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Finance (No. 4) Bill

The difficulty with raising the personal tax allowance is, first, that those on very low incomes—those who will have their disability living allowance or housing benefit cut—do not even pay tax. Secondly, those much higher up the scale will benefit from the increased personal allowance. It is often dual-income families, quite high up the scale, who benefit from the personal allowance being pushed up. It is a very expensive way of helping people who are in the position that the hon. Gentleman sets out. Although people criticised the tax credit system, the whole point of it was that it maximised the amount of benefit that went to the people who really needed it. The irony is that when we were in government, we were often accused of introducing stealth taxes, but look at the amount of indirect taxation now. What people have supposedly been given back through the direct taxation system—that is, through their personal allowance—has already been taken off them through the 20% VAT rate. That is the type of ““stealth tax””—the same goes for fuel and so forth—that people resent. They are actually saying that they are paying more tax than before. Even the increased personal allowance will not make up the difference. The Government propose making a very expensive move that is not properly targeted, and that is worrying, because the money will not feed back into the economy as quickly as it would if it were targeted at those who really need it and would want to spend it straight away. The first problem is that the money is going to the wrong place. Secondly, we seem to have no growth strategy at all. We are lucky that some of our manufacturers are able to export because they are selling to markets in countries where there are stimulus packages, or strategies to stimulate growth. The fact remains that if we were relying solely on the home market, our manufacturing would be in a dire condition. With growth flatlining and unemployment rising, the Government, far from bringing the deficit down, are facing the fact that they will have to borrow an additional £150 billion simply to pay people who are out of work. What is the point of that, when we could be paying them to do constructive things such as build council houses or schools? Through employment in manufacturing, they could be learning skills that they could use later. That would keep the skills base going. One of the big problems when there is mass unemployment and a massive drop in the number of people in an industry, whether it is coal mining or building, is that we lose a generation of skills. People do not want to sit about doing nothing. The overwhelming majority of people whom I meet who cannot find a job are very frustrated at not being able to find work. They are looking for anything and everything. It is often older workers in their 50s and early 60s who particularly suffer. They feel that time and again, they turn up for an interview only to be told that they are too old and cannot be taken on. We want the opportunity for all people—young and old—to get back to work. Let me give an example of the type of money being taken out of the economy, so that we can see the real problem. In Wales alone, some £6.3 billion will be taken out of the economy over the next three years. We are talking about a very small population of not even 3 million people. The money is coming directly out of the Welsh economy. It is coming from the VAT increase, the loss of jobs in the public sector, and, significantly, most of all, from cuts to the tax credit system and to a wide range of allowances, including the disability living allowance, housing benefit, and council tax benefit. It is coming from a whole range of moneys that were put in to help people who struggle to pay particular bills—people who really could not make ends meet without the money. As was mentioned, many of the people affected by the housing benefit changes will either find themselves homeless or simply have to use money that they would normally use for food and heating to pay the rent.