I beg to move, That the Bill be now read a Second time.
As my right hon. Friend the Chancellor set out in the recent Budget, the British economy is fundamentally stronger than it was five years ago. The deficit has been halved as a percentage of GDP; for the first time since 2001-02 debt as a share of GDP is falling; the UK was the fastest growing economy in the G7 in 2014, and we are expected to repeat that in 2015, too. We have more individuals in work than ever before, and wages continue to rise above inflation.
Having come so far, we need to stick to our long-term plan for economic recovery. The first Finance Bill of this Parliament demonstrates this Government’s commitment to continuing the plan to build a productive, balanced and secure economy, which delivers for working people at every stage of their lives.
I shall happily take interventions this afternoon, but let me first set out to hon. Members the order in which I intend to discuss the measures in the Bill. I shall begin by talking about those measures that are intended to support working people through the tax system. Next, I shall set out how the Bill will help put the public finances in order by tackling tax avoidance, evasion, non-compliance and imbalances in the tax system. Finally, I shall talk about how the summer Finance Bill 2015 will take the first steps in implementing measures to improve the UK’s productivity.
I shall begin with those measures designed to help hard-working people keep more of the money they earn, a principle to which this Government are committed. We have a proud record on reducing tax for the lowest paid. As a result of action taken in the previous Parliament, 27.5 million individuals saw their typical income tax bill reduced by £825. This Finance Bill makes even further progress, by increasing the tax-free personal allowance to £11,000 in 2016-17 and to £11,200 in 2017-18. As a result of those changes, a typical basic rate taxpayer will be £80 better off in 2016-17 compared with in this tax year. Further, the higher rate threshold will also increase from £42,385 in 2015-16 to £43,000 in 2016-17—£300 more than the amount announced in the March Budget. That will take 130,000 individuals out of the higher rate of tax by 2016-17.
It is the firm belief of this Government that individuals working 30 hours a week on the national minimum wage should not pay income tax. That is why this Finance Bill will enshrine that link in law for future increases in the personal allowance. Once the personal allowance has reached £12,500, it will always be at least the equivalent of 30 hours a week on the national minimum wage. Until that point, my right hon. Friend the Chancellor will have a legal duty, when setting the personal allowance, to consider the financial impact on an individual working 30 hours on the national minimum wage. This Finance Bill also delivers another legislative
commitment to low levels of taxation. It introduces aspects of the five-year tax lock by ruling out increases in income tax and VAT for the duration of this Parliament.
Finally, this Government know that the wish to pass something on to one’s children is the most basic human aspiration. To give hard-working people the security of knowing that they can continue to provide for their families after they have gone, this Bill phases in a new £175,000 per person transferable allowance when a person’s home is passed on at death to their direct descendants. This means that by the end of this Parliament, the effective inheritance tax threshold for married couples and civil partners will be £1 million.
At the same time, to ensure that those with the broadest shoulders continue to bear the biggest burden, this new allowance will be gradually withdrawn for individuals with assets of more than £2 million. This reform will be paid for by cutting down on the £34 billion that the Government spent on pensions tax relief in 2013-14 —two thirds of which goes to higher and additional rate taxpayers. The benefits of pensions tax relief for top earners will be restricted by tapering away the annual allowance for those with a total income of over £150,000 from April 2016.
These are important measures, rewarding and supporting the efforts and aspirations of working Britain—and doing so in a fair and balanced way.