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Budget 2013 – £10,000 tax free pay thanks to the Liberal Democrats

March 20, 2013

Most Budgets fade into the mists of time.  But some stand out in history.  For Liberals, Lloyd George’s 1909 “People’s Budget” is surely the greatest. Peel abolished the Corn Laws in 1846, having re-introduced income tax in 1842.  Of more recent Chancellors, the two longest serving have been Nigel Lawson and of course Gordon Brown.  Lawson made huge changes to the rates of income and capital gains taxes in 1988.  Brown littered his budget speeches with claims to have abolished “boom and bust”…and then presided over the biggest economic contraction since the early 1930s.

Budget 2013 will be remembered for the announcement that the Coalition Government has delivered on the Liberal Democrat promise of £10,000 tax free pay. In the last general election I campaigned in Bristol West for a  huge rise in the income tax personal allowance, from roughly £6,500 to £10,000. We made that policy the main demand in our Coalition negotiations.  In the agreement we eventually made with the Conservatives, it was to be the first fiscal priority of the Coalition Government.

So now, thanks to the Liberal Democrats, nearly 3 milion people will have been lifted out of income tax by April 2014.  The remaining 24 million income tax payers will have their tax bill slashed by £700.  This is a huge achievement, at a time of budgetary difficulty for the country.

As the Liberal Democrats Chair of our Economic Affairs Committee I speak for the party on all matters to do with tax and the economy.  So I get to respond in the Commons chamber to all Budgets and other statements made by the Chancellor.  Here is my speech from this afternoon, which is just over 10 minutes long, with a few interventions from other MPs.

3 pm


Stephen Williams (Bristol West) (LD):Liberal Democrats will look back on our record in government and on every Budget that the coalition Government have delivered, and will judge them according to our values and our principles. We will judge them according to whether we have, together, built a stronger economy and a fairer society that enables everyone to get on in life.

The Chancellor has recognised that building a stronger economy in today’s turbulent world conditions is an extraordinarily difficult thing to do. The Office for Budget Responsibility has said that our export markets have been suppressed, and that that alone accounts for suppressed rates of growth. It is right for us to recognise the extraordinary achievements of businesses in our economy in producing 1.25 million extra private sector jobs since the first quarter of 2010. However, it is also right for the Government to give businesses a helping hand to enable them to go that one step further.

The Liberal Democrats are delighted by the announcement in the Budget of a £2,000 employers’ national insurance credit which will enable every business to take on new employees. A business could take on four adults on the national minimum wage and see absolutely no increase in its employment costs. As a result of this measure, 450,000 small businesses will make no national insurance contributions whatsoever. That will provide a further boost for the recruitment of apprentices, in respect of which the Government already have an extraordinarily good record.

The Government need to do more to get growth in our economy going. Liberal Democrats both inside and outside Government have called for that growth to come from extra capital spending, which is why I am pleased that the Budget contains a further switch to finance more of it. It is worth noting that over the decade since the Government came to office, our capital expenditure will be higher than it was throughout the 13 years of the last Labour Government. However, most capital expenditure does not come from Government; it comes from the private sector and, in particular, from housing. For some time, many of us have been calling for a boost to be given to house building, especially the building of affordable homes, so that young people can get their foot on the housing ladder for the first time.

The Government announced two housing initiatives today. Under the help-to-buy scheme, which will start in just two weeks’ time, they will put a fifth of the equity in a new home on the table for those who can put down 5% themselves. There is also our mortgage guarantee to free up the mortgage market. There are planning permissions for various sites in all our constituencies, but, as we know, they have been frozen for some time. House builders have received the message that they have been waiting for, which will enable them to make a start on those sites, to give people new homes, and to provide new jobs throughout the land. However, growth needs to come from other sectors as well.

Dr Huppert:Has my hon. Friend seen a report about green growth which was published last year by the Confederation of British Industry? It said:

“The business response is definitive and emphatic: green is not just complementary to growth, but is a vital driver of it.”

The CBI said that green business could

“roughly halve the UK’s trade deficit”

by 2014-14. It also said:

“With a smarter approach, green business could add £20 billion to the UK economy by 2014-15. This is an opportunity we cannot afford to miss.”

I know that Liberal Democrat Ministers are pressing for such action. Will my hon. Friend encourage them to go further, and try to persuade the Chancellor of the business benefits of green growth?

Stephen Williams:I entirely agree with my hon. Friend. There is, perhaps, a tension in the coalition Government between the Chancellor and the Department for Energy and Climate Change, and, if we are honest, within the Department itself, when it comes to whether sustainable growth from green technologies is desirable. I emphatically believe that it is desirable, and I want investment in wind farms in particular to go ahead. We said at the time of the 2010 general election that we wanted to rebalance the economy, and green growth is certainly one of the things that we had in mind.

What I have in mind particularly at the moment, however, is a major industry in which Britain is a world leader, especially in the south-west of England, and its centre is in Bristol. I refer to the aerospace industry. The Government are working on industrial strategies for 11 critical sectors of the economy, so I was delighted when the Deputy Prime Minister came to Bristol on Monday and announced a £2.1 billion investment in an aerospace technology institute. I would say that the best place for that is, indeed, in Bristol.

We also need to introduce reforms to help local economic growth in all our city regions. I am pleased that the Government have accepted 81 of Lord Heseltine’s recommendations, and especially pleased that they have accepted the recommendation of a single growth fund bringing together investment in skills, housing and transport. The Liberal Democrats have long believed that our economy needs to be rebalanced, away from London and the south-east, and centred on city regions such as Leeds and Bristol.

John Healey:The hon. Gentleman has said that he welcomes a single pot. Is that not exactly what the regional development agencies had, including the south-west RDA? They had a single pot with no strings attached from the centre, and decisions on the spending of that pot were made in the regions, for the regions. Was it not a mistake to abolish the RDAs and then to wait three years before reintroducing that important flexible funding arrangement?

Stephen Williams:The right hon. Gentleman is one of the most thoughtful Members of the Opposition, but on this occasion I must respectfully disagree with him. My experience in Bristol suggests that no one misses the south-west regional development agency, but everyone in the greater Bristol area recognises the extraordinarily good work done by the West of England local enterprise partnership. [Interruption.] I hear a chorus of agreement from my west midlands colleagues, including my hon. Friend the Member for Solihull (Lorely Burt). It seems that the experience is the same in that area.

We want to rebalance the economy, away from the south-east and to our city regions, and also—as was pointed out by my hon. Friend the Member for Cambridge (Dr Huppert) to decarbonise the economy. I want to raise an issue that has not been the subject of much comment, but which I know is tucked away among the Budget details. I think that we should consider how we can provide further incentives for the setting up of social enterprises around the country in order to produce sustainable micro-growth in all our communities, and devise innovative ways of bringing people into business on a not-for-profit basis. That would contribute to a fairer society as well, but the biggest contribution to a fairer society that any Government can make is putting more money into people’s own pockets and purses, so that they can decide for themselves how to spend the money for which they have worked so hard.

At the last general election, all my Liberal Democrat colleagues stood on the basis of their No. 1 priority: the delivery of £10,000 of tax-free pay by whatever Government we were to become a part. That promise will have been delivered in full by April 2014. During his speech today, the Leader of the Opposition urged people to put their hands up in favour of a different tax measure, but 24 million people around the country will be able to put their hands up and say “I am receiving a tax cut because of this coalition Government, and, in particular, because of the Liberal Democrat participation in that coalition Government.”

Since we came to office, the personal allowance has risen by £3,525. That is an increase of more than 50% in the amount of money that people can take home without income tax being deducted from it. A total of 2.7 million people will have been taken out of tax altogether, and £700 of extra income will land in the pockets and purses of 24.5 million workers up and down the country. That is an extraordinary achievement on the part of the coalition Government, and I am very proud of the role that my own party has placed in developing a tax change that is a landmark in the history of our country.

A young person working on the minimum wage has already been lifted out of the income tax net altogether. Members should contrast that with the lamentable record of the Labour party, which introduced the 10p tax rate and then abolished it in order to fund a tax cut for people who were earning much more. Despite what Labour Members say now, Labour’s record in office was one of cutting taxes for the wealthy and raising them for the poorest. The coalition is doing the reverse of that.

We are also delivering further help for families up and down the country who are trying to balance their budgets. Many of my colleagues, particularly those representing rural seats—the Chancellor referred to my hon. Friend the Member for Argyll and Bute (Mr Reid) earlier—will welcome the fact that a fuel duty increase planned by the previous Government has been cancelled, yet again. I say, speaking for myself, that we cannot go on doing this indefinitely; I would prefer us to be much more radical and to scrap fuel duty altogether. It is an extremely blunt instrument of taxation that is long past its sell-by date, and a more economically sensible system of road-user pricing in the long term should replace it.

In pubs and clubs up and down the country, including the Prince of Wales in Gloucester road in my constituency, people will be raising a glass to the Chancellor tonight for the cancellation of another duty escalator—that on beer. I pay tribute to my hon. Friend the Member for Leeds North West (Greg Mulholland), who has badgered me and everyone else involved in this area for the past two and a half years to try to do something to get rid of it.

Greg Mulholland:People will indeed be raising a glass to this Government for this. Does my hon. Friend agree that we now need to hear from the large pub-owning companies? They need to say clearly today that they will pass on the 1p reduction to their licensees, who can then pass it on to their customers.

Stephen Williams:My hon. Friend makes a vital point. We all know that when the global oil price fluctuates all over the place we do not necessarily see a cut in the price at the pump. I would expect every major beer company to pass on this reduction in full to its customers.

The other significant help that the coalition Government have announced this week for families up and down the country is the increase in our assistance with child care costs—£1,200 per child, to be delivered by 2015. However, our entire structure of taxes works only if people actually pay what we in this place decide should be assessed, so I am delighted that this Government have announced another huge package of anti-avoidance measures. Let us not forget that in 2013 we will see the country’s first general anti-abuse rule. So this is the second largest set of anti-avoidance measures that any Government have introduced—the largest was also introduced by this Government, back in 2011. This Government have done more to tackle egregious tax avoidance and evasion than any of our predecessors, but it is also worth mentioning that tax avoidance is a problem abroad.

Some of us will have been startled yesterday to see 500 masked Osbornes outside Parliament promoting the Enough Food for Everyone IF campaign. We should be proud that this coalition Government are delivering the 40-year-old promise of having 0.7% of our income go to the less-developed parts of the world. I am pleased that some of that increased aid budget is going on a tax capability-building unit, thus making developing countries able to stand on their two feet by collecting their own tax revenues and royalties.

This Budget, over time, will be remembered for that promise of delivering £10,000 of tax-free pay. We have cut the taxes on people in work. We have cut the tax that is a barrier for people entering work. We have given a boost for housing. We have given help with the costs of raising a family. We are indeed building a stronger economy and a fairer society, where everyone is able to get on in life.


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