Income Tax Debate

The Exchequer Secretary to the Treasury (Priti Patel): We have had a lively debate this afternoon, and that is no great surprise, as it is only the third Treasury Opposition day debate this year. We have heard from the Opposition repeated claims that the decision to reduce the additional rate of income tax was the same as handing cheques to millionaires. Those claims show the Opposition’s true colours when it comes to tax, and how they would revert to their failed policies of spending more than this country can afford, with hard-working taxpayers continuing to pay back Labour’s debt.
 
The Opposition had 13 years to take action and ensure that those with the most to contribute in tax did so, yet it was their discredited and failed Government who introduced the 50p rate just 36 days before they were kicked out of office.
 
When it comes to fairness this Government will not take any lectures, because it was a Conservative Chancellor who took the decisive action to ensure that those with the most to contribute did so. It was measures announced by this Government throughout this Parliament that increased the contribution of the wealthiest by many times more than the cost of reducing the additional rate to 45p. It was this Government, led by a Conservative Chancellor of the Exchequer, who delivered lower taxes for more than 25 million hard-working people, taking low earners out of tax altogether.
 
It is worth reflecting on the number of low earners taken out of tax altogether. The hon. Member for Bethnal Green and Bow (Rushanara Ali) spoke about justice and fairness in the tax system. I remind the House that it is this Government who are supporting hard-working people. In her constituency alone, more than 52,000 people are now benefiting from the increases in personal allowances introduced by this Government. In Inverclyde 34,000 people, in Heywood and Middleton more than 41,000 people, and in Holborn and St Pancras more than 61,000 are benefiting from this Government’s policy and the increases in personal allowances. That is down to the fact that we trust the British people with their money, unlike the Labour party, which believes that it is right to take more of people’s money out of their pockets.
 
The report laid before the House alongside the Budget found that the 50p rate of income tax raised considerably less than the anticipated sum. A number of contributions have highlighted that simple fact today, and I pay tribute to my hon. Friend the Member for North West Leicestershire (Andrew Bridgen), my right hon. Friend the Member for Gordon (Sir Malcolm Bruce), my hon. Friend the Member for Wyre Forest (Mark Garnier), and, in particular, my hon. Friend the Member for Taunton Deane (Mr Browne) for his concise contribution on basic economics, showing that higher tax rates do not result in greater revenues, and, more important, damage the country’s long-term economic stability.
 
The 50p rate has been distortive and uncompetitive, and it pushes away the very wealth creators that this country needs to create jobs and economic growth. At a time when labour mobility is greater than it has ever been before, the Government recognise that the UK is competing for talented individuals and business investment. It is investment that creates jobs, economic security and a long-term economic future for Britain. A 50p rate of income tax does not help to do that. At a time when global economies are still struggling to compete, it is this Government who understand the value of ensuring that Britain is open for business.
 
The evidence speaks for itself. The 50p rate did not work. This Government reduced the rate to 45p because it was not rational to persist with a tax rate that was distortive and harmful to this country’s economy and did not raise any revenue. We have heard that the 50p rate left the UK with the highest statutory rate of income tax in the G20. In a world of increasing competition, it would be totally irresponsible for a Government of any colour to put this country at an economic disadvantage with a punitive rate of tax.
 
Hon. Members have heard throughout today’s debate that the top 1% of taxpayers pay more than 27% of income tax revenue, more than at any point under previous Governments. Maintaining an uncompetitive rate is counter-productive and will result in long-term economic failure. When it comes to long-term economic failure, we know that the Labour party has a specialism in that area. Clearly, tax competitiveness and a sustainable, prosperous economy do not matter to the Labour party, because if they did we would not be having this debate. As the HMRC report shows, we would not just be losing the additional tax revenues as a result of the higher rate, but would lose all the tax revenue of that group of taxpayers.
 
Britain is a country that is open for business. We want those with the most to offer and the most to contribute in tax working in the UK, creating wealth, jobs and growth, and, importantly, paying taxes. It is this Government who have shown that contrary to the myth generated by the Opposition, we have made the changes in every Budget to ensure that those with the broadest shoulders contribute more. We have increased capital gains and introduced the new rate of stamp duty on properties over £2 million, we are restricting the excessive use of certain tax reliefs, and, most significantly, we are clamping down on the minority of individuals who choose to avoid and evade tax.
 
The Labour party had 13 years to undertake such measures and it did not do so. We have made historic steps to support those on low and middle incomes. We have more people in employment and more young people and women in work. We have increased the personal allowance, frozen fuel duty, frozen council tax, and increased the national minimum wage.
 
Labour wishes to use an inefficient income tax rate to damage our economy, and to put our international competitiveness at risk by backing a failed tax. It is willing to drive wealth creators out of this country and to risk long-term damage to the economy. That is not what a responsible Government would do, and it is certainly not what we are doing. We have a long-term economic plan that is working. We are getting on with the job of putting the economy back on track, creating jobs and growth and securing Britain’s long-term economic future, which is why the motion should be thoroughly rejected.

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