Finance Bill

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. The fly in the ointment, of course, was the Prime Minister's now notorious inability to make a decision, and the obviously completely irrelevant drop in his opinion poll rating at the beginning of last October—he would give his eye teeth for such a rating now. There we have it: a bungled and deceitful plan foiled by its author's weakness and indecision. There is a case for fiscal loosening—tax reductions—when the economy is slowing dramatically. A prudent Government who had put something by during the good years would have made that case in the Budget speech in March this year. But our Government did not put anything by. They did not fix the roof while the sun was shining. Unlike most of our competitors, who put their public finances in order—some of them paid off the entirety of their net public debt—the UK enters the downturn ill- prepared as a result of what the OECD called ““excessively loose fiscal policy”” during the good years, and even more exposed to financial instability than the US, according to Alan Greenspan. Therefore, the Chancellor did not announce a fiscal giveaway in the Budget in March because he had nothing left to give away. In fact, he said in his Budget speech that the best way to help families is not through a further rise in personal tax allowances. Of course, that was before; now he claims that he meant to say that the best way to help families is through a further rise in personal tax allowances. As the temperature started to increase on the Labour Back Benches, the Chancellor pleaded that he had no money, and said that he could not rewrite the Budget. As the temperature reached boiling point when the Bill was before a Committee of the whole House, however, his resolve snapped once again, and a perfect 180° U-turn was executed by the Treasury's now rather accomplished U-turns team—veterans of the non-dom tax, the entrepreneurs relief, the foreign profits tax, and now the banking reforms. The Budget that could not be reopened was reopened; the money that the Chancellor did not have was found; and the barbarians at the gate—I am sorry to refer to the right hon. Member for Birkenhead (Mr. Field) in those terms—were bought off. Or were they? The emergency Budget on 13 May plucked another £2.7 billion of borrowing out of the air, and at a stroke reduced the number of losers from the 10p tax debacle from 5.3 million families to just 1.1 million families. But two questions remain to be answered. The first is the one that the Financial Secretary identified from the Treasury Committee's report: what about the other 1.1 million families? On the day of the great climbdown, when the right hon. Member for Birkenhead went to see the Prime Minister, the words being used were ““compensation in full backdated for everyone””. To date, we have still not heard how the remaining 1.1 million losers will be compensated. Secondly, we have not heard from the Government what will happen next year. Will the personal allowances stay at the level of new clause 11, and be indexed in accordance with existing law? Will the additional winter fuel allowance be repeated in future years? Speculation is rife. The Institute for Fiscal Studies calculates that, in the absence of action to extend the effect of new clause 11 into 2009-10 and 2010-11, by 2010—which, as hon. Members will have noted, could be a general election year—some 18 million families would be worse off than they are in 2008-09. However, 13 million families who were not losers from the Budget 2007 reforms have none the less gained from the increases in the personal allowance. Do the Government plan to claw back from them in future years, perhaps by adopting proposals along the lines of those of the hon. Member for North-West Leicestershire (David Taylor) in new clause 10, or will they just continue to borrow an additional £2.7 billion a year to fund the tax giveaway and the £600 million-odd required to extend the additional winter fuel payments?