I feel that I should first explain why I have a teddy bear on the Bench beside me, because various people have been making eyes at me. The bear is the prize for my Christmas card competition. As I am en route between the gift shop and having a photograph taken with the Prime Minister, I thought that I would sit him there.
As I said on Second Reading, I very much welcome the whole thrust of this Bill, which is needed to balance the books. I will not repeat what I said then, but I have a few comments on some of the amendments. First, amendment 2 to clause 5, tabled by the hon. Member for Richmond Park (Sarah Olney), is about trying to publish the number of taxpayers who get caught in higher rate bands as a result of this Bill. I very much welcome tax transparency, and I very much welcome His Majesty’s Revenue and Customs telling people how much tax they will pay. There are many measures that we could take to promote tax transparency, but I can say with a high degree of confidence that, if this amendment were to pass, HMRC would not need to write to one single member of the public, because it is fundamentally based on a complete misunderstanding of how fiscal drag works.
The Bill keeps the personal allowance and the higher rate thresholds as they are, so somebody earning, say, £12,000 a year will not pay the base standard rate of income tax now and they will not pay it next year. The way that fiscal drag works is that people get pay rises, which push them into a higher rate band than if they had not got that pay rise, but that is not as a result of a change in the Bill. The wording of the amendment says that
“they have become liable to pay the basic rate of income tax (when they were not previously so liable)”.
It is mathematically impossible to have someone not liable at the moment who will then become liable as a result of the Bill.