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Tax Relief

Volume 127: debated on Thursday 11 February 1988

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To ask the Chancellor of the Exchequer what average income tax relief has been received by a taxpayer earning £50,000 each year since 1979 at 1987 prices.

I refer the hon. Gentleman to the answer I gave to the hon. Member for Newcastle upon Tyne, North (Mr. Henderson) on 14 January 1988 at colunm 390 in the Official Report.

I do not think that I have a direct interest in this question. However, how can the Minister possibly justify the giving of tax handouts of well over £10,000 a year to the richest 1 per cent. of people in the country at a time when the National Health Service, its patients and staff, are suffering the effect of a financial squeeze? Why should hospital patients in my constituency face the closure of their hospitals to subsidise the very rich?

The hon. Gentleman does not seem to have noticed that cutting rates is quite compatible with increasing revenue. As all my hon. Friends behind me know, the top 5 per cent. of income groups now pay a larger proportion of income tax than they did before the Government's tax cuts. It could be said that as a result of those tax cuts there has been more, not less, money for the National Health Service.

Does not the deplorable term "tax handout" imply that the whole of an individual's income belongs in the first place to the state, and that it is at the discretion of the state that he is allowed to enjoy some of it?

I wonder whether the Minister will give us an assurance that his priority this year will be to ensure that those who have done well from his economy will be enabled to support the Health Service, and not to profit personally in the way that he has described them as being able to do in the past six years?

The purpose of my right hon. Friend's Budgets in the past has certainly been to produce policies that benefit all the people in the country, and the result of our tax cutting has been that the take-home pay, or disposable income, of a person on average earnings has increased by more than 20 per cent. That is how the policies of this Government have been in the interests of all the people.

Is my right hon. Friend aware that, whereas the Labour Government attempted to squeeze until the pips squeaked and collected only about £800 million from the higher rates of tax, this Government, by increasing growth in the economy with the consequent increase in incomes, now collect some £3,800 million from the higher rates of tax? Does that not augur well for a Budget in which tax cuts among the higher rates might be considered?

As my hon. Friend knows, I cannot anticipate my right hon. Friend's Budget. However, I entirely agree with his point about the results of cuts in the top rates hitherto. The top 5 per cent. were previously paying some 24 per cent. of income tax revenues. That has now increased to nearly 30 per cent., amply illustrating my hon. Friend's point.

Does the Financial Secretary deny that those earning £50,000 a year or more have been gaining £10,000 a year under his regime? Does he deny that anyone earning £450 a week or less is now paying more tax—both in real, cash terms and as a proportion of income—than in 1978–79?

Does the right hon. Gentleman believe that that now produces a disincentive effect, with the top rate at 60 per cent., and that there is therefore a case for cutting it? Or does he believe that the rich are due for yet another handout? If he believes the former, what is his hard evidence, as opposed to hearsay? If he believes the latter, will he simply admit it?

As I said, I shall not anticipate my right hon. Friend's Budget. The only point that I was making about the cuts in higher rates was that, in my opinion, they have been in the overwhelming interest of the country, and the revenue figures show that. The figures also illustrate that those on half average earnings have done a great deal better under this Government than they did under the Labour Government.