HC Deb 18 January 1999 vol 323 cc629-79 7.15 pm
Mr. David Heathcoat-Amory (Wells)

I beg to move, That this House notes that from April 1999, 300,000 non-taxpaying pensioners and 330,000 other non-taxpayers will lose an average of £75 each because of the Government's decision to abolish the dividend tax credit; further notes that 80,000 of the pensioners affected will lose over £100 per year; considers that it is unacceptable that basic rate taxpayers and higher rate taxpayers are unaffected directly by this decision which only affects non-taxpayers, half of them poor pensioners, who by definition must be poorer than taxpayers; calls on the Government to act on the promise made to the House of 30th June when the then Paymaster General stated 'I am aware of the growing anxiety among poorer non-taxpayers who have been hit by the measure so I know that we need to make our position utterly clear as quickly as possible' (Official Report, 30th June, column 175); calls upon the Government to honour now this pledge by announcing that non-taxpayers will be able to continue to reclaim a 10 per cent. tax credit from April 1999 in the same way as taxpayers who hold PEPs or ISAs will be able to do so; and further notes that this is still a 50 per cent. cut from the current 20 per cent. dividend tax credit. The subject that we have chosen for debate has given rise to an all-party motion to correct an evident wrong—the withdrawal of dividend tax relief from the poorest savers in the country. From April this year, at least 630,000 people whose incomes are too low for them to pay tax will lose an average of £75 a year. That may well be an underestimate, because the figures that we have are four years out of date and the Treasury does not have more recent estimates.

We know that about half those people—300,000 of them—are pensioners who are, by definition, the poorest pensioners. They are about to be penalised. The purpose of the debate is to end that injustice and to get the Government, even at this late date, to think again and change their mind.

Mr. Patrick McLoughlin (West Derbyshire)

I am grateful to my right hon. Friend for giving way. Would it be fair to say that those who will be affected are working-class pensioners, not middle-class pensioners? Perhaps that is why there is not much sympathy for them from the Government.

Mr. Heathcoat-Amory

My hon. Friend makes a good point. The Prime Minister's attitude is that everyone must be middle class, and those pensioners do not exist. However, we know that they do exist. They have written letters to me and my hon. Friend, and to Labour Members, complaining about the injustice. They have been left behind in the new Labour project, and it is up to the Opposition to stand up for them this evening.

Mr. Geraint Davies (Croydon, Central)

Does the right hon. Gentleman agree that if he and his colleagues are sincere about helping the poorest pensioners, they would not adopt a discriminatory form of help that simply helps poor pensioners who save in a particular way—through shareholdings? Instead, perhaps he should support the idea of income guarantees, lower fuel bills and so on. Moreover, does he agree that pensioners who had that discriminatory benefit in the past have been helped by a 25 per cent. appreciation of the FTSE 100 since 2 July, when that change was made in response to the Government's global economic management?

Mr. Heathcoat-Amory

The flaw in that muddled and incoherent intervention is that those people cannot sell their shares, as the hon. Gentleman can. They have to live on the income, and the dividends have not increased. The effective income that they get from their dividends is to be cut by an average of £75 a year from 1 April. That is the injustice that we seek to correct this evening.

The first Labour Budget in 1997 set the process in train. Its central feature, as the House will recollect, was that notorious £5 billion a year raid on pension funds. That was done by stopping pension funds reclaiming tax credits on the dividend income that they received. That was exactly what the British economy did not want at that time. It wanted more savings and less consumption. If the Government had not hit pension funds in that way, the subsequent interest rate rises later that year would not have occurred, and we would not be living with the consequences today.

That was also misconceived because the Government were, at the same time, encouraging people to get off welfare and to build up long-term savings and self-reliance, but by hitting pension funds in such a way they adopted an entirely contradictory policy. That was the wrong thing to do at the wrong time.

When they were doing that to savings institutions, the Government announced that, from 1 April 1999, they would restrict dividend tax credits to individuals—particularly and specifically by halving the rate to 10 per cent.

I remind the House that tax credits are not some lucky bonus or handout from the Government. They are designed to prevent double taxation—taxation once in the hands of the company, through corporation tax, and again in the hands of the individual saver, through income tax. Tax credits avoid such double taxation, and from 1 April they are to be halved.

That is bad enough, but, although higher-rate taxpayers will be compensated by a cut in the rate of tax on that savings income, non-taxpayers—this is the point—will not be able to reclaim tax credits, even at the new 10 per cent. rate. Uniquely, non-taxpayers are being singled out and penalised in that way.

Mrs. Angela Browning (Tiverton and Honiton)

Will my right hon. Friend give way?

Mr. Heathcoat-Amory

In a moment; I want to emphasise this point.

Taxpaying individuals and pensioners will be compensated; non-taxpaying individuals—who, by definition, are poorer—will not be compensated and will be subject to receive that penalty from 1 April.

Mrs. Browning

May I give my right hon. Friend an example involving constituents of mine? They are a married couple in their late 70s who live in Honiton, in Devon, and the wife has written to me. They spent most of their working lives working abroad for a Christian charity which, typically for that sort of organisation, did not have a pension scheme. Those people will suffer, and certainly, as non-taxpayers, they will suffer the loss of £70 a year. That is a strange way for the Government, who came into office with cries of fairness and justice, to reward people who have dedicated their lives to such work.

Mr. Deputy Speaker (Mr. Michael J. Martin)

I should say at the beginning of the debate that interventions cannot become speeches. They must be brief.

Mr. Heathcoat-Amory

That intervention was well worth listening to, because my hon. Friend used a specific example to illuminate what the Government are doing. It is an eloquent commentary on the new Labour party that it is sacrificing the poorest pensioners—the poorest savers—and rewarding the better off.

We were so amazed by the announcement in 1997 that we assumed that it was a mistake. As hon. Members will remember, that year's Finance Bill was rushed through—under a guillotine motion, by inexperienced Ministers and in a few weeks. That Finance Bill contained 17 tax rises, but no one expected the Labour party to break its promise not to increase personal taxes by targeting the poorest households in the country.

During the passage of the following year's Finance Bill we raised the matter to have it looked at again. It was being dealt with by the ex-Paymaster General, the hon. Member for Coventry, North-West (Mr. Robinson). There was something particularly distasteful about him sheltering £12 million in an offshore trust in Guernsey when he was penalising the poorest households in the country.

Mr. Douglas Hogg (Sleaford and North Hykeham)

Was not there another distasteful aspect to what the hon. Member for Coventry, North-West (Mr. Robinson) was saying? His case was that it was possible for those people to realise their capital and re-invest it in a different form of holding. That would have made them liable to capital gains tax, when he was immune from it.

Mr. Heathcoat-Amory

My right hon. and learned Friend makes—

Mr. Deputy Speaker

Order. We should remind ourselves that, unless there is a substantive motion before us, we should not criticise other Members of the House.

Mr. Heathcoat-Amory

My right hon. and learned Friend was making a general point that Labour Members are good at putting up taxes that other people will pay but they will not pay themselves.

My hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) started a campaign with Age Concern, with cross-party support, to get the matter reviewed. He was successful. During the passage of the Finance Bill he argued that the matter was iniquitous. We received support from a number of Labour Members—in particular the hon. and learned Member for Dudley, North (Mr. Cranston), who is now the Solicitor-General, so that rebellion must have had official sanction.

To be fair to the ex-Paymaster General—I am sorry that he is not in his place to hear me being fair about him—he announced a retreat, saying that the matter was wrong and had to be looked at again. When the Finance Bill was on Report, he referred to a meeting between himself, my hon. Friend the Member for Bognor Regis and Littlehampton, a number of other hon. Members and Age Concern: I think that they made a powerful case…I am sympathetic to that case. He continued: I am aware also of the growing anxiety among poorer non-taxpayers who have been hit by the measure, so I know that we need to make our position utterly clear as quickly as possible. I am working to that end."—[Official Report, 30 June 1998; Vol. 315, c. 174-75.] The ex-Paymaster General conceded that those people had been hit, and he was going to do something about it. What happened after that?

Mr. Nicholas Soames (Mid-Sussex)

May I raise with my right hon. Friend the case of my constituent, Mr. George of East Grinstead, who—encouraged by the campaign of Age Concern and my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb)—wrote to me on 21 May? On 25 May I wrote to the Paymaster General to inquire on my constituent's behalf about this monstrous measure. Is my right hon. Friend aware that the reply arrived in my office on 14 January? Does not my right hon. Friend consider that to be impertinent, casual and arrogant on the part of the Treasury?

Mr. Heathcoat-Amory

I could not describe it any better.

What happened after the hon. Member for Coventry, North-West had made those concessions? He got into a lot of personal difficulties and became, in effect, a lame-duck Minister. That took the form of not answering any letters, as my hon. Friend the Member for Mid-Sussex (Mr. Soames) has shown.

That is not the worst example. Many letters written early last year have only just been replied to by the new Paymaster General, the hon. Member for Bristol, South (Dawn Primarolo), but far worse happened. On 10 December 1998, the hon. Lady, then Financial Secretary to the Treasury announced that she had reviewed the matter and there would be no change at all. The original policy to withdraw dividend tax credits from these people would go ahead.

Amazingly, the Paymaster General justified that in a press release as an attempt to boost profit retention by British companies. That was the best that she could come up with. Even if that was an attempt to justify the policy, it has not worked. According to Government figures announced in November, business investment will fall from the 8 per cent. growth of recent years to only 1 per cent. this year.

The policy has not even succeeded in boosting investment by British companies. Nor has the policy gone down at all well—as might be expected—with those affected by it. We are only just beginning to receive letters, because most taxpayers are not yet aware of what has happened. They may not even be aware of it on 1 April. It will not be until a year hence—in April of next year—when they write for their dividend tax credits and will be refused by the Inland Revenue. We are witnessing only the start of a campaign by the people affected.

However, we have received many letters. A lady wrote to us from Paignton in Devon pointing out that these sums may be small—perhaps £100 or £200 a year—but to her they represent the difference between retaining a decent style of life or not. She concludes her letter by saying: I'm not quite sure which 'people' this 'people's government' represents but it doesn't seem to be people like me. Another gentleman wrote to a Labour Member in Durham without success. He describes this measure as a hidden tax on the less well off. A gentleman from Nottingham has written to us pointing out that this is an attack on "the poorer pensioners", and that it is an insult to suggest to these people that they should take their money out of the shares they own and invest it in PEPs or ISAs. As he says, the fees and charges incurred in taking money out of one investment and putting it into another make this a wholly inappropriate course of action for the vast majority of these people.

Mr. Jonathan Sayeed (Mid-Bedfordshire)

TESSAs, PEPs and ISAs are of particular benefit to upper-rate taxpayers, and are of little benefit to those who pay no tax.

Mr. Heathcoat-Amory

My hon. Friend is absolutely correct. When the Government suggest to these people that they should rush out, sell their shares and put the money into ISAs, they are telling them to invest in a savings vehicle that is untried, untested and does not yet exist. Furthermore, the fees and charges will cancel out any advantage. It is completely inappropriate advice, and I hope that the Financial Services Authority will take a close interest in any other such recommendations from Treasury Front-Bench Members.

The investors we are talking about are typically widows who inherited a few shares when their husbands died, probably instead of a good occupational pension scheme. They rely on this small annual tax repayment to live on, and they cannot, at the end of their lives, seriously be expected to take their money out and invest in a new savings plan designed for people who are saving throughout their lives. It shows what a fantasy world Treasury Ministers live in when they seriously suggest to pensioners that, at the end of their lives, they sell their shares and invest in a new Government scheme that does not yet exist.

It is not true that these people are in any way compensated by other measures, as suggested in the Government's amendment. Their amendment suggests that increases in income support will go some way towards compensating these people. They do not realize—so I shall remind them—that many of these people are above the income support level. They are below the tax threshold, but they do not receive income support, so it is irrelevant to say that income support will increase in a future Budget. That is misleading.

Some people are below or just at the income support level. This measure will force more people away from reliance on their own savings and into reliance on welfare and benefits. I thought that that was the opposite of what the Government were trying to do in their welfare reforms. They tell us that they want to get people off welfare and into self-reliance. That fact alone shows what a shambles the Government are in with their welfare reforms. They are driving more people into dependency on the state instead of reliance on their savings.

What will the Government save by this measure? What. sums will the Treasury recover? According to their own estimates, after the halving of the rate of dividend tax credits, the Treasury will get only an extra £25 million a year. Compare that with the £5 billion that they got by raiding pension funds. That £25 million is, in effect, a tax increase, and it is targeted precisely at the least well-off. It is laser-focused at those least able to afford it. They pay no tax, so they are, by definition, the less well off, but they are the people who the Labour party has decided and confirmed will be hit as I have described.

Mr. Nicholas Winterton (Macclesfield)

On a matter of philosophy, does my right hon. Friend think that there is any justice, honour or fairness in the Government's decision? How does it meet the objectives that were expressed by the Prime Minister in his much-heralded speech last week?

Mr. Heathcoat-Amory

I think that the Prime Minister wishes that these people would go away, as they have no part in the new Labour project. They have been left behind, but not by the House. It is one of the jobs of the House of Commons to remind the Government that some people are hit, perhaps inadvertently, by Government measures. It is the job of hon. Members to highlight that problem and get something done about it.

Luckily, there is something we can do. This measure can be stopped, because some Labour Members will join us in the Division Lobby this evening. The signatories to an early-day motion that has been tabled come from all the main political parties and include 28 Labour Members. The motion before the House this evening is identical to the motion that they signed. They should start to put into practice what they preach.

Doubtless the Labour Whips have been busy. Some of the more impressionable new Labour Members of Parliament may have signed the EDM for a quick and easy press release in their local paper, or may have never stood up for any principles in their lives. That does not apply to all the 28 signatories. Some Labour Members still have principles, and they know that this is a mean, unnecessary measure. It is tax reform at its worst. We look forward to joining them in the Division Lobby at 10 o'clock.

7.38 pm
The Paymaster General (Dawn Primarolo)

I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof: notes that the fundamental reform of company taxation carried out by the Government has removed major company taxation distortions from the system and put in place a sound base for better quality investment and growth that will lead to greater prosperity for everyone in the UK, including pensioners; that the Government has taken significant steps to help pensioners, including a guaranteed minimum income for the poorest pensioners through an increase in Income Support from this April worth over £236 extra per year for single pensioners and over £377 extra for couples, a minimum guarantee on tax so that pensioners have no income tax to pay unless their income rises above a certain level, £20 of winter fuel payments for every pensioner household, the introduction of free eye tests for pensioners from this April, new travel concessions on public transport and an extra £21 billion invested in the National Health Service; and further notes that this contrasts sharply with the record of the previous Government which introduced VAT on fuel at 8% and tried to increase it to 17.5%, which introduced charges on eye tests for pensioners, which presided over the mis-selling of pensions which severely damaged the financial security of many pensioners, which ran down the National Health Service on which many pensioners rely, and which was responsible for boom and bust economics which eroded the real value of pensioners' savings through inflation exceeding 10%.'. The debate highlights the Government's progress in two key areas of reform: reform of economic policy to encourage prosperity and growth, and reform to support those in our society who are in most need. I shall deal with a number of points made by the right hon. Member for Wells (Mr. Heathcoat-Amory). His central proposition is that, as pensioners who are non-taxpayers will lose because an alternative has not been provided, the Labour Government have not discharged their duty. That is incorrect, and I shall show why.

In May 1997, the Conservative party left us with an economy with fundamental weaknesses. [Interruption.] Conservative Members do not like hearing about that. It is interesting that they want to forget their poor growth and investment record. Inflation rose above target, and there was a productivity gap of 40 per cent. with the United States of America and 20 per cent. with France and Germany. No wonder they do no want to hear about that. No wonder they do not want to hear about a history of instability that discouraged long-term planning and investment.

Mr. Tim Loughton (East Worthing and Shoreham)


Dawn Primarolo

We immediately had to set about tackling the problems that we faced. Within days we established a new monetary framework, and as soon as possible after that, we established a new fiscal framework. The country needed a platform of long-term stability, and an end to the cycle of boom and bust that has held our economy back for so many decades, against a backdrop of mounting uncertainty and instability in a global economy.

Mr. Nick Gibb (Bognor Regis and Littlehampton)

Will the Paymaster General give way?

Dawn Primarolo

I want to make progress. The hon. Gentleman will have plenty of time to speak.

One of the building blocks necessary for the creation of the economy that we need—an economy with high levels of growth and employment—is the reversal of the legacy of under-investment. The corporation tax system has an important part to play in our strategy for tackling that legacy. The system that we inherited was outdated and in need of modernisation. It involved damaging distortions, which encouraged companies to distribute their profits rather than reinvesting them for future growth and prosperity.

Mr. Gibb

Will the Paymaster General give way?

Dawn Primarolo

No, I will not. I should like to make some progress. When I have done so, I shall be happy to give way first to the hon. Member for East Worthing and Shoreham (Mr. Loughton)—who has also been trying to intervene—and then to the hon. Gentleman. In any event, he will have a chance to comment when he winds up the debate, as he presumably will.

Encouraging high levels of investment is vital if we are to break out of the cycle of boom and bust that has afflicted our economy for so long. We want a more stable and prosperous economy to benefit everyone in Britain. That is what the Opposition fail to understand or recognise. Since coming to office, the Government have introduced an important package of measures to reform corporation tax. First, we cut both the main and the small companies rate of corporation tax by 2 per cent., in July 1997—

Mr. Sayeed

On a point of order, Mr. Deputy Speaker. The title of the motion is "Pensioners and Dividend Tax Credits". That has nothing to do with corporation tax.

Mr. Deputy Speaker

The Paymaster General is perfectly in order, because the Government amendment mentions such matters.

Dawn Primarolo

If the hon. Member for Mid-Bedfordshire (Mr. Sayeed) does not understand the context in which the reforms were made, I do not think I can help him. It just goes to show how little he recognises the devastation that his Government left behind for us to clear up.

As I was saying, we cut 2 per cent. from the small companies and main corporation tax rate in July 1997, and a further 1p in the March 1998 Budget. That means that the main rate of corporation tax will be 30 per cent., while small companies will pay just 20 per cent. The rate of corporation tax is now at its lowest level ever, and is lower than that of any of our major international competitive partners. The hon. Gentleman must understand that. He must also understand that we have given an unprecedented undertaking to guarantee the same rates for the duration of the present Parliament.

Mr. Soames

In explaining the background, will the Paymaster General explain how the loss of £800 for my constituents Mr. and Mrs. George will encourage long-term investment by companies?

Dawn Primarolo

I will answer the hon. Gentleman's question when I reach it in my speech. [Interruption.] The hon. Gentleman asked me whether I was prepared to answer the question, and I am. The answer is that his constituents were provided for, in terms of alternatives for investment. The proposition that his party seeks to advance is that there is no alternative, and that the Government have left such people high and dry. I intend to demonstrate to the hon. Gentleman and the House that is not the case.

Mr. Loughton

I am interested to note that taxing the poorest pensioners is now described as modernisation by the Government.

Will the Paymaster General give me a reference—in an election manifesto, for instance—that suggests that the last Government had anything to do with removing tax credits from the poorest pensioners? That is the point that we are debating. What has it to do with everything that the Paymaster General has come up with so far? Is she trying to pin it on the Conservative party?

Dawn Primarolo

I think that, in his impatience to intervene, the hon. Gentleman forgot the point of his intervention. I am trying to explain to him why reform of the corporation tax system was necessary for the encouragement of long-term investment, in the context of what happened to tax credits. I shall then demonstrate that pensioners who are not taxpayers have an alternative, and that the central proposition in the motion is not sustainable.

Sir Robert Smith (West Aberdeenshire and Kincardine)

Will the Paymaster General give way?

Dawn Primarolo

I will, but then I must make progress.

Sir Robert Smith

What concerns me about the line that the Paymaster General is developing is that it would have been available to the Government in June and July, when I wrote to them about the issue on behalf of a constituent. However, they were not able to produce it until January of the following year. I should have thought that the Government would have accepted that there was a serious concern to be considered, that they wanted to find a way of reforming the position, and that they failed to do so. Why can they not accept that the Opposition have a case, and deal with that case?

Dawn Primarolo

The point of my speech is to demonstrate that there is not an issue in that regard. The hon. Gentleman appears to be criticising the Government on the basis of a series of complaints, suggestions, observations and urgings for reconsideration.

Certainly, the point at issue is important. We are talking about poor pensioners. However, we subsequently reflected on the issue, and made certain that our views were correct as originally stated. That is what we are doing now. That is what I did on 10 December when I made my announcement, and that is what I am explaining to the House.

We have abolished advance corporation tax. We have solved the problem of surplus ACT once and for all, whereas the last Government could only tinker and come up with a partial solution. If Opposition Members want to talk about cutting tax credit, we can produce many quotations from the time when they were in government and pursuing a certain policy.

Earlier, the hon. Member for Mid-Bedfordshire asked about the connection with corporation tax. Here is the explanation that he sought. We have withdrawn payable tax credits for pension funds and companies, and are withdrawing them for individuals from April this year.

Mr. Gibb

Will the Paymaster General give way?

Dawn Primarolo

I have been very generous. I have given way a number of times. I wish to make some progress now; then I shall be happy to give way again. [HON. MEMBERS: "Give way."] It is not for others to tell me when I should give way; it is for me to decide. I have been very generous in taking a number of interventions, and I now wish to make progress.

The withdrawal of payable tax credits has removed the distortion that encouraged large institutional investors such as pension funds to press for higher dividends, rather than allowing companies to retain profits and reinvest in business. [Interruption.] Opposition Members do not want to hear this. They would rather shout insults than deal with the issue.

Our move has created a more level playing field for business and business decisions.

Dr. Lynne Jones (Birmingham, Selly Oak)

Will my hon. Friend give way?

Dawn Primarolo

I hope that my hon. Friend will give me time to make some progress, given the number who wish to speak and the fact that I need to get the Government's view on the record so that hon. Members understand the context in which the decision has been made.

Payable tax credits for individuals will be withdrawn in April. We announced the change in July 1997, giving people nearly two years to consider their investments and, if necessary, to switch them before the rules take effect. The vast majority of shareholders will be unaffected, but we have given the others time to react to the changes, and to plan to protect their income. Of course, they still have a further three months.

The House will note that the motion that the Conservative party has tabled does not call for the reintroduction of ACT. Conservative Members accept its abolition and reform, but ask for a longer period of phasing-out, so the pensioners whom they talk about will be faced with exactly the same decisions, except in the future. So Conservative Members are not saying that they want a different strategy. It is just a way in which to use pensioners and to try to make it sound as if the Government have not provided for an alternative.

I do not propose to give financial advice to anyone from the Dispatch Box. Individuals' circumstances are different and we recognise that, but the House has done all it can for small savers. We have introduced individual savings accounts, which mean that, for the first time, tax-free savings are accessible to all, not just the better off—not that Conservative Members did anything about it when they were in power, or cared about small investors and poorer pensioners who had only a small amount to invest. Did they introduce any vehicles? They did not.

It is the present Government who have made it possible for those on low incomes to have tax-free interest on bank deposits with ISAs, however small their savings. In the past, the most vulnerable savers faced the heaviest tax burden of all on their savings. We have given them that opportunity without restricting their flexibility to withdraw money if they need it.

Mr. Gibb

I am grateful to the hon. Lady for giving way at last. Does she believe that the long list of economic objectives that she has set out will be achieved by taking £25 million from 300,000 poorer pensioners?

Mr. Nicholas Winterton

That is it in a nutshell.

Dawn Primarolo

In a nutshell, the investors in question have alternatives. Again, the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) seeks to perpetuate the suggestion that the money is to be taken away from those people and that there is no alternative. That is not true: alternatives are there. [Interruption.]

Mr. Deputy Speaker

Order. Perhaps some hon. Members could calm down.

Dawn Primarolo

It is, Mr. Deputy Speaker, because Conservative Members are so pleased to see me at the Dispatch Box and keen to participate in my first contribution as Paymaster General. That is it in a nutshell. I can always rely on Conservative Members to assist me when I speak from the Dispatch Box.

Mr. John Bercow (Buckingham)

Will the hon. Lady give way?

Dawn Primarolo

No. I will not give way to the hon. Gentleman.

Dr. Lynne Jones

I agree with everything that my hon. Friend has said, and the Government are right to abolish ACT. However, could the Government not institute a system that allows non-taxpayers, who, by definition, must be on low incomes, to have their dividends paid tax free? Such a system already exists for bank and building society interest, where they fill in form R85. Why could not such a system be put in place?

Dawn Primarolo

Savings vehicles are available to those investors that would enable them to invest and to get a return on their money. Again, the Opposition seek to make it sound as if there is nothing else that those people could do.

Mr. Bercow


Mr. Deputy Speaker

Order. The hon. Member for Buckingham (Mr. Bercow) keeps bobbing up and down and asking the Paymaster General to give way. It does not seem as if she wants to give way to him.

Dawn Primarolo

Within ISAs, those who invest in equities will continue to have payable tax credits for a further five years, despite the corporation tax changes. Already more than 300 providers have registered with the Inland Revenue to offer the ISAs. That will help to make them widely available and to create competition between providers. We have also introduced the CAT—cost access terms—standards, which will help to keep charges down, making ISAs potentially good value for money investments even for those on low incomes and small investors.

That is the point that Conservative Members cannot understand and will not acknowledge. Most important—[Interruption.] Conservative Members table a motion about poor investors, savers and those who are on low incomes and then will not listen to the Government's case, which demonstrates that what they say is wrong. If they are so concerned, during this part of my speech—after asking me to address the matter—they should at least let me make some progress.

Most important, for all savers, we are determined to end the cycle of boom and bust that dragged down the economy and the value of people's savings under the Conservative Government.

Our corporation tax reforms provide a framework for long-term growth. They remove a number of serious distortions from the system and enhance the competitiveness of the United Kingdom as a location for international investment. They are good for the economy. That means that they are good for everyone, including pensioners.

Mrs. Jacqui Lait (Beckenham)


Dawn Primarolo

I have been very generous in giving way, but I will give way to the hon. Lady and then make some progress.

Mrs. Lait

The hon. Lady is trying hard to get across the Government's policy. She says that the Government are offering an alternative to poor pensioners who save through shares. How much would she expect a poor pensioner to have to pay in charges to sell the shares? How much capital gains tax would the poorer pensioner be liable for? How much would the charges be to buy a PEP, TESSA or ISA?

Dawn Primarolo

The hon. Lady will know that it depends on which particular services are used, but as she will also acknowledge—presumably, she supports the Government's policy—by the use of the CAT standards and by increasing competition in the market, we are driving down those charges.

Several hon. Members


Dawn Primarolo

I have taken eight interventions. I should like to make a little more progress.

Under the Government, pensioners are better off. They have been better off since the Government took office and are certainly better off since we announced our corporation tax reforms in July 1997. As Conservative Members obviously want to be reminded of the good things that the Government have done, let me go through a few of them.

Mr. Geraint Davies

Will my hon. Friend give way?

Dawn Primarolo

I will not, if my hon. Friend will forgive me.

In the comprehensive spending review, we announced a £2.5 billion package of support for pensioners. I say to each pensioner: the Government care for pensioners and for the poorest pensioners. The right hon. Member for Wells sought to ridicule the changes to increase income support for those in most need: an extra £236 for a single pensioner and £377 for a couple. Those increases are three times the increase due under the normal uprating.

It was the Conservative party that ended free eye tests and that now tries to masquerade as a supporter of poor pensioners; it did not worry about them when it abolished free eye tests. It was the Conservative party that put value added tax on fuel and tried to raise it to 17.5 per cent. Its concern for poor pensioners did not exist at that stage. Obviously, it has found it only in opposition.

We are introducing a programme to ensure that people can claim the benefits to which they are entitled. Millions of pensioners are not getting what they are entitled to. When in government, the Conservative party did nothing about that. Conservative Members now have the cheek to tell us that they care for poor pensioners.

This winter and last winter, we gave each pensioner household a £20 winter fuel payment, with a £50 payment to those in most need. Along with the cut in VAT and other measures that we have taken, pensioner households benefit by an average £108—it is £140 for the poorest. We are also investing £500 million over the next three years to continue with the provision of winter fuel payments. We reversed the previous Government's decision to charge for eye tests. Conservative Members would not support us or congratulate us on that, or say that it will help poor pensioners. They abolished free eye tests, but we restored them.

The NHS is particularly important for pensioners. In our first two years in office, we are investing an extra £2.25 billion in the NHS. We also plan to deal with our inheritance from the Tories.

Here are the facts: help on fuel; minimum income guarantees—

Mr. Soames

On a point of order, Mr. Deputy Speaker. I wonder if you could help my constituents, who look to Parliament to protect their rights. How are they to get a truthful answer to the question of how having £800 taken from them will make them better off? How am I to get an answer to that question, Mr. Deputy Speaker?

Mr. Deputy Speaker

I am quite sure that the hon. Gentleman knows how to help his constituents, and that he knows his way around the House. It is not a matter for the occupant of the Chair.

Dawn Primarolo

The hon. Member for Mid-Sussex (Mr. Soames) can help his constituents by understanding the changes that the Government have made and by explaining them properly to his constituents, rather than by building on his constituents' concerns and fears about losing money. He should explain to them the alternatives.

The Government have provided more investment in the NHS, and free eye tests. Those measures will help to ensure that pensioners have higher spending power and a better standard of living. Conservative Members failed to implement those measures when they were in government.

The Government's programme does not stop at helping today's pensioners, because we care also about tomorrow's pensioners. Conservative Members did not worry about those pensioners when they presided over the pensions mis-selling scandal. This Government tackled that problem and are fighting for pension security. My hon. Friend the Economic Secretary to the Treasury continues to work closely with the pensions industry, making more progress on the matter than was ever made by the previous Government.

Mr. Steve Webb (Northavon)

Will the Paymaster General give way?

Dawn Primarolo

I shall not give way to the hon. Gentleman. I have spoken for a considerable time and have given way nine times, and many hon. Members wish to speak. The hon. Gentleman should respect that.

Mr. Bercow

Will the hon. Lady give way?

Dawn Primarolo

Much as I am tempted to give way, the answer is no.

In December, the Government announced another major plank of their welfare reform package—the Green Paper, "Partnership in Pensions". The Government are about helping tomorrow's pensioners and protecting today's pensioners, and about examining retirement issues and ensuring that there is security in retirement. That is good news for pensioners.

Conservative Members' record on helping pensioners shows that they have no right to try to lecture the Government on caring for the poor. They failed today's pensioners, and they failed tomorrow's pensioners. They spent years not addressing the issues. They put VAT on heating after promising not to, and they did not help to solve the pensions mis-selling scandal. The Tories wrongly encouraged people to opt out of occupational pensions into private personal pension plans, and failed to take action to compensate victims of pensions mis-selling.

Conservative Members do not know what it is to keep a promise, and they are angry that the Government are delivering on our promises. I tell my hon. Friends that the Opposition motion is about using pensioners, frightening people and failing to explain what they know to be the case—there are alternatives, and people's income can be protected. I urge my hon. Friends to reject the Opposition motion and to support the Government amendment.

8.4 pm

Mr. Edward Davey (Kingston and Surbiton)

I congratulate the Paymaster General on her promotion—which she may not have expected. Other than the Chancellor, she is now the only Minister who has been at the Treasury since abolishing the tax credit was first proposed to the House. I hoped that, today, the Paymaster General would offer a better defence of the proposal. However, she failed to answer any of the substantive questions asked by Opposition Members—specifically that asked by the hon. Member for Beckenham (Mrs. Lait)—which is deeply to be regretted.

I congratulate the official Opposition on their motion, which has the support of myself and other Liberal Democrat Members. For many months, we have supported and worked on the issue with Conservative Members. I pay credit specifically to the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb), who has worked with my hon. Friend the Member for Twickenham (Dr. Cable), to create a cross-party alliance. We have been pleased also that some Labour Members have supported us in our early-day motion. In Committee, we all remember the brief but pertinent and very effective—or so we thought—intervention made by the hon. and learned Member for Dudley, North (Mr. Cranston), the new Solicitor-General, who has gone on to higher things. We had hoped that he would use his influence to express his concern about the poorest pensioners, but, regrettably, that has not happened.

I welcome this debate because it gives the Opposition an opportunity to expose the Government's soundbite politics, which overwhelms substantial politics. The Prime Minister was at it again this weekend, in the News of the World, when he said: This is your Government, living in your world, with your priorities. He applied the usual Government spin about the Government's minimum income guarantee for pensioners, which is an Arthur Daley guarantee and is not worth the paper it is not written on.

The Government's real policies take money from pensioners. Moreover, the minimum income guarantee will not protect any of the pensioners whom we are considering in this debate, as most of them will have savings above £8,000 from which they gain their dividend income. They will not be eligible for the income support increases mentioned by Ministers. Those pensioners, therefore, will be affected but not protected by the Government's policy. The Paymaster General shakes her head. I should be grateful if she would intervene on that substantive point. I should like her also to deal with it in her reply. Opposition Members are concerned that those pensioners will be affected and that they will be offered absolutely no protection.

I welcome the Government's amendment, as it enables us to refer back to last week's Opposition day debate initiated by Liberal Democrat Members. In that debate, we demonstrated that the Government's NHS policy would not help pensioners as Ministers claimed it would. Ministers go on and on about the £21 billion that the policy will provide for the NHS—but Liberal Democrat Members demonstrated in last week's debate that if the year-on-year increases made by the previous Government were projected over this Parliament, the current Government will, by the fifth year of this Parliament, have produced only £1 billion extra for the NHS. That is the extent of the Government's commitment to the NHS and to the pensioners who use it. Over five years, the figure is £1 billion, not £21 billion; it is a total nonsense and fabrication. I am therefore glad that the Government have tabled their amendment, so that we can again demonstrate that that figure is a complete fabrication.

There is a long history to the debate on the issue, with which the House has dealt on many occasions. As I said, Liberal Democrat Members have developed a co-operative approach. When the issue was first debated, on 22 July 1997, in the Standing Committee considering the Finance (No. 2) Bill, I joined the hon. Members for Daventry (Mr. Boswell) and for Ashford (Mr. Green) in warning Ministers about the effect of their proposals. As the right hon. Member for Wells (Mr. Heathcoat-Amory) pointed out today, the measure was being guillotined and rushed through. However, we gave Ministers the benefit of the doubt.

In Committee, the hon. Member for Ashford and I pointed out that the Government had perhaps made a mistake, and suggested that they probably did not intend to hit the poorest pensioners. We gave them a chance to make amends. Unfortunately, Ministers were in a fairly belligerent and arrogant mood, and they told us that we were lecturing them. The Government, of course, take lectures from no one, as they keep reminding us. Nevertheless, it was a shame that they did not listen to us, because we were pointing out that an issue of social justice was involved. I thought they were supposed to care about such issues. I hoped that Ministers would listen to us, rather than respond as the then Economic Secretary did.

Mr. Webb

The Paymaster General mentioned pensions fraud when talking about social justice. Surely one of the biggest pensions frauds of recent years was the raiding of the pension fund of the bus employees, who are now pensioners. Will my hon. Friend join me in calling on the Treasury to make a clear statement that it will not block attempts to get justice for those pensioners, as reported in The Guardian today?

Mr. Davey

I am grateful for that intervention because it shows one of the problems with the Government. One Minister is warring with another and they cannot make up their minds. That is what happened in this case. The previous Paymaster General said that he would review it and made promises to the House of Commons, but other Ministers did not follow through on that. The Deputy Prime Minister was clearly trying to bat for the bus employees, but he has been blocked by the Treasury.

After the initial debate in Committee on dividend tax credits on 22 July, the issue came back to the House on Report on 29 July, but we got no movement from the Government. It was then raised in Committee on 14 May 1998 as a result of initiatives by the hon. Member for Bognor Regis and Littlehampton. The Liberal Democrats supported him, with effective speeches coming from my hon. Friends the Members for Twickenham and for Torridge and West Devon (Mr. Burnett). I warned the Government that: We are talking about the most disadvantaged and vulnerable elderly people in our constituencies. Do Labour Members really want to impose a savage tax increase on those people? The good news was that we got a sign of movement. A professor—the hon. and learned Member for Dudley, North—said that the Government should look again at the issue. He seemed to have some influence with the then Paymaster General. Those of us who were on the Committee remember the discussions that they had on the Back Bench, seemingly stitching something up. We got the first glimpse of light from the Paymaster General when he said: Perhaps a case can be made for an overall limit on payable tax credits, which might be in the region that Age Concern described in its very good paper. That is not a promise; it is merely a promise to revert".—[Official Report, Standing Committee E, 14 May 1998; c. 190-94.] When we reverted to the issue on Report on 30 June 1998, the hon. Member for Bognor Regis and Littlehampton tabled a new clause. The debate brought forth another delphic pledge from the former Paymaster General. He said: I am also aware of the growing anxiety among poorer non-taxpayers who have been hit by the measure. He added: We are looking at alternatives".—[Official Report, 30 June 1998; Vol. 315, c. 175.] He did not make a promise—he was clear about that—but we felt that a nod was as good as a wink with him. We were hopeful that the review that he announced would produce something of substance. We were encouraged when Labour Back Benchers joined forces with Conservatives and Liberal Democrats on early-day motion 56, which gained more than 20 Labour signatures. Some of those Labour Members are present tonight. We have heard from the hon. Member for Birmingham, Selly Oak (Dr. Jones). I see the hon. Member for Stroud (Mr. Drew) here as well, who also signed the early-day motion.

It looked as though we were building up a head of steam, but there was continual delay and equivocation. Although we were pressing the Government in private meetings and letters—my hon. Friend the Member for Twickenham sent a letter to the Prime Minister on 25 November—we were getting no response.

My right hon. Friend the Member for Yeovil (Mr. Ashdown) asked the Prime Minister about the issue at Prime Minister's Question Time on 9 December. That seemed to prise out an answer. The answer to my hon. Friend the Member for Twickenham from the then Financial Secretary appeared on 10 December. As the right hon. Member for Wells said, that answer was brief and continued the discredited arguments that the Government had used in the past—that the removal of the tax credit was somehow about removing distortions and that alternative savings vehicles were acceptable and equivalent.

That answer broke the pledges that we felt we had secured. It went back on what pensioners thought the Government were doing. The Paymaster General said tonight that the Government had given pensioners a good deal of notice so that they could change their affairs, but then they set up a review. There was uncertainty about the Government's policy; only on 10 December was it made clear. In effect, there is only three or four months warning.

Mr. Geraint Davies (Croydon, Central)

I seek confirmation of the Liberal Democrats' position. Is it simply to extend the 10 per cent. tax credit—which is already available to the group that we are talking about for five years under individual savings accounts—to beyond five years? Is that the extent of their great new policy?

Mr. Davey

Opposition Members would like to return to the situation before the 1997 Budget.

The Government's arguments do not bear analysis. Their first argument is that no one need lose because everyone can change to the new ISAs, which we have not yet seen. Ministers are not living in the real world, despite the Prime Minister's comments that the Government are pursuing the policies of the real world. I do not know whether the Paymaster General's elderly constituents in Bristol, South are sophisticated financial savers, but many of my constituents who come to me want help with council tax benefit forms or housing benefit forms. The forms worry them. My grandmother is 82, going on 83. She has osteoporosis and is partially sighted. She seeks my help just to pay her utility bills. Many elderly people cannot cope with the financial transactions required to make such shifts in their savings.

I was interested to read a report from the Chartered Institute of Taxation's low incomes tax reform group, published in December last year.

Mr. Barry Gardiner (Brent, North)

I have two brief questions. First, given the hon. Gentleman's remarks about the Liberal Democrats' preference for reverting to the previous situation, what would he do with advance corporation tax? Secondly, if people over the age of 60 are incapable of filling in forms, how do they reclaim their tax credits?

Mr. Davey

We have spoken to many groups—particularly the Chartered Institute of Taxation—which have said that they are more than happy to work with the Government and all parties in the House to produce a result that will protect the people about whom I am talking and would allow the Government's major policy to go forward. The former Paymaster General was having such discussions with hon. Members. I cannot accept the hon. Gentleman's point on that.

Many people have problems filling in forms. Clearly, some are able to claim the tax credit because they have been doing it for some years. The point is that they have got used to it. Many people do not benefit from the tax credit because they cannot fill in the forms. The hon. Gentleman's point does not follow through.

I recommend that the hon. Gentleman reads the report from the Chartered Institute of Taxation, which chose to study the taxation position of older taxpayers first among low income groups, because there are particular problems for that group. They have practical difficulties with filling in forms. They are not at work, so they have no payroll department from which to get advice. Many of them are not mobile, so they cannot go to tax offices for advice. The Inland Revenue's standard response is that it has free telephone lines. Many elderly people are hard of hearing. The report refers to the estimate of the Royal National Institute for Deaf People that 55 per cent. of people over 60 are deaf or hard of hearing, making telephone communication difficult, while 570,000 have severe or profound deafness that may need communication by text phone or video phone, which very few of them have. As well as having difficulty with mobility or hearing, some of those people are partially sighted.

Mr. Desmond Swayne (New Forest, West)

The hon. Gentleman will be aware that the Paymaster General pointed out that as a consequence of the Government's policy—the quid pro quo of taking away the tax concession—pensioners at least have the benefit of free eye tests.

Mr. Davey

I am grateful for the hon. Gentleman's intervention, but he will agree that those free eye tests do not make up for the loss of the tax credit.

Ordinary people who will be hit by this measure face difficulties in filling in tax returns. The Royal National Institute for the Blind reported that, in 1996, there were estimated to be about 950,000 people in the UK over 60 suffering from blindness or partial-sightedness—making it difficult for them to follow the tax guidance or fill in the forms.

Mr. Geraint Davies

It follows from what the hon. Gentleman is saying that owing to the many disabilities of the more mature people in our population, there should never be any changes to tax regulations on the basis that a change could not be understood by people who are becoming chronically deaf or blind.

Mr. Davey

That is not the logical consequence of what I am saying. The Government say that those people can move their savings that are currently held in shares into new savings schemes. My point is that, in the real world, it will be difficult for some of them, as they are not avid followers of the financial pages.

Mr. Michael Jack (Fylde)

Is the hon. Gentleman aware of the previous Government's attempt to address this very problem with the tax back campaign, which attempted to return to exactly the group of people whom the hon. Gentleman is describing some £560 million by means of national advertising and freephone telephone numbers? Does that not support the very point that he is making?

Mr. Davey

Yes. However, it is a shame that the previous Government took so long to get rid of composite rates on building societies. When they were abolished, that campaign was launched. Liberal Democrats had pressed the previous Government to get rid of that composite rate of tax for many years, but it took them a long time to get around to it. We welcomed it when they did do it.

My first point—[HON. MEMBERS: "First?"] The first point in this part of my speech concerns the proposed alternatives. For many people, these are not practical.

Mrs. Theresa May (Maidenhead)

Will the hon. Gentleman give way?

Mr. Davey

If the hon. Lady does not mind, I want to make progress. Ministers are clearly worried that I am taking up a lot of time, and I apologise for that.

The Government's solution of people moving to ISAs will not work—this follows on from the point made by the hon. Member for Beckenham. The charges on joining an ISA are likely to be substantial. Even with the cost access terms standard and other simple schemes, according to the Age Concern briefing that I was given before the debate the charges are likely to more than outweigh the tax credit.

The cost of holding investments in an ISA is estimated at around 0.5 per cent. of the value of the shares in the ISA. The value of the shares that would have produced a tax credit of £75 per year for non-taxpaying pensioners would have been about £12,500, using the Treasury's estimates of the income from such shares. That means that holding those shares in an ISA would cost £62.50 per year. When the estimated start-up costs for an ISA of £125 are added, it becomes clear that the cost of transferring and holding investments in an ISA for those low-income pensioners will be more than the tax credit. The Government's argument that those pensioners need not lose out and will remain protected is simply wrong in fact and in practical reality.

Another argument in the parliamentary answer of 10 December is that the tax credit is a distortion and has to be abolished. That was debatable, but let us be charitable. Let us agree that, overall, the ACT system was distortive, pushing firms into higher dividend policies and away from retaining profits for growth. Let us accept that as a hypothesis.

The question for this debate is whether retaining the tax credit for 630,000 non-taxpayers keeps that distortion. That argument defies credibility. It is one thing to say that major pension funds demand higher dividends because of the tax system and can exercise influence on a firm's financial policies; it is quite another to say that children and the elderly—who make up most of those 630,000 people—will be so influential as to force firms to alter their financial planning. What percentage of UK plc is held by those 630,000 non-taxpayers?

The Government seem to think that chief executives and boards across the country are quaking at the thought of Aunt Agatha and her friends complaining that too much profit is being retained by the company. That is a total nonsense. The Government's answer on 10 December was a disgrace and showed that they have lost the argument. Ministers are trying to avoid that point and are saying that their generosity elsewhere to pensioners makes up the difference. The reality—as the motion makes clear in relation to other policies—is that it clearly does not.

I wish to refer to the minimum pension guarantee. A constituent phoned me this morning because she had read the article by the Prime Minister in the News of the World yesterday. She had read about the minimum pension guarantee and wanted to know whether her pension would go up. I asked her a few questions, and it was clear that it would not. The minimum pension guarantee refers to increases in income support, for which she is not eligible. We know that more than 1.1 million pensioners are eligible for income support but do not claim it, and almost 500,000 of those are women over the age of 75. Those pensioners are losing an average of £15 a week—or £780 a year. Another 600,000 pensioners' incomes fall below the income support level, but their small savings—perhaps just over £8,000—prevent them from benefiting from income support and from the Government's proposed minimum income guarantee. The minimum income guarantee will not help those people to offset the tax rise.

We welcome the Government's attempts and measures to improve the take-up of income support and we hope they work. However, why in the meantime are the Government taking away an average of £75 from many of the same pensioners—£75 which is taken up and which is extremely important? The policy goes against the Government's stated aims—aims which are far from being realised.

The other policy that the Government have pushed tonight is the winter fuel payment. This is a gimmick of a policy, and we should look at how much it is costing in bureaucracy. My hon. Friend the Member for Northavon (Mr. Webb), with his usual forensic skills, has shown in questions to Social Security Ministers that by paying for the scheme in a one-off payment of £20—rather than a simple 40p a week on the basic pension—the extra bureaucracy is costing £12 million. On top of that, there is the need to spend £1.7 million to advertise the winter fuel payments. In other words, £14 million has been wasted on bureaucracy and advertising when restoring the tax credit would cost about £25 million. That shows the extent of the Government's support for pensioners and their priorities. The Government have mentioned free eye tests and concessionary fares, and we support those policies—we were the first to propose them.

The Government talk about tax guarantees, but no one knows what the Chancellor means. On 14 July, when he published the comprehensive spending review, he said: We shall also set a tax guarantee that no pensioner will pay income tax unless their income rises above a specified level."— [Official Report, 14 July 1998; Vol. 316, c. 193.] That sounds excellent—but unless I have missed them, no details have been announced, not even in the "Partnership for Pensions" Green Paper before Christmas. In December, the Chartered Institute of Taxation's low incomes tax reform group commented: Mr. Brown provided no further explanation but presumably he meant something more than retaining the existing system of allowances at current levels, otherwise the undertaking would have been meaningless. We all know that the Chancellor is the man of substance in the Government, so we eagerly await an explanation of his meaning about the tax guarantee. I hope that a Treasury Minister will enlighten us about that today. Otherwise, we suspect that the guarantee is meaningless.

I recommend to Ministers an idea proposed by the Chartered Institute of Taxation. It argues cogently for a new system of tax exemption certificates, granted every four years, which would be a pensioner's response to every Inland Revenue tax form and could perhaps become the embodiment of what the Chancellor means by a tax guarantee. Such a system would save a lot of heartache and worry among elderly people.

I want to be constructive and to propose prudent and effective policies to help the poorest pensioners. Liberal Democrats have suggested an increased and expanded age addition to the basic pension. We believe that we must support the elderly and give them dignity in retirement. We suggest an extra £3 a week for those over 75 and an extra £5 a week for those over 80, which would be taken up as all pensioners over 75 would benefit. That would put an end to the insulting extra 25p a week now given to those over 80.

The Government must start tackling poverty among pensioners. Labour should stop the new tax rise for pensioners and increase pensions, giving priority to those most in need.

8.31 pm
Mr. Eddie O'Hara (Knowsley, South)

As Labour co-chairman of the all-party group on aging and older people, and a co-signatory of the early-day motion that has been referred to, I feel that I must contribute to this debate. That early-day motion was tabled before we had the promised clarification by the Paymaster General. It asked for that clarification and, naturally, requested an outcome in accordance with the reasons for seeking a review in the first place.

The Opposition motion is, rather lazily, based on that early-day motion, the signatories to which may not be happy to be associated with an attack on the Government for their decision, after the event. But I make no complaint about that: it is all part of the robust style of debate in the House, in which all parties indulge on different occasions.

I shall not indulge in point scoring or political embarrassment, but I once again make a reasoned appeal to the Government on this matter. I wrote to my hon. Friend the Paymaster General after the clarification was announced in December. Will the Government, even at this late stage, consider the point that, as the tax credit will remain payable in respect of dividends paid on investment in ISAs and PEPs until 2004, and for up to seven years for charities, it does not seem logical that it cannot be paid to UK resident non-taxpayers during that same period?

It is only non-taxpayers who lose income because of the decision. In July 1997, the Inland Revenue even went to the extent of ensuring that higher-rate taxpayers did not suffer as a result of the reduction of the tax credit to 10 per cent. Non-taxpayers—those on the lowest incomes, as has fairly been pointed out—-will lose income from April 1999. That does not make logical sense to me.

Two thirds of pensioners pay no tax, so tax-free savings are an inappropriate and unnecessary compensatory mechanism for them. The cost implications of transferring investment to ISAs are liable to outweigh any benefit from retaining the 10 per cent. tax credit, because the start-up costs are so great and there are limits on how much can be transferred into an ISA in any one year.

I hear the arguments about the macro-economic benefits to the Treasury accruing from the adjustments to advance corporation tax, and the arguments that have been rehearsed many times by my hon. Friend the Paymaster General about the alternative shelters for investments, but I ask the Treasury to consider the puny £25 million that it would cost to restore the tax credit facility for non-taxpayers, as against the £5.4 billion accruing to the Treasury from the overall adjustments to tax credits.

I ask the Treasury, even at this late stage, to consider the fact that some old people manage their own investments. I hear what my hon. Friend the Member for Croydon, Central (Mr. Davies) said about people being senile, deaf and blind, but there are old people in the real world who manage their own investments and may not be able or disposed to reorder their investments into ISAs as has been suggested, which may in any case not even be cost-effective.

I urge the Government to consider whether UK resident non-taxpayers should be able to continue to claim the reduced tax credit of 10 per cent. on their investment income after 6 April 1999. As a minimum, they should be allowed to claim the tax credit until 2004, when it will be phased out for PEPs and ISAs, or until 2006, when it will be phased out for charities.

In all friendship and reason, at this late stage, I make that appeal to the Government. Whatever the outcome of this debate, I shall continue to appeal to their reason, good will and generosity of spirit on this matter.

8.38 pm
Mr. Michael Jack (Fylde)

I congratulate the hon. Member for Knowsley, South (Mr. O'Hara) on a brave and principled speech. He has thought through his arguments carefully and put them before the House with clarity. He made a telling point at the end of his speech, reminding us that this is certainly not the last drop saloon for this issue. If the Government are unmoved to change their mind, even at this late stage, as he said, there will still be an opportunity for the matter to be revisited on each and every Finance Bill of this Parliament, as we attempt to change the Treasury's view.

I was planning to make a very short speech, but I have to respond to one or two of the Paymaster General's comments. It was sad that she was not prepared to face the music of financial analysis; otherwise, I would have reminded her that, when I held the post that she held until recently—Financial Secretary—I considered the differences between classical corporation tax systems and those such as ours, based on the imputation system.

Many of the arguments now made in strict economic terms to justify the change simply did not stand up, according to the arguments of the Treasury officials: the same officials who now advise the Government. They pointed out to me that the biggest single economy in the world that works on a classical corporation tax system—that of the United States—has a higher level of distributed profits than the United Kingdom economy.

It is a bizarre idea that, by recreating a classical system in this country, there will be a magical improvement in economic activity. That is for the birds. The former Secretary of State for Trade and Industry, the right hon. Member for Hartlepool (Mr. Mandelson), made many trips to the United States to learn how it was that that economy was so vibrant and healthy in terms of growth and job creation—in short, how it managed to do exactly what Treasury Ministers claim will be achieved by the Government's policies to change the tax system. In economic terms, the Government's arguments do not add up.

The second charge made by the former Financial Secretary was that the previous Conservative Government did nothing to support savers. I remind Ministers that one of our best achievements was to change the tax system so that many pensioners became non-taxpayers—one reason for our being here tonight. We also worked hard on TESSAs and PEPs, and we did much to help saving and the ethic of saving in this country.

However, I shall focus on some of the wider consequences of the change. We have talked about its impact on pensioners, and the Government have argued that people can make compensatory adjustments to their financial position and income flow. I have studied a group of institutions that find it incredibly difficult to make such adjustments, but whose investments service the needs of their pensioners.

I started with the Church of England, and the Economic Secretary might be interested to know that, in answer to a question from me, the hon. Member for Middlesbrough (Mr. Bell), in his role as Second Church Estates Commissioner, representing the Church Commissioners, said: At their 1997 dividend levels, the Commissioners estimate that the removal of payable tax credits will ultimately reduce their income and their total investment returns by £12 million annually. Each and every year, therefore, the Church of England will have to find another £12 million. Grossing up that figure to include other Churches, I estimate that this country's Churches, all of which have a responsibility for former clergy, will be about £40 million down as a result of this mean-minded measure.

A closer examination of the effect on Church pension funds of the change reveals that, again according to the hon. Member for Middlesbrough, it will also reduce returns on the newly established contributory pensions scheme, which meets pension liabilities for service from 1998 onwards, which is administered by the Church of England Pensions Board."—[Official Report, 7 December 1998; Vol. 322, c. 53.] Will the Economic Secretary say how the Church of England is supposed to extract from the already limited money in its Sunday morning collection plates an extra £12 million every year? It cannot adapt to those conditions easily, but perhaps the Minister believes that the widow's mite will make up for the Treasury's meanness.

I also checked the effect of the policy on other Churches. For the Roman Catholics, Monsignor John Moore said a submission to the Treasury had been made to point out the folly of its ways—perhaps the Catholics hoped that a sinner would repent, even at such a late hour. However, Monsignor Moore said the measure would cause a "considerable loss" for his Church's pension funds.

It is clear that the entire Christian community will stack up against the policy, but the effect is not limited to the Christian Churches. Those who are of the Jewish persuasion are already employing actuarial experts to work out the impact for them. Fundraising in these areas is most difficult, yet the Government have decided to hit them hard.

Finally, the effects go beyond what will be felt by the Churches and there will be a substantial impact in the world of charity. The Government talk about looking after the least well off and those deserving of help, but the Treasury received a collective submission from the charities which pointed out that the effect of removing the payable tax credits was a reduction in resources of about £400 million a year. The charities calculated that that was equivalent, given their annual turnover of £12 billion, to a total cut of 3 per cent. and that it doubles the amount already taken through the irrecoverable VAT inputs.

That is a fine record for a Labour Government in regard to those groups that are least able to do anything about their income. Such groups try to help the worst off in society, and give comfort and succour to those in need. The reward that they get is that the Government take away their money.

8.45 pm
Mr. Ian Pearson (Dudley, South)

I begin by welcoming my hon. Friend the Paymaster General to her post. Although she is not at present in the Chamber, I know that in the past she has shouldered much of the burden of Finance Bills: her hard work means that she deserves her promotion.

The Government are right to abolish advance corporation tax and foreign income dividends, and to phase out dividend tax credits. I must resist the temptation to engage in economic debate with the right hon. Member for Fylde (Mr. Jack), but I am persuaded that a modern corporation tax system with in-year payments will remove previous distortions in the market. In the long run, it will lead to greater investment in British business.

The Conservative Government broke the link between pensions and earnings. They were also responsible for pensions mis-selling and for taking away free eye tests. Until the Labour Opposition stopped them, they would have doubled VAT on fuel as well. It is a bit rich, therefore, for Conservative Members to argue that they are standing up for the rights of pensioners. Already, after only 20 months in office, it is clear that this Labour Government care for pensioners and want to do something practical to help the poorest pensioners in our society. The minimum income guarantee for pensioners, lower fuel bills, the state second pension and stakeholder pensions—all those initiatives show that Labour are delivering on election promises.

The facts in the debate are a little out of date but not seriously in dispute. About 300,000 non-taxpaying pensioners receive a dividend credit of about £75 on average. That average implies a saving fund of about £12,500. Pensioners probably will have got their money through a building society demutualisation, or through investments in one or two privatisations whose shares they have kept as savings in their own accounts. About 160,000 non-taxpaying pensioners have a dividend tax credit of £50 or less.

Does it matter? I suggest that the average of £75 per year that the non-taxpaying pensioners will lose is significant.

Mr. Robert Syms (Poole)

Will the hon. Gentleman give way?

Mr. Pearson

In a minute. The minimum income guarantee is of £75 a week for a single pensioner, so we are talking about a loss equivalent to one week's earnings for a poor pensioner. That is an important amount for people on low incomes and we need to think carefully about what to do about it.

Mr. Syms

No doubt the hon. Gentleman has received letters from pensioners complaining about the change. In his replies to them, has he called the change insignificant?

Mr. Pearson

The hon. Gentleman must have misheard me. I said that the change is significant and that the Government must consider what to do about it. I listened to my hon. Friend the Paymaster General with great interest when she talked about alternative saving vehicles. The ones that exist are relatively straightforward. At present, they are either PEPs or TESSAs, which in the future will become ISAs. It is clear that, in relation to a fund size of £12,500, the average costs of management charges at 0.5 per cent. will more than swallow the benefits to be gained by sheltering half the dividend tax credit in one of the new ISAs.

The Government appear to be saying that small shareholdings of £12,500 are not appropriate for people on low incomes and that they would be better placed as individuals getting tax relief by putting their money in a building society or some other savings vehicle, because they can at least claim the tax benefit from doing so, whereas if they invest in the equity market, they cannot. I am not sure that that is a message that we should be sending to poor non-taxpaying pensioners, but it appears to be the logical conclusion to draw from the Government's actions.

I am worried that, despite the many Government actions to help pensioners, the measures that we are debating will appear to many pensioners to be mean-minded and unfair. The issue will not go away and the Government should reconsider.

8.51 pm
Mr. Howard Flight (Arundel and South Downs)

Albeit in her absence, I congratulate the Paymaster General on her promotion. I sympathise with her attempts to defend that which most hon. Members believe to be quite indefensible. I shall refer to the arguments she used, but it must be said that there can be no justification for worsening the position of those who, by definition, are badly off, for they do not pay tax. By removing what small income they receive, the position of those pensioners is worsened relative to most other pensioners. All pensioners receive a fuel allowance, but the pensioners affected by the measure—those who have capital—will not benefit from income support. My constituency contains many such pensioners—people who never had an occupational pension, who spent their careers about the world and who have retired to my area. Many of them are not well off and fall into the category of pensioners who are affected by the measure.

I cannot understand the justification for the abolition of advance corporation tax—-the whole argument is totally bogus. Everyone knows that the change was made to increase tax revenue by £5 billion per annum, at the expense of pension funds. Every economist knows that it is nonsense to argue that investment increases if the money is left with companies rather than distributed, and if the market is left to decide how it is to be reinvested. The result of the changes is that the savings rate has fallen from 10.4 per cent. to 7.2 per cent. As everyone knows, in the long term, investment is a function of savings; therefore, as the savings rate in this country falls, so does investment. Smokescreens and distortions have been thrown around what is essentially a tax-gathering change; and in an obscure little area, in a mean and doctrinaire measure, a tax credit benefiting a particular category of not-well-off pensioner that cost only £25 million per annum has been abolished.

The reason why the Government have refused to give way is not administrative—as we know, form R85 could deal perfectly easily with the situation. They refuse because the sort of elderly person who has a few shares does not appeal to the Government—they do not see such pensioners as their supporters and cannot derive from doing something for such pensioners the sort of propaganda hype that can be spun from winter fuel payments and alleged income guarantees. The pensioners who are affected by the Government's changes are independent people, self-respecting, often elderly widows—-not the sort of people who fit into the Government's preferred role model. The Government believe that they are not worth bothering about, even though the cost of helping them would be minuscule.

I cannot understand how a Government headed by a Prime Minister who claims that a fair society is a priority can do such a thing. I cannot understand how the Paymaster General could have believed any of what she said this evening. I call on the Government to get over their pride, and end a policy that is hugely unfair and that falls on those who are least able to afford it in their old age. It makes nonsense of everything the Government claim to stand for to do something like that.

8.55 pm
Ms Ruth Kelly (Bolton, West)

I have recently had occasion to reflect on the subject of the debate and find it astonishing that the Opposition should have chosen the Government's actions in respect of pensioners as their line of attack. As my hon. Friend the Paymaster General said, the Opposition do not have an honourable record on the subject. To call themselves the friends of the pensioner, when the Conservative Government were involved in the huge pensions mis-selling scandal in which 600,000 people at or near retirement were mis-sold pensions, is a bit rich. However, I shall do them the courtesy of concentrating my arguments tonight specifically on the rationale behind the abolition of tax credits on dividends and on the Labour Government's overall strategy on the economy and pensioners.

Let me start with the tragedy of the persistent under-investment that has afflicted the British economy. Too often, British companies have invested too little, too late in the economic cycle. One does not have to look far to see some of the reasons: the pattern of booms and busts, intensified during 18 years of Tory rule; economic uncertainty; and inflation gripping the system. Another less-noticed reason—albeit not an obscure little area, as the hon. Member for Arundel and South Downs (Mr. Flight) put it—was the desperately outdated tax system. That system meant that pension funds—the most important investor group—stood to gain more if the company paid out a dividend than if it retained or invested its profits; and, as dividends were tax exempt, the funds could claim back the tax, all of which caused a major economic distortion.

As the professor of finance, Janette Rutterford, wrote in The Guardian in June 1997, shortly before the Budget changes: No wonder that UK companies top the global dividend yield tables. The corporate tax system positively encourages pay-outs. The solution is to remove the refund for tax-exempt shareholders. I agree. What the Labour Government have to do is create a climate in which the level of investment is raised. It should be up to companies to take appropriate decisions, based on economic merits, on whether to pay out dividends to their shareholders or to benefit from growth in capital values as they reinvest in the business.

Mr. Edward Davey

Will the hon. Lady give way?

Ms Kelly

I should like to make some progress first—time is limited.

The right hon. Member for Fylde (Mr. Jack) made a comparison with the United States, which I found somewhat surprising. There is a similar system there whereby pension funds take decisions on the basis of economic merits, not tax advantage. However, I disagree completely with his argument. Sir David Cooksey examined emerging companies in the United States and looked at the performance of companies since 1975. He found that the companies that had grown and thrived were those that had invested and not those that had paid out dividends. I think that the abolition of this measure will help companies by offering them higher long-term growth and ensuring that the tax system does not starve them of capital.

Mr. Jack

How does the hon. Lady square her criticism of my remarks with the fact that there is a higher level of distributed profits in the United States than in the United Kingdom? Although less profit is retained within companies, the US has a much more sustained higher level of growth and lower unemployment than our economy. How does the hon. Lady explain that?

Ms Kelly

The right hon. Gentleman has missed my point. The successful US companies that have grown and thrived are those that have invested in their companies and not those that have distributed their profits.

Mr. Edward Davey

Does the hon. Lady believe that abolishing tax credit for pensioners will help to remove the distortion? Surely retaining the tax credit would not create a distortion.

Ms Kelly

I shall address precisely how pensioner poverty should be tackled. My point is that there is a huge economic distortion in the tax system which encourages companies to distribute their profits rather than invest them.

The abolition of the dividend tax credit is only one strand of Labour's reform package. The Paymaster General set out the whole package that is designed to encourage investment, growth and employment, highlighting in particular the reductions in corporation tax to a level lower than that of our major competitors and the abolition of the advance corporation tax in its entirety, which was another major tax bias which distorted investment decisions.

I am aware that some non-taxpayers have been affected by the abolition of tax credits. However, the Opposition's argument that the tax credit should be restored or alleviated—the motion is quite difficult to understand—-completely misunderstands the purpose of the tax system. Let us examine how the system is used and how it currently operates. I hope that hon. Members will forgive me if I become a little technical.

Under the previous system, the principal responsibility for paying tax on dividends rested with the company that paid dividends, rather than with the individual or the organisation that received them. If a company decided to pay out some of its profits in share dividends, it had to pay advance corporation tax on that money. Individual investors received a credit with their dividend payments that stated that advance corporation tax had been paid and gave them a credit with the Inland Revenue for the amount paid on their dividends. In fact, the advance corporation tax charge was set at exactly the amount that basic rate taxpayers would pay, thus ensuring that tax was not paid twice—a point recognised by the right hon. Member for Wells (Mr. Heathcoat-Amory).

However, the argument for individuals whose income falls below the tax threshold is completely different. They can claim the tax credit as a cash payment from the Inland Revenue, but, if the non-taxpayer is not liable to pay tax, there is no double taxation. The House of Commons Library states: By allowing non-taxpayers to cash in their credits—and giving non-taxpayers money to repay a tax they have not paid in the first place—-the tax credit system is doing something for which it was never intended: supplementing the income of non-taxpayers. It is hard to believe that the Opposition are suggesting reintroducing a tax bias to the system that distorts long-term investment decisions made by companies and pension funds, in order to help poor pensioners. The Daily Telegraph—-not a natural Labour supporter—recognised that point clearly after the July 1997 Budget. It stated:

The quality of life in retirement…depends on growth in the economy, reflected in the prices of shares where the contributor's money is invested. This is the point of the Brown budget that the pension funds would do well to grasp. I suggest that the Opposition would do well to grasp it too. The best way to help pensioners surely is to assist them indirectly through better growth in the economy and directly, if necessary, by supplementing their income. That is what the Government are doing.

I will not run through all of the measures that we have taken to help pensioners since gaining office in May 1997—no doubt they will be well discussed during the debate. I shall mention only two. For the poorest pensioners, our new minimum income guarantee will ensure a minimum of £75 a week for single pensioners and almost £117 for pensioner couples. We have saved pensioners an average of £108 a year on their fuel bills—-the poorest pensioners will save £140—by cutting VAT on fuel, introducing winter fuel payments and abolishing the gas levy and through our tougher regulation of gas and electricity prices. That contrasts with the actions of the previous Tory Government, who put 8 per cent. VAT on fuel and tried to double it to 17.5 per cent. I think that that puts this motion in a little context.

9.3 pm

Mr. Robert Syms (Poole)

I apologise to the hon. Member for Dudley, South (Mr. Pearson). If I had listened a little longer before I intervened, I would have realised that he was making a courageous speech. I am so used to Labour Members defending the indefensible that I misinterpreted what was probably a difficult speech for the hon. Gentleman. He has no doubt received many letters on this topic and his contribution to the debate demonstrates his concern about the subject.

We have heard a great deal about reforming and improving tax systems, but there is no such thing as a perfect tax system—all distort to some extent. The key point about the change to advance corporation tax is that, at the end of the day, the Government will have an extra £5 billion a year in revenue to spend in other ways. It is surprising that every reform to make this country more efficient seems to generate additional tax for the Government, whether in corporation tax, ACT or another form of taxation. I am not sure that that will make business more efficient. It will lead the Government to spend more where they should not spend.

The key point about the reform is that, as when one tries to reform any tax system, there are winners and losers. Most Governments, irrespective of party, tend to be sensitive to the fact that there may be people who cannot afford to be losers. When my constituents started writing to me about the changes, many of them could not believe that the effects were what the Government intended. They wrote, "There must be a mistake. I am not particularly well off. I have a few shares. They generate a little income for me which makes a material difference to my life. Please, as a Member of Parliament, write to the Treasury and point that out."

This matter was debated during Budget debates and in Committee, and at one stage the Government acknowledged that they might want to reconsider it. The Opposition are surprised that the Government have not made modest proposals to deal with the problem. As we heard earlier, 300,000 non-taxpaying pensioners have each lost £75 a year and the cost of the measure to the Exchequer is about £25 million. However, the tax change means that the Government are collecting an additional £5 billion, so it does not seem to be unreasonable to address the pensioners' loss. Treasuries and Governments raise a lot of money and then give back a small amount to try to ensure that people who cannot afford the change receive a little help. We are discussing a measure that affects 300,000 non-taxpaying pensioners and 330,000 non-taxpayers who may be earning very little or who do not work but are not of pensionable age. They are losing an average of £75, so some people are losing much more.

Many people's personal financial position is conditioned to some extent by the historic position of their family. We are talking not about sharp, smart people who pay a lot for advice on arranging their affairs, but about people, some of whom are in their 70s or 80s, who have perhaps inherited a few shares from their father, mother or aunt. Some people have written to me saying that they have an emotional attachment to their few shares because that is all they received from their family. They want to retain that investment; they do not want to be told that they have to sell the shares and consider alternatives.

As we heard in the intervention by my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth), when one sells shares, one pays a price, such as capital gains tax. One can put shares into individual savings accounts, which provide limited tax relief, but there are management charges. There is not an alternative for many people who want only to have a small investment with a small income and to live their lives in retirement with dignity.

The Government have done themselves no favours by not acknowledging that there is a problem and by making no move to deal with that problem. All Governments make a fetish of always getting their way—the previous Conservative Government did so on occasion—and in the end, people think that the Government are not listening. The Government are not listening to people's views on this matter. They have a large majority and there is no doubt that they will carry the vote tonight.

The measure will affect the lives of many of my constituents. I have received many letters about the proposal. I have a somewhat elderly constituency. Some of my constituents are very wealthy, but many are retired and are trying to live on their few investments. Some are asset rich in that they have houses and flats, but they need those to live in and do not particularly want to sell them. They try to make do with their small income.

The Government have done themselves no favours with this measure. I listened to the Paymaster General, who did not deal with any of the points raised by the debate. That is a great pity, because I might respect the Government if they honestly addressed the issues. The hon. Lady went round the houses and gave a litany of points about everything but the problem that the measure will create for pensioners, which is a great pity.

We have heard about the early-day motion that was tabled. Many Labour, Liberal Democrat and Conservative Members have signed it. That is a sign of some strength of feeling, to which I had hoped the Government would pay some attention. There is a real issue, which is affecting people's lives. Some people who have never written to their Member of Parliament felt that they must put pen to paper because their lives and circumstances were threatened.

The Government still have an opportunity to make some concessions towards these relatively poor individuals, who want dignity and income. They want to keep their shares, some of which they have had for a while. If, when we vote, the Government have not made any concession, I hope that some Labour Members will stand up for what they believe and join us in the Lobby. We may not win the day, but I believe that we will win the argument on an issue that is important to so many of our constituents.

9.10 pm
Mr. Tony McNulty (Harrow, East)

I have listened very carefully to the debate, but remain unconvinced by Opposition Members—not least the hon. Member for Kingston and Surbiton (Mr. Davey), the Liberal Democrat spokesman, who took the best part of 27 minutes to "unconvince" me.

It is very easy to take in isolation one measure, however important, in an extremely complex area, without explaining the whole story across government. It is very easy to give erroneous impressions by dwelling on one aspect of policy in one area. Given Opposition Members' speeches, it is clearly easy to scaremonger, worry and suggest that there are no alternatives. There is almost a mantra to the Opposition's policy: "If we say often enough that there is no alternative, there may not be any alternative." Opposition Members have not, in any shape or form, answered the fundamental case put by the Paymaster General. It is very easy to do all those things, but it is also quite shameful.

Many Opposition Members are using this issue to give people cause for concern. Their time and energy—-not least, given some of their professional backgrounds—would have been, and still will be, better spent helping the people who are affected by the change to alter their investment patterns. The point about the range of other vehicles that can be utilised has not been discredited. Opposition Members have said often enough that it has been discredited, but have not sufficiently proved the charge that there is no alternative. The fact that St. Margaret used to say that there is no alternative, does not automatically mean that such a response can be invoked at any time in order to change an argument.

Mr. Bercow

Will the hon. Gentleman give way?

Mr. McNulty

No, I have precious little time and others are still waiting to speak. The hon. Gentleman can have a cup of tea with me after the debate.

As has been suggested, the measure removes a distortion, and needs to be seen in the context of discouraging companies from distributing profits and encouraging them to reinvest. Again, that charge has not been answered—certainly not by the right hon. Member for Fylde (Mr. Jack) in response to my hon. Friend the Member for Bolton, West (Ms Kelly). The right hon. Gentleman's little foray into American business history showed more about his lack of knowledge of it than otherwise. The case has been well made for the need to restore investment levels and to develop economic policy for the future. In that context, Opposition Members' comments at the beginning of the debate, which seems so long ago now, about Labour forgetting the working class and being interested only in the middle class were facile and fatuous.

In considering this policy, we must appreciate the reality of the Government's action on pensions. Although I do not doubt that many of the cases read out by Conservative Members on 30 June—I have read through them quite assiduously—were true, they did not offer anything like half the story of what people may lose if they do not opt for alternatives, and what they will gain in other areas Of policy on which the Government are working. To.suggest only half the story, but to paint it as the whole story, does not do the constituents of Opposition Members that much of a favour.

Every item detailed by Labour Members has been ridiculed or pooh-poohed by Opposition Members. We were told by the hon. Member for Kingston and Surbiton—probably in the 22nd minute of his 27-minute peroration—that winter payments for pensioners are a gimmick. He was asked several times—admittedly, from a sedentary position—whether, in that case, the Liberals would abolish the current arrangements. There was no answer, so we must assume that it was only a gimmick. It was so irrelevant to the Liberals that they could not be bothered to table an amendment to the motion.

On 30 June 1998, the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb)—in between writing his stunning little column for Accountancy Age—said that fuel was crucial to poorer pensioners. Opposition Members made no mention of the fact that pensioners would gain £108 to £140 a year in fuel payments—far more than they would lose if they stayed in their current savings vehicle. During the passage of the Bill that became the Finance (No. 2) Act 1998, an Opposition Member said that the debate on the subject was another red herring.

The only mention that was made of the £21 billion invested in the national health service was a cack-handed attempt at "Brucean" economics by the hon. Member for Kingston and Surbiton. During his 27 minutes, he tried to say that £21 billion equals £1.5 billion, and that we are spending the £1.5 billion only because the Liberals pressured us to. That is nonsense.

Mr. Bercow

Will the hon. Gentleman give way?

Mr. McNulty

I cannot, I am afraid. I have told you before: we shall have a cup of tea afterwards.

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. The occupant of the Chair would no doubt be very pleased to be able to have a cup of tea, but the hon. Gentleman knows that that is impossible. His remarks are being addressed to me.

Mr. McNulty

I apologise profusely, Mr. Deputy Speaker.

Strangely, there was only ridicule about free eye tests. Nothing was said about the £3 billion programme to improve home residential care programmes, which is just the start of what we are doing, especially for the very elderly, in that regard. Nothing was said about the White Paper proposals on concessionary travel for all pensioners.

Nothing was said about benefit take-up, apart from a facile little comment by the hon. Member for East Worthing and Shoreham (Mr. Loughton) on 30 June 1998, which seemed to suggest that pensioners who desperately needed benefits lacked virtue if they took them up. He spoke sneeringly of their having to rely on the welfare state instead of supporting themselves. If he was present—which he was for much of the evening—I would remind him that all those pensioners paid their dues time and again to the welfare state, and that it is not a matter of shame that they take that money back again, but their due right. If that is what they need into their late old age, we should encourage that.

I shall not dwell on the other half of the equation—not mentioned in the motion or in interventions—concerning future pensioners. The world having stopped and then started again for Conservative Members in the year zero, 1 May 1997, they have no idea what the future is about, other than next week's headlines and hoping that William does better at the next Question Time than he did at the previous one.

In Committee on the Bill that became the Finance (No. 2) Act 1998, the hon. Member for East Worthing and Shoreham spoke about the culprits and perpetrators of the crime, who sit on the Labour Benches."—[Official Report, 30 June 1998; Vol. 315, c. 168.] If there are those who perpetrate crime in this regard, they do not sit, and in the past have not sat, on Labour Benches.

The hon. Member for Chichester (Mr. Tyrie) tells us that we shall be judged on the decision that we take. Well, I hope that we are judged on the totality of the decisions that we take, if only in terms of those short items about VAT on fuel and what we are doing for the lowest-paid pensioners. Opposition Members will be judged on the record of their time in government; not on their rhetoric—a word that an Opposition Member used at Question Time today, emphasising the second syllable instead of the first—but on their action over the past 18 years. In that regard, they are still found wanting.

I urge all those on whom this measure impacts the most to look at everything that the Government are doing in this area, not just at dividend tax credits, and remember that Conservative Members are no friends to pensioners. They were not during the past 18 years, and despite their weasel words they are certainly no friend of pensioners now.

9.19 pm
Mr. Tony Baldry (Banbury)

I shall be brief because the issues are of a narrow compass and we have been going for nearly two hours. The debate is bizarre. Ministers have not addressed the points in the Opposition motion. It says, very straightforwardly, that from April 1999, nearly a third of a million non-taxpaying pensioners and a third of a million other non-taxpayers will lose an average of £75 each because of the Government's decision to abolish the dividend tax credit. At no stage did the Paymaster General or anyone else on the Government Benches say that that statement was inaccurate, fallacious or in any way wrong.

The motion further notes that 80,000 of the pensioners affected will lose over £100 per year". That figure has not been challenged, so presumably it is correct—

Ms Sally Keeble (Northampton, North)

Will the hon. Gentleman give way?

Mr. Baldry

No. I shall be brief. The hon. Lady wants to get in, I think.

The motion goes on to state that it is unacceptable that basic rate taxpayers and higher rate taxpayers are unaffected directly by this decision which affects only non-taxpayers". There has been no explanation from the Paymaster General or anyone else as to why such circumstances have come about.

Ms Keeble

Will the hon. Gentleman give way?

Mr. Baldry

I will give way to the hon. Lady, but she is taking up time from her own speech.

Ms Keeble

Thank you. Much has been made of the fact that people stand to lose £75, which is the amount that they gain in tax credit. However, my reading of your motion is that you are not proposing to reinstate—

Mr. Deputy Speaker

Order. The hon. Lady has been in the House long enough to know that she is addressing the Chair when she says "you".

Ms Keeble

I apologise. The hon. Gentleman has not dealt with the point that his party does not propose to reinstate the full amount of the tax credit, but speaks of some £37.50.

Mr. Baldry

My point, which is not disputed and which the hon. Lady confirms, is that pensioners will lose £75, on average. That has not been challenged.

I read the Government's amendment to see what conceivable explanation there is. Having been in the House for 15 years, I assume that there must be some rational explanation. The Government amendment deals at length with income support, which may be welcome, but it does not necessarily relate to the non-taxpaying pensioners who will lose out.

The only justification in the Government amendment that possibly addresses the point is the statement that the Government has removed major company taxation distortions". I hope that when she winds up the debate, the Minister will help me to understand how, in my constituency surgery, I should explain to pensioners who have some small income from dividends and who are non-taxpayers that they will lose money each year—tough—because the Government have removed major company taxation distortions.

The simple fact is that as a consequence of that action, a significant number of pensioners will be worse off, and nothing that we have heard this evening from the Government Benches has attempted to disguise that. The only suggestion that we have heard is that those pensioners could perhaps put their money into some other form of savings. That ignores the fact that for people in their 70s or 80s who own a few shares, that is not a realistic proposition in view of the management charges and all the other administration.

I hope that the Minister will explain to the House how it can be right that only non-taxpayers are hit, and that they are hit because of some mantra about a major company taxation distortion being removed. That point has not been addressed by those on the Government Benches this evening. Until they do so, many people will feel that the Government have failed pensioners.

The hon. Member for Birmingham, Selly Oak (Dr. Jones) made the valid comment that exemptions are granted for bank dividends and savings dividends, so why should there not be exemptions for such company dividends? What is so special about those?

The Government have had ample time during the debate to address those issues. They have failed to do so. I hope that the Minister will deal with them in her winding-up speech.

9.24 pm
Mr. Laurence Robertson (Tewkesbury)

I, too, am amazed that despite the wording of our motion, the Government's amendment does not address it. The speeches that we have heard tonight have not dealt with our arguments.

A small amount of Government revenue is involved, yet it is made up of sums that are extremely significant to some of the poorer pensioners. It is hard to believe that any Government would set out to penalise the poorest in society. I, for one, hope that that is not the Government's intention and that they will change their mind on that policy.

The removal of advance corporation tax is a short-sighted act that has many knock-on costs, and it will hit many people and many organisations. The scrapping of personal equity plans and tax-exempt special savings accounts is an unnecessary and unsettling change. They are popular schemes and are open to everybody, and they seem to have been scrapped simply for change's sake. The removal of dividend tax credits from the poorest pensioners and non-taxpayers is yet another totally unnecessary act.

These changes will affect many people—the poorest pensioners, future pensioners and ordinary savers—and organisations such as Churches, charities and local councils, but the principal point is that they will also hit companies; and hit them in the way that the Government say they will not. The Government say that they want to encourage investment, but as far as I can make out the measure will reduce investment in industry and in business.

For example, if there are no tax advantages, why should organisations and people—especially poorer people—invest their money where an element of risk is involved? The tax advantage, through ACT credits and tax relief on dividends, makes that risk acceptable. The change may persuade non-taxpayers to put their money where it is completely safe, but that would deny that investment to industry and business.

The Government seem to be somewhat embarrassed by the changes that they have made. First, many Labour and Liberal Democrat Members have signed the early-day motion, which is almost identical to our motion. Secondly, last June the then Paymaster General said: I am aware also of the growing anxiety among poorer non-taxpayers who have been hit by the measure".—[Official Report, 30 June 1998; Vol. 315, c. 175.] The Chancellor himself talked about not introducing the change until 1999, to allow people to reinvest—precisely the point that I am making. People will take money out of equities and out of industry and reinvest somewhere else.

The Government look to be further embarrassed by the difficulty with replying to letters we have written on behalf of constituents. I wrote to the Chancellor about this issue on 22 July 1998. In spite of chasing him for a reply many times, I have yet to receive a reply. The Government seem to be extremely embarrassed by the measure; because of that—and, more so, because it would be the right thing to do—I hope that they reverse it.

9.28 pm
Mrs. Theresa May (Maidenhead)

I am grateful for the opportunity to contribute briefly to the debate. I shall focus on two points, in particular one that has not been discussed fully, although it was referred to in passing by the hon. Member for Kingston and Surbiton (Mr. Davey).

One of my constituents, from Walker road in Maidenhead, came to my surgery recently. She was very concerned, because she had suddenly discovered the issue of dividend tax credits and that, as a non-taxpaying pensioner shareholder, she would suffer to the tune of several hundred pounds as a result of the Government's policy.

My constituent was outraged at the Government's policy. She thought it quite appalling that the Government should tax non-taxpayers in such a way, but she also mentioned her concern that many non-taxpaying shareholders in such a position are still not aware of the Government's policy or of the way in which their finances will be hit by it.

There is an issue in respect of lack of publicity. Many hon. Members raised the concerns with the Government in the summer, of pensioner constituents but, because of the comments of the hon. Member for Coventry, North-West (Mr. Robinson), the former Paymaster General, we assumed that the Government had seen the error of their ways and would change their policy to ensure that non-taxpaying pensioners would not lose out.

I wrote many letters to constituents saying that the Government had expressed their sympathy and would review the position. My constituents wrote back saying how pleased they were to hear that.

We now realise that the Government cynically left a period of months during which they thought the issue would go away and that people would not notice, and then, shortly before Christmas, they sneaked out the announcement that they intended to stick to their original policy. Many of my constituents and others who are currently non-taxpayers will be appalled by the fact that they will have to pay tax as a result of the Government's policy. They will lose out financially, but, as the shadow Chief Secretary said, many of them may not discover that fact until April 2000. They will wonder what on earth the Government were doing and why they did not listen to the concerns expressed.

Secondly, we heard an extraordinary peroration from the Paymaster General. We had a circuitous tour of Government policies and of the various economic objectives that the Government have claimed for themselves. It did not take the Paymaster General long before she used those good old words "boom and bust", which we hear in virtually every Minister's speech. She completely failed to answer the question put by my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb). He asked how on earth the Government can claim that they will meet those economic objectives and ensure that we never again have boom and bust in our economy in any shape or form purely by taxing non-taxpaying pensioners, who are some of the poorest pensioners, to the tune of £25 million. I trust that the Economic Secretary will answer that question.

9.32 pm
Mr. Nick Gibb (Bognor Regis and Littlehampton)

I congratulate the hon. Member for Bristol, South (Dawn Primarolo) on her promotion to Paymaster General.

Although in Opposition time, this is not a party political debate—it is the Commons versus the Executive. The House of Commons is performing its duty to tell the Government that they have done something wrong. The cross-party motion that led to the debate was signed by 110 Members, including 29 Liberal Democrats and 28 Labour Members, all of whom believe that the Government are wrong on this issue.

Ms Kelly

If the Opposition believe that this measure is deeply flawed, would they reimpose the tax credit?

Mr. Gibb

The debate is about Government activity. We want this tax credit to be extended to 2004 as a minimum. Ideally, we would like the full credit to remain at 20 per cent. and not to be abolished for non-taxpaying pensioners. It is wrong to end the repayment of dividend tax credits to 300,000 non-taxpaying pensioners. It is wrong to confiscate an average of £75 a year from people who can least afford to lose that amount. It is wrong of the Treasury to argue, as the Paymaster General did in her press release, that these people have time to consider their investments before the new rules take effect, for example, moving to tax-favoured investments should they wish to do so.

Dr. Desmond Turner (Brighton, Kemptown)

Will the hon. Gentleman give way?

Mr. Gibb

No, I shall not give way, because I want to make progress.

This measure is wrong because the 300,000 people concerned are not highly sophisticated investors who consider their investments. They are elderly people on very low incomes with a few privatisation or windfall shares. They have come to rely on the tax credit refund that they claim every year. It is wrong of the Government to tell them to sell their shares and to buy gilts, or to transfer their shares to an ISA, the charges relating to which will be more than the tax credit they are losing. This measure affects people of an age and at a time when they will never be able to earn or to save enough money to make up the loss.

The hon. Member for Kingston and Surbiton (Mr. Davey) said that the minimum income guarantee alluded to by the Paymaster General does not protect the incomes of people who have savings in excess of £8,000 and so will not qualify for income support.

The hon. Member for Knowsley, South (Mr. O'Hara), who chairs the all-party group for older people, made a reasoned and well-argued appeal to the Government, pointing out that, in July 1997, special efforts were made to ensure that basic and higher-rate taxpayers would not lose out from the changes to tax credits. He also pointed out that two thirds of pensioners did not pay tax at all, and that tax-free savings vehicles were therefore inappropriate for most pensioners. He also made the point that the cost of ISAs would probably outweigh any benefit to be gained from putting shares into such vehicles.

My right hon. Friend the Member for Fylde (Mr. Jack) made the excellent point that the idea that returning the United Kingdom corporation tax system to the classical system that exists in the United States would reduce the level of dividend payments was nonsense, given that the United States has a much higher dividend-payment ratio than the United Kingdom. He also drew attention to the effect that this mean-minded measure would have on the Church's income, resulting in some £12 million less for the Church of England and £400 million less for the charity sector as a whole.

The hon. Member for Dudley, South (Mr. Pearson), formerly parliamentary private secretary to the former Paymaster General, expressed the same sympathy for the cause as his former boss. He believes that the measure may well appear mean-minded and unfair to those affected by it.

My hon. Friend the Member for Arundel and South Downs (Mr. Flight) pointed out the nonsense of the Government's description of the abolition of dividend tax credits as some kind of beneficial corporation tax reform, saying that in reality—as everyone knows—it was simply a major tax revenue-raising measure. The hon. Member for Bolton, West (Ms Kelly) made a valiant attempt to defend the indefensible, but I am afraid that, despite her technical expertise, she is wrong. She claimed that non-taxpayers should never have been allowed to reclaim the tax credit—that was somehow an anomaly. That is nonsense. Unless non-taxpayers can reclaim the credit that is available to taxpayers, they will effectively lose the benefits of their personal tax allowance, an allowance granted to the whole population by Parliament.

My hon. Friend the Member for Poole (Mr. Syms) mentioned the surprise felt by many of our constituents that the Government have not sorted out the problem. They made a big error in not doing so: they have shown that they are not listening to the real anxieties felt by thousands of pensioners.

The hon. Member for Harrow, East (Mr. McNulty)—in a complacent speech, in which he tried to defend the Government—revealed only that he does not understand the issue, or, more worrying, does not care about it. My hon. Friend the Member for Banbury (Mr. Baldry) pointed out that Labour Members who tried to defend the Government had not dealt with any of the substantive points in the motion. My hon. Friend the Member for Tewkesbury (Mr. Robertson) observed that, in urging pensioners to move their investments, the Government might well, in effect, be urging people to take their investments away from industry. My hon. Friend the Member for Maidenhead (Mrs. May) pointed out that, as most non-taxpaying pensioners were not even aware of the issue, the Government's problems were yet to arise.

The Paymaster General made an astonishing defence. She listed a set of economic objectives that she believed would be achieved by taking £25 million away from the poorest pensioners in the country. I cannot believe that she really thinks that. She talked about the poorest pensioners' having an alternative if they transferred their shares to an ISA. Has she seen the briefing by Age Concern to which the hon. Member for Kingston and Surbiton referred? She seems to be saying, from a sedentary position, that she has, but has she read it? It clearly states that the average amount currently reclaimed by non-taxpayers is worth £75. That means that the non-taxpayer involved will have an income from shares of £375. If we use the Treasury's own assumption of a 3 per cent. return on income, that means that the capital will be £12,500, leading to a charge in an ISA that is likely to be about 0.5 per cent., or £62.50 a year. When that credit falls from 20 per cent. to 10 per cent., as it will in April, the income will be £37.50, which will be more than eaten up by £62.50 worth of charges. On top of that, there is likely to be a l per cent. start-up cost in the ISA of £125.

The measure that we seek to have reversed arose from the Government's decision in July 1997 to end repayment of dividend tax credits to pension funds. Either inadvertently or deliberately, the measure was extended to include non-taxpaying individuals from April this year.

During the passage of last year's Finance Bill, we tried to persuade the Government to reverse the measure as it affected individuals. Although we failed in our attempt, we received a sympathetic hearing from the then Paymaster General, who said that he would look again at the issue. Sympathetic noises continued to emanate from the Treasury until 10 December. On that day, the then Financial Secretary sneaked out a written answer that stated that the Government confirmed the decision that was taken in July 1997 to end the repayment of dividend tax credits to non-tax paying individuals.

That decision has disappointed many hon. Members and many thousands of pensioners, including my constituent, Mr. Caffyn. On reading the Government's decision on 10 December, he wrote to me that he "was sadly disappointed." He went on to say: It's more upsetting when I know that many of the people who will be affected by this travesty are those who served in the armed services or nursing services during the 39/45 war years. Age Concern, which has campaigned vigorously on the issue, has rightly pointed out: many of those affected are likely to be older pensioners who will not have had the same opportunity to contribute to SERPS or private pensions and are therefore heavily dependent on income from savings and investments. The majority of hon. Members know that the decision is wrong. Because they know it to be wrong, it is right that we do our duty as Members of Parliament and tell the Government so.

Mr. Bercow

Does my hon. Friend agree that, if the 28 Labour parliamentarians who signed early-day motion 56 criticising the Government on the subject fail to join us in the Division Lobby tonight, they will be guilty of an abdication of responsibility that should be widely publicised?

Mr. Gibb

It would be sad if a large number of the hon. Members who signed the early-day motion were not to join us in the Division Lobby tonight because it would send a clear signal to the Government, who may change their mind.

Dr. Desmond Turner

It is touching to hear the Opposition's concern for the deprivation of £75 a week from the average pensioner—[HON. MEMBERS: "A year."] Sorry, a year. It is touching also to hear the Opposition's concern for the poorest pensioner. It is not the poorest pensioners who are being deprived, but it was the poorest pensioners who were deprived of £1,000 a year by the previous Government through their decision to break pensions' link to earnings. Has the hon. Gentleman forgotten that?

Mr. Gibb

Will the hon. Gentleman give a commitment that his Government will restore that link? No, he will not. I hope that we will see him in the Division Lobby tonight as I believe that he is one of the signatories of the early-day motion.

Mr. O'Hara

As one of the Members who signed the early-day motion, may I point out again that it did not criticise the Government, but appealed to and encouraged them? I made precisely that point in an intervention. It belies the position of those Members who signed the early-day motion to associate them with the lazily tabled motion on the Order Paper, which uses exactly the same words.

Mr. Gibb

I am sure that the hon. Gentleman's career is now safe.

Some Members will have signed early-day motion 56 just to get a quick mention in their newspapers, but have no intention of voting for that motion this evening. However, other Labour Members can be expected to stick to their principles. We look forward to joining them in the Lobby.

If I were a Labour Member, I would vote with even greater conviction for the Opposition motion, as it would not only be the right thing to do but would make practical political sense. In April 2000, the vast majority of the 300,000 pensioners we have been discussing will submit a claim to the Inland Revenue for their annual tax credit refund. However, they will not have read finance legislation, the House's proceedings or the money pages of the press informing them that they can no longer reclaim that money, and they will simply, as usual, submit a claim.

By return of post, those people will receive a letter from the Inland Revenue saying that they cannot have their cheque for £75, £100, £200, or whatever figure they were expecting, because the Government have changed the law. Only months from a general election, the Government will have to contend with 300,000 angry pensioners who have suffered a large personal financial loss directly because of decisions taken by the Chancellor. That cannot be good.

A cynical person might argue that it would be better for the Opposition if the Government did not reverse the decision. However, the Opposition do want the Government to reverse it. We want Ministers to reverse it because of people such as a gentleman from Christchurch, who said: The thought of losing the ability to reclaim tax credits has really upset us. Last year, the total reclaim between the two of us amounted to only £118.16, but even that small amount makes a big difference to us. Opposition Members have received many letters from many people describing the very real hardship that they will suffer if the provision is not reversed. I should like to read a letter from a 67-year-old lady. Labour Members might learn something from her letter, which reads: I have a mentally ill son of 44. When I knew how severely ill he was and would never be able to work, I set out to try to put a small nest-egg away for him for his later years, and I stayed at work for an extra five years because of it. As a consequence, he has about £120 a year tax refund which I use to replace things like shoes and clothes. The Opposition want the Government to reverse the decision because of people like those. However, those cases represent only the tip of the iceberg—an iceberg that will tear into the Government if they fail to reverse the decision. Reversing the decision will cost only £25 million a year, and there should be no technical difficulties in doing so. I therefore urge all hon. Members to vote for what they know to be right—allowing the House to flex its muscle—by voting for the Opposition motion.

9.47 pm
The Economic Secretary to the Treasury (Ms Patricia Hewitt)

We have had an interesting and lively debate, although I am sure that hon. Members will forgive me if I cannot deal with every point that has been made.

The hon. Member for Kingston and Surbiton (Mr. Davey) made much, at considerable length, of the point that the minimum income guarantee that the Government are introducing for the elderly will not assist those from whom the tax credit will be withdrawn should they not change their investments. I should stress that he was quite wrong on that point. The minimum income guarantee—which will mean an income increase for some of the poorest people in the United Kingdom, of £238 a year for a single pensioner and of £377 a year for a couple—will apply to a large number of non-taxpayers with dividend income.

Under the income support rules, it is perfectly possible to qualify for full income support entitlement with savings of up to £3,000. Depending on the dividend rate, shares of £3,000 would produce a tax credit of about £20, although the tax credit would be below that if the shares were below £3,000.

The average numbers that have been quoted in this debate for tax credits for non-taxpaying pensioners have been thoroughly misleading. Two thirds of non-taxpayers currently receiving a tax credit on their dividend receive less than the average of £75 that has been quoted, half of them receive less than £50 a year in tax credit, and about one third receive less than £20. In other words, they receive less than the tax credit that would be received on a typical shareholding that would still qualify them for full income support if it was their only saving.

The minimum income guarantee that we are putting in place will benefit many of those about whom the hon. Member for Kingston and Surbiton was concerned, just as the minimum tax guarantee that we are putting in place will remove from tax many of the elderly pensioners who are now paying tax.

Mr. Edward Davey

Will the hon. Lady give way?

Ms Hewitt

No, I am afraid that I shall not. I hope that the House will understand that, as the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) took up a considerable part of my time, I cannot give way. I have dealt with the point that the hon. Member for Kingston and Surbiton made at such length and with such inaccuracy.

My hon. Friends the Members for Knowsley, South (Mr. O'Hara) and for Dudley, South (Mr. Pearson) urged the Government to reconsider. I understand their concerns and those of other hon. Members. That is why we undertook to look again at the issue and took time to consider it carefully and look at the representations that we had received from many hon. Members. However, the abolition of payable tax credits to UK non-taxpayers is inextricable from the abolition of advance corporation tax.

The right hon. Member for Fylde (Mr. Jack) and the hon. Member for Arundel and South Downs (Mr. Flight) criticised the abolition of ACT—a criticism that was answered by my hon. Friend the Member for Bolton, West (Ms Kelly) in an exceptionally well-informed speech. Our corporation tax reforms, which were announced by my right hon. Friend the Chancellor and are now coming into effect, will remove the distortions of payable tax credits that led to UK-based companies being put under pressure to distribute income in dividends rather than reinvesting the money in the growth of the company. We are removing the distortion of surplus ACT, which was created by the previous Government and has led to UK-based companies paying £7 billion in surplus ACT over the years. It led to the absurdities and complexities of the foreign investment dividend, which was a cack-handed attempt by the previous Administration to deal with the mess created by surplus ACT.

Part of our corporation tax reform package, which has been widely welcomed by business—we heard nothing about that from the Opposition—is a cut in corporation tax to the lowest rate ever in this country and a lower rate than the countries with which we compete.

Mr. Soames

Will the hon. Lady give way?

Ms Hewitt

No. I am sorry, but I have already explained—

Mr. Soames


Mr. Deputy Speaker (Mr. Michael J. Martin)

Order. The hon. Lady says that she is not going to give way.

Ms Hewitt

I am grateful, Mr. Deputy Speaker. I have explained my reasons. The Government are not going to take lessons from the Opposition in how to run the economy or how to create a tax system that is good for business. We inherited a productivity gap of 40 per cent. with the United States and a personal pensions mis-selling scandal, which my predecessor and I are having to put right. It has cost hundreds of thousands of people who were mis-sold a pension an average of £4,000 in their pension investment. The previous Administration gave this country inflation in double figures, which ate into the savings of elderly people—something about which we heard nothing this evening.

Mr. Gibb

Will the Minister give way?

Ms Hewitt

No, I will not. I have already said that I will not give way. The hon. Gentleman has wasted quite enough time already.

My hon. Friend the Member for Harrow, East (Mr. McNulty) rightly pointed out that the Conservative party and the Conservative Government were no friends of the pensioners, and he reminded the House of the package of benefits that the Government have put in place for elderly people, including the cut in VAT on fuel—VAT introduced by the previous Government—coupled with a package of improvements and help with fuel bills worth £108 a year, or £140 a year to the poorest elderly people; the minimum income guarantee, which I have mentioned, and the minimum tax guarantee, on which we will hear more this year; free eye tests; the national concessionary fares scheme; and the investment in the NHS that will make such a difference to elderly people in particular.

The hon. Member for Banbury (Mr. Baldry) and the hon. Member for Maidenhead (Mrs. May) asked how they would explain these changes to elderly constituents, and how taxing non-taxpayers would help. Let me make it quite clear—we are not taxing non-taxpayers. We are removing a repayable tax credit that was covered by ACT. The abolition of ACT necessitates the abolition of the repayable tax credit.

Conservative Members ought to be reminded of what the former Chancellor of the Exchequer said in 1993 when he cut repayable tax credits. He said that the payments of lower-rate payers and non-taxpayers will be reduced by five percentage points, saving the Exchequer no less than £1 billion a year."—[Official Report, 16 March 1993; Vol. 221, c. 186.] The right hon. Member for Charnwood (Mr. Dorrell) defended that policy in Standing Committee, and said that the then Chancellor decided that to collect extra revenue principally from tax-exempt shareholders"—

Mr. Gibb

Will the Minister give way?

Ms Hewitt

I am in the middle of a quotation, which I will finish. The right hon. Member for Charnwood said that the then Chancellor decided that to collect extra revenue principally from tax-exempt shareholders…is to collect revenue from a group of people with taxable capacity, but who are not taxpayers".—[Official Report, Standing Committee A, 15 June 1993; c. 377.] I do not recall the hon. Member for Bognor Regis and Littlehampton or any of his right hon. and hon. Friends complaining at the time.

The Government's plans are good news for pensioners, good news for business and good news for the elderly.

Mr. Gibb

Will the Minister give way?

Mr. Deputy Speaker

Order. The Minister is not going to give way.

Ms Hewitt

I am not surprised that Conservative Members do not want to hear the facts—because the facts never help their cause. However, we are helping pensioners and business. We are raising the pension with the minimum income guarantee and cutting corporation tax to its lowest-ever rate. That is why I ask the House to reject the Opposition motion and to support the Government amendment.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 166, Noes 336.

Division No. 35] [9.59 pm
Allan, Richard Baldry, Tony
Amess, David Beith, Rt Hon A J
Ancram, Rt Hon Michael Bercow, John
Arbuthnot, Rt Hon James Beresford, Sir Paul
Ashdown, Rt Hon Paddy Body, Sir Richard
Atkinson, Peter (Hexham) Boswell, Tim
Baker, Norman Boottomley, Peter (Worthing W)
Bottomley, Rt Hon Mrs Virgina Lidington, David
Brand, Dr Peter Lilley, Rt Hon Peter
Brazier, Julian Lloyd, Rt Hon Sir Peter (Fareham)
Breed, Colin Llwyd, Elfyn
Brooke, Rt Hon Peter Loughton, Tim
Browning, Mrs Angela Luff, Peter
Bruce, Ian (S Dorset) McIntosh, Miss Anne
Burnett, John MacKay, Rt Hon Andrew
Burns, Simon Maclean, Rt Hon David
Campbell, Menzies (NE Fife)
Cash, William Maclennan, Rt Hon Robert
Chapman, Sir Sydney (Chipping Barnet) McLoughlin, Patrick
Chidgey, David
Chope, Christopher Madel, Sir David
Clappison, James Major, Rt Hon John
Clark, Rt Hon Alan (Kensington) Malins, Humfrey
Clarke, Rt Hon Kenneth (Rushcliffe) Maples, John
Clifton—Brown, Geoffrey Mates, Michael
Cormack, Sir Patrick Mawhinney, Rt Hon Sir Brian
Cotter, Brian May, Mrs Theresa
Cran, James Michie, Mrs Ray (Argyll & Bute)
Davey, Edward (Kingston) Moore, Michael
Davis, Rt Hon David (Haltemprice) Moss, Malcolm
Day, Stephen Nicholls, Patrick
Dorrell, Rt Hon Stephen Öpik, Lembit
Duncan, Alan Ottaway, Richard
Duncan Smith, Iain Page, Richard
Duncan Smith, Iain Paterson, Owen
Emery, Rt Hon Sir Peter Pickles, Eric
Evans, Nigel Prior, David
Faber, David Randall, John
Fallon, Michael Redwood, Rt Hon John
Flight, Howard Rendel, David
Forth, Rt Hon Eric Robathan, Andrew
Foster, Don (bath) Robertson, Laurence (Tewk'b'ry)
Fox, Dr Liam Roe, Mrs Marion (broxbourne)
Gale, Roger
George, Andrew (St Ives) Rowe, Andrew (Faversham)
Gibb, Nick Russell, Bob (Colchester)
Gill, Christopher Sanders, Adrian
Gillan, Mrs Cheryl Sayeed, Jonathan
Gorrie, Donald Shephard, Rt Hon Mrs Gillian
Gray, James Simpson, Keith (Mid-Norfolk)
Green, Damian Smith, Sir Robert (W Ab'd'ns)
Greenway, John Soames, Nicholas
Grieve, Dominic Spelman, Mrs Caroline
Gummer, Rt Hon John Spicer, Sir Michael
Hague, Rt Hon William Spring, Richard
Hamilton, Rt Hon Sir Archie Stanley, Rt Hon Sir John
Hammond, Philip Streeter, Gary
Harris, Dr Evan Stunell, Andrew
Hawkins, Nick Swayne, Desmond
Hayes, John Syms, Robert
Heald, Oliver Tapsell, Sir Peter
Heath, David (Somerton & Frome) Taylor, Ian (Esher & Walton)
Heathcoat—Amory, Rt Hon David Taylor, Matthew (Truro)
Hogg, Rt Hon Douglas Taylor, Sir Teddy
Horam, John Tonge, Dr Jenny
Howard, Rt Hon Michael Townend, John
Howarth, Gerald (Aldershot) Tredinnick, David
Hughes, Simon (Southwark N) Trend, Michael
Hunter, Andrew Tyler, Paul
Jack, Rt Hon Michael Tyrie, Andrew
Jenkin, Bernard Viggers, Peter
Jones, Nigel (Cheltenham) Wallace, James
Kennedy, Charles (Ross Skye) Walter Robert
Key, Robert Wardle, Charles
Kirkbride, Miss Julie Webb, Steve
Laing, Mrs Eleanor Wells, Bowen
Lait, Mrs Jacqui Welsh, Andrew
Lansley, Andrew Whitney, Sir Raymond
Leigh, Edward Whittingdale, John
Letwin, Oliver Widdecombe, Rt Hon Miss Ann
Lewis, Dr Julian (New Forest E) Wilkinson, John
Willetts, David
Willis, Phil Young, Rt Hon Sir George
Wilshire, David
Winterton, Mrs Ann (Congleton) Tellers for the Ayes:
Winterton, Nicholas (Macclesfield) Mr. John M. Taylor and
Yeo, Tim Mr. Tim Collins.
Abbott, Ms Diane Cousins, Jim
Adams, Mrs Irene (Paisley N) Cranston, Ross
Ainger, Nick Crausby, David
Ainsworth, Robert (Cov'try NE) Cryer, Mrs Ann (Keighley)
Allen, Graham Cryer, John (Hornchurch)
Anderson, Donald (Swansea E) Cummings, John
Armstrong, Ms Hilary Cunliffe, Lawrence
Ashton, Joe Cunningham, Rt Hon Dr Jack (Copeland)
Atherton, Ms Candy Cunningham, Jim (Cov'try S)
Atkins, Charlotte Dalyell, Tam
Austin, John Darvill, Keith
Banks, Tony Davey, Valerie (Bristol W)
Barnes, Harry Davies, Rt Hon Denzil (Llanelli)
Barron, Kevin Davies, Geraint (Croydon C)
Battle, John Davies, Rt Hon Ron (Caerphilly)
Bayley, Hugh Dawson, Hilton
Beard, Nigel Dean, Mrs Janet
Beckett, Rt Hon Mrs Margaret Denham, John
Bell, Martin (Tatton) Dismore, Andrew
Bell, Stuart (Middlesbrough) Dobbin, Jim
Benn, Rt Hon Tony Dobson, Rt Hon Frank
Bennett, Andrew F Donohoe, Brian H
Benton, Joe Doran, Frank
Bermingham, Gerald Dowd, Jim
Berry, Roger Drew, David
Best, Harold Dunwoody, Mrs Gwyneth
Betts, Clive Eagle, Angela (Wallasey)
Blears, Ms Hazel Eagle, Maria (L'pool Garston)
Blizzard, Bob Edwards, Huw
Blunkett, Rt Hon David Efford, Clive
Boateng, Paul Ellman, Mrs Louise
Borrow, David Fatchett, Derek
Bradley, Keith (Withington) Field, Rt Hon Frank
Bradley, Peter (The Wrekin) Fisher, Mark
Brinton, Mrs Helen Fitzpatrick, Jim
Browne, Desmond Fitzsimons, Lorna
Buck, Ms Karen Flint, Caroline
Burden, Richard Flynn, Paul
Burgon, Colin Follett, Barbara
Butler, Mrs Christine Foster, Rt Hon Derek
Caborn, Richard Foster, Michael Jabez (Hastings)
Campbell, Alan (Tynemouth) Foster, Michael J (Worcester)
Campbell, Mrs Anne (C'bridge) Foulkes, George
Campbell, Ronnie (Blyth V) Fyfe, Maria
Campbell—Savours, Dale Galloway, George
Casale, Roger Gapes, Mike
Caton, Martin Gardiner, Barry
Cawsey, Ian Gerrard, Neil
Chapman, Ben (Wirral S) Gibson, Dr Ian
Chisholm, Malcolm Gilroy, Mrs Linda
Clapham, Michael Godman, Dr Norman A
Clark, Rt Hon Dr David (S Shields) Godsiff, Roger
Clark, Paul (Gillingham) Goggins, Paul
Clarke, Charles (Norwich S) Gordon, Mrs Eileen
Clarke, Eric (Midlothian) Griffiths, Jane (Reading E)
Clarke, Rt Hon Tom (Coatbridge) Griffiths, Nigel (Edinburgh S)
Clarke, Tony (Northampton S) Griffiths, Win (Bridgend)
Clelland, David Grocott, Bruce
Clwyd, Ann Grogan, John
Coaker, Vernon Gunnell, John
Coffey, Ms Ann Hall, Mike (Weaver Vale)
Coleman, Iain Hall, Patrick (Bedford)
Colman, Tony Hamilton, Fabian (Leeds NE)
Connarty, Michael Harman, Rt Hon Ms Harriet
Cook, Frank (Stockton N) Heal, Mrs Sylvia
Cooper, Yvette Healey, John
Corbett, Robin Henderson, Doug (Newcastle N)
Corbyn, Jeremy Henderson, Ivan (Harwich)
Corston, Ms Jean
Hepburn, Stephen Marek, Dr John
Heppell, John Marsden, Gordon (blackpool S)
Hesford, Stephen Marsden, Paul (Shrewsbury)
Hewitt, Ms Patricia Marshall, David (Shettleston)
Hinchliffe, David Marshall, Jim (Leicester S)
Hoey, Kate Marshall—Andrews, Robert
Home Robertson, John Martlew, Eric
Hoon, Geoffrey Meacher, Rt Hon Michael
Hope, Phil Meale, Alan
Hopkins, Kelvin Merron, Gillian
Howarth, George (Knowsley N) Michie, Bill (Shef'ld Heeley)
Howells, Dr Kim Miller, Andrew
Hoyle, Lindsay Mitchell, Austin
Hughes, Ms Beverley (Stretford) Moonie, Dr Lewis
Hughes, Kevin (Doncaster N) Moran, Ms Margaret
Humble, Mrs Joan Morgan, Ms Julie (Cardiff N)
Hurst, Alan Morgan, Rhodri (Cardiff W)
Hutton, John Morley, Elliot
Iddon, Dr Brian Morris, Ms Estelle (B'ham Yardley)
Illsley, Eric Mountford, Kali
Ingram, Adam Mullin, Chris
Jackson, Ms Glenda (Hampstead) Murphy, Denis (Wansbeck)
Jackson, Helen (Hillsborough) Naysmith, Dr Doug
Jamieson, David O'Brien, Bill (Normanton)
Jenkins, Brian O'Brien, Mike (N Warks)
Johnson, Alan (Hull W & Hessle) O'Hara, Eddie
Johnson, Miss Melanie (Welwyn Hatfield) Olner, Bill
Jones, Barry (Alyn & Deeside) O'Neill, Martin
Jones, Mrs Fiona (Newark) Organ, Mrs Diana
Jones, Helen (Warrington N) Palmer, Dr Nick
Jones, Ms Jenny (Wolverh'ton SW) Pearson, Ian
Jones, Martyn (clwyd S) Pendry, Tom
Jowell, Ms Tessa Perham, Ms Linda
Keeble, Ms Sally Pickthall, Colin
Keen, Ann (Brentford & Isleworth) Pike, Peter L
Kelly, Ms Ruth Plaskitt, James
Kemp, Fraser Pond, Chris
Kennedy, Jane (Wavertree) Pope, Greg
Khabra, Piara S Pound, Stephen
Kidney, David Powell, Sir Raymond
Kilfoyle, Peter Prentice, Ms Bridget (Lewisham E)
King, Andy (Rugby & Kenilworth) Prentice, Gordon (Pendle)
King, Ms Oona (Bethnal Green) Prescott, Rt Hon John
Kingham, Ms Tess Primarolo, Dawn
Kumar, Dr Ashok Prosser, Gwyn
Ladyman, Dr Stephen Purchase, Ken
Lawrence, Ms Jackie Quin, Ms Joyce
Laxton, Bob Quinn, Lawrie
Lepper, David Rammell, Bill
Leslie, Christopher Rapson, Syd
Levitt, Tom Raynsford, Nick
Lewis, Ivan (bury S) Reed, Andrew (Loughborough)
Lewis, Terry (Worsley) Reid, Rt Hon Dr John (Hamilton N)
Linton, Martin Robertson, Rt Hon George (Hamilton S)
Lloyd, Tony (Manchester C) Robinson, Geoffrey (Cov'try NW)
Lock, David Roche, Mrs Barbara
McAvoy, Thomas Rooney, Terry
McCabe, Steve Ross, Ernie (Dundee W)
McCafferty, Ms Chris Rowlands, Ted
McCartney, Ian (Makerfield) Ruane, Chris
McDonagh, Siobhain Russell, Ms Christine (Chester)
McDonnell, John Ryan, Ms Joan
McGuire, Mrs Anne Salter, Martin
McIsaac, Shona Savidge, Malcolm
McKenna, Mrs Rosemary Sawford, Phil
Mackinlay, Andrew Sedgemore, Brian
McNulty, Tony Shaw, Jonathan
MacShane, Denis Sheerman, Barry
Mactaggart, Fiona Sheldon, Rt Hon Robert
McWalter, Tony Shipley, Ms Debra
McWilliam, John Short, Rt Hon Clare
Mahon, Mrs Alice Simpson, Alan (Nottingham S)
Mallaber, Judy Singh, Marsha
Mandelson, Rt Hon Peter Skinner, Dennis
Smith, Rt Hon Andrew (Oxford E)
Smith, Angela (Basildon) Trickett, Jon
Smith, Miss Geraldine (Morecambe & Lunesdale) Turner, Dennis (Wolverh'ton SE)
Smith, Jacqui (Redditch) Turner, Dr Desmond (Kemptown)
Smith, John (Glamorgan) Turner, Dr George (NW Norfolk)
Smith Llew (Blaenau Gwent) Twigg, Derek (Halton)
Snape, Peter Twigg, Stephen (Enfield)
Soley, Clive Vis, Dr Rudi
Southworth, Ms Helen Walley, Ms Joan
Spellar, John Wareing, Robert N
Squire, Ms Rachel Watts, David
Starkey, Dr Phyllis White, Brian
Steinberg, Gerry Whitehead, Dr Alan
Stevenson, George Wicks, Malcolm
Stewart, David (Inverness E) Williams, Rt Hon Alan (Swansea W)
Stewart, Ian (Eccles) Williams, Alan W (E Carmarthen)
Stinchcombe, Paul Wills, Michael
Stoate, Dr Howard Winnick, David
Strang, Rt Hon Dr Gavin Winterton, Ms Rosie (Doncaster C)
Stringer, Graham Wise, Audrey
Sutcliffe, Gerry Wood, Mike
Taylor, Rt Hon Mrs Ann (Dewsbury) Woolas, Phil
Temple—Morris, Peter Worthington, Tony
Thomas, Gareth R (Harrow W) Wray, James
Timms, Stephen Wright, Dr Tony (Cannock)
Tipping, Paddy
Touhig, Don Tellers for the Noes:
Mr. David Hanson and
Mr. Keith Hill.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments):—

The House divided: Ayes 332, Noes 155.

Division No. 36] [10.12 pm
Abbott, Ms Diane Burden, Richard
Adams, mrs Irene (Paisley N) Burgon, Colin
Ainger, Nick Butler, Mrs Christine
Ainsworth, Robert (Cov'try NE) Caborn, Richard
Allen, Graham Campbell, Alan (Tynemouth)
Anderson, Donald (Swansea E) Campbell, Mrs Anne (C'bridge)
Armstrong, Ms Hilary Campbell, Ronnie (Blyth V)
Ashton, Joe Campbell—Savours, Dale
Atherton, Ms Candy Casele, Roger
Atkins, Charlotte Caton, Martin
Austin, John Cawsey, Ian
Banks, Tony Chapman, Ben (Wirral S)
Barnes, Harry Chisholm, Malcolm
Battle, John Clapham, Michael
Bayley, Hugh Clark, Rt Hon Dr David (S Shields)
Beard, Nigel Clark, Paul (Gillingham)
Beckett, Rt Hon Mrs Margaret Clarke, Charles (Norwich S)
Bell, Martin (Tatton) Clarke, Eric (Midlothian)
Bell, Stuart (Middlesbrough) Clarke, Rt Hon Tom (Coatbridge)
Benn, Rt Hon Tony Clarke, Tony (Northampton S)
Bennett, Andrew F Clelland, David
Benton, Joe Clwyd, Ann
Bermingham, Gerald Coaker, Vernon
Berry, Roger Coffey, Ms Ann
Best, Harold Coleman, Iain
Betts, Clive Colman, Tony
Blears, Ms Hazel Connarty, Michael
Blizzard, Bob Cook, Frank (Stockton N)
Boateng, Paul Cooper, Yvette
Borrow, David Corbett, Robin
Bradley, Keith (Withington) Corbyn, Jeremy
Bradley, Peter (The Wrekin) Corston, Ms Jean
Brinton, Mrs Helen Cousins, Jim
Browne, Desmond Cranston, Ross
Buck, Ms Karen Crausby, David
Cryer, Mrs Ann (Keighley) Howells, Dr Kim
Cryer, John (Hornchurch) Hoyle, Lindsay
Cummings, John Hughes, Ms Beverley (Stretford)
Cunliffe, Lawrence Hughes, Kevin (Doncaster)
Cunningham, Rt Hon Dr Jack (Copeland) Humble, Mrs Joan
Cunningham, Jim (Cov'try S) Hurst, Alan
Dalyell, Tam Hutton, John
Darvill, Keith Iddon, Dr Brian
Davey, Valerie (Bristol W) Illsley, Eric
Davies, Rt Hon Denzil (Llanelli) Ingram, Adam
Davies, Geraint (Croydon C) Jackson, Ms Glenda (Hampstead)
Davies, Rt Hon Ron (Caerphilly) Jackson, Helen (Hillsborough)
Dawson, Hilton Jamieson, David
Dean, Mrs Janet Jenkins, Brian
Denham, John Johnson, Alan (Hull W & Hessle)
Dismore, Andrew Johnson, Miss Melanie (Welwyn Hatfield)
Dobbin, Jim Jones, Barry (Alyn & Deeside)
Dobson, Rt Hon Frank Jones, Mrs Fiona (Newark)
Donohoe, Brian H Jones, Helen (Warrington N)
Doran, Frank Jones, Ms Jenny (Wolverh'ton SW)
Dowd, Jim Jones, Martyn (Clwyd S)
Dunwoody, Mrs Gwyneth Jowell, Ms Tessa
Eagle, Angela (Wallasey) Keeble, Ms Sally
Eagle, Maria (L'pool Garston) Keen, Ann (Brentford & lsleworth)
Edwards,Huw Kelly, Ms Ruth
Efford, Clive Kemp, Fraser
Ellman, Mrs Louise Kennedy, Jane (Wavertree)
Fatchett, Derek Khabra, Piara S
Field, Rt Hon Frank Kidney, David
Fisher, Mark Kilfoyle, Peter
Fitzpatrick, Jim King, Andy (Rugby & Kenilworth)
Fitzsimons, Lorna King, Ms Oona (Bethnal Green)
Flint, Caroline Kingham, Ms Tess
Flynn, Paul Kumar, Dr Ashok
Follett, Barbara Ladyman, Dr Stephen
Foster, Rt Hon Derek Lawrence, Ms Jackie
Foster, Michael Jabez (Hastings) Laxton, Bob
Foster, Michael J (Worcester) Lepper, David
Foulkes, George Leslie, Christopher
Fyfe, Maria Levitt, Tom
Gapes, Mike Lewis, Ivan (Bury S)
Gardiner, Barry Lewis, Terry (Worsley)
Gerrard, Neil Linton, Martin
Gibson, Dr Ian Lloyd, Tony (Manchester C)
Gilroy, Mrs Linda Lock, David
Godman, Dr Norman A McAvoy, Thomas
Godsiff, Roger McCabe, Steve
Goggins, Paul McCafferty, Ms Chris
Gordon, Mrs Eileen McCartney, Ian (Makerfield)
Griffiths, Jane (Reading E) McDonagh, Siobhain
Griffiths, Nigel (Edinburgh S) McDonnell, John
Griffiths, Win (Bridgend) McGuire, Mrs Anne
Grocott, Bruce McIsaac, Shona
Grogan, John McKenna, Mrs Rosemary
Gunnell, John Mackinlay, Andrew
Hall, Mike (Weaver Vale) McNulty, Tony
Hall, Patrick (Bedford) MacShane, Denis
Hamilton, Fabian (Leeds NE) Mactaggart, Fiona
Harman, Rt Hon Ms Harriet McWafter, Tony
Heal, Mrs Sylvia McWilliam, John
Healey, John Mahon, Mrs Alice
Henderson, Doug (Newcastle N) Mallaber, Judy
Henderson, Ivan (Harwich) Mandelson, Rt Hon Peter
Hepburn, Stephen Marek, Dr John
Heppell, John Marsden, Gordon (Blackpool S)
Hesford, Stephen Marsden, Paul (Shrewsbury)
Hewitt, Ms Patricia Marsden, David (Shettleston)
Hinchliffe, David Marshall, Jim (Leicester S)
Hoey, Kate Marshall—Andrews, Robert
Home Robertson, John Martlew, Eric
Hoon, Geoffrey Meacher, Rt Hon Michael
Hope, Phil Meale, Alan
Hopkins, Kelvin Merron, Gillian
Howarth, George (Knowsley N) Michie, Bill (Shef'ld Heeley)
Miller, Andrew Short, Rt Hon Clare
Mitchell, Austin Simpson, Alan (Nottingham S)
Moonie, Dr Lewis Skinner, Dennis
Moran, Ms Margaret Smith, Rt Hon Andrew (Oxford E)
Morgan, Ms Julie (Cardiff N) Smith, Angela (basildon)
Morgan, Rhodri (cardiff W) Smith, Miss Geraldine (Morecambe & Lunesdale)
Morley, Elliot Smith, Jacqui (Redditch)
Morris, Ms Estelle (B'ham Yardley) Smith, John (Glamorgan)
Mountford, Kali Smith, Llew (Blaenau Gwent)
Mullin, Chris Snape, Peter
Murphy, Denis (Wansbeck) Soley, Clive
O'Brien, Bill (Normanton) Southworth, Ms Helen
O'Brien, Mike (N Warks) Spellar, John
O'Hara, Eddie Squire, Ms Rachel
Olner, Bill Starkey, Dr Phyllis
O'Neill, Martin Steinberg, Gerry
Organ, Mrs Diana Stevenson, George
Palmer, Dr Nick Stewart, David (Inverness E)
Pearson, Ian Stewart, Ian (Eccles)
Pendry, Tom Stoate, Dr Howard
Perham, Ms Linda Strang, Rt Hon Dr Gavin
Pickthall, Colin Stringer, Graham
Pike, Peter L Sutcliffe, Gerry
Plaskitt, James Taylor, Rt Hon Mrs Ann (Dewsbury)
Pollard, Kerry Taylor, David (NW Leics)
Pond, Chris Temple—Morris, Peter
Pope, Greg Thomas, Gareth R (Harrow W)
Pound, Stephen Timms, Stephen
Powell, Sir Raymond Tipping, Paddy
Prentice, Ms Bridget (Lewisham E) Touhig, Don
Prentice, Gordon (Pendle) Trickett, Jon
Prescott, Rt Hon John Turner, Dennis (Wolverh'ton SE)
Primarolo, Dawn Turner, Dr Desmond (Kemptown)
Prosser, Gwyn Turner, Dr George (NW Norfolk)
Purchase, Ken Twigg, Derek (Halton)
Quin, Ms Joyce Twigg, Stephen (Enfield)
Quinn, Lawrie Vis, Dr Rudi
Rammell, Bill Walley, Ms Joan
Rapson, Syd Wareing, Robert N
Raynsford, Nick Watts, David
Reed, Andrew (Loughborough) White, Brian
Reid, Rt Hon Dr John (Hamilton N) Whitehead, Dr Alan
Robertson, Rt Hon George (Hamilton S) Wicks, Malcolm
Robinson, Geoffrey (Cov'try NW) Williams, Rt Hon Alan (Swansea W)
Roche, Mrs Barbara Williams, Alan W (E Carmarthen)
Rooney, Terry Wills, Michael
Ross, Ernie (Dundee W) Winnick, David
Rowlands, Ted Winterton, Ms Rosie (Doncaster C)
Ruane, Chris Wise, Audrey
Russell, Ms Christine (Chester) Wood, Mike
Ryan, Ms Joan Woolas, Phil
Salter, Martin Worthington Tony
Savidge, Malcolm Wray, James
Sawford, Phil Wright, Dr Tony (Cannock)
Sedgemore, Brian
Shaw, Jonathan Tellers for the Ayes:
Sheerman, Barry Mr. David Hanson and
Sheldon, Rt Hon Robert Mr. Keith Hill
Shipley,Ms Debra
Ainsworth, Peter (E Surrey) Boswell, Tim
Allan, Richard Brazier, Julian
Amess, David Breed, Colin
Ancram, Rt Hon Michael Brooke, Rt Hon Peter
Arbuthnot, Rt Hon James Browning, Mrs Angela
Ashdown, Rt Hon Paddy Bruce, Ian (S Dorset)
Atkinson, Peter (Hexham) Burnett, John
Baker, Norman Burns, Simon
Baldry, Tony Cash, William
Beith, Rt Hon A J Chapman, Sir Sydney (Chipping Barnet)
Bercow, John Chope, Christopher
Beresford, Sir Paul Clappison, James
Body, Sir Richard
Clark, Rt Hon Alan (Kensington) Major, Rt Hon John
Clarke, Rt Hon Kenneth (Rushcliffe) Malins, Humfrey
Clifton—Brown, Geoffrey Maples, John
Cormack, Sir Patrick Mates, Michael
Cran, James Mawhinney, Rt Hon Sir Brian
Davey, Edward (Kingston) May, Mrs Theresa
Davis, Rt Hon David (Haltemprice) Michie, Mrs Ray (Argyll & Bute)
Day, Stephen Moore, Michael
Dorrell, Rt Hon Stephen Moss, Malcolm
Duncan, Alan Nicholls, Patrick
Duncan Smith, Iain Öpik, Lembit
Ottaway, Richard
Emery, Rt Hon Sir Peter Page, Richard
Evans, Nigel Paterson, Owen
Faber, David Pickles, Eric
Fallon, Michael Prior, David
Flight, Howard Randall, John
Forth, Rt Hon Eric Redwood, Rt Hon John
Foster, Don (Bath) Rendel, David
Fox, Dr Liam Robathan, Andrew
George, Andrew (St Ives) Robertson, Laurence (Tewk'b'ry)
Gibb, Nick Roe, Mrs Marion (Broxbourne)
Gill, Christopher Rowe, Andrew (Faversham)
Gillan, Mrs Cheryl Russell, Bob (Colchester)
Gorrie, Donald Sanders, Adrian
Gray, James Sayeed, Jonathan
Green, Damian Simpson, Keith (Mid-Norfolk)
Greenway, John Smith, Sir Robert (W Ab'd'ns)
Grieve, Dominic Soames, Nicholas
Gummer, Rt Hon John Spelman, Mrs Caroline
Hague, Rt Hon William Spicer, Sir Michael
Hamilton, Rt Hon Sir Archie Spring, Richard
Hammond, Philip Stanley, Rt Hon Sir John
Harris, Dr Evan Streeter, Gary
Hawkins, Nick Stunell, Andrew
Hayes, John Swayne, Desmond
Heald, Oliver Syms, Robert
Heath, David (Somerton & Frome) Tapsell, Sir Peter
Heathcoat—Amory, Rt Hon David Taylor, Ian (Esher & Walton)
Hogg, Rt Hon Douglas Taylor, Matthew (Truro)
Horam, John Taylor, Sir Teddy
Howard, Rt Hon Michael Tonge, Dr Jenny
Howarth, Gerald (Aldershot) Townend, John
Hunter, Andrew Tredinnick, David
Jack, Rt Hon Michael Trend, Michael
Jenkin, Bernard Tyler, Paul
Jones, Nigel (Cheltenham) Tyrie, Andrew
Kennedy, Charles (Ross Skye) Viggers, Peter
Key, Robert Wallace, James
Kirkbride, Miss Julie Walter Robert
Laing, Mrs Eleanor Wardle, Charles
Lait, Mrs Jacqui Webb, Steve
Lansley, Andrew Wells, Bowen
Leigh, Edward Whitney, Sir Raymond
Letwin, Oliver Whittingdale, John
Lewis, Dr Julian (New Forest E) Widdecombe, Rt Hon Miss Ann
Lidington, David Wilkinson, John
Lilley, Rt Hon Peter Willetts, David
Lloyd, Rt Hon Sir Peter (Fareham) Willis, Phil
Wilshire, David
Loughton, Tim Winterton, Mrs Ann (Congleton)
Luff, Peter Winterton, Nicholas (Macclesfield)
McIntosh, Miss Anne Yeo, Tim
MacKay, Rt Hon Andrew Young, Rt Hon Sir George
Maclean, Rt Hon David
Maclennan, Rt Hon Robert Tellers for the Ayes:
McLoughlin, Patrick Mr. John M. Taylor and
Madel, Sir David Mr. Time Collins.

MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Question accordingly agreed to.

Resolved, That this notes that the fundamental reform of company taxation carried out by the Government has removed major company taxation distortions from the system and put in place a sound base for better quality investment and growth that will lead to greater prosperity for everyone in the UK, including pensioners; that the Government has taken significant steps to help pensioners, including a guaranteed minimum income for the poorest pensioners through an increase in Income Support from this April worth over £236 extra per year for single pensioners and over £377 extra for couples, a minimum guarantee on tax so that pensioners have no income tax to pay unless their income rises above a certain level, £20 of winter fuel payments for every pensioner household, the introduction of free eye tests for pensioners from this April, new travel concessions on public transport and an extra £21 billion invested in the National Health Service; and further notes that this contrasts sharply with the record of the previous Government which introduced VAT on fuel at 8% and tried to increase it to 17.5%, which introduced charges of eye tests for pensioners, which presided over the mis-selling of pensions which severely damaged the financial security of many pensioners, which ran down the National Health Service on which many pensioners rely, and which was responsible for boom and bust economics which eroded the real value of pensioners' savings through inflation exceeding 10%.