Finance Bill

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.