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Orders Of The Day

Volume 22: debated on Thursday 22 April 1982

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Finance Bill

(Clauses 18, 22, 29, 65, 71, 75, 117 and 128 and Schedule 10)

Considered in Committee



That the order in which proceedings in Committee of the whole House on the Finance Bill are to be taken shall be Clauses 22, 18, 29, 117, 65, 71 and 75, Schedule 10 and Clause 128. —[Mr. Britton.]

Clause 22

Personal Reliefs

4.24 pm

I beg to move amendment No. 1, in page 13, line 25, leave out '£2,445' and insert '£2,755'.

With this it will be convenient to take the following amendments: No. 2, in page 13, line 25, leave out '£2,445' and insert '£2,510'.

No. 3, in page 13, line 28, leave out '£1,565' and insert '£1,775'.

No. 4, in page 13, line 28, leave out '£1,565' and insert '£1,609'.

I wonder whether we might, for the convenience of the Committee, take also the following amendment:

No. 6, in page 13, line 30, leave out '£3,295' and insert '£3,387'.

No. 7, in page 13, line 31, leave out '£2,070' and insert£2,340'

No. 8, in page 13, line 31, leave out '£2,070' and insert£2,129'

No. 9, in page 13, line 33, leave out £6,700' and insert '£7,600'.

No. 10, in page 13, line 33, leave out '£6,700' and insert '£6,903'.

Although amendments Nos. 5 to 10 are of the same genus and deal with the taxation of the aged, before agreeing to the proposal, as we would like to do, we should like to be assured that if this change is made it will not prevent separate votes on amendments Nos. 2 and 6.

I take it, Mr. Weatherill, that it is proposed to include also amendment No. 5, in page 13, line 30, leave out '£3,295' and insert '£3,735'. I think that by mistake it was not included.

That would be in the second grouping. As I understand it, it would be for the convenience of the Committee if we took amendments Nos. 1 to 10 together in one debate. That appears to be so.

The Government have a few simple economic views, which are reflected in their tax policies which we start to discuss in some detail this afternoon. They believe in the market economy. I should not trust those who preach that economy to go into Sainsbury's with a shopping list, let alone venture into Petticoat Lane. Their belief in these matters has been clearly stated, and continues to be.

The Government's second broad policy of which we must take note, because it, too, is reflected in the taxation policies that we are discussing, is that they have in mind the need to look after the rich, on the principle that it is the rich who provide the jobs and the wealth of the country. The policy is a simple one: let the rich make even more money and they will spend their time creating new industries, investing in the economy and improving the efficiency of the enterprises for which they are responsible.

Even though the rich have been encouraged magnificently by the Government, I see no sign of industrial investment expanding in the way that was hoped. Rather, I see a decline, and side by side with that decline in the investment that it had been hoped would increase I see tax havens flourishing as they have never flourished before.

The two economic views that I have set out hold at least part of the key to the tax policies of which clause 22 is a good example. For the Conservative Government, the taxation of the rich is an economic problem and the taxation of the ordinary person is a budgetary one. They need to reduce the money that is taken from the rich to improve the economy, but they need to increase the money that is taken from ordinary people to pay for the running of the economy.

Does the right hon. Gentleman agree that if it were not for the likes of Mr. Ken Livingstone across the river the taxation and the budgetary problems of the poor would be rather less than they are at the moment?

I find that an incredible assessment. If the hon. Gentleman has the courtesy to stay and listen to these debates he will hear us dealing with the taxation of those people who are least well off and what has happened to them during the lifetime of this Government. He will see from the figures, which will be discussed at some length during the debate, just how ordinary people and, even worse, those with smaller than average incomes, have suffered under this Government. That is one of the marked features of this Conservative Administration which the hon. Gentleman will do well to study. If he has not studied it so far, I hope that he will take note of what is said during these debates.

4.30 pm

The Government have divided the people into two parts—the rich, who are made richer to encourage them, and for whom taxation represents a diminishing burden, and the ordinary people, for whom taxation is increased to pay for running the economy. The Government have changed the traditional basis of taxation, which is the raising of tax from the those best able to bear it. The principle so far has been that those with the broadest backs should rightly bear the greatest burdens. That principle has been eroded by the Government in their various Budgets. That is a serious departure, made for reasons that we find unconvincing.

The first major element came in last year's Budget, though there were signs before. That important change was the failure to uprate the personal allowances in line with the Rooker-Wise amendment, introduced under the last Labour Government. The amendment was the first element of indexation in our tax system, if we exempt the indexation of pensions carried out by a Conservative Government way back in 1972.

We are not talking about the failure to increase allowances; we are talking about the system of indexing year by year in line with the increases in the cost of living. Following on from that simple element of indexation, which applied to the taxation of ordinary people, there have been further legislative attempts by the Government to index other areas of our tax system. Whereas we indexed the allowances in so far as they applied to ordinary people, the Conservatives have indexed capital transfer tax, capital gains tax, higher rate bands, capital gains tax exemption limits and the CTT bands, and there will be more to come.

The Government have deliberately zeroed in on the rich in order to give them, at times of both economic difficulty and lesser economic difficulty, increased limits in a way that we find incomprehensible and unjustified.

Will the right hon. Gentleman tell us which way he voted in the Division when the Rooker-Wise amendment was carried in Committee?

Will the hon. Gentleman recall what happened on Report, when the Labour Government accepted the amendment? We listened to the arguments and accepted on Report the amendment put forward by my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker). Since then I have not ceased to pay tribute to my hon. Friend for his wise education of the Treasury. I wish that that education had continued into the present Government. Their types of indexation are different from ours. The benefits that they provide in Finance Bill after Finance Bill go directly to those with higher incomes.

All of this started with the statement by the present Chancellor of the Exchequer in the debate on 25 July 1977, when he said:
"That is why truth in taxation is important."
The great claim was that indexation would not be a means to help the wealthy but would be for truth and for telling people what taxation really meant.
"By failing to keep personal allowances in line with the dreadful ravages inflicted by inflation, the Government have extended the range of disincentives and deepened the poverty trap. Social benefits have risen with full indexation while personal tax thresholds have not. Therefore more people are moving into the band where their earnings in work hardly exceed their earnings out of work … the real thief is inflation. It is the promoter of this increased burden of taxation and we are angry because, due to the Treasury's failure to change the tax system in line with inflation, the Treasury itself becomes the main body to profit from the inflation that it has failed to check. The House should feel quite entitled to impose the indexation obligation on the Government."—[Official Report, 25 July 1977; Vol. 936, c. 70.]
Those were ringing words, but the right hon. and learned Gentleman last year failed to increase the personal allowances in, line with inflation. He had said that he would index them to ensure that in particular those at the lower levels of incomes would not suffer from inflation. The Government had in mind that they would reduce taxation, because they believed in that. The right hon. Member for Blaby (Mr. Lawson), who is a conviction politician, persuaded a gullible Chancellor to introduce a tax and price index. He talked about the need to show people how they were better off under the present Government. He said that to show that they were a tax-cutting Government they needed an index that did not simply illustrate the way in which retail prices had moved upwards but took account of the way in which taxes would diminish year by year. Side by side with inflation coming down, the levels of taxation would come down even quicker, so there would be two benefits for ordinary people—inflation declining and taxation declining.

The right hon. Gentleman wanted to introduce an index that made that clear for all to see. Everyone could then go into the negotiating room to discuss increased pay realising how much better off in both those areas he was year by year. The Chancellor said in his speech to a conference organised by the Financial Times on 23 July 1979:
"There has been a good deal of talk about whether or not the tax changes make most households better off. I hope that the new tax and price index of real take-home pay which the Government hopes shortly to introduce will help to settle this kind of dispute. For the retail price index, by itself, is not a sufficient guide".
In the period from the introduction of the tax and price index in 1979 to February 1982 the retail price index rose by 35·6 per cent. That is the measure of the decline of the value of money in the economy run by the Conservative Government. At the same time, the tax and price index rose by 42·7 per cent. The position worsens each year. Between March 1981 and February this year the retail price index rose by 9·4 per cent. and the tax and price index rose by 12½ per cent.

The tax and price index is recording that prices are going up and up. Additionally, we are now being given the useful but not surprising information that taxes are also going up and up. That is the valuable contribution made by the right hon. Member for Blaby. The right hon. Gentleman, who is adept at all these matters, thought up the index. He designed the petard. He constructed it lovingly of selected iron plate, placed the gunpowder inside, and prepared to use it against the enemy. When he arranged the initiating ceremony the whole petard blew up, hoisting the right hon. Gentleman with it.

But the right hon. Gentleman's ingenuity did not end there. Once he realised that the tax and price index had failed, the base dates were kept separate, so a direct comparison is a tedious operation. Many of us can recognise the hand of the right hon. Member for Blaby in constructing what is a rather difficult exercise for those who wish to make a fairly obvious simple comparison. I am grateful, and I must express my gratitude, to the Library staff for arranging this examination.

As I mentioned before, the Rooker-Wise amendment was overridden for the very first time by this Government. The principle of truth in taxation—which we understood the Conservative Government were always interested in—gave away to the more important principle that tax reliefs should be available for the better off. This was the principle that finally won in the conflict. It was not a conflict about which we had all that much doubt.

If we make a further examination to see what happened in the case of the worse off, we see that the level of income at which a typical family started to pay tax fell from 44·7 per cent. of average earnings to an estimated 38 per cent. in November last year. The proportion of a low-paid family's earnings taken in income tax and national insurance contributions increased from 21·9 per cent. to 23·6 per cent. There were further problems for those in the poverty bracket.

This Government did not just fail to index last year; they failed to raise the allowances at all. So the thief of inflation which made the Chancellor angry when it took place in the lifetime of the last Government—those were his own words; it is a rare attribute of the Chancellor to be angry, he rarely gets angry—was discovered not to be a thief at all last year. The Chancellor of the Exchequer was no thief; he was a removal man and he arrived with a whole pantechnicon and left nothing. There was nothing left to compensate for the increases in inflation then. I understand that the bailiffs—a growing profession under this Government—are supposed to leave a bed and a chair for the occupants. But this Government last year left bare boards. That was all that remained of truth in taxation on that occasion.

Also, for the first time the Government did not increase the age allowance. Extra consideration has always been given to the age allowance. Many people in work, however difficult their circumstances, always have the prospect of future opportunities to make good the ravages of any year. The problem of the older members of our society is that they see their savings decline, and if benefits or tax allowances to old people are delayed many of them cannot postpone their needs in the same way that young people can. For older people the future is obviously more limited.

Last November a typical family started to pay tax at an estimated 38 per cent. of average earnings as against the 44·7 per cent. at the beginning of this Administration.

Looking now at the effect of the 1982 Budget on individual incomes, we are indebted to the Library and to the Institute of Fiscal Studies for an excellent background paper which documents many of these matters. [Interruption.] The hon. Member for Marlow would be well instructed to read this paper carefully. He will find many of the answers in it. I know he prefers to make speeches without notes, but from time to time it is an advantage to have a document which sets out the facts for him to look at. I am going to be tedious and quote one or two facts but perhaps we should hear the comments of the hon. Gentleman first.

I am grateful to the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) for giving way. He is a very courteous Member of the House. I can see what he is driving at. His amendments are there for us to see: that these allowances should be increased significantly. The right hon. Gentleman is an honest man and would not want to mislead the House. Will he tell the House exactly how much these increases will cost, bearing in mind the massive increases in public expenditure which he and his colleagues are calling for, and tell the House precisely where he intends to get the money?

4.45 pm

That has been made quite clear in previous economic debates. I am happy to have repeated economic debates so as to explain how this Government have such a narrow view of the public sector borrowing requirement that they think that they can tie it down to the nearest £100 million, although the task force going to the South Atlantic will be without cash limits. Who knows, it may be hundreds or even thousands of millions of pounds over which the Government will have no control. They will find, when they come to look at their PSBR, that they will have no control of the kind that they had assumed with such certainty. They will have to consider their policy again right from the beginning as we would wish to see.

As I said, we are indebted to the Library and to the Institute of Fiscal Studies. Their paper makes use of the family expenditure survey and works out the effect fully and accurately in the case of seven different types of households. It looks at households on half average earnings and goes through seven family households up to five times average earnings. It looks at the effects of their expenditure and the taxes on that expenditure. It comes to a certain number of conclusions, which are set out in this background paper, No. 100. I advise the hon. Member for Northampton, North (Mr. Marlow), when he comes to the House to make speeches or interventions on this matter, to absorb at least one small part of this paper in order to inform himself and others of his hon. Friends on these matters.

If we consider the impact of the taxation on those on half average earnings, we see that they have suffered a reduction of 45p a week. They will pay an extra 45p a week in income tax. Those on average earnings will suffer to the extent of £1·01 a week, those on one and a half times average earnings will suffer to the extent of £1·75 a week, those on twice average earnings will be £1·50 a week worse off. Those on three times average earnings will suffer to the extent of 25p per week. Those on four times average earnings will be 39p a week worse off. But those on five times average earnings—surprise!—will gain. They are the only ones who will do so. The Library has produced a study showing who gains and who loses, and the only ones to gain will be those on five times average earnings.

I am sure that it must be inadvertence on the part of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), because I cannot believe that, with his customary courtesy, he would have wished not to answer the point made by my hon. Friend the Member for Northampton, North (Mr. Marlow). Perhaps he was confused by thinking that my hon. Friend was the Member for Marlow, which of course is his name.

The cost of the amendment to which the right hon. Gentleman is speaking, over and above what the Government are doing, would be £2 billion in a full year. How does he think that that ought to be financed?

I am not sure whether the Minister heard our previous debates on these matters when my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) made it clear that there was to be an increase in the PSBR. Did he not hear that? It was mentioned again and again. I should not have thought that I need to come to the House, which has heard the figure mentioned again and again, and say how we would finance it. We shall increase the borrowing. That should come as no surprise to the right hon. Gentleman. He has attacked us for increasing the borrowing. He is entitled to attack us, but he is not entitled to deny that we have told him how we shall deal with these matters.

It does not fall to the Chief Secretary to make those points. After all, it was he who said that the ordinary person would be much better off as a result of the Budget. We have had long debates to prove that the ordinary person will do badly out of the Budget and that income tax will be increased. I remember that the matter caused great concern to Treasury Ministers, who were unaware whether people would benefit or lose as a result of the Budget. It has now been proved conclusively that they will lose, in contradistinction to the point made by the Chief Secretary to the Treasury, who was under the misapprehension that the Budget, on which he must have spent a considerable time, would benefit them. We had to show that they would lose, as has now become accepted in our discussions.

I know that the right hon. Member for Aston-under-Lyne (Mr. Sheldon) is a keen reader of The Guardian. I wonder whether he read the assessment of the economic policies of his right hon. Friend the Member for Stepney and Poplar (Mr. Shore) in that newspaper on Tuesday? As we all wish to debate these matters seriously, will the right hon. Gentleman persuade his right hon. Friend to publish the figures not only for the first year of his simulation on the Treasury model but for subsequent years, because that might give us some interesting information?

Order. I hope that the right hon. Gentleman realises that if he goes down that road we shall be straying far from the amendment.

I was sorely tempted to reply to Mr. Huhne, who was putting what he believed to be the Labour Party's budget. If the hon. Member for Enfield, North (Mr. Eggar) is an avid reader of The Guardian, he will have read my right hon. Friend's statement, but perhaps he has not got round to it yet. It is an interesting and excellent statement, which will answer the points about which he seems to be concerned. That is as far as I can take the matter and I hope that it answers the point.

This year's Budget was said to recognise the wrong that was being done to the ordinary person and to compensate him in some small way for the failure to increase the personal allowances last year. But even in such a Budget the rich once again become better off. That refers only to this clause. What about those that we shall be discussing later on capital taxes in general?

One series of our amendments embodies the principle that both last year and this year the Rooker-Wise upratings of personal allowances should have been implemented. We have increased both the personal and age allowances by the amounts that the Government failed to uprate last year and should have uprated this year. As a result personal allowances will increase for single and married people, as will age allowances. We shall divide the Committee in such a way as to make it clear that we wish to see those allowances increased in line with inflation and in line with the wishes of the entire Committee, as they were expressed last year.

The amendments are not magnanimous. They are no more than what is expected as a consequence of inflation. What is more disturbing is that a Government who are anxious to help the better off have failed to increase personal allowances. They have revealed their true intentions to the elderly and others. They have done so on many occasions, but this is a further example, which we wish to divert by a vote this evening.

Like the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), we, too, consider that tax thresholds are an essential part of our financial structure. One of the best acts of the Budget was to raise those thresholds across the board by about 14 per cent., which is substantially more than the rate of inflation. It took about 500,000 taxpayers out of the tax bracket. It was a most welcome act and is a move in the right direction, because we must all recognise that tax thresholds are much too low. The cost of raising the thresholds was about £2 billion, so it took a substantial slice of the money that my right hon. and learned Friend the Chancellor had available.

The Government must go much further along that road in future. We must recognise—I believe that the Government do—that low tax thresholds cause substantial hardship and are a great disincentive to everyone in work. My experience, which is restricted to my constituency, is that many families that pay tax should not do so. I have become aware of that through letters, constituency surgeries and talking to people. I am sure that many hon. Members have heard about pensioners, widows and single-parent families who pay tax but who genuinely should not, and the hardship caused by that tax demand. Hon. Members on both sides of the House recognise that for many years we have lived with the nonsense of a growing number of people who receive benefits but who pay tax. No hon. Member could concede that that is sensible.

If the hon. Member for Lincoln (Mr. Carlisle) feels so strongly about the matter, will he support us when we table our amendments on capital gains tax and capital transfer tax, because the Government are giving large sums of money to the better off? The hon. Gentleman obviously wishes to protect the low paid.

The hon. Member for Workington (Mr. Campbell-Savours) is going up the wrong path. I have yet to develop the theme of incentives. Perhaps the answer to his question will come later in my speech.

It is fair to recognise that every party has condemned the idea of people paying tax while receiving benefits. The problem has become worse in the past year. I respect the work of my hon. Friend the Member for Norfolk, North (Mr. Howell), who has argued comprehensibly and powerully about the fault of the "why work" syndrome, the disincentive that it causes and the poverty trap that it creates in society. I am sorry that he is not here today, as his would be a more powerful voice than mine in this matter.

I welcome the move in the Budget to take 500,000 taxpayers out of the tax bracket. That has been of considerable help to many pensioners and widows in my constituency, and they have recognised the fact. However, I hope that next year my right hon. and learned Friend the Chancellor and his team will consider taking tax thresholds much further than they have this year.

I distinctly remember that in the May 1979 general election I campaigned hard on a programme of less tax and better incentives. I know from my meetings outside factories and elsewhere that the issue of incentives struck a deep chord among all working people. I am conscious that the pledge that I gave then has not been fulfilled. I recognise that was a pledge for a full Parliament. We still have time to succeed. However, I beg the Treasury to take note that the varying of taxes and the increasing of incentives struck a chord in the hearts of many average earners at that time.

5 pm

The Government have done enough for the better paid. There are sufficient incentives for the creation and building up of small businesses. The Government have done a great deal to help the small business man. I am glad that the Minister of State, Treasury, my hon. Friend the Member for Maldon (Mr. Wakeham), has had a role to play in that respect.

It is easy to ask the Government to raise tax thresholds, as the Opposition have done. It is easy for the Opposition to pledge to raise tax thresholds. Amendment No. 1 seeks to raise tax thresholds.

This year, I have supported the Budget strategy. I have told my constituents and others that it is a good Budget. We must recognise that only by controlling borrowing, which means restricting our tax handouts or our expenditure, can we hope to bring down interest rates and inflation. That is central to our escape from recession. It must be remembered that high inflation affects the pensioner and the widow perhaps more than anyone.

The Budget strategy this year is reasonable, given the money that is available. During a severe recession the Government have sought to cover their costs much more from personal taxation. We all know of the extra sums that have had to be spent to sustain industries, such as British Leyland and the British Steel Corporation, and to expand employment schemes for the young unemployed. The money has had to come from somewhere. Therefore, there has not been sufficient scope to raise tax thresholds as much as we might have done.

As my right hon. and learned Friend the Chancellor said recently, there are signs that we are emerging from this claustrophobic recession. As we do, the curse of low tax thresholds must be tackled, for that is one of the major pledges that remain to be fulfilled over the last two years of the Government's term of office.

I welcome the fact that a start has been made in this Budget to raise tax thresholds by more than the rate of inflation. More needs to be done now. I should like my right hon. and learned Friend the Chief Secretary to give his word that the Government regard this matter with great gravity and considerable commitment and that, if the money is available over the next year, priority will be given to raising tax thresholds and creating many more incentives for men and women on average incomes.

This debate is about tax thresholds, both generally and in relation to the age allowance. Tax thresholds are most important because they have a major and decisive influence on the take-home pay of the lowest paid. It is they, apart from the unemployed, of course, who have the toughest time in a recession.

I would regard as a major priority of a Social Democratic and Liberal alliance Government the raising of tax thresholds in line with inflation and, whenever the occasion permits, raising them faster than the rate of inflation so that we can see some real uplift in the point at which people begin to pay tax. This is certainly a more important issue than the level of the standard rate of income tax. It has always disappointed me that Conservative Governments appear to pay so much more attention to the standard rate of tax than to the level at which people begin to pay tax. That is far more important to the average and low-paid person's standard of living.

The problem of tax threshold was not always so severe. In the 1950s it was about level with average male earnings. It has steadily increased under successive Governments over the past few years and has now reached the point where people begin to pay tax at well below half average earnings.

After all that the Conservative Party said in its manifesto, it is a major crime that the Government have allowed the general slide to worsen. It is estimated that the tax threshold is now £250 lower in real terms than when the Government took office nearly three years ago. That is a measure of the extent to which the Government have gone against the commitment that they and their supporters made at the general election.

I shall give way to the hon. Gentleman, but I shall not give way again. I want to make a short speech so that I can make another speech somewhere else.

I am grateful to the hon. Gentleman for giving way. I know how busy the Social Democrats are. The Government's pledge at the election was for a full term of office. We are only halfway through that teen. Perhaps the hon. Gentleman will be generous enough to recognise that there is still time for us to fulfil that pledge.

There is very little time left. We have had almost three years of Conservative Government. There is little time left, whether it be six months, 18 months or the full two years. Would the hon. Gentleman like to lay a bet with me on what the tax threshold will be at the end of the Government's term of office compared with what it was when they took office? I bet that the £250 real depreciation in the value of tax thresholds will not be made good in the time available.

The Conservative manifesto said that a Conservative Government would take the lowest paid out of tax altogether. Despite the 500,000 to whom the hon. Gentleman referred, 26·3 million are paying tax this year compared with 26·4 million when the Government came to office. That is a significant difference, especially as unemployment is much higher now than when the Government took office.

The damage was done last year. The Government recognised that by raising the threshold by 14 per cent. this year-2 per cent. above the going rate of inflation. However, there is a limit to what can be done to make up for the sins of last year. One reason why we shall not be supporting the Labour Party's amendment on general tax thresholds is that it would cost too much. That cost—£2 billion was the Chief Secretary's assessment—shows how irresponsible and opportunistic the Opposition are to call for a doubling of the tax threshold this year.

The Government's position is untenable at a general level, and it is even worse when it comes to the elderly. The Finance Act 1981 meant that some women between 60 and 65 years of age were taxed on their pensions when they received no other income. That was mollified by the Inland Revenue's concession, but it still required only £56 of graduated pension supplement to bring them into income tax. That is indefensible. Therefore, because of the smaller sums involved and the real hardship caused to the elderly by the Government's failure last year to do anything about tax thresholds, the Social Democratic Party will support amendments to make the Government more generous than they are now.

Clause 22 is of great importance. It is particularly important to the many families who live on limited incomes. Therefore, in some respects, it is one of the most important clauses of the Finance Bill that is likely to emerge for debate.

The hon. Member for Lincoln (Mr. Carlisle) referred to those in his constituency who are clearly paying more in tax than they should be. A number of such cases have been brought to my attention during surgeries and in letters. One elderly widow told me that she had a very small income, that she received only the widow's pension, but that she was having to pay income tax. I wrote to the Inland Revenue in my district and it confirmed that my constituent had an obligation to pay income tax. In the course of the reply I was told:
"It is true that the single personal allowance of £1,375 per annum is insufficient to cover an annual widow's pension."
My constituent has an income slightly above that level.

I wrote to the Minister of State, Treasury, who is not on the Treasury Bench today. I put all the facts before him. I explained how my constituent, with an income of less than £2,000 a year, was being drawn into income tax liability as a result of personal allowances not being increased in the previous financial year. He tried to justify that position in his reply. I forwarded the letter to my constituent, as I was bound to do, and, understandably, it did not provide her with much satisfaction.

A parliamentary reply of 14 December 1981 stated that about 80,000 more widows of 65 and over were liable to pay tax in 1981–82 than in 1980–81. I imagine that the majority of the 80,000 are living on limited incomes. However, they have been drawn into tax liability. These women have the utmost difficultly in managing from day to day, and it is extremely difficult to justify the argument that they should be paying income tax in the first place.

The hon. Member for Lincoln was frank when he said that what he promised his constituents during the 1979 election campaign had not come about. Probably the most important promise that the Conservative Party made during that election campaign was that a Conservative Government would reduce tax. During the general election campaign the average person would have said that the main emphasis of the Tory campaign was to reduce income tax. Indeed, without the Conservative Party's promises on income tax reductions, it is likely that a Conservative Government would not have been elected.

We tried to explain at the hustings that, even if a Conservative Government were able to reduce income tax as the Conservative Party intended, the majority would not be helped—certainly not those on average or below average incomes. We explained that public expenditure would be reduced, which would certainly hit those on low incomes, and that indirect taxation would increase accordingly. However, we lost that argument, and it is no use pretending otherwise.

5.15 pm

It is important to consider whether those on small incomes have suffered or benefited as a result of the Government's action on taxation. In 1978–79 a married couple with two children in receipt of 50 per cent. of average income paid 6·6 per cent. of their income in tax. In 1981–82, income tax had increased the proportion to 11·8 per cent. If we move up the scale to 75 per cent. of average income, the income tax liability in 1978–79 was 14·7 per cent. That was the last financial year in which the Labour Government were in office. In 1981–82, the income tax liability became 17·4 per cent. If national insurance contributions are included, a married couple with two children in receipt of 75 per cent. of average income paid 20·8 per cent. of their earnings in income tax and national insurance contributions compared with 24·5 per cent. in 1981–82. That family is not able to say that it has benefited from the promises that the Conservative Party made during the 1979 general election.

My hon. Friend has asked an interesting and relevant question. Before I respond to it, I suggest that it is appropriate to consider who has not benefited from the Conservative Party's promises. Much has been made about those on average incomes. We have heard a great deal about how the Government want to help them by providing incentives, for example. In 1978–79, a married person with two children in receipt of average income paid tax and national insurance contributions amounting to 25·2 per cent. of his income. In the past financial year that same person paid tax and insurance contributions amounting to 27·6 per cent. of his earnings. That person has not benefited from the Government's policies. The figures that I have quoted do not include increases in rents, fuel charges and indirect taxation. These are all the things that make life difficult and hard for those on limited incomes.

Does the hon. Gentleman agree that inflation hits especially hard the weakest in society? If so, does he accept that if Britain increased its borrowings dramatically and lived beyond its means it is likely that the rate of inflation would be increased, whereas the reduction of inflation is likely to be one of the Government's great successes?

My constituents, and no doubt the hon. Gentleman's constituents, are waiting for the inflation rate to be reduced to the level that obtained when the Labour Government left office. That day has yet to come. We would be silly to dismiss the argument that more borrowing would lead to increased interest rates and a higher inflation rate. One hopes that that would not be the result, but that leads to a much wider argument about dealing with the misery of mass unemployment, which I am unable to advance while speaking to the amendment.

My hon. Friend the Member for Workington (Mr. Campbell-Savours) asked "Who has benefited?". My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) explained who has benefited. It would not help my constituents, who are mainly on limited incomes and paying larger tax bills, if everyone suffered. That would be no consolation to them. However, it is even more irritating that the richest in the community—those who need the least help of all—have benefited from the tax changes and other measures introduced by the Conservative Government since May 1979. For example, a man on five times average income—about £38,500—has seen his tax bill reduced from 49½ per cent. in May 1979 to about 44·9 per cent. That has been a hefty reduction. If we move further up the income scale—incidentally, I am talking about incomes that my constituents do not have and are never likely to have—and take someone with 10 times average income, which is over £77,000 a year—

I understood that a Government Whip was not permitted to intervene in debates. The hon. Member for Watford (Mr. Garel-Jones) can always drop his book and join us. I am not a great believer in ritual. He can go to his former place and join the debate. I do not believe that it is his role to make a running commentary on hon. Members' speeches, but if he wants to continue to do so from his former place I shall not report him to the Chief Whip or the Prime Minister.

The hon. Member for Watford (Mr. Garel-Jones) was found a place in the Whips Office to shut him up.

That is not a matter on which I shall comment.

The tax liability of someone earning over £77,000 has dropped from 65 per cent. during the last financial year of the Labour Government to 51 per cent. in 1981–82. There is quite a difference between the way in which those on substantial incomes have benefited and what has happened to those on half or three-quarters of average earnings and those to whom I referred earlier who are on even less than half average income.

We hear a great deal from the Government Benches about matters such as rent control and the difficulties of widows, but what of the widows who have been penalised over the past few years in the way that I have described?

I fully support the changes in taxation and personal allowances urged on the Government by the Opposition Front Bench. It has never been my view that there is a good case for reducing the general tax level. First and foremost, our need is to protect those in greatest need. Perhaps it has been unpopular, but I have never played the demagogue like Conservative Members at elections and promised all kinds of tax concessions.

Reducing the standard rate of taxation does not help the average person; it helps only the richest and most prosperous in the community. I urge the Government to change the tax system. People on the smallest and most limited incomes should not pay tax. It has been pointed out in previous debates that in some cases they are the people who receive State benefits because of their limited incomes and at the same time pay tax. There is no sense in that. It discredits the tax system. Conservative Members may not be worried, but it causes us on these Benches anxiety.

I believe that taxation is a fair way for raising revenue, and it is the worst kind of trickery to pretend to the electorate that one can reduce taxation for most people. Most of the measures in which I believe, which I defend and, rightly or wrongly, want to see carried out, will come to some extent as a result of taxation. I want to make it clear that my argument, like that of my right hon. and hon. Friends, is not a general argument for reducing taxation as such. I want to help those in greatest need.

Many of my constituents have been humiliated and means-tested when applying for assistance. If they have more than £2,000, for example—I note that this ceiling is to be raised a little—they cannot draw one penny of supplementary benefit. In many cases their life savings and redundancy money are taken into consideration. The Labour Government did not have that ceiling of £2,000.

My constituents are means-tested before they can receive supplementary benefit, but prior to the Government's economic policies many would have been earning their own living, and proud to do so. The last thing they wanted was to be on the dole. When I compare the difficulties of those people with what has happened to the richest in our community, I am justified in saying that the Tory Party has again established itself as the party that cares about one tiny section of the community—the richest in Britain.

There has been hardly any change in the concentration of personal wealth. One per cent. of the population continues to own about 24 per cent. of all private wealth. Five per cent. of the population owns nearly half of the personal wealth of this country. Bearing that in mind, one recognises the scope for fundamental change that we shall expect from a Labour Chancellor.

The hon. Member for Walsall, North (Mr. Winnick) gave a particularly convincing demonstration of the peculiarly great hardships for widows and other women pensioners caused by those disgracefully low thresholds. He gave one or two telling individual examples. I hope that his feelings will later lead him to support amendment No. 11.

I support amendments Nos. 2, 4, 6, 8 and 10, relating to the various income tax thresholds. Earlier, hon. Members correctly claimed that there was grave disapproval on both sides of the Committee of the appallingly low level of tax thresholds. I hope that there will be a convincing demonstration of those all-party feelings in the Lobby tonight.

However, it is by no means only in this House, important though that is, that these thresholds are conspicuously deplored. For example, the Royal Commission on the taxation of profits and incomes as long ago as 1954 felt it necessary to utter this solemn statement by way of warning:
"There should be no income tax levied upon any income which is insufficient to provide its owner with what he requires for subsistence."
What a long, steep descent from civilised standards we have had since then, particularly when one associates with the income tax thresholds that other tax on incomes—national insurance. That has made increasing inroads into incomes of the poor that are well below subsistence levels since the Royal Commission reported.

It is not only within these shores that low thresholds are regarded as uncivilised. Our partners in the Common Market, with the exception of Italy, do not tolerate tax thresholds anywhere near as low as we have in this country and proposed in the Bill. In West Germany, in 1981, the threshold for income tax was £3,010 sterling equivalent, and that related to a starting rate for income tax of only 18 per cent. In France the threshold was even more civilised—£5,400—with a starting rate for tax of only 7·2 per cent. In Belgium the threshold is £3,300, with a starting rate of 21·7 per cent. We are in a uniquely deplorable state of levying income tax on the poor.

I emphasise that one of the major factors in creating the present state of hardship—the failure to index tax thresholds last year—is, in the opinion of Liberal Members, far too deep and grave a damage to be put right in one Finance Bill. We cannot support the Labour segment of the Opposition in its proposal that the failure to apply the Rooker-Wise amendment last year can be fully put right this year and that we can go sailing onwards with super-indexation, virtually regardless of cost.

The cost of repairing last year's damage, approximately £2 billion, would be an impossible burden to assume in one fiscal year. That proposal comes oddly from a Labour Opposition who would finance it by adding a further £2 billion to public sector borrowing without any defence against inflation in the form of an incomes policy. Therefore, I do not support those amendments.

The Liberal amendments embody an additional 3 per cent. on the previous threshold to acknowledge part of the failure to index in the previous year, making in all a 17 per cent. increase this year. In other words, we believe that last year's damage will have to be recovered by instalments. The approximate cost of £330 million for this fiscal year is a burden that should be accepted, and would be accepted by a Government who had put their defences against inflation into place and operated an incomes policy.

It is well known that these low thresholds hit two important sections of our population particularly hard—the poorest families with a breadwinner and, at the other end of the scale, elderly people, especially women between the ages of 60 and 65, who receive a pension but who have not reached the age of 65 which would entitle them to age relief for income tax.

In the first case, the numbers caught in this poverty trap are considerable. It is important to say that, because from time to time some hon. Members have suggested, although their statements have never survived challenge, that the poverty trap is more a statistical theory than a human fact. However, the Low Pay Unit, which only yesterday gave impressive evidence to one of our Select Committees, has given a statistically backed estimate that at least 150,000 families are caught in the poverty trap and have an income less than their supplementary benefit entitlement. It is estimated that the total number of people involved is 390,000. We are talking not about a few freak situations or about a tiny minority which should be relieved in some other way, but about a substantial body of taxpayers.

5.30 pm

We must then consider how people can climb out of that poverty trap, which has largely been created by these thresholds. I address my remarks for a moment to people of the Samuel Smiles school, for whom I have no profound disrespect, who might say "If only the breadwinner in these families made more of an effort and bullied his foreman to get some overtime or did a second job, he might bring his family out of this trap".

The trouble with the poverty trap is that marginal tax rates are so high that someone earning £45 a week with a wife and two children, would be no better off if he managed to jack his earnings up to £85 a week gross. It is a further blot on our income tax system that the marginal tax rate, not the margin created by social security and other benefits, for people in that position is more than 60 per cent., which is higher than the highest marginal rate payable on earned income by any other taxpayer.

It is peculiarly perverse that we should impose on people trapped this way a marginal rate that is higher than the rate we deem to be right for people with substanital earned incomes.

As to the average tax threshold on all income taxpayers, I am informed that as a percentage of average male earnings we are now down to a tax threshold of only 30·33 per cent. In other words, people earning less than a third of average male earnings come into the income tax net. That cannot be right and must be remedied as rapidly as possible by as large an instalment of increased thresholds as the economy can bear.

Our judgment of that increase is embodied in these amendments. I hope that the Committee will support them, because they are intended to be a responsible answer to the challenge of taxing poverty based on what the economy can afford this year.

The debate has been marked by the dire absence of Conservative Members. Indeed, the only Conservative Back Bencher who has spoken is the hon. Member for Lincoln (Mr. Carlisle), who criticised the Government and their strategy. He expressed reservations about the inadequacy of the Government's response to the problems of the lower paid, yet on a number of occasions he has intervened in defence of the Government.

Outside the Chamber, a colleague told me "The fact that the hon. Member for Lincoln is perhaps to the Left of Dick Taverne may indicate the reason for his reservations". Of course, Mr. Taverne, as a member of the Social Democratic Party, represents the new Conservative strain in monetary matters, in the sense that the SDP represents the old views, recipes and remedies which we all know will not work, particularly to resolve the crisis confronting the British economy.

The Government's taxation policy is a disaster. It must join the other areas of Government that have proved to be equally disastrous. For example, there is the Government's inability effectively to deal with law and order. They have failed to constrain the disorder in the way that they promised the electorate three years ago. They have failed sufficiently to maintain a defence policy that protects our friends overseas. That has led to the crisis confronting the Government. Indeed, they have failed to deal with unemployment and to defend the poster seen by millions of people during the election, which suggested that Labour's employment policy was not working when clearly it was.

I remind hon. Members of the statement by the Government in the 1979 Conservative Party manifesto, because it makes interesting reading now. It said:
"To become more prosperous, Britain must become more productive and the British people must be given more incentive … We shall cut income tax at all levels to reward hard work".
In the light of the comments made by hon. Members today, including the hon. Member for Lincoln, it is clear that the Government have not fulfilled that expectation and promise.

The manifesto promised
"to reward hard work, responsibility and success;"—
there is little of that—
"tackle the poverty trap; encourage saving and the wider ownership of property; simplify taxes—like VAT;"—
that meant doubling it from 8 to 15 per cent.—
"and reduce tax bureaucracy".

Yes, indeed. When the Daily Mirror printed the suggestion that they would do so they promised not to increase VAT, yet they did precisely that.

This absurd document goes on:
"it is especially important to cut the absurdly high marginal rates of tax both at the bottom and top of the income scale. It must pay a man or woman significantly more to be in, rather than out of, work. Raising tax thresholds will let the low-paid out of the tax net altogether.".
I recall the Workington by-election. It was an experience that I shall never forget. I remember the door knocking that took place. We were told that the Labour Government's taxation policy would lead to defeat, which is what happened. If one assesses the effect of the weight of taxation on the British people, including my constituents in Workington, it is interesting to note that they are paying more today than they did then. Perhaps today the people will wish to consider their commitment to the Conservative Party. They will do so at the next general election.

The people were misled during the general election campaign in 1979. The miserly tax concessions that have been made in the Budget have all been overtaken, cast aside and rendered negligible by the effects of the national insurance increases that were introduced before the Budget, and have therefore damaged the interests of the lower paid, again with the result that the poverty trap has deepened. A family with two children is now required to start paying tax on income that is £23 a week below the official poverty line. In my language that means that tax is now being paid on poverty scale incomes. I cannot believe that the Government can use any language or rhetoric at the Dispatch Box to justify the effect of that on many of our constituents.

Every hon. Member, particularly Opposition Members, will have constituents who have complained in recent months about the burden of taxation that has developed under the Government. That has been accompanied by the substantial rise in council rents over the past few years. They have had to pay substantially increased amounts for many of the services that under the Labour Government were provided free. That is the measure of the effectiveness of the Government.

I shall now refer to the response by many people outside the House following the statement made by the Chancellor of the Exchequer on taxation policy at the time of the Budget. Much of the euphoria was false and misplaced. Many people believed that they were getting something which they were not getting. It is only when the analysts in the media and my hon. Friends have sat down to evaluate the effects of the Budget measures that it has become increasingly clear that the Government cannot fund the social wage that many of our electorate have come to presume is their right and entitlement. When I refer to the social wage, I refer again to all the public services that for decades successive Governments, including—

Order. The hon. Gentleman is going wide of the amendments. He must relate what he is saying to the amendments.

Perhaps you feel that I am speaking wide of the amendments, Mr. Armstrong. However, I am trying to suggest that, with the increase in taxation that is taking place under the Government and with their refusal to accept our amendments, they further damage the interests of our constituents who are already suffering from the increases to which I have been referring. Therefore, I believe that there is a direct link between the amendments and the points that I am seeking to make.

The credit that was paid to the Government on their decision to reintroduce a form of indexation of tax thresholds was grossly misplaced. A married couple pay tax on an income that is £4·74 a week lower in real terms than it was two years ago. In 1980 the tax allowance for a married couple was £2,145. If that had been indexed, as it should have been last year, the tax threshold for a married couple in 1981–82 should have been £2,475. This year it should have been £2,775. As it is only £2,445, there must be a shortfall of £330 in the tax threshold which, in our view, is the entitlement of our constituents. I wonder how many fewer people would be paying tax if the Government had decided last year to maintain the indexation policy of the Labour Government.

5.45 pm

I am sure that I shall be corrected if I misrepresent his remarks, but in his Budget Statement the Chancellor of the Exchequer said that 1·2 million people would not pay tax next year. That was widely reported in the country as a reduction in the total number of people who would be paying tax. That is not correct. It is a gross misrepresentation of the facts. As I understand it, the number of people who will be paying tax this year is broadly similar to the number of people who were paying tax last year. The 1·2 million people to whom the Chancellor of the Exchequer referred in his Budget Statement are the people who would be paying tax next year in the event that the Government did not raise the tax threshold in line with inflation, or perhaps higher than the level of inflation.

However, that is not the way in which the Government have sought to present the facts on taxation policy, because they know the truth. They are using every procedural and public relations device to deceive the British people into believing that there has been a general benefit in taxation arising from the implementation of the Chancellor of the Exchequer's policies. That is not so.

When we consider the innumerable comments that were made before the general election about the need to reduce the numbers who are paying tax, an interesting statistic surfaces. In 1978–79, if one includes tax-paying wives, the number of people paying tax was 26·4 million. In 1979–80 that number had dropped to 26·2 million. In 1980–81 it had dropped to 25·8 million. Last year it increased to 26·3 million.

Therefore, the reduction in the numbers of people paying tax has been marginal. Although we do not have the figure for next year, it will probably be but 100,000 people fewer. That has all been during a period when 1¾ million people have become unemployed. If the Government were effectively to have reduced the number of people paying tax, at the least we would have presumed is that the statistics would have revealed 2 million fewer people paying tax. That has not been so. The real effect of the Government's policy overall has been to increase as a total percentage of the work force the number of people paying tax.

We are told that the lowest threshold—in other words, the earliest point for paying tax—in the whole European Community is in the United Kingdom, apart from Italy. Even in Italy the bottom tax band is at a substantially lower rate than in the United Kingdom.

I shall consider tax thresholds falling as a percentage of average earnings. In April 1979, the figure was 34·42 per cent.—that was during the final year of the Labour Government's period of office. By April 1980 that tax threshold had fallen again to 33·13 per cent. By April 1981 it had fallen to 29·3 per cent. In their projections, as in all the projections they make, the Government are seeking to claim that the threshold will now marginally rise by 1 per cent. We know in advance that that will not be so. The burden of taxation is falling increasingly on the lower paid, and the burden of taxation falls on those people who can ill afford it.

I want to quote the words of the Prime Minister in 1977, to make my point, certainly in connection with what I said about the European Community:
"We pay the highest rate of tax at the lowest level of income of any country in the EEC".
She went on to say:
"That is the measure of Socialism—the effect on the poorer people of this country."—[Official Report, 29 March 1977; Vol. 929, c. 293.]
She was criticising the Labour Government for what she believed was their high tax policy at that time, blaming it on what she called "the measure of Socialism". I wonder what she calls it today. Is it the measure of Conservatism? Is it the measure of failure? What is it? The right hon. Lady always seems to pass by when questions of taxation are raised, and selectively produces statistics which in no way reflect the reality of this Government's attitude to taxation. So much for the right hon. Lady's leaky and flimsy attitude to the poor and the lower paid.

However, in our society there is a group of people who have benefited. We in the House know who those people are, because over the past years in Committee considering the Finance Bill we have repeatedly raised the matter of the better off in society. The media have not reflected our frustrations. What we have said has not been reported in the press. The truth should be told. The better off in society are gaining handsomely again under this Budget from the concessions on capital gains tax and capital transfer tax.

My hon. Friend the Member for Walsall, North (Mr. Winnick) said that the man who earns five times the average income, £38,610 per annum, benefits under this Budget, in that his tax loading is reduced from what it was in 1979, from 49·7 per cent. of his total income to 44·9 per cent. this year under this Government. There has been a 5 per cent. measurable benefit to the better off, directly arising out of the taxation policies pursued by this Government.

It is interesting that when my hon. Friend the Member for Walsall, North said that Conservative Members whispered to themselves "How many are they? How few are they?", as if that negated the indecency of pursuing such a policy. It does not matter how many they are. In the view of the lower paid, it is unjust that the better off in society can gain in the way that they have under successive Finance Bills. It is about time that the Chief Secretary informed his constituents in the Northern region why he and the Treasury support a policy that favours the better off, when in that region tens of thousands of people—indeed, hundreds of thousands of people—are now suffering as a result of this Government's policy.

The reflation proposed by the Social Democratic contingent in the House is quite insufficient to deal with the problems of our society. That is why I support the alternative economic strategy which has been proposed by the Labour Party and which is the only solution to the crisis that confronts our country. Labour Members realise that the economy needs a major reflation if 3 million people are to be put back to work in the way that my right hon. Friend the Leader of the Opposition said at that famous press conference two months ago. We have a major task before us, and the Opposition are ready to take on the responsibilities of carrying out the policies that are necessary if we are to protect the people whom we represent.

Finally, I want to mention an article that was printed in The Guardian the other day on a matter that was mentioned in a number of other newspapers. Curiously enough, it is a subject which repeatedly crops up prior to the Finance Bill going into Committee each year. It is the black economy. I am told that the article is based on research that was carried out by two eminent economists, Mr. Edgar Feige and Mr. Robert McGee. They maintain that the black economy is now responsible for the loss to the Inland Revenue of possibly as much as £11 billion per year. The relevance of the black economy to this debate is that, if we were to secure only a small portion of that money, it could be offset against the unfair weight of taxation on the lower paid. That £11 billion compares with the £4 billion that was identified by Sir Lawrence Airey, the chairman of the Inland Revenue, when he gave evidence to a Commons Select Committee last year, as representing between 6 and 8 per cent. of the total economy. If it is £11 billion, it is £1½ billion more than this Government's projections for the public sector borrowing requirement. It is madness for this Government to ignore the possibility that the black economy is now of this scale and nature.

I shall quote what Mr. Feige and Mr. McGee said, according to the journal of the Institute of Economic Affairs:
"A large and growing unobserved sector has significant implications for our understanding of the macro-economic situation of the British economy"—
as I understand that statement, it means that the Chief Secretary should now, in the light of the magnitude of that sum, take that potential revenue to the Exchequer into account in the macro-decisions that are taken by this Government and in their determination of the PSBR and other Government financial factors—
"and for guiding government stabilisation policy."
The article goes on:
"Feige and McGee insist that efforts to predict tax revenues, to estimate revenue losses and to determine optimal tax policy can no longer ignore the important consequences of the unobserved sector".
I recall the Finance Bill debates two years ago, when my hon. Friend the Member for Midlothian (Mr. Eadie), at great length, moved an amendment on the black economy and the lack of response by the Government. I recall that at each stage of the Finance Bill over the past two years the Government have failed to respond as the Opposition demand. We say that if the scale of loss to the Exchequer is now possibly £11 billion, and if it is the sum that was identified by the chairman of the Inland Revenue last year, there is a duty on the Government to treat this as a matter of urgency and to act in the national interest.

I understand that Treasury Ministers speak for the Civil Service. It is quite insufficient for them to come to the Dispatch Box and repeatedly try to impress the House with the number of civil servants that they have managed to displace. They have been put on the queue of unemployed when there is a demand for more civil servants capable of dealing with the problems of the black economy.

On this occasion, Opposition Members on the Finance Bill Committee cannot afford to miss the opportunity of pressing our cause on the black economy relentlessly and at every stage, perhaps on every amendment, as we did last year on capital gains and capital transfer tax concessions.

I hope that the Chief Secretary will refer to the black economy and to the article in the document to which I have referred. He should also give a clear undertaking that this time the Government will not ignore the problem but will take real action to restore the money that is lost to the Exchequer so that it can be used to offset the enormous weight of tax that falls on those whom Labour Members represent—the lower paid, the unemployed and those who need more money to live as a result of the Government's economic strategy.

6 pm

I shall not take too much time as I understand that there is an arrangement for a Division at about 7 o'clock. I shall refer to some facts that I hope will induce the Chief Secretary, if he is listening, to reply. I shall refer specifically to some remarks that he made on the Budget. He made the absurd claim that almost everyone will be better off in tax terms as a result of the Budget proposals. I hope that he has heard sufficient in the debate so far to convince him that he was misleading the House. It is obvious that millions of people, especially those on below average earnings, and a large number of those on above average earnings, will be worse off as a direct consequence of the Budget.

I shall quote from a document that was produced by the House of Commons Library research division. It is background paper No. 100 entitled "The impact of the 1982 Budget on individual incomes and real income movements since 1979". I hope that the Chief Secretary has a copy, as he will need to correct it if his assertion is right. Both he and this document cannot be right. I would bank on the Library's figures if I had to choose between them and the Chief Secretary's.

The Institute for Fiscal Studies carried out the work for the Library research division. The document is divided into three sections. The first deals with income, expenditure and the effect of the Budget on various income groups. The second deals with how the tax system has changed between 1978 and 1982. The third deals with the effect of tax and other changes on the seven family groups in section I. I shall not weary the House with the detailed figures in the document, but I shall refer to the final page.

Figure 6 is a block diagram of the effect of the Budget on families on half average earnings, average earnings, one-and-a-half, two, three, four and five times average earnings—in other words, a broad sweep of incomes from the very poor to the extremely rich. The block diagram makes it abundantly clear that the most massive penalties have been imposed on those earning minutely or substantially below average earnings.

The only group that has gained from the Budget in real terms, taking account of inflation and the rest, is the people on five times average earnings. That evidence has not been produced by the Labour Party or anyone with a political axe to grind. It is produced by some of the most objective and able people at the service of the House. The information that the Library provides for hon. Members is impeccable.

The block diagram shows clearly that those on half average earnings have lost about 50p a week as a direct result of the Budget taxation proposals. Those on average earnings have lost about £1 a week, those on one-and-ahalf times average earnings more than £1·50, those on twice average earnings about the same, those on three times average earnings about 30p a week and those on four times average earnings about 40p to 50p a week. Only those on five times average earnings have a net gain in real terms.

The final sentence in the document deals with all other groups—all those receiving less than five times average earnings—who are losing. It says:
"All other groups make losses, which are more important at below average and average incomes than at higher levels, both because they are greater in nominal terms and because they reflect a higher proportion of those families' incomes."
Those are the words of an objective document. I refer specifically to those who have lost most heavily as a direct consequence of the Budget because I represent a large number of them, both as a Member of Parliament and as a Member sponsored by the Confederation of Health Service Employees. That trade union represents some of the lowest paid workers in the country. It also represents some of the most worthy citizens.

I received this morning a letter from a gentleman in Gwent who will add up his pennies after the Budget and will almost certainly find that he is substantially worse off as a result of it. He writes:
"I am employed by the N.H.S. as a storesman in St. Cadoc's Hospital Gwent and I strongly urge you to support the NHS staffs' united campaign for a 12% pay increase for 1982. N.H.S. staffs, working as a team, are for the most part low paid, highly skilled and extremely dedicated to the N.H.S. and its patients. Many staff including nurses, ancillaries, clerical staff, technicans and junior doctors earn little more then £60 per week.'
That employee writes:
"My wages are £50 per week, after stoppages. I have worked for the N.H.S. for 10 years.
Our 12 per cent. claim is a reasonable demand".
That claim is far too modest. The Chief Secretary probably spends £50 per night on dinners. Yet that employee who has worked for 10 years in one of the most noble professions in this country takes home only £50 per week, and the Government say that he must be satisfied with a 4 per cent. pay increase and not a penny more.

What will that employee get out of the Budget? The effect of our amendments is highly marginal and far too modest, but we cannot deal with these people through income tax proposals. We must deal with them in other ways, through a more just economic system and a fairer distribution of the country's wealth.

A survey was undertaken by my sponsoring union at the Royal Surrey county hospital in Guildford, with the cooperation of the hospital management. Those people will be watching and listening carefully to our debates to see whether we have any concern for their problems. I cite just one or two of the many cases to show the amount of tax that those people pay and why it is essential that something be done in the Bill to protect them. The survey states:
"The most senior nurse on duty—a nursing officer responsible for four wards of around 30 beds each—takes home between £460 and £500 a month, depending on her shift pattern. Last month she earned the equivalent of £115 a week."
That is less than the average earnings on which, according to the Library document, even after the Government's proposals on allowances and so on, employees will be substantially worse off as a result of the Budget. The survey further states that that lady, who receives the princely sum of £115 per week net,
"has two qualifications—the State Registered Nurse and the State Certificate of Midwifery. On duty she is responsible for over thirty nursing staff. At evenings and weekends she is responsible for nursing services in the entire hospital of 400 beds … Last week she worked through her half day off to help make ends meet."
I cite just one other case from the many examples given. The survey states:
"Robin Jago is the senior operating department assistant in theatre. He is responsible for the in-service training of ODA staff, the day to day staffing of the theatre as well as clinical commitments. He has 16 staff in his team. … He takes home £75 a week for a 40 hour week, £95 last week when he worked for 55 hours. His gross was £125·11."—
that means that he pays £50 per week in tax and national insurance.
"For on-call duty he receives a 5p an hour allowance."
Those are the people whom we are exploiting in our hospital service. It behoves the House to call attention to their problem on every possible occasion. They have not been protected. On the contrary, they have been further penalised by the Budget. Moreover, the Government are now telling them that they shall have a pay increase of no more than 4 per cent. this year although the inflation rate is at least 10 per cent. and probably higher. We are asking those people to work hard for starvation wages while attempting to cut their standard of living by a swingeing amount in the forthcoming year.

It is no wonder that nurses, who do not usually threaten strike action, are now driven to it. I hope that the Government are proud of what they have done to those people. I hope that the Chief Secretary will now make as graceful an apology as he can for having misled the House in such an outrageous way by claiming that all individuals will benefit as a direct consequence of the Budget proposals.

6.15 pm

The levels at which tax begins to be paid in this country are extraordinary. Our amendments propose at least minor modifications to the present limits

The incident which brought the situation home to me most powerfully in the past year was the discovery, after considerable correspondence with the Chancellor, the local tax office and various other people, of the situation facing a 62-year-old widow in my constituency. Her sole income was State benefit, plus—unfortunately, as it turned out—a pension of just £10 per year from her husband's former employer. That £10 per year caused my constituent to lose the exemption given by the Government on the amount of tax payable by widows according to the basic tax thresholds. As a result, the £10 per year pension that her husband had earned for her during his working life cost her £40 or £50 in tax.

As a Member of Parliament, I often try to explain to constituents the difficulties that face Governments. It is not my job to defend the Government, but it is good for all of us to play our part in explaining that the country is perhaps not quite so easy to run as people sometimes imagine. Nevertheless, I could not think of one coherent or even half-coherent reason why that 62-year-old constituent, whose income consisted entirely of her widow's pension and a miserable £10 per year from her husband's former employer, should pay some £50 in tax. I even wrote to the Chancellor, suggesting that he should compose a letter explaining the position to my constituent, but of course he could not do so.

The situation is incredible. It was considerably worsened by the Government last year, but the problem has been growing for a considerable number of years. I hope that tax thresholds will be considerably increased by any future Government in which I may be fortunate enough to play a part.

Is the hon. Gentleman thinking of joining the Labour Party?

I stand as good a chance as the hon. Gentleman of being a member of the next Government.

After the Budget, the first £1 of income that will attract tax will be the forty-eighth for a married person and the thirty-first for a single person—income below that being tax free. On that £1, the effective rate of tax taken by the Government—my constituents rightly regard income tax and national insurance contributions as much the same thing—will be 38·75p.

I would be prepared—I am speaking personally—to vote for an increase in the standard rate of tax if that was the only way by which we could do something about this obscenity. There is no justification for it. Nearly 40p in the pound is taken by the Government on a married person's forty-eighth pound and on a single person's thirty-first pound. The Government campaigned throughout the country—less successfully in my constituency, as it turned out, than in others—about reducing tax. It is therefore extraordinary that the Government have made the situation worse. The Budget has made it marginally even worse than last year if that was possible. I ask the Minister to explain the widespread claim that this year's tax threshold changes will take about 500,000 people out of income tax. That is the figure thrown around on the Opposition Benches, and I recollect that it has been mentioned by a Government Member. I should like the right hon. and learned Gentleman to explain it.

I have been an hon. Member since October 1974. I suppose that, in that time, not least because of the record of the former Chancellor of the Exchequer, I must have heard at least 10 or 15 Budgets. I should have liked, if I had had some research assistance, to set someone the task of adding together all the people that Chancellors claim to have put outside the tax threshold. I think that there would be very few left paying tax. It is misleading for the Government to claim that the tax changes this year mean that, by the end of the year, when one assumes that most people's incomes are adjusted for a little less than, about, or a bit more than, inflation, 500,000 fewer people will pay income tax. This would mean, in my constituency, that 1,000 people, according to the Chancellor, will not pay tax who paid it last year. Hon. Members know this to be nonsense. Why do the Government insist on going around the country saying it?

The modest proposal of the Liberal Party, supported by our alliance colleagues, is for a 3 per cent. increase in the thresholds—£44 a year for a single person and £65 a year for a married couple. We recognise that there are considerable economic difficulties. We wish to express dissatisfaction at the current allowances and to indicate a determination to do something about them should we be given the opportunity. I believe that the Government could accept the amendment put down by my colleagues and myself. The total cost is £380 million in a year. When one considers that enough money has been found to launch two thirds of the British Navy to the other side of the world, it is inconceivable that such a modest proposal would seriously affect the country's economy.

I wish to deal with a matter that the Government have been foolish, psychologically speaking, to pursue. Even in terms of aggregate sums, the amount is not much. A great deal has been made about the amount of tax reduction received by those who earn five times the national average wage. Incredibly few people earn five times the national average wage. I recollect once asking the Chancellor of the Exchequer to state what percentage of the PAYE population earns more than a Member of Parliament. I was surprised to learn that the reply was 1½ per cent. I must admit that I felt far more satisfied with my job at that moment than I did before.

Not many people have these colossal earnings. The global sum involved in the tax reductions is not large. Psychologically, however, at a time of economic recession and a time when people are unemployed or living on very small incomes, the tax reductions on these high incomes are insanity of the first order. The Government deserve much of the abuse that has been thrown at them.

I represent a constituency a long way from the House. The average wage in my constituency is more than 20 per cent. below the national average. A working man will be lucky to find a job, especially at the moment, with what is known in my area as a top line of £80 or £85 a week. The hon. Member for Fife, Central (Mr. Hamilton) outlined the pay of many of those employed in the Health Service. There is nothing in his remarks with which I would not concur. In my area, however, those who work in the Health Service, by local standards, are not badly paid. The jobs are enormously sought after.

These are the sort of wages on which people are forced to bring up families. I cannot believe that the modest proposal put forward from this Bench would cause the Government any serious financial difficulty. To accept the proposal would show the Government's willingness to rectify some of their sins since they took office. I express a clear determination that we shall do something about this problem when we are given the opportunity. I believe that we shall be given the opportunity before long.

I rise only to ask the Minister to explain what the Government have done with regard to the ratio between the single person's allowance and the married man's allowance. Many hon. Members feel that, over a prolonged period, the ratio should be altered in the direction of bringing the two reliefs closer together. By a fractional amount, the figures this year have gone in the opposite direction. I imagine that this is only due to rounding. It is, however, particularly serious because this is the first year in two years that the reliefs have been altered. Two years ago, the figures were set at levels which meant that the married man's allowance was 56 per cent., I think, more than the single person's allowance. This year, following no change last year, the married man's allowance will stand, I believe, at about 56·23 per cent. more than the single person's allowance.

The difference is no doubt entirely attributable to rounding. I would, however, beg the Minister to see that when this is done the move is made in the other direction. This change can only be done gradually. It is therefore important that, when a change is made, it should bring the two figures closer together rather than the opposite. I should like the Minister to explain the rationale, if there is one, in the Government's mind for the ratio that they have chosen and especially their decision to round in the wrong direction rather than in the right direction.

I should like to deal first with the specific point raised by the hon. Member for Islington, South and Finsbury (Mr. Cunningham). The hon. Gentleman is right in his guess. There is not, in any sense, a conscious policy decision to move in a particular direction in the balance between allowances. It is simply a question of a convenient figure for the purposes of rounding. The difference, as the hon. Gentleman will appreciate, is so small that the question of the direction of the move was not the dominant consideration in deciding where to put it. If one was making a policy decision, even a decision to move gradually, one would move a little further than has occurred simply as a result of the rounding operation. I shall take account of the direction that the hon. Gentleman commends when these matters are considered in future years. I can obviously make no statement about that now.

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This debate is in the best traditions of debates on this Budget in that everybody wants to talk about the Government's economic policy over the past three years or to say that the Budget was doing the right thing and should have done more of it. It is significant that the criticism is not so much of what the Budget has done, but rather of what has happened in previous years or to the effect that the Government have not done more along the same lines. It is in that context that I consider some of the points that have been made. I would remind hon. Members—certainly those who are filling up the Chamber now—that the debate has been purportedly on allowances but it has ranged more widely. I make no complaint about that.

Clause 22 gives effect to the decision, announced in my right hon. and learned Friend's Budget Statement, to increase personal allowances across the board by about 14 per cent. The Opposition, in their various manifestations, are inviting an increase of 29 per cent. or 17 per cent., as the case may be. The 14 per cent. increase that is implemented in the unamended Finance Bill is 2 per cent. more than inflation in 1981 and 5 per cent. more than the 9 per cent. forecast for the increase in the 1982 retail price index. The burden of income tax will be lower in 1982–83 than it was in 1981–82 for people at all income levels. That statement, which I made in the Budget debate, is unchallengeable.

In spite of the characteristically intemperate language of the hon. Member for Fife, Central (Mr. Hamilton), having scrutinised everything that I have said, I have found nothing that calls for correction. The full impact of the Budget as a whole, as opposed to the income tax provision, is a different matter. I shall say a word about that in a moment.

To return to the allowances, the increase in the married man's allowance which is implemented by the Budget proposals is £300. That is £40 more than the statutory indexation requirement. A married man paying tax at the basic rate will get an income tax reduction of £1.73 a week. The increase in the single allowance is £190, which is £20 more than the statutory requirements, giving a reduced tax payment at the basic rate of £1·10 a week. The cost to the Exchequer of the increases in personal allowances will be £2,050 million in a full year and £1,665 million in 1982–83. That is over £200 million more than the cost of bare indexation. Several hon. Members, including the hon. Member for Workington (Mr. Campbell-Savours), referred to the impact of those proposals, and specifically the ones that we are debating, in the narrower sense of the word, on the total number of taxpayers. The hon. Member for Truro (Mr. Penhaligon) also touched on that point.

The hon. Member for Workington accused the Chancellor of misrepresentation in saying in his Budget speech that there would be 1·2 million fewer taxpayers in 1982–83 than in 1981–82. There was no misrepresentation. That accusation is wholly false. What the Chancellor said is true. The number of taxpayers will be 1·2 million less than it would have been if the thresholds had remained at their 1981–82 levels.

About 500,000 people will drop out of tax this year as a result of the increases that we are debating and other factors—as, I think, my hon. Friend the Member for Lincoln (Mr. Carlisle) said. The other 700,000 of the 1·2 million who would have been paying tax if allowances had remained at their 1981–82 levels are people who would otherwise have been brought into tax. There is no mystery about it.

I am grateful to the Chief Secretary for his clarification of the figures. I presume that the figure of 500,000 less is as at March 1982. Will the Chief Secretary tell the House how that figure would compare with the figures for March 1981?

I cannot do that without notice. If the hon. Gentleman would like to have that information he has only to put down a question and he will get it. The Chancellor made an accurate statement about the number of people paying tax at the time of the Budget who would cease paying tax as a result of the Budget. That does not seem to me to be unreasonable.

As I have said, the burden of income tax will be lower than last year at all levels of income. The question arose in various forms as to the total burden of the Budget. National insurance contributions were changed not in the Budget but elsewhere in legislation. None the less, it may be convenient to take them together with the income tax changes.

The position is as set out by the Chancellor of the Exchequer in an answer to a question on 11 March, elaborating what had been said earlier in the Budget debate. On the assumption that earnings increased by 7·5 per cent. in 1982–83—which is a particular assumption but by no means the one that will prove to be right—the proportion of income going in income tax and national insurance contributions combined will indeed be higher for most people.

It is significant that that is not the case not only for those with the highest incomes but also for those with the lowest. The proportion of earnings going in income tax and national insurance contributions will be lower than last year in the case of a married man earning between £2,300 and £3,800 a year and for a single person or a working wife with earnings between £1,500 and £2,200. In addition, families with children will benefit from the increase in child benefit from November.

Low-paid families will also benefit from the substantial improvement in family income supplement. Moreover, those over pensionable age who are taxpayers will benefit from the income tax changes. They will not be affected by the national insurance contribution increase and will benefit from the full uprating of the retirement pension in November.

Is the Chief Secretary aware that the Treasury table from which he has just made some selective quotations about people on low incomes shows in cold print that for single people with incomes of £3,000 a year right up to £15,000 a year in 1981–82 the proportion taken under the Bill in 1982–83 to those adjusted incomes is in each case higher than in the previous year?

That is not a result of the Bill. I am sure that the hon. Gentleman did not mean to say that. As the hon. Gentleman will appreciate, the Bill is concerned with income tax and not with national insurance contributions. It is of considerable significance because the statement relating to income tax on which I was challenged was correct and I am now giving the picture for income tax and national insurance contributions which are not covered by the Bill.

What the hon. Gentleman says is in no sense inconsistent with the point that I was making, which is that, although it is true that the proportion going in income tax and national insurance contributions combined would be higher for most people, that was not the case not only for those on the highest incomes but also for those on the lowest. That is exactly the mirror image that one would expect, as the previous year the indexation provision was not implemented.

I shall give way in a moment.

Reference has been made to the background paper produced by the House of Commons Library research division and based on work done by the Institute for Fiscal Studies. That document also purports to discuss the real effect of the Budget. I remind the House that we are discussing the allowances and not the Budget as a whole. Nevertheless, reference was made to it, although the hon. Member concerned has chosen this moment to leave the Chamber without hearing the answer.

The paper takes account of indirect tax changes as well as of national insurance contributions. The assertions that it makes are based on a number of speculative assessments about the effect of indirect tax changes on such things as the consumption of spirits. It takes no account of the increase in child benefit due in November. It is extraordinary to take account of national insurance contribution changes—although I do not make any complaint about that—but to fail to take account of child benefit.

Page 5 of the paper also assumes that families on half average earnings are entitled to family income supplement and to rent and rate rebates, but do not claim them. That is an heroic assumption. Without wishing to criticise the paper, it makes several speculative assumptions. The facts that I have given about the combined effect of national insurance contributions and income tax in relation to percentages are correct.

The gravamen of the debate is the suggestion by the Labour Party that allowances should be increased by 29 per cent. and the Liberal Party's more modest suggestion that they should be increased by 17 per cent. I shall refer first to the principle of the indexation provisions. They have been rightly described as the "truth in taxation" provisions. I am firmly of the view that no Government—whether Conservative, Labour or of unknown hue—

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The hon. Gentleman refers to a rainbow Government with pride. [Interruption.] The hon. Member for Blackburn (Mr. Straw) obviously does not regard that as such an attractive appellation. However, the very possibility of mentioning such a thing shows how speculative and almost flippant the debate has become.

Whatever their political complexion, no Government could or should guarantee that tax rates will be indexed year in and year out in accordance with the increase in inflation. It would be constitutionally impossible for a Government to guarantee to do that, because Parliament is sovereign and would have to consider the matter. Therefore, the purpose of these so-called indexation provisions is truth in taxation. Wherever possible the Government will implement the indexation provision and will index the tax allowance or whatever. However, above all, the Government and the legislation will not permit inflation to affect the burden of taxation without anyone knowing and without any action being required by Parliament.

The provisions require Parliament to face up to matters and require the Government to say whether they are increasing the allowances in full or in part and to justify that to the House, according to the economic circumstances and to priorities. That is the benefit of the provisions that I warmly support. However, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) was effectively teased by the Financial Secretary for opposing them when they first came before the House. The provisions do not mean that it is always possible, year in and year out, to implement them. My right hon. and learned Friend the Chancellor of the Exchequer was fully justified last year in not implementing the provisions. The economic circumstances of the country made it impossible to implement them without expending a large sum of money and without increasing the public sector borrowing requirement to a quite unacceptable level.

At the time of the last Budget, the right hon. Member for Stepney and Poplar (Mr. Shore) and others warned us that if we introduced a Budget that reduced the borrowing requirement to the extent proposed by the Chancellor of the Exchequer the consequences would be dire in the extreme. Far from being dire, the Budget's introduction marked the beginning of this country's emergence from the recession. Because the Government were prepared to take tough steps last year, a report that came out only today describes us, in common with only two other countries, as leading the world out of the recession.

This year, as we emerge from the recession, my right hon. and learned Friend introduced a Budget very different from that introduced last year. It was not a profligate Budget that sought to distribute largesse on a grandiose scale, as the right hon. Member for Stepney and Poplar desires, but it succeeded in giving assistance both to industry and to individuals over a wide sector.

Reference has been made to the national insurance contributions which were not in the Budget but which were necessarily increased to pay for the increased social security benefits. Rightly, the people of Britair, require such increases, and know perfectly well that they must be paid for. My right hon. and learned Friend the Chancellor of the Exchequer accurately met the needs of the situation by concentrating his assistance on industry. He concentrated on reducing the national insurance surcharge, on giving assistance to the construction industry, on developing the measures of assistance to new industry and to those concerned with technical innovation and on giving assistance to new industry and to those concerned with technical innovation and on giving assistance to heavy energy users. In an economy emerging from a recession, it was right to give that priority and not to give priority to assistance to the personal taxpayers.

Even within the content of a Budget that was rightly geared towards industry rather than the personal sector, my right hon. and learned Friend increased allowances by 14 per cent., which is 2 per cent. above the indexation provision. That was a reasonable and responsible response to the needs of the situation and it is reflected in the Bill.

It must be a question of judgment as to where to give the balance of reliefs as well as their total extent. The totality was responsible and reasonable. I shall deal with the alternatives put forward by the Labour and Liberal Parties. The distribution was right because it concentrated on industry while at the same time allowing more than an indexation provision on allowances.

What do the official Opposition say? The right hen. Member for Stepney and Poplar has put his name to a series of amendments which would give a 29 per cent. increase in allowances. This would cost over and above what my right hon. and learned Friend the Chancellor of the Exchequer thought appropriate as much as £2,080 million in a full year. When challenged in opening, the right hon. Member for Ashton-under-Lyne was slightly coy about it. He thought that we all ought to know but in the end he said that that money should be raised simply by borrowing.

Of course, other hon. Members from the Liberal and Social Democratic Benches, including the hon. Member for Gateshead, West (Mr. Horam), immediately joined those of us on this side who would regard that as being utterly irresponsible and likely to jeopardise the recovery which is emerging in the British economy. The impact of extra borrowing of that level would have a severe impact on interest rates and inflation. It is characteristic of the profligacy that passes for policy from the Labour Front Bench today that a proposition of that kind is put before the Committee.

Obviously the 17 per cent. increase which the Liberal Party and the Social Democrats propose is much more modest than the 14 per cent. put forward by the Government. That goes without saying. None the less I must point out to the hon. Member for Come Valley (Mr. Wainwright) that, although he was modest in manner, the proposals that he put forward are not quite so modest in cost. In a full year they would cost £440 million—not an insubstantial sum.

Compared with the official Opposition Front Bench, whose propositions are plainly irresponsible, the difference between us and the Social Democrats and Liberal Party is more a question of judgment. The Chancellor has to make a judgment. In his judgment the £440 million that this would cost was better spent on assistance to industry and it would not have been possible both to give assistance to industry on the scale that he gave and to give further indexation of the kind proposed by the

Is the right hon. and learned Gentleman not aware that the difference between us is not, as he has just said, only one of judgment but also that the fiscal relaxation which we are proposing we have always put across in accompaniment with the implementation of an incomes policy to protect us from the inflationary consequences?

I appreciate that. The one difference between the hon. Gentleman and us is that in this respect the Opposition Front Bench and this Front Bench are united. We are united in that each party which has had the responsibility for being in power has had in different ways to try to implement an incomes policy and has seen the consequences of doing that and the long-term harm that it has done to the economy, quite apart from the social, economic and political disruption that was caused. Therefore, the hon. Gentleman can confidently call for incomes policies, never actually having had to face up to the consequences of introducing such a measure.

The Opposition Front Bench, now that they are safely out of office and are likely to be out for a long time, are toying with the idea of an incomes policy again under another name. This is only just peeping over the horizon in its true colours.

Not on this point. The response of the Government in indexing and going beyond that by 2 per cent., and concentrating their fiscal assistance this year on industry, is the right one. I therefore commend it to the Committee and ask the Committee not to accept the amendments put forward by either of the opposition parties.

I begin by responding to the speech of the Chief Secretary. The right hon. and learned Gentleman made a passing reference to Britain leading the world in a return to growth and compared us with two other countries, France and Japan, both of which have achieved a steady increase in output and in GDP over the past three years. It takes necks of brass to compare with that experience the experience of Britain over the past three years, when Britain has led the world certainly, but with a massive, unprecedented and unequalled drop in output and GDP. It is to be prayed that the rest of the world does not follow that lead.

I turn from the Chief Secretary's passing reference to macroeconomic affairs to the more narrow points that he argued in relation to the tax thresholds and take him up on two points. First, I return to the intervention which I made during his speech, when I asked him to clarify the calendar basis for his claim that the Budget will remove from taxation half a million people who were previously paying tax. He made it clear that in making that assertion he was comparing the numbers post-April 1982 with the numbers as at March 1982. It follows logically that after any Budget that increases the tax thresholds there must be some reduction in the number of taxpayers. Indeed, the only Budget when that has not applied in recent memory was the Government's Budget of last year, when precisely the same number were paying tax the day after as the day before, because there was no increase in tax thresholds.

If we are to have an honest comparison and truth in the statistical presentation, we must have, not the figures for April 1982 and March 1982, but those for April 1982 and April 1981, so that we can see what the change has been over the full financial year. When we have that figure, it will be nothing like the figure of half a million to which the Chief Secretary referred.

The other point on which I have to come back to the Chief Secretary is his argument that the Budget should be welcomed, because as a result people will be paying less in income tax. I think that I speak for all segments of the Opposition when I say that we accept that it is logically unanswerable that the Budget achieves a reduction in the income tax that people have to pay. However, what the Chief Secretary still resists grasping is that in assessing the effect of the total fiscal burden on an individual taxpayer, not only is it legitimate, but it is essential to take into account the combined effect of the changes in income tax and in national insurance contributions which came into operation at the same time. They are plainly designed to balance each other and have a similar impact on the individual taxpayer.

Whatever the attitude of the Chief Secretary when he opens his salary cheque each month, the average wage earner on receiving his wage packet does not eagerly study it to find out how much he has paid in income tax and how much in national insurance and heave a sigh of relief when he discovers that he has paid more in national insurance than he did the month before but not more in income tax. What he is interested in is how much has been deducted from his wage. It is right and proper that he should be concerned with that. It is the overall level of deductions that affects his standard of living.

If we have regard to how national insurance contributions have affected post-tax income, we find a different picture from the rosy glow cast by the Chief Secretary's speech. The Government have increased national insurance contributions three times in three years. Those increases have not been, as the Chief Secretary argued, to permit an increase in benefits. Over those three years national insurance benefits have gone down in real terms. Those drawing them have lost 5 per cent. in unemployment benefit and have lost an earnings-related supplement. They are worse off than before, yet when they are in work they are expected to pay even more in contributions than before.

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When we put in the balance the increase of 1 per cent. in national insurance contributions introduced last November and payable from this month, we find that it has the effect of cancelling out the reduction in income tax as a result of the Budget increases in thresholds. Every independent authoritative body that has examined the question has come to the same conclusion. The Library has pointed out that one needs to earn £36,000 a year to achieve a break even point. The Institute for Fiscal Studies, which provided much of the raw data on which the Library reached that conclusion, says that one would require a similar income to break even as a result of the Budget, inking into account all the other forms of taxation.

One could not expect to find a more independent authoritative body on statistics related to taxation and revenue than the Inland Revenue. Even the Inland Revenue comes to the conclusion that a married couple require an income of £20,000 a year to break even on the combined effect of national insurance contribution increases and income tax reductions. Those earning less—except those around the particular point of the threshold of £20 a week—are all worse off as a result of the changes in the Budget and the national insurance contributions added together.

The only body of opinion resisting that obvious, irrefutable, arithmetical conclusion is Treasury Ministers. Everyone else has grasped that that conclusion is unavoidable. I can understand why those on the Treasury Bench wish to resist it. The reason takes us back to a paradox which has been at the centre of this debate and to which a number of hon. Members have referred. My hon. Friend the Member for Workington (Mr. Campbell-Savours) referred to it at length in a powerful speech, the first of a number that we shall hear from him in the Committee sittings. My hon. Friend, who set himself a high standard for his future contributions, recalled his experience in the Workington by-election, when his Conservative opponent campaigned on the issue of tax and won on the basis of his promises.

The only contribution from the Conservative Back Benches was by the hon. Member for Lincoln (Mr. Carlisle), who was honest and candid enough to recall that in the general election he campaigned, not to increase the general level of income tax, but on the promise that his Government would reduce the overall level.

In case the hon. Gentleman is feeling isolated and lonely because he was the only Conservative Back Bencher to speak in this debate, I can tell him that he was not the only Conservative candidate to campaign on the basis of that promise. I have a press statement issued by the present Chancellor, based on a speech that he made on 30 April 1979; a speech which began with what in retrospect appears a richly ironic opening sentence:
"Labour have fought one of the most deceitful election campaigns in British political history."
Even after opening on that basis, the right hon. and learned Gentleman went on to make an unequivocal commitment that a future Conservative Government would cut taxes. He said:
"Let me set the record straight on taxes. We shall make substantial cuts in income tax. And we shall be raising tax thresholds as well…This means that every taxpayer should be paying less taxes in total."
That commitment is trenchant and unqualified. There are none of the niggling little caveats now entered by Treasury Ministers about the impossibility of comparing post-Budget and pre-Budget tax liability. The right hon. and learned Gentleman clearly and unequivocally stated that every taxpayer would pay less tax as a result of the Conservatives' tax programmes.

The reality is that, as speaker after speaker has pointed out, almost every taxpayer is paying more, not less, in tax. A number of my hon. Friends—particularly my hon. Friends the Members for Walsall, North (Mr. Winnick) and for Fife, Central (Mr. Hamilton)—made the point that a favoured few had succeeded in reducing their tax burden even under this Government. I call in aid the statistics produced by the Institute for Fiscal Studies. A person with an income of £30,000 a year, which is well in excess of what is received by most hon. Members on the Opposition Benches and by most of our constituents, is paying 18 per cent. less in income tax than he was in 1979.

The hon. Member for Lincoln told the Committee, in a very good speech, that he could understand the need for an increase in the income tax burden to pay for the cost of recession induced by his own Front Bench. He must ask himself the following question, to which the Committee is entitled to an answer: if the income tax burden had to be increased because of the recession, why should it not increase for the man earning £30,000? Why should he, and he alone among the taxpayers of Britain, have a reduction in his tax burden while the rest of us face increases?

The hon. Gentleman must not mislead the Committee. I did not say that the recession was induced by the Government. As he well knows, it was induced by not only world conditions, but high rates of inflation, which started under his Government.

The hon. Gentleman must pardon my rhetorical exaggerations. On an appropriate occasion I am prepared to debate with him the consequences of the recession.

The hon. Gentleman did not respond to the question that arises naturally out of his speech: why is it that the rest of the body of taxpayers should face an increase in their tax burden while the man earning £30,000, and he alone, has a reduction in his tax burden? By any standards—including, I suspect, by the standards of the hon. Gentleman himself—that contrast is a social outrage.

After three years of the present Government, after four out of the five Budgets that they will have the opportunity to present, there are now more people paying tax than there were before. That is a striking achievement, since there are 2 million people fewer at work than there were before. Those who are paying tax are paying on a larger proportion of their income. One now requires to earn only 30 per cent. of the average wage to be liable to the standard rate of tax, compared with 52 per cent. in 1978. When people start paying tax, they now pay at a higher marginal rate as a result of the abolition of the reduced rate band by this Government in 1980.

The only country with a tax structure in which people start paying tax at a higher level than in Britain is Australia. In all the other countries of the world the initial tax rate is lower than in Britain, and in nearly all the initial tax threshold is higher. That is the record. That is what has happened over the past three years.

I return to what the Chancellor said in a separate speech from the one to which I have referred. He said towards its conclusion:
"You need not take my word for what we will do. Just judge from your own experience."
The nation now has the opportunity to judge from its own experience, and when the time comes it will pass the appropriate judgment on what the Government have done over its tax liability. But we can save even the present Treasury Bench from that judgment, by remedying its failure last year to uprate the tax thresholds. We can save Treasury Ministers by carrying the amendments that the Opposition have tabled in a modest attempt to save them from the wrath of the electorate to come.

The Chief Secretary made much play of the fact that this year the increase in the tax threshold is marginally more than the increase that will be necessary to keep pace with inflation—precisely 2 per cent. more. The Chancellor referred to that increase as an important advance. If we are to test the extent to which it is an important advance, it is necessary to ask what would be the position if last year the Treasury Bench had revalorised personal allowances by the full amount required, had carried through a 15 per cent. increase in tax thresholds, and had this year asked by how much they would need to increase those revalorised tax thresholds in line with the RPI.

What is the answer? If we apply that calculation to the uprating of the married couple's tax threshold, we find that the figure required is £300, precisely the figure by which the Government propose to increase that threshold in the Budget and Finance Bill. In other words, they have done no more than increase by 12 per cent. last year's tax thresholds, which is what would have happened had they been uprated by the amount appropriate for that year. Taxpayers, both married and single, are still short-changed of the 15 per cent. that they were denied last year.

The question to which the Committee must address itself is whether those taxpayers are entitled to have that 15 per cent. restored to them. Here there is a division in the Opposition between the official Oppostion and those who are anxious to dissociate themselves from the official Opposition. I should describe them as the provisional Oppostion were it not that they are so much more effectively orthodox than we could ever hope to be.

The hon. Member for Gateshead, West (Mr. Horam) made a powerful speech about the need to increase tax thresholds in line with inflation. Indeed, the hon. Member said that there should be a major commitment to raise thresholds in line with tax. The hon. Member was so persuaded by his own speech that he promptly disappeared from the Chamber to speak outside the House and will not be present tonight when we vote on this issue. Before he disappeared, he condemned the official Opposition for being irresponsible in putting down amendments which are no more than what he described as a major commitment.

The hon. Gentleman has left behind to hold the fort the hon. Member for Colne Valley (Mr. Wainwright), who has his own set of amendments, which call for an increase in the tax threshold of 3 per cent. beyond the Government figures. The hon. Member for Gateshead, West said that the increase should be by as large an instalment as possible. The moderately balanced centre between zero and 15 per cent., which we are proposing, would appear for present purposes to be 3 per cent. The hon. Member will concur that if we accept his figure of 3 per cent., and if we accept as a desirable target returning to the position of 1980, the position before last year's Budget, which failed to revalorise the tax threshold, it will require a full Parliament of five years' increases of 3 per cent. to get back to where we were in 1980. I can say to the House that the official Opposition do not believe that we should wait that long for such an unsatisfactory outcome.

It is uncharacteristic of the hon. Member for Edinburgh, Central (Mr. Cook) to take such a narrow and pedantic line and suggest that the instalment by which the allowances can be recovered in line with inflation must be continuously 3 per cent. per annum. Does the hon. Member agree that the implementation of a fair and firm incomes policy will make it possible to take a leap next year to bring the whole thing back into line?

7.15 pm

The only circumstance in which it will be possible to take a major leap next year is if we change the Treasury Bench before the next Budget. We cannot judge what amendments the hon. Member will put forward next year. All that we can judge is the extent to which this year he is prepared to make good lost ground, and the extent to which he is prepared to do that is 3 per cent. of 15 per cent. He must be prepared to defend that judgment. We believe that the situation is too serious to wait that long.

There are two reasons why we believe that what has happened over the last three years is a major scandal. The first is that not only are the poorer paying more in tax than before, but that they are paying more in tax for poorer public services. Secondly, not only are the poorer paying more tax, but the increase in their tax burden coincides with a sharp reduction in the tax burden on the higher paid.

The Chief Secretary referred to truth in taxation. I put it to him that as well as truth in taxation the Committee should have regard to truth in election pledges. When Conservative Members went into the election they promised that they would take the low-paid out of tax altogether. The only way in which they have done that is by taking many of the low-paid out of employment and even then they have taken special measures to tax them once they become unemployed. If Conservative Members remember that manifesto of three years ago, and if any of them are troubled by honourable notions about the need to adhere to manifesto pledges, they have the opportunity tonight to refresh their memories and vote with us on our amendments.

Question put, That the amendment be made:—

The Committee divided: Ayes 196, Noes 291.

Division No. 125]

[7.16 pm


Adams, AllenCocks, Rt Hon M. (B'stol S)
Allaun, FrankCohen, Stanley
Anderson, DonaldColeman, Donald
Archer, RtHonPeterConcannon, Rt Hon J. D.
Ashley, RtHonJackConlan, Bernard
Ashton, JoeCook, Robin F.
Atkinson, N. (H'gey,)Cowans, Harry
Barnett, Guy (Greenwich)Cox, T. (W'dsw'th, Toot'g)
Bamett, RtHon Joel (H'wd)Crowther, Stan
Bennett, Andrew (St'kp'tN)Cryer, Bob
Bidwell, SydneyCunliffe, Lawrence
Booth, RtHonAlbertCunningham, G. (IslingtonS)
Boothroyd, MissBettyDavidson, Arthur
Bottomley, RtHonA. (M'b'ro)Davies, Rt Hon Denzil (L'lli)
Bray, Dr JeremyDavies, Ifor (Gower)
Brown, Hugh D. (Provan)Davis, Clinton (HackneyC)
Brown, R. C. (N'castle W)Davis, Terry (B'ham, Stechf'd)
Browr, Ron (E'burgh, Leith)Dean, Joseph (Leeds West)
Buchan, NormanDewar, Donald
Callaghan, Jim (Midd't'n&P)Dixon, Donald
Campbell, IanDormand, Jack
Campbell-Savours, DaleDouglas, Dick
Canavan, DennisDubs, Alfred
Cant, R. B.Duffy, A. E. P.
Carmichael, NeilDunnett, Jack
Carter-Jones, LewisDunwoody, Hon MrsG.
Clark, Dr David (S Shields)Eadie, Alex

Eastham, KenMorris, Rt Hon C. (O'shaw)
Edwards, R. (W'hampt'n S E)Morris, Rt Hon J. (Aberavon)
Ellis, R. (NE D'bysh're)Moyle, Rt Hon Roland
English, MichaelMulley, RtHonFrederick
Ennals, RtHonDavidNewens, Stanley
Evans, Ioan (Aberdare)Oakes, Rt Hon Gordon
Evans, John (Newton)O'Neill, Martin
Field, FrankOrme, RtHonStanley
Fitch, AlanPalmer, Arthur
Flannery, MartinPark, George
Fletcher, Ted (Darlington)Parker, John
Foot, Rt Hon MichaelParry, Robert
Ford, BenPowell, Raymond (Ogmore)
Forrester, JohnPrice, C. (Lewisham W)
Foster, DerekRace, Reg
Fraser, J. (Lamb'th, N'w'd)Radice, Giles
Freeson, Rt Hon ReginaldRees, Rt Hon M (Leeds S)
Garrett, John (Norwich S)Richardson, Jo
Garrett, W. E. (Wallsend)Roberts, Allan (Bootle)
Gilbert, Rt Hon Dr JohnRoberts, Ernest (Hackney N)
Golding, JohnRobons, Gmilym (Cannock)
Graham, TedRobertson, George
Hamilton, W. W. (C'tralFife)Rooker, J. W.
Hardy, PeterRoss, Ernest (Dundee West)
Harrison, Rt Hon WalterRowlands, Ted
Hart, Rt Hon Dame JudithRyman, John
Hattersley, RtHonRoySever, John
Haynes, FrankSheerman, Barry
Healey, Rt Hon DenisSheldon, Rt Hon R.
Holland, S. (L'b'th, Vauxh'll)Shore, Rt Hon Peter
HomeRobertson, JohnSilkin, Rt Hon J. (Deptford)
Homewood, WilliamSilkin, Rt Hon S. C. (Dulwich)
Howell, Rt Hon D.Silverman, Julius
Hoyle, DouglasSkinner, Dennis
Huckfield, LesSmith, Rt Hon J. (N Lanark)
Hughes, Mark (Durham)Snape, Peter
Hughes, Robert (Aberdeen N)Soley, Clive
Hughes, Roy (Newport)Spearing, Nigel
Janner, HonGrevilleSpriggs, Leslie
Jay, Rt Hon DouglasStallard, A.W.
John, BrynmorStewart, Rt Hon D. (W Isles)
Johnson, Walter (Derby S)Stoddart, David
Jones, Rt Hon Alec (Rh' dda)Stott, Roger
Jones, Barry (East Flint)Strang, Gavin
Kaufman, Rt Hon GeraldStraw, Jack
Kerr, RussellSummerskill, HonDrShirley
Kilfedder, James A.Taylor, Mrs Ann (Bolton W)
Kilroy-Silk, RobertThomas, Dafydd (Merioneth)
Lamborn, HarryTilley, John
Lamond, JamesTinn, James
Leadbitter, TedTorney, Tom
Leighton, RonaldVarley, Rt Hon Eric G.
Lewis, Arthur (N'ham NW)Wainwright, E. (DearneV)
Litherland, RobertWalker, Rt HonH.(D'caster)
Lofthouse, GeoffreyWatkins, David
Lyon, Alexander (York)Weetch, Ken
McCartney, HughWelsh, Michael
McDonald, DrOonaghWhiteJ. (G'gow Pollok)
McKay, Allen (Penistone)Whitehead, Phillip
McKelvey, WilliamWhitlock, William
MacKenzie, Rt Hon GregorWigley, Dafydd
McNamara, KevinWilley, RtHonFrederick
McTaggart, RobertWilson, Gordon (Dundee E)
Marshall, Dr Edmund (Goole)Wilson, William (C'try SE)
Martin, M (G'gowS'burn)Winnick, David
Mason, Rt Hon RoyWoodall, Alec
Maxton, JohnWoolmer, Kenneth
Maynard, Miss JoanWright, Sheila
Meacher, Michael
Mellish, Rt Hon RobertTellers for the Ayes:
Mikardo, IanMr. James Hamilton and Mr. George Morton.
Miller, Dr M. S. (E Kilbride)
Mitchell, Austin (Grimsby)


Adley, RobertAmery, Rt Hon Julian
Aitken, JonathanAncram, Michael
Alexander, RichardAspinwall, Jack
Alison, Rt Hon MichaelAtkins, Rt Hon H. (S'throne)
Alton, DavidAtkins, Robert (PrestonN)

Atkinson, David (B'm'th, E)Fry, Peter
Baker, Kenneth (St.M'bone)Gardiner, George (Reigate)
Baker, Nicholas (Dorset)Gardner, Edward (S Fylde)
Banks, RobertGarel-Jones, Tristan
Beaumont-Dark, AnthonyGilmour, Rt Hon Sir Ian
Beith, A. J.Glyn, Dr Alan
Bennett, Sir Frederic (T'bay)Goodlad, Alastair
Benyon, Thomas (A'don)Gow, Ian
Benyon, W. (Buckingham)Grant, Anthony (Harrow C)
Berry, HonAnthonyGray, Hamish
Best, KeithGreenway, Harry
Bevan, David GilroyGrieve, Percy
Biffen, Rt Hon JohnGriffiths, E. (B'ySt.Edm'ds)
Blackburn, JohnGriffiths, PeterPortsm'thN)
Body, RichardGrimond, Rt Hon J.
Bonsor, SirNicholasGrist, Ian
Boscawen, HonRobertGrylls, Michael
Bottomley, Peter (W'wich W)Gummer, JohnSelwyn
Bowden, AndrewHamilton, Hon A.
Boyson, Dr RhodesHamilton, Michael (Salisbury)
Bradley, TomHampson, Dr Keith
Braine, Sir BernardHaselhurst, Alan
Bright, GrahamHastings, Stephen
Brinton, TimHavers, Rt Hon Sir Michael
Brittan, Rt.Hon. LeonHawkins, Paul
Brocklebank-Fowler, C.Hawksley, Warren
Brooke, HonPeterHayhoe, Barney
Brotherton, MichaelHeath, Rt Hon Edward
Brown, Michael (Brigg&Sc'n)Heddle, John
Brown, Ronald W. (H'ckn'y S)Henderson, Barry
Browne, John (Winchester)Hicks, Robert
Bryan, Sir PaulHill, James
Buck, AntonyHogg, HonDouglas (Gr'th'm)
Budgen, NickHolland, Philip (Carlton)
Bulmer, EsmondHooson, Tom
Burden, Sir FrederickHoram, John
Butcher, JohnHordern, Peter
Cadbury, JocelynHowell, RtHonD. (G'ldf'd)
Carlisle, John (Luton West)Howells, Geraint
Carlisle, Kenneth (Lincoln)Hunt, John (Ravensbourne)
Chalker, Mrs.LyndaIrving, Charles (Cheltenham)
Chapman, SydneyJenkin, Rt Hon Patrick
Churchill, W.S.Jenkins, Rt Hon Roy (Hillhead)
Clark, SirW. (CroydonS)Jessel, Toby
Clarke, Kenneth (Rushcliffe)JohnsonSmith, Geoffrey
Cockeram, EricJohnston, Russell (Inverness)
Colvin, MichaelJopling, RtHonMichael
Cope, JohnKaberry, Sir Donald
Corrie, JohnKershaw, Sir Anthony
Costain, Sir AlbertKing, Rt Hon Tom
Cranborne, ViscountKitson, Sir Timothy
Critchley, JulianKnight, Mrs Jill
Crouch, DavidKnox, David
Dean, Paul (NorthSomerset)Lamont, Norman
Dickens, GeoffreyLatham, Michael
Douglas-Hamilton, LordJ.Lawrence, Ivan
Dover, DenshoreLawson, Rt Hon Nigel
du Cann, Rt Hon EdwardLeMarchant, Spencer
Dunn, James A.Lennox-Boyd, Hon Mark
Dunn, Robert (Dartford)Lester, Jim (Beeston)
Durant, TonyLewis, Kenneth (Rutland)
Dykes, HughLloyd, Ian (Havant&W'loo)
Eden, Rt Hon Sir JohnLloyd, Peter (Fareham)
Edwards, Rt Hon N. (P'broke)Loveridge, John
Eggar, TimLuce, Richard
Elliott, SirWilliamLyell, Nicholas
Eyre, ReginaldMcCrindle, Robert
Fairbairn, NicholasMacfarlane, Neil
Fairgrieve, Sir RussellMacGregor, John
Faith, MrsSheilaMacKay, John (Argyll)
Farr, JohnMacmillan, RtHonM.
Fell, SirAnthonyMcNair-Wilson, M. (N'bury)
Finsberg, GeoffreyMcNair-Wilson, P. (NewF'st)
Fisher, Sir NigelMcNally, Thomas
Fletcher-Cooke, SirCharlesMadel, David
Fookes, Miss JanetMajor, John
Fowler, Rt Hon NormanMarland, Paul
Fox, MarcusMarlow, Antony
Fraser, Peter (SouthAngus)Marten, Rt Hon Neil
Freud, ClementMates, Michael

Mather, CarolShaw, Michael (Scarborough)
Maude, Rt Hon Sir AngusShelton, William (Streatham)
Mawby, RayShepherd, Colin (Hereford)
Maxwell-Hyslop, RobinShepherd, Richard
Mayhew, PatrickShersby, Michael
Mellor, DavidSilvester, Fred
Meyer, Sir AnthonySims, Roger
Miller, Hal (B'grove)Skeet, T. H. H.
Mills, Iain (Meriden)Smith, Dudley
Mills, Peter (West Devon)Speed, Keith
Miscampbell, NormanSpence, John
Mitchell, David (Basongstoke)Spicer, Michael (S Worcs)
Mitchell, R.C. (Soton Itchen)Sproat, Iain
Monro, SirHectorSquire, Robin
Montgomery, FergusStainton, Keith
Moore, JohnStanbrook, Ivor
Morris, M. (N'hampton S)Stanley, John
Morrison, HonC. (Devizes)Steel, Rt Hon David
Morrison, Hon P. (Chester)Steen, Anthony
Mudd, DavidStevens, Martin
Murphy, ChristopherStewart, Ian (Hitchin)
Myles, DavidStokes, John
Neale, GerrardStradling Thomas, J.
Needham, RichardTaylor, Teddy (S'end E)
Nelson, AnthonyTebbit, Rt Hon Norman
Neubert, MichaelTemple-Morris, Peter
Newton, TonyThomas, Rt Hon Peter
Onslow, CranleyThompson, Donald
Oppenheim, Rt Hon Mrs S.Thorne, Neil (IlfordSouth)
Page, Richard (SW Herts)Thornton, Malcolm
Parris, MatthewTownend, John (Bridlington)
Patten, Christopher (Bath)Trippier, David
Patten, John (Oxford)van Straubenzee, Sir W.
Pattie, GeoffreyVaughan, Dr Gerard
Pawsey, JamesViggers, Peter
Penhaligon, DavidWaddington, David
Percival, Sir IanWainwright, R. (Colne V)
Peyton, Rt Hon JohnWakeham, John
Pink, R.BonnerWaldegrave, Hon William
Pollock, AlexanderWalker, Rt Hon P. (W'cester)
Porter, BarryWalker, B. (Perth)
Prentice, Rt Hon RegWall, SirPatrick
Price, SirDavid (Eastleigh)Waller, Gary
Proctor, K. HarveyWalters, Dennis
Raison, Rt Hon TimothyWard, John
Rees-Davies, W. R.Watson, John
Renton, TimWellbeloved, James
RhodesJames, RobertWells, John (Maidstone)
RhysWilliams, SirBrandonWheeler, John
Ridley, HonNicholasWhitney, Raymond
Ridsdale, SirJulianWickenden, Keith
Rifkind, MalcolmWiggin, Jerry
Roberts, M. (Cardiff NW)Wilkinson, John
Roberts, Wyn (Conway)Williams, D. (Montgomery)
Roper, JohnWinterton, Nicholas
Rossi, HughWolfson, Mark
Rost, PeterWrigglesworth, Ian
Royle, Sir AnthonyYoung, SirGeorge (Acton)
Sainsbury, Hon Timothy
St. John-Stevas, Rt Hon N.Tellers for the Noes:
Sandelson, NevilleMr. David Hunt and Mr. Ian Lang.
Shaw, Giles (Pudsey)

Question accordingly negatived.

Amendment proposesd: No.2, in page 13, line25, leave out '£2,445' and insert '£2,510'. — [Mr Beith.]

Question put, That the amendment be made:—

The committee divided: Ayes 14, Noes 268.

Division No. 126]

[7.29 pm


Alton, DavidKilfedder, James A.
Cunningham, G. (Islington S)Penhaligon, David
Edwards, R. (W'hampt'n S E)Steel, Rt Hon David
Freud, ClementStewart, Rt Hon D. (W Isles)
Grimond, Rt Hon J.Thomas, Dafydd (Merioneth)
Howells, GeraintWainwright, R. (ColneV)

Wigley, DafyddTellers for the Ayes:
Wilson, Gordon (Dundee E)Mr. A. J. Beith and Mr. Russell Johnston.


Adley, RobertFinsberg, Geoffrey
Aitken, JonathanFisher, SirNigel
Alexander, RichardFletcher-Cooke, SirCharles
Alison, Rt Hon MichaelFookes, Miss Janet
Amery, Rt Hon JulianForman, Nigel
Ancram, MichaelFowler, Rt Hon Norman
Aspinwall, JackFox, Marcus
Atkins, Robert (PrestonN)Fraser, Peter (SouthAngus)
Atkinson, David (B'm'th, E)Fry, Peter
Baker, Kenneth (St.M'bone)Gardiner, George (Reigatse)
Baker, Nicholas (N Dorset)Gardner, Edward (S Fylde)
Banks, RobertGarel-Jones, Tristan
Beaumont-Dark, AnthonyGilmour, Rt Hon Sir Ian
Bendall, VivianGlyn, Dr Alan
Bennett, SirFrederic (T'bay)Goodlad, Alastair
Benyon, Thomas (A'don)Gow, Ian
Benyon, W. (Buckingham)Grant, Anthony (Harrow C)
Berry, HonAnthonyGray, Hamish
Best, KeithGreenway, Harry
Bevan, David GilroyGrieve, Percy
Biffen, Rt Hon JohnGriffiths, E. (B'ySt.Edm's)
Blackburn, JohnGriffiths, PeterPortsm'thN)
Body, RichardGrist, Ian
Bonsor, SirNicholasGrylls, Michael
Boscawen, HonRobertGummer, JohnSelwyn
Bottomley, Peter (W'wich W)Hamilton, Hon A.
Bowden, AndrewHamilton, Michael (Salisbury)
Boyson, Dr RhodesHampson, Dr Keith
Braine, SirBernardHaselhurst, Alan
Bright, GrahamHastings, Stephen
Brinton, TimHavers, Rt Hon Sir Michael
Brittan, Rt.Hon.LeonHawkins, Paul
Brooke, Hon PeterHawksley, Warren
Brotherton, MichaelHayhoe, Barney
Brown, Michael (Brigg & Sc'n)Heath, Rt Hon Edward
BrowneJohn (Winchester)Heddle, John
Bryan, Sir PaulHenderson, Barry
Buck, AntonyHicks, Robert
Budgen, NickHill, James
Bulmer, EsmondHogg, HonDouglas (Gr'th'm)
Burden, SirFrederickHolland, Philip (Carlton)
Butcher, JohnHooson, Tom
Cadbury, JocelynHordern, Peter
Carlisle, John (Luton West)Howell, RtHonD. (G'ldf'd)
Carlisle, Kenneth (Lincoln)Hunt, John (Ravensbourne)
Chalker, Mrs. LyndaIrving, Charles (Cheltenham)
Chapman, SydneyJenkin, RtHonPatrick
Churchill, W.S.Jessel, Toby
Clark, SirW. (CroydonS)JohnsonSmith, Geoffrey
Clarke, Kenneth (Rushcliffe)Jopling, RtHonMichael
Cockeram, EricKaberry, SirDonald
Colvin, MichaelKershaw, SirAnthony
Cope, JohnKing, RtHonTom
Corrie, JohnKitson, Sir Timothy
Costain, Sir AlbertKnight, MrsJill
Cranborne, ViscountKnox, David
Critchley, JulianLamont, Norman
Crouch, DavidLangford-Holt, SirJohn
Dean, Paul (NorthSomerset)Latham, Michael
Dickens, GeoffreyLawrence, Ivan
Douglas-Hamilton, LordJ.Lawson, RtHonNigel
Dover, DenshoreLeMarchant, Spencer
du Cann, Rt Hon EdwardLennox-Boyd, HonMark
Dunn, Robert (Dartford)Lewis, Ron (Carlisle)
Durant, TonyLloyd, Ian (Havant& W'loo)
Dykes, HughLloyd, Peter (Fareham)
Eden, RtHonSirJohnLoveridge, John
Edwards, Rt Hon N. (P'broke)Luce, Richard
Eggar, TimLyell, Nicholas
Elliott, SirWilliamMcCrindle, Robert
Eyre, ReginaldMacfarlane, Neil
Fairbairn, NicholasMacGregor, John
Fairgrieve, SirRussellMacKay, John (Argyll)
Faith, MrsSheilaMacmillan, Rt Hon M.
Farr, JohnMcNair-Wilson, M. (N'bury)

McNair-Wilson, P. (NewF'st)Sainsbury, HonTimothy
Madel, DavidSt. John-Stevas, Rt Hon N.
Major, JohnShaw, Giles (Pudsey)
Marland, PaulShaw, Michael (Scarborough)
Marlow, AntonyShelton, William (Streatham)
Marten, Rt Hon NeilShepherd, Colin (Hereford)
Mates, MichaelShepherd, Richard
Mather, CarolShersby, Michael
Maude, RtHonSirAngusSilvester, Fred
Mawby, RaySims, Roger
Maxwell-Hyslop, RobinSkeet, T. H. H.
Mayhew, PatrickSmith, Dudley
Mellor, DavidSpeed, Keith
Meyer, Sir AnthonySpence, John
Miller, Hal (B'grove)Spicer, Michael (S Worcs)
Miller, Iain (Meriden)Sproat, Iain
Mills, Peter (West Devon)Squire, Robin
Miscampbell, NormanStainton, Keith
Mitchell, David (Basingstoke)Stanbrook, Ivor
Monro, SirHectorStanley, John
Montgomery, FergusSteen, Anthony
Moore, JohnStevens, Martin
Morris, M. (N'hamptonS)Stewart, Ian (Hitchin)
Morrison, HonC. (Devizes)Stokes, John
Morrison, Hon P. (Chester)Stradling Thomas, J.
Mudd, DavidTaylor, Teddy (S'end E)
Murphy, ChristopherTebbit, Rt Hon Norman
Myles, DavidTemple-Morris, Peter
Neale, GerrardThomas, Rt Hon Peter
Needham, RichardThompson, Donald
Nelson, AnthonyThorne, Neil (IlfordSouth)
Neubert, MichaelThornton, Malcolm
Newton, TonyTownend, John (Bridlington.)
Onslow, CranleyTrippier, David
Oppenheim, Rt Hon Mrs S.van Straubenzee, Sir W.
Page, Richard (SW Herts)Vaughan, Dr Gerard
Parris, MatthewViggers, Peter
Patten, Christopher (Bath)Waddington, David
Patten, John (Oxford)Wakeham, John
Pattie, GeoffreyWaldegrave, HonWilliam
Pawsey, JamesWalker, Rt Hon P. (W'cester)
Percival, Sir IanWalker, B. (Perth)
Peyton, Rt Hon JohnWall, Sir Patrick
Pink, R.BonnerWalier, Gary
Pollock, AlexanderWalters, Dennis
Porter, BarryWard, John
Prentice, Rt Hon RegWatson, John
Price, SirDavid (Eastleigh)Wells, John (Maidstone)
Proctor, K. HarveyWheeler, John
Raison, RtHonTimothyWhitney, Raymond
Rees-Davies, W. R.Wickenden, Keith
Renton, TimWiggin, Jerry
Rhodes James, RobertWilkinson, John
RhysWilliams, SirBrandonWilliams, D. (Montgomery)
Ridley, HonNicholasWinterton, Nicholas
Rifkind, MalcolmWolfson, Mark
Roberts, M. (Cardiff NW)Young, SirGeorge (Acton)
Roberts, Wyn (Conway)
Rossi, HughTellers for the Noes:
Rost, PeterMr. Ian Lang and Mr. David Hunt.
Royle, Sir Anthony

Question accordingly negatived.

Amendment proposed: No. 5, in page 13, line 30, leave out '£3,295' and insert '£3,735'.n — [Mr.Robert Sheldon]

Question put, That the amendment be made:—

The Committee divided: Ayes 189, Noes 266.

Division No. 127]

[7.40 pm


Adams, AllenBidweil, Sydney
Allaun, FrankBooth, RtHonAlbert
Anderson, DonaldBoothroyd, MissBetty
Archer, Rt Hon PeterBottomley, RtHonA. (M'b'ro)
Ashley, Rt Hon JackBray, Dr Jeremy
Ashton, JoeBrown, Hugh D. (Provan)
Atkinson, N. (H'gey,)Brown, R. C. (N'castle W)
Barnett, Guy (Greenwich)Brown, Ronald W. (H'ckn'yS)
Barnett, Rt Hon Joel (H'wd)Buchan, Norman

Callaghan, Jim (Midd't'n& P)Lamborn, Harry
Campbell, IanLamond, James
Campbell-Savours, DaleLeadbitter, Ted
Canavan, DennisLeighton, Ronald
Cant, R. B.Lewis, Arthu r (N'ham NW)
Carmichael, NeilLitherland, Robert
Carter-Jones, LewisLofthouse, Geoffrey
Clark, Dr David (S Shields)Lyon, Alexander (York)
Cocks, Rt Hon M. (B'stol S)McCartney, Hugh
Cohen, StanleyMcDonald, DrOonagh
Coleman, DonaldMcKay, Allen (Penistone)
Concannon, Rt Hon J. D.McKelvey, William
Conlan, BernardMacKenzie, Rt Hon Gregor
Cook, Robin F.McNamara, Kevin
Cowans, HarryMcTaggart, Robert
Cox, T. (W'dsw'th, Toot'g)McWilliam, John
Craigen, J. M. (G'gow, M'hill)Marshall, DrEdmund (Goole)
Crowther, StanMartin, M (G'gowS 'burn)
Cryer, BobMason, Rt Hon Roy
Cunningham, G. (IslingtonS)Maxton, John
Davidson, ArthurMaynard, MissJoan
Davies, Rt Hon Denzil (L'lli)Meacher, Michaei
Davis, Clinton (Hackney C)Mellish, Rt Hon Robert
Davis, Terry (B 'ham, Stechf'd)Mlkardo, Ian
Dean, Joseph (Leeds West)Miller, Dr M.S. (E Kilbride)
Dewar, DonaldMitchell, Austin (Grimsby)
Dixon, DonaldMorris, Rt Hon J. (Aberavon)
Dormand, JackMorton, George
Douglas, DickMoyle, Rt Hon Roland
Dubs, AlfredMulley, Rt Hon Frederick
Duffy, A. E. P.Newens, Stanley
Dunnett, JackOakes, Rt Hon Gordon
Dunwoody, Hon Mrs G.O'Neill, Martin
Eadie, AlexOrme, Rt Hon Stanley
Eastham, KenPalmer, Arthur
Edwards, R. (W'hampt'n S E)Park, George
Ellis, R (NE D'bysh're)Parker, John
English, MichaelParry, Robert
Ennals, Rt Hon DavidPowell, Raymond (Ogmore)
Evans, Ioan (Aberdare)Price, C. (Lewisham W)
Evans, John (Newton)Race, Reg
Field, FrankRadice, Giles
Flannery, MartinRees, Rt Hon M (Leeds S)
Fletcher, Ted (Darlington)Richardson, Jo
Foot, Rt Hon MichaelRoberts, Allan (Bootle)
Ford, BenRoberts, Gwilym (Cannock)
Forrester, JohnRobertson, George
Foster, DerekRobinson, G. (Coventry NW)
Fraser, J. (Lamb'th, N'w'd)Rooker, J. W.
Freeson, Rt Hon ReginaldRoss, Ernest (Dundee West)
Garrett, John (Norwich S)Rowlands, Ted
Garrett, W. E. (Wallsend)Ryman, John
Gilbert, RtHonDrJohnSever, John
Golding, JohnSheerman, Barry
Graham, TedSheldon, Rt Hon R.
Hamilton, W. W. (C'tralFife)Shore, Rt Hon Peter
Hardy, PeterSilkin, RtHonJ. (Deptford)
Harrison, RtHonWalterSilkin, Rt Hon S. C. (Dulwich)
Hart, Rt Hon Dame JudithSilverman, Julius
Hattersley, Rt Hon RoySkinner, Dennls
Haynes, FrankSmith, Rt Hon J. (N Lanark)
Holland, S. (L'b'th, Vauxh'll)Snape, Peter
HomeRobertson, JohnSoley, Clive
Homewood, WilllamSpearing, Nigel
Howell, Rt Hon D.Spriggs, Leslie
Hoyle, DouglasStewart, Rt Hon D. (W Isles)
Huckfield, LesStoddart, David
Hughes, Mark (Durham)Stott, Roger
Hughes, Robert (Aberdeen N)Strang, Gavin
Hughes, Roy (Newport)Straw, Jack
Janner, HonGrevilleSummerskill, HonDrShirley
Jay, Rt Hon DouglasThomas, Dafydd (Merioneth)
John, BrynmorTilley, John
Johnson, Walter (Derby S)Tinn, James
Jones, Rt Hon Alec (Rh'dda)Torney, Tom
Jones, Barry (East Flint)Varley, Rt Hon Eric G.
Kaufman, Rt Hon GeraldWainwright, E. (Dearne V)
Kerr, RussellWalker, Rt Hon H. (D'caster)
Kilfedder, James A.Watkins, David
Kilroy-Silk, RobertWeetch, Ken

Welsh, MichaelWoodall, Alec
White, J. (G'gow Pollok)Woolmer, Kenneth
Whitehead, PhillipWright, Sheila
Wigley, Dafydd
Willey, Rt Hon FrederickTellers for the Ayes:
Wilson, Gordon (DundeeE)Mr. Lawience Cunliffe and Mr. James Hamilton.
Wilson, William (C'trySE)
Winnick, David


Adley, RobertFairbairn, Nicholas
Aitken, JonathanFairgrieve, SirRussell
Alexander, RichardFaith, MrsSheila
Alison, RtHonMichaelFarr, John
Amery, Rt Hon JulianFinsberg, Geoffrey
Ancram, MichaelFisher, Sir Nigel
Aspinwall, JackFletcher-Cooke, SirCharles
Atkins, Robert (PrestonN)Fookes, MissJanet
Atkinson, David (B'm'th, E)Forman, Nigel
Baker, Kenneth (St.M'bone)Fowler, Rt Hon Norman
Baker, Nicholas (Dorset)Fox, Marcus
Banks, RobertFraser, Peter (SouthAngus)
Beaumont-Dark, AnthonyFry, Peter
Bendall, VivianGardiner, George (Reigate)
Bennett, SirFrederic (T'bay)Gardner, Edward (S Fylde)
Benyon, Thomas (A'don)Glyn, Dr Alan
Benyon, W. (Buckingham)Goodlad, Alastair
Berry, HonAnthonyGow, Ian
Best, KeithGrant, Anthony (Harrow C)
Bevan, DavidGilroyGray, Hamish
Biffen, Rt Hon JohnGreenway, Harry
Blackbum, JohnGrieve, Percy
Body, RichardGriffiths, E. (B'ySt.Edm 'ds)
Bonsor, SirNicholasGriffiths, PeterPortsm'th N)
Bottomley, Peter (W'wich W)Grist, Ian
Bowden, AndrewGrylls, Michael
Boyson, Dr RhodesGummer, JohnSelwyn
Braine, SirBernardHamilton, HonA.
Bright, GrahamHamilton, Michael (Salisbury)
Brinton, TimHampson, DrKeith
Brittan, Rt.Hon.LeonHaselhurst, Alan
Brooke, Hon PeterHastings, Stephen
Brotherton, MichaelHawkins, Paul
Brown, Michael (Brigg&Sc'n)Hawksley, Warren
Browne, John (Winchester)Hayhoe, Barney
Bryan, SirPaulHeath, RtHonEdward
Buck, AntonyHeddle, John
Budgen, NickHenderson, Barry
Bulmer, EsmondHicks, Robert
Burden, SirFrederickHill, James
Butcher, JohnHogg, HonDouglas (Gr'th'm)
Cadbury, JocelynHolland, Philip (Carton)
Carlisle, John (LutonWest)Hooson, Tom
Carlisle, Kenneth (Lincoln)Hordern, Peter
Chalker, Mrs. LyndaHowell, RtHonD. (G'ldf'd)
Chapman, SydneyHowell, Ralph (Norfolk)
Churchill, W.S.Hunt, David (Wirral)
Clark, Sir W. (Croydon S)Hunl, John (Ravensbourne)
Clarke, Kenneth (Rushcliffe)Jenkin, RtHonPatrick
Cockeram, EricJessel, Toby
Colvin, MichaelJohnsonSmith, Geoffrey
Cope, JohnJopling, RtHonMichael
Corrie, JohnKaberry, SirDonald
Costain, SirAlbertKershaw, SirAnthony
Cranborne, ViscountKing, Rt Hon Tom
Critchley, JulianKitson, SirTimothy
Crouch, DavidKnight, MrsJill
Dean, Paul (North Somerset)Knox, David
Dickens, GeoffreyLamont, Norman
Douglas-Hamilton, LordJ.Lang, Ian
Dover, DenshoreLangford-Holt, SirJohn
du Cann, Rt Hon EdwardLatham, Michael
Dunn, Robert (Darfford)Lawrence, Ivan
Durant, TonyLawson, Rt Hon Nigel
Dykes, HughLeMarchant, Spencer
Eden, Rt Hon Sir JohnLennox-Boyd, HonMark
Edwards, Rt Hon N. (P'broke)Lester, Jim (Beeston)
Eggar, TimLewis, Kenneth (Rutland)
Elliott, SirWilliamLloyd, Ian (Havant & W'loo)
Eyre, ReginaldLloyd, Peter (Fareham)

Loveridge, JohnRoberts, M. (CardiffNW)
Luce, RichardRoberts, Wyn (Conway)
Lyell, NicholasRossi, Hugh
McCrindle, RobertRost, Peter
Macfarlane, NeilRoyle, SirAnthony
MacGregor, JohnSainsbury, Hon Timothy
MacKay, John (Argyll)St. John-Stevas, Rt Hon N.
Macmillan, Rt Hon M.Shaw, Giles (Pudsey)
McNair-Wilson, M. (N'bury)Shaw, Michael (Scarborough)
McNair-Wilson, P. (New F'st)Shelton, William (Streatham)
Madel, DavidShepherd, Colin (Hereford)
Major, JohnShepherd, Richard
Marland, PaulShersby, Michael
Marlow, AntonySilvester, Fred
Marten, Rt Hon NeilSims, Roger
Mates, MichaelSkeet, T. H. H.
Mather, CarolSmith, Dudley
Maude, Rt Hon Sir AngusSpeed, Keith
Mawby, RaySpence, John
Maxwell-Hyslop, RobinSpicer, Michael (S Worcs)
Mayhew, PatrickSproat, Iain
Mellor, DavidSquire, Robin
Meyer, Sir AnthonyStainton, Keith
Miller, Hal (B'grove)Stanbrook, Ivor
Mills, Iain (Meriden)Stanley, John
Mills, Peter (West Devon)Steen, Anthony
Miscampbell, NormanStevens, Martin
Mitchell, David (Basingstoke)Stewart, Ian (Hitchin)
Monro, SirHectorStokes, John
Montgomery, FergusStradling Thomas, J.
Moore, JohnTaylor, Teddy (S'end E)
Morris, M. (N'hampton S)Tebbit, Rt Hon Norman
Morrison, HonC. (Devizes)Temple-Morris, Peter
Morrison, Hon P. (Chester)Thomas, Rt Hon Peter
Mudd, DavidThompson, Donald
Murphy, ChristopherThorne, Neil (IlfordSouth)
Myles, DavidThornton, Malcolm
Neale, GerrardTownend, John (Bridlington)
Needham, RichardTrippier, David
Nelson, Anthonyvan Straubenzee, SirW.
Neubert, MichaelVaughan, DrGerard
Newton, TonyViggers, Peter
Onslow, CranleyWaddington, David
Oppenheim, Rt Hon Mrs S.Wakeham, John
Page, Richard (SW Herts)Waldegrave, HonWilliam
Parris, MatthewWalker, Rt HonP. (W'cester)
Patten, Christopher (Bath)Walker, B. (Perth)
Patten, John (Oxford)Wall, SirPatrick
Pattie, GeoffreyWaller, Gary
Pawsey, JamesWalters, Dennis
Percival, Sir IanWard, John
Peyton, Rt Hon JohnWatson, John
Pink, R.BonnerWheeler, John
Pollock, AlexanderWhitney, Raymond
Porter, BarryWickenden, Keith
Prentice, Rt Hon RegWiggin, Jerry
Price, SirDavid (Eastleigh)Wilkinson, John
Proctor, K. HarveyWilliams, D. (Montgomery)
Raison, Rt Hon TimothyWinterton, Nicholas
Rees-Davies, W. R.Wolfson, Mark
Renton, TimYoung, SirGeorge (Acton)
Rhodes James, Robert
Rhys Williams, SirBrandonTellers for the Noes:
Ridley, HonNicholasMr. Robert Boscawen and Mr. Tristan Garel-Jones.
Rifkind, Malcolm

Question accordingly negatived.

Amendment proposed: No. 6, in page 13, line 30, leave out '£3,295' and insert '£3,387'.— [Mr. Beith.]

Question put, That the amendment be made:—

The Committee divided: Ayes 24, Noes 261.

Division No. 128]

[7.51 pm


Alton, DavidFreud, Clement
Brocklebank-Fowler, C.Grimond, Rt Hon J.
Brown, Ronald W. (H'ckn'y S)Horam, John
Cunningham, G. (IslingtonS)Howells, Geraint
Dunn, James A.Jenkins, RtHonRoy (Hillhead)

Kilfedder, JamesA.Wainwright, R. (Colne V)
McNally, ThomasWellbeloved, James
Mitchell, R. C. (Soton Itchen)Wigley, Dafydd
Penhaligon, DavidWilson, Gordon (Dundee E)
Roper, JohnWrigglesworth, Ian
Sandelson, Neville
Steel, Rt Hon DavidTellers for the Ayes:
Stewart, Rt Hon D. (W lsles)Mr. A. J. Beith and Mr. Russell Johnston.
Thomas, Dafydd (Merioneth)


Aitken, JonathanEyre, Reginald
Alexander, RichardFairbairn, Nicholas
Alison, Rt Hon MichaelFairgrieve, SirRussell
Amery, Rt Hon JulianFaith, MrsSheila
Ancram, MichaelFarr, John
Aspinwall, JackFinsberg, Geoffrey
Atkins, Robert (Preston N)Fisher, SirNigel
Atkinson, David (B'm'th, E)Fletcher-Cooke, SirCharles
Baker, Kenneth (St.M'bone)Fookes, MissJanet
Baker, Nicholas (N Dorset)Forman, Nigel
Banks, RobertFowler, Rt Hon Norman
Beaumont-Dark, AnthonyFox, Marcus
Bendall, VivianFraser, Peter (SouthAngus)
Bennett, SirFrederic (T'bay)Fry, Peter
Benyon, Thomas (A'don)Gardiner, George (Reigate)
Benyon, W. (Buckingham)Gardner, Edward (S Fylde)
Berry, HonAnthonyGlyn, Dr Alan
Best, KeithGoodlad, Alastair
Bevan, David GilroyGow, Ian
Biffen, Rt Hon JohnGrant, Anthony (Harrow C)
Blackburn, JohnGray, Hamish
Body, RichardGreenway, Harry
Bonsor, SirNicholasGrieve, Percy
Boscawen, HonRobertGriffiths,E.(B'ySt.Edm'ds)
Bottomley, Peter (W'wich W)Griffiths, Peter Portsm'thN)
Bowden, AndrewGrist, Ian
Boyson, DrRhodesGrylls, Michael
Braine, SirBernardGummer, JohnSelwyn
Bright, GrahamHamllton, Hon A.
Brinton, TimHamilton, Michael (Salisbury)
Brittan, Rt. Hon. LeonHampson, DrKeith
Brooke, Hon PeterHaselhurst, Alan
Brotherton, MichaelHastings, Stephen
Brown, Michael (Brigg&Sc'n)Hawkins, Paul
Browne, John (Winchester)Hawksley, Warren
Bryan, SirPaulHayhoe, Barney
Buck, AntonyHeath, Rt Hon Edward
Budgen, NickHeddle, John
Bulmer, EsmondHenderson, Barry
Burden, SirFrederickHicks, Robert
Butcher, JohnHill, James
Cadbury, JocelynHogg, Hon Douglas (Gr'th'm)
Carlisle, John (LutonWest)Holland, Philip (Carlton)
Carlisle, Kenneth (Lincoln)Hooson, Tom
Chalker, Mrs.LyndaHordern, Peter
Chapman, SydneyHowell, Rt Hon D. (G'ldf'd)
Churchill, W.S.Howell, Ralph (NNorfolk)
Clark, Sir W. (Croydon S)Hunt, John (Ravensbourne)
Clarke, Kenneth (Rushcliffe)Irving, Charles (Cheltenham)
Cockeram, EricJenkin, RtHonPatrick
Colvin, MichaelJessel, Toby
Cope, JohnJohnsonSmith, Geoffrey
Corrie, JohnJopling, RtHonMichael
Costain, SirAlbertKaberry, SirDonald
Cranborne, ViscountKershaw, SirAnthony
Critchley, JulianKing, Rt Hon Tom
Crouch, DavidKitson, SirTimothy
Dean, Paul (NorthSomerset)Knight, MrsJill
Dickens, GeoffreyKnox, David
Douglas-Hamilton, LordJ.Lamont, Norman
Dover, DenshoreLang, Ian
du Cann, Rt Hon EdwardLangford-Holt, SirJohn
Dunn, Robert (Dartford)Latham, Michael
Durant, TonyLawrence, Ivan
Dykes, HughLawson, Rt Hon Nigel
Eden, Rt Hon Sir JohnLeMarchant, Spencer
Edwards, Rt Hon N. (P'broke)Lennox-Boyd, HonMark
Eggar, TimLester, Jim (Beeston)
Elliott, SirWilliamLewis, Kenneth (Rutland)

Lloyd, Ian (Havant & W'loo)Ridley, Hon Nicholas
Lloyd, Peter (Fareham)Rifkind, Malcolm
Loveridge, JohnRoberts, M. (Cardiff NW)
Luce, RichardRoberts, Wyn (Conway)
Lyell, NicholasRossi, Hugh
McCrindle, RobertRost, Peter
Macfarlane, NeilRoyle, Sir Anthony
MacGregor JohnSainsbury, Hon Timothy
MacKay, John (Argyll)Shaw, Giles (Pudsey)
Macmillan, Rt Hon M.Shaw, Michael (Scarborough)
McNair-Wilson, M. (N'bury)Shelton, William (Streatham)
McNair-Wilson, P. (NewF'st)Shepherd, Colin (Hereford)
Madel, DavidShepherd, Richard
Major, JohnShersby, Michael
Marland, PaulSilvester, Fred
Marlow, AntonySims, Roger
Marten, Rt Hon NeilSmith, Dudley
Mates, MichaelSpeed, Keith
Mather, CarolSpence, John
Maude, Rt Hon SirAngusSpicer, Michael (S Worcs)
Mawby, RaySproat, Iain
Maxwell-Hyslop, RobinSquire, Robin
Mayhew, PatrickStainton, Keith
Mellor, DavidStanbrook, Ivor
Meyer, Sir AnthonyStanley, John
Miller, Hal (B'grove)Steen, Anthony
Mills, Iain (Meriden)Stevens, Martin
Mills, Peter (West Devon)Stewart, Ian (Hitchin)
Miscampbell, NormanStokes, John
Mitchell, David (Basingstoke)StradlingThomas, J.
Monro, SirHectorTaylor, Teddy (S'end E)
Montgomery, FergusTemple-Morris, Peter
Moore, JohnThomas, Rt Hon Peter
Morris, M. (N'hamptonS)Thompson, Donald
Morrison, Hon C. (Devizes)Thorne, Neil (IlfordSouth)
Morrison, Hon P. (Chester)Thornton, Malcolm
Mudd, DavidTownend, John (Bridlington)
Murphy, ChristopherTrippier, David
Myles, Davidvan Straubenzee, Sir W
Neale, GerrardVaughan, DrGerard
Needham, RichardViggers, Peter
Nelson, AnthonyWaddington, David
Neubert, MichaelWakeham, John
Newton, TonyWaldegrave, HonWilliam
Onslow, CranleyWalker, B. (Perth)
Oppenhelm, Rt Hon Mrs S.Wall, Sir Patrick
Page, Richard (SW Herts)Waller, Gary
Parris, MatthewWalters, Dennis
Patten, Christopher (Bath)Ward, John
Patten, John (Oxford)Watson, John
Pattie, GeoffreyWheeler, John
Pawsey, JamesWhitney, Raymond
Percival, Sir IanWickenden, Keith
Peyton, Rt Hon JohnWiggin, Jerry
Pink, R. BonnerWilkinson, John
Pollock, AlexanderWilliams, D. (Montgomery)
Porter, BarryWinterton, Nicholas
Prentlce, Rt Hon RegWolfson, Mark
Price, Sir David (Eastleigh)Young, SirGeorge (Acton)
Proctor, K. Harvey
Raison, RtHonTimothyTellers for the Noes:
Rees-Davies, W. R.Mr. David Hunt and Mr. Tristan Garel-Jones.
Renton, Tim
Rhys Williams, Sir Brandon

Question accordingly negatived.

8 pm

I beg to move amendment No. 11, in page 13, line 33, at end insert—

'(3) In subsection (1A) of section 8 of the Taxes Act (personal reliefs: age allowance) for the words "of the age of sixty-five or upwards" wherever they appear there shall be substituted the words "of pensionable age"; and at the end of that subsection there shall be added the words "and the expression 'pensionable age' shall bear the same meaning as in Schedule 20 to the Social Security Act 1975".
(4) At the end of section 15A of the Taxes Act (personal reliefs: widows' bereavement allowance) the following words shall be added "and, to the extent that such deduction is not utilised by reason of an insufficiency of her total income, any amount so utilised shall be similarly available for the following year".
This amendment is not very expensive to the Revenue, but it is related to two aspects of the tax structure that I and my hon. Friends regard as unfair. As it is not expensive, it gives the Chief Secretary, his fellow Treasury Ministers and the Government a small opportunity to redeem their reputation.

In the first place, as they cannot keep their promise to reduce the overall tax burden, surely they will grasp the opportunity to make that burden fall more fairly by removing from the deadweight of taxation some of the most jagged nails and spears that hurt the most vulnerable people in our community.

As the Chief Secretary now appears on television at frequent intervals and tells the nation that the negligence of the Foreign Office may result in higher taxes, surely he will welcome an opportunity to include a brief tailpiece saying that the Government are showing evidence of doing their best to ensure that those higher taxes will not in future be applied quite as unfairly as taxes have been in the past.

The amendment is two-pronged, and each part applies to clause 22 which deals with thresholds. The proposed subsection (3) deals with the unfairness that was commented upon adversely on both sides of the House during our Finance Bill and Budget debates last year, particularly by the hon. Member for Birmingham, Perry Barr (Mr. Rooker), who produced some appalling examples of this hardship, and by Liberal Members. The criticism is that, so long as we have these disgracefully low thresholds for liability to income tax, women who at the age of 60 draw a pension under the Social Security Act 1975 will be at risk until they reach 65, the earliest age at which income tax age relief applies.

In no way does the amendment, either in its wording or purpose, attempt to sanctify a particular age for women to start drawing a retirement pension. It carefully avoids using any stated age, and simply requires that the "pensionable age", as defined by law, shall become the point at which age relief for income tax shall apply to all taxpayers. In no way does the amendment judge the age at which women should become pensionable.

Rightly or wrongly, under the law as it now stands, that age is 60. If the amendment were to be applied now, women taxpayers would be eligible for income tax age relief at 60. As a result—this is the whole thrust of the amendment—women on a bare State pension plus a small graduated pension, or women who inherited a modest pension from their husbands' employers, would escape tax.

Among other things, that would end a particularly dangerous trap that I should like to describe. During the proper hubbub last year about the number of women pensioners between 60 and 65 receiving income tax demands merely because of their pensions, the Government replied that that was not a great hardship to many people because the Inland Revenue did not bother to collect tax of less than £30. We should be thankful for that highly irregular mercy.

However—and this is scandalous—if the amount due from the pensioner is £31, the whole of that sum is immediately payable. There is no question of the £30 being a threshold and the pensioner paying only the amount over £30. Not a bit of it. Immediately the liability exceeds £30, the lot becomes payable. That happens to a considerable number of women pensioners between 60 and 65.

If clause 22 goes through unamended, income tax relief for a single person will be £1,565. In November, these women will receive a pension of £1,708. At once, there is the obvious gap between the pension and the appallingly low threshold. In addition, everything in our tax system is based on the single, highly-insulated fiscal year. Therefore, one must have regard to the figure in the fiscal year.

If the Government's pension intentions are honoured, as I am sure they will be in dark November, the pension for such a person in the fiscal year 1982–83 will be £1,609. That by itself marginally exceeds the proposed single person's threshold. As I have already said, many of these people also receive a graduated pension from the State, for which they have paid in the past, or a pension, usually small, relating to their own past employment or their husbands' employment. Therefore, it will require only £56 of graduated or occupational pension to bring such a woman into tax until she reaches the age of 65.

That is wholly unacceptable. It is penalising people who are receiving a benefit—benefits that Parliament has decided people require and should be paid—and who do not have any other income in addition. I re-emphasise that I am talking not about women between 60 and 65 who have other substantial means—that is a different matter—but about people who are trying to live on the benefit that Parliament has considered to be appropriate for them.

The revenue loss involved would not be substantial, but the esteem in which the Government are held would rise considerably. Every hon. Member has his own surgery cases on this matter. The people who come to my surgery are appalled at the folly and administrative costs of putting a pension into someone's handbag and then taking out the tax.

I have been asked by thrifty Yorkshire women how much it costs the State, therefore the taxpayer, to go through that ridiculous rigmarole. I have not yet been able to obtain an estimate from the Inland Revenue, but the figure must be substantial. There are misunderstandings in some cases, because often the Revenue puts the whole tax burden on total income on the PAYE code for one sort of pension and people become confused because they think that they are being taxed in error.

It is the job of the Government to draft the amendment in proper form. That is one of the few jobs that they can perform with total satisfaction—or they should.

The second heading of my amendment is different, but it relates also to women. I refer to the proposed subsection (4). It is not a substantial matter, but it seems to cry out for relief. The amendment tries to remedy what I have always regarded as an unfortunate, pedantic and legalistic aspect of our tax structure.

Almost everything in taxation of the individual is confined to the one sacred tax year. If an incident occurs to someone immediately after 5 April, he will find that his tax circumstances are different from what they would have been if the incident had happened on 4 April. That is a feature of our tax structure that I regard as outmoded. I hope that in this instance we shall mitigate it.

In his Budget Statement in March 1980 the Chancellor of the Exchequer made the following unexceptionable and welcome remarks:
"I want also to do something more for widows in the difficult time immediately following bereavement. I therefore propose to increase the present single allowance that widows receive for the tax year in which they are bereaved. The addition for that year will, at its maximum, bring the single allowance for widows up to the level of the married allowance."—[Official Report, 26 March 1980; Vol. 981, c. 1477.]
As we said in Committee in 1980, that was a civilised thing to do. However, even then we had to press the Government to amend and improve that proposal, which they did. The amount of the allowance that most widows, unless they have substanial means, can use depends on the sheer accident of the month in which they are bereaved. For example, the amount of allowance that a widow is able to use if she is bereaved in the first month of the tax year, if her income is appropriate, is £880. If she is bereaved in the last month of the tax year, there will be only £73 of the allowance available. The Committee will appreciate that that is not giving full expression to the Chancellor of the Exchequer's worthy purpose.

The amendment simply proposes that the allowance, if necessary, should run to a second year—not for ever. People in equal circumstances should be treated equally by allowing a carry-over of the allowance to the second year if the bereavement takes place in the latter part of the first tax year.

Those are the two parts of the amendment. I hope that both parts commend themselves to the Committee, and particularly to the Government.

I do not know whether the Liberal Party's procedure has been infected by its new alliance with defectors from the Labour Party, but it appears that the procedure for producing amendments has suffered from the process, well known to the Labour movement, of the production of composites through a compositing meeting. The hon. Member for Colne Valley (Mr. Wainwright) has produced what can only be described as a composite amendment. There are two separate issues rolled into one. I listened with interest to what he said about the widows' bereavement allowance. He has identified a genuine problem on which the official Opposition will reflect.

8.15 pm

However, we are not immediately enamoured of the principle of carrying a personal allowance forward from one financial year to another. There might be diffiulties with the precedent that would be created. However, the hon. Gentleman has touched on a genuine problem. We shall take to heart what he has said and consider what can be done. We look forward with interest to hearing what the Government propose to do with the hon. Gentleman's amendment.

The other matter that the hon. Gentleman raised is also a genuine and real issue that probably affects more people more intimately than the first matter to which I referred. As the hon. Gentleman said, the position of single women pensioners between 60 and 65 exercised the minds of the Committee during the Finance Bill 1981. I join with the hon. Gentleman in paying tribute to my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) because of the persistence with which he pursued the issue.

The position of women in that age group is an outrage. Over the past year a basic pension was sufficient to carry them over their personal tax threshold. They avoided tax liability only because the amount by which they exceeded the threshold was within the administrative tolerance. However, that was by so narrow a margin that it required an additional income of only 33p a week to carry them over that administrative tolerance. In some cases a graduated pension payment would be sufficient to carry them over that small additional sum. That meant that for the first time in our history since the introduction of the State pension some pensioners found that they were liable to tax on nothing but the State pension.

I thoroughly endorse the hon. Gentleman's point. It is probably the most acute aspect of the difficulty. At the point at which those people enter tax liability, the administrative tolerance ceases to be a blessing and becomes a curse. At that point they are liable to tax not simply on the amount by which they have crossed the threshold into tax liability, but on the £100 that previously was covered by the administrative tolerance.

I should like to share with the Committee the case of one of my constituents. I am not seeking to make a constituency point, because there are similar constituents in the constituency of every hon. Member. My constituent had fallen foul of that aspect of the Finance Bill 1981. She received a graduated addition to her pension that carried her up to, but not over, the administrative tolerance. In the preceding year she had received notice of a roof repair that was required on her house, which in Scotland can be legally enforced by the local authority.

This is a tribute to the care with which that lady shepherded her money, given how little her income was. Over that year she had succeeded in saving £200 at the bank. She therefore became liable—I can only describe it as liable rather than entitled—to interest on her bank deposit of £20. That £20 of bank interest carried her over the administrative tolerance threshold and triggered off a tax liability not just for that £20 but for the full £120 by which she exceeded her personal tax threshold. As a result of the income of £20 of bank interest, she received a tax demand for £40—30 per cent. of £140. She was paying tax on that £20 at a marginal rate of 200 per cent.

I wrote to the Chancellor of the Exchequer to draw his attention to this case and to the extent to which it highlighted a danger of which several hon. Members, including myself and the hon. Member for Colne Valley, had warned during the passage of the 1981 Finance Bill. I received a reply from the noble Lord Cockfield, who has since been translated to higher office, in which he had the impertinence to suggest that my constituent should be indebted to the Government because they had cut the rate of tax she paid from 33 per cent. to 30 per cent.

To suggest that is to miss the point. Before the 1981 Finance Bill, my constituent did not pay tax at all Moreover, if she had been liable for tax, she would have paid it at the rate of 25 per cent., instead of the standard rate of 33 per cent. Indeed, as a result of what the Government did, she was paying tax at a higher rate than she otherwise would have done. The final lunacy is that I could advise my constituent—if she had been willing to do so, but in the circumstances she was not—to go to the DHSS and obtain a supplementary pension which would cover the extent to which she was liable for tax.

I come to the case of Miss D, who was mentioned by both myself and my hon. Friend the Member for Perry Barr, when we considered the matter on Report in 1981. As hon. Members who were present on that occasion may recollect, Miss D, was a client—if that is the right word—of the social services department at Harlow new town. The case was brought to my attention and to the attention of my hon. Friend the Member for Perry Barr because the lady found that she was simultaneously paying £4·06 in tax and drawing £9·06 in supplementary pension. She was a woman aged 60 to 65, retired and drawing a State pension. The £9 that she drew in supplementary pension was calculated to reflect her tax liability.

The final touch of farce has occurred since we debated the matter on Report in 1981. On appeal, Miss D was successful in persuading the supplementary benefit appeal tribunal to backdate her entitlement to supplementary pension to cover her tax liability to the start of the 1981–82 tax year, on the ground that it was so unlikely that she would find herself liable to tax in that year that she could not have reasonably anticipated it at the start of the tax year.

That situation is an offence to reason. There is no need for us to become morally indignant or to describe it as a social outrage. It is irrational. It is preposterous that the House should lay down a level which represents a minimum income standard, and then find that there are people with less than that income paying tax. Yet that is precisely what happens, particularly with the 60 to 65 age group living on State pension.

To a degree, the problem is reduced this year because the tax threshold has been increased by 4 per cent. more than the State pension. Nevertheless, the problem remains, as the hon. Member for Colne Valley made clear. Women in this position still find that they have a State pension which exceeds the single person's allowance for 1982–83. Again, they are saved from being liable to tax on that State pension only by the operation of the administrative tolerance. This year, they require an additional income of £1·25 a week to become liable to payment of tax. If they receive such an income, it will then trigger a tax liability of 58p per week, or a marginal rate of tax of 46 per cent.

We are talking about a group of people whose income hovers around £30 a week. It is one of the poorest sections of the community, if the term "poorest" is to have any meaning at all. The situation is an outrage. It is an offence to reason that this group should be subjected to tax liability. It is particularly outrageous when we reflect that in this Finance Bill £400 million has been found to uprate the higher thresholds for the higher rate bands, which apply to people who have much less hardship in meeting their tax bill than the people whom we are considering in the amendment.

The Government have created a new defect in the British tax structure. That in itself is something of an achievement. As they have devised this anomaly, so they have a duty to resolve it. Because of the difficulty involved in the other part of the hon. Gentleman's amendment, it is not the appropriate vehicle for remedying it, but I warn the Chief Secretary that if, between now and Report, no remedy is put forward for the category of women in this position, we on the official Opposition Front Bench will press the matter strongly and divide on it on Report.

If I follow the hon. Member for Edinburgh, Central (Mr. Cook) in this respect, it is to deal in reverse order with the two limbs of the amendment of the hon. Member for Colne Valley (Mr. Wainwright).

The cost of allowing the widow's bereavement allowance to be carried forward to the year after bereavement in the way that the hon. Member for Colne Valley proposes would be £15 million in a full year. The hon. Gentleman was good enough to say that it was this Government who introduced this allowance in 1980. It was aimed at helping widows in the difficult period immediately following breavement, when they have to make financial as well as personal adjustments to a difficult situation. It was well received and, I think, has been most welcome.

Although I understand the reason why the hon. Member for Colne Valley has put forward the amendment, I cannot commend it to the Committee, because, as the hon. Member for Edinburgh, Central said, it would be a radical departure from our tax situation. I am not suggesting that radical departures are never appropriate—they often are—but the amendment would be a strange vehicle by which to introduce a departure of this kind.

Our objection, leaving aside the question whether this is the vehicle to make a fundamental change of this kind, is that it would introduce considerable complexity, and therefore administrative cost, into the handling of these affairs. The Revenue would need extra staff. It would often be some time into the tax year before it could be established how much of the allowance was available to be carried forward, and if the amount had been over-estimated the widow would be faced with an increase in her tax bill part of the way through the year.

Moreover, in equity, the argument is not quite as straightforward as it might seem. The people most likely to have an unused part of the allowance are those whose husbands died towards the end of the tax year, but in the first part of the year, when the husband was alive, they are more likely to have been in a position to get the full benefit of the married man's allowance against the combined incomes of husband and wife, so that counter-balances it is some cases. I am not saying that there are not cases when that does not happen, but the situation is not quite as clear-cut as the hon. Gentleman would have us believe. The administrative complexity of making the change would be considerable, and there is a cost. For those reasons, I cannot commend that limb of the amendment to the Committee.

On the first limb of the amendment, the Committee will be grateful to the hon. Members for Colne Valley and for Edinburgh, Central for raising once again the question of widows and single women aged 60 to 64. As the hon. Member for Edinburgh, Central rightly said, their position is substantially eased by the Budget proposals.

In 1982–83, women with basic pension alone and no other income will not have to pay tax because of the £100 assessing tolerance. Women with earnings-related additions to their State pension will not have to pay tax unless those additions are more than £64 a year, which is well above the average amount of such additions to State pensions. That is a considerable improvement on last year. About half of the widows and single women in that age group will not pay tax at all. The number paying tax will be about 50,000 fewer than in 1981–82, even after taking account of the pensions increase in November 1982.

There has been a substantial improvement in the financial position of women this year simply because of the increase in the allowance. That is the right approach to the problem. Of course it would be nice to go further, but we have not been able to do so. It would be a mistake to try to solve the problem by giving the age allowance to women aged 60. The cost of doing that would be quite substantial—about £85 million in a full year. That would not be the right approach in principle to the problem, because the age allowance is, as its name suggests, an allowance for old age—not for retirement as such.

8.30 pm

If the proposals of the hon. Member for Colne Valley were enacted, they would introduce a number of anomalies. Many men stop working at 60 and many women keep on working after that age. The amendment would give age allowance at 60 to women who were still at work as well as to those who had retired, but deny it it men of the same age even if they had stopped work. Widows aged 50 or more receive the same pension as single women and widows over 60, and one of the results of the amendment would be to give the relief to a woman over 60 who was still working and had no pension, but deny it to a widow under 60 even though she is receiving a pension and is not working.

There are other anomalies with regard to married couples. The mischief, to the extent that it exists, and the extent to which it has not been met by the increase in allowances, is more to do with the fact that there is no common pension age for men and women. The White Paper on the elderly opened up for public discussion the possibility of men and women receiving a State pension at the same age. The Select Committee on Social Services is considering that.

The approach of the hon. Member for Colne Valley is not right. The mischief, to the extent that it exists, has been substantially ameliorated by the Budget. The costs of going further, whether in the direction and by the means that the hon. Gentleman suggests, or in any other way, would be substantial. I cannot, therefore, commend the amendment to the House.

The Chief Secretary's reply to both heads of the Liberal amendment is disappointing. I should not have been at all miffed if he had pointed out some of the defects of the details of our proposal and showed how a superior measure could remedy the injustices that were well outlined by the hon. Member for Edinburgh, Central (Mr. Cook) and, I hope, myself. However, the Chief Secretary has done nothing of the kind.

He has belaboured the Committee, not for the first time, about the cost to the Revenue. The cost of each of the branches of the amendment is small compared with what the Government are prepared to spend on their friends. It is intolerable that women, who are vulnerable in many financial respects, should be deprived of reasonably fair treatment simply because the costs that are apparently not taken into account with regard to concessions to large taxpayers are regarded as insurmountable and mountainous when proposals of this kind are brought forward. There was an atmosphere about the Chief Secretary's reply—it was partly true also of the speech of the hon. Member for Edinburgh, Central—of the good old political firms of Box and Cox, of Punch and Judy, of Mr. See and Mr. Saw, of Tweedledum and Tweedledee. Both are wedded to keeping our dear old rickety tax machine in virtually its present state. The unfair Procrustean bed of the single fiscal year whereby all hope dies with regard to allowances on 5 April each year must apparently be maintained as part of the torture, the cold water treatment of the British people, that has made us the great nation that we are. It is nonsense that in 1982, in the age of the computer, we should be imprisoned by the concept of the single fiscal year. I was disappointed that both Front Benches seemed to regard the single fiscal year as sacred, so the bereaved would just have to lump it. That is just not good enough.

The hon. Gentleman must not misrepresent our position. I entirely accepted that there was a problem with the bereavement allowance which would require solution. I urge the hon. Gentleman that he should not lightly concede the principle of allowances not being carried forward from one year to the other. If he is in any doubt as to the dangers that lie ahead on that path, he should reflect on what has happened with corporation tax, which has produced a yearly tax overhang which accrues faster than the total revenue from the tax.

I entirely part company with the hon. Gentleman on that. When I practised as an accountant, I could have laid my hand on my heart and said that, if there had been no carry-over of corporation tax from one year to the next, three quarters of the well-run businesses of this country would have been in the bankruptcy court. It is an extremely civilised principle, and it is notable that all Governments have been forced to admit it for the business sector. Otherwise there would be no corporate taxpayers left to milk. But the poor old individual, especially the woman, has to lump it Carry-over can be admitted for ICI, GKN, GEC and all limited companies, but not for the individual—and the alliance stands for the individual.

The rainbow alliance, as I said before—SDP and Liberal.

I was staggered at the Chief Secretary's extraordinarily callous defence of the present position when he said that ladies who were bereaved in the latter part of the tax year had enjoyed the benefit of the married allowance in the earlier part of the year. But the husband was not dead then. He had to be fed and looked after, his room had to be heated, and so on. The married allowance was needed for that. We believe that every widow who pays tax is entitled to 12 months of married allowance after bereavement. That is the only way to give proper effect to the admirable purpose outlined by the Chancellor in March 1980, and nothing that has been said today has convinced me or, I think, my hon. Friends otherwise.

The second and more substantial grievance, in which more people are involved, is that tax is simply levied on the amount to which the House decides that retired people are entitled in State benefit. In other words, the House contradicts on a Thursday what it has solemnly voted for on, say, a Monday. That brings the House into disrepute, and it makes the law and especially the Treasury look an ass in the eyes of many people.

In gathering ammunition on this, I have been assisted by one of the most reputable charities for the elderly, Help the Aged, which drew my particular attention to the added insult of the present tax position. As I hinted in my earlier speech, when women between the ages of 60 and 65 are taxed on a pension plus a graduated supplement or occupational pension, the tax is usually collected by applying an exorbitant rate of PAYE to the additional pension.

Help the Aged cites the case of one client whose papers it has carefully examined who, as a result of this, was given an F tax code on her occupational pension last year so that this iniquitous amount could be levied. The result was a tax rate of no less than 40 per cent. on her occupational pension. Not only had she to pay the money, but she had all the frustration of suddenly finding that, as an elderly and retired person, she was given a PAYE code resulting in tax at 40 per cent. Help the Aged assures me that a considerable number of people have very properly asked it why they have received such hefty PAYE codes.

One other part of the Chief Secretary's thin defence calls for comment. He said that we were trying to apply age relief to people who were simply retired. I must tell him that in the part of the country from which I come—the county of Yorkshire that he used to have a share in representing—this is still known as the old age pension. I am convinced that for the rest of my lifetime at any rate the vast majority of people in and around Collie Valley will rightly describe it by its proper Anglo-Saxon name and not apply the Latinised vague and meaningless term, retirement pension.

I had hoped to see some glint of civilisation in the Government's eyes and some sign that they would act to make the tax system in this respect less of a nonsense. Instead, we have had an implacable attitude from the Chief Secretary. I have no option but to recommend to my right hon and hon. Friends that we press the amendment to a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 19, Noes 236.

Division No. 129]

[8.40 pm


Alton, DavidSteel, Rt Hon David
Brocklebank-Fowler, C.Stewart, Rt Hon D. (W Isles)
Brown, Ronald W. (H'ckn'yS)Thomas, Dafydd (Merioneth)
Horam, JohnWainwright, R. (Colne V)
Howells, GeraintWellbeloved, James
Johnston, Russell (Inverness)Wigley, Dafydd
Kilfedder, JamesA.Wilson, Gordon (DundeeE)
McNally, Thomas
Mitchell, R. C. (Soton Itchen)Tellers for the Ayes:
Penhaligon, DavidMr. A. J. Beith and Mr. Clement Freud
Sandelson, Neville
Skinner, Dennis


Alexander, RichardBraine, Sir Bernard
Alison, Rt Hon MichaelBright, Graham
Amery, Rt Hon JulianBrinton, Tim
Ancram, MichaelBrittan, Rt. Hon. Leon
Aspinwall JackBrotherton, Michael
Atkins, Robert (Preston N)Browne, John (Winchester)
Atkinson, David (B'm'th, E)Buck, Antony
Baker, Kenneth (St. M'bone,)Budgen, Nick
Baker, Nicholas (N Dorset)Bulmer, Esmond
Banks, RobertBurden, Sir Frederick
Beaumont-Dark, AnthonyButcher, John
Bendall, VivianCadbury, Jocelyn
Bennett, Sir Frederic (T'bay)Carlisle, John (Luton West)
Benyon, Thomas (A'don)Carlisle, Kenneth (Lincoln)
Benyon, W. (Buckingham)Chalker, Mrs. Lynda
Best, KeithChapman, Sydney
Bevan, David GilroyChurchill, W.S.
Biffen, Rt Hon JohnClark, SirW. (Croydon S)
Blackburn, JohnClarke, Kenneth (Rushcliffe)
Body, RichardColvin, Michael
Bottomley, Peter (W'wich W)Cope, John
Bowden, AndrewCorrie, John
Boyson, Dr RhodesCostain, Sir Albert

Cranborne, ViscountLewis, Kenneth (Rutland)
Critchley, JulianLloyd, Ian (Havant & W'loo)
Dean, Paul (North Somerset)Lloyd, Peter (Fareham)
Dickens, GeoffreyLoveridge, John
Douglas-Hamilton, Lord J.Luce, Richard
Dover, DenshoreLyell, Nicholas
du Cann, Rt Hon EdwardMcCrindle, Robert
Dunn, Robert (Dartford)MacGregor, John
Durant, TonyMacKay, John (Argyll)
Dykes, HughMcNair-Wilson, M. (N'bury)
Eden, Rt Hon Sir JohnMcNair-Wilson, P. (NewF'st)
Edwards, Rt Hon N. (P'broke)Madel, David
Eggar, TimMajor, John
Eyre, ReginaldMarland, Paul
Fairbairn, NicholasMarlow, Antony
Fairgrieve, Sir RussellMarten, Rt Hon Neil
Faith, Mrs SheilaMates, Michael
Farr, JohnMather, Carol
Finsberg, GeoffreyMaude, Rt Hon Sir Angus
Fisher, Sir NigelMawby, Ray
Fletcher-Cooke, Sir CharlesMaxwell-Hyslop, Robin
Fookes, Miss JanetMayhew, Patrick
Forman, NigelMellor, David
Fowler, Rt Hon NormanMiller, Hal (B'grove)
Fox, MarcusMills, Iain (Meriden)
Fraser, Peter (South Angus)Mills, Peter (West Devon)
Fry, PeterMitchell, David (Basingstoke)
Gardiner, George (Reigate)Monro, Sir Hector
Gardner, Edward (S Fylde)Montgomery, Fergus
Garel-Jones, TristanMoore, John
Glyn, Dr AlanMorris, M. (N'hampton S)
Goodlad, AlastairMorrison, Hon C. (Devizes)
Gow, IanMorrison, Hon P. (Chester)
Grant, Anthony (HarrowC)Mudd, David
Gray, HamishMurphy, Christopher
Greenway, HarryMyles, David
Grieve, PercyNeale, Gerrard
Griffiths, E (B'ySt. Edm'ds)Needham, Richard
Griffiths, Peter Portsm'th N)Nelson, Anthony
Grist, IanNeubert, Michael
Gummer, John SelwynNewton, Tony
Hamilton, Hon A.Onslow, Cranley
Hamilton, Michael (Salisbury)Oppenheim, Rt Hon Mrs S.
Hampson, Dr KeithPage, Richard (SW Herts)
Haselhurst, AlanParris, Matthew
Havers, Rt Hon Sir MichaelPatten, Christopher (Bath)
Hawkins, PaulPatten, John (Oxford)
Hawksley, WarrenPattie, Geoffrey
Hayhoe, BarneyPawsey, James
Heath, Rt Hon EdwardPercival, Sir Ian
Heddle, JohnPink, R. Bonner
Henderson, BarryPollock, Alexander
Hicks, RobertProctor, K. Harvey
Hill, JamesRaison, Rt Hon Timothy
Hogg, Hon Douglas (Gr'th'm)Renton, Tim
Holland, Philip (Carlton)Rhodes James, Robert
Hooson, TomRhys Williams, Sir Brandon
Hordern, PeterRidley, Hon Nicholas
Howell, Rt Hon D. (G'ldf'd)Rifkind, Malcolm
Howell, Ralph (N Norfolk)Roberts, M. (Cardiff NW)
Hunt, David (Wirral)Roberts, Wyn (Conway)
Hunt, John (Ravensbourne)Rossi, Hugh
Irving. Charles (Cheltenham)Rost, Peter
Jenkin, Rt Hon PatrickSainsbury, Hon Timothy
Jessel, TobyShaw, Giles (Pudsey)
Johnson Smith, GeoffreySheldon, Rt Hon R.
Jopling, Rt Hon MichaelShelton, William (Streatham)
Kaberry, Sir DonaldShepherd, Richard
King, Rt Hon TomSilvester, Fred
Knight, Mrs JillSims, Roger
Knox, DavidSmith, Dudley
Lamont, NormanSpeed, Keith
Lang, IanSpence, John
Langford-Holt, Sir JohnSpicer, Michael (S Worcs)
Latham, MichaelStainton, Keith
Lawrence, IvanStanbrook, Ivor
Lawson, Rt Hon NigelStanley, John
Le Marchant, SpencerSteen, Anthony
Lennox-Boyd, Hon MarkStevens, Martin
Lester, Jim (Beeston)Stewart, Ian (Hitchin)

Stokes, JohnWall, Sir Patrick
Stradling Thomas J.Waller, Gary
Taylor, Teddy (S'endE)Walters, Dennis
Temple-Morris, PeterWard, John
Thomas, Rt Hon PeterWatson, John
Thompson, DonaldWheeler, John
Thorne, Neil (IlfordSouth)Whitney, Raymond
Thornton, MalcolmWickenden, Keith
Townend, John (Bridlington)Wiggin, Jerry
Trippier, DavidWilkinson, John
van Straubenzee, Sir W.Winterton, Nicholas
Vaughan, DrGerardWolfson, Mark
Viggers, PeterYoung, Sir George (Acton)
Waddington, David
Wakeham, JohnTellers for the Noes:
Waldegrave, Hon WilliamMr. Robert Boscawen and Mr. Peter Brooke.
Walker, B. (Perth)

Question accordingly negatived.

Clause 22 ordered to stand part of the Bill.

Clause 18

Charge Of Income Tax For 1982–83

I beg to move amendment No. 12, in page 12, line 23, after 'charged', insert—

`(i) in respect of so much of an individual's total income as does not exceed £750 at the rate of 25 per cent.;
It may be for the convenience of hon. Members, so that they are not detained too late tonight, if I range slightly wider than I would otherwise in the debate on the amendment and take in some of the remarks that I might have made in the clause stand part debate.

There have been many references by my right hon. and hon. Friends this afternoon to the pledges made by the Conservative Party at the last election to reduce income tax at all levels. The Conservative Party manifesto says:
"We shall cut income tax at all levels to reward hard work, responsibility and success; tackle the poverty trap … It is especially important to cut the absurdly high marginal rates of tax both at the bottom and top of the income scale."
It is important to emphasise that, while the manifesto contained only a reference to income tax, during the course of the election campaign, in their anxiety to win the election, Conservative spokesmen gradually extended the pledge to cover not only income tax but all taxes on earnings, including national insurance contributions. It is important to have that point on the record. That pledge was made by the Chancellor of the Exchequer in a speech at Whitefield on 24 April 1979. He departed from the language in the manifesto, which referred to income tax, and spoke deliberately about lowering taxes on income, and taxes on income include national insurance contributions.

In a speech on 16 April 1979, the Prime Minister spelt out six steps to Britain's recovery. One of those steps was lower taxes on earnings. If there was any dubiety, it was dispelled by the Prime Minister in a speech on 19 April—just three days later—in the town hall, Birmingham. The right hon. Lady said:
"I say to every worker in the Midlands, to every person who goes out to earn a living: the Conservatives are on your side …. It's our intention to rebuild our industries on the rock hard and well-tested foundations of incentive and profit."
It gets better:
"We are going to do it by … making it pay to work again, by seeing that those who put their back into the job get good wages with fewer 'deductions' and more for the family to spend as it chooses."
However, as my hon. Friend the Member for Edinburgh, Central (Mr. Cook) spelt out, deductions are what matter, and they include national insurance contributions as well as income tax. It was to reduce deductions, not just income tax, that the Prime Minister made her explicit and categoric pledge during the election. It is important to get that on the record. It is not just a point of sophistry or a casuistical point. Given the judgment that must be made by Parliament and the electorate, it is vital to ascertain precisely what the Prime Minister and her colleagues promised at the election. Since the election, the Chancellor of the Exchequer and the Chief Secretary have often attempted to suggest that national insurance contributions are not a form of tax. I have heard the Prime Minister suggest on more than one occasion that it is not a tax and that the justification for raising national insurance contributions is that those in work should pay for those out of work. I should have thought that applied equally to the payment of income tax.

Far from treating national insurance contributions less and less as a tax, the Government are treating them more and more as a tax. They have destroyed much of the insurance principle that lay behind the original separation of national insurance contributions from income tax. They have destroyed a central element of the insurance principle for the short-term benefit of the relation to earnings. When earnings-related contributions were introduced by the present Secretary of State for Education and Science in the Social Security Act 1973, they were justified on the ground that they would produce earnings-related benefits. The Government have now broken that link, particularly for short-term benefits.

Partly as a result of the break in that link and of the increase in national insurance contributions, the burden of direct tax on low incomes has greatly increased. That is demonstrated by the figures that the Government were forced to give in response to questions from others as well as myself on the changing burden of taxation between the last year of the Labour Government and this year. In 1978–79 a married couple with two children on half average earnings had to devote about 12·5 per cent. of their income to tax and national insurance contributions. Today, that figure has increased by 50 per cent. There has been an increase in the real burden of taxation on the lowest paid to over 18·5 per cent. The direct tax burden on a family on three-quarters of average income has increased from 20·8 per cent. in 1978–79 to 24·7 per cent. today. As nine out of 10 families know to their cost, the reality of the Government's tax record has been not that direct taxes have gone down but that they have gone up.

9 pm

What perhaps is not appreciated sufficiently, although we may have succeeded finally in securing the understanding of Conservative Members and the people, is that, while the burden of direct tax has gone up, the burden of indirect tax has also increased. Under this Government the burden of total taxation has increased dramatically at all levels of earnings until one gets to earnings which are above twice the average, but that affects only about 8 per cent. of taxpayers.

The Conservative Party, in its election manifesto, pledged itself to tackle the poverty trap. According to the manifesto, it was especially important to cut the absurdly high marginal rates of tax at the bottom of the income scale. It is in the context of the poverty trap and the absurdly high marginal rates of tax at the bottom of the scale that the Government have produced that the case for a reduced rate band becomes very strong.

I spelt out the way in which the tax burden on the lowest paid has increased dramatically during the past four years. The Government may say in reply—this point was made by the Institute for Fiscal Studies when it put in evidence two years ago against the idea of a reduced rate band—that very few families earn only half average earnings, or £80 per week, so it is using a sledge hammer to crack a nut.

I should like to make two points in reply to points that the Minister will no doubt make and also to the calculations of the Institute for Fiscal Studies. First, when we talk about an average income of £80 per week, which is half average earnings, we mean that the wage of the breadwinner is about £69 and that he is receiving child benefit of about £11 in addition. There may be few people in Surrey, East or Cirencester and Tewkesbury who earn only £69 per week, but I warrant that in Stepney, Ashton, Edinburgh, Workington, Glasgow and all the constituencies represented by the Opposition Members there are hundreds of thousands who earn only £69 per week. I could name hundreds of my constituents in Blackburn who earn that or less, so we are talking about many people.

The second point is that the taxation of unemployment benefit and supplementary benefit will bring the income of many more families into the tax bracket where half avearge earnings are taxed. This will apply particularly where a breadwinner loses his job half-way through the year, and typically where he loses his job in the autumn. If we take into account that those who are already on low earnings are likely to be in insecure, often seasonal, employment and will lose their jobs as winter approaches, we are again talking about large numbers.

Before the taxation of unemployment benefit was agreed, those who lost their jobs half-way through the year, having been earning approximately £70 per week, would have dropped out of taxation altogether because their total taxable income during the year would have been less than their personal allowance as married men. Therefore, someone earning up to £90 per week for half the year who was declared redundant in the autumn would have paid no tax at all. If someone earning £90 a week on gross earnings of, say, £100—the maximum of this example—becomes unemployed half-way through the year, his total taxable earnings for the whole year will work out at half average earnings, because his unemployment benefit of £41 a week will now be taxed by the Government. Thousands of people who previously would not have been within this tax bracket, which the IFS and the Government dismissed as a piece of statistical imagination, will be brought into it because of the taxation of unemployment benefit.

As my hon. Friend says, those people's disposable income will also be greatly affected by the delays in paying rebates until the end of the year.

Most people do not need highly paid economists to tell them that the Government are proving a very costly experience for them. The Government have not only raised the tax levels but they are telling working people to take less in wage increases.

Indeed, they are, but the Government use highly paid economists to try to suggest that our case on behalf of our constituents is a figment of our imagination. Sad to say, the IFS fell into that trap when it suggested that only about 10,000 families would benefit from a reduced rate band of 25 per cent.

The case for a reduced rate band has been discussed many times. A feature of the taxation system throughout the 1950s and part of the 1960s was not one reduced rate band but three. Indeed, a reduced rate band was reintroduced by the Labour Government in 1966, abolished in 1970, reintroduced by the Labour Government in 1978, and abolished by the present Government in 1980. It has been given great consideration by Parliament over many years. It was last discussed during the Committee stage of the 1980 Finance Bill, when much of the discussion centred on evidence submitted by Mr. C. N. Morris, of the IFS, about its operation.

The IFS said that pound for pound it was better to spend the cash that one would spend on a reduced rate band to raise personal allowances, which would take more people out of taxation than would the reduced rate band. In short, it said that there was confusion between the marginal rate of tax and the average rate, and that what mattered, except for a small group, was not the marginal rate but the average rate, and that people's position would be no different with a marginal rate of 25 per cent. on a small band of their income rather than 30 per cent. The IFS also claimed that only about 10,000 families would benefit from a reduced rate band. When that evidence was discussed, the hon. Member for Gateshead, West (Mr. Horam) described it as not a fiscal study but fiscal sorcery. On that occasion, if no other, he was fairly close to the mark.

I concede to the IFS and those who are held in high regard by the Opposition, such as David Piachaud, that the case against the reduced rate band is respectable and needs to be considered. However, it has been well answered by a submission by Christopher Pond and Clive Playford, of the Low Pay Unit, who took issue with the IFS evidence. They said that the argument that it was better to spend the cash on personal allowances rather than on the reduced rate band was
"true only at a single point in time. In any one financial year it is always more beneficial to the low paid to have an increase in allowances than the maintenance of a lower rate of tax. But if such allowances are not fully index linked then the following year part, if not all, of the value of the increase in allowances will have been eroded by inflation. The reduced rate band, on the other hand, will remain as a structural feature of the tax system."
Exactly the situation that the Low Pay Unit predicted in its evidence has now arisen. There has been a failure fully to index not only last year but, for the reasons given by Labour Members, this year. That failure fully to index has increased the burden of taxation by 50 per cent. in real terms for those on the lowest incomes.

It is in the context of that failure, which we regret but can do nothing about, that the case for a reduced rate band to provide some amelioration in the tax burden for the lowest paid becomes overwhelming. When the reduced rate band was abolished by the Government in 1980, the full year's costing given in the Red Book at that time was a saving of £901 million. I dare say that the Minister will give the Treasury's present estimate of the cost. Sadly, the Government, this year as last year, refused to provide the Opposition with a tax ready reckoner before the Budget. It does not lie in the mouth of the Chief Secretary or the Minister to cavil at the cost of amendments that the Opposition are forced to make when they refuse to provide the information, as they did in answer to a parliamentary question from me before the Budget.

Moreover, the Government have failed to publish their own tax ready reckoner, which they traditionally publish after the Budget. My own calculation—and I shall be interested to hear the Minister's—is that if the cost of abolishing the lower rate band in 1980–81 was £900 million, the cost of restoring it today may be £1,100 million to £1,200 million. The Minister will no doubt ask the question that he asked of my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon): where is the money to come from? I will provide an answer to that, but I also make one other point. In these debates on the Finance Bill, given the procedures and the procedural straitjacket within which we operate, there is no opportunity for the Opposition to put forward their alternative Budget or their studied Budget judgment. That is why my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) had to put forward that considered judgment outside rather than inside the House of Commons.

Our job in the course of these debates is to criticise the Government, constructively we hope, and to allow the Committee to judge whether the Government are standing by their promises, rather than to state what we would do in the alternative. That applies to personal allowances where, if the Government had stuck to their promises, the bill would have been the £2,000 million that they were suggesting should be paid.

Where might the money come from? Again, Opposition Members have dealt at length and with great eloquence which the way in which the tax burden on the rich has been reduced while that on the poor and on everybody else in work has been increased. I shall not go over that. In answering the question that the Minister will pose about where the money will come from, I want to deal with the cost of these enormous and gratuitous increases in tax payments to the rich, the cost that has fallen on the country, in order to reduce the burden of taxation on single Cabinet Ministers from 52½ per cent. to 46 per cent., and those who are married with two children from 50 per cent. to 44 per cent. It is the cost of those reductions and the reductions for those with higher incomes.

9.15 pm

It is interesting that although the Government made it plain before the general election that they would cut taxation for the rich as well as the poor—they have kept that promise and a good bit more—they have suddenly become coy about the cost of the tax cuts to the rich. On 8 April the hon. Member for Ealing, North (Mr. Greenway) asked the Chancellor of the Exchequer
"by what percentage the basic rate of income tax could be reduced if the top rate were raised to its 1979 level."
The Chancellor replied:
"The re-imposition of an 83 per cent. top rate of income tax would finance a reduction of less than one quarter of 1p in the basic rate."
He went on in a supplementary answer to say:
"Any attempt to whoop up envious onslaughts on the higher paid could generate …negligible revenue."—[Official Report, 8 April 1982; Vol. 21, c. 1077.]
At best, that reply was seriously misleading and, in my judgment, verging on the mendacious.

The Library's estimate of the cost of reducing the basic rate by 1p in 1982–83 prices is £950 million. One quarter of that is £237 million. My hon. Friend the Member for Oldham, West (Mr. Meacher) asked the Chancellor on the same day:
"What is the total annual cost at current prices of changes in taxation of the higher rate—and higher rate thresholds— of income tax, capital transfer tax and capital gains tax made in his last four Budgets, apart from the cost of any adjustments to these taxes to maintain the real burden at the levels which obtained in 1978–79."—[Official Report, 8 April 1982; Vol. 21, c. 449.]
He was told that the cost was £740 million in a full year.

There is more to that because when the Library checked with the Inland Revenue about the composition of that answer it was told that £5 million of the total was for capital transfer tax, because, even after all the giveaways, capital transfer tax had not been indexed at 1978–79 levels. I find that surprising, but we shall accept it for the moment.

The Inland Revenue also said that capital gains tax concessions had cost only £90 million above indexation. Of the full cost of £740 million, £655 million was the cost to the tax concessions made to the rich above the need to index, at the higher rates and on higher thresholds. But, by sleight of hand, the Treasury omitted to mention the cost of the investment income surcharge, which applies only to those on higher rates. That is another £210 million. On the Treasury's own figures, the cost of the concessions to the rich, above those necessary to maintain their real value as at 1978–79, is not £237 million, as the Chancellor intimated on 8 April, but £865 million.

Both the Financial Secretary and the Chancellor have a serious duty to explain to the Committee how they gave an answer that was so clearly at variance with the facts also provided on that day.

Can my hon. Friend the Member for Blackburn (Mr. Straw) tell me how many families benefited from the changes? The Government said that only 10,000 families would benefit from the lower rate band. We wish to know how many families at the top end benefited.

I can tell my hon. Friend that 93 per cent. of taxpayers earn twice average earnings or less. Those who receive substantial benefits—those earning five times average earnings or more—represent 2 per cent. or 3 per cent. of all taxpayers.

I have known the hon. Gentleman for many years and I know that he would not mislead anyone, or wish to do so. In my question I was tackling the principle that is adopted by Opposition economic spokesmen, who have consistently led the public to believe that by restoring the high levels of taxation in the early part of 1979 they would release large sums of money that could be used to reduce the burden on those paying taxation at the lower rates. I do not know whether the hon. Gentleman's figures are right or wrong, but they make no difference to my argument. I have a duty to tell him that he must say where the money should come from to finance some of the tax cutting that he is talking about.

The Chancellor of the Exchequer told the hon. Gentleman that the figure was £237 million, which in my judgment is not a negligible revenue, bearing in mind that we receive letters from DHSS Ministers telling us that they cannot allow the unemployed some tiny concession because it would cost £2 million. At the same time £237 million is described as negligible. However, it appears that the actual cost to the Treasury is £950 million, which is exactly the cost of reducing income tax by 1p in the pound, which is a substantial thing to do if that is what a Government want to do.

My hon. Friend has brought to the Committee's attention a major area of consideration. It seems that £700 million is unaccounted for, although that has been denied in Parliament. That is what we shall have to pay to meet the demands of the better off in our society. I hope that the Minister will address himself to this issue if to no other. He should respond to my hon. Friend's argument and withdraw the statements that he and his right hon. and hon. Friends have made in denial of my hon. Friend's assertions.

I hope that the Minister will bear in mind my hon. Friend's intervention.

When the Government were in Opposition they complained that the then Labour Government were practising the politics of envy. That was a charge which had little evidence to support it. It was really an aggressive and assertive defence of massive and growing inequalities in our society. It was the Conservatives' attempt to justify those inequalities. They always forgot to mention the sin of avarice, which is a far deadlier sin than that of envy. The Government have unquestionably practised the politics of greed. They have done so without shame.

The Government have torn up their taxation pledges to the poor. They have transferred the burden of taxation from the rich to the poor and they have made the divisions in our society far greater rather than less. These policies have hardly been the one nation politics of Disraeli, which the Government are proud to claim, let alone the moralities of St. Francis of Assisi, to which we were all treated when the Prime Minister crossed the portals of No. 10 on that dismal day three years ago.

The acceptance of amendment No. 12 would go some little way to putting some fairness into the unfair tax system that the Government have created, and some way to reducing the burden of taxation on the poor. It is in that spirit that I commend it to the Committee.

I shall be brief, but I have one or two points to make on this important issue.

People are paying tax who should not be doing so. I give one example. I received a letter from a constituent who is a widow, working as a home help, but who is receiving no widow's benefit because her husband became ill and was unable to work for the last 14 years of his life. She has an unemployed son of 17 living at home. She earns £59 a week and pays £9 a week in tax. She pays a further £4 in national insurance, together with a superannuation payment. She takes home a total of £42 a week. She is perhaps paying more tax than she should, but she is still within the tax band.

It is nonsense that in this day and age a person earning £59 a week and paying rent—her rent rebate is being reduced by the Government.—

Be fair. Surely my hon. Friend knows that his constituent must pay towards the 60 per cent. increase for Sir Michael Edwardes. He must have his £95,000 and if she does not contribute towards it, how will he get it?

I find it difficult to accept my hon. Friend's slightly sarcastic standard of fairness. It would be grossly unfair if this woman were taxed to pay for that.

As a result of the cuts in the higher tax bands, some people receive more per week from the Government in tax handbacks than that woman earns, and she has to keep herself and her family. That is what the Government are doing.

I cite that case as an example, but in my constituency there are many like her, and many on even lower incomes, because many are unemployed. On the housing estate in which she lives, which has a population of 39,000, more than 30 per cent. are unemployed. They receive less than that woman, but at least she has a job.

The woman is a home help, doing what most people consider to be a useful service. However, she is paying more in rent because she is not receiving the same amount of rent rebate. She is paying higher bus fares because the Government have imposed on local authorities the need to meet increased transport costs. She is paying increasingly higher prices for many other things, including electricity. She is trying to handle all these increases on £42 a week. It is a disgrace that anyone shold be asked to live on such a low income. She says that she does not know how she will manage. If she does not pay the electricity bill because she does not have the money, the electricity board will disconnect her supply. She will be without electricity, and that is not unusual in my constituency.

Labour Members are constantly reminded of similar examples. Conservative Members may say that we have nice, comfortable incomes. That is true, but week after week we come into contact with people who have incomes near the poverty level. They have incomes which Conservative Members could not live on even if they tried. They have no idea of what it means to live on such low incomes. Conservative Members spend as much in one night taking their wives to a restaurant for dinner as that woman receives to handle her budget for one week.

Moreover, the Government are imposing on that woman a 4 per cent. limit on the rise in her income. That is what the Government's tax policies are all about, and that is why I shall vote for the amendment.

9.30 pm

The amendment relates to the 25 per cent. lower rate band which the Opposition suggest should be restored. It has proved to be a peg for the hon. Members for Glasgow, Cathcart (Mr. Maxton) and Blackburn (Mr. Straw) to debate wider issues. I would rather debate the peg—[HON. MEMBERS: "What about the wider issues?"] I should like to debate the wider issues that relate to the suggestion that has been made by the Opposition. As the Opposition have put those wider issues at the forefront of their case in support of the amendment, it is only right that we should judge whether the amendment has any effect on the wider issues.

The hon. Member for Blackburn said that we have refused to give figures about the costs of various tax changes about which Labour Members have inquired. I know that there is a convention not to give estimates before the Budget, but since then I have answered literally hundreds of detailed questions and have given vast quantities of information in tabular form which the Revenue has prepared with great care and at great cost so that hon. Members can be informed about all aspects of costs, percentages or changes.

The hon. Member for Blackburn has been supplied with copious information. He has got everything that he wanted. We have done all that we possibly can. It is therefore wrong for the hon. Gentleman to complain about the service that he has received. Had he tabled a question about the amendment, I could have told him that as drafted it would cost the PSBR £620 million in 1982–83. In a full year, the cost would be £770 million. I imagine that the hon. Gentleman would like to include the lower rate band for an earning wife. That was a feature of the reduced rate band in 1978–79. In that case, the PSBR cost this year would be £730 million, and the full-year cost would be £900 million.

The Opposition have had a good day. My right hon. and learned Friend the Chief Secretary replied to a debate on an amendment that would have cost £2,080 million. They have also asked for another £900 million in a full year, bringing the total to £2,980 million. Therefore, we are touching on £3 billion in one day.

Throughout the long nights of the Finance Bill Committee I intend to keep a tally of the cost of the Opposition amendments. By the time we get to the end of the Committee proceedings, I imagine that the figure will be slightly higher.

I shall say nothing more about how these proposals are to be financed. My hon. Friend the Member for Northampton, North (Mr. Marlow) asked those questions of the Opposition, hut, as The Guardian is quick to point out, we do not get sensible answers.

If we had £900 million in a full year to use, what would be the best way to spend it? In pursuit of the objectives of the hon. Member for Blackburn to help those at the bottom of the scale, where life is tightest and taxation pinches hardest, we should like to create the maximum help. I have a witness for saying that raising the thresholds would be best. That witness is the right hon. Member for Llanelli (Mr. Davies). When he was a Treasury Minister he said on 3 March 1977:
"A reduced rate hand, as distinct from an increase in the tax threshold, would not give most help to those on the smallest incomes. For the man on the tax threshold complete exemption for a few pounds is worth more than a lower rate of tax on a larger band of income which he has not got."—[Official Report, 3 March 1977; Vol. 927, c. 747.]
That is just right.

The hon. Member for Blackburn quoted figures that were stated in the Institute for Fiscal Studies paper by Morris and Warren. Admittedly, that was in 1980, but those figures are still valid as a matter of principle. The figures in the table prove that at the lowest rates of income that attract tax people are worse off and the benefit such as there is from transferring money from the allowances to a reduced rate band—revenue neutral, for the sake of the argument—benefits people slightly higher up the scale and not those at the bottom of the scale.

The most helpful thing that one can do for the people about whom the hon. Gentleman was talking is to let them out of tax. The more one can let them out of tax, the better. Therefore, I am surprised that the hon. Gentleman puts his name, and gives his support, to an amendment that does not let such people out of tax, but which includes more people in tax than would be necessary if the alternative course of raising the allowances that my right hon. and learned Friend the Chancellor of the Exchequer has taken were followed.

There is another point. The Opposition's amendment would concentrate the advantage on people equally, whether they were married or single. I am not sure that it is not better, in trying to use the £900 million to the best advantage, in the hypothetical sense, that we should seek to apply it more to married couples and families than to single people. That is another advantage to be derived from using the money to increase the allowances rather than to introduce a reduced rate band.

The Financial Secretary cannot play around with how he would spend the hypothetical sum of £900 million when he has told the House that he is against spending it. The House has voted against amendments tabled by the official Opposition to increase the tax thresholds. It voted against them on advice from the Dispatch Box. If the Financial Secretary will agree to use his influence with the Chancellor of the Exchequer to accept those amendments on Report, we shall seek to withdraw our amendment now.

The hon. Gentleman seems to want to have it both ways. We have increased the allowances. This is a hypothetical question. If the Chancellor of the Exchequer now had a further £900 million available, I am arguing about whether it would he best invested in a further increase in allowances or a reduced rate band. I am sorry to say that that money is not available to him. However, I do not want to shirk the point of principle that has been raised by the Opposition in the amendment.

Finally, I shall refer to the question of the so-called poverty trap and the advantages of a reduced rate band or otherwise in relation to the starting rate of tax for those who increase their income to the point where they first reach the tax level. In this country we have a high initial rate of tax at 30 per cent. Admittedly, it was higher in the past, when it was as high as 35 per cent. in some years. It is one of the unusual features of our tax system. However, it is not unique, as the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) said earlier today. I believe that Australia has a higher starting threshold, and possibly one or two other countries as well.

The arguments about the poverty trap are not greatly affected by the proposition that there should be a reduced rate band of £750 over and above the allowances. Incomes in that range which would pay tax within the reduced rate band are very low. It may be of interest to the Committee if I quote the part of the Institute for Fiscal Studies paper by Morris and Warren which analyses the people who were in the reduced rate band between 1978 and 1980 which we abolished in 1980.

Their estimate—I make it clear that I am only quoting their work, which I believe to be reputable and sound—is that there were about 3½ million people in that band. Of those 3½ million people, they estimated that there were 1,130,000 pensioners or people without occupations, 1,220,000 wives working part time, 160,000 wives working full time, and 510,000 under 21, making a total of over 3 million of the 3½ million people who were not heads of families and breadwinners. Of the people who were solely dependent for maintaining themselves or their families, there were about 130,000 single people and 300,000 married men.

Thus, the evidence suggests that people in this range of income are few in relation to those whose sole source of income it is. Many of the people in this band of income either derive income from other sources, or are married and therefore their husbands have other sources, or perhaps are young people who are still living at home. The effect of reducing the tax rate from 30 per cent. to 25 per cent. within this £750 range of income will give a little special help to a large number of people who do not particularly need it, whereas the effect of increasing the allowances would help people who need it more.

I return to the question whether women in part-time work are in need. For most women, part-time jobs are taken on to earn not pin money but desperately needed cash for their family income.

I want to ask the hon. Gentleman one question. Does he accept that, with taxation of unemployment benefits, a large group of people who lose their jobs during the course of the year and then have to rely on taxed unemployment benefit will now come into the tax bracket that we are discussing?

On the hon. Gentleman's first point, I did not say "women"—I said "wives". I was talking about working wives whose husbands also work. By corrupting it to women, the hon. Gentleman implied that they were sole earners. That is not the essence of what I was saying.

9.45 pm

When people fall into a given range of low income, whether as a result of low wages or unemployment benefit or a combination of both, as the hon. Member for Blackburn (Mr. Straw) rightly said, those people will be in low ranges of income in total. The Opposition amendment raises the question whether it is better to try to help them through the rather blunt instrument of the tax system—not the social security system—by increasing allowances, or by introducing a reduced rate band. I suggest that, on all the three tests that I have described so far, the answer is, as Morris and Warren said:
"We have found little substance in any of the arguments in favour of the reduced rate band. It does not help the low paid. It does not significantly increase incentives either for those in work or as between those in work and those out of work. Few of those who were in the reduced rate band were in the poverty trap and few of those who were in the poverty trap were in the reduced rate band. The wide basic rate band is one difference between the British income tax system and those of other countries which is actually worth preserving."
The expert evidence, therefore, does not support the Opposition. I add as a throw-away line that the Opposition's suggestion would be more complicated, harder to understand and would require many extra Inland Revenue staff to administer.

I have one further point to add to the discussion about the alternative to the threshold. The hon. Member for Blackburn asked my right hon. and learned Friend how many people were let out of tax by the Budget. As he fairly said, there can be no doubt that on the day before the Budget there are a number of people paying tax who will be let out of tax the day after. The figures that my right hon. and learned Friend gave were for those who paid tax during the tax year 1981—82. There will be 500,000 fewer paying tax during the tax year 1982–83. One can take any date in the year as a base. A person is either a taxpayer or not. Taking like with like, there will be 500,000 fewer taxpayers in 1982–83 than there were in 1981–82 as a result of my right hon. and learned Friend's proposals.

The hon. Member for Blackburn returned to the theme, about which we shall no doubt hear a great deal more, that the Budget increases the proportion of tax on some people in the middle range of incomes assuming that they satisfy certain conditions about the increase in their earnings—whether they are working, pensioners or whatever. The figures that the hon. Gentleman quoted were accurate. I have given him many figures in answer to parliamentary questions. He can quarry through them as much as he likes, but he is chasing the wrong fox. It will run a little, but it is not the real one. The real fox is the question "Are people better or worse off?" [HON. MEMBERS: "They are worse off'.) I shall give the figures. In 1978–79, the average weekly earnings for a single person after income tax were £70·67. In the year just past, they were £112·06—an increase of 58 per cent. For married people, the increase was 54 per cent.

I have not quoted figures for national insurance, but the difference would be marginal. Those increases must be compared with the far smaller increase in the retail price index. As I said in the Budget debate, simply concentrating on the proportion of tax and national insurance from one year to another ignores the real question whether people have greater disposable incomes. The Opposition should concentrate on that instead of making bogus points.

For those reasons, and because the Oppostion amendment provides no help for people where the shoe really pinches, I ask my hon. Friends to reject the amendment.

The only people making bogus points have been the Government in trying to place a smokescreen around the clear, categorical promises that they made at the general election to reduce direct taxation and deductions from wages on all levels of income. The Opposition have been asking exactly the right question. How has the burden of taxation changed in the last four years? As my hon. Friend the Member for Walsall, North (Mr. Winnick) said, we have not gone around the country saying that we propose major increases in social programmes and lower taxes. It was the Conservatives who on every hustings in the last election said that taxes would be lower, but they have ensured that taxes have become higher except for the very rich.

If the Financial Secretary really wishes to ask his question and not simply give cash figures for increases in the past four years he must give figures to show that there has been a real improvement in living standards for the average family, taking account not only of income tax but of national insurance and the other hidden taxes that people have had to face in council rents, fares, gas charges and the rest. Translated into those real terms, we find that the family on average earnings had £110 per week in 1978, £115 per week in 1979 but £108 per week in 1982—a reduction of 1·1 per cent. The reduction in living standards for those on half average earnings was 5 per cent., while for those on 10 times average earnings there was an increase of 44 per cent. So the Financial Secretary has come up with the wrong answer even to his own question.

The Financial Secretary quoted the comments of my right hon. Friend the Member for Llanelli (Mr. Davies) in 1977 to the effect that raising the thresholds would be best. We all agree that that would be best, but the best has not been done by the Government. Therefore, we have had to consider a second best. The Government may have raised the thresholds this year, but they have raised them by less than the amount by which they would have had to raise them if they had raised them last year, which they failed to do. The failure to raise thresholds over the lifetime of this Government is one of the reasons for the dramatic increase in the tax burden on the poorer section of society. The Financial Secretary said that the most helpful solution would have been to let such people out of tax altogether. Of course that would have been the most helpful solution, but, far from letting the poor out of tax, the Government have brought them into an ever-increasing tax burden which has already risen by 50 per cent.

Perhaps the hon. Gentleman did not hear me say a short time ago that half a million people have been let out of tax by the Budget.

Of course I heard, but that is compared with last year. We are concerned at what has happened over the lifetime of the Government.

The Chief Secretary says that that is not what the debate is about. However, the Chief Secretary often says that the Government should be judged on what happens not even in one Parliament but in two. Here he is trying to suggest that he only started last year. The truth is that in 1978–79, those on half average earnings were paying 12½ per cent. of their income in deductions and now they are paying over 18½ per cent. That is a dramatic increase in the burden of taxation. The Government have done nothing for taxation of the poor except to make it worse.

We do not believe that this is the best thing to do but we certainly believe that when this Government have refused to agree to our other amendments it is better than doing nothing. When the hon. Gentleman is working out his little tally, he should be aware that we certainly saw this amendment as an alternative to the last. To accumulate the cost of the last amendment and this one is to make a mockery of any serious discussion about the burden of taxation and the burden that should fall on the country as a whole.

The hon. Gentleman failed to mention one further point in his reply. I mentioned the extraordinary discrepancy between the Chancellor's claim that the reimposition of an 83 per cent. top rate of income tax would finance a reduction of less than one-quarter of 1p in the basic rate of tax, which is about £237 million. Information based on Inland Revenue figures, but elaborating that given to my hon. Friend the Member for Oldham, West (Mr. Meacher), shows that the total cost of tax giveaways to the very rich over and above that needed for indexing purposes was £865 million—at least three times as much.

The hon. Member for Ealing, North (Mr. Greenway) was given full notice by me. I would refer to his question which is why he was here in the Committee. He may have told the Financial Secretary that it was coming up. In any event the Financial Secretary had a duty to reply to the point which I raised, to explain how the House has been given the impression, to quote the Chancellor, that
"envious onslaughts on the higher paid could generate … negligible revenue'.
That was exactly what he said on 8 April, yet when we flush out from the Government the true figures this "negligible revenue" turns out to be £865 million from income tax and another £90 milion from capital gains tax.

We want an answer to this discrepancy. If we do not receive the answer tonight, as I suspect, we shall certainly continue to pursue it.

I must apologise to the hon. Gentleman. I should have given him the answer. It is very simple and straightforward. The question of my hon. Friend the Member for Ealing, North (Mr. Greenway) was, what was the value of the concessions in the 65 to 83 per cent. range? The answer was £230 million. He did not ask what was the cost of the changes in the other rate bands—the 40 per cent., 45 per cent., 50 per cent. and 60 per cent. rate bands. That accounts for the difference of £655 million.

The Financial Secretary has even got the original question wrong. The original question was by what percentage the basic rate of income tax could be reduced if the top rate was raised to its 1979 level. One has to assume that if the top rate is raised the other rates are raised with it. [HON. MEMBERS: "Why?"] Because the whole sense of the question by the hon. Member for Ealing, North was, what would be saved if the burden of taxation on the higher paid were brought back to the level that obtained in 1979? That is exactly what the hon. Gentleman asked in his supplementary question when he spoke of all the things that can be financed by raising taxation to the level that prevailed when the Government came to office. It was in response to that question that the Chancellor suggested that

"Any attempt to whoop up envious onslaughts on the higher paid could generate … negligible revenue."—[Official Report, 8 April 1982; Vol. 21, c. 1077.]
That "negligible revenue" turns out to be about £865 million. Even £237 million is not negligible by any stretch of the imagination.

This debate has been concerned with the burden of taxation which the Government have imposed, particularly on the poorest in our community. The amendment seeks to relieve some of that burden on the poorest in our community in circumstances where the Government have refused to relieve that burden through the better course of raising the level of personal allowances. In that spirit, I commend the amendment to the Committee.

Question put, That the amendment be made:—

The Committee divided: Ayes 183, Noes 249.

Division No. 130]

[10.01 pm


Allaun,FrankCallaghan, Rt Hon J.
Anderson,DonaldCallaghan,Jim(Midd't'n & P)
Archer, Rt Hon PeterCampbell Ian
Ashley, RtHonJackCampbell-Savours,Dale
Atkinson,N.(H'gey,)Cant, R. B.
Barnett, Rt Hon Joel(H'wd)Carter-Jones,Lewis
Bidwell,SydneyClark, Dr David(S Shields)
Booth,RtHonAlbertCocks, Rt Hon M.(B'stol S)
Bray, Dr JeremyColeman,Donald
Brown, Hugh D.(Provan)Conlan,Bernard
Brown, R. C.(N'castle W)Cook, Robin F.
Brown, Ron(E'burgh, Leith)Cowans,Harry

Cox,T.(W'dsw'th, Toot'g)Marshall,DrEdmund(Goole)
Craigen, J. M.(G'gow, M'hill)Martin,M(G'gowS'burn)
Crowther,StanMason, Rt Hon Roy
Cunliffe,LawrenceMaynard, Miss Joan
Davies, Rt Hon Denzil(L'lli)Mikardo,Ian
Davis, Clinton(HackneyC)Miller,Dr M.S.(E Kilbride)
Dean, Joseph(Leeds West)Morris, Rt Hon J.(Aberavon)
Dewar,DonaldMoyle, RtHonRoland
Dormand,JackOakes, Rt Hon Gordon
Dubs,AlfredOrme, Rt Hon Stanley
Dunwoody, Hon Mrs G.Park,George
Eastham, KenParry,Robert
Edwards, R.(W'hampt'n S E)Powell,Raymond(Ogmore)
English,MichaelPrice, C.(Lewisham W)
Ennals, RtHonDavidRace, Reg
Evans, loan(Aberdare)Radice,Giles
Evans, John(Newton)Rees, Rt Hon M(Leeds S)
Fletcher Ted(Darlington)Roberts, Ernest(Hackney N)
Foot, RtHonMichaelRoberts,Gwilym(Cannock)
Forrester,JohnRobinson, G.(CoventryNW)
Foster,DerekRooker, J. W.
Fraser, J.(Lamb'th, N'w'd)Ross, Ernest(Dundee West)
Freeson,RtHonReginaldRowlands, Ted
Garrett, John(NorwichS)Ryman,John
Garrett, W. E.(Wallsend)Sever, John
Gilbert, RtHonDrJohnSheerman,Barry
Golding, JohnSheldon, RtHonR.
Graham,TedShore, RtHonPeter
Hamilton,James(Bothwell)Silkin, RtHon J.(Deptford)
Hamilton, W. W.(C'tral Fife)Silkin, Rt Hon S. C.(Dulwich)
Hardy, PeterSilverman,Julius
Harrison, RtHon WalterSkinner,Dennis
Hart, RtHonDameJudithSmith, Rt Hon J.(N Lanark)
Hattersley, Rt Hon RoySoley,Clive
Haynes, FrankSpearing,Nigel
Howell, Rt Hon D.Stoddart,David
Hughes, Robert(Aberdeen N)Summerskill,HonDrShirley
Hughes, Roy(Newport)Thomas,Dafydd(Merioneth)
Jay, RtHonDouglasTinn,James
Johnson, Walter(Derby S)Urwin, RtHonTom
Jones, Rt Hon Alec(Rh 'dda)Varley, Rt Hon Eric G.
Kaufman, Rt Hon GeraldWainwright, E(D'earneV)
Kerr,RussellWalker, Rt HonH.(caster)
Kilroy-Silk,RobertWeetch, Ken
Lamond,JamesWhite,J.(G'gow Pollok)
Lewis, Arthur(N'ham NW)Wilson, Gordon(Dundee E)
Litherland,RobertWilson,William (C'try SE)
MacKenzie, RtHonGregorTellers for the Ayes:
McNamara,KevinMr. George Morton and Mr. Allen McKay


Aitken,JonathanGardner, Edward(S Fylde)
Alexander,RichardGlyn, Dr Alan
Ancram,MichaelGow, Ian
Aspinwall,JackGrant, Anthony(Harrow C)
Atkins,Robert(PrestonN)Gray, Hamish
Baker,Kenneth(St.M'bone,)Grieve, Percy
Baker, Nicholas(NDorset)Griffiths, E.(B'ySt.Edm'ds)
Beaumont-Dark,AnthonyGrist, Ian
Bennett, Sir Frederic(T'bay)Hamilton,HonA.
Best,KeithHavers, Rt Hon Sir Michael
Bottomley,Peter (W'wich W)Hicks,Robert
Brooke,HonPeterHowell, RtHon D.(G'ldf'd)
Brown,Michael(Brigg &Sc'n,)Hunt,David (Wirral)
Budgen,NickJessel, Toby
Carlisle, John(Luton West)King, Rt Hon Tom
Carlisle,Kenneth(Lincoln)Knight, MrsJill
Chalker, Mrs.LyndaKnox,David
Clark, SirW.(CroydonS)Langford-Holt,SirJohn
Dean, Paul(North Somerset)Lloyd, Ian(Havant & W'loo)
Dickens,GeoffreyLloyd, Peter(Fareham)
du Cann, Rt Hon EdwardLyell,Nicholas
Dykes, HughMacGregor,John
Eden, RtHonSirJohnMacKay, John(Argyll)
Edwards, Rt Hon N.(P'broke)McNair-Wilson,M.(N'bury)
Eggar,TimMcNair-Wilson, P.(NewF'st)
Fenner, MrsPeggyMates,Michael
Fisher, SirNigelMaude, RtHonSirAngus
Fletcher-Cooke,SirCharlesMawby, Ray
Fookes, MissJanetMaxwell-Hyslop,Robin
Fowler, Rt Hon NormanMellor,David
Fraser, Peter(SouthAngus)Mills,Iain(Meriden)
Fry, PeterMills, Peter(WestDevon)

Miscampbell,NormanRoberts, M.(CardiffNW)
Mitckell,David(Basingstoke)Roberts, Wyn(Conway)
Montgomery, FergusRost, Peter
Morris, M.(N'hamptonS)Sainsbury,HonTimothy
Morrison, HonC.(Devizes)Shaw, Giles(Pudsey)
Morrison, Hon P.(Chester)Shelton,William(Streatham)
Myles, DavidShersby,Michael
Onslow,CranleySpicer, Michael(S Worcs)
Oppenheim, Rt Hon Mrs S.Squire,Robin
Page, Richard(SWHerts)Stainton,Keith
Patten, John(Oxford)Steen,Anthony
Pawsey, JamesStewart, Ian(Hitchin)
Pollock,AlexanderTaylor, Teddy(S'end E)
Prentice, Rt Hon RegThomas, Rt Hon Peter
Proctor, K. HarveyThompson,Donald
Raison, RtHonTimothyThorne,Nieil(IlfordSouth)
Rhodes James, RobertTownend, John(Bridlington)
Ridley,HonNicholasvan Straubenzee, Sir W.

Walker, B.(Perth)Winterton,Nicholas
Ward,JohnTellers for the Noes:
Watson,JohnMr. Selwyn Gummer and Mr. Tristan Garel-Jones.

Question accordingly negatived.

Clause 18 ordered to stand part of the Bill.

To report Progress and ask leave to sit again tomorrow— [Mr. Britton.]

Committee report Progress; to sit again tomorrow.

House Of Commons (Services)


That the Standing Order of 15th June 1979 relating to the nomination of the Select Committee on House of Commons (Services) be amended, by leaving out Mr. Francis Pym and inserting Mr. John Biffen.—[Mr. John Stradling Thomas.]



That the Standing Order of 27th June 1979 relating to the nomination of the Committee of Privileges be amended, by leaving out Mr. Francis Pym and inserting Mr. John Biffen.— [Mr. John Stradling Thomas.]

North-East Lancashire (Government Assistance)

Motion made, and Question proposed, That this House do now adjourn.— [Mr. Lang.]

10.14 pm

I am glad that I have been joined for this debate by my hon. and learned Friend the Member for Accrington (Mr. Davidson) and by the hon. Member for Rossendale (Mr. Trippier). My hon. Friend the Member for Burnley (Mr. Jones) told me that he would have liked to be present, but he is unavoidably absent because he has had to go to Burnley tonight to keep an appointment tomorrow morning. The hon. Member for Nelson and Colne (Mr. Lee) asked me to make it clear that he, too, would have wished to be present, but he is on an important trip to America.

All of us, together with the people in North-East Lancashire, are deeply grateful to Mr. Speaker for having selected this subject for debate. To us there is no more important issue than the future prosperity of North-East Lancashire and the part that the Government can and should play in reversing the terrifying decline which the area has suffered over the past three years, by, above all, acceding to the request of the North-East Lancashire Development Association for development area status, a request which, I should like to emphasise, is backed by all parties and every responsible group in the area. I am glad that the hon. and learned Member for Darwen (Sir C. Fletcher-Cooke) acknowledges that.

A comprehensive submission of the case for development area status was made by NELDA in January of this year. The Minister has that and it is not necessary for me to repeat it in every detail. No doubt the Minister and his Secretary of State are also fully aware of the careful and wide-ranging series of articles about North-East Lancashire's recent industrial decline which have appeared in the Lancashire Evening Telegraph and in its sister newspaper, the Burnley Evening Star since those two papers launched their "Save East Lancashire" campaign in mid-February. Those articles give more fully and in many ways more eloquently than I can the roll-call of dead and dying firms and the tragic personal and human consequences which have followed the decline. We commend those newspapers for the initiative that they have taken.

The House will wish me to outline the case for North-East Lancashire and to spell out why the area needs special help. To do that, I must give a little history. The prosperity of North-East Lancashire was founded on the twin staples of the Industrial Revolution, cotton and coal. In the 'twenties and 'thirties three-quarters of those employed in my constituency and in most of the other constituencies in North-East Lancashire worked in textiles. Such heavy reliance on a single product, cotton, was not healthy. When the country as a whole first caught a cold and then bronchitis in the slump of 1929, North-East Lancashire nearly died. Throughout the 'thirties, as the study, "Readjustment in Lancashire", by the University of Manchester made clear, the area was one of the unemployment black spots.

The area was saved, partly by the war and the change in economic policy that that caused, but also by the recognition in the late 'thirties, again by all parties, that the area would help itself but that it needed Government and local government help. One of the biggest employers in my area, Mullard, was sited in Blackburn because of incentives provided by the Government and the borough council, supported by both sides of the council. There are many similar examples across North-East Lancashire.

It is remarkable that, despite the area's history and the very high levels of unemployment there throughout the 1930s, in the period from 1945 to 1976 there was truly full employment. From 1976 to 1979 it was not the happiest of stories, but unemployment was no more than about 6 per cent. in 1979. For that long period there was full employment. One reason was that in the late 1960s the Government had recognised that the area had special problems. There was disguised unemployment, reflected in high levels of migration from the area, and there were communication problems. As a result of the recognition of those special problems, the area was given intermediate area status by the Labour Government. That was confirmed by the Conservative Government in the 1970s and maintained throughout the period of the Labour Government from 1974 until 1979.

In July 1979 the Secretary of State for Industry announced that the whole area was to lose its development area status in August 1982. That decision was justified partly on the ground that the aid should be concentrated in those areas where it was needed most, but also in terms of the Government's overall economic strategy, which was expected to lead to greater opportunity and more jobs. It is not my task or intention to make complaints about the Government's economic policies. There are other occasions on which we can do that. I say only that, whatever the intention behind the strategy in July 1979, it is apparent that it has not worked out as intended. That is reflected by what has happened in North-East Lancashire.

The Minister will, of course, be concerned about whether the position in North-East Lancashire is worse than it is lsewhere in the country as a whole. He and his predecessors have made it clear that what they are really concerned about is whether there has been a relative change in the position of one travel-to-work area compared with others.

The submission from NELDA and the figures that I shall give make it absolutely clear that there has been a dramatic change in the relative position of North-East Lancashire. The figures in the NELDA submission are for the two-year period from September 1979 to September 1981. I can give the Minister figures for three years, from March 1979 until March 1982. Because they cover the same months in each year, we avoid the problems of seasonal fluctuations.

In the country as a whole, unemployment has risen in that period by 113 per cent. In the North-West it has risen by 111 per cent., and in Blackpool, which is continuing with its assisted area status, it has risen by only 89 per cent. In Lancaster, which also continues with assisted area status, it has risen by 76 per cent. In North-East Lancashire unemployment has increased over the past three years by no less than 176 per cent.—more than twice as much as the increase in Lancaster and Blackpool and 60 percentage points up on the increase for the North-West and the United Kingdom as a whole.

There is no question but that there has been a dramatic, appalling change in the relative position of North-East Lancashire. That relative change justifies NELDA's case for development area status. I hope that the Minister will answer it tonight.

Other figures, which I shall send to the Minister, show that although textiles account for a third-6,000 out of 19,000—of the declared redundancies, the pattern of redundancies has been spread right across the diversified industrial base of the area. There have been another 6,000 in mechanical and electrical engineering, almost 1,000 in clothing and footwear, and others spread across the industrial structure.

I hope that the Minister will say that North-East Lancashire will receive development area status. If he does not, he should confirm that the area will be the subject of a proper, formal review. I hope that he will give at least that commitment, which he and his predecessors have not given in the past.

North-East Lancashire has been renowned for high productivity, good industrial relations and low wages. It has a long history of helping itself. It has done so in the past and will do so in the future. It also needs the help of the Government, and I hope that the Minister will tell us that we shall get that help, which will provide hope for an area which has lost a great deal of hope over the past three years.

10.26 pm

I congratulate my hon. Friend the Member for Blackburn (Mr. Straw) on the way he has set out the indisputable case for the early granting of development area status to North-East Lancashire. I would also like to associate myself with his praise for the way the Lancashire Evening Telegraph has sustained the momentum of its "Save East Lancashire" campaign.

I want to add one or two alarming figures to those already given by my hon. Friend the Member for Blackburn. The Hyndburn area is rapidly becoming a disaster area. The unemployment rate in the Accrington travel-to-work area is 15·3 per cent.; in the Hyndburn area it is 14·9 per cent. With the horrifying glut of recently-announced redundancies, the projected figures for May and June will be about 19 per cent. in the Accrington area and 16½ per cent. in the Hyndburn area. The average unemployment rate in the present intermediate area is about 13 per cent., and the average unemployment rates in the present development areas are about 16 per cent.

On either basis, the case for granting development area status to Hyndburn—although I am associating myself with the general campaign for granting it to North-East Lancashire—is overwhelming. Unless the Minister accedes to the request, I fear that there will be despair, despondency and gloom in an area which has always been cheerful and has managed to overcome its adversity.

10.28 pm

I am grateful for the opportunity to make a brief contribution in this debate. I compliment the hon. Member for Blackburn (Mr. Straw) on raising this matter. It is much appreciated that he has sought to be non-partisan in his speech, which is welcome to those of us who sit on the Government benches, including my hon. and learned Friends the Members for Darwen (Sir C. Fletcher-Cooke), and for Clitheroe (Mr.

Waddington) and the hon. Member for Nelson and Colne (Mr. Lee) who is unavoidably absent due to his important visit to the United States.

I value this opportunity to speak and to thank the Minister for recently receiving a delegation from my constituency, Rossendale, which in the main comprised representatives of the local authority. I considered that he was extremely sympathetic to the plight which we face. I wish to thank him for visiting Rossendale last year. I hope that he found that a fruitful and useful visit. He was well received.

It is well to remember two things, having listened carefully to the contribution of the hon. Member for Blackburn. When one is putting a case for North-East Lancashire, as NELDA has done effectively, it is difficult to compare the plight of Rossendale, Blackburn and Accrington with the plight of Clitheroe, where the unemployment figures are vastly different. There is a danger of crying wolf in applying to the Government for assisted area status, preferably development area status, for certain areas in the sub-region.

Our over-dependence in Rossendale on textiles and footwear is one of the greatest dangers we face in that 45 per cent. of the work force are employed in those two industries which are both labour-intensive and are regarded by most people as declining. The truth is that Rossendale has not diversified like other areas within the sub-region of North-East Lancashire, which makes us much more vulnerable. Because of our over-dependence on textiles and footwear, we have suffered greatly with the recent international decline in trading within those two industries.

Most of my constituents accept that there must be a transitional period in which we can diversify into other industries, but as the hon. Member for Blackburn eloquently said, we need time to diversify. We are short of that time. We also need fair competition. Although I realise that my hon. Friend is not responsible for it, development area status for Rossendale is now vital. I am grateful to my hon. Friend the Minister for the support and help that he has given in my constituency for starting up and encouraging the Rossendale Trust. Anything that he can do in future to encourage the growth of small businesses will be very much appreciated.

I hope that the Minister will view seriously the representations made to him by NELDA, that he will consider sympathetically our recommendations in Rossendale, and that he will take into account all that has been said in this debate.

10.30 pm

The hon. Member for Blackburn (Mr. Straw) was in full flow earlier this evening and I congratulate him on the fluent presentation of his case in this debate. I hope that the hon. and learned Member for Accrington (Mr. Davidson) will forgive me if I do not refer to his points, but, as he knows, just before the House rose for the Easter Recess we had an Adjournment debate in which I discussed briefly assisted area status.

I am well aware of the position in the area to which this debate refers. We have not been short of representations about it, although we have also received many representations from other parts of Britain, all of which have individual reasons for believing that they should receive special treatment. We have made it plain on many occasions that, as a Government, we are always prepared to consider representations from any area. I have met the hon. Member for Blackburn and I recently received a deputation from Rossendale.

On that basis, my right hon. Friend the Secretary of State recently agreed to receive a deputation from the North-East Lancashire Development Association, which presented the case that the hon. Member for Blackburn presented this evening. My right hon. Friend is giving the matter careful consideration and has passed on the representations about inner urban area status under the Inner Urban Areas Act 1978 to my right hon. Friend the Secretary of State for the Environment, which he pledged to do when he met that deputation, and he will give his decision in due course.

I fully understand the difficulties of the area and I sympathise with all those affected, but the hon. Gentleman will forgive me if I do not give a substantive reply to the points made by the recent deputation, because that is a matter for my right hon. Friend and I do not wish to anticipate the outcome of his considerations. However, I can assure him that I shall bring to his attention the points made by hon. Members during this debate.

Nevertheless, it would be helpful if I were to remind the House of the basis of our regional industrial policy and the general principles that apply.

I should be grateful if the Minister would tell us when the Secretary of State will make his decision.

The hon. Gentleman must forgive me if I do not answer that tonight. We have received many representations, and we must consider them all.

I do not intend to go into the wider economic background, but successive Governments have followed a regional policy designed to correct imbalances in the distribution of employment and in regional disparities that have developed over some years as traditional industries have declined. I stress that that policy has been, and continues to be, aimed at encouraging new industrial investment in the various areas with a view to correcting the imbalances in their industrial structure.

When we came to office we looked for a way of making regional policy more effective. We are doing so essentially by making it more selective. When the changes take full effect this August, the coverage of assisted areas will be reduced from 44 per cent. to about 26 per cent. of the working population, thus concentrating on the areas of greatest need.

By consequently reducing regional aid, we are also reducing the burden on public expenditure, although there are many other ways in which aid is given to industry generally. This will help indirectly to reduce the burden on industry by dealing with the public sector borrowing requirement. I do not need to go into that in detail, because we have often debated it in the House.

I remind the House that rather than remove assisted area status from certain areas immediately we allowed three years' grace. The House will want to know that £9·3 million of regional development grant and selective financial assistance has been paid or offered to industry in North-East Lancashire by the Government and a substantial portion relates to projects completed in the transitional period.

We are required by the Act to have regard to certain criteria in designated areas. These are considered in relation to the general approach of making regional development assistance more selective and hence more effective. Past evidence of regional assistance tends to suggest that the more selective assistance is the more effective.

In that overall context we must first consider the rate of unemployment. It is important that the absolute level of long-term unemployment for any one travel-to-work area is considered relative to all other travel-to-work areas. The hon. Gentleman has made play of the relative increases in North-East Lancashire. They are deeply regrettable, but it must be born in mind that proportionate increases that relate to a previous date and not to other areas are not the relevant criteria as much depends on the starting date. The relevant criterion is the level of unemployment in the country at any one time.

The hon. Gentleman knows that successive Governments have designated assisted areas by reference to travel-to-work areas because they represent reasonably self-contained labour markets and are the smallest areas for which the Department of Employment is able to calculate meaningful unemployment rates. A travel-to-work area is based on factual information that is collected in the census of population and updated by the Department of Employment in consultation with local interests.

I shall explain how the system works, because I find that there is a great deal of misunderstanding about travel-to-work areas. Officials in the Department of Employment take one of the employment office areas and examine where people live and where they work. If about 70 per cent. of those who live in the area also work in it and 70 per cent. of those who work in the area also live there, the employment office area is regarded as a self-contained travel-to-work area. However, if there is evidence of significant commuting across employment office area boundaries, the areas are linked together as appropriate to satisfy the same criteria.

Successive Governments have come to the conclusion that that is the most effective way of assessing levels of unemployment. That is why my right hon. Friend emphasised when he met the deputation from the North-East Lancashire Development Association that the Government would consider the case in the light of individual travel-to-work areas rather than the area as a whole. My hon. Friend the Member for Rossendale (Mr. Trippier) has given one indication of why that is necessary. That must be said when representations are being made to declare all the travel-to-work areas in the area assisted areas.

We must consider also evidence of long-term structural decline. It is recognised that traditionally north-east Lancashire has depended largely on the textile and footwear industries. We all know that these industries are having to adjust to changes in the world economy. It does not necessarily follow that because an area is facing a degree of structural decline—I emphasise "degree"—in certain industries it should necessarily be an assisted area. That facet must be considered along with the other criteria.

In north-east Lancashire there are a number of travel-to-work areas in which over the past 10 years there has been a considerable diversification of industry. However, I recognise that in Rossendale there is a heavy preponderance of footwear and textile undertakings.

The third consideration is the geographical position, especially in relation to markets and communications. I visited Rossendale and Nelson and Colne last year, and I am aware of those difficulties. However, there are plans to improve communications in the Calder Valley. We must consider also the prospects of achieving other jobs in the travel-to-work areas and the changes that can take place. The designation of assisted areas is one of the most difficult that faces my Department. Events that have taken place while I have been in the Department have shown that it would have been wrong to take certain decisions. In some cases natural economic forces mean that new jobs can be created. That aspect must be also considered.

I draw attention to some of the good news in the hon. Gentleman's constituency. Philips (Mullard) will almost double its £7 million investment in its video disc pressing plant to meet greater than expected demand for its programmes and discs. The current work force is likely to double to about 200. MEC Pressings (Blackburn) has been bought by the Risden Corporation, the leading American manufacturer of cosmetic containers, which plans to double the investment already envisaged for the next five years. American executives are looking for further sites in Blackburn to set up a finishing plant which will provide up to 100 additional jobs. AFM Leisure has developed a new micro-electronic gaming machine. That company has won about £2 million worth of new orders and in the short term will provide an additional 50 or 60 jobs. Netlon plans to open a new factory which will create 100 jobs in the next few years. I could go on. There is movement within the area.

I make one other relevant point. In North-East Lancashire total unemployment last month was 27,748. It is interesting to note that in the past year the employment service placed 19,500 people in employment in North-East Lancashire. Many more will have found jobs by other means. I state that simply to indicate that there is a great deal more movement in the economy than levels of unemployment would sometimes suggest.

I state these facts to give the hon. Gentleman some indication of the considerations in our minds. It is important to mention the domino effect. One cannot change the status of one travel-to-work area in isolation. There will be immediate legitimate representations and epectations from many other parts of the country. To put this into perspective in relation to North-East Lancashire—I say this without any commitment but to give an indication of some other statistics that must be considered as well as those given by the hon. Gentleman—only the Rossendale travel-to-work area, at 15·5 per cent., had a 1981 average unemployment rate that was above the average of all remaining intermediate areas for the same period. I refer to the average for the intermediate areas after August 1982. The relative position has not changed since then. Rossendale now has an unemployment level of 16·1 per cent., whereas the intermediate area average is 14·6 per cent. No other travel-to-work areas in North-East Lancashire have unemployment levels above 14·6 per cent., and a number are considerably well below. Those factors have to be taken into account.

As I said, earlier this month I saw a deputation from Rossendale, and I am fully conscious of the serious problems facing the area. I have just referred to its level of unemployment.

I shall put the domino effect another way—the hon. Gentleman is fair on these matters and that is why I seek to do him justice by giving a full reply. If one considers the areas by level of unemployment rate—I refer to assisted areas boundaries as they will be after August 1982—59 areas will become non-assisted or are already non-assisted. Of those, 23 will become non-assisted. They have a higher level of unemployment than the hon. Gentleman's travel-to-work area. After August 1982 there will be 127 travel-to-work areas which will continue to have assisted area status of one sort or another.

That will show the hon. Gentleman the number of travel-to-work areas all over the country that will immediately make representations on the domino effect. I make that point to show the hon. Gentleman some of the factors that must be taken into account.

It is important to consider stability in regional policy. I discussed this with the hon. Gentleman when he came to see me, so I can be brief. Stability is essential if industry is to plan ahead effectively. For investment incentives to have a real effect on industry's decisions on where to locate, they must be stable and predictable. That is why we do not work on a hand-to-mouth basis, constantly chopping and changing.

Those are the major criteria that my right hon. Friend the Secretary of State will be applying in consideration of the case. I do not want to predict the outcome at this stage.

There are many other measures, including enterprise allowances, that we have recently specifically introduced, concentrating on one of the selected areas in North-East Lancashire. Many other measures of national effect, and many other measures of— —

The Question having been proposed after Ten o'clock and the debate having continued for hay' an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at sixteen minutes to Eleven o'clock.