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AMENDMENT OF THE LAW

I come from a different political philosophy from the hon. Member for Cities of London and Westminster (Mr. Field). There was much in his speech with which I disagreed, but there was also much with which I agreed—particularly his point about means-testing and the level that tax credits go up the income scale. I will make some comments about that. I congratulate him on giving credit to the Chancellor where it is due and not indulging in political point-scoring. The last measure that the Chancellor announced was the reduction in the basic rate of income tax. I have not seen the news, because I have mostly been in the Chamber, but I suspect that that is what has grabbed all the headlines. I believe in a progressive, fair tax system that is as simple as possible. In so far as the measures announced today have moved towards a simpler system, I welcome them. I am not intrinsically enthusiastic about cuts in the basic rate of tax, but I think that it is right to go to a 20 per cent. rate, if only because it is simple. However, we must not forget that—as the right hon. Member for Wokingham (Mr. Redwood) quite rightly pointed out—that has been primarily paid for by the abolition of the 10p tax rate. I shed no tears over that either, because I thought that it was a gimmick when it was introduced. I am worried that far too many people are paying tax. The Red Book refers to a single-earner couple without children on half-median earnings of £13,500 a year who are in receipt of working tax credit being £175 a year better off. It is good that they are better off, but why are they paying tax in the first place? The Chancellor has brought the national insurance and personal tax allowances into line and raised the threshold for the higher rate of tax. That is a welcome simplification, but I would like him to move down the radical road of raising substantially the threshold at which people begin to pay taxes. Such a measure would take many people out of income tax altogether and reduce the need for so many people to be in receipt of tax credits. I am unhappy with a system that takes on the one hand and gives on the other to make a neutral transaction. Such a process is unnecessary. I accept that if we were to raise the threshold at which people started to pay tax, we would need to make adjustments at the higher levels. That could be achieved by introducing a 30 per cent. rate between the 20 per cent. and 40 per cent. rates. It is right that the threshold for the 40 per cent. rate should have been substantially increased because I have always been worried about people on moderate incomes paying the same rate of tax as millionaires.