That is a very good question, but the fact is that we do not even know whether that is the way in which people behave. As has already been pointed out, many of those who pay the top rates of tax are employees, and many have their roots here. Their children are at schools here, they are involved in their communities here, and they have their families—their grannies, their mummies, their uncles and so forth. The assumption that people will suddenly cut all those ties when the marginal rate of tax is raised is extremely tenuous. I have not so far seen any figures that suggest that that happens. I can understand that if the marginal rate were raised from 45% to 90%, there might well be some incentive for people to leave, but when it is raised by only a few percentage points, is there really an incentive for people to avoid taxation by becoming exiles, given all the disruption that that may cause?
Ministers frequently refer to tax take predictions based on economic models, but it should be borne in mind that such predictions cannot specify the exact impact of tax changes with rapier-like incision. Their other argument is that, if the theory and the models cannot provide an exact picture, we should look at what has happened to tax revenue in practice over the past few years, because the proof of the pudding is in the eating. No doubt the Minister will give figures showing an increase in tax revenue from this particular income group, in which case we must ask whether it is possible to separate the various elements that have led to that increase.
I believe that the Government made a rather cynical attempt to ensure that they would achieve the result that they wanted by announcing the tax reduction a year in advance, knowing that that would give people an opportunity to defer the tax that they pay, thus enabling the Government to point to an increase in tax revenue in the first year of the new rate. Of course, if people are given advance notification and a chance to delay their payments, we will see the predicted outcome. I suppose it would be best to see whether the trend continues over a longer period, because we do not have any figures yet.
We know that while the incomes of certain groups have been frozen, incomes have been much more fluid at the top end of the income scale than at the bottom end, where there has been a blanket 1% increase. Indeed, there have been wage decreases in some parts of the
private sector, especially at the lower end of the scale. How much of the increase is attributable to the fact not that there is more tax take from the same level of income, but that there is more tax take from increased incomes because there has been greater fluidity at that end of the income scale? Even after consideration, it cannot be said with absolute certainty that the reduction in the level of income tax has led to the increase in revenue.
4.45 pm
There are a lot of uncertainties, and it is for that reason that I make the following argument. The Minister could be correct when he says the public purse has benefited, but given the uncertainties as to whether that has been due to rising incomes, deferred tax payments or a range of other factors, against the political impact this has had and will continue to have as austerity measures have to be applied in the economy, serious consideration needs to be given to the proposal that the situation be reviewed.
In an intervention it was asked whether we would persist in going back to the 50% rate if the review showed that 48% is where we maximise. Given that there may well be a marginal difference, I think some of these decisions have to be made on what people believe, and the politics of the decision will dictate that as well. That is why I believe this is an important amendment.
One thing I have found in the context of Northern Ireland is that headline rates of taxation can have a very important psychological impact. In a previous occupation, I had many discussions with the Minister about a reduction in corporation tax in Northern Ireland. The problem we faced was that there was a 12.5% rate in the Irish Republic and we had a much higher rate in Northern Ireland. In fact, however, with all the concessions, firms in Northern Ireland probably paid less corporation tax than those in the Irish Republic. That was not the important thing, however. The important thing was that when businesses looked at corporation tax—