UK Parliament / Open data

Finance Bill

Proceeding contribution from David Leslie Taylor (Labour) in the House of Commons on Tuesday, 1 July 2008. It occurred during Debate on bills on Finance Bill.
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.
Type
Proceeding contribution
Reference
478 c752-3 
Session
2007-08
Chamber / Committee
House of Commons chamber
Legislation
Finance Bill 2007-08
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