| I shuddered at the consequence for low-earners and the Government, as Gordon Brown announced last year the 2p cut in the standard rate of tax in his Budget for 2008. It is not that I am against reducing tax — my belief in tax reductions puts Margaret Thatcher into the shade — but it was how the cut was to be paid for: largely by lower-paid people.
The Prime Minister could argue that I was against introducing the 10p rate of tax in the first place. Absolutely right: I argued that it was not the best way of spending what was then £1.6 billion. But, once the lower rate was introduced, there were many gainers. To reintroduce the rate would now cost £7 billion.
It is therefore difficult for the Government to claim that it was not aware who would lose. Days after the 2008 Budget was unveiled in March 2007, I tabled the first of many Parliamentary Questions asking about the gainers and losers. In the main Budget debate, I also asked three times about the losers. On the last day of debating the Budget, I tabled an amendment calling for a package of compensation for those low-earners who would be losing out. It was heavily defeated by the Government.
None of the media showed the slightest interest. Without their help, it is generally impossible to mobilise backbench support.
Throughout last year, I continued to ask questions about who would lose, and the extent to which the Government was right that the losers would be compensated by tax-credit payments. The answers scored highly in dissembling.
Step forward, Greg Pope. The vote on losers was reignited on 2 April by Greg Pope, the Member for Hyndburn. The fact that action has now been taken is because of his courage. His Motion expressing concern about the impact of the abolition on low-paid workers was quickly signed by other MPs who rarely, if ever, speak out publicly against the Government. If there had been no Greg Pope Motion, there would have been no package of compensation. It is as simple as that.
I followed up on this action by tabling an amendment to this year’s Budget, blocking its progress until a package of compensation was published and approved by Parliament. I now realise that this demand could not be met.
The Government, as you will know, is now committed to introducing such a package. But, while they know in what groups the losers are — early retirees aged between 60 and 64, for example — crucially, they do not know the names and addresses of the losers. Instead of using this reason to face down Labour MPs who were demanding action, the Government acted decisively, and, as I hope time will show, generously.
The search is on for the losers, and for a series of mechanisms for paying compensation. While it is impossible to pay the compensation now, the Government has promised to backdate all payments to April this year. It will be looking at the part the Revenue could play by changing tax allowances and codes, and putting a bar on taxpayers who gain from the 20p level. It is also looking at how the tax-credit system might be reformed to help the losers. Likewise, it has asked the Low Pay Commission to review the age at which the full minimum wage becomes payable. If the Governement begins to drag its feet, a blocking amendment will go down when the whole House discusses the Budget again in June.
Why was the campaign so short and swift? That the Budget might be blocked is only part of the answer. There is a deeper reason. Over the past 15 years, the Labour Party has transformed itself into a party of great electoral appeal. Out went socialism, nationalisation, and the rest, but the baby was not thrown out with the bath water. Labour’s most cherished belief is that it is on the side of those who have least.
Despite Gordon Brown’s record of redistributing unimaginable sums to lower-income groups, the 10p-tax abolition struck at the only core belief the Labour Party now collectively holds.
The saga will have an impact also in the longer run. The Government has accepted that the working poor without children are worthy of help. The disquiet felt by richer people at their gains could be mobilised towards reforming — albeit gently over a decade or so — a tax system along more progressive lines. It should lead to freezing the tax-credit system, and using the money saved from uprating to cut taxes for the poor.
Gladstone once remarked that any fool can spend other people’s money by giving it to the poor. What is more difficult is to see that redistribution operated in such a way that the freedom of the poor also to help themselves is equally advanced.
Frank Field is Labour MP for Birkenhead.
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