On a point of order, Mr. Speaker. Last week, I saw on the Order Paper that I had been fortunate enough to have a question selected for a response, most likely from one of the Under-Secretaries of State. The question related in every particular to the responsibilities of his Department—to a British standard for flood-resistant products in connection with planning policy statement 25. Imagine my surprise when I saw that my question was no longer to be taken today. I have not had an explanation. If I do not get a satisfactory explanation, will you, Mr. Speaker, look kindly on the issue as a subject for a future Adjournment debate?

Transferring is a matter for a Department, but it is my understanding that the hon. Lady, or any hon. Member, should be notified. I will look for an explanation as to why she was not notified—that is unacceptable.

I beg to move,

That leave be given to bring in a Bill to make provision for all receipts printed in the United Kingdom to contain a figure for the total amount of tax paid on the goods and services purchased.

I declare my interest as the owner of a small retail store in Swansea.

The purpose of the Bill is to ensure that taxation is as transparent as possible. People rightly want to know how their money is spent, but it is also essential for the Government to be open about how that revenue is raised. The Government estimate that the Treasury’s receipts for 2007-08 will be £549.9 billion, projected to rise to £575.2 billion next year. The Bill would be particularly relevant to purchases that are subject to multiple taxes and duties. I am thinking specifically of fuel, tobacco and alcohol, which are everyday items bought, at one time or another, by the majority of the population. Each purchase soon adds up. On those products alone, the Government will rake in an estimated £41.2 billion in 2007-08. That is a huge amount of people’s hard-earned money, and they deserve to see exactly how it is collected.

The Bill would benefit the taxpayers of this country and have few, if any, cost implications for major businesses. It would not be an extra burden but merely a hassle-free way of making government as open as possible. Smaller businesses would not be targeted by any potential legislation; safeguards would be put in place to ensure that they were not adversely affected. Placing the amount of tax generated on each receipt next to the total price would make people better able to see how and where their taxes are collected. It is important that people see where their money is going; in that way, a Government can be held fully accountable.

In researching the Bill I have consulted representatives of the Adam Smith Institute and the TaxPayers Alliance, both of which have given their unequivocal support to the measures that I seek to introduce. Both those organisations have said that taxation should be more transparent and that people should have a right to know how much tax they are paying on a particular product. One of the most interesting concepts that surrounds taxation is that of tax freedom day, which shows how long we have to spend working for the Treasury before our money becomes our own. Last year, that meant working from 1 January until 4 June just to pay our tax bill. It is that sort of realisation that hammers home the need for open and understandable taxation.

I should like to take the three main products one by one. Fuel duty currently stands at 50.35p per litre and is scheduled to rise by 2p in October of this year—unless The Independent is wrong, Ministers get their way, and there is yet another U-turn. Then, of course, there is VAT at 17.5 per cent. As with all goods subject to duties—I suspect that a large number of people do not realise this—the Government tax the duty as well. Rather than paying VAT on the basic price of the fuel, we pay it on both the basic price and the 50.35p. In April 2008, according to the Library, unleaded petrol retailed at an average of 107.6p per litre—remember those heady days?—and the average diesel price was 116.5p per litre. According to further figures provided by the Library, the pre-tax price would be 41.2p per litre and 48.8p per litre respectively. Putting those figures into context and including VAT, that means that 62 per cent. and 58 per cent. of the money that people pay for their fuel goes to the Treasury. As people will know, during the past few months, while I have been researching this Bill, fuel prices have risen considerably to about £1.20 per litre for unleaded and as much as £1.34 for diesel.

My Bill would ensure that people were aware of the rising amount of tax that the Government are creaming off. As a practical example, let us assume that I went to the petrol station and put £20-worth of unleaded petrol in my car. For the most part, the receipt would mention only the amount of VAT but, as I have stated, that is only a minor part of the taxation. Under the Bill, the bottom of my receipt would read, “Total—£20.00; total tax take—£12.40.” There would be no hidden costs, and when the Government talked about 2p rises the public would be able to see the exact effect as soon as it came into force.

Tobacco is exactly the same. For those without a degree in economics, tobacco taxation is especially complicated. There are two duties on cigarettes. As of 12 March 2008, the specific duty is £112.07 per 1,000 cigarettes, there is an ad valorem duty of 22 per cent. of the retail price and—lest we forget—VAT. The Institute for Fiscal Studies has calculated that a packet of 20 king-size cigarettes would be subject to 217.03p specific duty and 109p ad valorem, which suggests that the VAT on a £4.95 packet of cigarettes is 86p. Under the Bill, the receipt would read, “Total—£4.95; total tax take—£4.12.”

The Budget immediately raised alcohol taxes by 6 per cent. above inflation, and there will be a 2 per cent. rise above inflation every year until 2013. That is projected to lead to a £600 million rise in revenue for the Treasury by 2008-09. From 17 March 2008, alcohol duty rates are £14.96 per 100 litres of beer and, on wine and spirits, £21.35 per litre of pure alcohol. To most normal people, such figures and statistics are not grounded in reality and everyday life. The Institute for Fiscal Studies has estimated that we currently pay 30.04p on every pint of beer, 134p on bottles of wine and 548p on bottles of spirits—and then there is VAT. Under the Bill, a receipt for a pint of beer that cost £3 would state, “Total tax take—83p.”

As with any proposed legislation, it is important to think about the unintended consequences. In the scenario that we are considering, the consequences would be minute, if not non-existent. As many hon. Members know, I am a convenience store owner in Swansea. I know that our till can be programmed to produce the type of receipt to which I have referred with minimal cost to the business, and that it could be done during the next servicing of the till. For businesses whose tills are not capable of that change, there would be no requirement to upgrade and no forced time limit, but the Bill would provide that when they purchased new machinery that could produce the requisite receipts, the till should be programmed accordingly. That way, smaller businesses would not be hit with an additional business cost, but naturally progress to the system that I propose.

Let me take the opportunity to reassure the House that there is no intention to impose any negative effect on small businesses—after all, they employ 58 per cent. of the UK’s private sector work force. However, it would be in the spirit of the Bill for smaller premises to display signs that specified the tax take on average cigarette, alcohol and fuel products. By the same reasoning, there will be no additional cost to the companies that make the tills. The technology required for that is already available and used in a huge number of tills.

That leaves the consumer. I do not believe that a single argument could be made to suggest that the Bill would not be beneficial to consumers. It represents an uncomplicated way of creating a more transparent taxation system, in which the general population can experience at first hand exactly how, where and when they are being taxed. It will lead to greater understanding of the taxation system and, I hope, mark the beginning of the end of stealth taxes, with which the incumbent Government have become synonymous.

There is not enough time to go through examples of every tax, and no one would want me to do so. [Hon. Members: “Go on!”] Well, we certainly do not have time to go through all the taxes that the Government have introduced since they came to power in 1997.

The Bill is in the spirit of open government. It is relatively cost and hassle free, and there would be great benefit to the public with no extra burden on them or the retailer. In short, it is a simple measure that would lead to a better understanding of the tax system, allow transparency and provide greater appreciation of how taxes are collected. At a time when hard-working families are feeling the pinch of higher prices on food, fuel, energy, tobacco and alcohol, it is only right that the Government should also tighten their belt, and let the public see the total tax as well as the total tax spend.

Question put and agreed to.

Bill ordered to be brought in by Mr. Nigel Evans, Mr. Brian Binley, Mr. Graham Brady, Mr. Christopher Chope, Philip Davies, Christopher Fraser, Mr. Paul Keetch, Patrick Mercer, Mark Pritchard, Mr. Robert Syms, Ann Winterton and Sir Nicholas Winterton.

Transparent Taxation (Receipts)

Mr. Nigel Evans accordingly presented a Bill to make provision for all receipts printed in the United Kingdom to contain a figure for the total amount of tax paid on the goods and services purchased: And the same was read the First time; and ordered to be read a Second time on Friday 17 October, and to be printed [Bill 127].

I beg to move, That the clause be read a Second time.

With this it will be convenient to discuss the following:

Government new clause 12—Basic rate limit.

New clause 1A—Interim statements to Parliament—

‘On any occasion when the Chancellor of the Exchequer or a Treasury Minister announces to Parliament any change or intended future change to—

(a) income tax rates,

(b) income tax thresholds, or

(c) income tax personal allowances,

other than in the course of a statement to Parliament presenting a Budget or Pre-Budget Report, the Treasury must publish a current forecast of—

(a) public sector net borrowing,

(b) growth rate of gross domestic product, and

(c) consumer price inflation,

for the current fiscal year and each of the subsequent four fiscal years, updated to take account of that announcement.’.

New clause 4—Income tax rates—

‘(1) The amendments made by the provisions of this Act specified in subsection (2) shall cease to have effect at midnight on 5 January 2009 unless the conditions set out in subsection (3) have been satisfied.

(2) The provisions referred to in subsection (1) are—

(a) section 3(2) and (3), and

(b) section 3(7)(a) and Schedule 1 (in so far as they relate to the starting rate).

(3) The conditions referred to in subsection (1) are that—

(a) the Chancellor of the Exchequer shall have laid before the House of Commons a statement setting out the measures taken, or intended to be taken, to mitigate the effect of the amendments made by the provisions of this Act specified in subsection (4), when taken together, on those for whom such effect is a net increase in income tax payable, and

(b) the House of Commons shall by resolution have approved such statement.

(4) The provisions referred to in subsection (3) are—

(a) sections 1, 3(2) and 3(3),

(b) section 3(7)(a) and Schedule 1 (in so far as they relate to the starting rate), and

(c) any other provision of this Act the effect of which is to change the bands of income on which income tax is charged.’.

New clause 6—Harmonisation of income tax and national insurance contributions—

‘(1) If for any tax year—

(a) the personal allowance under section 35 of the ITA 2007 (c. 3) is set at an amount which is not equal to the amount of the primary threshold under section 5 of the Social Security Contributions and Benefits Act 1992 (c. 4), or

(b) the sum of the personal allowance and the basic rate limit under sections 35 and 10(2) of the ITA 2007 (c. 3) is set at an amount which is not equal to the upper earnings limit under section 5 of the Social Security Contributions and Benefits Act 1992 (c. 4),

the Treasury shall within one month of the passing of the Act which sets the personal allowance or basic rate limit lay before Parliament a report explaining the matters set out in subsection (2).

(2) Those matters are—

(a) why the amounts have diverged for the year, and the expected future path of the amounts in relation to each other; and

(b) the estimated cost to—

(i) employers, and

(ii) HMRC,

of operating a system of divergent thresholds and the savings that are expected to result from a convergence of those thresholds.’.

New clause 10—Personal allowances—

‘(1) The Treasury must by regulations made by statutory instrument vary section 35 of ITA 2007 (personal allowances for those aged under 65) so as to achieve the outcome specified in subsections (2) and (3).

(2) For the tax year 2008-09 50 per cent. of income in excess of £6,400 (up to a maximum of £600) shall be added to the personal allowance, subject to subsection (3).

(3) That addition shall be withdrawn at the rate of £10 for every £100 of income in excess of £7,600, so that—

(a) a taxpayer with an income of £7,600 receives an addition to the personal allowance of £120, and

(b) a taxpayer with an income of £13,600 receives no such addition.

(4) Regulations under this section may make such transitional or incidental provision as the Treasury thinks fit.

(5) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.’.

New clause 13—Independent review of income taxation—

‘(1) The Chancellor of the Exchequer must appoint a person to review the operation of the provisions of the ITA 2007 and sections 1 to 3 (income tax) of this Act.

(2) That person must, within 12 months of the coming into force of this Act, carry out and report on a review of those provisions and, where he does so, must send a report on the outcome of his review to the Chancellor of the Exchequer as soon as reasonably practicable after completing the review.

(3) That person must, upon the amendment by future legislation of any provision contained in ITA 2007, carry out and report on a review under this section within 12 months of that amendment coming into force.

(4) A report received by the Chancellor of the Exchequer under subsection (2) must be laid before the House of Commons.’.

New clause 20—Personal allowances (No. 2)—

‘(1) The Treasury must by regulations made by statutory instrument vary section 35 of ITA 2007 (personal allowances for those aged under 65) so as to achieve the outcome specified in subsections (2) and (3).

(2) For the tax year 2008-09 50 per cent. of income in excess of £6,400 (up to a maximum of £600) shall be added to the personal allowance, subject to subsection (3).

(3) That addition shall be withdrawn at the rate of £10 for every £100 of income in excess of £7,600, so that—

(a) a taxpayer with an income of £7,600 receives an addition to the personal allowance of £600, and

(b) a taxpayer with an income of £13,600 receives no such addition.

(4) Regulations under this section may make such transitional or incidental provision as the Treasury thinks fit.

(5) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.’.

Amendment No. 102, in clause 1, page 1, line 8, at end add ‘, unless subsection (3) applies.

(3) If this subsection applies—

(a) the starting 10%,

(b) the basic rate is 22%, and

(c) the higher rate is 40%.

(4) Subsection (3) applies in the case of any person who has notified the Commissioners for Her Majesty’s Revenue and Customs that he wishes his income to be charged at the rates specified in that subsection and not at the rates specified in subsection (2).’.

Amendment No. 103, in clause 3, page 2, line 18, leave out subsections (2) and (3).

Amendment No. 104, page 2, line 22, leave out subsection (5).

Amendment No. 105, page 2, line 26, leave out ‘the starting rate and’.

Amendment No. 6, page 2, line 27, at end insert—

‘(8) The Chancellor of the Exchequer shall, within six months of the coming into force of this section, lay before the House of Commons a report containing an assessment of the combined impact of—

(a) the increase in personal allowances, and

(b) the abolition of the starting rate of income tax,

on individuals with a gross income under £13,000 per annum.’.

Amendment No. 106, in schedule 1, page 101, line 15,  after ‘(2)’, insert

‘Unless section 1(3) of FA 2008 applies,’.

Amendment No. 107, page 101, line 17,  at end insert—

‘(3A) After subsection (2) insert—

“(2A) If section 1(3) of FA 2008 applies, income tax is charged—

(a) at the starting rate on an individual’s income up to the starting rate limit, and

(b) at the basic rate on an individual’s income above the starting rate and up to the basic rate limit.”’.

Government amendment No. 5

Amendment No. 108, page 101, line 24, at end insert—

‘(8) The starting rate limit is £2,150.’.

Amendment No. 109, page 101, line 25, leave out sub-paragraph (6).

Government new clauses 11 and 12 and Government amendment No. 5 put into effect the Chancellor’s statement to the House on 13 May. Raising the personal allowance by £600 to £6,035 is worth £120 for a basic rate taxpayer, equivalent to the average household loss from the Budget 2007 reforms. Around 2 million basic rate taxpayers will benefit from the change. The number of households that lose from the Budget 2007 reforms will be reduced from 5.3 million to 1.1 million, and the amounts for those who still see a loss will be at least halved.

The Treasury Select Committee published its report on Saturday 28 June. We will respond in detail to that report in due course, but let me just quote from the Committee’s press release. The Committee welcomed the compensation for

“those who have lost out through the abolition of the starting rate of income tax through raising the personal allowance for basic rate taxpayers, but concludes that there remains a pressing need for the Government to seriously examine ways in which the 1.1 million households who will continue to lose can be fully compensated.”

As I have the opportunity of speaking twice on such occasions, it has been my practice in Committee to move the Government’s amendment or new clause briefly and then listen to the detail of the debate, so that I may address directly the points that colleagues raise.

Before the Minister concludes for now, may I ask her the question that my constituents in Montgomeryshire have asked me? Why have the Government abolished a tax arrangement that they introduced? Why was it their judgment to introduce it in the first place, only to abolish it now? I do not understand what changed.

There are very sound reasons why the 10p rate was removed in the Budget 2007. Those have been debated on many occasions in the House. I will come to many of the benefits that flow from those changes later in this debate.

I am sure that those of us on the Government Benches much appreciate the approach that my right hon. Friend will adopt of listening to the debate and then replying. I hope that when she replies, she will be able to say something about how she thinks the Government will probably respond to the Treasury Committee’s recommendation on how that smaller group who benefit only partially from new clause 11—many have benefited, most totally, but some only partially—may be fully compensated before the year is out.

I have listened very carefully and had conversations with my right hon. Friend and many others who have spoken to me about this issue, and I am sure that they will wish to participate in today’s debate. I want to reassure him that we will return to this issue in the pre-Budget report, as the Chancellor has said, not only in front of the Select Committee but elsewhere. He will bring forward concrete proposals, and they will be implementable as soon as possible. I want to give my right hon. Friend that reassurance right up front at the beginning of this debate.

Will my right hon. Friend say a little more about this while she is setting the scene? She quoted from the Treasury Select Committee’s press release and mentioned a figure of 1.1 million households. I believe that that represents 20 per cent. of the figure of 5.3 million households that was put forward last year by the Institute for Fiscal Studies. Treasury officials appearing before the Treasury Select Committee last year said that they broadly accepted that figure. Will the Minister tell the House whether the Treasury has looked again at that figure? Many hon. Members, especially on this side of the House, are rather suspicious because, while we wish to see no losers at all, we think that the figure of 1.1 million households is awfully high.

I stand by the figures that we have discussed. I have no reason to believe that the 1.1 million figure is not accurate. It is certainly the figure that we continue to work to.

The Minister has just said that the Chancellor will return to this issue in the pre-Budget report. Will he also take into consideration the other issues, besides the changes to the 10p rate, that are affecting the losers? I was contacted today by a constituent who feels that she has been hit by a double whammy, because she will also lose out as a result of the switch from housing benefit to housing allowance. Can the Minister give me an assurance that all these cross-cutting issues will be looked into when the Chancellor returns to this matter in the pre-Budget report?

At the beginning of the debate, I said that my making a short introduction would enable Back-Bench colleagues to make a longer contribution, to which I could respond in more detail at the end of the debate. I would hope to give the hon. Lady the reassurances that she is asking for, and I can assure the House that this work is ongoing. It is not a matter that Ministers have set aside. It is a serious matter, and I acknowledge the way in which amendments on the issue—many of which will be debated today—have been put forward.

It might speed the debate up if the Minister could clarify this point. Is she now saying that the Chancellor will come forward with proposals in due course to ensure that there will be no losers, or is she saying that a lesser number of losers than 1.1 million would be acceptable?

What I have said is that we intend to consider this matter very seriously. We have made it very clear that we will return to the issue in the pre-Budget report, which is the proper time for such a matter to be discussed in further detail in the House. That is our intention. At this point, I would like to hear the detail of the debate, and to respond in detail in due course.

I have been in this House for 11 years, but I do not think that I have ever seen a Minister so anxious to sit down and hear what her colleagues had to say. She seems remarkably reluctant to pin her colours to the mast at this stage. The hon. Member for Wolverhampton, South-West (Rob Marris) suggested that the Minister was in listening mode, and I am delighted to hear that. Let us see whether we can make some progress on that basis.

The first group of amendments that we are debating today addresses what has become the central issue in the fiasco of the 2008 Budget and Finance Bill, as it has unravelled on what I think it is fair to call a scale that is unprecedented in modern parliamentary history. No one inside or outside the Chamber really believes that the changes introduced by the Government in new clauses 11 and 12 are some kind of well thought through, counter-cyclical response to the economic slow-down. They were announced on 13 May as an attempt—to use the language of the Treasury Committee—to pull a rabbit out of the hat ahead of the Crewe and Nantwich by-election and to undo the damage that the Prime Minister did in the 2007 Budget by putting short-term political calculation ahead of long-term political principle. Behind the spin, this is simply the final act—at least, it is for this year’s performance—of what, depending on one’s point of view, is either a tragedy or a farce of epic proportions, which has been delivered at epic cost, both financial and political.

The Financial Secretary did not provide any context, so let me remind the House of the history of the 10p tax rate, its birth and its death, on which these new clauses are intended to buy the silence of Labour Back Benchers. The 10p tax band first reared its head in the 1997 Labour party manifesto as a long-term objective towards lowering the starting rate of income tax to 10p in the pound. When it was introduced in 1999, the then Chancellor, our current Prime Minister, described it as something that will

“make work pay and help people, especially those who are low-paid, to keep more of the money that they earn”

As I have reminded the House before, the Prime Minister’s final flourish on delivering that 1997 manifesto pledge for the 1999 Budget was this:

“When we make promises, we keep them”.

That is grand and principled stuff, but by May this year, the current Chancellor was not describing the 10p tax rate as some long-term objective and deeply held principle of taxation, or as a manifesto commitment the delivering of which was a moral obligation for the Labour party. No, by spring this year, the promise to be kept had been downgraded to something

“introduced in 1999 as a transitional measure”.

So it is not so much a case of making promises and keeping them; it is more a case of ducking and weaving, twisting and spinning rather than of admitting that the promises were being broken.

The hon. Gentleman is speaking very warmly about the 10p tax rate, so will his party give a commitment to reintroduce the 10p rate, should it ever become the Government?

I note the tone in the hon. Gentleman’s final phrase, but I do not know where he has been over the past couple of months. He knows very well that the answer to that question is no. We have said that we accept the abolition of the 10p rate and the simplification of the tax system. That is supportable, but the Government have to ensure that it is delivered in a way that is not carried on the backs of the poorest taxpayers in our society. I would have thought that the hon. Gentleman would have been keen to promote that principle. What I am speaking warmly of is the principle that when parties make manifesto commitments—we could all think of a few of them—it is generally good for the health of the body politic if they deliver on them.

To be fair to the Prime Minister—I like to be fair to him—he could scarcely have paid a higher political price than he has for his cynical calculation over the income tax changes, creating 5.3 million losers among some of the lowest paid in our society. The Financial Secretary told us that there were very sound reasons for abolishing the 10p rate. The very sound reason that I can determine is that it was in order to fund the 2p cut in the basic rate of income tax that was announced with a flourish at the end of the 2007 Budget speech—a speech that was constructed and intended to be the launch pad for the then Chancellor’s bid for the Labour leadership and thus the office of Prime Minister. He thought that, by giving a demonstration of Blair-like ability to appeal to middle English voters, he would appeal to his party as an election winner in the mode of his predecessor. The price that was to be paid by the poorest in our society in the form of a deferred increase was buried in the small print. The plan was to hold the election in the autumn and worry about the mess that fell into place the following spring after the election was safely out of the way. The rest, as they say, is history.

I can see the temptation to make a party point or two in these circumstances, but is there not one view that unites Members in all parts of the House? We are genuinely puzzled over why some of those on the lowest incomes should face this tax increase, and we cannot believe that the Government really intended it. Is it not rather a pity that the Financial Secretary did not repeat the assurance that all 1.1 million people would be guaranteed not to be worse off by whatever means the Government come up with in the autumn? Is that not a concern that we can all share?

That is true. There was speculation at the beginning of this fiasco as to whether it was a simple error—a failure to understand the distributional consequences of the measure—but I well remember saying in the Committee of the whole House that, while I deferred to no one in my enthusiasm for criticising the Prime Minister, I had never suggested that he was either stupid or innumerate. Subsequently, in evidence to the Treasury Committee, officials have made very clear that a full distributional analysis was undertaken, that the measures announced in the 2007 Budget were announced—as the phrase goes—with eyes wide open, and that the Prime Minister knew exactly what he was doing. What his game plan was at the time, when he was faced with the Labour party leadership and a possible election in the autumn, is anyone’s guess, as I have said. Members will form their own views on what his ultimate intentions were.

The hon. Gentleman is in typically generous mood this afternoon as he assesses the Government’s dilemma. May I ask what advice he might give them? The right hon. Member for Wokingham (Mr. Redwood) has suggested that the House is united in the view that the poorest paid should not lose out as a result of the Budget changes. Does the hon. Gentleman believe that next year the Government should increase personal allowances above the level of indexation and pay for the increase by clawing it back, perhaps through national insurance increases for those of us who benefited from the 2p cut in the standard rate?

Various suggestions are being bandied about. I do not consider it my responsibility to be prescriptive about the solution that the Government should adopt. They dug the hole, and they can jolly well get themselves out of it. We have a responsibility to ensure that the Government stick to the promise that they made to the right hon. Gentleman in the Committee of the whole House and present proposals at the time of the pre-Budget report—as the Financial Secretary to the Treasury has already suggested that they will—to deal with the issue in terms that fulfil that promise. That is the obligation that we must enforce, and that, I think, is the mood throughout the House.

Let us consider the worst possible scenario. It is an unlikely prospect, but let us suppose that the Government stumbled again, and in the November statement did not come up with a package that met the requirements of Labour Members. The hon. Gentleman is presumably aware that if enough of us tabled a motion, the Opposition would have time to debate it and to censure the Government. While I do not propose that he should help the Government to dig themselves out of a hole, he might suggest that he would be ready to ensure that they do not get out of the hole without fulfilling the commitment made to the very poorest workers.

The idea of a censure motion is interesting, and I am grateful to the right hon. Gentleman for advancing it. I do not know whether he has had time to read new clause 4 in detail, but it presents our solution to the immediate challenge to Parliament. It lays down a marker that holds the Financial Secretary to her commitment to revisit the matter in the pre-Budget report, and requires the Chancellor to return at the time of the report with a comprehensive solution. He has plenty of time: he has the rest of the summer in which to work it out with his armies of civil servants. The important proposal in new clause 4 is for the House ultimately to decide whether his solution constitutes a satisfactory and acceptable delivery on the promise made to the right hon. Member for Birkenhead a couple of months ago.

Will the hon. Gentleman give way?

I will give way once more, but then I must make some progress.

I thank the hon. Gentleman for giving way. According to the Treasury Committee report, the Chancellor will be faced with two choices: either to focus directly on the 1.1 million families at relatively low cost but with a huge increase in the complexity of the tax system, or to take a step that is much less complex but which will cost the public purse a great deal more. Which of those two options does the hon. Gentleman think the Chancellor should choose?

The first part of the hon. Gentleman’s question was a useful contribution, but the latter part was not, because this is not my hole—I did not dig it—and, as I will now outline, there are many ways in which the problem could be tackled, including through the suggestions of the hon. Members for Birmingham, Selly Oak (Lynne Jones) and for North-West Leicestershire.

The Institute for Fiscal Studies suggests that some of the remaining losers could be compensated by raising the personal allowance still further or by extending working tax credits to those working 16 hours a week at the age of 21 and over. If the Government want to claw back some of the gain they have delivered this year through new clause 11, they could use a variant on the taper, which the hon. Member for North-West Leicestershire has proposed, although, as the hon. Member for Edmonton (Mr. Love) rightly says, that would be at the cost of making the tax system more complex and expensive to operate, when the original intention was to make it simpler.

As we know, in Her Majesty’s Revenue and Customs, with complexity goes a tendency to make errors, which is bad for the integrity of the tax system as a whole. The IFS says that if the Government chose to freeze the personal allowances at the level introduced by new clause 11 instead of indexing them in accordance with the law under the Income and Corporation Taxes Act 1988, that would be equivalent to a real cut of around £200 and would thus claw back about a third of the gain received by each basic rate taxpayer, leaving about 8.3 million families worse off next year than they are this year.

There are many different solutions, but we do not have the resources that the Treasury has and I do not pretend to have answers to the dilemma in which the Government find themselves. However, what unites Members in all parts of the House is a belief that something must be done, both this year for the 1.1 million families who are still worse off, and in future years for those who have been compensated by the increase in personal allowance but do not yet know if they will get the increase next year along with the additional winter fuel payments. We are united on that, because it is morally unacceptable to fund a tax cut on the backs of the poorest, and because the Government promised that they would do such a thing—and rebuilding political trust in this country, which is a priority for my party, requires that Governments get into the habit of keeping the promises they make.

A variety of mechanisms have been suggested, and I commend the Labour Back Benchers who have sought to engage in this debate and remind the Prime Minister of his commitment. Precisely because there are many ways in which the Government can deliver on their promise, I and some of my party colleagues have tabled new clause 4, which I call the insurance policy clause. It is a variant on an amendment that we tabled in the Committee of the whole House and it should appeal alike to those who expect the best from the Chancellor and those who fear the worst, because it introduces a sunset provision for the changes to the starting rate unless the Chancellor has by the end of this year laid before the House of Commons a report setting out what he has done, and what he intends to do, to compensate those who are still losers when all the measures are taken together, following the introduction of the measures that the Government are introducing today.

Our proposal is deliberately not prescriptive. There is no requirement that the Chancellor must take one approach or another. There is no attempt to force him to give his answer today; we accept that he will do so at the time of the pre-Budget report. It will be for the House then to decide whether it is satisfied with the actions he has taken, or proposes to take, as set out in the report that he will be required to make. Given the parliamentary arithmetic—unless the rate of by-elections increases a little between now and the end of the year—that will mean in practice that he must satisfy the 50 or 60 Labour Back Benchers who have been most concerned about, and active on, this issue that he has in this autumn’s pre-Budget report delivered on the commitment to compensate all the losers.

All those who believe that a solution for the future has to be found and announced in the pre-Budget report, as well as those who doubt the Chancellor’s commitment or ability to deliver and those who do not, should be able to coalesce around this insurance policy clause. If the Chancellor can satisfy the House by the end of the year that he has delivered, in his pre-Budget report, a lasting and satisfactory solution that adequately compensates those who have lost out, he will have no difficulty in obtaining his resolution and thus overriding the sunset provision. But if he should be tempted to turn his back on this issue, or if the Prime Minister should be tempted to renege on his earlier commitments, the sunset clause will provide a mechanism for a parliamentary check to keep them both honest.

Does my hon. Friend agree that one of the difficulties for the Government even of the converged thresholds initiative, which we entirely agreed with, was that it was not going to be revenue-neutral at that stage? Perhaps he will explore the subject with the Minister to try to ensure that so far as hard-pressed middle-earning taxpayers will pay for the result of that convergence, they will at least have some of the disadvantage brought back because the confusion to which he has alluded will be sorted out.

I know that my hon. Friend served with distinction on the Committee that considered the National Insurance Contributions Bill. He is well versed in these issues. The Financial Secretary will have heard his comments and, I hope, will feel able to respond to them in her substantive speech.

Let me move on to new clause 1A. There is a theme among these amendments and new clauses of seeking to strengthen Parliament’s control over the process. New clause 1A seeks to strengthen Parliament’s knowledge and oversight of the Treasury’s projections in a situation where the state of the public finances is deteriorating rapidly. Traditionally, the Chancellor gives to Parliament statements of the Treasury’s forecast of economic growth and public borrowing twice a year—at the pre-Budget report in November and at the Budget in March. In normal times, that is just about sufficient. However, when the public finances are deteriorating rapidly and economic growth projections are being downgraded regularly, that is simply not good enough. Parliament is being kept in the dark.

At the time of the pre-Budget report last year, the Chancellor said that the Government would borrow £36 billion and that growth this year would be 2 to 2.5 per cent. In the Budget, just four months later, he said that he would borrow £43 billion—£7 billion more—and downgraded his growth forecast to 1.75 to 2.25 per cent. Since then, the continuing effects of the credit crunch and the oil price shock, all of which Britain is ill-prepared to absorb, have led every commentator, including the Bank of England, sharply to downgrade their expectations of economic growth. With a downgrading of the growth forecast invariably comes a downgrading of tax receipts and, all other things being equal, an increase in the expected level of borrowing.

I concede that the territory is complicated. The Government benefit from higher tax receipts from North sea oil and gas—I am sure that we will hear something about that as Report stage unfolds. So long as unemployment does not begin to rise rapidly, the automatic stabiliser of increased welfare spending will not necessarily manifest itself. The Government have now stated that they will borrow an extra £2.7 billion for the 10p compensation package. The picture is complicated and it is simply not good enough, when the Government are led by a Prime Minister who claims to want to reinforce the accountability of the Executive to Parliament and to build a new relationship between citizen and Government, for them to keep both Parliament and the population in the dark.

All leading City commentators and the Bank of England have downgraded their economic forecasts. We know that the Treasury will have revised its forecast, but that revision remains locked away in the Chancellor’s safe. Parliament is left in ignorance, as are the people. They are left ignorant of the scale of the slow-down in the economy that is expected by the Government and of the size of the increase in public borrowing that that will entail.

New clause 1A enshrines the principle that when income tax changes are made in-year—an unusual situation that implies very unusual circumstances—the Government should publish an updated report on economic growth and public borrowing so that Parliament, as well as the nation, has an authoritative view of the bigger picture when approving the changes that it is asked to make to income tax. The established principle is that tax changes are announced only in Budgets and pre-Budget reports and that growth and borrowing are forecast at the same time. If tax changes are made at other times, the updated forecasts should be set out alongside them for the sake of transparency and completeness.

I shall conclude by referring briefly to new clause 10 and amendments Nos. 102 to 109, tabled by the hon. Members for North-West Leicestershire and for Birmingham, Selly Oak. As I have said before, we believe that it is the Government’s responsibility to deliver on their promises to compensate all those who have lost out from the abolition of the 10p rate of tax.

As I said earlier, the Prime Minister, when he introduced the 10p band, claimed:

“When we make promises, we keep them”.

Last May, he faced a Back-Bench rebellion and made another promise—he promised the right hon. Member for Birkenhead that he would compensate all the losers in full. So it is disconcerting that this morning’s edition of The Sun should report that he had

“slammed the door on help for 1.1 million low-paid workers hit by the Government’s 10p tax fiasco.”

The headline says that there will be “Not a Penny More” aid the for 10p tax rebels, so the hon. Members for North-West Leicestershire and for Birmingham, Selly Oak deserve praise for maintaining the pressure. There are advantages and disadvantages to the solutions that each proposes, but they are a contribution to the debate—in stark contrast to the reported slamming of the door by the Prime Minister.

Our view is that this is the Government’s problem, and that it was created by the Prime Minister’s machinations last year. It is for them to clean up their own mess, by coming forward with detailed proposals to help the remaining 1.1 million losers and explaining how they will continue support into the future—but compensate the Government must if they are to deliver on the promise that they made. They must make those proposals known to Parliament, and not only in private to their Back Benchers. That is why we believe that new clause 4 is the best way forward: it is a sunset provision that gives the Government the latitude to explore an optimum solution to delivering compensation, but one that will give Parliament the final say as to whether the proposals are adequate.

I sincerely hope that hon. Members of all parties who are determined to ensure that the Government deliver on the promise given to the right hon. Member for Birkenhead will support new clause 4 in the Lobby tonight. May I give you notice, Mr. Speaker, that with your leave I shall be seeking a separate Division on new clause 4?

Thank you, Mr. Speaker, for calling me to speak and for selecting new clauses 10 and 20 for debate this evening. I am grateful to my 20 colleagues who are the new clauses’ co-signatories. Many others who have not signed have said that they will support the new clauses in the Lobby at the end of this part of the debate if I exercise my right to move them formally, should that be appropriate.

I shall speak mainly to new clause 20, which supersedes and replaces new clause 10, which has a slight textual error. New clause 20(3)(a) specifies an addition to the personal allowance of £600, rather than the £120 that was incorrectly printed in new clause 10. The new clauses are otherwise identical, but new clause 20 is the framework for my address to the House this evening.

The level of taxation is a crucial and sensitive performance indicator for any Government. There are many myths about the differences between parties, and they are persistent. At least one of those myths was laid to rest in 1997, when the incoming Labour Government famously committed to—and delivered on—public expenditure levels that were unchanged from those of the previous Conservative Government. It is perhaps a measure of the Opposition’s esteem for this Government that they have committed—if they were to return to power in, say, 2015, or some later date—to stick to our public expenditure levels for a two-year period. That is an echo of what we did 11 years ago, and I welcome it.

However, some myths persist, and one was exposed very effectively by a well-known commentator on these matters, Andrew Dilnot, at the time of most recent conferences of the three main parties. He said that the electorate would see the “customary but bizarre spectacle” of the two parties—the main Opposition party and the Labour party—emphasising the differences between us on public expenditure and taxation, even though they were quite minor. In an important section of his article, he went on to state:

“Even when you take borrowing into account by looking at total spending rather than just taxation, during every year that Mrs. Thatcher was in power, except the last two when the economy was in an unsustainable boom, her government spent more of national income than Mr. Blair’s did.”

The crucial sentence followed, and I hope that Members will hang on to it and perhaps wake up at 3 o’clock tomorrow morning and say, “Is that really right?” It reads:

“Her Government averaged public spending of 45.4 per cent. of national income”

between May 1979 and when she fell, in Paris or elsewhere, in November 1990. The Government of Mr. Blair, our own former Prime Minister, in the 10-year period between May 1997 and when he stepped down last June, averaged 39.7 per cent., which is almost 6 per cent. less public expenditure as a proportion of gross domestic product. That should lay to rest the myth—it is patently false—that modern Labour Governments are reckless high spenders and excessive taxers. That is a myth and the figures give the lie to it.

Given what the hon. Gentleman has just told us, why does he think that the then Chancellor thought it necessary to introduce the fiscal rules that he introduced, and why do the Government seem to set such store by them?

The then Chancellor was a very wise and creative politician who had sound reasons for taking his actions. They were proved to be wise, at least for quite a lengthy period.

Although there is a bit of a myth about Labour having high-taxing Governments and the Conservatives being abstemious in that regard, the level of taxation, especially for the low-paid, is hugely important to Labour Members. That is why the abolition of the 10p tax rate in the 2007 Budget had such resonance on our Benches. It was because of its impact, which I shall discuss in a moment.

The most effective Labour Prime Minister of the 20th century was indisputably Harold Wilson, who famously said—I think that it was at the October 1962 Labour party conference:

“This party is a moral crusade or it is nothing.”

The last Prime Minister quoted those words on the death of Harold Wilson. Amen to them, because many Labour Members felt moved to join our party in a crusade to combat poverty, tackle inequality and root out injustice. We can be proud of a legion of successes and advances, but when it became clear that the unintended consequences of the 2007 Budget would adversely affect 5.3 million people on low pay, while leaving 21 million people better or no worse off, we were alarmed that poverty, inequality and injustice were being worsened by the decisions that had been taken. That was a triple whammy, and we urged the Chancellor of the Exchequer—by then it was the new Chancellor—to eliminate it. We did not want those three problems of poverty, inequality and injustice to become entrenched, perpetuated or institutionalised to any extent.

That was how the debate started about how to get out of the situation. It was not a problem such as would feature in the children’s comics, where with one bound we could be free. An awful lot of time, trouble and evaluation of options was involved. My early contribution to try to assist the Government drew on my background as a tax accountant. I designed and promoted a fairly simple framework based on an additional tax allowance of £1,200, but with tapering. It would have compensated those who had lost out, and only them, with the amount that they had lost through the abolition of the 10p rate, and only that amount. The people who were affected at that stage, before the 13 May announcement, were typically those on an income starting at about £5,200. The peak loss occurred among people with an income of about £7,600, for whom the loss was about £240, and it tapered off because of all the tuppences that they were receiving from a lower rate at a capped level of about £19,600. So there was a triangle with, at its centre, £7,600. Those people who earned about that amount were, before the 13 May statement, losing about £240.

I am not one of the 21 signatories to my hon. Friend’s new clause, but I will be supporting him in the Lobby tonight. Can he expose the myth that we have taken money from the poor to give to the poorer? It has been suggested that the people who will pay are those on £13,000 to £18,000.

I can. There are always myths in the area of taxation and accountants grow fat exposing them or sometimes exploiting them. The fact is that the official reason for the abolition of the 10p rate was at least in part that it would fund the reduction of the standard rate from 22p to 20p. The actual losses of 5.3 million people, as I shall go on to explain in a moment, aggregated to about £700 million in that regard. In no way did the savings generated for the Government by the abolition of the 10p rate for the lower band of income earners fund the tuppence reduction for salaries that went off into infinity from about £19,600. I think that I intervened on the hon. Member for Runnymede and Weybridge (Mr. Hammond) in the Budget debate to make that point. They made a small contribution to that reduction, but it would be unfair to say that it was a case of the poor subsidising the rich.

I therefore devised a fairly simple framework to compensate people with the exact amount that they had lost. They typically had income taxed at only 10 per cent. under the old system, between £5,200 and £7,600. The maximum loss was £240 per annum. I incorporated my framework into early-day motion 1477. In a rare success, I got a letter published in The Guardian on 7 May, six days before the Chancellor announced the details of his scheme. One part of it reads:

“An HMRC software developer can code it up rapidly. No changes needed to WFA, tax credits or minimum wage.”

They were options at the time, and I am pleased that they were abandoned because they were not a great idea. The letter continued:

“And the tax rate stays at 20%. It has the benefit of (relative) simplicity, it is retrospective”—

that was always a requirement of the campaign for compensation—

“and it will fully and accurately reimburse all those (and only those) who otherwise lose up to £240 per year. Total cost around £650m - much less than the political damage that we are incurring.

Come on, Gordon, announce something like the above as the chosen scheme so that our party can start to put this damaging distraction behind us.”

It is disappointing that two months on we still have this distraction, and I hope that this debate will at last lay this one to rest.

The scheme that I suggested was similar to that which exists for pensioners. They have a higher tax allowance that is tapered off and disappears. It starts to taper off at about £21,000 and disappears totally by about twice that sum. I urged my right hon. Friend the Chancellor not to pursue the winter fuel allowance, national minimum wage and tax credit route for the under-65s. It was an imprecise, uncertain and lengthy way of doing it. This is a tax problem. It was a problem injected into the taxation system and it needed a solution within the tax system. It did not need solutions that were incomplete, delayed or inaccurate.

I was pleased to be present in the Chamber on 13 May when the Chancellor announced an extra tax allowance, albeit not my £1,200, which would have been the basis for reimbursement of full losses. The Chancellor decided to reimburse average losses, so obviously the tax allowance he inserted was not £1,200 but £600. That reimbursed the average loss of £120, but it was not tapered and allowed for the fact that it was not applied to those who pay income tax at the 40 per cent. rate—as all of us in the Chamber do. New clauses 11 and 12 are designed to implement the Chancellor’s statement of 13 May.

The package was broadly welcomed on the Labour Benches at the time, but the difficulty was that it gave £120—£600 extra allowance at 20 per cent.—to 22 million people, of whom a good 14 million or more were not adversely affected by the abolition of the 10p rate. They had not received a hit of any kind, but 5.3 million—that famous figure—had been affected.

The hon. Gentleman is being very coherent and I understand his argument, but is he proposing that 18 million people should have clawed back from them some of the benefit of the personal allowance awarded to them under new clause 11? Given the squeeze on incomes and the soaring prices that families face, does he think that that is an appropriate measure at this point in time?

I was just coming to that point, so I shall make it now. New clause 20, to which I am speaking, sits on top of the Chancellor’s existing arrangements. I did not want to interfere with the thrust of those arrangements, because 14 million or more of the 22 million people in question will have already factored into their personal budgets the fact that they will receive £120 during this tax year—£60 in September and £10 in each of the following six months. As the Chancellor said on 13 May, that was designed in part to compensate people for higher fuel bills and so on. My new clause 20 sits on top of those provisions, and I shall vote for new clauses 11 and 12 before turning to my proposal.

I am grateful to the hon. Gentleman, who is genuinely trying to find a solution to the problem. Does he have a figure for the additional costs that his idea would impose on the Treasury?

I shall be pleased to answer that question, and will do so almost immediately.

The abolition of the 10 per cent. rate adversely affected 5.3 million people, and the Chancellor’s statement on 13 May more than fully compensated 4.2 million of them—in fact some of them had not quite suffered a hit of £120—but 1.1 million people remained, and my new clause 20 is designed to compensate that group. What will it cost? It is a matter of relatively straightforward and simple arithmetic. The maximum uncompensated loss at present, which went from £0 to £240 to £0—from £7,200 and so on—has been reduced by £120, so the uncompensated loss runs from £0 to £120 to £0 again. The average uncompensated loss, which my new clause will address, is around the £60 mark as far as we can tell: thus, 1.1 million people at £60 is £66 million. That is not an enormous sum; it is the kind of amount that the Chancellor might find down the back of the metaphorical settee when announcing his Budget. It really is a trivial sum. It is about 100th of 1 per cent. of his total tax take, not a major hit on the level of taxation. At only £66 million it is very good value, and I am sure that the Chancellor and his representative on the Treasury Bench must be tempted to snatch my hand off at this point.

My hon. Friend is making a powerful case for new clause 20. I appreciate that he is not a prophet or the son of a prophet, but I am sure that he has given great attention to the case that he is making. Does he believe that new clause 20 will cover all the losers whom Members of Parliament across the country have been trying to help in the past few months?

I do, and the new loser bands—the bands for those who have residual uncompensated losses—apply to those with an income from around £6,400. The bands still run up to £7,600, and now, because of the £120, they taper out at £13,600. That is the umbrella of income under which people still have uncompensated losses. We are talking about a maximum of £120, which is still at that £7,600 point. The figure involved is 1.1 million people; we are not talking about dribs and drabs. Typically, constituencies represented by Labour Members of Parliament have 2,000 or perhaps even 2,500—in some cases there are 3,000—such individuals or families. To Members of Parliament, £120 a year may not seem a substantial sum, but to families who are up against it, with high and rising core prices, even an addition of £10 to their monthly income can be helpful, crucial or valued.

There was a choice, the Chancellor went for the simple and expensive option, and I am effectively adding to new clauses 11 and 12 my own humble attempt to refine the announcement in a way that would deal with those 1.1 million people. My scheme would build on the announcement, and it is, I hope, simple, accurate and inexpensive: £66 million seems to me to be good value if it gets rid of a political, financial and fiscal problem. There are plenty of sticks lying around for the electorate to beat us with, but let us at least put one of them on to the bonfire.

My purpose in tabling new clause 20 was not to seek a method of beating the Government in the Lobby. I have not been the most persistent loyalist in recent years; I have had my concerns about a range of Government policies, and I have expressed my unhappiness through the votes that I have cast on a variety of topics. However, on this issue, my purpose was to ensure that the matters were debated and that an option was aired for the Chancellor to consider when he analysed the background to his pre-Budget report. I am not wedded to the scheme; it is just a suggestion.

The Treasury Committee received from the Institute for Fiscal Studies and others a range of ideas, and equally they might work. They have their costs, weaknesses and strengths. I believe that my suggestion would work, and I commend it to the House. I reserve the right to press the new clause to a Division if necessary, but when the Minister responds, I want to hear an absolute copper-bottomed, concrete-rooted guarantee that the Government, and the Treasury team in particular, are focused on those 1.1 million people. There are perhaps 2,500 such people in the Minister’s constituency, and they are important.

Just before my hon. Friend finishes, does he accept that the Government would do well to look at the whole income tax system for the future and to take an opportunity—certainly in the next Budget—to make the system more progressive, more redistributive and more graduated in the middle range, with higher taxes on the rich and distinctly lower taxes on the poor?

My hon. Friend and I are both regulars at Treasury questions, and we often express such sentiments and point to the fact that if tax evasion and avoidance in the UK economy were more effectively tackled, it would produce a stream of revenue that would resolve some of our problems in respect of council housing, free accommodation for those in social care and so on. However, Mr, Deputy Speaker, I sense that you want me to return to the track and not to be seduced by the pretty scene that my hon. Friend paints for me.

At the risk of briefly seducing my hon. Friend further, I should say that many older people who have contacted me believing that they have lost out because of the withdrawal of the 10p tax rate are actually losing out because their tax code is wrong and they do not receive their full age-related benefit. Is that not the other side of the coin, and a matter that we need to pursue to ensure that people are taxed properly?

About six weeks ago, I was sitting in the front room of a retired miner who had a relatively low retirement income. I would guess that he was about 70 or 71 years old, and he was certain—he had rung me up in high dudgeon, so I dashed the two miles from my office to where he was—that the Chancellor’s abolition of the 10p tax rate had left him with a higher tax burden. However, he was wrong, and I pointed out why. His British Coal superannuation scheme had been slow to implement the much higher personal allowance that the 2007 Budget had provided for from 6 April 2008 precisely to cater for the abolition of the 10p rate, among other things. So my hon. Friend is right: more people felt that they had been adversely affected than had actually been in practice. There has been more concern, hostility and disapproval among not only those who have lost out themselves, but those who have observed our party for a generation and more and believe that what we did at that time did not sit easily with the objectives for which we have fought and will continue to fight.

I have about two more sentences to say. My requirements are that we should have a copper-bottomed guarantee that the Treasury team will focus on the 1.1 million people still affected, that those people will get full and precise compensation—£66 million is trivial in Treasury terms—and that that compensation will be delivered as rapidly as is humanly possible, ideally within the 2008-09 tax year.

Let us hear what the response will be when we get to the pre-Budget report, but the guarantee has to be copper-bottomed, otherwise we will be in the position highlighted by my right hon. Friend the Member for Birkenhead (Mr. Field). After a successful party conference that has boosted our morale and narrowed the gap with the Conservative party, and after we have gone from minus 18 to plus 3, or something like it, we will want to take advantage of the situation and soar into the stratosphere. We will not want to be encumbered by having the Chancellor come back to the Dispatch Box having hatched a deal for the 1.1 million people that is not adequate. I want to hear from the Minister words that will satisfy me; otherwise, I shall press new clause 20 to a Division.

In a manifestly sincere and decent speech, the hon. Member for North-West Leicestershire (David Taylor) said that one has to read to the end of the Treasury Committee report before finding out whodunnit. I can reveal to anybody who does not wish to read the entirety of the report that we all know who committed the crime on this occasion: the Prime Minister.

The writing of the history of the Brown premiership may be quite imminent. I am not given to betting—not least because it is a good way to lose money—but I see that the shortest odds on the Prime Minister’s time of departure are for the final quarter of this year and that the second shortest odds are for the third quarter of this year, the quarter that started today. The end may be fairly imminent. When the history of the Brown premiership comes to be written, people will offer many explanations on how he came to be such a disappointment in the post. They will say, for example, that he should have called the election in November and that that was a great missed opportunity. They will say that the lost tax discs were indicative of a wider malaise in the Government and that the visit to Iraq during the Conservative party conference made it hard for the Prime Minister to sustain the position that the era of spin had come to an end. All kinds of explanations will be offered on why he failed to live up to expectations, but the one that will last longest in the public mind—because it is not to do with Westminster political to-ing and fro-ing, but with the everyday lives of millions of people—will be the fiasco of the doubling of the 10p tax rate.

Let us look back, as the hon. Member for Runnymede and Weybridge (Mr. Hammond) did, to the announcement that the Prime Minister made in his final Budget speech as Chancellor of the Exchequer. As the Treasury Committee rightly says, there are huge dangers in seeking to pull rabbits from hats, but that is precisely what the then Chancellor sought to do. It was a manifestly political move—about his positioning, his inheritance and his wanting to be perceived as the rightful heir to Blair, a mantle that he was keen to claim from the right hon. Member for Witney (Mr. Cameron). Labour Back Benchers cheered with great fury. I have been a Member of Parliament for only three years, so I have not had the opportunity and privilege of witnessing many Budget speeches. The Budget speech that I am talking about was significant, because it was the final one of an extremely long-standing Chancellor who had served in office for a decade. We remember that the Labour Back Benches resembled a football stadium after a winning goal had been scored in the last minute. There was a sense of euphoria that their man had come up with such a brilliant scheme—that he had out-manoeuvred the Conservative party and made it inevitable that he would become the Labour leader and Prime Minister and that Labour would go on to win the next general election.

In the midst of this diatribe, does the hon. Gentleman have any thoughts on the new clauses before us?

I have plenty of thoughts, and I will unveil them all. I should compliment the right hon. Gentleman. The Conservative party is in a very optimistic mood about its prospects at the moment, and I see that one Conservative website is asking its readers to pick the dream first Conservative Cabinet. One has to be careful about schadenfreude—

Order. With great respect, the hon. Gentleman has spent enough time setting the scene; perhaps he can now deal with the new clause before the House.

I will reveal on some other occasion what the website said about the right hon. Member for Wokingham (Mr. Redwood), but it was extremely positive.

What I am saying is relevant, Mr. Deputy Speaker, because the motivation for doubling the 10p tax rate was entirely party political. It had nothing to do with alleviating poverty. Anyone could see with only a moment’s examination of the policy that it was going to be disadvantageous to millions of the poorest citizens in the country. With respect, if my analysis is somewhat party political and partisan, it is because that was the Chancellor’s precise motivation when he introduced the policy.

Labour Back Benchers cheering euphorically and waving their Order Papers was phase 1 of the Labour party response. Phase 2 was the rebellious phase, when the right hon. Member for Birkenhead (Mr. Field) marched the Government to the top of the hill, in effect taking on the role of Prime Minister and deciding Government tax policy from the Labour Back Benches. It was an extraordinary act of revenge on his long-term nemesis that was interesting to watch and enjoy from these Benches. That rebellion was extremely successful. We then had a mid-term mini-Budget in which what the Treasury Committee describes as

“probably the least bad option”

was brought forward by the Chancellor despite protestations that he would not do so.

Will the hon. Gentleman get to the point? What is the Liberal position?

I am getting to the point, but the Labour party could learn much from the process because it is instructive on the way in which a political party that has lost its moorings and is trying to position itself in a way that is advantageous to Opposition parties can end up—[Interruption.]

Order. We must not have sedentary interventions.

I am grateful, Mr. Deputy Speaker.

The second phase was the extremely successful rebellion that the right hon. Member for Birkenhead led. We must give him great credit for being the architect of much Government fiscal policy.

The third phase was the climbdown, with the right hon. Gentleman rightly apologising for some of the more personal elements of his comments about the Prime Minister. He also expressed his great gratitude because the problem had been resolved and put to bed, and the Chancellor of the Exchequer had found a solution. Of course, there was a problem with the solution: the Chancellor was spending £2.7 billion that he did not have—£2 billion of which was going to people who were already net beneficiaries of the tax changes. Nevertheless, there was a sense that peace had broken out on the Labour Back Benches and that the issue had been resolved.

I am sure that the hon. Gentleman told the Tories five minutes ago that one had to be careful about schadenfreude, yet he seems to have had it injected into his arteries. Will he please get on with the business of telling us how high the Liberals would raise the tax?

I am doing precisely that. However, as I have already said, the motivation for the measures was not helping poor people. Those who believe that our constituents on low to middle earnings welcomed the doubling of the tax rate delude themselves. The motivation was to ensure that Labour’s poll ratings went into the stratosphere. Judging by the effect of the policy, as well as other mistakes that the Prime Minister has made, on Labour’s poll ratings, it did not have its intended consequences. However, that does not mean that improving poll ratings was not the motivation.

The hon. Gentleman is not a betting man but we are. What odds would he give on his touching on one of the amendments before he finishes speaking?

They are extremely high. I tabled one new clause and one amendment. They are excellent and I recommend them to hon. Members, but they would not be necessary if the Prime Minister had not sought to wrong-foot the leader of the Conservative party and achieve the Thatcherite dream by pulling a rabbit out of a hat and doubling the 10p tax rate, which adversely affected the income of 5.3 million households. That is a reasonable point, although I can understand that Labour Members do not want to dwell on it.

rose—

I will give way again to the hon. Gentleman so that he can tell me which of the 5.3 million households have written to him, expressing gratitude for the previous Chancellor’s policy changes.

The hon. Gentleman has made it clear that he distrusts the motivation of the Prime Minister when he was Chancellor for reducing the basic rate of income tax to 20p. He must have said that a hundred times. Will he please now tell us how high the Liberals would have raised the basic rate and what they would do about everything else?

We had a long discussion in Committee on precisely that point and I can repeat it for those who were not present, although the hon. Gentleman was. Our party policy is for a basic rate of 16p in the pound. We believe that people on low incomes are paying too high a proportion of their income in taxation. We do not agree with the Conservative party policy position—that the Conservatives will match whatever level of tax the Labour Government set. That is not right or responsible, so we are in favour of lower marginal rates of tax for people on low and middle incomes. I will revert to some of the other proposals shortly.

Let me complete the phases of the Labour rebellion. We began with the joyous response, then we had phase 1 and we moved to the third phase, which was the climbdown. Now we are in the fourth phase, which is rebellion rising up again. That must be a source of great dismay to the Financial Secretary and the Prime Minister, because I suspect that they thought that the issue had been quietly put to one side. Eighty per cent. of those who were losers—roughly speaking, about four out of five of the losers from the doubling of the 10p rate—had been bought off.

What is more, millions and millions of people who were net beneficiaries had been given even more money, although they will all have to repay it eventually. Indeed, we will all have to repay it eventually, because borrowing is, after all, only deferred taxation. In the short term, however, people have more money in their pockets. I assume that the calculation that the Chancellor and the Prime Minister made was that if they could buy off 80 per cent. of the losers, the remaining 20 per cent. would fall by the wayside and not many people would notice. By definition, they were the poorest 1.1 million people, and in many cases probably do not have the loudest voices or the best opportunities to make their grievances known. That was the political calculation.

Of course, I acknowledge—others have made this point, including the hon. Member for North-West Leicestershire—that there is always a difficulty on these occasions over whether to go for the simple, easy-to-understand, less well focused and therefore possibly more expensive option or the complex but more targeted option. What the hon. Gentleman has proposed, aligned with what the Government propose, means that they are jointly going for the option that is both expensive and complex. That is probably quite a messy solution, although if they cover all their bases—that would be the result of the hon. Gentleman’s amendment—they can ensure that everybody is fully compensated. The obvious question is why we got ourselves into this mess in the first place, and that is what I have been trying to help the House understand in the past 10 minutes.

The odds on the hon. Gentleman reaching his amendment before he sits down are changing as the hours go by. One useful thing that our constituents would like to know is whether, given that the Government have increased allowances, he would advocate clawing that back next year or making it part of the tax threshold.

That is precisely what I am waiting with bated breath to hear the Financial Secretary announce—[Interruption.] I do not always agree with the Conservative spokesman, but the woes and ills of the Labour party are not my No. 1 priority, either. To be honest, one would think that there were enough people in the Labour party wondering where it all went wrong without the need for anybody else to supplement that process. My concern is with the 5.3 million people in this country whom the then Chancellor and now Prime Minister sought, as a deliberate act, to make poorer, even though they were the poorest people in the country. He did that so that he could claim that he was a better heir to Blair than the leader of the Conservative party, make a connection with middle English, despite the fact that he is not English himself, and be an exciting and reforming Prime Minister who could win a fourth term for Labour and reach the promised land of a 20p basic rate, which Margaret Thatcher never achieved.

rose—

That was the motivation, so Labour Members can talk about the politics and I will talk about the 5.3 million, which I will do after I have taken this intervention.

I may have had too long a slot earlier, but is the hon. Gentleman familiar with the internet slang term ROFL, which stands for “rolling on the floor laughing”? That is what those watching this who take an interest in politics must have been doing when he said that he was not really interested in the woes of the Labour party, because he has spent 18 minutes trying to stir the pot in a party political way.

It was not me who started it; it was the Prime Minister, with such an appallingly ill-judged electioneering Budget. Anyone who thought that his judgment was sound—[Interruption.] I give credit to the right hon. Member for Birkenhead, who was one of the, I think, eight Labour MPs who did not sign the Prime Minister’s nomination papers—

Five.

Only five—well there we go.

The right hon. Gentleman’s judgment has been immaculate throughout. He realised not only that 5.3 million people would lose out as a result of this process, but that the architect of the policy was not fit to be leader of the Labour party or the country. However, I cannot see anyone else who made such sound judgments.

rose—

I am having difficulty getting to the nub of my argument, so perhaps the hon. Gentleman will allow me to make a little more progress—[Interruption.] I have been very generous and taken many interventions from Labour MPs who are suffering from a collective guilt complex.

As a result of this deliberate political calculation, 5.3 million people lost out. The Government’s response was initially one of denial, and the Prime Minister told the Treasury Select Committee that no one would lose out. However, there now appears to be an acceptance, including by the Prime Minister, that more than 5 million people will lose out as a result of the changes that he announced. There was then a long and protracted process while the Government tried to decide what to do and the right hon. Member for Birkenhead held a gun to their head. Then the announcement was made that the Government were going to borrow £2.7 billion, £2 billion of which would be given to people who were net gainers in any case. And we are now in a position of having 1.1 million people who are still losers.

What can we learn from that process? I have tabled a new clause and an amendment. The new clause seeks to ensure that, when changes are made to the levels of income tax, a proper assessment is made of the impact of the changes. One of the biggest lessons from this hopeless process must be that sleight of hand—the rabbits being pulled out of a hat—will be consigned to history, and that there will be greater transparency in the setting of taxation. Members of the Treasury Select Committee and Members who wish to participate in debates in the Chamber should be able to have the information clearly and concisely set out on who will be the winners and who will be the losers. We should not have to rely on organisations such as the Institute for Fiscal Studies. It is an excellent organisation, but there is no reason why it should have the job of telling Members of Parliament the implications of Government policy for people on low and middle incomes.

Amendment No. 6 would require the Chancellor to report within six months on the impact of the 10p compensation mechanism on people earning less than £13,000 a year. Labour Back Benchers have expressed support for the principle behind the amendment, which is to ensure that this issue does not disappear into the long grass of politics. We do not want a situation in which everyone vents their fury and expresses their reservations here, after which the Government push their measures through using their natural majority and everyone forgets about the 1.1 million people who are still losers as a result of this change. The Liberal Democrats are keen to guard against that, and I would urge Members on both sides of the House to support amendment No. 6. The hon. Member for North-West Leicestershire estimated that between 2,500 and 3,000 people in a typical constituency remained losers, and the amendment would ensure that their interests would not be forgotten when the political debate rolled on to new territory.

The hon. Gentleman claims not to have been making a load of partisan points. I shall take his claim at face value; hon. Members can make up their own minds. He has finally got round to talking about his amendment and about new clause 13, both of which deal with transparency—an attractive proposition—and with generating reports and information, which is potentially attractive. He claims to be very concerned about the position of the 1.1 million people. Will he therefore tell us why he did not put his name to new clause 20?

I shall deal with both those issues. The hon. Gentleman suggested that I was seeking to be unduly party political and partisan. I was not. I was seeking to explain the Prime Minister’s motivation for introducing this policy. His motivation was unduly party political and partisan, and it is very difficult for me to explain that without appearing to touch on the same ground myself. It remains crucial to understanding this fiasco that one also understands what motivated the then Chancellor to introduce the policy in the first place. I can tell all those Members for whom the scales have not yet fallen from their eyes that it was not a concern for the poorest people in this country. If that had been his motivation, he would have rejected the policy instantly. It was done because he wanted to position himself in a way that was politically advantageous over the Conservative party in particular, and to a lesser extent, over other Opposition parties. That was the motivation and that is what has led to the woeful state of affairs within the governing party at the moment.

The Liberal Democrats have made it abundantly clear—after all, we have not suffered from a lack of debate on this subject and the Finance Bill, which has been discussed for months—that our priority for taxation is to reduce the burden on people on low and low-to-middle incomes who, we feel, are paying too much. Why has this become such a salient political issue at this time? It is because food prices, council tax bills and petrol prices are rising and the sort of people who might not have felt the pinch quite so badly when the then Chancellor announced this policy—the economy was then still growing at a reasonable rate—are now feeling that pinch very acutely indeed. That is why, when the history of the Brown premiership comes to be written, this issue will be seen to symbolise the entire failure of this Prime Minister and this Government.

rose—

I fear that it will be the final chapter in a rather sorry story for the Labour party.

I would like to make it clear to the House that I have never in my life waved my Order Paper—and certainly not on Budget day 2007. To me, the abolition of the 10p rate would have been acceptable only had it been replaced with a zero tax band for the same amount of income, and I commented to that effect on the day.

The majority of the British people have an innate sense of fairness. Whether they vote Labour or not, they see the Labour party as the party of fairness and they look to a Labour Government to implement their policies, including fair policies on taxation. People were so outraged when they learned that some of the poorest people were going to lose out as a result of the abolition of the 10p tax rate because it offended that innate sense of fairness. That sentiment applied not just to the people who were to be worse off, but was shared by many of their friends and neighbours and others who knew about their situation. That is why I supported the amendments proposed by my right hon. Friend the Member for Birkenhead (Mr. Field) in 2007 and why I wrote to the Government expressing my concerns.

My amendments Nos. 102 to 106 would enable someone who had lost out from the abolition of the 10p rate to opt to be taxed at that previous rate. I have to admit that I did not think up that idea myself; it was based on ideas submitted in a letter to the Financial Times on 8 May by Mr. John Curran. At that time, I felt that it was worth while to put that option to the Chancellor for consideration. It was certainly not intended as a permanent solution, but as a stop-gap that would have precisely targeted all the losers, so it would have been much more cost-effective than the Government’s eventual announcement. I have to say that I wrote to the Chancellor on 9 May; obviously, my letter had not reached him by 13 May, when he announced that the Government’s proposed solution was to raise the tax threshold. Despite that alteration, we found that 20 per cent. of the losers were still waiting to be compensated, so I decided to table my amendments and to support the new clauses proposed by my hon. Friend the Member for North-West Leicestershire (David Taylor) to flag up the fact that it was unfinished business.

We cannot continue with the situation in which 1.1 million families are still losing out from the measure, so I, too, seek cast-iron assurances that the Government will fix that. I wrote again to the Chancellor, and last night received a letter from my right hon. Friend the Financial Secretary. I accept her explanation that it would be difficult for people to identify whether they would gain from my proposals if their terms were combined with the Government’s raising of the tax threshold. I will not, therefore, press my amendments, but it is right to debate the matter and for Labour Members who feel as I do to express their concerns and to look to the Government to provide solutions.

At the end of his speech, my hon. Friend the Member for North-West Leicestershire had an exchange with my hon. Friend the Member for Luton, North (Kelvin Hopkins) on the need to overhaul the tax system to make it fairer. I believe that far too many people on low incomes pay tax, and I find it unacceptable that people on less than half average earnings pay income tax. If we want a fairer tax system, we must raise substantially the threshold at which people start paying tax. I accept that that would have ramifications higher up the income scale, so a smooth clawback from high earners, in as simple a way as possible, would be necessary.

Like my hon. Friend the Member for Luton, North, I would look to a Labour Government to implement a fair tax system, which takes as many people as possible out of tax altogether, and which is progressive up the income scale. That would require at least one further rate of income tax—as long as rounded figures such as 20, 30 or 40 per cent. were maintained—and I would also advocate a 50p rate for those earning more than, say, £100,000 a year. In that way, we could respond to the express view of many people in society that a Labour Government should implement fair taxation.

I urge the Government to think again, and more promptly than their timetable suggests. I do so because many of our constituents are worried sick about the state of their family budgets. Food prices are rising rapidly, and the combination of tax increases and price increases is putting enormous pressure on family energy budgets, especially to meet the fuel bills for motor cars, which many people need to get to work or to the shops, especially in rural areas. At this juncture, the last thing that such people need is extra pressure on their respective budgets from the kind of tax increase that we are discussing. The Government would be well advised to think again about their timetable, and to consider whether they can go further to respond to this very serious and good debate—with perhaps one exception from the Liberal Democrat Benches—and to make people feel a bit easier about their future and their family budgets.

My hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) has asked the two crucial questions. The first question is: what will be done next year? Is the package for one year only? Surely when people are worried about whether their income will stretch, they need some earlier indication of what might happen in the following year. The second question is more urgent and important today: what will be offered to the 1.1 million people, who, as the Government admit, along with their critics, are losing out from the mishandled package of tax changes? Can there be some statement to reassure them? I was disappointed that the Minister did not choose to inform the debate more at the beginning. Paradoxically, that has required her to listen to rather more critical comments—and I suspect there may be further such comments if other Members catch your eye, Mr. Deputy Speaker—before beginning to allay some of the fears that have been expressed. When I offered her an opportunity to reaffirm the promise that I thought the Prime Minister had made to the right hon. Member for Birkenhead (Mr. Field) that all the losers would be compensated, it was with regret that I heard that she could not do so. There seemed to be some backsliding.

The right hon. Gentleman has spoken of proposals to find a way out of the problem that have been made by Members across the House. He has mentioned some of the interesting and innovative ideas that have emerged from those on the Labour Back Benches, and the contributions from his own Front-Bench spokesman. Have I misunderstood something, or have the Liberal Democrats—notwithstanding the extraordinary 20-minute diatribe that we heard earlier—not tabled any amendments with any proposals that have anything to do with helping out of their difficulties any of the people about whom they keep claiming to be so concerned?

The hon. Gentleman has made an effective partisan point in his own way. That is also my understanding of the position. However, this is a serious debate, and I do not think we expected the Liberal Democrats to come up with a means of solving the problem for our constituents. We heard a long diversionary diatribe that might have been appropriate in a grand Second Reading debate or as part of heated exchanges, but now, on Report, we are trying to find a working solution, and there are solutions on offer.

We naturally look to the Minister for leadership, because she has access to the figures and because she and her colleagues were the architects of the circumstances that caused this particular problem. I urge her again to recognise just how much people are hurting out there. Anyone who has been involved in recent political campaigns anywhere in the country will know that the dominant issue on the doorsteps is people’s fear of going to the supermarket because the price of food has gone up again, their fear of filling up the car because the price of petrol has gone up again, and their fear of receiving energy bills because the price of energy is going up again. Their wages, for good reasons, are not going up by enough to compensate for that. We all know that there will have to be a real squeeze on people, but it perplexes us that the squeeze is to be more intense on those on the lowest incomes because of this tax proposal. Let me say again to the Minister that we need some kind of offset to tackle that particular twist of the knife.

As every Member in the House knows, I am a passionate tax-cutter: I always want lower taxes. However, I am keen for the disproportionate benefit of that tax reduction to be felt lower down the income scale, particularly at a time when there is a real fear of the family bills because of the sudden surge of price increases, and a worry that there may be job losses and worse to come as the credit crunch and the squeeze intensify.

I recently looked at our history. Between the 1920s Labour Government and the 1980s Conservative Government there was a rise of 73 per cent. in the number of people living in poverty. That was partly as a result of changes in tax policy at that time, and partly as a result of the decision to break the link between earnings and pensions. Therefore, I must admit that I feel some scepticism when I hear Conservatives talking of their concern about poverty.