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Finance Bill

One of the best changes would be a change of Government. I emphasise that we believe that putting pressure on the Treasury to carry out the sort of analysis referred to in the new clause would make a significant contribution not only to improving the quality of our tax law but to enhancing and improving the fairness of future Budgets, and dealing with some of the grave concerns that the right hon. Gentleman raises. We believe that the sort of analysis provided for in the clause would help to ground Budget decisions on empirical evidence and reduce the opportunity to use them for cynical political tricks. As we have stated repeatedly in the Budget debate, on Second Reading and in Committee, we are concerned about the impact of the Chancellor’s Budget on those on low incomes. As the right hon. Member for Birkenhead pointed out today, and as the shadow Chancellor pointed out in his speech in the Budget debate, the abolition of the 10p band amounts to a shift in the tax burden from those on middle incomes to those on low incomes. We have heard that one in five households will be worse off as a result of the Budget—5.3 million families—and many of those will be people on low incomes hit hard by the loss of the 10p band. Some of the people worst hit by the changes will be those on wages of between £5,225 and £18,000. The right hon. Gentleman is right that I have many of those in my constituency who are concerned about the changes—cleaners, nurses, shop assistants and catering workers, not millionaire executives. In giving evidence to the Treasury Committee in March, Robert Chote of the Institute for Fiscal Studies set out a number of groups of people who will lose out, several of which have been mentioned this evening, but it is worth going through them in turn. According to Mr. Chote, 2.2 million of those losing out are single working people with no children who are not getting the working tax credit because they earn more than £12,500 but less than £18,000, or because they work fewer than 30 hours, or because they are too young. He states that 1.2 million are two-earner couples with no children. They may not qualify for the working tax credit or they may fail to take it up. They may also be in the position where the two earners both lose under the income tax and national insurance changes, but there is only one gain from the tax credit, which is assessed per household. A couple both earning £7,445 would suffer the maximum loss of £446. Mr. Chote states that 400,000 are one-earner couples without children, most of them because they will be in an income range of about £17,000 to £18,5000 where they are not compensated by tax credits. There are 700,000 two-earner couples with children who lose twice from the income tax and national insurance changes, but gain only once from child tax credit or working tax credit. The hon. Member for Wolverhampton, South-West (Rob Marris) adverted to the point that 300,000 of these people are tax-paying women between the ages of 60 and 64 who do not get tax credits and are too young to be compensated by the rise in the pensioner tax allowance. A further 500,000 are non-workers who are early retirees or who are on incapacity benefit. In making an effective assessment of the impact of tax changes on different income decile groups as provided for by new clause 14, it is critical that the Chancellor take into account the wider economic picture. The hardship caused by tax increases is clearly more keenly felt when families feel that their household budget is already under strain. With inflation hitting a 16-year high earlier this year, many families on lower incomes are struggling to make ends meet. Last year, inflation was almost double the EU average, and disposable incomes rose at the slowest rate for nearly a quarter of a century. Two weeks ago, the Office for National Statistics announced that, for the sixth month in a row, regular pay failed to keep pace with inflation and real living standards fell again. The Council of Mortgage Lenders also recently reported that home owners are suffering the highest mortgage burden for 15 years and that further rate rises could be on the cards. Personal debt now stands at a staggering £1.3 trillion in Britain, and problem debt is worsening by the day. All these factors should be taken into account before the Chancellor imposes tax increases on Britain’s hard-working families.