asked Her Majesty’s Government:
Whether they intend to provide assistance to persons made financially worse off by the abolition of the 10 per cent starting rate of income tax.
My Lords, the Chancellor has today written to John McFall, chairman of the Commons Treasury Select Committee, to outline how we intend to do more to help low-paid workers without children and pensioners aged under 65.
My Lords, in the past few weeks, we have seen the Government move from denial, to an attempt at self-justification and now to a complete U-turn on the question of compensation for people who are losing out from the abolition of the 10p rate. At least we have made progress. I have two questions for the Minister. First, will he give a commitment that the action that the Chancellor has promised today will fully compensate every one of the 5.3 million poor people who are suffering financially? Secondly, will he apologise for the misery and uncertainty suffered as a direct result of the dithering of the Prime Minister and his Chancellor?
My Lords, that is almost the first time that I have heard in this House the Conservative Front Bench talking about issues affecting the lowest paid in this country. We recognise the opportunism reflected in the Question.
The position is straightforward. The last Budget significantly reduced child poverty in this country and significantly helped the less well off. The vast majority of people benefited from the last Budget, and the Budget carried out the Government’s intention to simplify taxation. Two groups have been identified as not benefiting from the changes; we have indicated today that we intend to seek compensatory arrangements for those two groups. The arrangements cannot be put in place immediately, but we intend to ensure that they are backdated to cover the period from the introduction of the Budget.
My Lords, does my noble friend accept that the talk of the consequences of what has been done has been hugely exaggerated on all sides? Does he further accept that most people—including, I thought, the Opposition—are in favour of a single, simple reduced basic rate of 20 per cent? Perhaps some time or other he might ask them. On the other hand, the tax credits, which are supposed to be helping, are very complex and are usually misunderstood or not understood at all. Will he ask the Inland Revenue to look very closely at identifying those who should be getting benefit from tax credits and who are not doing so at the moment?
My Lords, on the latter point, not only the Inland Revenue but Ministers are engaged in a campaign to increase the take-up of tax credits, which is notoriously low among certain categories of those who are entitled, including lowly paid single workers, who are part of the problem that we have identified. On the more general issue, my noble friend is absolutely right; if the Opposition have ever managed a semblance of consistency, it is to ask for there to be simplicity in the tax system, which is exactly what the last Budget provided.
My Lords—
My Lords, the abolition of the 10p rate is being justified by the Government to cut the basic rate of tax. Would not the better way to fund that be to tax those who can better afford it? For example, could not the Government reverse some of the changes that they are proposing on capital gains tax, starting with the ridiculous proposal to reduce the rate of capital gains tax charged on the sale of second homes?
My Lords, an invitation from the Liberal party to rewrite the whole of the Budget is to be anticipated because, on the whole, the Liberal party rewrites every Budget each time it is presented without ever making its sums add up to a coherent package of measures. It is constantly critical of what the Government do, but it has to recognise that we have built the strongest economy among the G8 over the past decade.
I say to the noble Lord that this Budget was directed to the key priorities of the Government, such as reducing child poverty and poverty in the country, and we made substantial strides in that direction. The changes that we will effect later this year will add to those points.
My Lords—
My Lords, this has gone round the block, and I think it is the turn of the noble Lord, Lord Higgins. If he is quick, we will be able to get my noble friend in as well.
My Lords, I am most grateful to the Leader of the House. I was seeking to point out, in view of the Minister’s first Answer, that in fact I spent some 10 years on the Front Bench stressing the importance of dealing with the problem of the low paid and, particularly in light of the point made by the noble Lord, Lord Barnett, pointing out how inefficient the then Chancellor of the Exchequer’s obsession with tax credits was in helping the low paid. Can the Minister tell us exactly how much has not been claimed in tax credits? It was recently suggested that the figure was more than £1.3 billion.
My Lords, the take-up of tax credits is not as high as we would want, but is improving each and every year, so we have increased take-up to a significant percentage. But if the noble Lord says that he was concerned about these issues, I have to ask him why, under the previous Administration, the number of children in poverty tripled and has been reduced very significantly indeed under this Administration.
My Lords, I apologise for trying to intervene on a Minister of a previous Government, but I cannot recall in my lifetime the Conservative Party being worried about poverty or the low paid. The party was opposed to the minimum wage and is still opposed to it, I think. Let us return to the Question. I believe that—
Question!
The question is, does my noble friend agree with me that what the Prime Minister said today at Question Time will help those whom people are concerned about?
My Lords, I reassure my noble friend that I was going to agree with him before he asked me whether I agreed with him. Of course I think that the Prime Minister’s statement this morning was extremely helpful.