Finance Bill

I should tell the House that I believe that new clause 6, tabled by the hon. Member for Runnymede and Weybridge, is technically flawed. [Hon. Members: ““Why?””] I can tell hon. Members why. Subsection (1)(b) states that the basic rate limit is set out in section 10(2) of the Income Tax Act 2007, but in fact it is in section 10(5). Also, the new clause does not recognise that with tax calculated annually and national insurance weekly, it would be rare for the two to be exactly aligned. Requiring a report every time they were not aligned is unnecessary. I hope that the hon. Gentleman will accept that. Turning to the substance of the debate, we have focused on what needs to be done to address the problem described by my right hon. and hon. Friends. Amendments Nos. 102 to 109 envisage two parallel tax systems. One would have three rates of tax—10 per cent., 22 per cent. and 40 per cent.—and the other would have two rates of tax—20 per cent. and 40 per cent. What I am saying formed the substance of the letter that I sent to my hon. Friend, but it is of value to explain why the amendments would not work, although we have considered them. Individuals could choose to be taxed under one or the other system at any time during the tax year. They could change their mind at any time over an unspecified period. We have estimated that the amendments would cost about £1.8 billion. I am afraid that the proposal would prove to be unworkable for individuals, for employers and for HMRC. Two parallel tax systems would require employers and HMRC to set up a new system over and above the one currently in place. That in itself is doable, and if it were the right thing to do, it might be necessary to do it, but, most importantly, I am not convinced that individuals who have lost out from the changes would find such a tax system beneficial. Two different systems would be confusing and impossible to understand for some taxpayers and hon. Members will acknowledge that those in the lowest income groups would find it particularly difficult to judge which system would benefit them. HMRC would simply not be in a position to give advice on such decisions. I very much appreciate the manner in which my hon. Friend the Member for North-West Leicestershire spoke to new clause 20. The one thing about which I agreed with the hon. Member for Taunton was his description of my hon. Friend's speech. My hon. Friend spoke with humour but passionately about what is clearly a serious issue not just for him for many of my right hon. and hon. Friends. New clause 20 is superficially attractive. We have had an opportunity to talk through some of the detail. My right hon. Friend the Chancellor made it clear in his evidence to the Treasury Committee that we had looked at what could be done through tapering, but we had to reject it for this year. For instance, I am advised that the new clause would affect 7.1 million taxpayers. I want to explain why that is the case. It would require a further 5.6 million people, most on low incomes, to complete a self-assessment tax return. There are 7.1 million people with incomes between £6,400 and £13,600 who would benefit from the extra personal allowance proposed by my hon. Friend the Member for North-West Leicestershire. The average gain for those on lower incomes would be around £60, with an overall cost of some £450 million, because the number of people who would benefit goes so much wider. That is the advice that I am given.