I am grateful to the hon. Gentleman for that intervention. The thing about corporation tax is that a lot of corporations can be taxed almost anywhere in the world. That is why I think the Government are absolutely right to bring down the rate of corporation tax. It will help businesses to be headquartered in the United Kingdom, which is good for the UK in terms of employment and, indeed, tax revenues, by which I mean not just corporation tax revenues, but the other tax revenues paid by companies, namely business rates and employer national insurance contributions, as well as the taxes paid by their employees. We get a larger, more successful economy if we are relatively generous to corporates.
Northern Ireland Members have spoken of the particular circumstances there and the competition Northern Ireland faces from the Republic of Ireland. That is a very good case of tax competition between neighbours and it can be seen very bluntly in Northern Ireland because of the land border. We see less of it on the mainland of the United Kingdom because we do not cross borders quite so easily and we do not necessarily focus on it as much as we should. I think that the Government are absolutely right on corporation tax and that they should continue down that line.
The Government have also been right on the raising of thresholds and I hope they will continue with it. It makes sense, as my hon. Friend the Member for Redcar (Ian Swales) has said, because it is not logical for people on the minimum wage to be paying taxes. There is no point in taxing people who are low earners merely to pay them benefits with their own money. Although it was a Lib Dem policy in the last election and they deserve credit for that, it was suggested earlier by Lord Saatchi and Peter Warburton in a booklet they produced for the Centre for Policy Studies. The Conservative antecedents of the policy are pretty good and solid. It is a Tory policy in origin and it ought to continue.
The aim of the Government in the long run should be that people on the minimum wage should pay neither tax nor national insurance. In that way, the amount of benefits that needs to be paid to them will be very significantly reduced, as will the administrative burden. Roughly speaking, tax collection costs 1% of the amount collected, and benefit payments cost about 2% of the benefits paid out, so if we tax people to pay them benefits, the
overall cost will probably be about 1.5% of the total amount paid and received. The policy is very good and welcome.
Another policy that must be welcomed is the change to pensions. Questions about pension funds came up when my right hon. Friend Chief Secretary to the Treasury spoke. What the Government are doing is very simple: they are allowing people to keep their own money. That is not very popular among Labour Members, who seem to have the view that it is the Government’s money and should be distributed as they, rather than individuals, wish. Conservative Members and, indeed, Liberal Democrats who still have some residual liberal attachment believe that the money belongs to the individual taxpayer.
The policy has a very clear advantage for the tax authorities, because it clarifies the idea that pension saving is nothing but a tax avoidance boondoggle. It is about taxing people once, rather than twice. People are taxed when they withdraw the money from their pension fund, with a 25% exemption, rather than taxed when they put it in. It is worth bearing in mind that if that was at any point reversed, the withdrawal would be taxed as a capital gain rather than as income, and the rates that applied might be very different from those that currently apply to withdrawals from pension funds. Any Government who intend at any point—whether at the higher or the lower rate—to withdraw the benefits of saving through a pension fund should consider the ultimate pay-out, and how the policy is a fair means of taxing people and ensuring that they are not taxed more than once.
As my hon. Friend the Member for Dover (Charlie Elphicke) said, this was a “steady as she goes” Budget. It is very impressive. The Government have not gone for cheap gimmicks, as parties sometimes do before elections; they have gone for continuing the work, which they started in 2010, of getting the country back on track. They are doing so in a way that benefits the least well-off in society the most. It is absolutely striking that the real incomes of every decile other than the highest-paid decile will rise by more than prices this year, as they did last year.
That Government achievement is helping where help is most needed: it is helping business to allow it to invest; doing more to help exporters; helping to rebalance the economy for the long term; and—gloriously, splendidly and rejoicingly—it is doing something to ensure that people have their own money. What a fine Conservative principle that is. We believe that the individuals and their families who build up society have the greatest wisdom about how they spend their money, not the tax authorities that dish it out. What is being done with pensions is the clearest statement of that. Yes, if people buy Lamborghinis, Bentleys or Porsches, they will spend it unwisely—