PARLIAMENTARY DEBATE
Finance (No. 3) Bill - 19 November 2018 (Commons/Commons Chamber)

[1st Allocated Day]
Considered in Committee

[Sir Lindsay Hoyle in the Chair]

Secondly, the minimum wage that is in place still discriminates on the basis of age. It is not fair that those under 25 are paid less than those over 25, yet the UK Government are backing this age discrimination. I do not believe that an over 25-year-old can live on the minimum wage as it is set, and neither does the Living Wage Foundation. I also do not believe that a 16-year-old who might reasonably have the same outgoings as somebody over 25 can live on £4.35 an hour. It is also depressing to note that 16 and 17-year-olds have had an increase of only 3.6% in their minimum wage while the rise for those aged over 25 is 4.9%. I do not understand how the UK Government can justify that, and I think they should remove the age discrimination in relation to the minimum wage so that everybody is paid a fair wage and the minimum wage is enough to live on, instead of being at a level that people cannot live on.

The £50,000 higher rate tax threshold is also being delivered a year early. Opposition Members often criticise the new threshold, saying it is a tax cut for wealthier people and so on, but it will be taking many thousands of people whom one would not think should be paying the higher rate out of paying 40% income tax. For example, deputy headmasters and headteachers often earn more than the £50,000 threshold. It is wrong that so many hard-working public and private sector workers are dragged into the higher rate of tax. Furthermore, that has a damaging effect on the overall productivity of the economy, because someone who could earn extra by doing extra overtime, taking on a second job, or doing consultancy or freelance work is less likely to do so if they think the tax authorities would take half the money they would earn by doing so. This measure is therefore eminently sensible, to prevent the most productive in our economy from being penalised in this way and to allow them to continue to earn. We have seen fiscal drag in this country over the past 17 years, since the end of the first Blair Government’s sticking to the Major Government’s financial strategy. Since then, the fiscal drag has meant that more and more people who should not have been paying the 40% rate of tax have been dragged into it. I am pleased that has been acknowledged by this Government with this measure, and I am happy to support it this evening.
Labour Members have also talked about reducing the advanced rate threshold to £80,000, which is a fool’s errand. We know from history that, in general, when we penalise at the top end, our tax take comes down. Putting dogma aside, we know there is a sweet spot in the taxation system, where we should try to maximise our revenues while supporting productivity and ensuring there are sufficient incentives in the tax system. The placing of the original advanced rate was a political move in itself; for some 98% of the time that Gordon Brown was Chancellor or Prime Minister, he kept the rate at 40% and did not increase it, because he saw the reality of the situation, which is that the more we allow people to keep of their own money and the more they can keep in their pocket, the better it is for the economy more widely and the greater the tax take. This was political manoeuvring in advance of the 2010 election in order for my party to fall into a bear trap by suggesting we would not decrease the advanced rate of tax.
I should make another point about reducing the advanced rate to £80,000. The amount of money that that would raise would be negligible, if not actually negative, and the number of spending commitments tied to that proposal are disproportionate to any sort of potential income that could be raised, even in the best-case scenario. So the tax allowances as they stand in respect of the basic rate and the advanced rate strike the right balance for our economy in the future.

For that reason, I fully support the measures in clause 5, which provide an opportunity to take yet more people out of income tax, building on the work done by the coalition Government. To return to a point made earlier by my hon. Friend the Member for Solihull (Julian Knight), it is very easy to create fiscal drag by having people pay higher taxes. Reducing those taxes reduces the drag and increases the amount of money in the economy. More people spend more money, which helps businesses to employ more people and creates a virtuous cycle from which we all benefit.

The Budget reported on the remarkable achievements of this Government and the British people in cleaning up the aftermath of the recession, with eight straight years of economic growth, over 3.3 million more people in work, regular wages growing at their fastest pace in almost a decade, an economy back on its feet again and austerity coming to an end. It is thanks to the hard work of the British people and this Government’s careful management of the public finances that the Chancellor could set out a series of measures in the Budget to help families and businesses right across Britain. The clauses in this group legislate for some of those measures by cutting taxes, making it easier for first-time buyers to purchase a home and cheaper to switch to greener transport, and making the tax system for businesses and charities simpler and fairer.
At the heart of this Government’s strategy on living standards is the principle that hard-working people should keep more of their money and that the best way to help families is to cut taxes, not raise them. Our record speaks for itself. When we came into office, the personal allowance was £6,475 and the higher rate threshold was £43,875. Last year, the Chancellor increased the two thresholds, and now this Government have gone all the way to £12,500 and £50,000 respectively, meeting our manifesto commitment. Clause 5 of the Bill delivers on that promise one year early, meaning that a typical basic rate taxpayer will pay £130 less in income tax in 2019-20 than this year, and meeting our manifesto commitment at the earliest affordable opportunity.
These changes mean that compared with 2015, we have cut taxes for 32 million people, over 1.7 million people will pay no income tax at all and nearly 1 million fewer people will pay the higher rate of income tax. As well as raising the thresholds a year early, clause 5 sets out how we will maintain our low-tax policy for the rest of this Parliament. We will keep the personal allowance and higher rate threshold at the same levels in 2020-21, meaning a tax cut in that year as well, with 32.3 million individuals paying less tax in 2020-21 compared with 2015-16.
Once the personal allowance reaches £12,500 next year, current legislation means that it will be linked to increases in the national minimum wage. That was intended to ensure that someone working 30 hours a week on the national minimum wage would not pay income tax, but in fact, increasing the personal allowance to £12,500 means that someone on the national minimum wage will already pay no income tax next year and will pay no income tax in every year of the forecast period. Clause 5 restores the link with indexation by the consumer prices index, meaning that the value of these allowances is not eroded by price increases over time and the value of the personal allowance continues to be higher than if we maintained the national minimum wage link.
Amendment 6 attempts to prevent that change. Making the personal allowance equal to the relevant national minimum wage for 2019-20 would mean that the personal allowance was actually lower than £12,500 in every year of the forecast period. I know that the SNP like to raise taxes—indeed, they have done so by exercising their newly devolved tax powers in Scotland—but I have no idea why they would wish to increase the tax burden in that way. To be fair, I am sure that that was not the intention behind the amendment, so I urge the Committee to resist it.
New clauses 1 and 19 would require the Government to publish a distributional analysis of the Opposition’s income tax policy and of a £250 increase to the personal allowance. That is unnecessary. This Government are more transparent than any other, publishing a detailed distributional analysis at Budget 2018. We do not need further analysis to know that the Opposition’s proposals would be an inefficient, economically distortive way to try to raise revenue by raising taxes for over 1.5 million people.
The impact of the Opposition’s income tax policy is immediately obvious to anyone with even a rudimentary grasp of economics. Soaring tax rates and lower thresholds would raise taxes on millions of people, harming wealth creation and making the UK a less competitive country. The Labour party’s draconian plans would drive away investment and erode our ability to raise revenue to fund our vital public services. Their plans would also destroy jobs, as every Labour Government in history have done—[Interruption.] I know that the hon. Member for Bootle will remind me of Ramsay MacDonald in 1924, but it was a minority Labour Government, and rather a long time ago.
Further analysis of increasing the personal allowance by £250 is also unnecessary. The Government could increase the personal allowance to £12,500 a year earlier than planned only because of our careful management of the public finances. Raising the personal allowance by a further £250 would cost an estimated £1.5 billion, in addition to the £2.8 billion that we are already spending in 2019-20 on lowering the burden of taxation on more than 32 million people. We do not need further analysis of a policy that is unaffordable in the context of our balanced fiscal approach. I therefore hope that Members will not press the new clauses to a vote.
New clauses 2 and 18 would require the Government to provide analysis of the impact of clause 5 on a range of different protected characteristics and health impacts. As I have stated, the Government have been completely transparent. We published a detailed distributional analysis at Budget 2018, which shows that the poorest households have gained the most as a percentage of net income since this Chancellor and Prime Minister took office. The Government carefully consider the impact of their decisions on those sharing protected characteristics, in line with our legal obligations and our strong commitment to promoting fairness.
As well as cutting income tax, the Bill takes further steps to help with the cost of living, making it easier to get on the property ladder. The last Finance Act permanently abolished stamp duty land tax for many first-time buyers. From its introduction until June 2018, the relief has been claimed on 121,500 property transactions, with an average saving of £2,300 per transaction. The changes made by clause 41 will allow those paying SDLT in stages, such as through shared ownership schemes, to claim first-time buyers’ relief. Previously, only those who elected to pay their SDLT on the whole market value of the property could do so.
The tax system should back hard-working people to switch to all-electric and plug-in hybrid cars, paving the way for an economy fit for the future. Clause 8 delivers on that. Clause 9 will ensure that police officers, firefighters and ambulance crews are not unintentionally subject to a tax charge on the private use of their emergency vehicles.
New clause 8 would require HMRC to publish a report into the geographical effects of clause 9, but clause 9 will be applied in the same way across the United Kingdom, so there is no need for that.
I want to leave a minute for the hon. Member for Aberdeen North to speak, so I will conclude. The clauses that we have debated today deliver on this Government’s commitment to cut red tape, to deliver effective tax relief and to cut taxes for over 32 million hard-working people—a commitment to cut taxes that stands in stark contrast to the reckless hikes proposed by the Labour party. Their plans are laid bare by their proposed amendments to the Bill, which place an ocean of true blue water between our drive to get tax down and theirs to let it rip. Of course, Labour will say, as they have in this debate, that only the wealthy will pay and that the ordinary taxpayer will be left alone, but their plans will see 1.5 million people clobbered, including headteachers, consultants in our health service and the great creators of enterprise and wealth from whom we all benefit.
We know the age-old truth, that Labour will not stop there. Their recklessness would consume far more than they profess. Just like their predecessors, they will not stop with the so-called privileged few. In time, they will widen the net, broaden the base and drag more and more into punitive taxation to feed the habit of the wanton and the insatiable. Labour’s true message to the millions of hard-working people up and down our United Kingdom is that in the end, they will come not just for the better off; they will come for you. We will continue to stand up for hard-working families up and down our country, with plans that work and an economy that delivers. I commend these clauses to the Committee.

Clause 5 ordered to stand part of the Bill.
More than three hours having elapsed since the commencement of proceedings, the proceedings were interrupted (Order, 12 November).
The Chair put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83D).
Clauses 6, 8 to 10 and 38 ordered to stand part of the Bill.
Schedule 15 agreed to.
Clauses 39 to 42 ordered to stand part of the Bill.
Brought up.
Question put, That the clause be added to the Bill.
Brought up.
Question put, That the clause be added to the Bill.
Brought up.
Question put, That the clause be added to the Bill.
Question proposed, That the clause stand part of the Bill.

Amendment 20 asks that no regulations be made under this power unless the UK has left the European Union without a negotiated withdrawal agreement. As is the job of any responsible Government, we are preparing for all possible EU exit outcomes, which extends to the unlikely event of no deal. As I have already said, that is not the Government’s preferred outcome. The power is tightly drafted only to provide scope for the sort of minor, technical changes I have set out in my letter to Mr Deputy Speaker. At the current time, we need the power to make changes in the event of no deal, but providing stability for tax legislation and for the taxpayer is of paramount importance into the future, regardless of our EU exit outcome. I want to ensure we can deliver that in any scenario, even if I have focused more on the unlikely event of no deal; this is what the power will provide for. However, no matter when we use the power, our intention for its use would remain the same and would not be broader in any eventuality. I hope this reassures hon. Members of the Government’s intentions in this respect, so there is no need for amendment 20.
New clause 11 calls for a report detailing the consultation process for the legislation discussed in this session. As my right hon. Friend the Financial Secretary said earlier this evening, the information asked for is in the public domain, and I encourage Members to examine it. For the legislation relevant to our exit from the European Union, it has either not been possible or would be unnecessary to publish these things in draft. Clause 89 contains a closely drafted power that would not have benefited from consultation and will not change the taxpayer experience—indeed, it will do quite the opposite, in that it seeks to ensure continuity.
Clauses 68 to 78 introduce the legislation for a carbon emissions tax and need to be introduced in this Bill to be ready for March 2019. The Government have already committed to consult on the detail of this tax during 2019. Clause 90 lays the ground for preparatory expenditure. Again, it would not benefit from consultation. However, we will continue engagement with stakeholders and the devolved Administrations on the most effective long-term approach to carbon pricing post Brexit. This is an important decision for the country, and I look forward to those discussions, including meeting colleagues from the Scottish Government in due course. I hope that these answers will satisfy the House and that colleagues will not proceed with their proposals.
These clauses take a number of essential steps to ensure that UK tax legislation is prepared for any EU exit outcome. We will continue to responsibly prepare for every eventuality to ensure stability both for the UK taxpayer and for businesses. These measures are pragmatic steps that any responsible Government would need to take. Importantly, these measures are essential provisions for ensuring the continued effect of the UK tax system and for maintaining stability. For all these reasons, I therefore hope that they will command respect from across the House and ask that they stand part of the Bill.

The second argument, which I would argue is more distasteful, is that Treasury forecasts cannot be relied upon—not because of their accuracy, which the hon. Gentleman just referred to, but because they have somehow been rigged. The Brexit champions, most of whom sit on the Government Benches, tell us that the Treasury is stuffed full of civil servants whom they describe as remainiacs, remoaners and God knows what else, and who they suggest doctor the figures to say what they want. I say to the civil servants here today and those listening that there is no shame in believing, as I do, that the best deal with the European Union is the one that we have now.
I want to say very clearly on the record that the routine denigration of our civil servants, in all Departments, and the questioning of their independence by the European Research Group is a complete and absolute disgrace. These are dedicated, faithful public servants doing their jobs, and they do not deserve to have their motives impugned.
I note that these champions of the Brexit cause take issue with the accuracy and independence of Treasury forecasts when they are on Brexit issues, but when it comes to the impact of austerity on the public finances or changes to benefits—the cack-handed introduction of universal credit, for example—they are never shy of quoting official forecasts that suit them.
Let us not forget that those who question the robustness and accuracy of forecasts do not exactly have a very good record of forecasting themselves. Let us not forget what the now ex-ex-Brexit Secretary, the right hon. Member for Haltemprice and Howden (Mr Davis), said. This guy said that we would get a free trade and customs agreement concluded before March 2019. The right hon. Member for Wokingham (John Redwood), who is often in debates such as this, told us:
And as we all know, the former Foreign Secretary famously went around the country in a big red bus proclaiming that Brexit would lead to £350 million a week extra going into the NHS.
Then, of course, there has been the ultimate forecast from these people over the past 48 hours. This ERG has been going around stamping its feet and telling us all that if it does not get the extreme form of Brexit that it wants, the poor Prime Minister will have these 48 letters going in calling for a vote of no confidence in her. As far as I am aware, she is still sitting in Downing Street right now. I do not know whether the ERG has hit the 48 letters it said there were going to be, but the bottom line is that these individuals, who impugn the motives of Treasury civil servants and call into question the accuracy of their forecasts, are in no position whatsoever to lecture any of us on the accuracy of forecasts given the huge, outlandish claims that they have made over the past few years.

The Prime Minister has acknowledged, as has the hon. Member for Streatham (Chuka Umunna), to whom I pay tribute for tabling the amendment, which I support, that there are three options facing our country. It means that we do not have to have a divisive debate about what direction we take. We can simply reflect the fact that there are three options and that they all have pros and cons. We need to have a measured debate, not a divisive one, but whether it is divisive will depend on all of us and how we conduct ourselves over the coming weeks and on whether we can accept that people have different views, respect those views and then engage with them constructively.
I have no doubt that the analysis the Treasury will produce, having conceded on this amendment, will be one of the ways by which we give ourselves and the country the chance to have an informed debate on the most important question to have faced this country in over half a century.

I am a bit on my high horse in relation to Government tax and spend, but this is incredibly important. Surely, one of the most important things that we do is to scrutinise the Government’s spending, and we are not able to do it adequately because the rules of this House bar us from doing so. We cannot scrutinise tax adequately in relation to this Bill because the Government have failed to introduce an amendment of the law resolution, so we cannot propose anything tangible or very tangible. Then the Government will stand up in the Public Bill Committee and say, “They are just asking for a review. We are going to say no because it is just a review.” We are asking for a review as we cannot move anything that has any actual effect because the Government are not introducing an amendment of the law resolution. This part of the Bill, particularly clause 90, really bugs me. I was really annoyed that there was a total lack of clarity from the Government—that the explanatory notes did not even say how much they intended to spend on this.
In relation to the minor and consequential amendments, I am very pleased that the Minister has put forward a list of the proposed changes that he intends to take place. In reality, however, even though he has put forward this list, he is not held to it. He is given more wide-ranging power than it actually appears from that list. Therefore, he could in future, because of the powers that are being given, introduce something that is not on the list. We will be looking to press amendment 7.

Amendment proposed: 7, page 67, line 1, leave out subsection (5) and insert—
Question put, That the amendment be made.
More than six hours having elapsed since the commencement of proceedings, the proceedings were interrupted (Programme Order, 12 November).
The Chair put forthwith the Question necessary for the disposal of the business to be concluded at that time (Standing Order No. 83D).
Clauses 89 and 90 ordered to stand part of the Bill.
The occupant of the Chair left the Chair (Programme Order, 12 November).
The Deputy Speaker resumed the Chair.
Progress reported; Committee to sit again tomorrow.