Finance Bill

That is okay, Mr Hancock; people often cannot tell us apart. I rise to support amendments 25 and 43. The impact that the VAT increases in the Bill will have on the most vulnerable in our society—those who are least responsible for the global financial crisis—has been ignored and avoided by the Government, and I wholeheartedly agree that there should be a full analysis of and subsequent report on the extent to which the increase will affect low-income households in particular. The Government's plans to raise VAT from 17.5 to 20% are highly regressive and entirely unfair. We know that the poorest fifth of Britons pay twice as much of their disposable income in VAT—at 12.1%—as the richest, who pay just 5.9%. Independent estimates from the Institute for Fiscal Studies show that because of this Budget, by 2014-15, the incomes of the bottom 10% of the population will fall by 2.6%, which is equivalent to £5 a week. Given that those in the bottom 10% of income distribution earn on average £190 a week and already struggle to make ends meet, that £5 a week reduction in their incomes will inevitably hit families and pensioners, plunging more of them into poverty. In contrast, those who are fortunate enough to be in the top 10% of income distribution will experience a mere 0.7% fall in their weekly incomes. As their average income is about £1,600 a week, I suspect that a reduction of £11 will be somewhat more manageable to them than the reduction in weekly income will be to those in the poorest decile of income distribution. I know that I need not spell all this out to the Government, because just a year ago, the Prime Minister said that VAT changes would hit "the poorest hardest", and it is no secret that the Deputy Prime Minister is well aware of just how regressive VAT changes can be. A few months ago, he described what the Government are planning now as a "VAT bombshell". The Government had a choice about how to reduce the Budget deficit and they chose a package of measures that included the VAT rise, which will make it even harder for low-income families to keep their heads above water. Let me remind the Government that they did have a choice. There is another way of achieving a reduction in the Budget deficit without threatening economic growth and without the unfairness of the most vulnerable in society being hit the hardest. In March, the then Chancellor of the Exchequer introduced a Budget that included £19 billion-worth of tax increases and £38 billion-worth of spending cuts. With those tax increases, those in the bottom 10% of income distribution experienced not the 2.6% reduction in their incomes that will be the effect of this Government's Budget, but a 0% reduction. In contrast, those in the top 10% experienced not a 0.7% reduction in their incomes, as they will under this Budget, but a 6.8% reduction. Instead of following the choices taken by the previous Labour Government, this Government have chosen measures that will hit the poorest in society the hardest.