Charles Walker speaks up for the very poorest in society, who are caught up in the complicated benefits and tax credit system and argues that they should be taken out of taxation altogether.

8.15 pm

Mr. Charles Walker (Broxbourne) (Con): Thank you, Mr. Deputy Speaker, for calling me to speak in this important debate.

Although today’s debate centres on the environment, I should like to discuss the moral case for ending tax poverty. I believe that the Government’s commitment to alleviating poverty is genuine, but I am concerned that there is a growing industry around poverty, with huge fortunes being spent on entrenching an immobile underclass. I am concerned that in the past 10 years, or perhaps even longer, the state has created an expanded pool of supplicants, with more and more people deriving an increasing share of their income from the state. It is wrong that those people should be patronised with benefits and hand-outs, which have a corrosive effect on their self-worth and self-esteem.

There are perversities in the benefit system, which is, in itself, extremely complex. As an MP, I try to help my constituents navigate it, but often it is beyond comprehension. There are tens of thousands of pages of legislation, backed up by thousands of forms, classes, groupings and exceptions. In too many cases, benefit recipients simply have their own money laundered back to them, minus the Government’s handling charge.

As a Member of Parliament, I believe that all Members have a duty to ease the benefits burden on our constituents by making large parts of it redundant. It is certainly complicated. In The Independent this weekend, Simon Carr wrote:

“Gordon Brown’s anti-poverty policy is literally unintelligible to ordinary people”.

It will not have escaped your notice, Mr. Deputy Speaker, that I am an incredibly ordinary person, and I find the Chancellor’s anti-poverty policy unintelligible. In The Sunday Times, economics correspondent, David Smith, wrote:

“We are still light years away from a simple personal tax system”.

The tax credit system is so complex that many people do not even bother to claim. That money is theirs by rights, but they are put off by the complexity of the system.

We have identified the fact that the very highest earners are getting richer, but the less well-off seem to be subject to more and more means-testing. That is a soul-destroying process, and it is not just or fair. It is wrong, for example, that tax is levied on pay rates once they exceed £2.65 an hour. Why should people earning the minimum wage or a sum just above it be forced to turn to the state to recover their confiscated earnings in the form of tax credits? Who is best served by that process? I do not believe that my constituents should have to go through that process to claim back money that is rightfully theirs. Another problem across our constituencies is the expanding poverty trap. Again, the Government are not deliberately making it bigger, but it is there. Some 2 million low earners still pay marginal rates of tax of between 60 and 90 per cent. Indeed, 200,000 people still pay marginal rates of tax in excess of 90 per cent. We in the House should not allow that to continue.

What is the solution? The priority fiscal reform of any Government, Labour or Conservative, should be to reduce the taxes on low earners. We must take people out of the tax and means-tested benefits net altogether. If the greatest cause of poverty is worklessness, we must work to make work pay. Reducing taxation on low earners will not only ensure that people keep more of what they earn, but will have huge social advantages.

In addition to encouraging people back into the work force, it will allow them to take jobs at or above the minimum wage, knowing that the money that they are earning will go into their pockets, and that they will be replacing the state as their family’s major provider. What price does dignity carry? “I am putting the food on my family’s table, not the Government”—many men and women would like to be able to say that.

Reducing the tax on low earnings will start to liberate people from a benefits system that can, at times, be seen as callous. I know that that is not a deliberate ploy on the Government’s part, but the benefits system can often seem remote and uninterested in people’s everyday concerns. All Members of Parliament are familiar with Her Majesty’s Revenue and Customs’ phrase

“having looked at the information we hold and that you have provided, I consider that you should have been aware that your payments were wrong”—

a mealy-mouthed phrase used by HMRC as justification for clawing back perhaps thousands of pounds of overpaid tax credits from bewildered and frightened families, who are sometimes left facing legal action for the recovery of moneys that they do not possess. That is not the action of a caring state. Most of those people notified HMRC of their change in circumstances, and HMRC failed to update and amend its records accordingly.

Ed Balls: Take the example of the working single parent to whom the hon. Gentleman refers, for whom the combination of the minimum wage and tax credits would lead to an effective hourly rate of slightly over £12 an hour. If tax credits were taken away from that lone parent, would she be poorer, or how would the hon. Gentleman make up the difference—by a higher minimum wage or by tax cuts? Could he explain that conundrum to us?

Mr. Walker: The Minister makes a good point, and I am about to come on to it, but I will take no lectures from a Minister whose Department has just introduced a Budget that will leave people earning £18,000 worse off. The Minister should get his own house in order. I am trying to approach the issue in a non-partisan way and I hope he respects me for that.

Ed Balls rose—

Mr. Walker: No, I will not give way again.

Over the next five years, I would like to see the tax threshold increased to £12,500. Anybody earning less than that would not pay tax. That requires an increase in the threshold each year of £1,500. Yes, the cost of the increase would be about £8.4 billion per annum. That sounds a lot, but in the 2007-08 tax year due to start in a week, the Government tax take is set to grow by £36 billion—that is, from £517 billion paid in this tax year to £553 billion paid in the tax year just starting, an increase of £36 billion. Then in each year for the next four years, the tax take is due to increase by £32 billion.

Helen Goodman: I am puzzled by what the hon. Gentleman is saying. I thought it was the policy of Conservative Members to share the proceeds of growth between tax reductions and increased public expenditure. How can the proceeds of growth be shared unless there is some increase?

Mr. Walker: I am happy to deal with that, but I am not speaking for my party. I am speaking as a very junior Member of Parliament for Broxbourne who is speaking because he feels passionate about the subject, and because he cares about alleviating the circumstances of the very poorest in society. Again, I will not be drawn into a partisan exchange.

The cost of reducing taxes by £8.4 billion a year is significant, but it would be substantially offset by higher rates of economic activity, with people choosing to take jobs and working longer. As people go back to work and increase their earnings, there will be savings in the £20 billion currently spent on tax credits, plusthe other £100-odd billion spent on other benefits. The £42 billion could quite easily be found if we did not spend the £36 billion that the Government have earmarked for unpopular ID cards and the failing NHS IT records system.

I would be more than happy to have a debate onhow we fund the future alleviation of high levels of taxation. I, as a Conservative—in answer to the question from the hon. Member for Bishop Auckland (Helen Goodman)—might like to fund it by getting rid of schemes that I do not think will deliver benefit to the taxpayer, or, yes, partially fund it by slowing the growth of the state, or yes, partially fund it by a reduction of the tax benefits and benefits that we pay out.

I know that Labour Members are concerned that many people on low incomes are paying tax and they might argue, as the hon. Member for Luton, North (Kelvin Hopkins) did, that the taxes of the very richest should go up. Let us have the debate. We cannot live in a sterile political world where we are afraid to talk about things that matter to the many millions of people out there in the community. We have an obligation and duty to them.

Mr. Newmark: I do not wish to cause a ruckus in my own party, but I hope my hon. Friend would agree that a core part of our policy is to put stability before tax cuts, and that we cannot achieve the goals that he seeks unless we put stability before tax cuts.

Mr. Walker: Of course we want to achieve economic stability, but it is not impossible that a future Government, whether Labour or Conservative, could commit to taking the very poorest people out of tax altogether. We are, after all, elected to run the country and to make hard decisions. I can almost anticipatethe Minister’s response. He will say that raising tax thresholds, as the hon. Member for Bishop Auckland said, cannot be done because it will benefit the rich.

That is not good enough. It is an abrogation of our responsibility to the least well off in society. Raising tax thresholds may benefit the rich, but the marginal benefit to the very poorest in society will be far greater.

Ed Balls: I do not wish to make a partisan point. In the spirit of the hon. Gentleman’s comments, I say to him that if he keeps the minimum wage at its current level, abolishes the tax credit for single parents and uses the money instead to raise the personal allowance, a single parent will be significantly worse off by many hundreds of pounds. Does he accept that fact?

Mr. Walker: We can assist single parents through universal child benefit. I point out to the Minister that the Joseph Rowntree Foundation said in recent evidence to the Scottish Affairs Committee that tax credits may be useful for single parents, but they keep many married couples and cohabiting couples in poverty. That is worth thinking about. I can send him that evidence if he wishes to double-check it.

Yes, I agree that cutting taxes or raising thresholds may benefit high earners, but as I said, the marginal impact of raising tax thresholds will be felt far more keenly by hard-working families at the bottom end of the income scale. The purpose is not just to give people back money. It is to give them back their self-respect and to reduce the role of the state in their lives.

Who would benefit from Charles Walker’s proposal from Broxbourne? People who want to work, people in work—despite what the Minister says, both single people and married people—families and pensioners, all worthy recipients of a tax cut allowing them to keep more of the income that they earn. Who would not benefit? The overbearing state would not benefit, and the poverty industry would not benefit if we took measures that genuinely alleviated poverty and restored self-respect to people and to families.

8.28 pm

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OTHER INTERVENTIONS IN THE SAME DEBATE

Mr. Walker: Will my hon. Friend explain to the uninitiated the mechanics of carbon capture? Is it captured and put into a substrate of porous stone or is it solidified?

Mr. Crabb: My layman’s understanding is that it is not solidified, but injected back into porous rock, and I gather that disused North sea oil and gas fields are particularly well suited geologically for that sort of use.

...

Mr. Walker: Given the need to reduce this country’s carbon emissions and the fact that clean coal technology may or may not be viable in the short to medium term, does my hon. Friend see a role for expanding our nuclear generation in the next five, 10 or 15 years?

Mr. Crabb: My belief is that in future decades we are going to need a basket of different energy supplies. I reject the football supporter approach whereby we have to be in favour of nuclear or coal or biofuels when the truth is that the UK is going to need a whole different spread of energy sources in the decades ahead. My belief is that nuclear will still feature in the mix, though it may have less of a share than it does now.

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