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Finance Bill

It is a pleasure to follow the hon. Member for Taunton (Mr. Browne). He reminds me of a former Member of Parliament, Bob Woof, whom many Members may recall. Each year he made a Budget speech, but about the previous year's Budget. He read the previous year's Budget carefully, and then made his speech. Having listened to all of today's debate so far, I have a feeling that this too is a debate on last year's Budget, and on last year's abolition of the 10 per cent. tax rate. I remind the House that last year, as now, there was a Budget statement, followed by publication of the Red Book, which has been mentioned. It was followed by a Budget debate which continued for about five days, a debate on Second Reading of the Finance Bill—which we are having now—a Committee stage, and Third Reading. Where the House went wrong in not picking up the fact that the 10 per cent. rate was to go must be a mystery to most of us. It seems to me that the reason why we are having a debate on that particular aspect is the Institute for Fiscal Studies and the figure of 5.3 million net losers, and I am not sure that the IFS report actually said that. I remind Labour MPs who are signing early-day motions and carrying their consciences on their sleeves that, in the 11 years of the Labour Government—to get on to the ““vision thing”” of the hon. Member for Taunton—our vision has been clear. We believed in a fundamental and irreversible shift in the balance of wealth and power to workers and their families. Over those 11 years, we have brought in a national minimum wage, against great hostility in this House from the Opposition, who said that it would cost jobs, and increased it to more than £5 an hour. We introduced tax credits, of which we have heard some criticism, to which I shall refer in a moment. We have signed the social chapter; the Conservatives not only did not support it, but have said that they will repeal it when they come to power. We have brought in specific measures for the elderly, of which the increases in winter fuel allowances are one. Over 11 years, we have moved the balance of power towards workers and their families. If I may spend a moment on the 10 per cent. rate, the tax package last year was designed to target extra support to help many of those who only paid the 10p rate. For those aged 65 and above, age-related allowances were increased by £1,180 above inflation, meaning that 600,000 pensioners paid no income tax at all. For families with children, the child tax credit child element increased by £175 above earnings indexation from £1,845 to £2,085, providing additional financial support for families and further reducing child poverty. For those in work on low incomes, the first income threshold of working tax credit rose significantly from £5,220 to £6,420. Supporting work is the best route out of poverty through increasing the gain from work for many low income households. That is the background to the abolition of the 10 per cent. rate. We do not want to go back over history or to recite poetry:"““see how dark the backward stream!""A little moment passed so smiling!””" It is a long time since we had a Conservative Government, but under the Conservatives the basic rate of tax was 23p in the pound with no tax credits other than the limited benefit from family credit. That meant that even the poorest taxpayers paid 23p in the pound. Under Labour, the basic rate is now 20p in the pound and there has been a major increase in tax credits, particularly for those with children but also for those without. The reforms overall meant that all income tax payers have benefited compared with 1997. Those on lower and middle incomes have benefited the most. Giving low income families a negative income tax rate—that is to say a tax credit—is better than leaving in place the 10p rate; that was the philosophy and reasoning behind the Government's decision, which was not picked up throughout last year's Budget proceedings. The tax credits system—a minus rate of income tax—is the best way to help people out of poverty. Each year, the Labour Government have put more and more resources into tax credits. The 10p rate is not a targeted tax measure as all taxpayers benefit from it, including higher earners, such as those on £100,000 a year who would still only pay 10p in the pound on the first £2,230 of their taxable income. As my hon. Friend the Member for Dumfries and Galloway (Mr. Brown) and my right hon. Friend the Member for West Dunbartonshire (Mr. McFall) said, it is because of these tax credits that we have been able to deliver historic achievements such as taking millions of pensioners and children out of poverty. The tax credits mean that we have rates of 40 per cent. and 20 per cent. for income tax, but that we have effective tax rates of minus 1 per cent. right up to minus 200 per cent. through tax credits, so that the tax and benefits system pays more to people on low and middle incomes. While the House is focused on this matter, we must not overlook the basis of our economy. Part of the Bill calls for the promotion of access to finance and resources for small and medium-sized enterprise and for the enterprise management incentive schemes. In this respect, I refer to David Smith's economic outlook column in The Sunday Times yesterday. The hon. Member for Taunton gave us a great review of the press over the last 10 days, but David Smith said that our"““job market remains extraordinarily strong, with a rise of 152,000 in employment in the December-February period. In the past year, employment has climbed by 456,000 to a record 29.51m.””" Twenty nine million of our fellow citizens are in work. As my right hon. Friend the Member for West Dunbartonshire said, there were 21 million beneficiaries from last year's Budget—something that must be repeated. There are nearly 700,000 job vacancies and the unemployment claimant count is at its lowest since June 1975. We have had forecasts on growth; my right hon. Friend the Member for West Dunbartonshire referred to them, as did the hon. Member for Runnymede and Weybridge (Mr. Hammond). In conjunction with the hon. Member for Taunton, I thought that the hon. Member for Runnymede and Weybridge made an excellent speech from the Front Bench. It was a strong Opposition speech and he should be congratulated on it. We will not go into his facts or polemics, but the manner of the speech was worthy of the House of Commons and for that he deserves congratulations. The growth rate forecast by the Treasury is about 1.85 per cent. It may be that the forecast will go down to 1.5 per cent., but I remember being an Opposition Member and asking the noble Lord Lamont, as he now is, at that Dispatch Box whether we were in a recession. The answer was yes, we were; we had had three months of negative growth. We are not in a recession and we are not likely to go into one. We are holding the line in a very difficult and turbulent financial world. We read a lot about consumer confidence. The newspapers make a great thing about the loss of consumer confidence, but whatever the newspapers tell us—to get back to the hon. Member for Taunton and his diligence in reading newspapers—total retail sales in our country, including new floor space, were up in March on a year earlier. The rise was 1.1 per cent., while Tesco reported a 12 per cent. increase in sales in the past financial year. By the way, over the same period cash was used for 60 per cent of all retail sales, up from 54 per cent. in 2006. If we are moving away from a credit card economy to a cash economy, that is all to the good. The Chancellor said that the theme of the Budget was stability. We live in an unstable world and I shall not repeat all the arguments on the sub-prime mortgage crisis. I commend my right hon. Friend the Member for West Dunbartonshire on his excellent Treasury review report on the subject. We have moved over the last 10 years to economic stability and growth. We are faced with unprecedented turmoil in the financial markets, but in those 10 years of stability, we have been able to deliver real change in our economy. The national minimum wage, to which I referred earlier, has increased by 23 per cent. in real terms to £5.73 in October 2008, which has helped 1 million low earners, many of them women working part-time. We have lifted 600,000 children out of poverty since 1997 and action since the Budget of 2007 will lift an additional 500,000 out of poverty. Child poverty, which doubled in the 20 years up to the mid-1990s, has been reversed under the Government. What we can see is a strong economy underlined by great stability.