Finance Bill

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 only have been acceptable 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 worthwhile 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) in order 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.