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Tax Changes

Volume 127: debated on Thursday 11 February 1988

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To ask the Chancellor of the Exchequer what the distributional effects of the changes in direct and indirect taxation have been since 1979.

The effect has been that real take-home pay has increased by at least 18 per cent. at all multiples of average earnings.

Does the Minister accept that most commentators now take the view that the burden of increased taxation since 1979 has fallen more heavily on the lower paid, part-time workers? Is he aware that if he takes the opportunity coming to him in the next few weeks to indulge in across-the-board cuts that will simply mean that the relative advantage will be given to those on higher levels of income? When will he take steps to redress the balance?

The hon. Gentleman may not have heard my answer, which was that all income groups have enjoyed increases in take-home pay of at least 18½ per cent. When one considers the proportion of tax and national insurance at all levels of income and compares that with the regime that we inherited in 1979, if that had been adjusted only for inflation, it will be seen that everybody is paying substantially less tax and national insurance at all levels of income.

Does my right hon. Friend agree that if the Social and Liberal Democrats are really concerned to help the lower paid they would be better advised to look beyond ideas such as putting VAT on children's clothes, and look instead to the example set by the Labour Government in New Zealand, where they are abolishing all higher rates of income tax, thus giving a real boost to productivity and growth, and to everybody's income?

I note my hon. Friend's suggestion. I am sure that he will understand if we are extremely careful in responding when we are so near to the Budget.

Will the Minister rule out now the destruction of jobs that will take place if VAT is put on newspapers?