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Living Costs (Personal Allowance)

Volume 565: debated on Tuesday 25 June 2013

4. What assessment he has made of the effect on living costs of changes to the personal allowance. (161221)

It was announced in Budget 2013 that the Government would increase the annual personal allowance by a further £560 to £10,000 in April 2014, thus meeting a key coalition commitment a year ahead of schedule. By that date, as a result of the combined effects of all personal allowance increases under this Government, a typical basic-rate taxpayer will have gained by more than £700 a year in cash terms.

Does my hon. Friend agree that the best way of tackling this issue is to put cash into people’s pockets, and that taking 2.7 million people out of tax altogether is an excellent way in which to proceed?

I do agree. What we have done is quite a contrast with what was done by the last Government, who increased the amount of income tax that some low earners would have to pay by £232. Now the equivalents of those people have been taken out of income tax altogether.

If everything is better for the average family, why did the Institute for Fiscal Studies say that the average family was £891 worse off? Was the IFS wrong?

We do not accept those figures. What I will say is that we have been prepared to tackle the biggest deficit in our peacetime history. We have taken measures to put the public finances back on a sustainable footing, with no help from the Labour party, which has opposed every measure that we have taken to do that.

Is my hon. Friend aware that the Government have taken 3,000 low-income people out of tax altogether in my constituency, and have cut taxes for 40,000 low-income residents? Is this not a Government who are on the side of the poor?

My hon. Friend is absolutely right. He could have added—and I am surprised that he did not do so—that we have taken action on fuel duty as well.

Money in people’s pockets is one thing, but since the financial crash, food prices have increased by 18% compared with inflation of 13%. It is not just a question of the money in people’s pockets; it is also a question of what they have to pay when they go to the shops. Does the Minister really believe that families in my constituency feel that they are better off?

It is because of the need to deal with the cost of living that we have taken measures such as controlling increases in council tax. That is why fuel duty is lower than it was in the plans that we inherited, and why we have taken the measures that we have taken in regard to the personal allowance. [Interruption.] The shadow Chancellor is muttering about VAT. Let us be clear about this. Labour Members did not vote against VAT; then they said they were against VAT. Last week they said that they would not change VAT; now the shadow Chancellor is complaining about VAT. It is just chaos and confusion from the Labour party.