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Taxes

Volume 458: debated on Thursday 29 March 2007

1. What his most recent estimate is of the proportion of income a household on average earnings will pay in taxes in 2007-08. (130439)

4. What his most recent estimate is of the proportion of income a household on average earnings will pay in taxes in 2007-08. (130442)

A single-earner household on male average earnings with two children will pay 20.5 per cent. of their gross income in tax in 2007-08. That is 0.7 per cent. lower than it was in 1997-98. As a result of the Budget, that will fall a further half a percentage point to 20 per cent. in 2009-10—far lower than in 1997.

Will the Chancellor briefly explain how many people will be left worse off as a result of the Budget’s changes to income tax and national insurance?

The vast majority of people will be better off—[Interruption.] more than 20 million households will be better off as a result of the Budget. I read the hon. Gentleman’s comments in the Budget debate. He wants tax cuts of £8.4 billion per annum. At the same time he wants more police officers, more money for hospitals, more money for schools and more money for transport. Will he now tell us whether he supports our public spending plans?

No; I cannot take a point of order. [Interruption.] I know that that is possible, but it prevents everyone else from asking a supplementary question. The hon. Gentleman should know that he should not tell his granny how to suck eggs.

A significant part of the big rise in taxation in recent years has been rises in council tax. This year, Hammersmith and Fulham residents are set to be the only people in Britain to get lower council tax bills. Does the Chancellor support the new Conservative council, which has delivered a real tax cut, rather than the tax con delivered by him?

The Labour Government’s funding of councils is what is keeping council tax lower. The hon. Gentleman is a member of the No Turning Back group and the Cornerstone group. They want £40 billion in tax cuts. Will he therefore tell us how he can meet his proposals for more schools, more youth centres and more sports facilities? Does he support our spending plans?

Average earnings in my constituency have increased because of the dramatic transformation in employment. As a former schoolteacher in my early days, I was dismayed to discover that pupils whom I had taught were still on the dole five or six years, or even longer, after they had left school. Now that that situation has been transformed, will the Chancellor ensure that opportunities are given to people so that we can be sure that they find employment, and so that average earnings in my constituency keep on going up?

My right hon. Friend is absolutely right. He chairs the Treasury Committee, which I am looking forward to appearing before this morning. In the Budget, we announced a proposal that, linking up with the retail industry, will create 100,000 jobs over the next few years for people who are inactive or unemployed. Therefore, the incomes of people who were previously unemployed will rise. In addition to the introduction of the minimum wage and the working tax credit, we are doing more than any previous Government to help the low paid in this country—and the Opposition party should remember that it opposed the minimum wage.

Does my right hon. Friend agree that we should ask the following question: if the 2p cut in income tax that he announced a few days ago was such a bad idea, why did the blood drain out of the cheeks of the hon. Member for Tatton (Mr. Osborne) when he announced it?

My hon. Friend is right. First, the Leader of the Opposition, the right hon. Member for Witney (Mr. Cameron), welcomed our tax cut, and the hon. Member for Tatton, the shadow Chancellor, overruled him a few minutes later. The real problem is that the Conservatives want tax cuts, but they cannot answer this question: do they support our public spending plans? Perhaps the shadow Chancellor will tell us.

To what extent are the current squeeze in real weekly disposable earnings and the fact that the savings rate has collapsed to the lowest level since the early 1960s interlinked?

The savings ratio is rising. The lowest savings ratio that this country has had occurred under a Conservative Government in the 1980s. In terms of real disposable incomes, since 1997 the living standards of our people have improved, and they have improved for one reason: we have had economic stability, whereas the Conservatives used to have recessions.

Is it not the case that the burden of taxation on families in this country compares extremely well with the burden on families in our international counterpart countries? Is that not a true and objective test of the measure of the success of the Chancellor, and should we not continue to aim for such achievements in future?

The proportion of tax taken from national income is lower than in the euro area—lower than in France, Germany and other countries. A single earner on male average earnings with two children will pay 20 per cent. of their income in tax in 2009-10. That is a far lower percentage than when we came to power, and the reasons for that are that we have cut the basic rate of income tax twice and made people better off by pursuing policies that give us economic stability.

As the Chancellor prides himself on being socially progressive, can he explain why the biggest beneficiaries of his tax changes are extremely rich pensioners and the biggest losers are households of single men or women, or childless couples, on very low incomes? Does that suggest that as he becomes Prime Minister, he will abandon the progressive consensus in favour of the Blair-Cameron alternative?

If the Liberals had joined us in supporting the minimum wage, they might have had more things to say. According to the Institute for Fiscal Study’s response to the Budget—[Hon. Members: “Read all of it.”] I am very happy to do so. According to it, in terms of direct tax the lowest decile is 0.8 per cent. better off, the second lowest decile is 1 per cent. better off, and the richest decile is 0.5 per cent. better off, so most of the gains are going disproportionately to the poorest and bottom deciles in our community. Without any help from the Liberal party or the Conservatives, since 1997 the position of the poorest decile has improved by 12.4 per cent., and of the second lowest decile by 11.8 per cent. That shows that this Government are on the side of hard-working families.

My right hon. Friend announced in last week’s Budget an increase in tax credits worth £4 billion. The Liberal Democrats want instead to raise tax thresholds. What would the impact have been on the poorest families with children if the money had been spent in that way?

I said in my Budget statement that the same amount of money—£1 billion—spent on raising personal tax allowances would have made that low-paid worker 70p a week better off, but that as a result of what we have done, that worker is £7 a week better off. I hope that at some point the Liberals, who perhaps take a greater interest in these issues than the Conservatives, will come around to our view that the best way to help those in the lowest income groups in our society is through child and working tax credits. That is the way that we are taking people out of poverty.

Yesterday, the Chancellor’s Treasury civil servants told the Treasury Select Committee that more than 5 million people—the lowest paid in the country—will be losers as a result of his Budget. Does he agree with his civil servants? Yes or no will do.

Twenty million people are better off, unlike under Conservative Budgets in the early 1990s, when everybody was worse off. The Conservatives want more tax cuts. Is it not time that they told us whether they support the public spending plans that we announced? The shadow Chancellor said on the “Today” programme on 1 March:

“If you could tell me what Labour is going to be spending, I’ll tell you what the Conservative party’s spending plans are, as well.”

Will he tell us the truth—are they supporting our spending plans, or not?

Order. The hon. Gentleman does not have to answer. He has a supplementary question and he is entitled to ask it. He does not answer questions at this stage.

Thank you, Mr. Speaker.

This week, we discover that the disposable income of the poorest is falling, that child poverty is now rising, and that more than 5 million of the lowest paid will be hit by the Chancellor’s tax con. The hon. Member for Coventry, North-West (Mr. Robinson), who used to be the Chancellor’s Minister, said during the Budget debate that the Budget will be “hurting many people” and urged him to think again. We know that the Chancellor has complete contempt for all his colleagues—does that really include the hon. Member for Coventry, North-West?

Child poverty trebled under the previous Conservative Government; this Government have brought it down, and it is about time that the Conservatives acknowledged that. The shadow Chancellor said that he would tell us what his spending plans are, and if he really wants to help the poor he should be in a position to do so. He said that spending has risen to 42 per cent. of GDP, and that they will bring that share down. Does he hold to that, or not? People will conclude that he is going to cut spending on vital services.

The average earnings in my constituency would fall if Vauxhall Motors were to close. My right hon. Friend may have seen press reports today of the Trade and Industry Committee’s informative report on the future of the motor industry. Will he assure me that he will continue to do everything possible to ensure that future investment from General Motors comes to the UK?

I am grateful to my hon. Friend, who takes a big interest in these matters. I visited the GM plant, where the workers have made enormous advances in productivity. One of the reasons why we can say that we can help both the plant and the region is the investment that we are making in education and training. That is one reason why we will spend £674 billion in 2010 on public services. It is up to all the parties now to tell us whether they support our spending plans or not.