Finance Bill

I can confirm that the take-up of tax credits among the lowest-income families is well above 90 per cent. I do not know the basis for the figure quoted by the hon. Gentleman, but the take-up is very high among those who need the greatest support. It is certainly much higher than that achieved under any previous system of family income support. Overall, the fiscally neutral Budget represents a £2.5 billion reduction in personal tax—that is, tax plus tax credits. The director of the IFS said:"““To reform the system in a useful way within tight financial constraints and with only modest gains and losses should be a cause for congratulation.””" It is important that the House recognise the significance of the achievements secured by the Budget package. This Budget builds on the progress made in earlier Budgets. There has been some discussion, rightly and fairly, of the position of pensioners. This year, the Government are spending in real terms about £11.5 billion more on pensioners than if we had left the system as it was in 1997, and nearly half that extra spending—more than £5 billion—is going to the least well-off third of pensioners. On average, they are £2,300 a year or £44 a week better off. Other groups in the taxpayer population referred to in the debate have benefited from other changes. We need to make a full assessment of the effects on people of changes introduced over a period rather than insisting on the basis of one year’s tax changes that there should be transitional protection. The Budget package forms the next stage in a programme to offer more support for work, for families and for pensioners. It includes eight separate reforms and the House will have the opportunity to debate each as they are put into legislation over the next two years. When the package is fully implemented, 6 million families with children will be better off and the gain to work will rise by £50 a year for many, up to £350 a year for some, helping to work make pay. The package reduces and simplifies personal taxation within a fiscally neutral Budget, protecting and boosting the incomes of vulnerable groups, with the number of losers minimised. I am not saying that there are none, but the number has effectively been minimised. The new clause would require transitional relief measures so that any adverse effects of personal tax measures are phased in over a period. That would not be the right thing to do for two reasons. The first is complexity—I know that my right hon. Friend the Member for Birkenhead is sensitive about that point. Income tax is paid by more than 30 million people —I think my right hon. Friend said 31 million. Transitional, and thus temporary, changes would add significant complexity to a system that is central to Government finances and to the maintenance of strong public services. The impact of the proposal would depend on the form taken by the transitional measures. My right hon. Friend and I had a brief conversation about one model, which is, if I understood it rightly, that taxpayers could choose whether they were taxed on the basis of the new system or the old. I think he realised that would be an extremely complex system to administer and that it would impose a large burden on employers as well as on Revenue and Customs. In debating the new clause, I am in some difficulty, because I am not sure what kind of transitional measures we are talking about. The only ones I can think of, which my right hon. Friend and I briefly discussed, would be impractical. Indeed, it would be impossible to implement such a dual system in time for next year.