It is interesting that the hon. Gentleman has managed to conflate tax and national insurance; perhaps he has given away what the Government’s thinking really is.
I am a member of the Public Accounts Committee which has been looking closely at the sometimes interesting tax arrangements of some individuals. We recently went on a study visit and discussed some of the international issues to do with how tax is dealt with. The UK’s is a complicated system and we are not alone in that. This means that, in the corporate world, corporate lawyers can run rings around HMRC and that highly paid lawyers can find ways for some high-worth individuals to work in a more tax-efficient way, to put it politely, and actively to avoid tax—sometimes worse. To a degree, New Zealand has simplified its tax system, although it is difficult to know from a distance how successful that is for people.
If the increase in allowance were genuinely linked to a simplification of the system, I would be much more supportive of it, but it has the feeling of being rather piecemeal, a bit joined together. It is like a dodgy second-hand car—the front bit is welded to the back bit. The coalition feels a bit like that; sometimes I am not entirely sure whether the Deputy Prime Minister or the Prime Minister is at the front or back at any particular time. There is a danger that we are seeing the increase in the personal allowance as a sticking plaster for one element of the coalition, while the cut in the 50p tax rate, which, as my hon. Friend the Member for Ashfield (Gloria De Piero) pointed out, was opposed by the Liberal Democrat half of the coalition—she quoted the former Energy Secretary—is a sop to the other side. We almost have two unjoined-up bits of the system.The hon. Member for Amber Valley (Nigel Mills) talked about tax simplification. If that is the mission, then let
us see the overall plan for it, but all we hear about is the increase in personal allowances. I do not sense that there is a big idea, and that is a real worry.
Let me turn to the 50p tax rate cut. Some 300,000 taxpayers will gain £10,000 a year as a result of that policy. These are individuals who earn more than £150,000 a year. The Treasury says that it should do this because £2.9 billion will supposedly come back from the people who are currently avoiding tax. I am not sure that that stacks up. Government Members try to suggest that these earners are all wealth creators, but we need to look a bit closer to home in the public sector. Perhaps the Government of whom I was a part, and the party that I represent, should have been a bit sharper in this regard. Public sector salaries have increased exponentially over the past decade. With the best will in the world, and much as I admire many of the people in my own constituency, and those I have met over the years, who work in the public sector because they genuinely believe in public service, they are not wealth creators, and I do not think they would consider themselves to be so. They may be safeguarding the health of my constituents or enabling the council to deliver excellent services; there are myriad ways that they can help, but wealth creation is not one of them.
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The notion that this measure has the benefit of encouraging wealth creators to stay in this country and create wealth is false. It may be true of a few, but for someone who is very wealthy it will not make the biggest difference. In fact, corporation tax will probably have a bigger effect on why people choose to invest. That is why there was a battle royal in the Republic of Ireland about keeping its corporation tax down to the lowest level in Europe to make sure that businesses were attracted to Ireland and wanted to stay there when it was going through very difficult economic times. If we are to have a grand plan for simplification, this does not seem to be part of it.
We should look at what the Office for Budget Responsibility and the Institute for Fiscal Studies have said about the supposed £2.9 billion that the Treasury expects to get back from people who are currently avoiding tax. The OBR said:
“The results of this evaluation are highly uncertain.”
The IFS said:
“If the future of the 50p rate is to be determined on the basis of evidence about its impact then Budget 2012 will be too soon to form a robust judgement.”
We lack robust judgments in this debate. This policy has become a shibboleth for one half of the coalition, while the higher rate of personal allowance that takes people out of tax is very important to the other half, and the two halves do not properly join up. Many of my constituents are among the poorest in the country, and when everything is taken into account, they will not gain from either measure because the increased rate of personal allowance does nothing to improve the public services that many of them are now losing out on as cuts begin to bite.
As my hon. Friend the Member for Brent North (Barry Gardiner) said, the big question about this tax take is how much revenue will be brought in from so-called missed tax avoidance in future years given that people will front-load their tax benefits in the early years. Overall, there is an inherent unfairness throughout
the Budget decisions and announcements that the Chancellor made, and I hope that this measure will bite the dust. It is as much about the signal that it sends as the reality of it. For me, that is very important, because my constituents, many of whom are working hard and just trying to hold body and soul together, do not see the fairness in this and do not see why the very richest should pay much less tax as a result. Indeed, these people are supposedly saving £10,000 in a single year, and that is as much as many of my constituents earn in a year.