Finance (No. 3) Bill — House of Commons, 2018-11-12
Topic: Macroeconomics
Mian Faisal Rashid (Labour, Centre-left): I wish to focus on two main issues that have already been mentioned by quite a few Members. The centrepiece of the Budget and, in turn, the Bill is the Chancellor’s decision to bring forward the increases to the income-tax thresholds, which has been praised by many Members today. From April 2019, the income tax personal allowance will increase to £12,500 and the higher-rate threshold will increase to £50,000. These increases will come a year earlier than planned, and the thresholds will then be frozen for a year Since his announcement, the Chancellor has been basking in praise from Conservative Members for his generosity, when in reality it is a relatively meagre giveaway. In its post-Budget analysis, the Institute for Fiscal Studies highlighted the fact that had the Chancellor allowed the thresholds to increase in line with inflation, as they do by default, they would have reached £12,390 and £48,590 respectively by 2020. That clearly shows that the Chancellor’s income tax commitment is little more than a tokenistic attempt to sustain the myth that the Government are ending austerity. He would have us believe that these policy changes are designed to benefit the low and middle-earners in this country, but once the empty rhetoric is stripped away, the reality is quite different Extensive post-Budget analysis from a variety of organisations all comes to the same clear conclusion: the raising of the income tax thresholds will disproportionately benefit the wealthiest individuals and families. Resolution Foundation analysis clearly shows that 84% of gains from the income tax cut will flow into the top half of the income distribution, and almost half will go to the top 10% of households alone. Although both basic-rate and higher-rate taxpayers will benefit from the increases in some way, the scale of the benefit is drastically different. According to the IFS, the typical basic-rate taxpayer will gain £21 per year in 2020-21, while in the same timeframe the typical higher-rate taxpayer will gain £156 per year. That sum is the only meagre offering in the Budget for those people who have borne the brunt of eight years of benefit cuts and pay freezes To make matters worse, for some the increase in the personal allowance, coupled with the Government’s inaction on pension tax relief, will mean that they will lose out on the tax relief on their pension contributions. Ahead of the Budget, campaigners including Age UK, Now: Pensions and two former Pensions Ministers, Steve Webb and Ros Altmann, wrote to the Chancellor to urge him to use the Budget and Finance Bill to take action to set straight an inconsistency in the tax rules. According to the Low Incomes Tax Reform Group, together the higher personal allowance and increased contribution rate will mean that the minimum pension contribution for someone earning £12,500 will now cost them £323.40—an increase of £64, or a week’s food shopping for a family or a tank of petrol for the family car. The inconsistency already affected more than 1 million people; with the Budget changes, it will now impact many more The Chancellor’s refusal to use the Budget to rectify the issues facing low earners who have fallen victim to a pension lottery is just one of many examples of inaction in the Budget. The Chancellor also failed to use the Budget to halt the roll-out of universal credit; to provide the long-term funding that is desperately needed for social care and mental health services; to end the funding crisis facing public services; and to address the funding gap facing local authorities. That is to name but a few Another main issue is the police cuts, with 21,000 fewer police officers. Just in Cheshire, where my constituency is, £60 million has been cut from the police, with a further £12 million to come. The police and crime commissioner and acting chief constable wrote to me a couple of weeks ago to say that it will be very difficult to sustain those cuts and provide the services. It is important that we provide security for our communities. If we do not, it will be difficult for people to come to this country and to invest, as well. It all depends not only on how we create economic activity but on how we provide a safe environment. That is absolutely key. I urge the Government to increase police funding Use of food banks is increasing. As the hon. Member for Aberdeen North (Kirsty Blackman) said so eloquently, just saying that austerity has ended does not mean that it has ended, unless the right action is taken and policies put in place. How can we say that austerity has ended when the use of food banks is on the rise, crime is rising, homelessness is rising, NHS waiting times are increasing and councils are struggling? We are talking about the basic services provided by councils—what can they do? Councils are going bankrupt. The Government need to look into that. Austerity has not ended Along with my Labour colleagues, I will continue to urge the Government to adopt a fair taxation system. This Finance Bill is nothing more than half measures and tax giveaways. It does nothing to address eight years of economic failure and it fails to include measures that would create a truly progressive tax system, address tax avoidance and close the tax gap. It is time for radical reform of our entire tax system. Only then can we truly transform our economy and ensure a fairer taxation system that shifts the emphasis on to those best able to afford it. Sadly, as it stands today under a Tory Government, we are left with a Finance Bill that will disproportionately affect those people who are already struggling to make ends meet.