Married Couples Allowance

HC Deb 03 February 2000 vol 343 cc1187-91

1. Mr. Tim Collins (Westmorland and Lonsdale)

What estimate he has made of the average cost of the abolition of the married couples allowance to a couple of working age in a full financial year; and if he will make a statement. [106881]

The Chancellor of the Exchequer (Mr. Gordon Brown)

Let me, first, announce that the Budget date will be Tuesday 21 March.

The cost to the married couple when, under the previous Government, the allowance was cut from 40p to 15p was £430. The cost of ending it is £197. The children's tax credit, which will replace it, will be worth £400—£8 a week—to families with children. However, in the case of this Government, the 1p cut in the basic rate, the introduction of the working families tax credit and the introduction of the new children's tax credit mean that almost every family with children is better off. The tax burden on the average family will fall to its lowest since 1972.

Mr. Collins

Why will not the Chancellor admit that the abolition of the married couples allowance is a tax increase, that the abolition of mortgage tax relief is a tax increase, or that ever higher petrol duties are a tax increase? Is it because to admit that would be to admit that he has clearly breached the Prime Minister's assurance that there would be no tax increases at all under a Labour Government?

Mr. Brown

I will deal with each of the hon. Gentleman's points in turn. However, I should have thought that the first thing he would want to do is welcome the 10p tax rate, which is a Labour tax cut. I should have thought that the second thing he would want to do is welcome the cut in the basic rate of tax, which is a Labour tax cut. I should have thought that the third thing he would want to do is welcome the national insurance cuts that we have introduced—which are worth £3 a week, and are another Labour tax cut—and of course the child tax credit and the working families tax credit, which are tax cuts worth on average £24 a week for the poorest families.

I am very glad that the hon. Gentleman raised the issue of the married couples allowance, because he might want to ask the new shadow Chancellor some questions about that. I have been looking back to the debates of the early 1990s, and the person who introduced the biggest cut in the married couples allowance and piloted it through the House of Commons was the shadow Chancellor himself. He told the House that the allowance had "no on-going justification"; he said that it was the "most anomalous" of allowances. He said: I doubt that the reduction to be made in the first year … could be held to be crucial for those deciding whether they get married."—[Official Report, Standing Committee A, 22 February 1994; c. 347.] If the hon. Gentleman looks back at the 1992 debates on mortgage tax relief, married couples allowance, national insurance or VAT on fuel, he will find that the person who was responsible for the 22 tax rises piloted through the House of Commons was the shadow Chancellor.

The debate in this country is between fairness, with our children's tax credit, and unfairness. It is because we are creating policies of stability and creating jobs that people are better off.

Mr. Robert Sheldon (Ashton-under-Lyne)

Is my right hon. Friend aware that the married couples allowance did make sense in the early war years, when it was an incentive to get women into the labour market to help the war effort, but that now, with women forming such a large proportion of the working population, it is not really necessary?

Mr. Brown

It would seem strange to say so, but I agree with the Leader of the Opposition on the matter. He said that if we were to replace married couples allowance, it should go to families with children, to meet the costs that people have as their children grow up. That is why I should have thought that the Opposition would welcome the children's tax credit, which is to be worth £8 a week to almost every family in this country. I should have thought that they would welcome the working families tax credit, which is worth £24 a week. I should have thought that they would welcome the rises in child benefit. That is the dividing line between the parties: we are for fairness to families; they have nothing to say to ordinary families in this country.

Mr. Michael Portillo (Kensington and Chelsea)

May I tell the right hon. Gentleman what a pleasure it is to be standing here opposite him, and what a pleasure it will be to oppose him? I very much hope that we can have a civilised relationship. I also very much hope that we can have some fun—although I do not think that laughing at himself is the Chancellor's strong suit, but perhaps Conservative Members can make up for that.

I do hope that we can start our relationship on a straightforward footing, because the Chancellor of the Exchequer has a reputation for ducking questions. However, does he agree that the burden of taxation in this country is rising faster than in any other industrialised country, as stated by the Organisation for Economic Co-operation and Development? Will he now admit that millions of people are going to be paying more income tax?

The Chancellor is abolishing the married couples allowance. He is abolishing mortgage interest relief. Income tax for a one-earner couple is therefore going to increase. Is he denying that that is the case? Will he further admit that those on the lowest incomes will face the biggest increases? [HON. MEMBERS: "Oh!"] Do Labour Members think that fair? Is not Brown's first law of gravity that that which goes up just keeps going up?

Mr. Brown

I welcome the new shadow Chancellor to his position. I look forward to the debates that we shall have over the next few months. I wish him well in his dealings with his Conservative colleagues in trying to come up with a sensible Conservative economic policy.

I have worked under four shadow Chancellors since I became Chancellor. The first denied any responsibility for the 22 tax rises, saying that they were all down to his predecessor. The second said that he was at the Department of Social Security at the time, in the early 1990s. The third said that he was not even in the House of Commons—his alibi was that he was not at the scene of the crime. We now have the person who piloted through the 22 tax rises. I think that he will want to take credit for the fact that he piloted through the House of Commons the rise in VAT on fuel, the escalator on fuel, the escalator on tobacco and the cuts in the married couples allowance. [Interruption.] I only make those points because, while the shadow Chancellor was touring the country and recanting, the Conservative party should have been learning from its mistakes. They made an unsustainable tax guarantee in 1992, followed by 22 tax rises.

Let me read the figures for the tax burden on families with children. When we came to power it was 21.5 per cent. It then fell to 20.9 per cent. and is falling to 20.4 per cent. By next year it will be 18.9 per cent. That is the lowest tax burden for families in this country since 1972, because we know that fairness to ordinary families matters.

Mr. Portillo

I notice that the Chancellor did not deny that tax for single-earner married couples will increase. That point is proven. I thank him for his words of welcome. Dealing with past Chancellors has sometimes been described as like being savaged by a dead sheep or nuzzled by an old ram. Dealing with the current Chancellor is like being assaulted by Mr. Toad, with the pomposity and self-congratulation that distinguish him. I did not get very far in securing answers from him. He says that he works under shadow Chancellors. Perhaps he does not yet realise that he is here to answer questions because he is meant to be part of the Government. [HON. MEMBERS: "Get on with it."] I intend to.

I want to be entirely open to see whether we can get some openness from the Chancellor. The next Conservative Government will respect the independence of the Bank of England and will legislate to enhance that independence and increase accountability to Parliament. The next Conservative Government will not repeal the national minimum wage.

Hon. Members

Hear, hear!

Madam Speaker

Order.

Mr. Portillo

I now want the Chancellor to answer questions and admit to the House that he is about to put up income tax for millions of people. I am not talking about people with children. I am talking about single-earner married couples with a mortgage. Their income tax is going up.

Mr. Brown

The shadow Chancellor is wrong. The tax burden is falling from 37.4 per cent. to 37 per cent. to 36.8 per cent. Those are the figures published in the Red Book and the ones into which the Select Committee inquired. They have been published internationally and are accepted by those who look at such matters. So not only has the burden for the family with children been cut to its lowest since 1972, but the tax burden will be cut next year.

I welcome the conversion of the Conservative party to Labour party policy on the Bank of England. I welcome, in particular, the shadow Chancellor who opposed the minimum wage so vigorously when he was at the Department of Employment admitting that he was wrong and now agreeing to the minimum wage. Now, will the Conservative party accept our other policies: first, the new deal to get young people back to work, which the Conservatives would still scrap; secondly, our working families tax credit, which is worth £24 a week; thirdly, our children's tax credit and our child care strategy; and fourthly, our commitment to the national health service, which they have never matched in anything they have said?

May I give one final bit of advice to the shadow Chancellor? If he is looking back on his record and what he might learn from it, is it not amazing that, on his first day as shadow Chancellor, he has repeated the same mistake as the previous Prime Minister, the previous Chancellor and the previous Chief Secretary made when they committed the Conservative party to a politically driven tax guarantee that risks money for the NHS and the maintenance of prudence in this country? It is a tax guarantee that the former Prime Minister now says was "mad", and it puts the NHS at risk. It is a tax commitment that the former Chancellor, Lord Lamont—not noticeably a left-winger on tax issues—says is "irresponsible". I put it to the shadow Chancellor that the Tories should learn from all their mistakes.

Madam Speaker

Perhaps we could get on with questions and answers now.