Today’s Budget confirms a tax cut for millions of people in two weeks time and looks forward to the biggest income tax cut in a generation in April 2013. As a Liberal Democrat in the Coalition I am delighted that our policy of £10,000 tax free pay is now within touching distance.
The government raised the personal allowance in April 2011 and over three years we will have taken over two million people out of the income tax net. This helps all part time workers, most of whom are women. And by April 2013 young people on the minimum wage will have all of their pay tax free. About 24 million people who are still in the tax net will see their bills cut by over £500. This allows people to keep more of their own money, leading to greater spending and a boost to local economies.
We’ve also increased and made more effective taxes on the very wealthy. Anyone buying property worth more than £2 million will face 7% stamp duty – not a mansion tax but certainly a mansion duty. People who have avoided stamp duty in the past by buying large houses via a company will now face a 15% charge to discourage avoidance. And I’m really pleased that the Govt is setting in train a General Anti Abuse Rule – see my blog on 5th December, which called for such a GAAR.
The Budget also had some good news for Bristol. You wouldn’t expect Wallace and Gromit to feature in a budget. But the Chancellor mentioned them in his speech as he is proposing an extension of film tax credits to made for tv films. I met with Aardman Animations a few months ago to discuss the competitive pressures they were facing from other countries tax regimes. As chair of the Lib Dems’ Treasury committee I made their case to ministerial colleagues. The lobbying has paid off. The govt will also be giving tax favoured status to Britain’s video games industry. Bristol’s digital economy will also benefit from £12million funding to become a broadband “super connected city.” This will give Bristol ultra-fast broadband (80-100 megabits per second) and also high speed wireless connectivity in key areas.
I made the Liberal Democrats’ official budget response speech in the Commons. I’ve pasted the Hansard record, complete with interventions, below:
As Liberal Democrats in the coalition, we wanted three tax changes in this Budget. First, we wanted a fair income tax system that would lift the low-paid out of tax and bring about a tax break for middle earners. Secondly, we wanted a system that would tax accumulated and unearned wealth fairly and effectively. Thirdly, we wanted action to tackle the abuse of the tax system that was taking place through aggressive tax avoidance schemes. All three of those objectives have been met by the Chancellor’s Budget.
Two years ago, we were all about to go out on to the streets to start the general election campaign. The Liberal Democrats’ No. 1 priority at the time was to achieve in this Parliament tax-free pay for all our fellow citizens earning less than £10,000. That objective is in the coalition agreement, and significant progress has already been made towards achieving it.
In the current tax year, we have raised the allowance from £6,475 to £7,475, lifting 800,000 people out of the income tax net altogether and providing a £200 tax cut for every basic rate taxpayer.
When the next tax year starts in two weeks’ time, the personal allowance will rise again, to £8,105, lifting 1.1 million people out of taxation altogether and providing a tax cut of £330. Also in two weeks’ time, as well as those tax changes, the largest pension increase for a century will have been delivered by this coalition Government.
In this Budget, our Liberal Democrat priority was to move further and faster towards our goal of £10,000 tax-free pay. Liberal Democrats in the coalition Government are therefore delighted by the confirmation that the rise in the personal allowance of £1,100 will proceed in April 2013. It is the largest rise in the personal allowance for 30 years—that is, in all our working lifetimes. In April 2013, people will be able to earn £9,205 without paying tax, which will lift a further 840,000 people out of tax. Over three years, 2 million British people will have been raised out of income tax. That will help everyone who works part time, the majority of whom are women. The measures will lift young people on the minimum wage out of income tax altogether, and 24 million basic rate taxpayers will be better off to the tune of £546. These changes will allow people to keep more of their own money. They will inject spending power into local economies and they will make work pay.
As the front page of the Liberal Democrat manifesto promised, we have delivered more than £500 into the pockets and purses of Britain as a result of this Budget. It will have been obvious from the fact that my colleagues were waving their Order Papers earlier that we are extremely pleased to have achieved that. Let us contrast it with the last Budget under the leadership of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), when Labour MPs waved their Order Papers following the abolition of the 10p tax rate. There could not be a greater contrast between the priorities of this coalition Government and those of the last Labour Government.
Our second objective in the Budget was to rebalance the tax system, so that taxes would fall lightly on work and enterprise and more heavily and effectively on wealth. Already, this coalition Government have raised capital gains tax from the historically low rates that we inherited from the last Labour Government, and there have been no changes to inheritance tax. Some people might have wanted to drop the 50p tax rate altogether. However, we all know that 2012 is going be a difficult year for families up and down the country, and Liberal Democrats have been clear that now would not have been the right time to reduce the top rate of tax. I am pleased that the Chancellor has agreed with our position.
By April 2013, our top rate of tax will be in line with that of our competitor states in the European Union and the United States of America, but we will also have effective taxes on wealth in place by then. Stamp duty will be 7% on house sales of more than £2 million. We might not have got a mansion tax in this Budget, but we have certainly got a mansion duty. That mansion duty alone—just that one measure—will raise three times the amount lost through the lowering of the 50p tax rate by 5p.
The third objective that we set in this Budget was to take action on tax avoidance, and I am therefore pleased by the introduction of a 15% charge on personal property that is under corporate ownership. I am pleased that tycoons will have the reliefs that they claim restricted to 25% of their income, and I am particularly pleased that the general anti-avoidance rule for which I have argued for so long is to be introduced by this Government. I see that rule as a kind of electric fence across the tax system: a clear warning to every taxpayer that this is a line that they must not cross.
The Budget makes further changes to rebalance the economy, to restore green growth to the economy and to build on Britain’s strengths in engineering and the creative industries. In 2012, we shall see the launch of the green deal, which was spearheaded by my right hon. Friend the Member for Eastleigh (Chris Huhne), when he was Secretary of State, and which is now being taken forward by the Secretary of State for Energy and Climate Change, my right hon. Friend the Member for Kingston and Surbiton (Mr Davey). Last weekend, I witnessed the demonstration projects that are already taking place in my constituency under the Bristol Green Doors initiative, which are showing what every householder can do to take advantage of the green deal. Also in 2012, the green investment bank will be making its first investments.
The creative industries are incredibly important to our national economy, and I was pleased that video games were given recognition in the Budget. As a Bristol and west country MP, I was particularly pleased to see the extension of film tax credits to the television industry. The Chancellor mentioned Wallace and Gromit. Despite Wallace’s Lancashire accent, their home is of course Bristol. The films are made in my constituency by Aardman Animations, Europe’s largest animation company. It is incredibly important to the economy of Bristol and is a great British brand that sells millions of pounds of exports all over the world.
For Liberal Democrats in this coalition, the headline of this Budget is that we have delivered a tax cut for millions of Britons and effective taxes on the wealth of millionaires. It is a Budget that maintains the confidence that Britain is back on track. It is a Budget that delivers the biggest tax break in a generation for millions of hard-working families. As a Liberal Democrat in this coalition, I am proud of the role my party has played in making Britain a fairer country.