HC Deb 05 July 1999 vol 334 cc747-68

'Nothing in the Income and Corporation Taxes Act 1988 shall have the effect that any tax payer whose total income is below the personal allowance threshold for income tax purposes shall pay income tax.'.—[Mr. Quentin Davies.]

Brought up, and read the First time.

Mr. Quentin Davies

I beg to move, That the clause be read a Second time.

Madam Speaker

With this, it will be convenient to discuss the following: New clause 18—A pensioner's tax exemption certificate—

'.—(1) The Inland Revenue shall be given the power to issue tax exemption certificates to taxpayers who, at any time within that year are of the age of 65 or upwards, whose income does not exceed £6,000 (Tax Exemption Certificate Limit), and is likely not to exceed that limit in the three following years.

(2) The Tax Exemption Certificate shall:

  1. (a) entitle the taxpayer to receive income from all sources without deduction of income tax
  2. (b) exempt the taxpayer from dealings with the Inland Revenue, save to confirm the level of income when renewing the Tax Exemption Certificate
  3. (c) require the taxpayer to notify the Inland Revenue by 5th October following the end of the tax year where their income has exceeded the Tax Exemption Certificate limit
  4. (d) be granted for a period of four consecutive years.

(3) The Tax Exemption Certificate limit shall be automatically uprated every year in accordance with section 257 of the Taxes Act 1988.'.

Amendment No. 2, in clause 19, page 9, line 12, leave out '20' and insert '10'.

Mr. Davies

I remind the House that I have interests that are listed in the register, but none of them is relevant to this debate or to earlier debates.

This is a crucial point in the proceedings. There is no need for any political banter or point-scoring. In tabling new clause 3 and amendment No. 3, we contend that the Government, in only two years, have inflicted immense damage on our income tax system. They have brought about a disreputable shambles by making changes that bear no relationship to the principles that ought to characterise a tax system. In a fair, just and economically sensible and successful society, a tax system ought to be based on the principles of justice, clarity and rationality. We now have an income tax system that is brutally unfair, discriminatory—particularly against the most vulnerable people—and incomprehensibly irrational and opaque.

I turn first to the callously unfair aspects of the tax system, as modified by the new Labour Government. The result of their measures is that people at the bottom of the income scale, whose incomes are so low that they do not even reach the income tax threshold, are now subject to income tax. That is already having a devastating effect on the finances of extremely—indeed, I would say almost pathetically—poor people.

Let us consider someone whose total income is £5,000 a year, which is derived from dividends. That person might be one of those widows whom the Government have decided, in other measures, to deprive of their widows pension. We debated and, I regret to say, unsuccessfully opposed that vicious measure only a few months ago. That person might be somebody who has no pension or other source of income, but who has saved from a lifetime of self-employment a small amount of money that now yields £5,000. That person might be someone who had to leave employment because of disablement, and we know how the Government have now cruelly restricted the eligibility criteria for incapacity benefit and are means-testing that benefit.

Those people are at the bottom of the income scale. A few months ago, their income was £5,000. What is their position now, following the Government's measures? It is almost inconceivable. Most people in this country, who are not in that category, have not even begun to face the reality of what has happened to people on the lowest incomes. The result of the Government's measures is that people who had £5,000 to live on now have only £4,000. Those people, who are extremely vulnerable, have lost £1,000 a year, which is an income reduction of 20 per cent.

Mr. Bercow

My hon. Friend is expounding the case with great force and eloquence. Is he aware that during the proceedings on last year's Finance Bill, the hon. and learned Member for Dudley, North (Mr. Cranston) urged the then Paymaster General to reconsider the Government's position on the tax treatment of dividends as it affected people of pensionable age? The hon. and learned Gentleman, having made that suggestion as a Government Back Bencher to the beleaguered Paymaster General, was subsequently promoted to the post of Solicitor-General. Sadly, despite his promotion, the Government have not shifted their position. Is not it about time that they did so, or that the Solicitor-General relinquished his post?

Mr. Davies

My hon. Friend makes two telling points—one about an hon. and learned Member who certainly ought to be considering his position in the new Labour Administration. I hope that the Financial Secretary to the Treasury, who is about to respond to me, is also considering not just her position, but whether she feels proud to serve in a Government who press on the poorest people in our society in such a malicious and devastating fashion. That is exactly what has occurred.

As my hon. Friend the Member for Buckingham (Mr. Bercow) rightly said, the former Paymaster General, the hon. Member for Coventry, North-West (Mr. Robinson), felt sufficiently ashamed by what his Government had done to express his embarrassment in Committee and to hold out the prospect that something would be done. Nothing, of course, has been done.

This is part and parcel of a campaign waged by this new Labour Government against the new poor—people who are at the bottom of the income scale, but who have a small amount of savings and therefore do not qualify for the Government's means-tested benefits. They are being clobbered over and again by these vicious tax measures.

One thing is quite extraordinary: the Government have protected certain categories of people from the impact of the abolition of the dividend tax credit. They have protected the higher taxpayers—people who would have been paying a marginal 40 per cent. tax on their dividend income and who continue to pay a marginal 40 per cent. on other sources of income. They have a new dividend tax rate of 32.5 per cent. The Government have protected overseas holders of British equities, so that Americans who receive a dividend stream from this country will still receive a cheque—a tax credit—from the Treasury.

The Government cannot find a single crumb for people in this country who have saved hard or who are—perhaps—widows whose husbands saved on their behalf and who have some small savings income from dividends on which to live. The Government should be utterly ashamed of themselves. It amazes me that they can sleep happily in their beds knowing how cruelly they have ruined the standards of living of people who are right at the bottom of the income scale. That is the achievement of new Labour.

Mr. Christopher Leslie (Shipley)

Do the hon. Gentleman's comments about people on the lowest income mean that he will now support the working families tax credit?

Mr. Davies

The hon. Gentleman has been well schooled by new Labour. The technique that he has learned is this: if one is asked an awkward question, if one is confronted with unpleasant reality, and if it is suggested that one's Government have betrayed the very principles on which the Labour party has thrived for most of this century, one changes the subject. The hon. Gentleman has tried unconvincingly to do so.

I shall next consider people who are slightly up the income scale. What is the position of savers who have an income from saving, from bank deposits, building societies, bonds and gilts, or wherever, which takes them just above the income tax threshold? They do not benefit from the new lower tax rate of 10 per cent. They therefore find themselves at a disadvantage. For reasons incomprehensible, and certainly indefensible either in terms of justice or economic rationality, such savers are taxed at 20 per cent.—not at 10 per cent., as for the first £1,500 earned income band of taxable income.

What has actually occurred? I shall briefly go through the range of rates, because the public have not yet focused on what has happened. Until last year, under the regime inherited from previous Conservative Administrations, there were only three income tax rates in this country. They were applied simply according to the taxpayer's income. They were progressive: the basic rate of tax was 23 per cent.; the lower rate was 20 per cent.; and the higher rate was 40 per cent. People paid at the relevant marginal rate according to their income. The system was fair, rational and comprehensible, and was widely accepted.

10.30 pm

What have the Government done during their two years in power? They have replaced those three rates—that simple and rational system—by eight different categories of liability for income tax and by five, soon to be six, different rates. They did so according to no principle at all, so that what has emerged is a dog's breakfast. There is a 10 per cent. lower rate of income tax on the first £1,500 of earnings from employment or self-employment. That does not apply to savings income from bank or building society deposits, bonds, gilts and so on. There is a 10 per cent. basic rate on dividends—not a lower rate—which takes that tax rate on dividend income up to more than £32,000. That is an extremely low rate. Anyone who receives dividend income up to more than £32,000—taking into account the personal allowance, which, I think, is now £4,335—does not have to make any further payments to the Revenue; that person does not have to account for any further tax.

Then, there is a 20 per cent. basic rate on other savings income, so that, although dividends are taxed at 10 per cent, bank deposits are taxed at 20 per cent. Where is the rhyme or reason in that? What about income from earnings from employment or self-employment? The basic rate is 23 per cent.—not 20 per cent. as for savings—for income within the range of the basic rate; that is up to £32,000 for people aged below 65, and slightly more than that for those aged over 65.

I have already referred to the new 32.5 per cent. higher rate on dividends; there is a 40 per cent. higher rate on other savings income, and on income deriving from employment or self-employment. Soon, there will be an eighth category and a sixth rate: a 44 per cent. marginal rate for those with children, when the child tax credit comes in.

The system is a complete shambles, based on no conceivable principle. Is it to be defended as being fair to the poor and slightly more unpleasant for the wealthier? No, not at all. As I have shown in my example, the people who suffer most—with a 20 per cent. reduction in their income overnight—are the poorest in the country, who have a savings income from dividends. On the other hand, higher rate taxpayers are protected; if they have dividend income, they are subject to a special 32.5 per cent. rate. One could not possibly say that the new system is a workers tax, as has been argued by new Labour, and that people receive better tax treatment if their income is from employment or self-employment rather than from savings. The reverse is true. People with higher earnings from employment and self-employment will pay tax at a margin of 40 per cent., whereas, if their income derives from dividends, the rate is 32.5 per cent. There is no rhyme or reason in that.

I take two examples from different ends of the range. First, let us take a person whose total income is £6,000. If that income derives from United Kingdom dividends, they get £6,000; that is fine. If that income derives from bank interest, they will pay 20 per cent. tax above the threshold, and their income will be £5,711. If they have earned income, they will pay 10 per cent. for the first band of £1,500 above the personal allowance, and they will get £5,855. If their income were from foreign dividends, they would get the same amount, because a rate of 10 per cent. would apply. If they have—

Mr. Geraint Davies

Will the hon. Gentleman give way?

Mr. Davies

Not at this stage.

Therefore, we have a series of five different possibilities—income from UK dividends; income from bank interest; income from earnings; income from foreign dividends; or income from PEPs and ISAs, in which case there will be a tax credit of 10 per cent., so the person will end up with £6,600. The income tax rate depends, not on how much one earns, but on the source of income.

Secondly, let us take someone with a total income of £30,000. If their income derives from dividends, they are credited with having paid tax at 10 per cent. and have nothing more to pay. If it derives from bank interest, it is taxed at 20 per cent. beyond the personal allowance, and they will get £25,665. From self-employment or employment, they will get £24,293; from foreign dividends, £27,433. From PEPs or ISAs, they will get £33,000 because they will get a tax credit. There is no rhyme or reason in that.

This is a system that simply cannot remain viable. This is a system that has lost all touch with justice or good sense. This is a system that the Government have managed to introduce in merely two years. They have produced a shambles—an extremely damaging shambles—and they are in danger of undermining the fundamental support for taxation in this country, which has always been a feature of British life. If one produces something that is neither fair nor rational, one will not enjoy public respect; and that is the most devastating disservice to the cause of good taxation that any Government could possibly deliver.

Mr. Geraint Davies

It is a great pleasure to have the hon. Member for Grantham and Stamford (Mr. Davies), who bears my name, back on the Conservative Treasury team. He is very amusing when he makes his emotional outbursts, which bear no relation to reality. Strategically—to put this in context—the Government are trying to have a Budget that gets people back to work and supports families, while protecting the least poor with minimum income guarantees. The changes that are embraced in the Budget and will be entailed in what happens in the wider economy, should be seen in that context—enabling families to work, stopping child poverty, making work pay, and so on.

There has been a lot of ranting from the Conservative Benches about the so-called pathetically poor and the cruel nature of the new Labour Government, but we should view that in context. The crocodile tears that Conservative Members have been shedding come from those who made up a Government who introduced such things as the poll tax, which obviously hit the poor the worst, and VAT on fuel, which especially hit the pensioners that they claim to be concerned about. That Government introduced charges for eye tests and cut pensions in real terms. We had the pensions mis-selling crisis.

Also under that Government, about a million pensioners underclaimed their rights, and the Conservatives did nothing to encourage and enable people to claim their rights. There was a complicated system, which many people who did not have a very good education—because of the legacy of the lot opposite—did not understand. Essentially, we ended up with a lot of poor people who did not claim their benefits. These are the sort of things that the Government are doing something about.

Mr. Bercow

The hon. Gentleman is a good colleague of the Solicitor-General and I believe that he sat on the relevant Finance Bill Committee with him. Given the hon. Gentleman's reputation for intellectual curiosity, has he at no stage since the elevation of his hon. and learned Friend the Member for Dudley, North (Mr. Cranston) to the post of Solicitor-General asked him whether he has changed his mind about the Government's policy on the tax treatment of dividends for pensioners? Has he asked the hon. and learned Gentleman whether he is now a supporter of the Government's position or whether, continuing to believe in the position that he held as a Back Bencher, he has used his position within government to argue for a change of policy? Is the hon. Gentleman saying that the thought of consulting his hon. and learned Friend has not crossed his mind?

Mr. Davies

I thank the hon. Gentleman for that long-winded question. He would know, if he had bothered to be a member of the Committee to which he referred, that my hon. and learned Friend the Solicitor-General asked whether the Government would care to review their position. The then Paymaster General said, "We will have another look at it because we are very fair on the Government Benches." The Government took that look and came to the conclusion that they were pursuing the right policy.

It is necessary to separate social policy from economic policy. Without rehearsing all the arguments, Opposition Members should know that the changes were introduced to encourage more inward investment in companies and to get rid of tax distortions and excess pay-outs of dividends. The fact that there is a by-product for some non-taxpayers is known, but against that we have a strategy for eliminating poverty that is separate. It is horses for courses, and that is a rational approach.

When we consider the number of people who are concerned by the changes—if he had been up to speed I would have expected the hon. Member for Grantham and Stamford to refer to the 300,000 pensioners—we find that 220,000 pensioners are affected by less than £100. About 270,000 are affected by less than £200. After all, we are giving £100 to older people for their winter fuel benefit. We are talking about gainers and losers, and in the wider context there is the reduction of value added tax on fuel, the minimum income guarantee and the extra £21 billion that is going into the health service. We must consider the real impact that the Government are having on pensioners. It is no use considering a small change in a microscopic way. We must have a wider vision of what is happening, and within that broader context is the case that the Labour party is the pensioners' friend.

Sir Robert Smith

If someone is £200 worse off and he is given £100 to pay his heating bills, what is he meant to pay the heating bill with when he is £100 worse off net?

Mr. Davies

The first £100 was only the winter fuel benefit. When we add up the other factors the average is £240. The hon. Gentleman should look up some of the facts rather than coming out with glib remarks that make no sense.

The changes that we made to advance corporation tax were to repay tax. Pensioners who invested in equities were receiving cash back on tax that they did not pay. A differential approach was taken to those pensioners who perhaps invested in other sources of savings. Clearly there was a distortion, which has been removed. If we want to give more money to poorer pensioners, it can be done through other strategies such as the minimum income guarantee and winter fuel benefit. Indeed, that is precisely what we are doing. We have introduced a range of measures including health service changes—

Mr. Desmond Swayne (New Forest, West)

Will the hon. Gentleman give way?

Mr. Davies

No, I will not take any more interventions.

We have got rid of eye-test charges for pensioners and there have been VAT changes. A host of measures in favour of pensions have been introduced by the Government. It is fallacious and cynical for pompous speeches to be made by Conservative Members about the particular change that we are considering.

Mr. Townend

I support new clause 3. It would ensure that people who earn less than £4,335—which, I should have thought, even Labour Members would accept is not a very high figure—and more importantly, people between the ages of 65 and 74 who earn no more than £5,720, do not pay income tax. I am particularly interested in that group because in my constituency, East Yorkshire, we have a much higher percentage of old age pensioners than in the country at large.

10.45 pm

The new clause tries to set right the perverse situation that occurred as a result of the Government's decision in the July 1997 Budget to abolish dividend tax credits for non-taxpayers. That measure came into effect this year and means that non-taxpayers who have already paid the tax on their dividend income cannot reclaim it, as they used to be able to do. That affects 300,000 pensioners, quite a number of whom are in my constituency.

It is all very well for the hon. Member for Croydon, Central (Mr. Davies) to say that £75 or £100 is not much money, but for pensioners living on just over £100 a week, an extra £2 a week in their pocket is a lot of money. At the last election Labour claimed to be the party of the old age pensioners, and the hon. Member for Croydon, Central said that today. The Government should think carefully about accepting the new clause, as it would be in their interest.

It was fascinating to me that an officer of the Pensioners Alliance came to my last surgery in Bridlington. That person is a lifelong socialist. I confess that, at the last election, I did not get anything like the support from older people that I had got in previous elections. That was for two reasons. First, it was put about that the Conservative party would do away with the old age pension. Secondly, the old age pensioners were led to believe that the Labour party would restore the connection between the average wage and the pension.

Mr. Hilton Dawson (Lancaster and Wyre)

Will the hon. Gentleman give way?

Mr. Townend

Naturally, I was interested in why that lady had come to see me. I could not help asking whether she was happy with her Government. She said, "No, that is why I have come to see you, Mr. Townend. I am very interested in learning what Mr. Hague's new policies are likely to be for pensioners, because we feel let down by the Government." She pointed out that people who had saved modest amounts could no longer reclaim the tax on the dividends.

When pensioners heard the Chancellor's speech, they were led to believe that the connection between earnings and pensions had been restored. Then they found that anyone who had an occupational pension got nothing at all. They learned that there was a new 10p income tax rate, but it did not apply to pensioners. They were told that they would keep their marriage allowance, but that was not for new pensioners—only for existing pensioners. The lady at my surgery said, "We are very disillusioned, and I will tell you one thing, Mr. Townend. We will not be voting in the European elections."

The Labour party should take note of that. The old people are feeling let down. If Labour Members say that an old age pensioner on £5,720 a year should be paying tax, they have got it wrong.

Mr. Edward Davey

What the hon. Member for East Yorkshire (Mr. Townend) did not tell us is what he told his constituent about Mr. Hague's pension policy. I learned from my hon. Friend the Member for Northavon (Mr. Webb) that when the hon. Member for Grantham and Stamford (Mr. Davies) was in charge of pension policy for the Conservative party, his pension policy was not to have a pension policy. I hope that a Conservative Member will intervene to tell us what William Hague's pension policy is.

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. The hon. Gentleman should realise that when he refers to another right hon. or hon. Member, he should do so by his constituency.

Mr. Davey

I am grateful to you for putting me right, Mr. Deputy Speaker.

I agree with the substance of what the hon. Member for Grantham and Stamford said. He made the point that the Government's abolition of the dividends tax credit has hit a lot of elderly people—300,000 of them. Despite a long review, the Government have failed to see the error of their ways. It is no good the hon. Member for Croydon, Central (Mr. Davies) saying that we should divide social policy from economic policy. Of course we should not; they are totally intertwined. The Government recognise that linkage in other policies. I have always thought that the welfare-to-work programme is about ensuring that social justice helps economic efficiency, so he cannot have it both ways.

The Liberal Democrats have tabled new clause 18 to put that idea before the House and the Government. We believe that giving tax exemption certificates to pensioners who are below the income tax threshold would simplify tax administration, bringing to the Inland Revenue and also to pensioners a lot of savings—not only financial, but in terms of anxiety and worry. Hundreds of thousands of pensioners who are below the income tax threshold receive large self-assessment tax returns every year, filling them with anxiety about whether they are due to pay tax, how to fill in the form and who they need to see make sure that they do so correctly. They want to pay any tax that they owe, but are not sure how to go about that.

New clause 18 is based on a simple idea developed by the low incomes tax reform group of the Chartered Institute of Taxation. We have borrowed it and we hope that the Government will borrow it from us in turn. It would ensure that all those unnecessary self-assessment tax returns do not have to be sent out. The Government could take that further and ensure that taxpayers who are sent self-assessment tax returns, even though they owe only a small amount, could benefit from simplification of the tax system.

The Chartered Institute of Taxation has produced many examples of ordinary taxpayers—pensioners—who are extremely concerned when they receive such forms. A pensioner from Tilbury was quoted in one of the institute's recent reports, which was published in June. The pensioner wrote: I am one of those pensioners on low income who is being hectored by the Inland Revenue. I've tried explaining about my income not being enough to tax. This is the third year running that the pensioner has had to do that even though my circumstances stay the same. A pensioner from Stroud wrote: My husband is disabled and a non-taxpayer. We now realise that because we have a joint Pensioners Bond we are sent a self-assessment form automatically every year. We could easily do without this form filling as we are on low income having paid taxes all our lives. I shall give a final quote, although I could have given hundreds. A pensioner from Ilfracombe wrote: My experience from the Tax point of view is basic. I have not paid any for over 20 years, but still receive annual tax forms. Now I must fill in the new Tax Assessment Forms (for the 2nd year running). That is bureaucracy gone mad; it is causing huge anxiety among the pensioner population and it flies in the face of the Government's declared policy. When the Chancellor announced the comprehensive spending review to the House, 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 is a policy that hon. Members on both sides of the House can subscribe to—it is very sensible—but it is yet to be enacted. New clause 18 would give the Government the chance to do so. It is a practical way forward.

The proposal for tax exemption certificates is simple. The Inland Revenue could work out from the records which pensioners had not paid tax for the previous two years and write to them, making the offer that they would gain a certificate if they filled in a simple application form. Alternatively, the individual non-taxpaying pensioner could apply to the Inland Revenue for an application form for a tax exemption certificate, for which I suggest the following simple wording: "I do not expect my income to exceed the tax exemption certificate threshold of £6,000 for the current year. I do not anticipate that my income in the next three years will exceed the tax exemption certificate threshold. If my income should exceed the tax exemption certificate threshold in the next three years, I will notify the Inland Revenue by 5 October following the end of the tax year."

Everyone would be able to understand such a simple declaration, and it would save us the cost of sending millions of tax returns to non-taxpayers, as well as saving them anxiety. Certificates could be re-registered every four years, and random checks used to ensure that the system was not abused, as happens in other parts of the tax system. Our proposal is in line with the Conservative new clause, but offers a practical idea to simplify administration of the tax system.

Our amendment is not just about non-taxpayers or self-assessment tax returns, but about the relationship of the Inland Revenue and the public sector with pensioners and others who may have difficulty filling out forms, such as those with learning disabilities. The IR ought to be far more user friendly. The Government could use new clause 18 to make a start on that.

Mr. Luff

The Financial Secretary to the Treasury is honourable and decent. If she listens to the purpose of new clauses 3 and amendment No. 2—and of the new clause proposed by the Liberal Democrats—she will realise that her task of asking the House to reject them is unpleasant and unsavoury. The purpose of new clause 3 is simply to ensure that those who earn less than the income tax threshold do not have to pay income tax. Who can argue with that? The Financial Secretary may say that the clause is technically flawed, or that it needs to be rethought. However, the principle that underlies it must be one with which the whole House agrees.

Amendment No. 2 would ensure that savings income is liable to taxation at the new 10p lower rate, not the 20p rate. Both measures would have a disproportionate advantage for those on low incomes, particularly for pensioners. I hope that the Minister will think carefully about what she is to say later.

In the post today, I received a document that I did not recognise. As far as I can tell, it must be a Government briefing document for Labour Members, as it is headed "DSS Key Messages on Welfare Reform June 1999".

Mr. Leslie

Read it; it is very good.

Mr. Luff

Reading it is exactly what I intend to do. It states: The Government's central aim is to make the welfare state fit for the next century. Some new Labour waffle follows, then the document says that the Government aim to promote work for those who can and security for those who cannot. On pensioners, it adds: Most help for those with most need. Giving more help to the severely disabled, to poor pensioners and to children. How will the measures on which the Government are insisting tonight help poor pensioners?

The document goes on—particularly amusingly—to say: Providing for the future with new stakeholder pensions and encouragement that those who can save should do so. What encouragement do the measures on which the Government are insisting give to those who want to save?

Later, the document lists all the marvellous things that the Government claim to have done to help pensioners—the minimum income guarantee; the winter fuel allowance referred to by the hon. Member for Croydon, Central (Mr. Davies); free eyesight tests; and the reduction in VAT on fuel. There is no mention of much more—the abolition of mortgage interest relief at source and the implications for home income plans; the abolition of married couples allowance for new pensioner families; and the higher rates of fuel duty that are crippling poor pensioners in many rural areas. The Financial Secretary will have to defend the position of making poorer pensioners pay income tax or pay it at higher rates than is acceptable.

I invite the Financial Secretary to think carefully about the consequences of rejecting amendment No. 2 on the taxation of savings. The estimates of independent analysts suggest that accepting this amendment would cost just £85 million, and £55 million of that advantage would go to people of pensionable age. I cannot believe that the new Labour Government, who publish such documents to send to their Back Benchers, intend to reject these measures. I am sure that the Financial Secretary, whatever she says, will, in her heart, know that the Opposition are right.

11 pm

Mr. St. Aubyn

The Government's mantra that we hear so often—that they govern for the many, not the few—will have a hollow ring tonight. The 300,000 people we are discussing are the few. They are vulnerable, and many are old. They are also the few because they believe in being self-reliant. It was significant that the hon. Member for Croydon, Central (Mr. Davies) emphasised the benefits that this group of people may be entitled to as a result of the Government's measures. Some of them may welcome those benefits, but others take pride in the fact that they have managed to provide for themselves up till now, and that is how they intend to carry on. As a result of the Government's proposal, those people will lose a significant amount of income.

In the debates on this issue this year and last year, Labour Members argued that this group of people could change their investment strategy, and that, if they switched to bonds, they would not suffer income tax. The difficulty with that approach is that inflation, even at the present low rates, eats away at such savings. In the long term, the only way to protect the value of an income through a savings plan is by investing in shares. We learned today that the average income in this country has now reached £20,000 a year. I read that, 25 years ago, it was only £2,500. People who, at the start of their retirement, took the Government's advice and put all their retirement savings into bonds may have had their standard of living severely curtailed compared with what they might have achieved if they had kept their savings in shares.

What is the point of a Government tax strategy that encourages the old, the vulnerable and the weak to put their small amount in the least sensible form of savings? Surely that goes against the whole thrust of modern thinking. We should encourage people to care and provide for themselves. We should foster the self-help culture. The Government are penalising the people who have provided for themselves through thick and thin, and who have wisely invested in shares to protect some of the value of their savings.

The other argument that was advanced in Committee this year and last year was that those people could put their money into ISAs. If they were to do that, they would get a double whammy. Not only would there be an element of taxation on their share income in ISAs but, because the amounts involved are very small, the management charges for running those funds would eat into the net income or into the capital. One way or another, they would suffer greatly compared with the situation they were in before the Government came to power.

Perhaps the Minister could tell us in passing what proportion of ISAs has been invested in stocks and shares and what proportion has been invested in cash ISAs. We could judge from that how successful the Government's new initiative has been.

We have already heard the ghost of the hon. and learned Member for Dudley, North (Mr. Cranston) hovering over the debate. I remember the surge of optimism among Conservative Members during the Committee stage of last year's Bill when he addressed the Committee with enthusiasm, urging the then Paymaster General to make concessions. We thought that the Government were at last listening to the needs of the few as well as the mantras of the many. Unfortunately, however, that particular Paymaster General has disappeared from the scene. He has not been in the Chamber for quite a while. I fear that he has been sent to Coventry, if not to Coventry, North-West.

Mr. Bercow

My hon. Friend presents an irresistible temptation. Does he agree that, at the end of the speech of the hon. Member for Croydon, Central (Mr. Davies), it was no clearer than it had been at the beginning whether he thought that the Solicitor-General had since experienced an apostolic conversion and come round to supporting the Government's view, or whether—secretly, and smothered in guilt—he still believed what he had said a year ago from the Back Benches?

Mr. St. Aubyn

Unlike my hon. Friend and me, the Solicitor-General is a lawyer, and none of us really knows what he believes. I wish that he were here to tell us. In his absence, however, I think that the Financial Secretary owes us an explanation. Why have the Government stalled at the last fence? Why have they failed to treat this section of our community fairly? I feel that they should pause, and consider the negative signal that the measure will send to other savers.

Dr. Vincent Cable (Twickenham)

I want to say a little about amendment No. 2, which Liberal Democrats tabled along with Conservatives. It relates specifically to discrimination between different kinds of income earned and unearned, and the 20p rate. Let me summarise what I consider to be the central reasons why that is an adverse development.

The first reason has, in part, already been summarised by the hon. Member for Grantham and Stamford (Mr. Davies). It introduces a great deal of complexity into the system. We are talking not merely about the distinction between earned and unearned income, but about the distinction between different types of savings income. Different rates now apply to dividend and fixed-interest income; different rates apply to fixed-interest deposits, as opposed to annuities, which stem from another kind of interest income. There is no economic, equity-based or administrative reason for that; it just happened to emerge from a very complex, badly-thought-out piece of legislation. That is why we are pressing our amendment, which relates specifically to the certification process that will make things much easier for low-income pensioners.

Another point has not been mentioned, although it is important. The Government have unintentionally reintroduced the old tax principle that unearned income is in some sense less worth while than earned income. It used to be a principle of taxation that those with rentier income were somehow less worthy than those who were working. That principle had been scrapped, but now it is returning in disguise. Although it may have been reintroduced unintentionally, it is very unhealthy, and not compatible with the ideas that I thought that new Labour stood for.

Mr. Quentin Davies

The hon. Gentleman is making a strong point. A case might be made for penalizing so-called unearned income, as opposed to earned income, and a case might be made for doing the opposite. At present, however, the Government are penalising unearned income at the bottom of the tax scale, and propose later, at the basic rate, to tax unearned income at a lower rate—dividends at only 10 per cent., and other savings income at only 20 per cent.—while taxing earned income at 23 per cent. That, surely, is complete madness.

Dr. Cable

The hon. Gentleman is right. The central issue of the debate is how the proposals affect people at the bottom end. I sense that the Government still have not appreciated the extent to which people who are otherwise very poor still depend on unearned income. The situation is quite common. We all have constituents in this position—for example, people who have not made the contributions that would entitle them to a state pension, and who therefore save. Because they have substantial savings, they will not qualify for income support, and their future retirement therefore depends almost entirely on savings income. Young pensioners in particular, and those whose allowances are particularly small—those who have retired prematurely, or have been made redundant—are being hit at very low levels of income by higher rates of tax. Therefore, the system does not merely discriminate against unearned income. As the hon. Member for Grantham and Stamford says, it particularly hurts poor savers.

In that context, I say a word about dividend tax credits and the dividend problem. It has been referred to, but it is helpful to go over a little of the chronology. The hon. and learned Member for Dudley, North (Mr. Cranston) has been singled out. I was present in the Committee when he spoke. He has been perhaps unfairly singled out because he was speaking up for the colleagues who were around him. He was representing a genuine disquiet among Labour Members about what was happening. Indeed, that continued for many months afterwards. There was a widely circulated early-day motion, which was, I think, roughly equally supported in the three parties.

I subsequently went to see the former Paymaster General with the hon. and learned Member for Dudley, North and the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb). He was very accommodating and accepted fully that an unfair and unfortunate major anomaly had been created. He undertook to mobilise the Treasury's resources to try to do something about it. What was discreditable was not the fact that he was not able to something about it—there may have been genuine administrative difficulties in sorting out the problem—but that it took the Treasury six months to make up its mind to tell us. Its reply came through in a written answer to me; it was sneaked through six months later. Not merely the policy but the way in which the Treasury handled the matter subsequently was discreditable.

In addition to all the other disadvantages of applying extra rates of tax to savings incomes, the provision is a further measure disadvantaging and discouraging personal savings. As the right hon. and learned Member for Rushcliffe (Mr. Clarke) has been sitting patiently during the debate, it is worth mentioning that he introduced a particularly popular and valuable form of personal savings called pensioner bonds. I was intrigued, as one of my constituents asked, how the returns on pensioner bonds had developed since he introduced them. It was clear not merely that the nominal return on the bonds had gradually declined over the past few years—I would expect that because inflation is lower—but that the real return on the bonds had been allowed to fall by about 2 per cent.

Therefore, a popular form of savings is being devalued and we have increased taxation of savings. In the short run, that may not matter—the United States has much economic growth and deteriorating personal savings—but it cannot go on. A society cannot grow rapidly and in a sustainable way without healthy personal savings. In addition to all the unfairness that the tax change introduces, it undermines the fundamentals of our economy.

Mr. Swayne

I support new clause 3. I would have kept my peace but for being provoked to speak by the hon. Member for Croydon, Central (Mr. Davies). Otherwise, I would have relied on the eloquence of Conservative Members who have put the case solidly.

The hon. Member for Croydon, Central refused to take my intervention, which was uncharacteristic because he is normally generous in taking interventions. However, I could see his difficulty, with the Government Whip shaking his head and telling him to refuse. The penalty is that he must now endure listening to me.

The hon. Gentleman expounded a most peculiar argument. He seemed to suggest that it was all right to plunder the savings of the elderly, so long as Government policy was viewed in the round. Specifically, he cited the fact that those people would benefit from the minimum pension guarantee. It might have escaped his notice that the guarantee is not yet payable, yet elderly pensioners in my constituency have already lost the right to reclaim tax on dividends. As a consequence, while living on low incomes, they are paying tax where they were not paying tax before. That is what the new clause is designed to remedy.

Labour Members might believe that people who have savings in the form of shares have developed a form of financial sophistication that makes it open season for such a tax increase. However, the lie to such sophistication is given by the number of constituents who are still writing to me to say that they have only just realised what effect the Government's proposals will have on them. That does not speak of great financial sophistication.

11.15 pm

Labour Members might also think that, generally, people who have invested in shares are at the wealthier end of the income ladder. However, the most distressing letters that I have received on the issue are from those who admit that being able to reclaim tax paid on dividends makes a difference, not between wealth and poverty for themselves but between being able to afford small luxuries—such as Christmas presents for their grandchildren, or visits to their relatives—[Interruption.]

Mr. Gray

The hon. Member for Shipley (Mr. Leslie) laughed.

Mr. Swayne

Labour Members may well laugh, but they might also recall that those are the very people for whom the Labour party—before it became new Labour, in pursuit of middle income and of those who are able, because of their income, to make donations to the Labour party—used to care.

Mr. Bercow

The whole House will have noticed that the hon. Member for Shipley (Mr. Leslie) does not believe that pensioners should be able to buy Christmas presents for anyone—that is the scale of the scandal of his position.

Nevertheless, does my hon. Friend agree that, when the hon. Member for Twickenham (Dr. Cable) said that the Government's handling of the matter was dishonourable, the one thing that he omitted to mention was that, today, the single most dishonourable aspect of the Government's handling of the matter is that the only currently serving Treasury Minister who served in the Finance Bill Committee when the matter was discussed is not in the Chamber to reply to the debate? I refer, of course, to the Paymaster General. Where is she?

Mr. Swayne

I entirely agree with my hon. Friend; he makes an important point. I am certain, however, that the dignity of age will change the views, and indeed the attitude, of the hon. Member for Shipley.

Quite unacceptably, the hon. Member for Croydon, Central contended that it is perfectly acceptable to plunder the savings, and therefore the self-reliance, of elderly people, and to replace them with means-tested benefit. What signal does that send to generations yet to retire? What message does it send in respect of self-reliance?

The hon. Gentleman went on to speak of the need to eradicate child poverty. Does he not realise that the tax that we are debating would be paid by children? Although I grant him that the tax is unlikely to be paid by children living in poverty—the nature of the arrangements that we are discussing are such that they are unlikely to be made for children by parents who are below the poverty line—I ask him to consider the fact that many parents have arranged for shares to generate income for their children precisely because those children will not be able to provide for themselves, as they are handicapped and their parents are worried about their future. They, too, will pay the tax, and their income will be affected by it.

I hope that the hon. Gentleman will reconsider his earlier remarks and reflect both on their wisdom and the message on self-reliance that they have sent to the British people.

Mrs. Roche

The hon. Member for New Forest, West (Mr. Swayne) said that he was not going to speak but was provoked into doing so. I am in the same position: I was tempted not to speak until I heard his speech. I have never heard such arrant nonsense, although he is not alone in this debate. One would have thought that the Conservatives had not presided over record levels of child poverty when they were in government and that they had not introduced VAT on fuel—perhaps the most regressive measure to hit our pensioners; yet they have the temerity to pose as the party of the pensioner. That is nonsense.

We have debated the issue time and again. That makes it all the more surprising that the new clause reveals a basic misunderstanding about the tax credit system and is fundamentally flawed. If the Conservatives really cared about the new clause, they would do their homework and get it right. Once again they have not done their homework, and not only can they not get the politics right but they cannot get the detail right either.

The withdrawal of payable tax credits does not mean that non-taxpayers below the personal allowance threshold will suffer tax on their income. The tax credit has never represented tax deducted on behalf of the individual, and the payment of tax credits on dividends was never a repayment of tax deducted on their behalf. On the contrary, it represented a payment to non-taxpayers of tax that they had not borne in the first place—tax paid by the company. Effectively it was an income top-up. The withdrawal of the credit leaves the non-taxpaying shareholders in the position of having paid no tax on the dividends.

Mr. Quentin Davies

Will the hon. Lady acknowledge the reality, which is that someone who had £5,000 entirely from dividends to live on will now have £4,000? That is a catastrophic fall in income for someone who is not well off—very likely a pensioner.

Mrs. Roche

The hon. Gentleman should listen to what I am going to say about the total package. If he does, he will find out.

Conservative Members have used the new clause as another opportunity to rehearse the well-worn arguments on the issue. Why did we make the change? We wanted to remove a distortion in the corporation tax system that encouraged companies to distribute their profits as dividends rather than reinvesting them in their business. Reinvestment is essential for growth in the economy, which we want to encourage. We know what the Conservatives did to our economy and we are determined not to see it repeated. [Interruption.] Conservative Members may shout. They do not like hearing the facts, but they are going to hear them this evening.

Payable tax credits were abolished immediately for most companies and pension funds, but we recognised that there would be a period of change. By investing in the new individual savings accounts, individuals will be able to benefit for a five-year period from 1999 from the payment of a 10 per cent. tax credit on dividends from UK equities. I urge the House to reject the new clause.

I understand the concerns raised by the hon. Member for Kingston and Surbiton (Mr. Davey) about the impact of the tax system on older taxpayers, but I am not convinced that his solution is the best way to deal with the problems. The aim of the proposed certificate for older taxpayers is that those on low incomes should be given assurances that they are outside the tax system, in particular to enable them to receive income without the deduction of tax at source. The present system achieves what the certificate is designed to do. Around two thirds of older taxpayers are outside the tax system. We are proud of that record. The package of Budget measures has taken a further 200,000 older people out of the system. Many of them have no reason to contact the Inland Revenue at all unless their circumstances change and their income rises.

Mr. St. Aubyn

Is the Financial Secretary proposing that people with share savings should put them through an ISA? How much has been put into share ISAs compared to the amount put into cash ISAs since the scheme was launched?

Mrs. Roche

I would certainly not want to give advice. [Interruption.] The hon. Gentleman must learn to have some patience. I gave way to him, and I will be pleased to reply if he will wait. It is no surprise that, in the first period, the most money has gone into cash ISAs, considering that they were very much designed to appeal to those with little or no savings. I am delighted to tell the House that ISAs are a tremendous success and are proving very popular. I congratulate my hon. Friend the Economic Secretary to the Treasury on all the work that she has done.

Mr. Davies

Will the Financial Secretary give way?

Mrs. Roche

No—the hon. Gentleman had his chance. If he will forgive me, I have heard him at volume tonight. I gave him one chance.

Obviously, the hon. Member for Guildford (Mr. St. Aubyn) is no longer interested in ISAs, as he is busy talking. However, for many poorer people, ISAs have been a great boon and we are proud of them.

The £1 billion Budget package for older people included a new minimum tax guarantee for pensioners; and the age-related personal allowances were increased by up to £200, more than required by statutory indexation. [Interruption.] I am not surprised that Conservative Members do not recognise the importance of that minimum guarantee. It is certainly important for the majority of pensioners whom the Government represent.

The proposal would have the effect of increasing the personal allowance for many lower income pensioners to £6,000 a year. As I have explained, the Budget package already includes generous increases in the age-related personal allowances. [Interruption.] I do wish that Conservative Members would cease chattering. The hon. Member for Kingston and Surbiton is entitled to a reasonable reply and that is what he will get.

The idea of the certificate was put forward by the low incomes tax reform group. I can tell the hon. Member for Kingston and Surbiton that the Inland Revenue is holding discussions with the group about its ideas, and we are always willing to consider how the scheme might be improved.

Savings income, such as bank and building society interest, is already taxed favourably. It is taxed at the lower rate of 20 per cent., rather than at the basic rate of 23 per cent., until it is of a sufficient size for the higher rate of tax to apply. As part of the reform of corporation tax, dividends are taxed at 10 per cent. up to the basic rate limit.

Mr. Davies


Mrs. Roche

I will tell the hon. Gentleman why—because one of the basic tenets of the Chancellor's Budget was to encourage work and enterprise and to help families. That is what we have done.

Mr. Davies

Will the Financial Secretary give way?

Mrs. Roche

No, the hon. Gentleman has had his chance. I noticed that he took no interventions. I have taken one from him and responded to a sedentary comment.

The Conservatives' amendment, which was not costed, would cost the Exchequer an extra £1 billion a year. Once again, we see that the Conservative party is prepared to talk about public services without saying how it will spend public money. The Conservative party poses as the pensioners' friend, but it is no such thing. It is the party that in the past has undermined pensioners. I urge the House to reject the new clause.

Question put, That the clause be read a Second time:—

The House divided: Ayes 149, Noes 316.

Division No. 223] [11.30 pm
Allan, Richard Howard, Rt Hon Michael
Amess, David Hughes, Simon (Southwark N)
Ancram, Rt Hon Michael Jack, Rt Hon Michael
Arbuthnot, Rt Hon James Jackson, Robert (Wantage)
Atkinson, Peter (Hexham) Jenkin, Bernard
Bercow, John Keetch, Paul
Beresford, Sir Paul Key, Robert
Blunt, Crispin King, Rt Hon Tom (Bridgwater)
Boswell, Tim Kirkbride, Miss Julie
Bottomley, Peter (Worthing W) Kirkwood, Archy
Bottomley, Rt Hon Mrs Virginia Laing, Mrs Eleanor
Brazier, Julian Lansley, Andrew
Breed, Colin Leigh, Edward
Brooke, Rt Hon Peter Letwin, Oliver
Browning, Mrs Angela Lewis, Dr Julian (New Forest E)
Bruce, Ian (S Dorset) Lidington, David
Burns, Simon Lilley, Rt Hon Peter
Cable, Dr Vincent Livsey, Richard
Chapman, Sir Sydney (Chipping Barnet) Lloyd, Rt Hon Sir Peter (Fareham)
Chope, Christopher Llwyd, Elfyn
Clappison, James Loughton, Tim
Clarke, Rt Hon Kenneth (Rushcliffe) Luff, Peter
Clifton—Brown, Geoffrey MacGregor, Rt Hon John
Collins, Tim MacKay, Rt Hon Andrew
Colvin, Michael Maclean, Rt Hon David
Cotter, Brian McLoughlin, Patrick
Cran, James Madel, Sir David
Davey, Edward (Kingston) Malins, Humfrey
Davies, Quentin (Grantham) Maples, John
Davis, Rt Hon David (Haltemprice) Mates, Michael
Day, Stephen Maude, Rt Hon Francis
Dorrell, Rt Hon Stephen Mawhinney, Rt Hon Sir Brian
Duncan, Alan Michie, Mrs Ray (Argyll & Bute)
Duncan Smith, lain Morgan, Alasdair (Galloway)
Evans, Nigel Moss, Malcolm
Faber, David Nicholls, Patrick
Fabricant, Michael Ottaway, Richard
Fallon, Michael Page, Richard
Flight, Howard Paice, James
Fowler, Rt Hon Sir Norman Pickles, Eric
Fox, Dr Liam Prior, David
Fraser, Christopher Randall, John
Gale, Roger Redwood, Rt Hon John
Garnier, Edward Robathan, Andrew
George, Andrew (St Ives) Robertson, Laurence (Tewk'b'ry)
Gibb, Nick Roe, Mrs Marion (Broxboume)
Gill, Christopher Ruffley, David
Gillan, Mrs Cheryl Russell, Bob (Colchester)
Gorman, Mrs Teresa St Aubyn, Nick
Gray, James Sanders, Adrian
Green, Damian Sayeed, Jonathan
Grieve, Dominic Shephard, Rt Hon Mrs Gillian
Gummer, Rt Hon John Shepherd, Richard
Hamilton, Rt Hon Sir Archie Simpson, Keith (Mid—Norfolk)
Hammond, Philip Smith, Sir Robert (W Ab'd'ns)
Harvey, Nick Soames, Nicholas
Heathcoat—Amory, Rt Hon David Spelman, Mrs Caroline
Hogg, Rt Hon Douglas Spicer, Sir Michael
Horam, John Spring, Richard
Stanley, Rt Hon Sir John
Steen, Anthony
Streeter, Gary Waterson, Nigel
Stunell, Andrew Webb, Steve
Swayne, Desmond Wells, Bowen
Swinney, John Whitney, Sir Raymond
Syms, Robert Whittingdale, John
Tapsell, Sir Peter Wilkinson, John
Taylor, Ian (Esher & Walton) Willetts, David
Taylor, John M (Solihull) Willis, Phil
Taylor, Sir Teddy Wilshire, David
Townend, John Winterton, Mrs Ann (Congleton)
Tredinnick, David Winterton, Nicholas (Macclesfield)
Trend, Michael Woodward, Shaun
Tyler, Paul Young, Rt Hon Sir George
Tyrie, Andrew
Viggers, Peter Tellers for the Ayes:
Wardle, Charles Mr. Oliver Heald and
Mrs. Jacqui Lait.
Abbott, Ms Diane Coffey, Ms Ann
Adams, Mrs Irene (Paisley N) Coleman, lain
Ainger, Nick Colman, Tony
Ainsworth, Robert (Cov'try NE) Connarty, Michael
Alexander, Douglas Corbett, Robin
Allen, Graham Corbyn, Jeremy
Anderson, Janet (Rossendale) Corston, Ms Jean
Armstrong, Rt Hon Ms Hilary Cousins, Jim
Atherton, Ms Candy Cranston, Ross
Atkins, Charlotte Crausby, David
Austin, John Cryer, Mrs Ann (Keighley)
Banks, Tony Cryer, John (Hornchurch)
Barron, Kevin Cummings, John
Battle, John Cunningham, Jim (Cov'try S)
Bayley, Hugh Curtis—Thomas, Mrs Claire
Beard, Nigel Darling, Rt Hon Alistair
Beckett, Rt Hon Mrs Margaret Darvill, Keith
Bell, Stuart (Middlesbrough) Davey, Valerie (Bristol W)
Benn, Hilary (Leeds C) Davies, Rt Hon Denzil (Llanelli)
Benn, Rt Hon Tony (Chesterfield) Davies, Geraint (Croydon C)
Bennett, Andrew F Davis, Terry (B'ham Hodge H)
Benton, Joe Dawson, Hilton
Bermingham, Gerald Dean, Mrs Janet
Berry, Roger Denham, John
Best, Harold Dismore, Andrew
Betts, Clive Dobbin, Jim
Blears, Ms Hazel Dobson, Rt Hon Frank
Blizzard, Bob Doran, Frank
Bradley, Keith (Withington) Dowd, Jim
Bradley, Peter (The Wrekin) Drew, David
Bradshaw, Ben Eagle, Maria (L'pool Garston)
Brown, Russell (Dumfries) Edwards, Huw
Browne, Desmond Efford, Clive
Burden, Richard Ellman, Mrs Louise
Butler, Mrs Christine Ennis, Jeff
Byers, Rt Hon Stephen Etherington, Bill
Caborn, Rt Hon Richard Field, Rt Hon Frank
Campbell, Alan (Tynemouth) Fisher, Mark
Campbell, Mrs Anne (C'bridge) Fitzpatrick, Jim
Campbell, Ronnie (Blyth V) Fitzsimons, Lorna
Campbell—Savours, Dale Flint, Caroline
Cann, Jamie Flynn, Paul
Caplin, Ivor Follett, Barbara
Casale, Roger Foster, Rt Hon Derek
Caton, Martin Foster, Michael J (Worcester)
Cawsey, Ian Galloway, George
Chapman, Ben (Wirral S) Gapes, Mike
Chaytor, David Gerrard, Neil
Chisholm, Malcolm Gibson, Dr Ian
Clapham, Michael Godman, Dr Norman A
Clark, Rt Hon Dr David (S Shields) Godsiff, Roger
Clark, Paul (Gillingham) Goggins, Paul
Clarke, Charles (Norwich S) Golding, Mrs Llin
Clarke, Rt Hon Tom (Coatbridge) Griffiths, Jane (Reading E)
Clarke, Tony (Northampton S) Griffiths, Nigel (Edinburgh S)
Clelland, David Griffiths, Win (Bridgend)
Clwyd, Ann Grogan, John
Gunnell, John Mahon, Mrs Alice
Hain, Peter Mallaber, Judy
Hall, Mike (Weaver Vale) Mandelson, Rt Hon Peter
Hall, Patrick (Bedford) Marsden, Gordon (Blackpool S)
Hamilton, Fabian (Leeds NE) Marsden, Paul (Shrewsbury)
Hanson, David Marshall, Jim (Leicester S)
Harman, Rt Hon Ms Harriet Marshall—Andrews, Robert
Heal, Mrs Sylvia Martlew, Eric
Healey, John Maxton, John
Henderson, Doug (Newcastle N) Meacher, Rt Hon Michael
Henderson, Ivan (Harwich) Meale, Alan
Hepburn, Stephen Michie, Bill (Shef'ld Heeley)
Hesford, Stephen Milburn, Rt Hon Alan
Hewitt, Ms Patricia Mitchell, Austin
Hinchliffe, David Moffatt, Laura
Hodge, Ms Margaret Moonie, Dr Lewis
Home Robertson, John Moran, Ms Margaret
Hope, Phil Morgan, Ms Julie (Cardiff N)
Hopkins, Kelvin Morley, Elliot
Howarth, George (Knowsley N) Morris, Ms Estelle (B'ham Yardley)
Hoyle, Lindsay Mullin, Chris
Hughes, Ms Beverley (Stretford) Murphy, Denis (Wansbeck)
Hughes, Kevin (Doncaster N) Murphy, Jim (Eastwood)
Humble, Mrs Joan Naysmith, Dr Doug
Hurst, Alan O'Brien, Bill (Normanton)
Hutton, John O'Hara, Eddie
Iddon, Dr Brian Olner, Bill
Illsley, Eric O'Neill, Martin
Jackson, Ms Glenda (Hampstead) Organ, Mrs Diana
Jackson, Helen (Hillsborough) Osborne, Ms Sandra
Jenkins, Brian Palmer, Dr Nick
Johnson, Alan (Hull W & Hessle) Pearson, Ian
Johnson, Miss Melanie (Welwyn Hatfield) Pendry, Tom
Jones, Barry (Alyn & Deeside) Perham, Ms Linda
Jones, Mrs Fiona (Newark) Pickthall, Colin
Jones, Helen (Warrington N) Pike, Peter L
Jones, Ms Jenny (Wolverh'ton SW) Plaskitt, James
Jones, Dr Lynne (Selly Oak) Pollard, Kerry
Jones, Martyn (Clwyd S) Pond, Chris
Jowell, Rt Hon Ms Tessa Pope, Greg
Keen, Alan (Feltham & Heston) Pound, Stephen
Keen, Ann (Brentford & Isleworth) Powell, Sir Raymond
Kemp, Fraser Prentice, Ms Bridget (Lewisham E)
Kennedy, Jane (Wavertree) Prentice, Gordon (Pendle)
Khabra, Piara S Prescott, Rt Hon John
Kidney, David Primarolo, Dawn
Kilfoyle, Peter Prosser, Gwyn
King, Andy (Rugby & Kenilworth) Purchase, Ken
King, Ms Oona (Bethnal Green) Quinn, Lawrie
Ladyman, Dr Stephen Rammell, Bill
Lawrence, Ms Jackie Rapson, Syd
Laxton, Bob Reed, Andrew (Loughborough)
Leslie, Christopher Reid, Rt Hon Dr John (Hamilton N)
Levitt, Tom Robertson, Rt Hon George (Hamilton S)
Lewis, Ivan (Bury S) Roche, Mrs Barbara
Lewis, Terry (Worsley) Rooker, Jeff
Liddell, Rt Hon Mrs Helen Rooney, Terry
Linton, Martin Rowlands, Ted
Livingstone, Ken Roy, Frank
Lock, David Ruane, Chris
Love, Andrew Ruddock, Joan
McAllion, John Russell, Ms Christine (Chester)
McAvoy, Thomas Ryan, Ms Joan
McCabe, Steve Salter, Martin
McCafferty, Ms Chris Sarwar, Mohammad
McDonnell, John Savidge, Malcolm
McGuire, Mrs Anne Sawford, Phil
Mclsaac, Shona Sedgemore, Brian
McNamara, Kevin Shaw, Jonathan
McNulty, Tony Sheerman, Barry
MacShane, Denis Sheldon, Rt Hon Robert
Mactaggart, Fiona Simpson, Alan (Nottingham S)
McWalter, Tony Singh, Marsha
McWilliam, John Skinner, Dennis
Smith, Angela (Basildon)
Smith, Rt Hon Chris (Islington S) Thomas, Gareth R (Harrow W)
Smith, Miss Geraldine (Morecambe & Lunesdale) Timms, Stephen
Smith, Jacqui (Redditch) Tipping, Paddy
Smith, Llew (Blaenau Gwent) Todd, Mark
Snape, Peter Trickett, Jon
Soley, Clive Turner, Dennis (Wolverh'ton SE)
Southworth, Ms Helen Turner, Dr Desmond (Kemptown)
Spellar, John Turner, Dr George (NW Norfolk)
Squire, Ms Rachel Twigg, Derek (Halton)
Starkey, Dr Phyllis Vaz, Keith
Steinberg, Gerry Vis, Dr Rudi
Stevenson, George Wareing, Robert N
Stewart, David (Inverness E) Watts, David
Stewart, Ian (Eccles) White, Brian
Stinchcombe, Paul Whitehead, Dr Alan
Stoate, Dr Howard Wicks, Malcolm
Stott, Roger Williams, Alan W (E Carmarthen)
Strang, Rt Hon Dr Gavin Williams, Mrs Betty (Conwy)
Straw, Rt Hon Jack Winnick, David
Stringer, Graham Winterton, Ms Rosie (Doncaster C)
Stuart, Ms Gisela Wise, Audrey
Sutcliffe, Gerry Wood, Mike
Taylor, Rt Hon Mrs Ann (Dewsbury) Worthington, Tony
Taylor, Ms Dari (Stockton S) Wray, James
Taylor, David (NW Leics) Wright, Anthony D (Gt Yarmouth)
Temple—Morris, Peter Wright, Dr Tony (Cannock)
Thomas, Gareth (Clwyd W)
Tellers for the Noes:
Mr. Keith Hill and
Mr. David Jamieson.

Question accordingly negatived.

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