ALTERATION OF PERSONAL RELIEFS

HC Deb 09 July 1979 vol 970 cc139-88

8.45 p.m.

Mr. James Dempsey (Coatbridge and Airdrie)

I beg to move amendment No. 30, in page 4, line 16, leave out ' and 14 ' and insert 14 and 18 '.

The Temporary Chairman

With this we may take amendment No. 31, in page 4, line 32, at end add: ' (4) In section 18 (relief for blind persons)—

1. (a) for any reference to £180 there shall be substituted a reference to £300; and
2. (b) for any reference to £360 there shall be substituted a reference to £600.'.

Mr. Dempsey

These amendments do not require detailed explanation; they merely attempt to restore the purchasing power of the income tax allowances given to registered blind persons that existed when these allowances were introduced in 1962. That is a long time ago. I do not know of any other financial assistance to a particular section of our community that has remained at a standstill since that time. Even the death grant. about which I have had much to say, was updated in 1967.

I move the amendment to probe the Minister's mind, to see whether the Government intend to improve the allowances. They no longer represent their value at the time of introduction. There are many reasons why registered blind persons should have fair allowances. For example, because of their unfortunate disability they soil their clothes more than anyone else when eating at work. They soil shoe leather marching through pools of water during the course of their work. They spoil their clothes, and sometimes their trousers become sodden. Their clothes deteriorate much more rapidly as a result of lack of care due to their disability.

These have always been accepted reasons why special provisions should be made for these people. Indeed, it is well known that today, with the volume of traffic on the roads, blind persons require to be accompanied when crossing main thoroughfares. Can anyone imagine a blind person alone trying to get across Whitehall, Millbank or Trafalgar Square, or any of our busy roads in towns and cities? Blind persons must have someone with them. When travelling to and from their work, they find themselves in that situation. I have known of many cases in which, because of the infrequency of bus services, blind people require to hire taxis. Taxis are now a costly luxury. Nevertheless, it is the only way in which some of these folks can get to and from work.

They do not want to adopt the alternative of throwing in the sponge and living on social security—which would cost the Government very much more in cash than it would cost them if they gave blind people a modest increase on the rates fixed for the allowance in 1962. I am at a loss to understand why all Governments from that time to date have never considered the demands—indeed, the entitlement—of these unfortunately disabled persons. Perhaps it has been an oversight; nevertheless, nothing has been done.

We cannot beg the question by citing other disabled people. There are no disabled people in the same category as the blind, due simply to the fact that a blind person is either registered blind or is not so registered. One cannot say that such a person has a percentage of blindness, because he is either 100 per cent. blind or nothing at all. He is not very difficult to locate. It does not pose a great administrative problem to assess this matter because there is a register of blind persons in the United Kingdom.

What other countries do for these individuals puts us to shame. Figures are available showing what Australia, New Zealand, Sweden, the Netherlands, Canada, and other countries are doing for fully blind persons, who are 100 per cent.

disabled but are working day after day and week after week for their livelihoods.

I should like to think that Britain would be as considerate and as generous as these other nations, which do so much for these unfortunately disabled people. That is why I felt that these amendments would be worth placing before the Committee, so that we could have an indication of the Goverenment's intentions in this matter. One cannot simply leave this allowance, fixed in 1962, to stand at its present rate for an indefinite period. We are entitled to some idea of the Government's thinking on this problem.

I certainly would have believed that in this Budget, when the reduction in the wealthy taxpayer's rate of tax from 83p in the pound to 60p will mean the loss of over £600 million—if we were able to make that particular sacrifice—we could do something, although strictly limited, for these individuals who are determined to live independently of any State funds.

The most recent figures show between 11,000 and 12,000 registered blind people at work in this country. To update their allowance, fixed in 1962, would cost less than the crumbs that fall from the relief given in this Budget to wealthy taxpayers. I am not making a political point; I am making a financial point. I am arguing fiscally. The amount received by blind people if the allowances were updated would be peanuts compared to the amount received by other sections of society.

The sum involved is so modest that I am deeply surprised that we have to frame amendments to raise the matter on the Floor of the House of Commons, that we have to publicise it, and have to mention that there exists a category of disabled people completely segregated from all other disabled. I have the greatest sympathy for all disabled, but one can get about with a stick; one can even get about in a chair or with a three-wheeled tricycle if one has one's sight. One cannot get about if one is among the registered blind.

The sum of money involved would not shake the foundations of the British economy. It would not rock the exchange rate of the pound or bring about a spiralling inflation and mass unemployment. The amount is peanuts compared to the gross national product and the tax handouts given in the Budget. I hope that the Minister will give some indication of the extent to which he sympathises with these unfortunate people and that, as a demonstration of practical sympathy, he will consider increasing substantially the allowances fixed for registered blind people.

If the Minister cannot give any indication tonight, will he say whether he can give any encouragement on Report? This is a grave problem for handicapped people, although it might not seem much to hon. Members sitting here. If they want to experience the plight of the registered blind, they should close their eyes and try to make their way through the streets of London. They would appreciate how courageous are these people who are working day by day. They would surely agree that some tangible help should be shown to them as soon as possible.

The Financial Secretary to the Treasury (Mr. Nigel Lawson)

No one could fail to be moved by the speech of the hon. Member for Coatbridge and Airdrie (Mr. Dempsey) in moving the amendment, not merely for the way he carried out that task but because of his personal affliction. We on the Government Benches are conscious of the problems of the blind.

The hon. Gentleman based a large part of his case on the claim that the allowance had remained at its present level since 1962. That is not the case. The allowance has been increased since 1962. The present level was set in 1975, so it has not stood still for nearly as long as the hon. Gentleman believes.

9 p.m.

Of course we must have practical sympathy for the blind, but, as the hon. Gentleman said, there are many other categories of disabled persons. Although I must advise the Committee to resist the amendment, it is not on the ground of cost—the hon. Gentleman is right about that; it is simply because it is very difficult in tax legislation to define other categories of disabled. The blind can be defined, if we go along the tax route. That means that we can help the blind more and more, but not those in the other categories who do not have a similar allowance. That does not sound like sensible discrimination.

Therefore, successive Governments have felt that, on the whole, it is better to help the disabled through the social security system, where this sharp distinction does not need to be made. However, the help which is given, whether through social security or through taxation, to the disabled in general and to the blind in particular, has to be and is reviewed all the time.

I cannot, in all candour, invite the Committee to support the amendment. I hope that in the light of what I have said the hon. Member will see fit to ask leave to withdraw it.

Mr. Dalyell

I have great regard for my hon. Friend the Member for Coat-bridge and Airdrie (Mr. Dempsey), who represents a neighbouring constituency, and I sympathise with the case that he has made. I understand also the Government's point of view, but if the Financial Secretary says that there has to be a constant review, at least we are entitled to know why the allowance has not been indexed since 1975. A great deal has changed in those four years. Has he in mind any mechanism for constantly updating the allowance?

Mr. Lawson

As I said, the question is not merely how frequently the allowance should be reviewed. Certainly we are not proposing any form of indexation of the blind allowance or any of the minor allowances. We have argued in opposition and in government, as appropriate, for the indexation of major parts of the taxation system—personal allowances and perhaps other areas—but the question arises whether a review of help for the disabled is best done in the context of the social security system or that of the tax system. The view of successive Governments—including the present Opposition when in government—has been that this is best dealt with through the social security system.

Mr. Dempsey

I have listened carefully to the Minister's explanation. I remind him that even the Radcliffe Commission on the taxation of profits and income, which reported in 1954, demonstrated that the blind person was entirely distinct from all other disabled people. The Minister's own Government ultimately accepted that guidance in 1962. I associate myself with my hon. Friend the Member for West Lothian (Mr. Dalyell) and ask that something should be done to index the allowance.

However, having said that, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. John Cartwright (Woolwich, East)

I beg to move amendment No. 29, in page 4, line 24, at end insert— ' (c) after subsection (2) (wife's earned income relief) there shall be inserted: " (3) If the total income of the claimant includes any income earned by her as a working widow, the deduction to be allowed under this section shall be the same as in the case of a married woman ".'. The amendment aims to tackle the main grievance of working widows—that they pay more income tax than married women working alongside them at the same job for the same pay. The official Treasury explanation is logical—the widow's pension is a long-term benefit, it is taxable income and must be added to the widow's earnings for tax purposes. That means that the widow has a higher income than her married women colleagues and should therefore pay more tax. The widow's reaction is equally logical. She says that her husband paid contributions on an insurance basis throughout his working life to provide her with assistance if she became widowed, and because of that she is now penalised by the tax system.

The working widow also tends to regard her pension as an inadequate replacement for the financial support that she used to receive from her husband. She says that her married women colleagues at least have the benefit of their husbands' earnings and the full married tax allowance. On top of that, they receive additional help from the married women's earned income allowance. It is not surprising that this makes working widows feel that they are less favourably treated by our tax system than their married colleagues, who are in a better financial position.

Any hon. Member who canvassed during the recent election must have been impressed by the sense of anger, frustration and resentment produced by that situation. The difficulty is that so few people can begin to understand this reaction unless they have experienced the problems. I shall quote from a typical letter that I have received, which makes exactly that point. A lady stated in a letter: Unfortunately I have recently become a widow myself and now realise what a difficult situation one is in … I am a supervisor, so have a number of widows working for me, but I did not really understand the problems of taxes until I found myself in their position. That is the nub of the problem which arises from the Treasury view that widows are single people and must be taxed as such. This attitude does not seem to be shared by the Department of Health and Social Security. Any widow who decided to act as a genuinely single lady in her personal relationships would soon run the risk of losing her pension.

The idea that widows are single people has never seemed to be particularly logical. A widow acquires a pattern of life and a series of financial obligations which are largely beyond her control. They were undertaken when she was part of a husband and wife team, and they do not disappear magically when the husband is no longer there.

This point was put to me graphically in a letter from an active member of the National Association of Widows. She said: it still takes the same amount of fuel to cook my two potatoes or warm the room I sit in as it did a few long months ago and the mortgage payments are the same, the rates, the water charges. The list is endless. That is echoed in many letters which I and other hon. Members have received. Indeed, some widows say that their household expenses are often greater because many of the decorating, maintenance and other heavy jobs around the house have to be paid for on a professional basis, when previously they were undertaken by the husband.

Because of this problem, there is a pressure on widows to go out to work. From a personal view, it is probably better for a widow to take up an occupation than to stay at home and brood about the life that she has lost. From a national point of view it must be better for a widow to make a contribution to the economy than to stay at home and draw supplementary benefit. However, the impact of taxation makes many widows question whether it is worth taking a job.

One of my constituents, a widow in her late forties, went back to work to provide her family with a better standard of life than it could expect on social security. She enjoys the work, the companionship and the sense of achievement which her job gives to her. Unfortunately, her widowed mother's allowance and child benefit absorb most of her tax allowance, leaving her with little to set against her earnings. Is it any wonder that she questions whether it is worth taking on all the additional worries and pressures involved in full-time work, when taxation hits her so hard?

I have no doubt that the Financial Secretary will argue that the increases in personal allowances in the Budget go some way towards tackling such a problem. I accept that they will give some help, but all the time that the working widow is taxed as a single person she will be relatively worse off than a working married woman.

That is why the amendment seeks to give the working widow an additional tax allowance equivalent to a wife's earned income allowance. This does not involve the exemption of a widow's pension for tax purposes. It cannot, therefore, attract the usual Treasury objection that it will lead to claims for similar exemptions of long-term benefits from other groups—even though the Government are proposing just that course for war widows.

It may be argued that giving a working widow an extra tax allowance of this sort, which together with the single person's allowance will amount to £2,330 a year, will place her in a better position than a married man whose wife does not work and whose allowance is only £1,815. This is supposed to be an incentive Budget, one that rewards those who are willing to go out to work. I would, therefore, have thought that this proposal would commend itself to Members on the Tory Benches. In any case, it has become obvious that there is no ideal solution to the grievances of the working widow, or one which is totally free of criticism. If there had been one, some Government would have introduced it long ago.

The full year cost of this proposal was estimated by the Minister of State, in a recent parliamentary answer, to be about £75 million for widows under the age of 65. That strikes me as a very modest price to pay to end the burning sense of grievance and injustice that is clearly felt by a particularly deserving section of the population. This is a relief which contrasts very sharply with some of the others proposed in the Budget.

Coupled with a determination to keep tax thresholds well above the level of the basic widow's pension and to re-examine the stupidities of the overlapping benefits rule, this proposal would go a long way to establishing widowhood as an honourable status deserving of fair treatment. The amendment has been suggested by Cruse, the national organisation for widows and their children, and it is supported by the National Association of Widows. I commend it to the Committee and ask the Financial Secretary to give it sympathetic consideration.

Mr. Tony Durant (Reading, North)

I support the hon. Member for Woolwich, East (Mr. Cartwright), who moved the amendment so eloquently and made a great deal of the argument in favour of it. Widows are an important group. I sometimes think that that fact is not understood by the Treasury and that although it is an important group it does not represent a very large number of people. I thought it would be of interest to the Committee to give some of the figures.

The number of widows in Great Britain in 1973, listed in the abstract of statistics for 1974, was over 3 million. Of that number, approximately 2½ million were aged 65 and over. There were 366,000 widows aged between 60 and 64. Those two groups are in receipt of retirement pensions, and since the percentage of the population aged over 65 has increased in the intervening years, these figures may now be slightly higher. However, they will give some idea of the scope.

Widows in receipt of widows' allowance, widows' pension, widowed mothers' allowances, widows' pension age related and industrial injury benefit number 609,000. This was the figure given in 1976 in a parliamentary answer. In addition to those in receipt of war widows' pensions-88,000—those widows over 65 already receive the larger personal tax allowance provided that their income does not exceed £3,000—that is the vast majority of them. War widows, whose allowances are greater than those of widows, now have their pensions disregarded for income tax purposes. This is something proposed in the current Budget.

Widowed mothers, although losing their £130 single parent tax allowance, are now classified as married men for tax purposes. Rightly so, since their needs are so much greater, as the hon. Member for Woolwich, East reminded us. Therefore, of the estimate of 3 million widows, almost 80 per cent. have already been recognised as needing special provision. We are, therefore, discussing about 20 per cent. only of the total number of widows, and they are working widows. The first point that I want to make is that the age of working widows is steadily dropping. If we look at the statistics—men seem to be dying earlier—we see that there are many more younger widows around.

This is an important matter for the working widow. I have taken an interest in the question of widows' rights since coming to the House and there is no doubt, in my experience, that it is very important, psychologically, that a woman should be able to go out to work in order to re-establish her life. The tax system has created a disincentive to do that. If we look at the facts we find that it pays to stay at home if one is in a certain category of widowhood. This is a mistake.

I was a member of a number of delegations that went to see the previous Government, who favoured the blanket approach for benefits. That was their view and they were entitled to it. I urge the present Government to look at this more from the incentive angle, a point made by the hon. Member for Woolwich, East. There is a need to provide an incentive for the working widow to go out to work. It is disheartening to her to find a married woman working alongside her taking home more pay.

Whether a previous Government were wise to bring in the allowance which enabled a married woman to go out to work is a matter of history. I think that it was done during the war in order to encourage more women to go out to work. I am not sure whether that was a good thing at the time. We now find that another group wants the same treatment, and that is only right and just.

9.l5 p.m.

After the Budget, the National Association of Widows sent a letter to my right hon. and learned Friend the Chancellor, a paragraph of which states: I do not need to remind you of the long and so far fruitless campaign waged by the National Association of Widows for recognition of the special financial difficulties faced by widows. The inevitable and drastic drop in income is exacerbated by the present method of taxation, and results only in very real lack of incentive to work and become independent. Every widow I have ever met has wanted to be independent of the State as soon as possible. Widows wish to reestablish their lives. Therefore, we want a reassurance from the Government that they have this matter very much in mind and that at another Budget they will take account of the difficulties of widows about which no action has beeen taken on this occasion. Many widows have told me that they are deeply disappointed about that.

Mr. Dalyell

It may be within your recollection in a previous incarnation and a previous Parliament, Mr. Godman Irvine, that I took up many hours of your time with my strident views on the Scotland Bill, as it then was. During the general election campaign in West Lothian there was infinitely more complaint about the treatment of widows than about the views of the Labour candidate on the future constitutional arrangements of the United Kingdom.

With one possible exception this subject is the greatest source of grievance that we, as candidates, met on the doorstep. We should therefore take very seriously the amendment of my hon. Friend the Member for Woolwich, East (Mr. Cartwright). As a credential for doing so, I asked a question on 21 June asking the Chancellor what examination he is making of the taxation treatment of working widows. The reply from the Financial Secretary was: All widows who are liable to tax will benefit from the very substantial reductions in income tax which my right hon. Friend has proposed in his Budget; but we shall, of course, continue to keep the effects of the tax system on widows under careful review. I then asked the obvious question What does ' under careful review' mean to the Financial Secretary? The Financial Secretary was his usual forthcoming self. He said: It means under careful review."—[Official Report, 21 June 1979; Vol. 968, c. 1492.] I admit—I will give the Financial Secretary the benefit of every doubt, because I am a generous man—that that question was put immediately before the start of Prime Minister's questions. It was no doubt tactful of him, and it was certainly tactful of me, not to extend our exchange on that occasion because it was already 3.15 p.m.

This amendment gives the Financial Secretary a golden opportunity to expand on precisely what he meant by " under careful review ". Under Governments of both parties that phrase, as my hon. Friend the Member for Wolverhampton, North-East (Mrs. Short) will know from her experience of Select Committee reports, can be a polite Civil Service and ministerial paraphrase for doing nothing very much in the immediate or foreseeable future. If that is so here it would be much better for the Government to come clean and say that they intend to do nothing.

However, some of us think that if, in a parliamentary answer, a Minister says that a matter is under careful review wd are at least entitled to find out whether the undertaking is genuine or flannel. I therefore ask the Financial Secretary to say which it is.

There is among many widows not only the worry that they do not have the huband's wage or salary coming in; as my hon. Friend the Member for Woolwich, East said, they feel, rightly or wrongly, that their costs are that much greater for all the services which were provided by the deceased husband.

This is a major source of grievance, and I look forward to hearing what " under careful review " means, because I agree with my hon. Friend in all that he said.

Mr. Vivian Bendall (Ilford, North)

I support the amendment, and in so doing I have in mind not just the financial consideration, which is very important for widows, but the moral aspect of the matter. A person who is left a widow or widower has to try to make a new life in society. This can be extremely difficult for someone who loses husband or wife, perhaps early in life. Apart from the financial problems, making a new way in life is difficult enough, but many widows and widowers wish to do just that, and under the present tax system that desire is frustrated.

As one always should in considering the social problems of our time, one must consider the moral as well as the financial aspects, and for that reason I strongly support what has been said. I shall not repeat the arguments already presented so ably, but I ask the Treasury to look at the matter again, and certainly in time for next year's Budget. Not only during the last election campaign but over many years this has been a grievance raised on the doorstep. I have had it brought to me at my surgeries, and I am sure that many hon. Members have had the same experience. I repeat my plea to the Treasury to look at the matter again from the moral as well as the financial standpoint.

Mr. Cryer

First, I apologise to my hon. Friend the Member for Woolwich. East (Mr. Cartwright) for not being present when he so ably moved his amendment, as I am sure he did, but I knew about it and had discussed it with him. I am now joining in the debate because I entirely sympathise with his view. Perhaps I should add that some of my constituents have made representations based on a most lucid article which my hon. Friend wrote about the position of widows.

I put down amendment No. 35, which has not been selected, to give some sort of tax relief not only to widows but to widowers and single persons running a household. The amendment before us makes a step in the right direction for a particular group of people living by themselves who have the problem in common that, for example, they face the same heating costs as are faced by a married couple. One cannot cut the light in half in a room. One has to pay the full amount just as a married couple do. I am sure that my hon. Friend pointed these things out. It is a problem common to all persons living by themselves and running a household, and I earnestly hope that the Treasury will give the amendments sympathetic consideration.

Widows feel resentment at being, put on a basis different from that applying to married women. Of course, it makes a difference to the actual cash in their hands, but, having been deprived of someone whom they had hoped would be a lifelong companion they feel aggrieved to find married women better off, and this seems to rub salt into the wound of deprivation. There is, therefore, a strong element of fairness and justice in the amendment.

I have received a wide range of representations from organisations such as the Bradford branch of the National Association of Widows. During the last election campaign this whole matter was a frequent feature, especially at factory meetings. In the canteen, for example, widows expressed very strongly their feeling that they were badly dealt with. Indeed, on the occasions when I had a meal in a canteen, it was virtually a condition of my having a meal that the women working in the kitchen who were widows gave it to me after I had given a sympathetic response to what they had to say.

I already had a strong view on the matter, and I was able to point out that the tax position would improve anyhow because of the Rooker-Wise amendment. I assured them also, clearly and positively, following my frequent meetings with the Bradford branch of the National Association of Widows and representations made at my advice surgeries, that I would put the case as strongly as I could in the House of Commons, and that is what I am doing.

It should be borne in mind that a woman living by herself has now to face increased maintenance costs if she is an owner-occupier, as many widows are likely to be. Such widows are less likely to be able to carry out repairs themselves because of a lack of training or because their husbands did all the jobs around the house. These widows will now have to pay 15 per cent. VAT on maintenance work due to the Government's action.

A widow is more likely to have to pay maintenance charges, including 15 per cent. VAT, than a married couple. That is because the man can reduce costs by turning his hand to various jobs. That may reflect a lack of equality in our society in education opportunities and in developing dexterity in manual tasks around the house, but it is true that by and large widows face a more onerous position than other single persons. That is all the more so because of the Governments action on VAT.

I hope that the Treasury will try belatedly to recoup some of the ill feeling that has been caused by the swingeing increase in value added tax by giving sympathetic consideration to the amendment.

Mr. Rooker

It must be said that those who view our proceedings or read what we say in the Chamber are likely to be surprised and upset when they realise that in the first debate of this Parliament on the vexed issue of widows and widows' pensions, which raised enormous interest during the election, there are only about 30 hon. Members in the Chamber. I am not asking for hon. Members to enter the Chamber to make fiery speeches. On this issue I am not even asking Tory Members to vote against the Government—I think that that is too much to ask. However, more hon. Members must be got at by widows, so that attendance is improved when we debate widows' pensions, widows' allowances and the tax position of widows. The Finance Bill was a golden opportunity to have a large-scale debate.

Having participated in and attended previous debates, I understand the real problems of changing the tax status of widows. It is an issue that was raised with me during the election. The only comfort that I had to offer the widows in my constituency was that the indexation of personal allowances would help. I said that the indexation of the personal allowance for the heads of single-parent families would help in any event. However, at that time I was not contemplating a VAT rate of 15 per cent. That has to be taken into account.

I ask the Financial Secretary to give consideration to two matters. If he cannot give an answer now, he will be expected to answer this time next year. All our short-term benefits are nontaxable except the widows' allowance. That is the one short-term benefit that is of a fixed term—namely, 26 weeks. Therefore, it can be easily coralled by the Treasury into the tax system. If we continue the present system of exempting short-term benefits, we should give consideration to exempting the short-term benefit paid to widows.

It has been said that the nature of society is changing. The age at which people die is changing. I have spoken to many widows—not only in the election campaign—aged between 35 years and 40 years who never considered the problems of widows when they were married. They never realised that if they were widowed under the age of 40 years they would not receive a widows' pension.

That never crossed their minds. They are bitter about it.

9.30 p.m.

I do not advocate that we should pay a widow's pension to all widows. However, the Treasury is reviewing the situation. No doubt that review will be considered before the next Financial Bill. A change could be made. That is what positive action by the Treasury should mean. If the pros and cons of public expenditure are being weighed up, will the Government allow more public expenditure in this area and widen the age range for the top rate of widow's pension from 40 to 55? In other words, will the Government consider giving a pension to widows who receive no benefit under the present system?

The hon. Member for Reading, North (Mr. Durant) pointed out that we were discussing only 20 per cent. of widows. That is not strictly accurate when we consider the number of widows under the age of 40. We must not forget that sector of the population. I ask the Financial Secretary to the Treasury to give a commitment that those two points will be considered in the Treasury review.

Dr. Alan Glyn (Windsor and Maidenhead)

For once I agree with the hon. Member for Birmingham, Perry Barr (Mr. Rooker). At least the amendment brought to the attention of the Committee and the public the fact that widows are, of necessity, placed at a great disadvantage.

The first point of significance is the age of the widow. Many widows feel strongly about the absolute barrier of age. The second point is the fact that short-term benefit is taxable. I do not ask the Minister to bend his view in any way. I shall support him in the Lobby. However, the vital part of this debate is that it has drawn the attention of the House to the difficulties of the widow, whom I regard as the only valid one-parent family.

She has been married and has had a child. It is not her fault that her husband died. We should treat such one-parent families a little more compassionately than others.

Mr. Dalyell

Did I hear the hon. Gentleman aright? Did he say that the widow was the only genuine one-parent family?

Dr. Glyn

I said that hers was the only family where the lady had been legally married, produced a child and become a widow. A lady cannot become a widow if she never married. I think that the hon. Gentleman missed that point.

Having raised the Committee to this level, I hope my hon. Friend will consider those points.

Mr. Frank Field (Birkenhead)

May I sound a note of dissent? I shall be brief, as I wish to move an amendment later.

I, like other hon. Members, was questioned by a large number of widows in the election campaign. I put before the Committee the views that I put to them. I said that I was against amendments that exempted from tax widows' incomes or pensions, on the old-fashioned principle that all income should be taxable. I am against the endless erosion of the tax base. At present only 45 per cent. of personal income is taxed. As a result, the nominal marginal rates are high.

Hon. Members on both sides of the Committee put forward powerful arguments showing why widows should be treated differently. If those arguments are valid—as I am sure they are; I support them—the way to bring justice to widows is to look at the way in which we exempt their income from tax, mainly through the allowances ystem, rather than use the crude method of merely exempting their pensions from tax.

I find myself to some extent, therefore, at variance with my own side, in that I believe that the other short-term benefits, such as unemployment pay and sickness pay, should be brought within the tax net, but that it is important that the tax threshold should be raised to a point at which it is above the State poverty line One is really putting forward the old principle of taxation—that all income should be taxed. If that is done, it is possible to make major differences to the marginal rate at which tax has to be levied. Although I am in 100 per cent. sympathy with widows in saying that they deserve better treatment, I believe that the amendment is profoundly mistaken.

Mr. Lawson

We have probably all had representations in our constituencies from widows who felt themselves to be very much ill treated by the tax system. The hon. Member for Birkenhead (Mr. Field), in his contribution a moment ago, put his finger on the real solution to the problem. That is not to go in for further erosions of the tax base, as he quite rightly put it. He was absolutely right in saying that, logically, unemployment benefit and sickness benefit should be brought within the tax net—although that is not, strictly speaking, the subject of the amendment—and that the right way to help widows was to introduce a substantial increase in the personal allowances.

The hon. Member for Keighley (Mr. Cryer) said that when he was tackled by widows in his constituency during the election campaign he pointed out that they would benefit from what he called Rooker-Wise. The increase in the allowances this year, as introduced by my right hon. and learned Friend the Chancellor of the Exchequer, is twice as much as that laid down by section 22 of the Finance Act 1977, commonly known as Rooker-Wise. This means that, even allowing for the November increase in the widow's pension—the biggest increase ever—by £3.80 to £23.30 a week—there is no widow living on the standard rate pension who will be for that reason liable to tax. That is the route that we have chosen for dealing with the problem of the widows in the Budget, and I commend it to the House.

I have to say to the hon. Member for Woolwich, East (Mr. Cartwright), who moved his amendment very eloquently, that, as drafted, it is technically defective. I know how annoying it is to be told that. During the years when I was in opposition, that is what Treasury Ministers were always telling me about my amendments. But I am assured that the amendment is technically defective, and that all it would do would be to replace the wife's earned income allowance by the single allowance that widows get, and that since those two allowances are the same the widow would be no better off. I know that the hon. Member's intention was to give the widow two single person's allowances. That would make the widow considerably better off than the married man. However much we want to help widows, it is very much open to question whether it is right to make the widow better off than the married man in terms of these allowances.

The extra burden borne by the widow—who has already, of course, the burden of having lost her husband—is one that is also borne by the woman who suddenly finds herself divorced or separated and who also has to carry, single-handed, the burden of running the house, looking after the children, and so on. If we were to say that the widow should be benefitted in this way, there would immediately be a cast-iron case for benefiting the other categories of women in the same way.

Mr. Kilroy-Silk

I accept the importance of the Minister's point, but it does not necessarily remove the arguments that have been advanced in favour of widows. One could say that if it applies to the widows, and we accept their case, it should apply equally to the other categories mentioned. Does the Minister accept that the important point here is that widows, particularly those with children, are in a disadvantageous position in relation to single women who may be earning exactly the same amount of money, and paying exactly the same amount of tax, but who do not have the household expenses and the burden of bringing up a family that a widow has? I part company with my hon. Friend the Member for Birkenhead (Mr. Field) here, and suggest that widows, and others in a similar situation, should at least receive a tax-free household allowance.

Mr. Field

They would not be at a disadvantage if the child benefit allowance was adequate.

Mr. Lawson

There is a certain irony in what the hon. Member for Ormskirk (Mr. Kilroy-Silk) just said, though he conceded my point by saying that if this were granted it would not be sustainable to confine it to widows—the House would not accept that—and therefore, the true cost would be substantially more. The hon. Member for Woolwich, East, in moving his amendment, rightly drew attention to the cost, which is something that we must all bear in mind. If this revenue is to be lost, there may be better uses to which that loss of revenue can be put. The hon. Member for Woolwich, East quoted a figure—it is the Revenue's best calculation—of £75 million, which is by no means chicken-feed. That would be the figure if this were confined solely to widows. If the scheme were extended along the lines that the hon. Member for Ormskirk said would be inevitable—I think he is probably right—the cost would be greatly in excess of that.

The widow, of course, when she is working alongside a married woman, often imagines that she is more highly taxed. She is not. The reason why she thinks she is more highly taxed is that she receives a widow's pension in addition to her wages. It is an irony if Opposition Members say that because a widow is given a more generous pension, which means that she pays more tax, she is therefore worse off. That really is the logic of the argument that has been put to the Committee tonight.

Mr. Kilroy-Silk

I go along with the hon. Gentleman on this and support him entirely. With that argument, how can he justify applying exactly the same considerations to war widows, because that is what he has proposed in the Finance Bill?

Mr. Lawson

We shall come to that on a separate clause, when I am sure it will be fully debated—particularly with the hon. Member for Ormskirk in the Chamber.

Mr. Field

That is an inconsistency.

Mr. Lawson

It may well be an inconsistency, but I shall come to that later this evening. The night is young. We have plenty of time. I am sure that the hon. Member for Birkenhead (Mr. Field) has no cause to feel impatient.

In advising my hon. Friends and the Committee not to accept this amendment—

Dr. Oonagh McDonald (Thurrock)

As we have already considered extending these allowances to other categories, does not the hon. Gentleman agree that such an allowance should also be given to a widower? A widower will have planned his household on the basis of two incomes and he may find additional expenses when he no longer has a wife to carry out various services.

Mr. Lawson

The hon. Member for Thurrock (Dr. McDonald) has made a most gallant and chivalrous gesture, if those terms can be used in reverse. The hon. Lady is, of course, absolutely right. If this extra allowance were to be given to widows there would be no equity in not extending it to widowers as well, so the consequent costs are that much greater.

In conclusion, in advising the Committee to reject this amendment—I hope that the hon. Member for Woolwich, East will not decide to press it to a Division, because I think that his intention was to have a debate on this subject, which is what we have had—let me answer the hon. Member for West Lothian (Mr. Dalyell) and the hon. Member for Birmingham, Perry Barr (Mr. Rooker), who asked me two questions. The hon. Member for West Lothian asked what the Treasury meant by a review. The Government have been in office for two months only. We produced a Budget that dealt with the key defects of the tax system as we saw them and made some major changes in income tax in particular. Of course, there were very many aspects of the tax system which there was simply insufficient time to go into.

The question of widows is one of many aspects that are under review. I give no indication that there is anything that we shall be able to achieve that will not be subject to unassailable objections in the light of that review. This is just one of many aspects of the tax system that are genuinely under review at the present time, which we could not deal with in the Finance Bill, which had to deal with the essence of the tax system.

The hon. Member for Perry Barr asked me two questions, and was kind enough to say that he would like me to reply to them this time next year. I shall certainly do so.

9.45 p.m.

Mr. Cartwright

I accept the Financial Secretary's advice about the technical deficiencies of the amendment, but that is one of the problems of opposition, which he knows only too well. I must tell my hon. Friend the Member for Birkenhead (Mr. Field) that, whatever the amendment's technical deficiencies, we were certainly not arguing for an exemption of the widow's pension. We were trying to put the working widow in the same situation as the married woman by improving her allowances, which is a rather different approach to the problem.

So far as he made any positive contribution at all, the Financial Secretary seemed to suggest that the only solution on offer was to increase the personal allowances, but, as I said, that does not solve the relative position of the working widow to the working married woman, and it is that which causes all the grievance and frustration. The proposal that I put forward would certainly place the widow in a better position than the married man, but only a working widow in relation to a married man whose wife was not working. Since Conservative Members are in favour of encouraging people to work, I should have thought that that was something that they would have supported and that it would not have been an argument for opposing the amendment.

The Financial Secretary used the usual Treasury argument that if one gives a concession to this group all manner of other groups will be waiting in the wings to jump on the bandwagon. I may not carry all hon. Members with me, but I would argue that widows are in a different category from single people, or even divorced people. What has happened to them has happened through no fault of their own. They are suddenly landed in a situation where they have a great deal of personal problems and a great deal of financial burdens to carry. I think that they are deserving of special treatment as a result.

The one thing with which I agree with the Financial Secretary was when he said that the Government may not find an ideal solution. Indeed, I said that at the beginning. I do not think that we shall find an ideal solution to this problem. I do not believe that we shall find a solution which is unassailable and against which no criticism can be levied. At some stage in the game—I hope not before too long, whatever the difficulty— I trust that there will be some action to deal with the problem of working widows.

This is a problem that will not go away. It will haunt both Front Benches. As my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) suggested, pressure will be applied to more and more hon. Members on both sides of the Committee. When we get to this stage in the Finance Bill next year, I hope very much that the Government will come forward with some positive proposals to deal with this problem. If they do not, I assure them that we shall once again return to the fray.

Amendment negatived.

Mr. Field

I beg to move amendment No. 32, in page 4, line 32, at end add—

1. " (4)(a) In section 22(2) of the Finance Act 1977 there shall be omitted the words ' Provided that the Treasury may by order, subject to approval before coming into effect by resolution of the House of Commons, prescribe a lesser relief in respect of any financial year, so long as those reliefs are not less than the levels provided for in subsection (I) above.'
2. (b) In section 22 (3) of the Finance Act 1977 there shall be omitted the words ' Provided that the Treasury may by order, subject to approval before coming into effect by resolution of the House of Commons, prescribe a lesser relief in respect of any financial year, so long as that lesser relief is not less than £420 '."

This amendment stands also in the name of my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker). That I can move the amendment more briefly than other amendments that have been moved is not due to any lack of commitment on our part. It is because the argument can be put very simply indeed. Our aim is to pluck out the " Lawson " from the Rooker-Wise bosom, if I may put it in that way. We have a form of indexation on the statute book in that personal allowances should be increased in line with inflation, which is the Rooker-Wise amendment, unless the Government ask permission of the House to do otherwise, which is the Lawson amendment.

I hope that the din from the Conservative Benches will rise to one of considerable support for the amendment. I am drawing on three great Tory principles that should govern our political actions. The first is that we should learn the lessons of the past. The first lesson that I refer to is from the immediate past —the Budget. The second is the principle that Governments cannot be trusted, and the third is that the law should be used sparingly and concern itself with only the key areas of public policy. I therefore wish to direct the debate to those areas where we wish the Government to keep to their commitments for the future, and to that end I wish briefly to look at the effects of the Budget.

We have had tax redistribution on an undreamt-of scale. I am not saying that the Government did not say that they would do that, but we did not dream that the redistribution would be on such a scale. One could go as far as to say that there has not been such a redistribution since the barbarians last overran Rome. Even the greedy must be embarrassed at the amount of relief that the Government are pushing their way.

The Treasury furnished me with a piece of information that illustrates my point. The poorest 10 per cent. of taxpayers received 2 per cent. of the tax cuts in the Budget. The richest 7 per cent. received 34 per cent. The amendment is tabled as a result of these lessons to influence the actions of the Government next year.

Next year the Government will have a full year in which to play with the value added tax revenue—if I may use the word " play ". We have heard consistently from the Government tonight about their commitment to reduce the standard rate of tax to 25p in the pound. That is worrying. Next year the Government will have to choose whether to reduce the standard rate or to honour the Rooker-Wise amendment and raise thresholds in line with prices. We move the amendment to tighten the Government's option and hope that it will not be such a clear option. We hope that with the revenue from a full year's VAT the Government will honour their commitment to raise the tax threshold. That is the essence of the amendment.

I wish to add an important rider, because what is said in debate is often quoted at a later stage. I am supporting indexation of personal allowances because we have to operate within the present tax system, but I doubt the wisdom of indexation. If one could guarantee where the revenue would be spent, there would be a good case for the tax thresholds falling to almost nil. That was the essence of the then Government's proposals in bringing forward the tax credit scheme. It was the logical outcome of a tax credit scheme, or, even prior to that, of the Lady Rhys Williams scheme of social dividends. I move the amendment because we have to operate within the tax framework that is laid down, and not because I am fullheartedly committed to indexation. Given the options that the Government have next year, I should like them to choose that option in preference to reducing the standard rate.

Mr. Rooker

I rise to support my hon. Friend the Member for Birkenhead (Mr. Field), in the sense—I am leaving myself wide open again, as I did a few minutes ago—that we want a debate about what may or may not happen in next year's Budget. That gives the Financial Secretary the marvellous get-out of saying that he will tell us about next year's Budget next year. It is not the point that we wish to make tonight.

As I have said many times in this Chamber, like my hon. Friend the Member for Birkenhead, I am not a full-hearted indexer, as the Financial Secretary is. In 1977, Mrs. Wise and I were forced into putting forward our amendment because of the disastrous position into which the working poor had been placed because of the drag in the tax system. If the tax system can be recast, in ways very much like those suggested by my hon. Friend the Member for Birkenhead, with whom I agree, I for one would be happy to see the end of the provision in section 22 of the Finance Act 1977. However, I do not see a great recasting of the tax system under the present Government to benefit the working poor. That being so, I shall defend our amendment until the last vote on the Opposition side of the Chamber.

What worries us is that, on the Government's own admission, the inflation rate in November this year, measured by the retail price index, will be running at 17½ per cent above that of last November. If it is running at only 17 per cent. in December over last December's level, the cost next April of the indexation provision, the so-called Rooker-Wise amendment, will be £1.9 billion—assuming that the tax thresholds in this Bill are the base.

The figure of £1.9 billion is close to £2 billion, which is almost the extra amount that the Government will get from VAT in a full year. According to the Red Book, this year the unification of the VAT rate at 15 per cent. will bring in £2 billion and in a full year it will bring in £4.175 billion. The Government have said repeatedly that there is more scope for further tax cuts because of the extra money from VAT. The first thing that must be made clear is the cost of indexation.

I am glad to see the Secretary of State for Energy sitting on the Front Bench below the Gangway, because I am about to quote to the Committee something that he said in Standing Committee D on 14 June 1977, just before the Divisions on this question took place. He said: It is not right to talk about the cost of indexation, which was the phrase the Chief Secretary used. That betrays a misunderstanding, at least, of what we are proposing."—[Official Report, Standing Committee D, 14 June 1977; c. 497.] He said " We ". Conservatives have some brass face. The amendments were tabled by Labour Members, but the right hon. Gentleman used the phrase " we are proposing ". He was making the point, and it is a point that I accept.

The present Chancellor changes his tune depending on which side of the Chamber he is sitting, in that the indexation cut is not a cut in taxes. It maintains the real value of the tax-free allowance, so that in real terms people are no better off. The other side of the coin is that if allowances are not maintained in real terms, people will be worse off. This is the gateway to the amendment successfully proposed by Mrs. Wise and myself, which bears our names. It is not a very well known term, so I shall not use it too often. It is only because Tory Members have kept using it that it has reached its present status.

However, amendment No. 32, which we are now discussing, was moved in June 1977 by the present Financial Secretary as a get-out for any future Tory Government. It was a cynical move, in the sense that the Conservatives knew that embarrassment would be caused to the then Labour Government in the Committee Room on that night in 1977, but they did not want to have to carry the can for where they were putting their votes then. They wanted to put their votes there because they wanted credit the following day for embarrassing the Labour Government, but in the small print of that Finance Bill appeared the words that are before us on the Notice Paper tonight.

As any hon. Member can see, if the present Tory Government are so minded, having seen the rip-roaring inflation that they are creating, causing the necessity for finding a massive amount of money to pay for the indexation provision of just the personal allowances—not the higher rate thresholds that we debated earlier; as the Financial Secretary knows, we are talking only about personal allowances—as they see the inflation effect making the cost of that indexation provision close to £2 billion, or perhaps a bit above £2 billion, given the rate of inflation, they will look around for a way out.

There are several ways out. The Government can follow what is provided in section 22, if it is not removed from the 1977 Finance Act, and bring forward an order to the House to give a lesser amount. The cheapest of tricks, which might be expected from the present Tory Government, would be to calculate falsely the indexation provision as if this year's indexation provision had been maintained as in the 1977 Finance Act—that is, the ordinary indexation required due to inflation last year.

10 p.m.

The Financial Secretary has already said tonight that the Government doubled indexation and gave Rooker-Wise twice over. That may be laying the foundations for their saying next year that the indexation will be counted only as if the Government last year had indexed at the minimum level. That is a way of cutting several hundred million pounds off the expenditure that one would see in the Red Book. That is another way out.

We would like to hear from the Financial Secretary, if he so pleases, a commitment that when the Government consider the operation of section 22 next year—this is no pre-Budget secret—they will take as their base for any uplift in the indexation provisions the thresholds as contained in this Finance Bill, with the double amount of indexation. We would like that commitment on the record. It is not too much to ask. The Financial Secretary has not given a lot in the debate on this Bill for us to use against him in the future. I believe that he could give us this small crumb. This is important to the millions of working poor. It is important to the 20 million people who mostly receive a tax cut only through a change in the allowances. They do not benefit from the Budget tax cuts granted by the Government to the well-off.

The second point is the thinking behind the operation of the order. I do not suppose that the Financial Secretary will advise his hon. Friends to accept the amendment. The Government would want to bring an order only if they did not want to index on the full basis of inflation. One can paint a horrific picture of inflation of 20 per cent. the other side of December-January, which would put the cost of indexation well over the figures that I have quoted. That should be enough to frighten even this Government. They are not so far frightened by the financial effects of their own Budget. If the Government decide to bring forward an order on the basis that they will not index according to that amendment, I remind them of three crucial words in that amendment—" retail price index ".

In the last few days a lot has been heard about possible moves by the Government to fiddle, jig and recast the retail price index—the cost of living index—chucking in all the tax reliefs and taking out the fuel costs. This is what we might get from the Government. That will nevertheless be their own index. They cannot call it the retail price index. The retail price index is the trigger for the indexation provision on the tax allowances. I would like that assurance tonight.

If the Treasury is so minded next year to contemplate bringing forward an order, will it guarantee that whatever else happens it will use the retail price index as it is today, and as it was in 1970, subject to any changes approved by the retail price index advisory committee? I suspect that even this Government will have a few problems getting some of the rumoured changes through that committee.

Mr. Barry Henderson (Fife, East)

Is the hon. Gentleman saying that his amendment in 1977 was good for the poorer section of society, that the present Government have done twice as well for that section of society, and that he does not like it?

Mr. Rooker

Basically, I am not debating this Finance Bill. [HON. MEMBERS: " Oh."] I have said that. Amendment No. 32 will give the House an opportunity to debate what might happen or to ask the Financial Secretary how the Treasury is thinking about the problem to be faced in next year's Finance Bill. That is legitimate. The amendment is in order. Tory Members express their doubts, but the amendment has been called for debate and so far I have not been called to order.

The whole point about the indexation section in the Finance Act is to enable us to think about the future. We looked to what was going on and thought that it should not be allowed to happen again. The indexation provision had no effect in 1977—or in 1978, because of the October Budget in 1977. This year is the first time that the automatic effect of section 22 of the 1977 Act has been an issue for debate in the House and something on which both parties have had to take a decision.

The whole point about indexation provisions is to cover ourselves for the future. The hon. Member for Fife, East (Mr. Henderson) is right. This Government may claim that they have done twice as well on indexation, but they have damaged the interests of the working poor through the other changes in the Budget and through the changes outside the Budget which we debated last week. If we were debating only changes in the tax system—of personal allowances—one could argue that they were of wholehearted benefit.

I have welcomed what the Government have done. They knew that they had to do better than my right hon. Friend the former Chancellor, because they were contemplating 15 per cent. VAT, which this party was not. But they have not done better in real terms. At the turn of the year, when inflation is close to 20 per cent., it will be seen that they have simply maintained the status quo in real terms.

I challenge anyone to deny that if it were not for the indexation provision in the 1977 Act fewer Members would have been raising the issue in the first place in the last two years. I have every expectation that Governments, perhaps of both parties, would not have been so meticulously careful to claim that they were fulfilling the requirements of that part of the Finance Act, simply because the issue, which concerns the working poor, was put to the top of the political agenda two years ago.

We hear a lot from Tory Members—although not so much since 1977—about how it pays not to work in this country. The hon. Member for Aberdeen, South (Mr. Sproat) is conspicuous by his absence from this debate. The indexation clause clipped his wings and those of many of his hon. Friends, who sought to use the fact that because of a small margin of overlap between tax and social security a tiny percentage of people with large families and low earnings could be better off out of work. The Tories did not argue for changing the system. They used the system as a stick to beat the Welfare State and to undermine what the Labour Government were doing. Every manjack of them did that whenever possible.

Since 1977 the wings of those Tories have been clipped. The debate now centres on the meat of the issue—the question how we recast the tax and social security systems so that there is no poverty trap interaction under which some poor people, when they receive a £1 a week pay rise, lose £1.06 off their income. That is a marginal rate of tax of 106 per cent.

Mr. Ralph Howell

The hon. Member is trying to deceive the Committee into believing that the Rooker-Wise amendment would have helped the poorer paid. Indexation was doubled but it did little to help the tax threshold. The hon. Gentleman agreed with me earlier today that indexing personal allowances will not solve the problem.

The hon. Gentleman has carried on at great length about the Rooker-Wise amendment. It did nothing to relieve the poverty trap. The poverty trap is still large.

Mr. Rooker

Without that amendment the poverty trap would have been 10 times worse. Our amendment did not provide that indexation should be at the level of the retail price index. That was the minimum that we were prepared to accept. We said that indexation should be raised not less than the percentage rise in the retail price index. We made our position clear.

We proposed new figures for personal allowances before the debate on indexation in Committee. The Tories would not vote for them. We wanted to raise the base of the personal allowance way above what was proposed by the Government so that the poor would be taken clear out of the poverty trap, and then to index the allowance.

I recall that one Conservative Member and John Pardoe—because he saw the light of day—voted with us. He saw the way things were swinging that night.

It is not true that we achieved the greatest thing since sliced bread. But we proposed the minimum to protect the working poor. It was a base on which to build. The Government have doubled the basic indexation and that is fine. I am trying to deal with the problem next year. That is why we have arranged the debate tonight.

Will the hon. Member for Norfolk, North (Mr. Howell) make a commitment that he will table amendments to next year's Finance Bill to raise personal allowances above indexation and be prepared to vote for them? If he says that he will I shall give way to him. If he is not prepared to put his vote where his mouth is he should stop moaning and saying that he is a champion of the poor. He should stop coming to the Chamber, obtaining information and, in the quietness of a poorly-attended Chamber doing what Conservatives always do—using that information as a stick to undermine the Welfare State and to make cheap political points based on a few spurious examples which have been publicised in the popular press. The Conservatives do not take serious action to obtain radical changes which will cure the poverty trap.

The poverty trap will remain unless we make the radical changes suggested by my hon. Friend the Member for Birkenhead such as a recasting of the tax system so that all income is brought within the tax net. I accept that point, but at the same time, the tax threshold should be lifted way above present levels. This Government could have made a considerable start, even this year, on tackling the issue of the poverty trap if they had carried out the commitment made by the Labour Party during the general election campaign to raise child benefit. As ever, Tory Parties make promises during elections and do nothing once they achieve office.

We have not forgotten the promises on family allowances made in 1970 by the right hon. Member for Sidcup (Mr. Heath). The promises were not followed up when he was in government. Once again the working poor, the working families, of this country were cheated because Tories gave false promises at election time.

I apologise to the Financial Secretary to the Treasury for having been forced to descend to the level of the political argument engendered by hon. Members on the Tory Benches. All that I wanted to do was raise some of the problems that I see approaching the Government's doorstep at the turn of the year because of the level of inflation foisted on the country by the Government. There is also the gateway, built into this Finance Bill by the Financial Secretary, which enables the Government if they wish, to escape their obligations—with the help of Lobby fodder, such as the hon. Member for Norfolk, North—to raise allowances in line with inflation next year.

10.15 p.m.

Mr. J. Enoch Powell (Down, South)

Those who read the race card of the amendments to the Finance Bill in Committee soon get the knack of it. One looks at the names attached to a particular amendment. If the names do not include distinguished occupants of the Opposition Front Bench one knows that there will he a debate but that there is not likely to be a Division in which, at any rate, those in opposition need show any empressement to take part.

Those debates, however, such as this one initiated in an able speech by the hon. Member for Birkenhead (Mr. Field), do very often touch upon larger questions than the amendments which result in a head-on clash settled by a Division, and it seems to me that the brief debate which this amendment initiated revolves around one great truth and one great misunderstanding.

The great truth which we have learned over the years of inflation is that the pattern of taxation which the House seeks to set is constantly being disturbed by the interaction between an unforeseeable rate of inflation and the pattern of tax rates cumulatively set by a series of Finance Acts.

I should like to refer to a speech—I am sorry that the right hon. Gentleman happens not to be present—made earlier this afternoon by the Chief Secretary to the Treasury in dealing with an amendment which was designed to minimise the proposed reduction in the incidence of tax upon investment income. He suggested to the House that no less an issue than that of human freedom—which lay at the heart of Conservative philosophy—was involved in the level of tax on investment income. I am not sure that some similar fallacy might not be present in some of the arguments of the hon. Member for Birmingham, Perry Barr (Mr. Rooker). The trouble is that a principle so vague, or general, as that of individual freedom, once one invokes it in the context of taxation, is liable to lead far beyond the point which one wishes to attain.

If there is a principle of freedom involved in taxation, presumably it is a freedom not to be taxed at all. Once the right of society to tax is admitted, then there is no particular point at which the principle of freedom calls a halt to the exercise of that admitted right of society. If it is alleged, as I thought was being argued by the Chief Secretary, that a graduated rate of taxation—that from him that hath shall more he taken—is an infringement of the self-evident principles of freedom, he should have been using it as an argument for the abolition of graduation or, at any rate, for an announcement that the Government intend to be done with graduation before this Parliament comes to an end. The principle cannot be invoked to justify a greater rather than a less degree of graduation, a matter of percentage points between greater or less graduation of taxation.

I stress this point because I fear that the concept of freedom, liberty, individual freedom will run away with the Conservative Party, and possibly with Her Majesty's Government themselves. There is no such thing as individual freedom apart from the society in which it is exercised. Freedom is a concept which is derivative from a particular society. Socrates, when he was asked " What is justice? " said " Let me construct a just society and then I will show you a just man." In the same way, those who are asked " What is liberty? " must beg leave to construct what they consider to be a free society and then say " We will now be able to show you free men."

The argument against greater or less regression, for a shift one way or the other in the pattern of taxation, is not to be resolved by the application of great principles. It is the expression of a trend or tendency a little more emphasised one way or the other as one year passes into the next. Those words bring me to the error which I believe lies at the heart of this amendment and its intention, namely, a breach of the principle of annuality.

Maybe the principle of annuality can be traced back to the Book of Genesis. Be that so or not, it is a principle which—I am sure that the Minister of State will bear me out—every incumbent of any office at the Treasury very quickly learns. Its relevant expression for our purpose this evening is perhaps that " there is no such thing as full year ". This might seem surprising, because the speeches of Chancellors of the Exchequer are full of references to " full year yield " and " full year cost ". But there is no such thing as full year cost or full year yield. It never happens. We never have a full year on the basis of the previous year's decisions on taxation and spending.

The hon. Members for Birkenhead and Perry Barr made play of the concept of the yield of VAT next year as a result of what is being done in this Bill. The yield of VAT next year as a result of what is being done in this Bill will not be perceptible or ascertainable. It will be confused, covered up and combined with the results of all sorts of other causes which have come into play in the intervening 12 months.

The only reality in any Budget is the reality of the proposed but not always realised taxation and revenue for that year and the proposed but not always realised expenditure for that year. Next year is a different year, and all bets of the past year are off as one approaches the Budget of year 2.

Therefore, much though we might like to do it, we cannot impose requirements upon next year's pattern by projecting or extrapolating them from the pattern which was thought to be achieved in this year's Budget. I fear that we shall find ourselves much in the same place 12 months from now—debating in the light of the Budget of 1980 the precise balance of the pattern of taxation which will assuage or offend the wishes and prejudices of hon. Members on both sides of the Committee, and the supposed wishes and prejudices of those out of doors whom we purport to represent and sometimes perhaps partially succeed in representing.

Mr. Barry Porter (Bebington and Ellesmere Port)

I think that what I am about to say will show that I am in agreement with the view expressed by the right hon. Member for Down, South (Mr. Powell) perhaps on a rather more esoteric level, but I shall at least try to make my speech much shorter than that of the hon. Member for Birmingham, Perry Barr (Mr. Rooker), which will not be difficult.

As I understand it, the purpose of the amendment is to restrict the power and right of the Government to assess the position regarding pensions or any other aspect of public expenditure on an annual basis. I was not a member of the House which discussed and voted for the Rooker-Wise amendment. Indeed, if I had been here I should not have voted for it. [HON. MEMBERS: " Why not? "] My reason is simple, and I shall explain it to you, Sir Stephen, if you at least are interest—[Interruption.]

The Temporary Chairman (Sir Stephen McAdden)

Order. I am trying to hear the hon. Gentleman's speech.

Mr. Porter

I am much obliged, Sir Stephen. I do not believe in indexation, for three good reasons. First, it is an acceptance of inflation. Secondly, it is an assumption of inflation. They may be reasonable assumptions and expectations at the moment, but I then come to my third and most cogent reason. I object to indexation because it is a direct encouragement of inflation.

Mr. Budgen

Does my hon. Friend agree that indexation is only an encouragement of inflation if we index the salaries or other emoluments of those who create inflation? We may therefore be encouraging inflation by indexation on Wednesday, but this particular Rooker-Lawson amendment does not necessarily encourage inflation, though it may reduce the popular will to defeat it.

Mr. Porter

I shall watch with interest to see how the hon. Member for Perry Barr votes on Wednesday. My much unread letter to the Daily Mail last week indicates where I intend to vote on Wednesday, and I shall vote against any suggestion of indexation of parliamentary salaries. In my view, anyone who is minded to vote in favour of it should examine his conscience carefully before doing so.

I said that I should be shorter than the hon. Member for Perry Barr was and I so intend. I shall be no supporter of any amendment which encourages the Government in any sense at any time to increase public expenditure through no desire of their own and no will of their own. It must be within the power of the Government each and every year to decide the content of their own Budget.

Mr. Peter Bottomley (Woolwich, West)

My hon. Friend the Member for Bebington and Ellesmere Port (Mr. Porter) has made an interesting point, but I suggest that his speech was rather like one of the speeches from the Opposition Benches in that it left out half the package, because if we are moving into a stage where tax and benefit payments to and from the State, as my hon. Friend the Member for Kensington (Sir B. Rhys Williams) often puts it, are becoming more united, any suggestion that only one part of the package should be indexed is incomplete, and rather obviously incomplete.

I was hoping—perhaps I can still hope—that at some stage we could have a second edition of the book by the right hon. Member for Down, South (Mr. Powell), which might be called " Tax at 22½p in the Pound ", which would consider how the question of benefits tied in with the question of tax. If we can produce a benefit and tax package which has marginal loss of benefit or loss of income from the total package, not just taxation, we may reach the stage where the whole idea of the poverty trap comes out into the open and the incentive to work will be the same whether or not people have dependants, and the whole relationship of the individual or family with the State will become far clearer.

My belief is that what happens to the amendment tonight is not important. What is important is that we try to establish the understanding that the practice of changing rates of tax and benefit once a year should be treated on all fours, whether on the taxation side or as part of the social security side, and especially the child benefit part of it.

My view is that if we concentrate solely on the threshold or the rate of tax to the exclusion of similar attention or proper consideration for the level of child benefit which replaces the child tax allowances and the old family allowance, we shall get the whole business of tax and benefits more wrong than we need.

10.30 p.m.

Mr. Lawson

We have had a great number of debates on indexation in Finance Bills of recent years. I have taken part in a good many and I have a particular interest in this one because, as the hon. Member for Birkenhead (Mr. Field) and the right hon. Member for Down, South (Mr. Powell) very ably said, the purpose is to remove from the statute book the only words that I have ever personally drafted and had placed on the statute book. However, if the 1977 Act is defectively drafted, the defect is not in the words for which I am personally responsible.

There are some important points here. I do not wish to go deeply into the question of indexation, but it is important that the different types of indexation are looked at on their merits. For example, my hon. Friend the Member for Woolwich, West (Mr. Bottomley) tried to make it appear that indexation of social security benefits was on all fours with the indexation of personal allowances. I have to tell him that that is not so. This is irrespective of the question whether benefits should be indexed, because—leaving aside the question whether there should be the words that some hon. Members wish to remove—indexation of benefits automatically sets the expenditure absolutely at that level.

Indexation of personal allowances does not set or fix the amount. It fixes only the structure, and the rates and yield can always be changed, year in and year out.

With other forms of indexation, such as indexation of salaries of hon. Members, new issues are brought in—issues of a totally different kind. I shall not go into that.

Mr. Peter Bottomley

Does that mean that when child benefits were substituted for tax allowances a mistake was made?

Mr. Lawson

No. I have not said that at all. I am just saying that many considerations are involved in this matter; that indexation of social security, child and other benefits, is of a totally different nature from indexation of tax allowances, and that it is important that that should be borne in mind. My hon. Friend the Member for Bebington—[HON. MEMBERS: " Look this way."] My hon. Friend the Member for Bebington and Ellesmere Port (Mr. Porter) sits on this side—

Hon. Members

Speak to the Chair.

The Temporary Chairman

It would be helpful if the Financial Secretary addressed himself to me.

Mr. Lawson

Yes. That is of very great concern to me since the time when I was your Whip, Sir Stephen.

My hon. Friend claimed that indexation was an invitation to inflation. Again, in this context we are talking of the indexation of the personal allowances. I am surprised that my hon. Friend should say that, because the Government's interest is in increasing the tax yield, particularly without obtaining parliamentary approval. That is a process which is ensured by an unindexed tax system. It is not ensured by an indexed tax system. Therefore, I think that my hon. Friend is mistaken in believing that somehow a Government have a vested interest in inflation if the tax system is indexed. The reverse is the case.

I now come to the specific point of the amendment. I am very glad that I and my colleagues on the Conservative side of the Committee considering the 1977 Finance Bill were able to get section 22 on the statute book. It was bitterly opposed by the then Government, particularly by the right hon. Member for Llanelli (Mr. Davies), who is now leading the Opposition team on this Bill. That is why he is so silent tonight.

I could not have approved the indexation clause as it now is—section 22—without the words that formed the burden of my amendment and that the Opposition seek to remove. Let us suppose that there were no such thing as inflation—a happy consummation. I am sure that no hon. Members would then suggest that it should be made impossible for any Government to change the personal allowances, or for that matter any other part of the tax system, in one direction—in this case to reduce them.

Hon. Members may argue that it would be wrong to do so, or that it would not be in the public interest, but they cannot argue that the Government should be prevented by law from ever changing the allowances—from ever reducing them. It is essential that the Government be given freedom to increase or reduce allowances. I see that the hon. Member for Birmingham, Perry Barr (Mr. Rooker) is nodding assent.

In an inflationary age, what I have said means that while the starting point for the allowances is indexed to take account of inflation, so that it is constant in real terms, the Government must be able to come before the House each year with an order, if they see fit to do so, and say " No. There should not be this indexation "—in other words, that the real value of the allowances should be reduced.

The important point, which we in the Committee on the 1977 Bill made time and time again, is that there must be truth in taxation.

Mr. Denzil Davies rose—

Mr. Lawson

I shall give way to the right hon. Gentleman in a moment. He should not be so impetuous.

We made clear that the Government must come to the House if they proposed that there should be a reduction in the real value of the personal allowances, and should not allow them to be eroded quietly, without any parliamentary approval, simply by the mechanism of inflation.

Mr. Denzil Davies

The hon. Gentleman is arguing that he added his own few phrases to the Rooker-Wise amendment so that the Government would have to come to the House in order to justify increasing or not increasing the personal allowances. But that happens every year. It has always happened, every year. Quite apart from the Rooker-Wise amendment, the Government must have the authority of the House on all the allowances every year. So what was the point of that amendment and of the hon. Gentleman's supporting it?

Mr. Lawson

The right hon. Gentleman is still trying to refight the battle that he lost in 1977. The Committee was not with him then, and this Committee is not with him now.

The fact is that at a time of inflation if there is no indexation provision of any kind, a reduction in the allowances is allowed to slide by without it ever being put to the House. That is why, under the previous Labour Government, in which the right hon. Gentleman was a Treasury Minister, the real value of the allowances fell and fell. It is under the present Government that the real value of the allowances has increased.

The hon. Member for Perry Barr seemed to accuse me of a Machiavellian plot. He did not seem to be sure what the plot was. He was not sure whether I had planned in 1977 to have provisions written into the statute book so that in, for example, 1980 the Government of which he assumed I knew I should be a member could introduce an order taking advantage of the provisions and increase the allowances by less than the rate of inflation, or whether I was not taking the present value of the allowance, if the Bill is enacted as drafted, as the base. He accused me of harbouring both plots. Clearly, both cannot be true.

I thought that the hon. Gentleman was wrong to attack my hon. Friend the Member for Norfolk, North (Mr. Howell) and to suggest that his concern for the poor and those who find that it does not pay to work is not genuine. The hon. Member for Birkenhead will acknowledge that my hon. Friend's concern is genuine and that it has been consistent over the years.

We accept the statutory obligation under the 1977 Act. As I understand it, the base for indexation would be the 1979 value of the allowances. It would be intolerable if the principle of truth in taxation, which the right hon. Member for Llanelli says was present throughout the period of office of the previous Labour Government but was not, were not to apply. If it was there all the time, why did he fight such a persistent action to try to defeat amendments that provided for important innovations in the tax system? It would be wrong to try to convert and subvert that principle and to make it something that was never intended. It would be wrong, in the words of the hon. Member for Birkenhead, to remove one of the Government's options.

Some may think it right for a change in the tax system to apply to one section of taxpayers and not another. That is a reasonable argument. However, it cannot be said that the Government should not be free to shape the tax system as they think best. That is what the amendment seeks to do. If accepted, it would remove from the Government a necessary freedom. Therefore, I cannot advise the Committee to accept the amendment.

Mr. Field

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Dr. McDonald

The debate has ranged widely but it has directed our attention to the role of personal allowances and the effect that they have on the burden of taxation on poor families.

Throughout the debate on the Bill the Government have insisted that it lowers the burden of taxation on ordinary families, that it provides an incentive for working families, and that it provides them with substantial tax cuts. To substantiate their views they presented figures alongside the Budget report that suggested that the Government's tax cuts provided a substantial tax reduction for ordinary families. The Government took credit for the changes in the Finance Act 1979 and linked those with the changes in the Bill to suggest that their generosity towards ordinary families was great indeed.

10.45 p.m.

When we separate those figures, as the Minister of State did in an answer to my parliamentary question on 21 June, we find that the situation is different. A family earning £35 a week gains not £2.39 but 68p from the Finance Bill. The same applies to a family on £40 a week. Its gain is only 68p. A family on £50 a week gains only 90p. A family on £60 a week begins to get something like a real gain, as a result of the tax cuts, of £1.20 a week.

In contrast, the April Finance Act gave substantial tax cuts to poorer families, and the increase in child benefit improved their income considerably. Under the April Finance Act and the increase in child benefit, a family on £35 a week received £1.71; a family on £40 a week the same; a family on £50 a week, £1.62; and a family on £60 a week received the same.

The generous treatment for ordinary working families comes not from the Finance Bill but from the April Finance Act. It is high time that the Government were honest enough to admit that. The Act of the previous Labour Government benefited many more ordinary families than this Budget.

Let me take that a stage further. The family on £200 a week gained 56p a week from the April Finance Act. The family on £200 a week, under this Finance Bill, gain £6.39 a week. When we look at the top and bottom of the scales we see who are the friends of the Government and where Government concern is directed. All their protestations of generosity to ordinary working families are totally meaningless. Their aim is to help those who are better off.

The Government have strengthened their case by talking about average male earnings of £100 a week. It is true that such a family receives a reasonable benefit from the Finance Bill. However, we must set that against two facts. The average figure is, as usual, misleading. If we take the median figure, which is probably about £93 a week at the moment, we begin to see more clearly where the tax benefits lie. If we take into account the fact that there are now probably about 900,000 male wage earners on less than £60 a week and over 6½ million male wage earners on less than £90 a week, we can see clearly that the Finance Bill benefits the minority. It does not benefit the majority of ordinary families. There is no serious effort here to provide improved incentives for most workers. Incentives are provided only for the few.

To rectify that I tabled amendments that, unfortunately, were not selected for debate. They would have had the effect of substantially raising the married man's allowance and tax threshold to £2,095 a year. They would have allowed the first £40-odd a week tax-free for the married man and raised the single person's allowance to £1,345 a year.

If all the resources used in the Finance Bill to cut the standard rate of income tax, to raise the starting point for the higher rate bands and to lower the highest rate of income tax from 83 per cent. to 60 per cent. had been directed, at roughly the same cost, to raising the tax threshold as suggested in my amendments, perhaps we could have talked about real incentives for ordinary people. Then perhaps we could have taken seriously the Prime Minister's words in the debate on the Queen's Speech, when she talked about the serious consequences of taxation for those at the bottom of the income scale, where an extra pound earned can be lost in tax and by the withdrawal of means-tested benefits. The right hon. Lady spoke movingly of the need to give an incentive all the way up the scale—to those on low incomes, those on differentials and those on management earnings. We shall hope to benefit all of those by a reduction in direct tax."—[Official Report, 15 May 1979; Vol. 967, c. 77–8.] Everyone who heard the right hon. Lady in that speech commented on the passion and the conviction with which she spoke. It indeed confirmed, it was said, her claim to be a conviction politician. But, of course, when it came to working out the Finance Bill he convictions flew out of the window. The only proper test of strength of commitment is the action taken, and when we examine the Bill we find that those actions are simply not there. There is no attempt whatever to direct the resources that she intended to use in the Budget towards helping the poor and towards helping the worst off.

It is not a Budget which provides incentives for the low-paid. It is not a Budget which provides for many ordinary families the way out of the poverty trap. In fact, the overall effect of the Bill and its tax changes, and of the family income supplement increases which were announced on 21 June, will be simply to increase the numbers in the poverty trap.

There is, of course, through the reduction in the standard rate, a slight benefit to those families who find that they are both paying tax and receiving benefit, but the benefit is only slight. It brings down by 3p in the pound the marginal rate of taxation which some of them have to face, but 3p will hardly be of any use to those poor families as they face the coming inflation in the autumn and the winter. It means that very many families will find themselves caught even more firmly than before in the poverty trap.

The reason for this is quite simple. On the one hand, there is the Government's failure to raise the tax thresholds sufficiently. On the other hand, there is the Government's failure to raise child benefit and thus to provide very many poor families with a greater tax-free income.

It has been very difficult to get any information about how many families will be caught in the poverty trap following this year's Finance Bill and following the November uprating. One piece of information has emerged—that the Government now expect three-quarters of those in receipt of family income supplement, or those who are eligible for it, to be paying tax in this financial year. Last year the proportion of those eligible for family income supplement also paying taxation came to two-thirds, so there is plainly some increase in the numbers to be caught in the poverty trap—and that following a speech in which the Prime Minister expressed her heartfelt concern for those families caught in this way and unable to struggle out of poverty.

I have found that, in the course of any attempt to pursue the matter further, parliamentary questions have not been answered, and there has been no reply to inquiries taken up with the DHSS. Section SR3A of the DHSS says that the figures are not available. Why are these figures not available? If the Government were much concerned about the poverty trap, surely these calculations would have been made as part of the preparation for the Budget. Failing to raise child benefit, failing to raise the tax threshold sufficiently, and concentrating all the resources on reducing the standard rate, and so on, would lead to an increase in the numbers caught in the poverty trap.

Surely the DHSS had those calculations available. Or was it that the Government just rushed headlong into their Budget and Finance Bill without carefully working these things out? Is there another reason, or is the real reason the fact that the Government are afraid to release the new figures of the numbers caught in the poverty trap? Is that why the Government are so hesitant and unwilling to answer any questions, and why any attempt to cross-examine the Department concerned provides no answer? I think that that is the real reason.

The Government have made their protestations. They have committed themselves to a concern for the poor, to an attempt to help each person help himself, and to help each individual family to find a way out of the poverty trap themselves. The Government have only made protestations. They have, in their tax concessions, carefully given all the goodies to the better off and have given nothing to the poor. That is why they are afraid to reveal that information, and why no information is provided. Perhaps that can be interpreted as a hopeful sign, and perhaps the Government are, after all, ashamed of their treatment of poverty stricken families. If they are so ashamed, it is high time that they rectified it in any further moves that they make.

Mr. Graham Page (Crosby)

It is a short point to which I want to draw attention and it is directly concerned with the clause. It is an unexpected result of these new personal allowances that the age allowance is claimed in the form of an additional personal allowance, and in this clause what I would call the ordinary, single allowance is put at £1,165 and increased for the purpose of age allowance by £375. The ordinary married allowance is put at £1,815 and increased by £640 for the age allowance.

The married age allowance of £640 is reduced by £2 for every £3 excess income over £5,000. That appears in subsection (2)(d) of the clause. The result is that at the margin between £5,000 and £5,960—the point at which relief disappears for a married couple—the income is taxed at the rate of 50 per cent. That seems a very high rate in the context of the lower rates of tax which this clause and the previous clause set out to embody in the Finance Bill.

Would it not have been more reasonable, I ask my hon. Friend, to have made the additional relief reduction by £1, and not £2, in every £3 in excess of £5,000. The result would be that that excess income would be taxed at 40 per cent. only, which I think is far more reasonable when taken in the context of the lower rates contained in the Bill. I do not ask my hon. Friend the Financial Secretary to answer at once, but will he consider this before we reach the Report stage?

Mr. Lawson

I shall certainly consider the point made by my right hon. Friend the Member for Crosby (Mr. Page). He will be aware that this point has been raised in previous Committee stages of Finance Bills. The problem is that this high marginal rate relates to a particular point in the scale, as a result of the working of the age allowance system. Unless I recollect wrongly, I believe that there have been times in the past when the marginal rate was higher than 50 per cent. The consequence of the way in which the income limit for age allowance works is certainly something that I shall consider and about which I shall write to my right hon. Friend.

The hon. Member for Thurrock (Dr. McDonald) failed to give sufficient credit to two things. First, incentives are a matter of marginal rates of tax and these have been reduced almost all along the line, certainly for the overwhelming majority of taxpayers.

Secondly, if the marginal rates of tax on those with high incomes have become absurdly high—which was a fact that was accepted by many Labour Members, including the former Chief Secretary, to whom the hon. Lady was PPS—that can be rectified only in a way that results in those people having reductions in their tax bills. If that is objectionable to the hon. Lady, there is no way ever of escaping from these absurd and damaging high marginal rates of tax. That is not something that we accept.

11 p.m.

Thirdly, the hon. Lady is concerned about the standard of living of the poorest members of the community. So are we all, but what will determine their standard of living is how well our economy performs this year and over the years ahead. There is no way of juggling with taxation that in the long run will make any difference to the welfare of the poorest members of the community, unless those changes in taxation are changes that will encourage incentive and an improvement in the economic performance of this country as a whole. That is what matters.

Dr. McDonald

May I say two things about that? First, the highest rate of tax is only a notional rate. It was extremely easy to avoid paying that high rate of tax by the kind of allowances that one was able to collect, and the hon. Gentleman will be well aware that there were many ways of doing that. Secondly, we are now in a position in which those on extremely low incomes face a higher marginal rate of tax than those on the highest incomes. Surely their position should be taken into account. It is not enough for the hon. Gentleman to say that such people will benefit from the growth in the economy as a whole. That is part of it, but when Government action, which is what is happening now, ensures that more of them will be caught in the poverty trap and will pay a higher marginal rate of tax than those on the highest incomes, that is a matter for the Government to decide on, in order to take the appropriate action. The hon. Gentleman cannot avoid that by airily talking about the growth in the economy as a whole.

The Temporary Chairman

Order. I remind hon. Ladies and hon. Gentleman that interruptions prolong speeches, and that long interruptions prolong them interminably.

Mr. Lawson

The last thing that I would wish to do is to prolong my own speech. The hon. Lady must recognise that the poverty trap, as it is called, is something from which we wish to see people removed. That is why there is a substantial increase in personal allowances in this Budget and Finance Bill. Let the hon. Lady also reflect on this: if we wish to give really adequate help to the poor through the social security system, and if we wish to concentrate on those in greatest need, it is almost inevitable that there will be people on very low incomes who will be in some sort of poverty trap. It need not necessarily be as capricious as the one that we have at the present time, but to some extent that is a consequence of providing adequate help for the poor, without having a vast apparatus of State expenditure on benefits at all levels which would be economically disastrous and socially foolish.

Mr. Field

I want to put one simple point to the Financial Secretary. Was he not serving notice on the rich? Before giving way to my hon. Friend the Member for Thurrock (Dr. McDonald), he said that the strategy of the Budget was to give incentives to those on high incomes. That was the most effective way of increasing wealth and helping those who were poorest. Do the Government have a time scale in which they intend to look at the strategy of rewarding those with most in our society? If there is such a timetable beyond which they may withdraw the concessions, may we know?

Mr. Lawson

All I can say in conclusion is that the longer this Government are in office, the more effective the strategy will be.

Question put and agreed to.

Clause 8 ordered to stand part of the Bill.