Finance Bill

The right hon. Gentleman has not only tabled the new clause, but has managed to bring the weather on tap at the right time to provide a backdrop to the debate. Amendment 37 raises the personal allowance to £10,000. I understand the attraction of that. It would take more people out of taxation. We are not averse to that concept. Indeed, our proposals earlier this year to increase the age-related allowance for pensioners by £2,000 demonstrates an interest in this area, but I am concerned about the potential cost, which I am sure the hon. Member for Taunton (Mr. Browne) will discuss at length. It sounds a potentially expensive way of providing relief to taxpayers. The people who would benefit most from the hon. Gentleman's amendment are those who pay the highest rate of tax, not those who pay the lowest rate. People at the highest rate of tax, who pay 40 per cent. at present, will benefit significantly. If the Government introduce their planned 50 per cent. tax rate, those 50 per cent. taxpayers will receive the most benefit. I look forward to the hon. Gentleman's arguments in support of the amendment. New clause 1 is the most important clause that we will discuss on Report. The genesis of today's debate lies in the 2007 Budget, where the cut in the basic rate of tax from 22p to 20p was funded through the abolition of the 10p rate. It is worth remembering the words of the then Chancellor, which explain why it took so long for people to recognise the issue to which that gave rise. In the Budget speech he said:""Having put in place more focused ways of incentivising work and directly supporting children and pensioners at a cost of £3 billion a year, I can now return income tax to just two rates by removing the 10p band on non-savings income."—[Official Report, 21 March 2007; Vol. 458, c. 826.]" I suspect that when that was greeted with cheers from the Labour Benches, people assumed that, in effect, the zero per cent. rate would be extended up to the threshold for the 20p rate, rather than the tax being doubled from 10p to 20p. That is why many people were uncertain what the change meant in practice. In the Treasury Committee's inquiry on the 2007 Budget, the Treasury official responsible for this area of policy was pressed and said that from the Treasury's own statistics 5.3 million households would have lost out from the changes made in the 2007 Budget. However, the Prime Minister, when he was Chancellor, was quizzed by the Treasury Committee and denied that there would be any losers from the change.