None the less, under this Chancellor and this Government, we will stick to the long-term economic plan and avoid populist giveaways that could damage the public finances.
I could spend some time on these clauses—they are a significant achievement for the Government and I am delighted we are making further progress on increasing the personal allowance—but I shall deal with amendment 1, tabled by the Opposition. It is the annual debate we have on these matters; it is familiar to me and, I suspect, to you, Sir Roger. It proposes that the Government publish a report reviewing the impact of setting the additional rate at 50% within three months of passing the Bill. In addition, it asks for an assessment of
“the impact of setting the additional rate for 2015-16 at 45 per cent and 50 per cent on the amount of income tax currently paid by someone with a taxable income of…£150,000…and…£1,000,000 per year.”
To be credible, such an analysis would need to take behavioural impacts into account, like the HMRC report on the additional rate published at Budget 2012. Simply looking at theoretical income tax liabilities when increasing taxes is not enough. For perhaps the first time in a long time in these debates, we might have made a bit of progress in trying to understand Labour’s position. The HMRC report concluded that the underlying yield from the introduction of the 50p rate was much lower than originally forecast owing to large behavioural effects.
It would be fair to say that when the 50p rate was introduced by the previous Government, they made allowances for behavioural effects. The question is whether it was sufficient.
When HMRC looked at this again, it was clear that the behavioural effect was greater than anticipated by the previous Government. Indeed, it is quite possible that it cost the Exchequer money. So let me take this opportunity to assure hon. Members once more that the Government already consider the impacts of any policy decisions taken, and they take the behavioural effects into account. The simple point is that the 50p rate was failing to raise the money anticipated.