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Finance (No. 4) Bill

The problem is that the measure was paraded as a bit of camouflage for the reduction in tax for those earning more than £150,000 a year. On the one hand, the Chancellor was reducing tax for the wealthiest, but he was also going to attempt to clobber them. This policy did not come from the heart; it was part of the camouflage being used in the Budget. There has also been a general sleight of hand over taxation. The Chancellor recently stated that he was ““shocked”” by how little the wealthy paid in taxes, yet this Budget gives a tax cut to the 14,000 people who earn £1 million a year or more. That will give them about £40,000 each year, while the average family with children earning just £20,000 will lose £253 a year from this April. That is on top of the VAT rise, which is costing the average family £450 a year. Furthermore, another 678,000 people of all ages who are currently paying the basic rate of income tax might feel pretty aggrieved when they wake up to discover that they have been catapulted into the 40p income tax rate, not because they are earning massively more but because the Chancellor has not raised the threshold in line with inflation—[Interruption.] I do not know whether I am interrupting a kind of confab of the horizontal speaking to the vertical on the other side of the Chamber, but I will continue, having drawn attention to the significant noise coming from the other side. The Treasury forecasts suggest that there will be 5.7 million higher rate taxpayers by the end of this Parliament. That is nearly double the 3.1 million at the time of the last general election and treble the number when Labour came to power in 1997. Of course the whole increase in personal allowance that has been paraded here today is outweighed by the VAT rises, the changes to tax credits and the higher petrol duties. As my hon. Friend the shadow Chief Secretary demonstrated earlier, the average family with children will be worse off—not on the basis of our figures, but on the basis of those of the Institute for Fiscal Studies. The Chief Secretary's answer to my hon. Friend was both evasive and complacent. According to Citizens Advice, poorer families that get housing and council tax benefits will be just £33 a year better off when the tax threshold rises because as their income goes up, their benefits go down. For every person eligible to pay tax who also receives housing or council tax benefit, the Department for Work and Pensions will claw back some £187 of the £220 notional annual gain. The Citizens Advice chief executive, Gillian Guy, said:"““Raising the personal tax allowance is an empty gesture for struggling families on low wages who get housing and council tax benefits. For these families, the weekly gain is less than the price of a loaf of bread””." In the name of simplification, the Chancellor launched his £3 billion tax raid on pensioners over the next four years. The freeze in the personal allowance for pensioners will see 4.4 million pensioners who pay income tax losing an average of £83 a year from next April. People who turn 65 after next year will, of course, lose most—up to £322 a year. The additional age allowance was introduced in the 1920s in recognition of the fact that those who have retired do not have the same capacity to increase their income. It is to the undying shame of the current Chief Secretary—a man for whom I once had some respect when he was a Liberal spokesperson on welfare issues—that he came forward today to try to justify taking money from those pensioners who have no other means of increasing their income, telling them that he was doing it in the interest of simplification.