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Income Tax

Volume 35: debated on Thursday 27 January 1983

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6.

asked the Chancellor of the Exchequer by how much the basic rate of income tax would have to be reduced in order to restore the proportion of total taxation, direct and indirect, and including national insurance contributions taken from the income of a family—wife not working, husband in work—with two dependent children on (a) average earnings and (b) 75 per cent. of average earnings to its level in 1978–79, from its level of 1982–83.

As my right hon. Friend the Financial Secretary told the hon. Member for Islington, South and Finsbury (Mr. Cunningham) on 23 November, the figures are about 4p and 6p in the pound respectively. Even without such reductions, the take-home pay at all levels of earnings is higher in real terms today than under the last Government.

Is it not appallingly misleading to have an increase in taxation of £8 a week, in effect, for the cases that the hon. Gentleman has quoted, when the Tory party claimed that it would cut taxation, but has managed to increase it dramatically at the same time as introducing mass unemployment?

The fact of the matter is that the overall tax burden has inevitably risen because of the increased public expenditure due to the recession and by the need to keep borrowing under control. The reductions in the high rates of tax on the highest incomes need no excuse. The fact remains that take-home pay at all levels of earnings is higher in real terms than it was under the previous Government.

With regard to family incomes, has my hon. Friend read today's Financial Times and seen the article by Mr. Samuel Brittan recommending an increase in child benefit to £7 a week? Does my hon. Friend agree with Mr. Brittan that

"When anti-poverty considerations and economic incentives point the same way, this the very least that is needed"?
At a time when low-paid workers are in dispute over wages, will my hon. Friend and his right hon. Friends bear in mind the attractions of meeting the needs of those with real problems by increasing child benefit, rather than by giving way to blackmail and giving blanket increases in wages?

I cannot anticipate my right hon. and learned Friend's Budget, but many of the benefits to which poorer families are entitled, such as child benefit, family income supplement, retirement pensions and so on, have gone up more rapidly than inflation since 1978–79.

The Minister is up to the Treasury's old trick of breaking statistics. Is he aware, as a result of the questions answered by his colleague, that, as a proportion of average earnings, taxation at every level up to twice the average earnings has risen under the Government? As my hon. Friend the Member for Hammersmith, North (Mr. Soley) said, the average family is paying £8 a week more in taxation than it was before. Is not the truth that the burden of taxation has risen so much under this Government that to get it back to its level under Labour would cost not 6p off income tax, but 9p, or £9 billion?

Although the hon. Gentleman is correct in saying that the proportion has gone up, the real level of take-home pay has gone up. My constituents live on their take-home pay.