UK Parliament / Open data

Finance Bill

Proceeding contribution from Mark Hoban (Conservative) in the House of Commons on Tuesday, 7 July 2009. It occurred during Debate on bills on Finance Bill.
The hon. Gentleman makes an important point. Part of the challenge was for the Government to justify why they moved from the previous three-rate income tax system to the two-rate system, and simplification seemed a convenient explanation at the time. [Interruption.] The hon. Member for Taunton asks, "Who spotted this?" May I remind him not only that his party identified it, but that we did? In a press release on Budget day 2007, we said:""In his"—" the then Chancellor's—""stealthiest taxes yet, he has paid for his 2p cut in income tax by abolishing the 10p rate"." I therefore want to lay that myth to rest for the hon. Gentleman and save him having to repeat it again during his remarks. Let me remind the House of the losers from the 2007 Budget. There were some 2.2 million single, childless working people who did not get the working tax credit because they earned more than £12,500 a year but less than £18,000, or because they worked fewer than 30 hours a week or because they were too young. They lost on average £125 a year per family. There were 1.2 million two-earner, childless couples who might not have qualified for working tax credits, who failed to take it up or who lost out from the Budget's other changes. Their maximum loss was £464 a year. There were 7.7 million two-earner couples with children, and they lost twice through the income tax and national insurance charges but gained only once from the child tax credit and working tax credit reforms. There were people who did not work and lost out because of tax on their benefits. There were 4 million one-earner, childless couples, earning in a range of £17,000 to £18,500, who lost out because they were not compensated. There were, as the hon. Member for Stoke-on-Trent, Central (Mark Fisher) said, 300,000 women, aged between 60 and 64 years old, who did not get tax credits but were too young to be compensated by the rise in the pensioner tax allowance. Indeed, in the days after the 2007 Budget, the first letter that I received from a constituent complaining about the measure was written by a lady who fell into that category. She clearly had read well the small print of the Budget and identified that she was in the group that would lose out. The average loss per family is about £145. They can be characterised as families who are on low incomes but who fall outside the tax credits safety net; as early retirees; and as people on incapacity benefit. They were caught out by the complexity of a tax and benefit system that the Government created; they were people who lost out from the measure; and they were some of the most vulnerable in society. It was, to reverse a phrase so beloved of the Prime Minister, a tax rise for the many and not the few. Despite the warnings on Budget day, and despite the evidence that was given to the Treasury Committee at the time, it is fair to say that the issue was a slow-burner. The scale of the losses came into focus only as the implementation date got closer, and, understandably and rightly, people were angry that the Government had not been clear about the scale. That triggered a significant wave of anger across the country that was reflected in the views expressed on both sides of the House. That is why the Chancellor came to the House on 13 May, part of the way through the Crewe and Nantwich by-election, to announce measures that would offer compensation to some of those affected by the abolition of the 10p rate. In his statement, the Chancellor said that the changes""will mean that 22 million people on low and middle incomes will gain an additional £120 this year. It will mean that 4.2 million households will receive as much, or more than, they originally lost. The remaining 1.1 million households will see their loss at least halved. In other words, 80 per cent. of households are fully compensated, with the remaining 20 per cent. compensated by at least half."—[Official Report, 13 May 2008; Vol. 475, c. 1202.]"
Type
Proceeding contribution
Reference
495 c870-2 
Session
2008-09
Chamber / Committee
House of Commons chamber
Legislation
Finance Bill 2008-09
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