Mr. Paul Johnson:

Hugely so. It is one of the most important parts of fiscal policy, both in tax and welfare. Having those defaults and being clear what one is trying to achieve with that is incredibly important. The default on tax thresholds was set in the 1970s by a couple of Labour politicians at the time, Jeff Rooker and Audrey Wise. Famously known as the Rooker-Wise amendment, it was designed specifically, particularly in periods of high inflation, to create this default whereby things would go up in line with inflation. Over a period, it totally changes the structure of a tax welfare or pension system and how ones does indexation. As I said, we had a clear policy between 1980 and 2010 to increase the State pension only in line with prices. That fundamentally changed the nature of the State pension and the structure of our pension system, just as the current indexation system is changing it again. The structure of our income tax system is being changed fundamentally by the failure to index the higher rate threshold, for example the failure to index the duty on petrol has fundamentally changed the structure of the whole of that system, and we have lost so much money as a result.

There are few things more important than having a real debate about indexation policy in order to get a clear understanding of what it is. I am delighted that the committee is looking at this, and I am very pleased to have a chance to talk to the committee about it. I really do think it is terribly important.