce enormous unfairness and complexity. There must be another way to meet the Government’s avowed objective to ensure that those on higher incomes contribute more to deficit reduction than they have hitherto. Her Majesty’s Revenue and Customs produced a technical document to accompany the Finance Bill and the Budget. In the section headed “Child Benefit: Income Tax Charge for Those on Higher Incomes”, it states under “Policy Objective”:
“In order to address the fiscal deficit the Government believes that it is right to ask those on higher incomes to contribute more.”
I do not disagree, but the document does not say that it is right for those on higher incomes with children to contribute more while those on higher incomes without children do not. As it is not possible to table an amendment to increase a charge in the Budget, but only to propose to reduce taxation or to oppose the Government’s proposals, I thought the best way to introduce discussion was to ask the Government to produce a report on the relative administrative costs for the option of going ahead with clause 8 and schedule 1, or for introducing a uniform charge for all those earning more than £60,000.
On Second Reading I gave some rough figures. The Government’s proposals would yield about £1.5 billion a year, but if instead there was a charge on all those earning more than £60,000 a year, the yield would be £2 billion. Not only would the yield be higher, but the costs of administration and collection would be much lower and the opportunities for confusion, fraud and evasion much reduced. I hope that my hon. Friend the Exchequer Secretary will tell us that the Government will look into whether it is right that we should increase the complexity of the tax system when the Government’s avowed intent is to reduce it.
Mark Reckless: Will my hon. Friend confirm that the estimates of administrative and staff costs the Government have given us for the higher income child benefit charge are actually somewhat higher than the entire revenue that they estimate, with some uncertainty, we will lose from reducing the top rate of tax from 50p to 45p?
Mr Chope: Exactly. My hon. Friend’s excellent point shows the gravity of the complexity that the Government are introducing. The figure is more than £100 million in administration costs to take away child benefit from 1.2 million families, either in total or in part.
Mark Field:
Is my hon. Friend concerned that the estimate is likely to be somewhat conservative? Many people are employed as consultants, so they do not know from one year to another whether they will be
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earning between £50,000 and £60,000. Huge costs will be involved in trying to collect the money, and I dare say a massive amount will have to be written off year on year if the charge goes through as proposed.
Mr Chope: My hon. Friend makes a series of good points that are recognised in the HMRC document to which I have referred. It says that the definition of a partnership will be the same as the one in the Tax Credits Act 2002, yet we already know that the Act and the technical manual that flowed from it resulted in an enormous administrative burden for those trying to work out who formed a couple, or when partnerships began or ended. There is a great file of documentation on how to interpret the tax credit definitions of partnership when people are cohabiting, whether or not they are in civil partnerships. The complications of the child tax credit system have resulted in a lot of fraud.
If we apply new rules to a fresh group of taxpayers and for the first time introduce in the tax system definitions of couples and partnerships, we shall create an enormous administrative burden. The document notes that the overall impact will be that HMRC will have to spend approximately £100 million on staff resources. If we say that that is £20 million a year—although it is actually more—at an average cost of £30,000 for a member of staff, we should be taking on 650 extra staff just to administer the removal of child benefit from 1 million families who currently enjoy it.
That is not the end of the story. We also have the problem that 500,000 tax-paying families who previously have not had to make a tax return will now have to do so. That is not mentioned in the cost analysis, but it is a cost on the tax-paying public that will not be borne by the Exchequer.
The proposal is highly flawed, as the Treasury Committee has recognised. Paragraph 23 of its report on the Budget notes:
“We recognise that the Government needs to take difficult decisions to tackle the Budget deficit. Nonetheless, the Government’s latest proposals for reform of Child Benefit solve only one of the two main problems identified with its original policy. They add further complexity.”
That conclusion is based on evidence the Committee received from the Chartered Institute of Taxation, the Institute of Chartered Accountants of England and Wales and other experts. They all drew attention to the complexity involved, and some of them pointed out the odd distinction between the child benefit charge and the justification articulated by the Chancellor for removing the age allowance for the over-65s. During the Budget debates, the Chancellor told us that the main justification for removing the age allowance was to bring about simplification, yet that will be the reverse of the added complexity that he is introducing through the child benefit tax charge.
I hope we shall have a bit of give from the Government. If they want everybody on a higher income to make an additional and fair contribution to deficit reduction, will they tell us why their proposals are targeted on those on higher incomes with children, while those on higher incomes who do not have children are excluded? I hope the debate will give us the opportunity to get answers from the Government on those points.
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Mark Durkan (Foyle) (SDLP): Does the hon. Gentleman also hope to have clarification from the Government of why, if the measure is about deficit reduction, they have refused to say that it will be reviewed or revised when the deficit is reduced? It will not necessarily be temporary, whereas the Chancellor was very clear that the 50p rate, while he adhered to it, would only be temporary.
Mr Chope: Absolutely. The hon. Gentleman makes a very good point. He may be of an age to recall what happened in the 1970s when we had the International Monetary Fund dictating to the then Labour Government what they should do to bridge the fiscal deficit that existed then. One of the measures that was introduced as a result was, in effect, an income tax surcharge which was retrospective for a year, but everybody who had been paying tax at a particular level had to pay a surcharge to help deficit reduction.
It would be possible for the Government to do something similar in this Budget to put a time limit on that, but the problem is that because of the enormity of the mess that the previous Administration made of things, we will not begin to reduce the debt until well on into the next five or seven years. In the meantime our debt will go beyond £1.5 trillion, so I am not sure that if we introduced a time limit, it could be an early time limit. It might have to be reviewed by Government in about 20 years. However, I take the hon. Gentleman’s point. Before he intervened, I was about to conclude my remarks as I know that many more colleagues wish to lay into the Opposition on their wholly misconceived amendment 1.
Jonathan Edwards: It is a pleasure to serve under your chairmanship this afternoon, Mr Hoyle, and to contribute to the debate. I shall speak to amendments 7 and 76, in my name and that of the hon. Member for Foyle (Mark Durkan), relating to the cut in the additional rate of income tax, and consequential amendments. I intend to press amendment 76 to a Division at the appropriate time unless, of course, it is accepted by the Treasury.
Despite heavy lobbying over the past year to remove the 50p additional rate of tax, the switch to a lower rate of 45p was one of the more surprising announcements in the Budget last month. It had been assumed by many that the Government mantra of being “in it together” meant that it would be politically necessary to show that all parts of society were paying more tax and facing the same level of public service cuts. Many therefore assumed that the 50p rate would be with us for at least as long as the Government maintained their plan A for cutting the deficit. After all, pressing issues such as Barnett formula reform have been conveniently parked in the name of the war on the deficit.
For my party, the issue is a matter of principle, irrespective of the timing and the state of the wider economy. Those with the broadest shoulders should bear the burden of taxation. A progressive taxation system based on the Scandinavian model is part of our political DNA. Someone who earns at the additional rate of £3,000 of taxable income per week is clearly in that category. Only a handful of people who earn that kind of money reside in my constituency. We therefore support the maintenance of the current 50p additional rate.
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As I made clear in my speech on Second Reading on Monday, my opposition to this tax cut is on the record, as I voted against it during the Budget votes last month. The income tax rates for 2013-14 were one of the founding resolutions of the Budget, and offer very little scope for change today. My amendment 6, which would mean that the additional rate would be 50%, appears on the amendment paper but was not selected.
Hon. Members can therefore imagine my surprise that the official Opposition did not join my colleagues from a variety of smaller parties in opposing this measure on 26 March. That was the vote against a cut in the additional rate, but the Labour party unfortunately abstained, apart from two honourable exceptions. The hon. Member for Leeds West (Rachel Reeves) representing the official Opposition kindly allowed me to intervene on her during the debate on Monday. I asked her to confirm whether this was a deliberate or a tactical abstention. Her response was that the Opposition had voted against the whole Finance Bill and that was sufficient.
The hon. Lady’s answer would have been a semi-appropriate response, were it not for the fact that, if my memory serves me well, her party divided the House on resolution No. 8 on higher income benefit. Clearly, some resolutions were more important than others that evening.
Owen Smith: Just to clarify, as my hon. Friend the Member for Leeds West (Rachel Reeves) made plain, we had already voted against the whole Bill. There was a further reason for not supporting the hon. Gentleman’s amendment, which was that unfortunately it would have wiped out all the rates of taxation, not only the 50p rate.
Jonathan Edwards: I am sure the hon. Gentleman read the leaked e-mails from Labour insiders the following day, which were widely reported on the Guido Fawkes blog and which indicated that this was a major balls-up—excuse the pun.
2.15 pm
Mr Gauke: May I help the hon. Gentleman? The motion on which he voted against the Government related to the tax charges for 2013-14. With apologies to the hon. Member for Pontypridd (Owen Smith), it would not have wiped out all the tax rates for this year. It was specifically for next year. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) is right. It would not have had the impact that the hon. Member for Pontypridd suggested.
Jonathan Edwards: I am grateful for that clarification.
The idea that the Tories would offer a tax break to millionaires would surprise nobody in my constituency—in fact, they would expect it—but that Labour would abstain after announcing it would vote against it has led to a great deal of confusion. I have had a lot of fun on the doorstep in the past few weeks explaining that, while campaigning for the local authority elections. It is similar to the way the official Opposition announced the policy of a temporary cut in VAT last June, then two weeks later abstained on the Finance Bill when I and my colleagues proposed such a measure. A lack of consistency and clarity on economic matters explains
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why it is so easy for the Government to continue to pin the blame on the official Opposition for the UK’s economic mess in spite of the flawed and ideological cuts programme which is destroying the fabric of the economy.
Stephen Williams (Bristol West) (LD): Does the hon. Gentleman recall that 12 months ago there was a similar set of circumstances, when the Labour Opposition said on three occasions that they opposed the rise in VAT, continued to say that they were opposed to the rise in VAT, but on three occasions failed to vote against it?
Jonathan Edwards: I am grateful for that intervention. The hon. Gentleman is of course right. It is a matter of record, and it shows that when it comes to a vote in the House, the Labour party does not have a policy.
Charlie Elphicke (Dover) (Con): The issue was not invented there so the Opposition could not vote for it, whereas although I disagree wholeheartedly with the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), I credit him with being principled, and principled in his voting, rather than trying to have it both ways, like Labour.
Jonathan Edwards: I am grateful to the hon. Gentleman for confirming that we are more efficient than the official Opposition.
Chris Bryant: The hon. Gentleman knows that I am very fond of him, so may I give him a tip? It is not to believe what he reads in newspapers, not to believe what he reads by Guido Fawkes—most hon. Members would agree with that—and not to listen to Liberal Democrats, who will support and vote for the cut from 50p to 45p, but to focus his anger on the Government, who are introducing this change.
Jonathan Edwards: I am grateful for that intervention. I am coming to that. Unfortunately, the papers did not report Labour’s shameless record on some of these issues.
Monday’s Second Reading saw Members from both sides continuing to trade a barrage of figures to explain why the additional rate should be cut or remain as it is. I thought the contribution from the hon. Member for Pontypridd on Monday night was excellent in explaining the political and economic value of the 50p rate. It is clear that there is no agreement over the mechanics of the issue, and given that Labour’s agreement to the 50p rate in the first place was based on revenue-raising rather than principle, that is a very important fact.
The Treasury should therefore instigate a report on the income-shifting and avoidance measures used to lower the amount of tax paid under the additional rate, and on possible revenue from a 50% and a 45% rate, taking into consideration the outlying factors that always impact heavily on the first year of any tax innovation. Such a report would clarify the situation and allow the House to make a considered judgment one way or the other in the next Finance Bill. As always, the majority of people pay the tax that they should, but there are some who will always try to avoid as much as possible.
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The artificial shock of the Chancellor at the scale of tax avoidance suggests that he takes Members of this House for fools. Although I accept the argument for a relationship between a lower taxation rate and economic growth and perhaps larger revenues, I find that argument counter-intuitive for income tax rates on this occasion. The majority of those who seek to avoid paying income tax at 50% will, I suspect, also seek to avoid paying it at 45%—and, as the Government contend over the 50% rate, they will have the resources to avoid doing so.
My amendment 76, which would require a review, neatly coincides with the Opposition’s amendment, so I assume that when my amendment is pressed to a vote they will join us in the Lobby. After all, they have already signed up to my amendment 7, which, I shall explain for the benefit of the Committee, is consequential on the additional rate changes relating to dividend and trust payments, the transferring of retirement benefits to a non-additional rate tax payer and the notional tax credit attached to some capital payments. We look forward to dividing on amendment 76 at the appropriate time.
Karl McCartney (Lincoln) (Con): It is a great pleasure to follow my hon. Friend the Member for Christchurch (Mr Chope), the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) and, of course, the hon. Member for Rhondda (Chris Bryant), who should take heart from the fact that although our initial reaction on the Government Benches perhaps disproves the adage that everybody goes crazy about a sharp-dressed man, we agreed with some of the points he made, which were valid. I will cover in my speech some of the points on which I perhaps do not agree with him.
Chris Bryant: You broke my leg.
Karl McCartney: Not on purpose.
We were told during the dying days of the previous Labour Government that the 50p tax rate was always intended to be a temporary measure. That remark came from very near the top level, as it was made by the previous Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling). Many of us suspect, however, that at the top of that economically discredited Labour Government, the then Prime Minister, who is now much missed in his absence, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), had a more political plan, perhaps with three prongs. First, the 50p tax rate was a bone to throw to the Opposition’s political masters who run the unions. It said, “Look how we are clobbering those who earn—or should I say ‘are paid’—slightly more than you.” Secondly, it was part of the Labour party's scorched-earth policy, a desperate act up there with the protectionist decision of the right hon. Member for Kirkcaldy and Cowdenbeath further to increase the indebtedness of our armed forces’ budgets by ensuring the most watertight contract, despite the fact that Whitehall lawyers are not renowned for their prowess in closing legal loopholes, for two new aircraft carriers, which funnily enough were not to be built in English or Conservative Members’ constituencies.
Stewart Hosie (Dundee East) (SNP): Will the hon. Gentleman give way?
Karl McCartney: Not at this stage.
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Thirdly, the 50p tax rate was designed to be something that any new Government would have to address at some time early in the next Parliament and to reduce to an acceptable level to ensure the competitiveness of our nation in the international marketplace.
Stewart Hosie: Will the hon. Gentleman give way now?
One hopes that the Labour party knows and realises that the 50p tax rate it introduced for spurious reasons made our country economically uncompetitive, but it has never let the truth get in the way of a good soundbite, has it? It is not fair to say that the reduction in the 50p tax rate and other measures announced in the Budget are a tax break for the wealthiest because, in total, the measures announced will see the wealthiest paying many times more.
Alison McGovern: Will the hon. Gentleman give way?
Karl McCartney: No, I certainly will not at this stage.
Chris Bryant: That is very ungenerous to a lady.
Karl McCartney: Later, I will be as generous as the hon. Gentleman was if hon. Members will let me get through some of my speech. I certainly will not speak for as long as he did.
The Chairman of Ways and Means (Mr Lindsay Hoyle): Order. I think we are having a few too many interventions. I say to the hon. Member for Rhondda (Chris Bryant) that although the hon. Member for Lincoln (Karl McCartney) might have broken his leg, he obviously did not break his tongue, which he ought perhaps to hold a little more.
Karl McCartney: Thank you, Mr Hoyle for letting me continue. I feel I ought to correct what might be an untruth: I did not break the leg of the hon. Member for Rhondda. I gave him quite a good pass—not even a hospital pass—on the rugby field and the two large gentlemen who were about to tackle me then tackled him.
The independent Office for Budget Responsibility agrees that the 50p rate raises only a fraction of what was supposedly intended. So, one of my questions to the Chancellor and his Ministers is whether they know of any reason why any Member would disagree with the highly respected OBR other than for disingenuous political gain.
The 50p rate is bad economics. The previous Labour Government’s Chancellors and Prime Ministers and the Labour party’s current shadow Chancellor, the right hon. Member for Morley and Outwood (Ed Balls), are well aware of that privately but cannot bring themselves to acknowledge it publicly. Ultimately, it is the highest tax rate in the G20. Our Government are clear where they stand on the 50p tax rate: it has not raised anywhere near the revenue expected as many individuals cleverly engaged their own or their accountants’ knowledge to bypass the rate and lower their tax bills. The Government have now sent out a clear signal to the international community that Britain is open for business and will no
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longer have the highest tax rate in the G20. The same clear signal cannot be said to be coming from those on the Opposition Benches.
Owen Smith: Will the hon. Gentleman give way?
Karl McCartney: Not at this point.
It has been interesting—and would be again—to hear from the Chancellor or his Ministers what positive signs we have seen from businesses after he announced the change. Once again, why does the Labour party fly in the face of business leaders’ opinion? As I have said, the 50p tax rate raises only a fraction of what was intended and is bad economics. It is better to put the British economy first, ahead of cheap headlines, but then that was never the Labour way, was it? One would have thought by now that Labour might have learnt some economic lessons.
The cut in the 50p tax rate was never a priority of this Government. Raising the personal tax allowance and helping low and middle income earners has always been the No. 1 priority tax cut for the Government and that is what we have done. This is a Budget to be welcomed by all with far-reaching tax reform that Labour should be embarrassed it never even considered. It announces the largest ever increase in the personal tax allowance, which will benefit 24 million ordinary families up and down our country. Most basic rate taxpayers will gain at least £220 every year. In total, this Government will have taken 2 million low paid people out of tax altogether.
Labour spent much of the aftermath of the recent budget indulging in photo calls in unfamiliar territory for Labour Members—any pasty shop they could find. Even an unannounced visit to my own constituency of Lincoln by the photogenic brother of the Leader of the Opposition, the right hon. Member for South Shields (David Miliband), featured such a stunt. Among all this new-found fondness for pasties, but perhaps notably not for one bottle of a famous brown sauce, the Leader of the Opposition has strongly criticised the decision to cut the top rate from 50p.
The right hon. Member for Doncaster North (Edward Miliband) made a laughable claim when he said:
“After today’s Budget, millions will be paying more while millionaires pay less.”—[Official Report, 21 March 2012; Vol. 452, c. 809.]
He is the true heir to Blair, is he not? Soundbite, not substance—and not even basic mathematical understanding. After this Budget, not only will millions of people pay less tax, but many low earners will pay little or no income tax. If, as we know, the 50p top rate raised only a fraction of what was intended and in addition harmed our international competitiveness and, as other Budget changes have ensured that the direct cost of the reduction to a top rate of 45p has been mitigated many times over, that should surely be welcomed by Members on both sides of this House.
Sammy Wilson: Let me make it clear that my party is not a party of high taxation. We do not wish to see people squeezed until the pips squeak and we are not ideologically committed to high taxation.
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Sammy Wilson: The hon. Gentleman asks whether I am sure. The record is open to scrutiny. In local government in Northern Ireland, when the Democratic Unionist party is in control of any council its rates are the lowest. In the Northern Ireland Administration at Stormont, where again we have control of the finances, we have more generous tax allowances for manufacturing industry and we have held local taxation frozen at the same point for the past four years and for the next three years. The hon. Gentleman asks from a sedentary position whether we are sure, but we stand on our record. When we have the ability to influence or the possibility of influencing taxation, we want to be a party of low taxation.
My comments in this debate are predicated on such policy and should be set against that background. I want to address the reduction in the top level of tax from 50% to 45%, which I believe is a huge political mistake for the Government. More importantly, I believe that it will impact on the ability to deliver sound fiscal policy and economic policy across the United Kingdom while getting people behind the measures that are required to get us out of our dire present situation.
The Government’s main argument has been that this is a good, sound economic policy and that it is necessary for a number of reasons. It is necessary, first, because the 50p rate of taxation has not worked: it has not raised the intended revenue. Indeed, the Prime Minister today claimed that it had not raised any revenue, but if he had read the documents that his own Chancellor endorsed he would have found that that is not true.
2.30 pm
Although the Office for Budget Responsibility and Her Majesty’s Revenue and Customs point out that the increase may have been less than expected, and they talk about it having been perhaps £1 billion less, they do not say that the measure did not raise any revenue. Part of the reason the figures for this year do not show the increase in revenue that the Government expected is that, as the HMRC report points out in paragraph 6.3, £16 billion to £18 billion of income was pushed forward: it was forestalled. But it cannot keep being pushed forward for ever, so, if we had looked at the figures over another year, we would have found that the revenue started coming in as the forestalled income started to be taxed. So the first argument that has been made—that the measure did not raise revenue—is not backed up even by the Government’s own published figures.
The second argument, which is being made here today, is that the change will raise more revenue because of the way in which people will change their behaviour. But, again, if we look at the figures that HMRC has published, we find that they are factual because they are based on what is happening at present with the static cost, and, then, that there are predicted figures—those that are based on what are called behavioural changes, about which there has been much discussion today.
The one thing that we do know, because we can be absolutely sure of the figures, is the revenue that will be forgone as a result of the change. The forgone revenue is not up for debate, because we know what was collected and what people normally paid—which they are not going to pay any longer. The figures are clear: in the next financial year, 2013-14, £3.01 billion will be forgone; in the year after that it will be £3.35 billion; in the year after that it will be £3.7 billion; and in the year after that
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it will be £4.19 billion. That is what we know is going to happen, because those are the static figures, as the Minister has said from a sedentary position, and the Government hope that that will be offset by behavioural changes, but, even by their own admission in their own document, those changes are fraught with uncertainty.
In evidence to the Treasury Committee, Mr Chote of the OBR said that there had been an “heroic exercise…to disentangle” all the factors that would be included in those behavioural changes, and that it was one of the six “areas of particular uncertainty” that had been identified. The changes are uncertain because—without getting into the technical phrase that has been used—“income elasticity” is uncertain. The income elasticity figures are so uncertain that, according to the Institute for Fiscal Studies, the rate of taxation that could maximise the Government’s revenue—the top rate of taxation—varies between 30% and 75%. Again, in evidence to the Committee, it was said that that the numbers are “absurd” in some sense, because the variations are so wide.
So before we talk about a concrete, cast-iron economic case, let us just look at the assumptions behind the model and the assumptions on which the revenue that the Government boast about raising are based. Once we start peeling them away, we see that the figures for the behavioural effects, which conveniently just about offset the static cost, are less than certain.
The third argument that has been made is that the change will help us to become more competitive because the high rate of taxation has had an impact on investment, on job creation and on the willingness of people to work harder and to declare their income in the United Kingdom. There is an odd thing about that argument, however, because if the Government are so certain of it why has the Chancellor, in answer to a question on the issue, indicated that he is going to initiate research into its broader macro-economic effects? One would have thought that, if we were absolutely certain that it was what we needed to do to improve the performance of the UK economy, we would have done the research, known the dynamic effects and ascertained the macro-economic impact. That has not been done.
The Government are only now, after making the change, indicating that they are prepared to initiate the research into it. So we hear all the certainties, that we did not raise the money that we wanted to, and that we will raise the money that we want to from this new tax, but, if the Government are so certain of that, why are they not introducing it this year? If we are in such perilous times and they actually believe that the measure will raise more revenue, they should be rushing to introduce it, but they have delayed it for another year. The economic case for the change has not been made.
As I said at the start of my speech, I am not against lower taxation. In Northern Ireland we have kept the tax regime—given what powers we have over taxation—as low as possible and sought to make adjustments by looking at administrative changes. Indeed, I am quite proud of the fact that in Northern Ireland this year we have cut the cost of the administration of government by 3.8%. Rather than raise money through taxation, we have looked for efficiencies in many different ways.
When the hon. Member for Rhondda (Chris Bryant) talked about the political aspects of the change, the hon. Member for South West Norfolk (Elizabeth Truss), who is no longer in her place, said, “We should not be
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concerned about the politics of it; we should only be concerned about the economics of it.” I do not believe that any economic decision can be made in isolation from the political context in which it has to be made, and the political context in which the decision to reduce the top rate of taxation is being made is one in which the Government are saying to people, “We are in a difficult economic situation, we have to reduce the deficit,” and I agree. We have to get the economy back on a stable footing and to make sacrifices to do so. If one is in the public sector—
Richard Harrington: Will the hon. Gentleman give way?
Richard Harrington: I am grateful to the hon. Gentleman for giving way and sorry for interrupting him mid-sentence, but in welcoming you, Mr Hood, to the Chair, I should like to ask him this question. Does he believe, as I do, that there are circumstances in which economic beliefs have to take precedence over political ones? Governments have to consider what they believe to be good in the long term for the country, for the economy and for growth, not just what might appear in newspaper headlines.
Sammy Wilson: I do agree, but if the hon. Gentleman had been listening he would have heard that the economic case—that we did not raise as much revenue as we should, that we will raise more revenue than we were doing and that we will improve the competitiveness of the UK economy through this new measure—has not been made. [ Interruption. ] The hon. Gentleman laughs, but on the basis of the Government’s own publication, the economic case has not been made.
Richard Harrington: To be clear, that is not what I was asking. I accept that the hon. Gentleman does not believe that the current economic policy is the right one, but does he accept my view that in many circumstances Governments have to consider what they believe to be the best economic case over and above the politics of the situation?
Sammy Wilson: That may well be the case. However, if a Government have to make that decision—and, yes, there are occasions when that has to be done— they must first convince people that the economic case is sound, and on the basis of the Government’s own published information, that is not so. Indeed, even the Prime Minister did not seem to know what his own Government’s information said when he was answering Prime Minister’s questions earlier. It cannot be argued that there are times when the economic case is more important than the politics and so the right decision has been made, because the Government have not made a sound economic case.
We have a political context in which the Government are saying to people: “Make sacrifices. If you’re working in the public services, take a pay freeze. If you’re a motorist, you’re going to have to pay more for your petrol. If you’re a pensioner, you must have your tax allowances frozen for some time so that allowances can catch up, with the result that you’re collectively going to lose £1 billion a year. You’re going to have to do this because we’ve got a deficit that we’ve got to address.”
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I could go through a whole lot of other measures. If people are going to be asked to follow a policy that is designed to reduce the deficit and to accept those impacts on their standard of living, they must understand that the weakest are not being selected for the heaviest burden. This decision is not only economically flawed but politically flawed because it will call into question the Government’s sincerity when they argue that we all have to make sacrifices together.
I have another role in Northern Ireland as Finance Minister. We have frozen wages. We have stopped all bonuses in the public sector where that has been possible and there are no contracts. We have said to people that there will be no recruitment or promotion within the public sector. We have said to people who work in the private sector, “You’re going to have it tougher because we’re going to be spending less on public sector contracts and so on, with the impact that that has on people’s jobs.” We have said about new house building and a whole range of other things, “This can’t be done.” We have said to voluntary groups and community groups, “You’re going to get cuts in your grants because we don’t have the money to do this.”
By and large, I have found that most people accept that when they see that it is evenly spread. People stop me in the street all the time and talk about the impact that it is having on their lives. They say, “We don’t like it, but if we have to put up with it because we know we can’t carry on spending money we don’t have, we’ll do it.” Nothing undermines the argument made by those of us who wish to be responsible about the budget deficit more than the news that the Government are saying to people, “Make sacrifices”, while those who are earning more than they need to live on will get a 20% or a 10% tax cut. That is why the politics of this is all wrong. The economics is not sound and the politics is not sound, and for that reason we will vote against it.
Alun Cairns: Thank you, Mr Hood, for calling me to contribute to this debate on amendment 1. It is a privilege to follow the hon. Member for East Antrim (Sammy Wilson). I accept some of his points about the importance of the economics, but I certainly do not agree with his conclusion. I will comment on the weakness of the argument presented by the hon. Member for Pontypridd (Owen Smith) a little later.
Mr Love: Does the hon. Gentleman accept that the message of this Budget is, “We’re all in this together except for the 1% of the richest people in this country”?
2.45 pm
Alun Cairns: That is clearly not the situation, as I will seek to demonstrate in the next few minutes.
The starting point of any Budget has to be the scale of the national debt, and the debate must take into account the legacy of the deficit that has been inherited, the scale of public spending, and the projections that can be made in a situation that is uncertain because of the volatility in the economy in the UK, in Europe and across the rest of the world. There is also an important central element about the setting of personal tax rates. We need to create an environment where the economy is growing and this country is attractive to international investors and to investors who reside in the UK. We want
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to recreate a business-friendly environment where wealth and jobs are created, and where that is spread across all parts of the UK.
The 50% rate is absolutely key, and an awful lot of attention has been paid to that. The hon. Member for East Antrim talked about the economics and the politics of it and claimed that both were wrong, but in fact both are right. If one thing in the Budget sent a positive message to every investor and every mover of capital around the world, it was the reduction of the 50% rate to 45%, which said that Britain is once again open for business.
Jonathan Edwards: If the politics is not wrong, why was the policy not in the Tory manifesto in 2010, and why has the hon. Gentleman’s party dived 10% in the polls since the Budget?
Alun Cairns: I am grateful for the hon. Gentleman’s point. In fairness to him, he has presented a respectable view. I disagreed with it, but I expected him, as a columnist in the Morning Star, to present that sort of image. On that basis, he would want to tax as much as he can and spend as much as he can—something that I disagree with. There is a difference between the respectable point that he made and the unrespectable point made by the hon. Member for Pontypridd because of the confused message that he is presenting because of the uncertainty.
Owen Smith: With the greatest respect to the hon. Gentleman, I have absolutely no idea what his last sentence meant, but I will move on. If this was such a good Budget for business, why did the OBR conclude that over the next year business investment in Britain will go up by 0.7%, which is down by almost 8% on last year’s estimate? If business is supposed to be spending lots more money as a result of the 50p rate cut and many other measures in the Budget, why is that not shown in the OBR figures? Why is GDP going up by only 0.1%?
Alun Cairns: It is interesting that the hon. Gentleman is extremely selective in whom he quotes and when he quotes them. He chooses to quote the OBR’s figures when it suits his argument on one occasion, but chooses to quote the HMRC’s figures when it suits his argument on another occasion. That relates back to the uncertainty that I mentioned.
Charlie Elphicke: I have a couple of points. I always understood that the issue of the 50p rate was not in our manifesto because the previous Government said that it was temporary. It therefore did not need to be in our manifesto, because it was always meant to be a temporary measure. On the nonsense that Opposition Members have spouted about business investment, has my hon. Friend seen paragraph 3.62 of the OBR’s “Economic and fiscal outlook”, which states:
“We therefore expect only moderate growth in business investment this year as the heightened uncertainty from the ongoing euro area difficulties limits firms’ investment plans”?
It is not the UK that is at fault, but the eurozone, which the Opposition wanted to take us into.
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Alun Cairns: I could not agree more with my hon. Friend. Once again, he makes a cutting point that exposes the weakness of the argument of the hon. Member for Pontypridd.
The politics of this measure is that it sends a message to international investors that Britain is once again open for business. The 50% rate needs to be added to the national insurance rate. People could well be paying a tax rate well in excess of 60%. For some individuals, it is as high as 68%. What sort of message does that send to international investors? The politics of this is extremely important in relation to how it is interpreted by the people we want to attract to this country, because they will bring their capital with them.
Sammy Wilson: I am not sure what Government Members are saying is causing the lack of investment. Is it the situation in the eurozone—I agree with the hon. Member for Dover (Charlie Elphicke) about that—or is it because of the high rate of taxation? The hon. Member for Vale of Glamorgan (Alun Cairns) seems to agree with both propositions.
Alun Cairns: I am sure that the hon. Gentleman would recognise that there is no silver bullet. I suggest that there is a range of issues. It is partly to do with the eurozone, partly to do with the debt that we inherited from the previous Government and partly to do with the global environment. Thanks to the Chancellor and the Treasury team, we are putting Britain on the road to the recovery. The reduction of the rate from 50% to 45% is central to that because of the message that it sends to every investor around the globe, as I have outlined.
We must recognise that we have had the highest tax rate in the G20. That has an effect when international companies consider where to invest. The G20 countries are in the top league of where international companies spend their money. Obviously, I want us to be seen as the most competitive nation in the league, not for us to be at the bottom of the league. That is the situation that we inherited.
The message of the Labour party consists of nothing more than envy. Labour fails to recognise that the top 1% of earners pay 30% of the income tax in this nation. The marginal rates are exceptionally important, as has been mentioned. We need to create an environment in which Britain is open for business and make it an attractive nation to investors from the UK and from elsewhere.
The argument presented by the hon. Member for Pontypridd is hollow. He misses a number of points. First, the 50% rate was intended to be a temporary rate in the first place. In response to interventions, he said that he did not think that the temporary rate should be adjusted just yet. How temporary is temporary? He gave the impression in his response that the rate should remain at 50% for the remainder of this Parliament. That would take us up to eight years of this temporary tax. He said in another response that he could not predict the Budgets that would happen after the next general election. There are three years remaining in this term. He cannot have it both ways. He says that the temporary tax should last for eight years, but that he cannot predict what will happen in three years’ time. The reality is that the Labour party is merely presenting the politics of envy. It wants to be the tax-and-spend
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party once again. It was the tax-and-spend party when it left office, and it has done little to move on from that position.
Owen Smith: The hon. Gentleman can rest assured that there is no envy on my part of him or other Government Members. I did not imply what we would have done in my speech; I stated explicitly that we would not have got rid of the 50p rate for the duration of this Parliament. The reason for that was equally clear: the Opposition are still asking for an equitable distribution of difficulty in these difficult times, as opposed to the Government, who are giving a tax bung to millionaires. We would not have done that and we think that it is the wrong thing to do. He clearly thinks that it is the right thing to do.
Alun Cairns: The hon. Gentleman has repeated that by “temporary”, the Opposition mean eight years and that it could be even longer. On the one hand, he is not prepared to make a commitment for three years’ time, but on the other, he is prepared to make a commitment for the next three years. That is another inconsistency in his argument.
The Opposition’s strongest argument is about the uncertainty over the change in income when the rate changes from 50% to 45%. To be kind, one would say that the hon. Member for Pontypridd has been selective; some might say that he has not been wholly honest. Everything is uncertain. There is no guarantee about how the economy will grow, nor about how the European or the global economy will grow. There was exactly the same uncertainty when the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), introduced the 50% rate. He predicted that it would bring in three times more than it has brought in.
Alison McGovern: On a point of order, Mr Hood. I believe that the hon. Gentleman referred to my hon. Friend the Member for Pontypridd (Owen Smith) as not being wholly honest. Will you clarify whether that is in order?
The Temporary Chair (Mr Jim Hood): I thank the hon. Lady for her point of order. It is not a point of order for the Chair if an opinion is expressed by an hon. Member. It is certainly not against the Standing Orders of the House.
Alun Cairns: If my remark caused offence to any Opposition Member, I will happily withdraw it. To rephrase what I said, the hon. Member for Pontypridd was inconsistent in his argument.
There is obvious uncertainty about the data that HMRC presents.
Owen Smith: In the interests of consistency, will the hon. Gentleman confirm that he agrees that there is gross uncertainty about the revenue receipts and about the £100 million loss? Does he therefore think that the Exchequer might lose more than that?
Alun Cairns:
I am grateful to the hon. Gentleman for that intervention, because I can answer him directly. Exactly the same uncertainty that there is now existed when the previous Chancellor increased the rate from
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40% to 50%. The economic situation has changed. Therefore, there will obviously be uncertainty in all the data, be they from the OBR, HMRC, the Institute for Fiscal Studies or any other independent forecaster. The Chancellor needs to make a judgment based on the data that are presented.
[
Interruption.
]
I will happily give way if the hon. Gentleman wants to intervene.
Owen Smith: I just want to point out that we know how much money was raised by the 50% rate. That is not in dispute or uncertain. It raised £1.1 billion. That is there in black and white on page 39 of the HMRC document on the 50p rate. It is the projections that are uncertain. It is uncertain that £100 million will be the loss to the Exchequer. However, we know that the static cost, if there is no behavioural change, will be £3 billion. We know all that.
Alun Cairns: The hon. Gentleman is missing the point. The increase from 40% to 50% raised only a third of what was projected when it was introduced. That is how uncertain things were. If it is a bad tax and is not raising what it is intended to raise, let us get rid of it and have a sensible tax that is a lot more business-friendly and attractive to international investors. If that is the Opposition’s best argument in opposing the reduction of the rate from 50% to 45%, it demonstrates how weak they are.
Owen Smith: I am grateful to the hon. Gentleman for giving way, because I did not get a chance to say this earlier. The notion that the rate raised only a third of what was anticipated is another half-truth that was included in the Budget speech. In the year when we set the rate, we anticipated that it would raise £1.3 billion. That is there in black and white in the Labour party’s final Budget. It raised £1.1 billion. That is not a third of what we anticipated, but £200 million shy of it.
Alun Cairns: There are uncertainties about the drafting of any Budget at any time. There will be uncertainties in the Budget next year and the year after, as there have always been for any Chancellor writing a Budget. In the end, it comes down to the fact that a Chancellor has to make a judgment. This Chancellor had to make a judgment about whether a marginal tax rate in excess of 60% was right for Britain to attract investors and create wealth within the nation. He did so on the basis of information from the OBR, HMRC and the Institute for Fiscal Studies that at a time when we needed growth more than ever, that marginal tax rate sent the wrong message to other nations, and that a reduction in the headline rate of tax from 50% to 45% was exceptionally important.
3 pm
Charlie Elphicke: My hon. Friend is making an incredibly forceful and passionate argument. The hon. Member for Pontypridd (Owen Smith) said that according to the HMRC report, the 50% rate had raised £1.1 billion. He is playing fast and loose with the figures, because in the 2010 Budget, Labour said it would raise about £2.6 billion extra. It is an ever-disappearing amount of receipts. Is it not the case that when the rate is cut, it normally ends up increasing the take?
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Alun Cairns: My hon. Friend obviously makes an extremely strong point. It underlines the argument that the last Chancellor faced the same uncertainty as the current one. The last Chancellor made a judgment that he should increase the rate of tax, and the current one has made a judgment that he should reduce it. That is the core difference between the Labour and Conservative parties. We want to create wealth, unlike the Labour party, which is the party of envy and wants to punish people and spend their money instead of giving individuals greater choice.
Mr Love: The hon. Gentleman rightly says that because of the uncertainty about all these figures, the Chancellor had to make a judgment. Was that judgment a political one, casting doubt on the Government’s claim that it was made for purely economic reasons? It was not an economic decision; it was a political one.
Alun Cairns: It was quite obviously an economic judgment, but we cannot ignore the politics, which is what international investors interpret when they are considering placing their money and creating jobs in the hon. Gentleman’s constituency or mine. They consider how much they, their senior management, their greatest innovators and their scientists will have to pay under the top rate of tax. The politics cannot be ignored, but the economics, as demonstrated by the Chancellor and the Treasury team, is sound according to figures from the OBR, the IFS and HMRC. I absolutely accept them.
Stewart Hosie: We back amendment 1. As the hon. Member for Pontypridd (Owen Smith) said, it is the only way in which we can score out the cutting of the 50p rate of tax. Government Members have made some obscurantist points, as he described them, about why the amendment may not do precisely what is intended, but we would expect the table showing the 2013-14 rates to appear in the 2013 Finance Bill, as the equivalent table does in the Finance Bill every year, whether the amendment succeeds or not.
We believe it is wrong to remove at this point the temporary 50p rate for those earning more than £150,000 a year. I want to say a little about the context in which that extraordinary tax giveaway is happening. The Government say that we are all in it together and point in their various documents to the fact that every decile in society will be worse off and take some share of the burden. However, they then tell us that, almost uniquely, the personal tax-raising measure of the 50p rate is now deemed ineffective in bringing in much-needed revenue to tackle the deficit and debt, which is their primary objective, and in bringing down their borrowing requirements, which they see as an essential part of their plan.
The Revenue has produced an assessment of the impact of the change, which I am certain the Exchequer Secretary will pray in aid to justify the Government’s case. I will come back to that assessment, but first I shall explain why the removal of the temporary 50p tax rate proves that we are not all in it together, and why that single tax cut amplifies the unfairness of the Government’s plans. I hope to expand on the points that the hon. Member for East Antrim (Sammy Wilson) made in his very good speech.
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For those on low and fixed incomes, pay cuts, wage freezes and now a shock rise in inflation have meant the erosion of their living standards over some time. They will see no benefit from a tax cut for millionaires. For families in receipt of working tax credit, the new rules mean that their household income will fall by up to £3,800-odd a year if they are unable to find an extra eight hours of work a week. We know from our constituencies that such work often simply does not exist. They will see no benefit or fairness in cutting the 50p tax rate.
Of course, the families who face a fall in working tax credits are those who tend to earn only about £17,000 a year in total. They will see no benefit from a tax cut for millionaires. Indeed, real middle-class families earning £40,000, £50,000 or £60,000 a year—not somewhere over £250,000 a year, as I suspect the Government assume middle-class families earn—are about to have their child benefit removed, even with the taper changes to be proposed.
Before a Liberal gets up to tell me that there have been moves to increase the basic personal allowance from £6,475 in 2010 to £9,205 by 2013, an increase of £3,000 leading to a saving of some £600, I point out that the threshold above which one pays the 40p rate will go down from £37,400 to £32,245 in the same time frame. That is a fall of £5,000, so the fall in the threshold at the top end is larger than the increase in the allowance at the bottom. The net impact is that by 2013, the percentage of people paying the 40p rate will go up to 15% of all taxpayers, or some 5 million people earning more than £41,500. We have never had such a percentage of our taxpayers paying that rate before, and they will see no benefit from a tax cut for millionaires.
That is before we even consider the tax changes for older people. The changes to age-related allowances—the so-called granny tax—will have an impact on some 40% of pensioners. Those above the basic tax and pension credit threshold but below the £30,000 level at which they would not benefit anyway, or some 4.41 million older people, will be worse off. They will be singing in the streets of Raith, as they say, at the millionaires getting a tax cut that they are paying for.
The Government are providing a tax cut for millionaires that is being paid for by those on fixed incomes hit by inflation, poor working families whose tax credits are being cut or removed and middle-class families earning just over the ever-reducing 40p tax threshold. It is hardly fair, it is not right, and we are definitely not all in it together.
How precisely do the Government justify that? It is an inevitable consequence of a financial plan that is seeing the Government fetishise debt and deficit levels to the extent that they plan to take £155 billion a year out of the economy by 2016-17 for fiscal consolidation, through cuts and tax rises. To understand the Tory priorities, we need to understand how the proportion of spending cuts to tax rises is changing, which is very instructive. I hope some Tories will find it instructive, because their constituents will soon be knocking on their doors asking why it is happening.
In 2011-12, spending cuts were planned to be 56% of the total consolidation, the rest of which would be tax rises, which is a pretty reasonable balance. However, the Government are increasing the proportion of the
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consolidation that is cuts through the next few years to 62%, 69%, 74% and 79%, and up to a whopping 81%—only 19% of the consolidation will be tax increases by 2016-17.
Alison McGovern: In addition to those comments, does the hon. Gentleman agree that there is a geographical dimension? Those likely to benefit from the tax cut are clustered in certain locations in our country, and those who lose money, as he has described—they will also suffer from public spending cuts—cluster in other areas.
Stewart Hosie: That is absolutely right, but I want to be careful in answering. It is not good enough to say that people in the north or Wales or Northern Ireland or Scotland will lose, because unemployment and poverty in London is enormous. The geographical areas are not the ones traditionally described in lazy journalism—it is not that the north is poor and the south is rich—because pockets of poverty and of wealth exist in every single constituency in the country. The hon. Lady is right, however, that there are such pockets.
Even with all the pain and austerity, and the social and economic problems that the Government’s plans will cause, the Chancellor has been able to find a tax cut for millionaires. How does he justify it? Whatever his justification, the measure does not make sense economically, to answer the points made by the hon. Member for Vale of Glamorgan (Alun Cairns), who seemed to think that the measure is economically robust.
The Government’s fiscal rules—that the structural current deficit should be in balance and that debt is falling as a share of GDP in the final year of the forecast—are under enormous pressure. The problem—this is the evidence we ought to look at—is that the deficit in this Budget was forecast in the 2011 Red Book for 2011-12 to be £90 billion, but it is now forecast to be £98 billion. That is £8 billion worse than planned. The net borrowing requirement in the 2011 Red Book was forecast for 2011-12 to be £122 billion; it is now £126 billion. That is £4 billion worse than planned. The national debt or the treaty ratio that was due to peak at 87.2% of GDP—£1.25 trillion—in 2013-14 is now expected to rise, on the same count, to 92.7% of GDP in 2014-15. That is up again; it is worse than the Government’s forecasts. Everything is going in the wrong direction, so this is the wrong time to forgo revenue yield.
Michael Connarty (Linlithgow and East Falkirk) (Lab): The hon. Gentleman has set out the figures for the overarching macro-economic situation very well, but is it not clear from the OBR that the effect on business investment will be minus 6.8%? The Budget incentivises no one in terms of the real growth that we require.
Stewart Hosie:
The points on business investment are incredibly well made. The Government’s targets were based on heroic rates of growth over four and five-year periods, but the 2011 Budget forecast for 2011 business investment growth was 6.7%. By the time of the 2012 Red Book, the forecast was 0.2%. The 2011 Budget forecast for 2012 was 8.9%, but as the hon. Gentleman says, that has been marked down to only 0.7%. Of course, that makes it even more extraordinary that there is a net fall year on year of central Government consumption and investment, which in normal
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circumstances in normal countries would be called an automatic stabiliser and would compensate. Of course, this country does not have that.
That means that for the Government to stay on their course, they almost certainly need the revenue yield that the 50p rate would have delivered. There is a debate on precisely how much that yield is. It could be the £360 million over four years forecast in the Red Book, or it could be the higher £3 billion a year static forecast we have heard cited. Whatever the actual figure, given that all those other metrics are going in the wrong direction, it is extraordinary that the Chancellor is prepared to forgo any revenue yields, whether they are in the hundreds of millions of the £1 billion range.
3.15 pm
However, I am most concerned that the Treasury has chosen to reduce the temporary rate now on the back of a review of one year’s self-assessment returns, which may well have been lower in any case because of the recession and flat economy. I am concerned at the over-reliance on behavioural change metrics, which have allowed the Treasury dramatically to recast the expected yield and minimise the nominal loss—it is a loss—of real yield, and I am concerned about the Government’s reliance on the argument of substantial forestalling to justify this change.
The hon. Member for East Antrim made the point that the Revenue report says:
“The uncertainty regarding the extent to which the unwinding of this forestalled income depressed incomes in 2010-11 makes isolating the true underlying…response to the additional rate challenging.”
I shall translate: the Government do not have a clue. It would have been better—surely—to have allowed the temporary rate to continue for another year or two, or at least until the economic indicators were pointing in the right direction, rather than butchering the public sector to fund the millionaires’ tax cut.
It is a political decision to give a tax cut to very wealthy people and to pay for it by increasing the value of cuts to Government expenditure and increasing the ratio of cuts to tax increases. The Government have done it in a way that threatens their fiscal plans and that is extraordinarily unfair. Low incomes are being squeezed by inflation, pay freezes and wage cuts; for many, working tax credits are going; 4.41 million pensioners will be worse off because of the granny tax; 5 million middle class, middle earners are being dragged into the 40p tax bracket; and there is a tax cut for 14,000 millionaires. That is not credible, and the Scottish National party and other parties will be delighted to support amendment 1.
Charlie Elphicke:
Much of the discussion on the 50p rate has been on whether it is an economic decision or a political one. My viewpoint is very simple. If we wanted a nice, easy time, and if our Ministers wanted a nice easy ride on the “Today” programme, where all those nice, gently liberal-leftie, metropolitan BBC people would congratulate us on doing nothing whatever, we would have left the higher rate at 50p. I am sure the hon. Member for Pontypridd (Owen Smith) would have approved and been happy to congratulate us. If, on the other hand, we wanted to take action and do the right thing economically—the one thing that really matters is getting this country growing as quickly as possible—even if it
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were politically hard for us to sell, we would support the entrepreneurs, wealth creators and aspirant people who create the jobs and money that make this country go. For my money, that is the bottom line. The economics trump the politics.
Owen Smith: I wholeheartedly agree with the hon. Gentleman that getting the country growing is the most important thing. The trouble is that that blue book he was waving around a moment ago, taking into account the 50p rate cut and all the other measures, says that the Government will increase GDP by 0.1%. Are they not failing?
Charlie Elphicke: I completely disagree. The Government are doing a great job. We have had the most difficult year, in which recovery was effectively postponed because the European and eurozone crisis caused massive uncertainty. I will not shirk from the point: that uncertainty has caused businesses to delay the business investment that was expected by about a year. The OBR, in the blue book that the hon. Gentleman says I am waving around, makes that perfectly clear. I will happily take him on on the issue of business investment. The situation has come to pass basically because of the eurozone. Also, the OBR says that business investment for the fourth quarter can be a bit lower than expected but that it often, statistically, bounces. It also says that the Government’s pioneering reduction of business taxes will have a positive effect in helping the country to grow.
The bottom line of economics is that we need to ensure more jobs and money as quickly as possible to help the country to grow faster despite the chaos and financial mismanagement in the eurozone. Let us not forget that Labour, if it had had its way, would have taken us into that chaos and into the euro. If Labour had won the election, it would also have carried on spending at an unsustainable rate and rapidly taken us the way of Greece, Spain, Italy, Portugal and Ireland, which would have put us in an extraordinarily difficult position.
On the revenue numbers, Labour’s central argument is that we should not cut the 50p rate because, first, we need to hit the rich and squeeze them until the pips squeak and, secondly, we are letting money go that would otherwise be brought into the Exchequer and are looking after our rich friends. That is its analysis. However, the summary in paragraph 4.7 on page 84 of the OBR report states:
“The Chancellor’s decision to cut the”
“has an estimated direct cost to the Exchequer of £0.1 billion, excluding the impact of ‘reverse forestalling’ as people shift…income from”
“to take advantage of the lower rate. The figure is small because the additional rate is now assumed to be close to its revenue-maximising level.”
In other words, it does not make much difference—£100 million here, £100 million there, out of a total budget that I believe is getting on for £700 billion, is a small
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amount, particularly given that it sends a positive message to aspirants, entrepreneurs and the people who work hard to deliver so much value-added for our country.
Michael Connarty: We can all pick selectively from the OBR report—I have referred to it quite a few times—but this is a comment based on the Government’s own estimate that there will be an inflow of £2.9 billion from increased activity by those who pay the 45% rate. There is absolutely no fact behind that yet. It is basically a comment based on a prediction by the Government. In other areas, again and again since they took office, they have been very wrong. It is a hope, not a statement of fact. The actual cost will be £3 billion until the money comes in that the OBR has accepted from the Chancellor’s estimates.
Charlie Elphicke: I thank the hon. Gentleman for bringing me on to my next point. The hon. Member for Pontypridd is fond of saying, “Ah, look at the HMRC impact report. It brought in £1.1 billion but the estimate was that it would then have brought in much more.” [Interruption.] Some £3 billion, he says. That was the estimate in the March 2010 Budget, which mentioned an additional £2.6 billion. In the June 2010 Budget forecast, that increased to £2.7 billion. However, when we look in detail at what happened and how much was brought in, it appears that the OBR and HMRC now estimate the figure to be £0.6 billion in 2012-13.
Owen Smith: I will explain to the hon. Gentleman why there is a step from year 1, when we anticipated it would raise £1.3 billion but when it actually raised £1.1 billion, to the subsequent figure of £3 billion. The explanation, of course, is that it gets far harder to bring money into earlier years. It gets far harder to forestall the income. That is what happened in the first year, but it would have been increasingly difficult to do so afterwards.
Charlie Elphicke: The hon. Gentleman makes that assertion. Let us consider the detail of what the OBR says, leaving aside forestalling. Page 108 of its report, which considers this matter in great detail, states:
“These steps might include labour supply responses (e.g. working less”—
“taking a lower paid job, retiring early, or leaving the country)”.
As we know, many people have given up, upped sticks and gone—driven away by the anti-business, anti-aspiration policies of the Labour party.
Alison McGovern: Will the hon. Gentleman tell us exactly how many people have left the country? If so, what is his source for that statistic?
Charlie Elphicke: I am simply reporting what the OBR has said. I will not pretend that I am an expert on immigration to and emigration from this country. I might represent Dover but that does not mean I count everyone in and out. I have to trust the OBR. Having said that, in the past decade my constituents have complained that an awful lot of people seem to have come in. They are very upset about that and think there could have been more border security. But that is not the key point of this debate.
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Harriett Baldwin: I am listening to my hon. Friend’s excellent speech with great interest because of his expertise as a tax accountant.
Harriett Baldwin: Tax lawyer even. Was he as surprised as I was at the £16 billion to £18 billion of forestalling measures taken after it was preannounced that the rate would rise to 50p?
Charlie Elphicke: Very much so. My hon. Friend makes a good point. It is also in the OBR report. These are the forestalling measures—[Interruption.] Labour assumes that people forestall for only one year and that the income will suddenly pop up the following year. That is not what really happens. Often people will take a long career break. [Interruption.] I shall give the hon. Member for Pontypridd, who is chuntering from a sedentary position—
The Temporary Chair (Mr Jim Hood): Order. I will not accept this happening across the Committee. Right hon. and hon. Members should know better.
Charlie Elphicke: I will give the Committee an example. Let us say that I earn £150,000. Obviously, as a Member of Parliament, I do not, but let us assume that I did and that I did not feel like paying the 50p rate. What could I do? People’s response—the market response, if one likes—is to set up things such as personal service companies, and then we will not see the 50p tax rate again. They will shove money into their personal service companies and pay the small companies rate of taxation. They then sit tight and pay a very low dividend rate of taxation when they get the money out as and when they see fit. Alternatively, they do this trick where they loan themselves lots of money and pay an extraordinarily low beneficial loan rate of tax. I think that such behaviour is wrong. The Labour party ought to know about this not just because of Ken Livingstone but because others of them are up to it as well. They should come clean and be a bit clearer with the Committee about their understanding that people will avoid and forestall for good.
Mark Durkan: Is the hon. Gentleman trying to tell the Committee that none of those schemes or scams will happen under the 45% rate?
Charlie Elphicke: With the 45% rate, there is less utility and less maximisation of revenue from doing so. Of course, it is marginal, but the unacceptability of paying—paying, not avoiding—at 45% is less than it is at 50p. People resent 50p and think, “These people are trying to stuff me and take all my money away.” The 40p rate was well settled and people’s behaviour was sort of booked in. The judgment is that the most revenue will be raised halfway between the two because, on the one hand, people will think it acceptable—they will not go the extra mile to avoid it—and, on the other hand, they will not think they are being fleeced as they were under the so-called temporary 50p rate, which Labour is now saying was not temporary.
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Charlie Elphicke: I will give way to the hon. Gentleman one more time, but I would ask him to say whether it was always the intention that the 50p should be temporary. Yes or no?
Owen Smith: I have already answered that three times in this debate, so I am not going to repeat myself. Yes, the rate was temporary, although we would not have got rid of it for the whole of this Parliament. However, let me remind the hon. Gentleman what the Business Secretary’s response was to the argument, which he has just made, about the equanimity with which people will pay full tax at the 45p rate: “Pull the other one”.
Charlie Elphicke: The Business Secretary is well known for having strong and principled positions from which he never resiles. The hon. Gentleman makes a fascinating point, although I do not know the detail of that quotation.
Let me turn to tax planning, and avoidance and evasion. As I have said, people set up personal service companies and, quite frankly, fiddle the system. To be honest, we need stronger anti-avoidance legislation to stop that kind of thing. However, the important point is that we need it if the rate is at a level at which people regard it as socially acceptable to pay, and do not feel that they are being completely fleeced.
Mark Reckless: My hon. Friend has substantial expertise as a tax lawyer. Does he think that a “look-through” anti-avoidance measure for personal service companies of that type would work?
3.30 pm
Charlie Elphicke: That is a really interesting question. In practice, it is incredibly difficult to distinguish between the person who is setting up a personal service company simply to play the system and the person who is in business and is genuinely using such a company so as not to go bankrupt. It is difficult to draw the dividing line to distinguish the husband and wife who are simply trying to play the system—that often happens—from the genuine business that is acting for true commercial purposes. It is quite invidious to separate the two.
It is better to set the rate at a level where, as the OBR would put it, the willingness of high-earning individuals is such that they regard it as slightly more socially acceptable to pay. Indeed, the OBR was not just the Exchequer’s patsy on this issue; rather, it was independent. As the OBR says on page 109 of its report, it reviewed in considerable detail what the HMRC report said about what the revenues would be, in considering whether to reduce the tax rate to 45p. It looked at the methodology used by the Institute for Fiscal Studies in the Mirrlees review, at the work of Brewer et al, while also adjusting for forestalling—a point the hon. Member for Pontypridd raised—and at the HMRC study on the underlying behavioural response. Therefore, a lot of work has been done on what exactly the position is.
It is true, of course, that things are quite uncertain. The cost to the Exchequer might not be £100 million. Indeed, students of tax history will know that when the rate originally went from 80% to 60%—a massive cut—the revenues did not fall, but rose dramatically. Did receipts fall when the tax rate was then cut from 60p to 40p? No, they rose dramatically. My understanding of the history, therefore, is that if we reduce the rate, we up the take.
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There is real risk and massive uncertainty. Indeed, rather than costing the Exchequer £100 million, this measure may well make the Exchequer up to about £500 million. From the history, it seems far more likely that we will have an increase in the take, which will mean improvements for our schools and hospitals, and in our ability to pay down the massive debt that the previous Government saddled us with. I therefore think this is the right policy at the right time.
Mr Gauke: As we all know, the previous Government were reluctant to take any meaningful steps to reduce the deficit. However, they could point to the imposition of an increase of more than 10% in the additional rate in three months, even though there was scepticism at the time about the projected levels of revenue. It is also worth pointing out that the then Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), accepted that the increase was “a temporary measure”. He recognised some of the difficulties with the policy. He accepted that the behavioural effect would steeply reduce potential revenues—the estimate at the time was that the measure would reduce revenues by two thirds. That is about £4 billion of revenue that he accepted would never materialise, owing to behavioural adjustments, such as individuals deciding to work less or not remain in the United Kingdom. He also accepted that the 50p rate would damage the UK’s international standing, giving us the highest statutory income tax rate in the G20. He also accepted, I am sure, the fact that although the measure was temporary, it would be politically difficult to reverse.
However, I have to say to the Opposition, and to the many hon. Members who have participated in this debate, that although Labour may claim to want to raise taxes on the wealthy, the reality is that the 50p rate was not succeeding in getting the money in. I do not think that it is a coincidence that the 50p rate was in place for only 36 of the 4,758 days for which the previous Labour Government were in power. When we came into office, we inherited a tax rate that we were told would damage our competitiveness, that would bring in questionable levels of revenue and that was always expected to be temporary.
Owen Smith: The Minister has repeated the line that the 50p rate was not getting the money in. What exactly does he mean by that? His own HMRC report says, in paragraph 5 on page 2, that the yield was
“around £1 billion or less”.
It does not say by how much less. Page 39 of the report states that the figure for the yield is £1.1 billion.
Mr Gauke: The hon. Gentleman cites the report; let me give him the full quote. On page 2, the summary gives the estimate that the yield from the 50p rate could be
“around £1 billion or less…and that it is quite possible that it could be negative.”
We need to compare that with the previous Government’s estimate of a yield of £2.6 billion—[
Interruption.
] Ah! The hon. Member for Pontypridd (Owen Smith) says that it was £1.3 billion in the first year. Let me explain why the figure was £1.3 billion in the first year. He is
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presenting that as a great triumph. Most of the money that comes in from wealthy individuals comes in through the self-assessment system, and most of the money raised from the top rate will be collected in the year after the rate is introduced. Only a certain proportion will come in through PAYE. The reason the figure was £1.3 billion in the first year was purely one of cash flow. If the hon. Gentleman is claiming that the revenue was only ever expected to be £1.3 billion, that is not a fair representation of the previous Government’s estimate, which was of a steady rate of £2.6 billion and rising.
Mr Gauke: I will give way to the hon. Gentleman if he wants to make a correction.
Owen Smith: I simply want to ask the question one more time. If the yield was less than £1 billion, how much less was it? Surely the Minister knows how much the top rate got him.
Mr Gauke: The central estimate, which the OBR has confirmed, is £700 million. We are reducing the rate to 45%, and the central estimate of the cost of that is £100 million. Were we to take it down to 40%, which would be the consequence of the hon. Gentleman’s amendment, the central cost would be £700 million.
Mark Reckless: I think the Minister is being rather too modest. On page 21, the report states that
“most of the studies…produce TIEs”—
“in the range of 0.4 to 0.7”.
Let us take a central estimate of 0.55 from within that range. If we look at page 51, we see a graph that suggests that a reduction in the additional tax rate—whether to 45% as proposed by the Government, or to 40% as proposed by the Opposition—would raise £600 million. Could the Minister use some of that money to enable him to accept our amendments on child benefit?
Mr Gauke: My hon. Friend is right to say that we have taken a cautious approach to this matter. Indeed, many estimates suggest that we are overstating the amount that the 50p rate is bringing in. He is right to cite those figures.
Richard Harrington: Does the Minister agree that the Opposition are missing the point by talking about the amount that was raised by the 50p rate? The real point is the money that was not raised, owing to the disincentive that it created for people to set up businesses and to spend to create jobs and provide the growth that the country needs.
Mr Gauke:
My hon. Friend is absolutely right. Let us put away some of the rhetoric that we have heard this afternoon and focus on the disagreement over the previous Government’s assessment of the behavioural impact of the 50p. Their assessment was that about 66% would be lost through behavioural impact. On the basis of the additional evidence that has emerged following the HMRC study, which is consistent with the consensus of the academic studies in this area, the estimate that the OBR has signed off is that the behavioural impact is closer to
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83%. No reasonable case can possibly be made that there is no behavioural impact, yet the shadow Chancellor’s consistent argument that this is a £3 billion tax cut for the rich implies a behavioural impact of zero—miles away from any realistic case.
Mr Love: The Minister quotes research that is primarily associated with the United States rather than the United Kingdom. British research under the Mirrlees project related to events occurring 20 or 30 years ago. The reality is that there is great uncertainty in these areas; the Government’s claim that that is not the case simply ignores the reality. We can pick out whatever number we choose, but the reality is that we are losing taxable income as a result of this change.
Mr Gauke: The hon. Gentleman is right that the assessment of Her Majesty’s Revenue and Customs, signed off by the Office for Budget Responsibility, is very similar to that of the Mirrlees review, which looked at evidence from the 1970s and the 1980s. Given that the big behavioural impact owes much to the mobility of international labour at that end of the scale—the highest earning individuals in the world are very mobile—and given that the mobility of labour has clearly increased, particularly in that sector, since the 1980s, it would appear that the hon. Gentleman is making a case to suggest that the elasticity we are using is too low, not too high, so he might like to have a conversation with my hon. Friend the Member for Rochester and Strood (Mark Reckless).
Chris Bryant: On a point of order, Mr Hood. You may not be aware of it, but the media are reporting that, contrary to what was announced to the House yesterday afternoon, Abu Qatada might have been arrested by the Home Office illegally because it had not consulted the European Court of Human Rights on the last available date to—
The Temporary Chair (Mr Jim Hood): Order. I have heard enough of the hon. Member’s contribution to give him a ruling. That is not a point of order for me. He can request that the Government make a statement to the House on the media or television report to which he refers, and if the Government agree, they can do so. As I said, it is not a point of order for me to deal with in this debate.
Mr Gauke: Thank you, Mr Hood. To return to the matter in hand—
Mr Gauke: I do not have much time, so I would be grateful to the hon. Member for Edmonton (Mr Love) if he would allow me to press on.
The Chancellor made it clear in a pragmatic way that we wish to see the evidence. HMRC conducted a review, making use of the self-assessment returns that became available in January this year. They provide the most complete source of data on high earners’ tax affairs, which only HMRC can analyse as they contain confidential taxpayer information. In this report, we have seen that the additional rate is distorted, that it is damaging to international competitiveness and that it is an economically inefficient way of raising revenue. These conclusions are
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based on that analysis of self-assessment data and international studies. The report finds that the behavioural response has been substantially larger than expected. The previous Government had estimated the revenue from the 50p rate to be approximately £2.5 billion each year. The HMRC analysis states that the yield would be £1 billion at best, and at worst might raise nothing at all. That is because of the much greater than anticipated behavioural effect.
We have seen huge levels of forestalling, and HMRC estimates that between a third and a half of the behavioural effect comes from genuine reductions in income through such changes as reduced hours worked or reductions in participation in the UK labour market. This suggests that total income fell by £2.9 billion and £4.4 billion as a result of the 50p rate, and that gross domestic product is between 0.2% and 0.3% lower. So this is not just a loss of tax revenue, but a loss to the economy as a whole through lower productivity and economic activity. Those are the conclusions of HMRC’s analysis.
It is very clear that the 50p rate has failed. It has been criticised by business, it has posed the risk of lasting damage to the UK economy, and it has raised considerably less for the Exchequer than expected, possibly costing rather than raising revenue.
3.45 pm
Mark Durkan: The Minister has said that the Chancellor wants to work on an evidence basis. He has previously told us that the Chancellor wants to pursue tax avoidance. Will he therefore accept amendment 76, which focuses on ensuring that the House is given the evidence relating to both tax avoidance and the effects of the additional rate of tax?
Mr Gauke: We have a report that produces evidence. I can also assure the hon. Gentleman that the Government have made clear their determination to reduce tax avoidance, and have taken a number of steps to do just that.
Amendment 1 has created some confusion. The Opposition Members who tabled it propose that the additional rate for 2013-14 should be left out altogether. Unlike the 45p rate proposed by the Government, the higher rate of 40% would apply to income over the higher-rate threshold. I understand that Labour sources have been briefing this afternoon that the amendment deliberately leaves the top rate undecided. It does not leave it undecided; it abolishes it. The Labour party has found itself in an extraordinary position.
We have heard astonishing suggestions that we should accept the “static” argument, although, to be fair to the hon. Member for Pontypridd, he has been somewhat hesitant about simply quoting the static numbers as if they were acceptable. We must take account of the behavioural impact, and as we have seen more evidence, it has become clear that it has been greater than was anticipated.
The effect of the 50p rate has been damaging not just to the Exchequer in failing to raise the money that was anticipated, but to competitiveness. There has been a 29% increase in Britain’s—[Interruption.]
The Temporary Chairman (Mr Jim Hood):
Order. I apologise for interrupting the Minister, but I cannot hear a word he is saying because of the noise made by
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his colleagues who are sitting on my right. I ask Members to give their own Minister some order when he is winding up a debate.
As I was saying, there has been a 29% increase in the number of Britons given permission to work long-term in Switzerland, and the United Kingdom has become less competitive. As a result of our reforms—the additional measures that we are taking to cap charitable and other reliefs, and the measures we are taking to deal with avoidance—27% of revenue from income tax will come from the top 1%, who paid between 20% and 25% under the Labour party.
The reduction in the additional rate is understandably controversial, but we should look at the evidence, not the Opposition’s rhetoric. The 50p rate did not raise the revenues that it was intended to raise, and what money it did raise came with a cost of damage to growth and competitiveness. This is not a sustainable position, so we are reducing the rate to 45p, providing certainty and clarity for those affected. That will mean a relatively small cost to the Exchequer and a significant boost to our competitive position. As the CBI has said,
“Reducing the 50p income tax rate will send a clear signal that the UK is open for business. We must continue to encourage top talent to live and work in the UK.”
This change is good for our long-term tax revenues, it is good for our economy, and it is good for the UK as a whole. I therefore ask hon. Members not to press their amendments, and propose that the clause should stand part of the Bill.
Owen Smith: Labour Members do not believe that the cut from 50p to 45p is good for the economy, and we do not think for a moment that the Minister has justified it today. Nor do we think that he has justified the claim that the rate raised practically nothing, which is what the Prime Minister, rather curiously, told the House earlier today. The Minister himself contradicted the Prime Minister in conceding that it raised perhaps £1 billion. In fact, I think the Minister definitively said £700 million whereas the Prime Minister said it raised nothing. I do not know which of them is right, but I am assuming the Minister is right.
Mr Gauke: Will the hon. Gentleman give way?
Owen Smith: I do not think I have time to give way, as I want to press the amendment to a Division.
Nor do I think the Government have succeeded in persuading any Member of this House that it is anything other than voodoo economics to suggest that the cost of this rate change will be only £100 million. It is very likely to be closer to £3 billion than to £1 billion.
As we remain wholly unpersuaded, we shall press the amendment to a vote—
3.50 pm
Three hours having elapsed since the commencement of proceedings, the debate was interrupted (Programme order, 16 April).
18 Apr 2012 : Column 376
The Chair put forthwith the Question already proposed from the Chair (Standing Order No. 83D), That the amendment be made.
The Committee divided:
Ayes 256, Noes 323.
[3.50 pm
AYES
Abbott, Ms Diane
Abrahams, Debbie
Ainsworth, rh Mr Bob
Alexander, rh Mr Douglas
Alexander, Heidi
Ali, Rushanara
Allen, Mr Graham
Anderson, Mr David
Ashworth, Jonathan
Austin, Ian
Bailey, Mr Adrian
Bain, Mr William
Balls, rh Ed
Banks, Gordon
Benn, rh Hilary
Berger, Luciana
Betts, Mr Clive
Blackman-Woods, Roberta
Blears, rh Hazel
Blenkinsop, Tom
Blunkett, rh Mr David
Bradshaw, rh Mr Ben
Brennan, Kevin
Brown, Lyn
Brown, rh Mr Nicholas
Brown, Mr Russell
Bryant, Chris
Buck, Ms Karen
Burden, Richard
Burnham, rh Andy
Byrne, rh Mr Liam
Campbell, Mr Alan
Campbell, Mr Gregory
Campbell, Mr Ronnie
Caton, Martin
Chapman, Mrs Jenny
Clark, Katy
Clarke, rh Mr Tom
Clwyd, rh Ann
Coaker, Vernon
Coffey, Ann
Connarty, Michael
Cooper, Rosie
Cooper, rh Yvette
Corbyn, Jeremy
Crausby, Mr David
Creagh, Mary
Creasy, Stella
Cruddas, Jon
Cryer, John
Cunningham, Alex
Cunningham, Mr Jim
Cunningham, Tony
Curran, Margaret
Dakin, Nic
Danczuk, Simon
Darling, rh Mr Alistair
David, Mr Wayne
Davidson, Mr Ian
Davies, Geraint
De Piero, Gloria
Denham, rh Mr John
Dobbin, Jim
Dobson, rh Frank
Docherty, Thomas
Dodds, rh Mr Nigel
Donaldson, rh Mr Jeffrey M.
Donohoe, Mr Brian H.
Doran, Mr Frank
Dowd, Jim
Doyle, Gemma
Dromey, Jack
Dugher, Michael
Durkan, Mark
Eagle, Ms Angela
Eagle, Maria
Edwards, Jonathan
Efford, Clive
Ellman, Mrs Louise
Engel, Natascha
Esterson, Bill
Evans, Chris
Farrelly, Paul
Fitzpatrick, Jim
Flello, Robert
Flint, rh Caroline
Flynn, Paul
Francis, Dr Hywel
Gapes, Mike
Gardiner, Barry
Gilmore, Sheila
Glass, Pat
Glindon, Mrs Mary
Goggins, rh Paul
Goodman, Helen
Greatrex, Tom
Green, Kate
Greenwood, Lilian
Griffith, Nia
Gwynne, Andrew
Hain, rh Mr Peter
Hamilton, Mr David
Hamilton, Fabian
Hancock, Mr Mike
Hanson, rh Mr David
Harman, rh Ms Harriet
Harris, Mr Tom
Havard, Mr Dai
Healey, rh John
Hendrick, Mark
Hepburn, Mr Stephen
Hermon, Lady
Heyes, David
Hillier, Meg
Hilling, Julie
Hodge, rh Margaret
Hodgson, Mrs Sharon
Hoey, Kate
Hopkins, Kelvin
Hosie, Stewart
Howarth, rh Mr George
Hunt, Tristram
Irranca-Davies, Huw
Jackson, Glenda
James, Mrs Siân C.
Jamieson, Cathy
Jarvis, Dan
Johnson, rh Alan
Johnson, Diana
Jones, Graham
Jones, Helen
Jones, Susan Elan
Jowell, rh Tessa
Kaufman, rh Sir Gerald
Keeley, Barbara
Kendall, Liz
Khan, rh Sadiq
Lammy, rh Mr David
Lavery, Ian
Lazarowicz, Mark
Leslie, Chris
Lewis, Mr Ivan
Lloyd, Tony
Llwyd, rh Mr Elfyn
Long, Naomi
Love, Mr Andrew
Lucas, Caroline
Lucas, Ian
MacNeil, Mr Angus Brendan
MacShane, rh Mr Denis
Mahmood, Shabana
Malhotra, Seema
Mann, John
Marsden, Mr Gordon
McCann, Mr Michael
McCarthy, Kerry
McCartney, Jason
McClymont, Gregg
McCrea, Dr William
McDonagh, Siobhain
McDonnell, Dr Alasdair
McDonnell, John
McFadden, rh Mr Pat
McGovern, Alison
McGovern, Jim
McGuire, rh Mrs Anne
McKechin, Ann
McKenzie, Mr Iain
McKinnell, Catherine
Meacher, rh Mr Michael
Meale, Sir Alan
Mearns, Ian
Michael, rh Alun
Miliband, rh David
Miliband, rh Edward
Miller, Andrew
Mitchell, Austin
Moon, Mrs Madeleine
Morden, Jessica
Morrice, Graeme
(Livingston)
Morris, Grahame M.
(Easington)
Mudie, Mr George
Munn, Meg
Murphy, rh Mr Jim
Murphy, rh Paul
Murray, Ian
Nandy, Lisa
Nash, Pamela
O'Donnell, Fiona
Onwurah, Chi
Osborne, Sandra
Owen, Albert
Paisley, Ian
Pearce, Teresa
Perkins, Toby
Phillipson, Bridget
Pound, Stephen
Qureshi, Yasmin
Raynsford, rh Mr Nick
Reeves, Rachel
Reynolds, Emma
Reynolds, Jonathan
Riordan, Mrs Linda
Ritchie, Ms Margaret
Robertson, Angus
Robertson, John
Robinson, Mr Geoffrey
Rotheram, Steve
Roy, Mr Frank
Roy, Lindsay
Ruddock, rh Dame Joan
Sarwar, Anas
Seabeck, Alison
Shannon, Jim
Sharma, Mr Virendra
Sheerman, Mr Barry
Sheridan, Jim
Shuker, Gavin
Simpson, David
Skinner, Mr Dennis
Slaughter, Mr Andy
Smith, rh Mr Andrew
Smith, Angela
Smith, Nick
Smith, Owen
Spellar, rh Mr John
Straw, rh Mr Jack
Stringer, Graham
Sutcliffe, Mr Gerry
Tami, Mark
Thomas, Mr Gareth
Thornberry, Emily
Timms, rh Stephen
Trickett, Jon
Turner, Karl
Twigg, Derek
Twigg, Stephen
Umunna, Mr Chuka
Vaz, rh Keith
Vaz, Valerie
Walley, Joan
Watts, Mr Dave
Weir, Mr Mike
Whiteford, Dr Eilidh
Whitehead, Dr Alan
Wicks, rh Malcolm
Williamson, Chris
Wilson, Phil
Wilson, Sammy
Winnick, Mr David
Winterton, rh Ms Rosie
Wishart, Pete
Woodcock, John
Woodward, rh Mr Shaun
Wright, David
Wright, Mr Iain
Tellers for the Ayes:
Chris Ruane and
Yvonne Fovargue
NOES
Adams, Nigel
Afriyie, Adam
Aldous, Peter
Alexander, rh Danny
Amess, Mr David
Andrew, Stuart
Arbuthnot, rh Mr James
Bacon, Mr Richard
Baker, Norman
Baldry, Tony
Baldwin, Harriett
Barclay, Stephen
Baron, Mr John
Barwell, Gavin
Bebb, Guto
Beith, rh Sir Alan
Benyon, Richard
Beresford, Sir Paul
Berry, Jake
Bingham, Andrew
Binley, Mr Brian
Birtwistle, Gordon
Blackman, Bob
Blackwood, Nicola
Blunt, Mr Crispin
Boles, Nick
Bottomley, Sir Peter
Bradley, Karen
Brake, rh Tom
Bray, Angie
Brazier, Mr Julian
Bridgen, Andrew
Brine, Steve
Brokenshire, James
Browne, Mr Jeremy
Bruce, Fiona
Bruce, rh Malcolm
Buckland, Mr Robert
Burley, Mr Aidan
Burns, Conor
Burns, rh Mr Simon
Burstow, Paul
Burt, Alistair
Burt, Lorely
Byles, Dan
Cairns, Alun
Cameron, rh Mr David
Carmichael, rh Mr Alistair
Carmichael, Neil
Carswell, Mr Douglas
Cash, Mr William
Chishti, Rehman
Chope, Mr Christopher
Clappison, Mr James
Clark, rh Greg
Clarke, rh Mr Kenneth
Clegg, rh Mr Nick
Clifton-Brown, Geoffrey
Coffey, Dr Thérèse
Collins, Damian
Colvile, Oliver
Crabb, Stephen
Crouch, Tracey
Davey, rh Mr Edward
Davies, David T. C.
(Monmouth)
Davies, Glyn
Davies, Philip
Davis, rh Mr David
de Bois, Nick
Dinenage, Caroline
Djanogly, Mr Jonathan
Dorrell, rh Mr Stephen
Dorries, Nadine
Doyle-Price, Jackie
Drax, Richard
Duddridge, James
Duncan, rh Mr Alan
Duncan Smith, rh Mr Iain
Dunne, Mr Philip
Ellis, Michael
Ellison, Jane
Ellwood, Mr Tobias
Elphicke, Charlie
Eustice, George
Evans, Graham
Evans, Jonathan
Evennett, Mr David
Fabricant, Michael
Fallon, Michael
Field, Mark
Foster, rh Mr Don
Fox, rh Dr Liam
Francois, rh Mr Mark
Freeman, George
Freer, Mike
Fullbrook, Lorraine
Garnier, Mark
Gauke, Mr David
George, Andrew
Gibb, Mr Nick
Gilbert, Stephen
Gillan, rh Mrs Cheryl
Glen, John
Goldsmith, Zac
Goodwill, Mr Robert
Gove, rh Michael
Graham, Richard
Grant, Mrs Helen
Gray, Mr James
Grayling, rh Chris
Green, Damian
Greening, rh Justine
Grieve, rh Mr Dominic
Griffiths, Andrew
Gummer, Ben
Gyimah, Mr Sam
Halfon, Robert
Hames, Duncan
Hammond, Stephen
Hancock, Matthew
Hancock, Mr Mike
Hands, Greg
Harper, Mr Mark
Harrington, Richard
Harris, Rebecca
Hart, Simon
Harvey, Nick
Hayes, Mr John
Heald, Oliver
Heath, Mr David
Heaton-Harris, Chris
Hemming, John
Henderson, Gordon
Hendry, Charles
Herbert, rh Nick
Hinds, Damian
Hoban, Mr Mark
Hollingbery, George
Hollobone, Mr Philip
Hopkins, Kris
Horwood, Martin
Howell, John
Hughes, rh Simon
Huhne, rh Chris
Hunt, rh Mr Jeremy
Hurd, Mr Nick
Jackson, Mr Stewart
James, Margot
Javid, Sajid
Johnson, Gareth
Johnson, Joseph
Jones, Andrew
Jones, Mr David
Jones, Mr Marcus
Kawczynski, Daniel
Kelly, Chris
Kirby, Simon
Knight, rh Mr Greg
Kwarteng, Kwasi
Laing, Mrs Eleanor
Lancaster, Mark
Lansley, rh Mr Andrew
Laws, rh Mr David
Leadsom, Andrea
Lee, Jessica
Lee, Dr Phillip
Leech, Mr John
Lefroy, Jeremy
Leigh, Mr Edward
Leslie, Charlotte
Letwin, rh Mr Oliver
Lewis, Brandon
Liddell-Grainger, Mr Ian
Lidington, rh Mr David
Lilley, rh Mr Peter
Lloyd, Stephen
Lopresti, Jack
Lord, Jonathan
Loughton, Tim
Luff, Peter
Lumley, Karen
Macleod, Mary
Main, Mrs Anne
Maynard, Paul
McCartney, Jason
McCartney, Karl
McIntosh, Miss Anne
McLoughlin, rh Mr Patrick
McPartland, Stephen
McVey, Esther
Mensch, Louise
Menzies, Mark
Mercer, Patrick
Metcalfe, Stephen
Miller, Maria
Mills, Nigel
Milton, Anne
Mitchell, rh Mr Andrew
Moore, rh Michael
Mordaunt, Penny
Morgan, Nicky
Morris, Anne Marie
Morris, David
Morris, James
Mosley, Stephen
Mowat, David
Mundell, rh David
Munt, Tessa
Murray, Sheryll
Murrison, Dr Andrew
Neill, Robert
Newmark, Mr Brooks
Newton, Sarah
Nokes, Caroline
Norman, Jesse
Nuttall, Mr David
O'Brien, Mr Stephen
Offord, Mr Matthew
Ollerenshaw, Eric
Opperman, Guy
Osborne, rh Mr George
Ottaway, Richard
Paice, rh Mr James
Parish, Neil
Patel, Priti
Paterson, rh Mr Owen
Pawsey, Mark
Penning, Mike
Penrose, John
Percy, Andrew
Perry, Claire
Phillips, Stephen
Pickles, rh Mr Eric
Pincher, Christopher
Poulter, Dr Daniel
Prisk, Mr Mark
Pritchard, Mark
Pugh, John
Raab, Mr Dominic
Randall, rh Mr John
Reckless, Mark
Redwood, rh Mr John
Rees-Mogg, Jacob
Reid, Mr Alan
Rifkind, rh Sir Malcolm
Robathan, rh Mr Andrew
Robertson, Hugh
Robertson, Mr Laurence
Rogerson, Dan
Rosindell, Andrew
Rudd, Amber
Ruffley, Mr David
Russell, Sir Bob
Rutley, David
Sanders, Mr Adrian
Sandys, Laura
Scott, Mr Lee
Selous, Andrew
Shapps, rh Grant
Sharma, Alok
Shelbrooke, Alec
Shepherd, Mr Richard
Simmonds, Mark
Skidmore, Chris
Smith, Miss Chloe
Smith, Henry
Smith, Julian
Soames, rh Nicholas
Soubry, Anna
Spencer, Mr Mark
Stephenson, Andrew
Stevenson, John
Stewart, Bob
Stewart, Iain
Stewart, Rory
Streeter, Mr Gary
Stride, Mel
Stuart, Mr Graham
Stunell, Andrew
Sturdy, Julian
Swales, Ian
Swayne, rh Mr Desmond
Swinson, Jo
Swire, rh Mr Hugo
Syms, Mr Robert
Tapsell, rh Sir Peter
Teather, Sarah
Thurso, John
Timpson, Mr Edward
Tomlinson, Justin
Tredinnick, David
Truss, Elizabeth
Turner, Mr Andrew
Tyrie, Mr Andrew
Uppal, Paul
Vaizey, Mr Edward
Vara, Mr Shailesh
Vickers, Martin
Villiers, rh Mrs Theresa
Walker, Mr Charles
Walker, Mr Robin
Wallace, Mr Ben
Walter, Mr Robert
Ward, Mr David
Watkinson, Angela
Webb, Steve
Wharton, James
White, Chris
Whittaker, Craig
Whittingdale, Mr John
Wiggin, Bill
Willetts, rh Mr David
Williams, Mr Mark
Williams, Roger
Williams, Stephen
Williamson, Gavin
Willott, Jenny
Wilson, Mr Rob
Wollaston, Dr Sarah
Wright, Simon
Yeo, Mr Tim
Young, rh Sir George
Zahawi, Nadhim
Tellers for the Noes:
Mark Hunter and
Jeremy Wright
Question accordingly negatived.
18 Apr 2012 : Column 377
18 Apr 2012 : Column 378
18 Apr 2012 : Column 379
18 Apr 2012 : Column 380
The Chair then put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83D).
Amendment proposed: 76, page 2, line 4, at end insert—
‘(1) The Treasury shall, within two months of Royal Assent of this Act, publish a report on the additional rate of income tax.
(2) This report shall make recommendations on—
(a) preventing the tax-avoidance measures employed by individuals to avoid making payments at the additional rate of income tax, and
(b) the impact upon Treasury revenue of setting the additional rate to—
(ii) 45 per cent in the tax year 2013-14.’.—(Jonathan Edwards.)
Question put, That the amendment be made.
The Committee divided:
Ayes 254, Noes 321.
[4.6 pm
AYES
Abbott, Ms Diane
Abrahams, Debbie
Ainsworth, rh Mr Bob
Alexander, rh Mr Douglas
Alexander, Heidi
Ali, Rushanara
Allen, Mr Graham
Anderson, Mr David
Ashworth, Jonathan
Austin, Ian
Bailey, Mr Adrian
Bain, Mr William
Balls, rh Ed
Banks, Gordon
Benn, rh Hilary
Berger, Luciana
Betts, Mr Clive
Blackman-Woods, Roberta
Blears, rh Hazel
Blenkinsop, Tom
Blomfield, Paul
Blunkett, rh Mr David
Bradshaw, rh Mr Ben
Brennan, Kevin
Brown, Lyn
Brown, rh Mr Nicholas
Brown, Mr Russell
Bryant, Chris
Buck, Ms Karen
Burden, Richard
Burnham, rh Andy
Byrne, rh Mr Liam
Campbell, Mr Alan
Campbell, Mr Ronnie
Caton, Martin
Chapman, Mrs Jenny
Clark, Katy
Clarke, rh Mr Tom
Clwyd, rh Ann
Coaker, Vernon
Coffey, Ann
Connarty, Michael
Cooper, Rosie
Cooper, rh Yvette
Corbyn, Jeremy
Crausby, Mr David
Creagh, Mary
Creasy, Stella
Cruddas, Jon
Cryer, John
Cunningham, Alex
Cunningham, Mr Jim
Cunningham, Tony
Curran, Margaret
Dakin, Nic
Danczuk, Simon
Darling, rh Mr Alistair
David, Mr Wayne
Davidson, Mr Ian
Davies, Geraint
De Piero, Gloria
Denham, rh Mr John
Dobbin, Jim
Dobson, rh Frank
Docherty, Thomas
Dodds, rh Mr Nigel
Donaldson, rh Mr Jeffrey M.
Donohoe, Mr Brian H.
Doran, Mr Frank
Dowd, Jim
Doyle, Gemma
Dromey, Jack
Dugher, Michael
Durkan, Mark
Eagle, Ms Angela
Eagle, Maria
Edwards, Jonathan
Efford, Clive
Ellman, Mrs Louise
Engel, Natascha
Esterson, Bill
Evans, Chris
Farrelly, Paul
Fitzpatrick, Jim
Flello, Robert
Flint, rh Caroline
Flynn, Paul
Francis, Dr Hywel
Galloway, George
Gapes, Mike
Gardiner, Barry
Gilmore, Sheila
Glass, Pat
Glindon, Mrs Mary
Goggins, rh Paul
Goodman, Helen
Greatrex, Tom
Green, Kate
Greenwood, Lilian
Griffith, Nia
Gwynne, Andrew
Hain, rh Mr Peter
Hamilton, Mr David
Hamilton, Fabian
Hanson, rh Mr David
Harman, rh Ms Harriet
Harris, Mr Tom
Havard, Mr Dai
Healey, rh John
Hendrick, Mark
Hepburn, Mr Stephen
Hermon, Lady
Heyes, David
Hillier, Meg
Hilling, Julie
Hodge, rh Margaret
Hodgson, Mrs Sharon
Hoey, Kate
Hopkins, Kelvin
Hosie, Stewart
Howarth, rh Mr George
Hunt, Tristram
Irranca-Davies, Huw
Jackson, Glenda
James, Mrs Siân C.
Jamieson, Cathy
Jarvis, Dan
Johnson, rh Alan
Johnson, Diana
Jones, Graham
Jones, Helen
Jones, Susan Elan
Jowell, rh Tessa
Kaufman, rh Sir Gerald
Keeley, Barbara
Kendall, Liz
Khan, rh Sadiq
Lammy, rh Mr David
Lavery, Ian
Lazarowicz, Mark
Leslie, Chris
Lewis, Mr Ivan
Lloyd, Tony
Llwyd, rh Mr Elfyn
Long, Naomi
Love, Mr Andrew
Lucas, Caroline
Lucas, Ian
MacNeil, Mr Angus Brendan
MacShane, rh Mr Denis
Mahmood, Shabana
Malhotra, Seema
Mann, John
Marsden, Mr Gordon
McCann, Mr Michael
McCarthy, Kerry
McClymont, Gregg
McDonagh, Siobhain
McDonnell, Dr Alasdair
McDonnell, John
McFadden, rh Mr Pat
McGovern, Alison
McGovern, Jim
McGuire, rh Mrs Anne
McKechin, Ann
McKenzie, Mr Iain
McKinnell, Catherine
Meacher, rh Mr Michael
Meale, Sir Alan
Mearns, Ian
Michael, rh Alun
Miliband, rh David
Miliband, rh Edward
Miller, Andrew
Mitchell, Austin
Moon, Mrs Madeleine
Morden, Jessica
Morrice, Graeme
(Livingston)
Morris, Grahame M.
(Easington)
Mudie, Mr George
Munn, Meg
Murphy, rh Mr Jim
Murphy, rh Paul
Murray, Ian
Nandy, Lisa
Nash, Pamela
O'Donnell, Fiona
Onwurah, Chi
Osborne, Sandra
Owen, Albert
Paisley, Ian
Pearce, Teresa
Perkins, Toby
Phillipson, Bridget
Pound, Stephen
Qureshi, Yasmin
Raynsford, rh Mr Nick
Reeves, Rachel
Reynolds, Emma
Reynolds, Jonathan
Riordan, Mrs Linda
Ritchie, Ms Margaret
Robertson, Angus
Robertson, John
Robinson, Mr Geoffrey
Rotheram, Steve
Roy, Mr Frank
Roy, Lindsay
Ruddock, rh Dame Joan
Sarwar, Anas
Seabeck, Alison
Shannon, Jim
Sharma, Mr Virendra
Sheerman, Mr Barry
Sheridan, Jim
Shuker, Gavin
Skinner, Mr Dennis
Slaughter, Mr Andy
Smith, rh Mr Andrew
Smith, Angela
Smith, Nick
Smith, Owen
Spellar, rh Mr John
Straw, rh Mr Jack
Stringer, Graham
Sutcliffe, Mr Gerry
Tami, Mark
Thomas, Mr Gareth
Thornberry, Emily
Timms, rh Stephen
Trickett, Jon
Turner, Karl
Twigg, Derek
Twigg, Stephen
Umunna, Mr Chuka
Vaz, rh Keith
Vaz, Valerie
Walley, Joan
Watson, Mr Tom
Watts, Mr Dave
Weir, Mr Mike
Whiteford, Dr Eilidh
Whitehead, Dr Alan
Wicks, rh Malcolm
Williamson, Chris
Wilson, Phil
Wilson, Sammy
Winnick, Mr David
Winterton, rh Ms Rosie
Wishart, Pete
Woodcock, John
Woodward, rh Mr Shaun
Wright, David
Wright, Mr Iain
Tellers for the Ayes:
Chris Ruane and
Yvonne Fovargue
NOES
Adams, Nigel
Afriyie, Adam
Aldous, Peter
Alexander, rh Danny
Amess, Mr David
Andrew, Stuart
Arbuthnot, rh Mr James
Bacon, Mr Richard
Baker, Norman
Baldry, Tony
Baldwin, Harriett
Barclay, Stephen
Baron, Mr John
Barwell, Gavin
Bebb, Guto
Beith, rh Sir Alan
Benyon, Richard
Beresford, Sir Paul
Berry, Jake
Bingham, Andrew
Binley, Mr Brian
Birtwistle, Gordon
Blackman, Bob
Blackwood, Nicola
Blunt, Mr Crispin
Boles, Nick
Bottomley, Sir Peter
Bradley, Karen
Brake, rh Tom
Bray, Angie
Brazier, Mr Julian
Bridgen, Andrew
Brine, Steve
Brokenshire, James
Browne, Mr Jeremy
Bruce, Fiona
Bruce, rh Malcolm
Buckland, Mr Robert
Burley, Mr Aidan
Burns, Conor
Burns, rh Mr Simon
Burstow, Paul
Burt, Alistair
Burt, Lorely
Byles, Dan
Cairns, Alun
Cameron, rh Mr David
Carmichael, rh Mr Alistair
Carmichael, Neil
Cash, Mr William
Chishti, Rehman
Chope, Mr Christopher
Clappison, Mr James
Clark, rh Greg
Clarke, rh Mr Kenneth
Clegg, rh Mr Nick
Clifton-Brown, Geoffrey
Coffey, Dr Thérèse
Collins, Damian
Colvile, Oliver
Crabb, Stephen
Crouch, Tracey
Davey, rh Mr Edward
Davies, David T. C.
(Monmouth)
Davies, Glyn
Davies, Philip
Davis, rh Mr David
de Bois, Nick
Dinenage, Caroline
Djanogly, Mr Jonathan
Dorrell, rh Mr Stephen
Dorries, Nadine
Doyle-Price, Jackie
Drax, Richard
Duddridge, James
Duncan, rh Mr Alan
Duncan Smith, rh Mr Iain
Dunne, Mr Philip
Ellis, Michael
Ellison, Jane
Ellwood, Mr Tobias
Elphicke, Charlie
Eustice, George
Evans, Graham
Evans, Jonathan
Evennett, Mr David
Fabricant, Michael
Fallon, Michael
Field, Mark
Foster, rh Mr Don
Fox, rh Dr Liam
Francois, rh Mr Mark
Freeman, George
Freer, Mike
Fullbrook, Lorraine
Garnier, Mark
Gauke, Mr David
George, Andrew
Gibb, Mr Nick
Gilbert, Stephen
Gillan, rh Mrs Cheryl
Glen, John
Goldsmith, Zac
Goodwill, Mr Robert
Gove, rh Michael
Graham, Richard
Grant, Mrs Helen
Gray, Mr James
Grayling, rh Chris
Green, Damian
Greening, rh Justine
Grieve, rh Mr Dominic
Griffiths, Andrew
Gummer, Ben
Gyimah, Mr Sam
Halfon, Robert
Hames, Duncan
Hammond, Stephen
Hancock, Matthew
Hancock, Mr Mike
Hands, Greg
Harper, Mr Mark
Harrington, Richard
Harris, Rebecca
Hart, Simon
Harvey, Nick
Hayes, Mr John
Heald, Oliver
Heath, Mr David
Heaton-Harris, Chris
Hemming, John
Henderson, Gordon
Hendry, Charles
Herbert, rh Nick
Hinds, Damian
Hoban, Mr Mark
Hollingbery, George
Hollobone, Mr Philip
Hopkins, Kris
Horwood, Martin
Howell, John
Hughes, rh Simon
Huhne, rh Chris
Hunt, rh Mr Jeremy
Hurd, Mr Nick
Jackson, Mr Stewart
James, Margot
Javid, Sajid
Johnson, Gareth
Johnson, Joseph
Jones, Andrew
Jones, Mr David
Jones, Mr Marcus
Kawczynski, Daniel
Kelly, Chris
Kirby, Simon
Knight, rh Mr Greg
Kwarteng, Kwasi
Laing, Mrs Eleanor
Lancaster, Mark
Lansley, rh Mr Andrew
Laws, rh Mr David
Leadsom, Andrea
Lee, Jessica
Lee, Dr Phillip
Leech, Mr John
Lefroy, Jeremy
Leigh, Mr Edward
Leslie, Charlotte
Letwin, rh Mr Oliver
Lewis, Brandon
Liddell-Grainger, Mr Ian
Lidington, rh Mr David
Lilley, rh Mr Peter
Lloyd, Stephen
Lopresti, Jack
Lord, Jonathan
Loughton, Tim
Luff, Peter
Lumley, Karen
Macleod, Mary
Main, Mrs Anne
Maynard, Paul
McCartney, Jason
McCartney, Karl
McIntosh, Miss Anne
McLoughlin, rh Mr Patrick
McPartland, Stephen
McVey, Esther
Mensch, Louise
Menzies, Mark
Mercer, Patrick
Metcalfe, Stephen
Miller, Maria
Mills, Nigel
Milton, Anne
Mitchell, rh Mr Andrew
Moore, rh Michael
Mordaunt, Penny
Morgan, Nicky
Morris, Anne Marie
Morris, David
Morris, James
Mosley, Stephen
Mowat, David
Mundell, rh David
Munt, Tessa
Murray, Sheryll
Murrison, Dr Andrew
Neill, Robert
Newmark, Mr Brooks
Newton, Sarah
Nokes, Caroline
Norman, Jesse
Nuttall, Mr David
O'Brien, Mr Stephen
Offord, Mr Matthew
Ollerenshaw, Eric
Opperman, Guy
Osborne, rh Mr George
Ottaway, Richard
Paice, rh Mr James
Parish, Neil
Patel, Priti
Paterson, rh Mr Owen
Pawsey, Mark
Penning, Mike
Penrose, John
Percy, Andrew
Perry, Claire
Phillips, Stephen
Pickles, rh Mr Eric
Pincher, Christopher
Poulter, Dr Daniel
Prisk, Mr Mark
Pritchard, Mark
Pugh, John
Raab, Mr Dominic
Randall, rh Mr John
Reckless, Mark
Redwood, rh Mr John
Rees-Mogg, Jacob
Reid, Mr Alan
Rifkind, rh Sir Malcolm
Robathan, rh Mr Andrew
Robertson, Hugh
Robertson, Mr Laurence
Rogerson, Dan
Rosindell, Andrew
Rudd, Amber
Ruffley, Mr David
Russell, Sir Bob
Rutley, David
Sanders, Mr Adrian
Sandys, Laura
Scott, Mr Lee
Selous, Andrew
Shapps, rh Grant
Sharma, Alok
Shelbrooke, Alec
Shepherd, Mr Richard
Simmonds, Mark
Skidmore, Chris
Smith, Miss Chloe
Smith, Henry
Smith, Julian
Soames, rh Nicholas
Soubry, Anna
Spencer, Mr Mark
Stephenson, Andrew
Stevenson, John
Stewart, Bob
Stewart, Iain
Stewart, Rory
Streeter, Mr Gary
Stride, Mel
Stuart, Mr Graham
Sturdy, Julian
Swales, Ian
Swayne, rh Mr Desmond
Swinson, Jo
Swire, rh Mr Hugo
Syms, Mr Robert
Tapsell, rh Sir Peter
Teather, Sarah
Thurso, John
Timpson, Mr Edward
Tomlinson, Justin
Tredinnick, David
Truss, Elizabeth
Turner, Mr Andrew
Tyrie, Mr Andrew
Uppal, Paul
Vaizey, Mr Edward
Vara, Mr Shailesh
Vickers, Martin
Villiers, rh Mrs Theresa
Walker, Mr Charles
Walker, Mr Robin
Wallace, Mr Ben
Walter, Mr Robert
Ward, Mr David
Watkinson, Angela
Webb, Steve
Wharton, James
White, Chris
Whittaker, Craig
Whittingdale, Mr John
Wiggin, Bill
Willetts, rh Mr David
Williams, Mr Mark
Williams, Roger
Williams, Stephen
Williamson, Gavin
Willott, Jenny
Wilson, Mr Rob
Wollaston, Dr Sarah
Wright, Simon
Yeo, Mr Tim
Young, rh Sir George
Zahawi, Nadhim
Tellers for the Noes:
Mark Hunter and
Jeremy Wright
Question accordingly negatived.