It is a pleasure to be back at the Dispatch Box. Had amendment 4 been selected for debate, we could have engaged in further discussion about the mansion tax and the 10p income tax rate. However, I think that some of the broader issues that I shall raise in relation to clause 3 are relevant to that subject.
Clause 3 sets the 2013-14 basic rate limit for income tax at £32,010. In doing so, it overrides the indexed amount, which would otherwise have been set at £35,300 as announced in the 2012 autumn statement. The explanatory notes on the clause state that it is
“part of a package of measures”.
I shall say something further about the implications of that package of measures as we go on. Effectively, the rise in the personal allowance from £8,105 to £9,440 for this year and the rise to £10,000 from 2014, however welcome they are and regardless of the difficulties raised concerning those who will not necessarily benefit, will in part be clawed back by the measures implemented in this clause and a further reduction in the basic rate limit next year to £31,865.
We have heard a lot of warm words from the Government about the package. The Chancellor called the rise in the personal allowance an
“historic achievement for this Government and for hard-working families across the country.”—[Official Report, 20 March 2013; Vol. 560, c. 944.]
However, as we heard in the previous debate, there is not that much celebration going on at the moment among most ordinary hard-working families across the country who are seeing their incomes squeezed. There is concern that the announcement and the clause are just smoke and mirrors.
I do not want to repeat the points we made in the earlier debate, but extensive mention has been made of the fact that the Opposition will welcome any steps that will help families and hard-working people through these tough economic times. However, we do not believe that these measures go nearly far enough to make up for what many basic rate taxpayers have already lost thanks to the tax and benefit changes made by this Government. Those measures have indisputably taken money out of the pockets of people who need it.
It is important that we consider the changes in the round rather than focusing on individual measures. That is why we, through a fairly mild-mannered amendment, are calling on the Government to produce a report that would comprehensively assess the impact of changes to taxation on the living standards of basic rate taxpayers. As we all know, times are incredibly tough for families up and down the country, for pensioners and for hard-working people who are paying taxes.
Basic rate taxpayers, who work hard and try to do the right thing, are the ones who are hurting. That has been backed up by various external organisations and commentators, including Citizens Advice, which said about the rise in the personal allowance for basic rate taxpayers:
“This is obviously helpful to all basic rate taxpayers. A single person with earnings of £30,000 a year will for example, gain £5.12 a week in April and will have gained the full £11.37 from the rise in the personal allowance…However”—
and this is the important point—
“this does not mean that families on low or even middle earnings will see an actual gain of this much: any rise in net earnings leads to a reduction in housing benefit and council tax benefit.”
We feel that the assessment and report are important because, in reality, 2.4 million families on low incomes will pay on average £138 more in council tax in the year 2013-14 as a result of cuts to council tax benefit, according to the Joseph Rowntree Foundation; 660,000 people will lose an average of £728 a year or £14 a week as a result of the “bedroom tax”, according to figures from the IFS; and child benefit will be frozen for a third year, while tax credits and other working age benefits will increase by just 1%, causing problems for many
families. Those are real-terms cuts that will affect 9.7 million households, of which 7.3 million, or 75%, are working households, according to the IFS.
If we take into account all of the tax and benefit changes introduced since 2010, including the personal allowance package of which the Government are so proud, analysis of figures published by the independent IFS shows that families will be £891 worse off on average in the new financial year. If the Government do not want to listen to independent figures, how about looking at their own figures? According to the distributional analysis issued by the Treasury after the Budget, the cumulative impact in cash terms for the bottom 10% of households from tax, tax credit and benefit measures in 2013-14 would result in a £200 reduction in incomes for the poorest group in society. What the Government are giving with one hand, they are taking away, and more, with the other. Perhaps the most shameful and the most concerning of all are the Government’s own figures revealing that the changes to support, including in-work support for basic rate taxpayers, will push a further 200,000 children into poverty. That is the real package that we should be concerned about.
The Government have an opportunity here to take that on board, carry out the assessment and provide the report. That would be important for both parts of the coalition. Some people have chosen to characterise the changes that the Government have made as marking the return of the nasty party. Perhaps we would not be entirely surprised at the steps that the Conservatives have taken, but many supporters of the other part of the coalition, the Liberal Democrats, who voted in these measures, will be surprised, and I hope Liberal Democrat Members will consider supporting us to ensure—I see heads shaking so I can only assume they are supporting the Conservative cuts and the measures that the Conservative part of the coalition is taking. I am disappointed that they would not even support the production of the report that the amendment calls for.
If the Government are confident of their actions, if they have nothing to hide, and if members of the coalition, including the Liberal Democrats, honestly believe that all the changes they are making are for the best and that Labour has got it wrong—as they consistently try to portray in the face of evidence and despite the opinion of independent commentators—and if they honestly believe that the changes will help basic rate taxpayers, will make work pay and will help boost the economy, then why do they not agree to commission a report, which would look straightforwardly at how the changes will impact on the living standards of basic rate taxpayers? With regard to the impact on those brought into the higher rate of tax, I hope the Minister will be able to clarify the number of people affected.
We in the Opposition do not believe that the measures in the package proposed by the Government go far enough. We have outlined other elements that could be included to help those who are suffering as a result of the failed economic policies. As I said in an earlier debate, we do not accept the Government’s mantra that we are all in it together—not while cuts to tax credits, in-work support, council tax and housing benefit, maternity pay, sick pay and a range of other benefits are impacting on people who are hard at work. Those changes are being made in the very same month as 267,000 people earning over £150,000 will benefit from a cut in the top
rate of tax, including 13,000 people earning over £1 million, who will each receive an average tax cut of £100,000. Again, I am using the Government’s own figures to make those comparisons.
People throughout the country are saying that that simply is not fair and it is not good enough to get the economy working and growth moving again. People believe it is not fair that while some of the wealthiest in our society are receiving £100,000 back from the Government, those at the other end of the scale, those least able to do so, have been asked to shoulder a bigger burden.
I am conscious of the time. Other hon. Members want to speak and we want to hear the Minister’s response. I ask the Minister and those on the Government Benches to recognise the amendment as a straightforward request for a report to be provided. If the Government are confident about what they are doing and if they have nothing to hide or to fear and they want to produce such a report, we of course will work with them on that. Sadly, I have my doubts whether that offer will be accepted but I am always open to being surprised by the Minister, and I look forward to hearing that, for once, he will accept our mild-mannered, straightforward amendment and commit to producing the report.