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Finance Bill

I am interested to hear the hon. Gentleman calling for longer and more complex Finance Bills; that is rather contrary to the mood of the Committee. The changes that I am referring to would not be made in a Finance Bill; they need separate legislation. We are of course also being careful to ensure that the benefits that this package will bring are not at the expense of the UK’s underlying economic and fiscal stability, which have made these reforms possible and have been the principal sources of Britain’s welcome economic transformation over the past decade. As I said, the hon. Member for Falmouth and Camborne asked why these changes will be introduced from April 2008 and are not being included in this year’s Finance Bill. Income tax is an annual charge re-imposed each year in the Finance Bill, and the convention is that changes to the rates are legislated for in the year in which they come into effect. I have done a little research on that point and, as far as I have been able to establish, there have been no instances in recent decades of income tax changes being legislated for other than in the year in which they take effect, so in line with that convention, next year’s Finance Bill will legislate for the personal tax reforms for 2008-09 that were announced in this year’s Budget. The amendment proposes removal of the starting rate and replacing it with a new zero-rate band, in effect increasing personal allowances. The total cost of those changes would, as I have said, be £13.8 billion, but it would be a very untargeted measure, which would be of most benefit to those on higher incomes. Our policy is to target help where it is needed, so the Budget package included a major investment in tax credits. Tax credits benefit about 6 million families and 10 million children and reach far more low and moderate-income families than any previous system of income-related financial support. By using that mechanism we can continue to give extra help to low-income families, whereas simply increasing tax-free personal allowances would not have that effect, as the figures I shall give in a moment will show.