We now come to the debate on the burden of taxation.
On a point of order, Mr. Speaker. Last night, as you know only too well, there was a long statement on beef and all the rest of it. I assumed that this morning there would be an announcement of another statement to be made by a Minister—about the scandalous announcement of an increase of 6·5 per cent. over and above inflation for water prices for the next five years. Has anyone informed you that the Secretary of State for the Environment will come to the House to make a statement on that scandalous matter? Water has been privatised. People are lining their pockets.
Order. No request for such a statement has been made to me yet, but it does not have to be made until 10 o'clock, so one may well come. I think we should leave it at that.
On a point of order, Mr. Speaker. The subject that we are about to embark upon is taxation, its impact on many people in this country, and the serious effect of the Government's measures. Part of the debate will be about the poll tax. On top of the poll tax people have to pay their water charges. Might not it be appropriate for the Government to take action to get the Secretary of State for the Environment to appear during the debate, so that that subject can be aired, if no statement is to be made?
These are interesting arguments which could well be advanced during the debate.
I wish to call attention to the taxation burden under Conservative Governments and I beg to move,
The debate will centre on destroying one of the Government's most carefully manufactured myths—that they are competent, fair and capable of managing a one-nation state. To place the debate in context, it is essential to remind ourselves of the current state of the economy and its relationship to the Chancellor of the Exchequer's 1990 Budget statement. There has been a sharp slowdown in growth. We have the highest interest rates in Europe. They have to be compared with West Germany's at 8 per cent. and France's at 10 per cent. Inflation is rising, and will continue to rise for a considerable period. The balance of trade deficit stands at almost £21 billion, imports are at their highest-ever levels and the overall tax burden is up yet again—to 37 per cent. of gross domestic product—that is without oil taxes— compared with 34 per cent. when the Government took office in 1979. It is a far cry from the heady days of the 1979, 1983 and 1987 Conservative manifestos. When I was looking at research material for the debate, I thought that it was important to be fair to the Government—at least at the commencement of my speech—by starting at the beginning of the Government's term in office so that when I compare tax burdens I do so over the period of the last decade, not over a short period, and relate them to the promises and statements that were made when the Government were first elected in 1979. I was therefore grateful to receive from the research department at the Conservative party's headquarters copies of the 1979, 1983 and 1987 manifestoes. As a Scot, I am very glad that there was no charge for them. On page 13—lucky for some—of the 1979 manifesto there is the statement under the heading "Cutting Income Tax":That this House notes that, despite savage cuts in the quality of public services, the burden of taxation has risen under this Government to a level higher than under any previous Government; that for most households income tax cuts have been outweighed by the growing burden of less fair taxes such as the poll tax and VAT; that national insurance contributions have been cynically used as an additional tax while benefits have been cut or abolished and that the combined effect of the Government's policies is that 320,000 low-paid workers face a combined marginal tax and benefit-withdrawal rate of 70 per cent. or more.
I shall return to that later. A later paragraph under the same heading says:"We shall…simplify taxes—like VAT: and reduce tax bureaucracy."
that is the operative phrase—"We must therefore be prepared to switch to some extent"—
the comma is very important—"from taxes on earnings to taxes on spending. Value Added Tax does not apply,"—
No mention is made of a promise to break the link between pensions and earnings. That was completely ignored, but was implemented immediately after the election. The 1979 manifesto's language was misleading and deceitful. The Government's real intention to switch the tax burden to the majority of the public—those with incomes of less than £20,000 a year, pensioners, the low paid and the most vulnerable who are in receipt of state benefits—was not made known. All that the 1979 manifesto said was that the Conservatives would "simplify taxes—like VAT". Where was the promise in the manifesto to increase VAT from 8 to 15 per cent.? They said:"and will not be extended, to necessities like food, fuel, housing, and transport. Moreover the levels of state pensions and other benefits take price rises into account."
The manifesto did not include the promise to increase indirect taxation to over 52 per cent. of all tax revenues. The manifesto was a deceitful attempt to ensure that the public did not know in advance of the election the real intentions of the incoming Conservative Government. The weekly VAT bill for a family of four on average earnings amounted to £730 a year in 1989–90—roughly 5 per cent. of the family's earnings. That bill has to be compared with one of just £130 in 1978–79, representing 2·7 per cent. of a family of four's average earnings. National insurance contributions on employees' earnings have risen from 6·5 per cent. in 1978–79 to 9 per cent. today. As a result, a family on average earnings is paying 7·9 per cent. of its gross earnings on national insurance contributions in 1990–91, compared with 6·5 per cent. in 1978–79. The massive surpluses in the national insurance schemes have not been used to reduce contributions or to increase pensions and other benefits. They have been used to subsidise the move out of state pensions into the private sector. That has led to the loss of millions upon millions of pounds, at the expense of working people who make proportionately far higher contributions to the scheme than do those on much larger incomes. Child benefit—formerly the child tax allowance—has been cut in real terms by £1·75 since 1979. For a family of four, that amounts to a loss of £182 a year. As a result of those policies, the tax burden under the Government is greater for most taxpayers. If we include national insurance contributions, VAT and the effects of cuts in child benefit we see that the tax burden of a family of four on half average earnings has more than trebled—from 2·4 per cent. of its gross income in 1978–79 to 7·4 per cent. in the current financial year. A family of four on average earnings has seen a rise in its tax burden from 23·6 per cent. of its gross income in 1978–79 to 25·6 per cent. in the current financial year. Furthermore, the poll tax is not included in those figures. Statistics compiled by the House of Commons Library show that, even with rebates, 26 million people have lost out under the poll tax. Those losses affect 73 per cent. of the adult population. In his 1990 Budget statement the Chancellor of the Exchequer raised income tax by £380 million by freezing the top rate threshold, thereby hitting about 1·7 million taxpayers. The Government go on about how Labour's tax policies will hit middle income taxpayers. According, however, to their own definition of middle incomes, that is precisely what they did in the last Budget, as 1·7 million people with taxable incomes of £20,700—which means that they have a gross income of between £24,000 and £26,000—are paying £380 million more in tax as a result of that freeze. The Conservative manifesto of 1983 contained a commitment to reduce tax bureaucracy. It said that the Conservative's policies had led to"We must therefore be prepared to switch to some extent from taxes on earnings to taxes on spending."
What have been the consequences of removing that manpower from the Customs and Excise and Inland Revenue? A report to the House by the National Audit Office in March this year found that £5 billion in taxes had not been collected at the end of 1988 and that since 1978 the number of permanent staff employed on collection had been cut by over 18,000—more than one fifth of the total complement of the department. An earlier National Audit Office report estimated that national insurance fraud by employers cost about £365 million in lost revenue—£1 million a day. That report was a consequence of the continued campaign in the House by my hon. Friend the Member for Bolsover (Mr. Skinner) through points of order and requests for statements regarding the truth about the cover-up by the Government of that huge loss of revenue. As a result of the fraud, the Comptroller and Auditor General refused to ratify the Department of Social Security's accounts. The National Audit Office report revealed a huge backlog of returns containing incorrect, incomplete or inconsistent national insurance figures. Only half the target of 200,000 visits by national insurance inspectors to check employers' premises had taken place. An internal Department of Social Security report blamed"greatly reduced tax bureaucracy. Manpower in the Inland Revenue and Customs and Excise has fallen from 113,400 in April 1979 to 98,500 in April 1983, and is set to fall further."
The Government are soft on big tax dodgers while hounding claimants who are looking for work and those on sickness benefit."inadequate resources, fragmented and diffused management and an absence of meaningful performance targets."
Does my hon. Friend agree that one group of people have benefited greatly from tax cuts—not the people to whom my hon. Friend referred, but the wealthiest 1 per cent. of the population? According to the figures issued by the House of Commons statistics office, the wealthiest 1 per cent. have cumulatively reaped the benefit of £26·2 billion worth of tax cuts in the first 10 years of Conservative Government. That figure is almost equivalent to the amount of money we need to run the national health service for a year.
My hon. Friend is correct. I shall demonstrate later that not only the wealthiest 1 per cent. of the population but the 13 per cent. below them have accumulated the overwhelming majority of tax cuts afforded under the Conservative Government. To pay for that, indirect taxation has increased and the position of those on benefit and those seeking additional benefit has been marginalised so that they are paying the equivalent of between 70 and 90 per cent. because of tax margins.The Conservative claim of fairness in the distribution of the tax burden is the most fraudulent of all. As a percentage of gross domestic product, non-oil taxes are forecast to rise to 37 per cent. this year compared with 36·75 per cent. last year and 34 per cent. in the year that the Tory Government came to power. The Tories talk only about income tax, conveniently forgetting to mention all the taxes that have risen during their years in government. Even when focusing on income tax, they never point out that some have gained far more than others, as my hon. Friend the Member for Bolsover pointed out a few moments ago. Since 1978–79, the average gain from income tax cuts per taxpayer on an income of below £5,000 per annum is a measly £110 in 1990–91. The average gain for a taxpayer on an average income of £ 10,000 to £15,000 a year is £690 in the current financial year. In contrast, the average gain for a taxpayer on an income of more than £70,000 per annum is £36,060 or £693 per week. Such a taxpayer gains more in a week than those on average income gain in an entire year. The super rich on the Conservative Benches—I see that the hon. Member for Eastbourne (Mr. Gow) is here for the debate—argue that the rich need incentives to make them work harder and pay taxes. In Conservative language, incentive is a code word for huge pay rises and unfair tax concessions. Increases in tax revenues from top-rate taxpayers have occurred because the rich are paying themselves more and not because they are willing to pay more tax. The Government argue that cutting the top rate of tax has led to an increase in tax revenues. Since the top rate was cut to 40 per cent., liability to the top income tax rate has increased by £3·1 billion or 40 per cent. in cash terms and 15 per cent. in real terms. But why has that happened? Huge pay rises for the rich are one reason why the tax take has been greater. Last July a survey of 86 of Britain's top 100 companies found that their highest paid executives had awarded themselves pay increases averaging 27 per cent.—three times the British inflation figure. Since then, a number of new top pay awards have been announced. The chairman of Glaxo has had a pay rise of 51 per cent., taking his salary to nearly £600,000 per annum. The insurance broker Bill Brown, the highest paid man in the City, has awarded himself a 108 per cent. pay rise and now earns £4·2 million per year. That is his salary and does not count all the other little freebies—legal or illegal—that he no doubt receives from his job in the City. Sir Denys Henderson, the chairman of ICI, has had a 25 per cent. pay rise and now earns £480,000 per annum. Lord Hanson of the Hanson Trust has had a pay rise of 24 per cent. and now earns £1·5 million a year. It does not stop there. What about Tory Members of Parliament and ex-Cabinet Ministers who earn full-time salaries for part-time jobs in the City? The rats are leaving the sinking ship.
Given the obvious truth that top pay in Britain is actually rather low in comparison with the United States and most of Europe, for how long does the hon. Gentleman think that the shareholders of Glaxo would benefit from reducing the chairman's salary to the national average wage?
More important than that, I wonder how much the workers of Glaxo would welcome such a pay award, as would all the other workers who are earning less than £80 per week. They earn less in a year than the chairman of Glaxo earns in a day. That is the real issue. We have poverty wages and taxes on the standard of living of low-paid workers. It is clear from that intervention which side Conservative Members are on.Let us get back to the rats who are leaving the sinking ship. It is important to analyse just what the Government are up to technically and politically.
Does my hon. Friend agree that the major beneficiaries from privatisation have been the chairmen and directors of the companies that have been privatised? They receive huge salary increases although the companies have not improved in efficiency, and have become less responsive to consumers. Privatisation has been a bad deal for the taxpayer. The people who have benefited have been those involved in the privatisation. Members of Parliament have taken the privatisation through Parliament and then joined the boards of the companies. If that is not sleaze I do not know what is.
My hon. Friend is absolutely right and if he will bear with me for a few more moments I shall read out a list of the sleazy decisions that have been taken by Cabinet members who, within weeks of leaving the Cabinet, appeared on the boards of the companies that they had privatised, or on the boards of other companies. In one case, before the Minister had left the Cabinet there was an announcement that he had been placed on the board of a particular company.Head of the shopping list must be the right hon. Member for Blaby (Mr. Lawson), whom Conservative Members now blame for all the Government's economic ills. He was the Chancellor to end all Chancellors. The Prime Minister continually referred to him as, "My Chancellor, my Chancellor", yet within weeks he became a non-executive director of Barclays Bank and a part-time consultant to Barclays de Zoete Wedd, the securities arm of Barclays Bank. It is not a bad little earner for a part-time job at £100,000 a year. Then, to top up his salary and pay his expenses, he earns £40,000 a year as a part-time director of an Irish aircraft leasing company. The former Secretary of State for Wales, the right hon. Member for Worcester (Mr. Walker), who has just left the Cabinet, has been appointed a non-executive director of a City securities firm Smith New Court. He has also been approached by N. M. Rothschild and Sons, the company which handled the privatisation of British Gas. I understand that he has joined the board. I do not know whether he has a full-time or part-time job as there has been no official statement yet, but one can rest assured that the pay and conditions are light years ahead of what any normal worker in Britain would expect during his lifetime, never mind in one year.
My hon. Friend refers to the right hon. Member for Worcester (Mr. Walker) and the fact that he is now lining his pockets in respect of British Gas. I remind my hon. Friend that the right hon. Gentleman has been round that course before. When he was out of government before he became a director of Slater Walker and what happened? They ran it into the ground and the Labour Chancellor of the Exchequer had to bail out Slater Walker because the right hon. Member for Worcester and his mates had got it into such a state that it was bankrupt. I hope to Christ that the next Labour Government does not have to bail him out again.
I am sure that my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) will put our minds at rest when he winds up the debate this afternoon.Most interesting of all is the right hon. Member for Chingford (Mr. Tebbit), the man who continually attempted to attack workers who were trying to achieve a decent standard of living. He has directorships at BET plc, Manpower employment agency—formerly known as Blue Arrow—British Telecom, the company he privatised, Sears plc, the owners of Selfridges, J. C. Bamford and now he is an unpaid director of The Spectator: God help him, he has an unpaid job. In May 1989, The Times reported from a filing that Blue Arrow made to the United States Securities and Exchange Commission that the right hon. Gentleman was paid £17,500 a year with an all-expenses paid, company Jaguar, a chauffeur, office secretarial support and membership of the company's private health plan. These are the people who are in the House on a regular basis undermining the living standards of working people.
Did my hon. Friend say that these are the people who are in the House on a regular basis? The right hon. Member to whom he referred, who unfortunately is not present today, is not present very often. Am I right in thinking that he is the same right hon. Member who accused nurses of moonlighting—in other words, drawing a salary, yet disappearing to take other jobs? Will my hon. Friend put my mind at rest? Is he referring to that right hon. Member who is not present today?
I am obviously far too kind. When I say "on a regular basis", I mean that that right hon. Member comes to the House when it matters—when there are votes on cuts in benefit, including housing benefit, implementation of the poll tax and privatisation of the health service. That is the type of regular employment to which I was referring.
Does my hon. Friend believe the statement by the chairman of British Aerospace to the Select Committee on Trade and Industry when I asked him about his personal adviser, the right hon. Member for Chingford (Mr. Tebbit)? The chairman said that the right hon. Gentleman was an unpaid adviser. Surely that goes against everything else that my hon. Friend listed. If the right hon. Gentleman is an unpaid adviser, one wonders what he is getting from British Aerospace.
Order. I warn hon. Members against the tendency to move dangerously near to questioning the integrity of right hon. and hon. Members who are not here.
I would not question the integrity of any right hon. Member, certainly not the right hon. Member for Chingford. I think that you would agree, Mr. Deputy Speaker, that I was only seeking information. I was trying to throw light on that unusual statement by the chairman of British Aerospace. All of us know what an honourable person the right hon. Member is and has been over the years.
I could go on for two hours listing all the sacked Cabinet and non-Cabinet Ministers who immediately on leaving Downing street with a knighthood, ended up in a company along the road from Whitehall on a huge director's salary.The most interesting person of all those ex-Ministers is Lord Gowrie, the former Chancellor of the Duchy of Lancaster. He had to leave the Cabinet just as his career was blooming because he could not live on his salary of £33,000. To make up for that, he became a director of Global Asset Management, the Ladbroke Group and St. Quentin Ltd., chairman of Sotheby's UK and Sotheby's International, non-executive chairman of one interesting company, the Really Useful Company, and provost of the Royal College of Art. Contrast that with the incentives to the poor. The Government have reduced their living standards by attacking their weekly income, squeezing them still further into the poverty trap and exploiting them by encouraging low wages, and by higher rents and mortgages, the poll tax and indirect taxation targeted at poor families who have to pay a much greater proportion of their income in taxation than the better off. That is not just an assertion made by the Labour party and other groups involved in the poverty lobbies. As a member of the Social Services Select Committee, I take the House back to that Committee's ninth report, "Social Security: Changes Implemented in April 1988". Paragraph 51 states:
The evidence collated by the Committee resulted in the following response in paragraph 52:"Marginal tax rates are instrumental in the effect known as the poverty trap where an increase in earnings can lead to a fall in total income through increased tax and reduced benefits. This is one of the major bugbears of the Social Security system. The Government contends that the current situation has improved substantially on the previous system and that currently there are 'no marginal tax rates above 40 per cent.' and that the maximum marginal reductions of tax and benefit combined do not exceed 100 per cent."
That meant that the Government did not want to provide public evidence of the way in which they were attacking those on low incomes. The Committee continued:"The Government also argue that 'for most Family Credit recipients the use of passported benefits is likely to be irregular and infrequent' and that it would therefore be 'neither possible nor meaningful' to try to assess who might have marginal rates exceeding 100 per cent. in any particular week."
Compare that with the Government's 1988 Budget giving £3 billion of tax cuts, mainly to the top earners. To rub salt in the wound, national insurance contributions now raise 64 per cent. of the revenue raised by income tax. National insurace is now an important "personal tax" which has been pushed up by the Government. They raised the standard national insurance contribution rate from 6·5 to 9 per cent. It is also a "regressive" tax, as the ceiling on national insurance contributions ensures that those on top incomes pay a smaller proportion of tax than those on lower earnings. It is not just the Labour party or the Tory-dominated Social Services Select Committee or even the figures in the Red Book that say that the Government have increased the burden of taxation on the majority of the British people while giving huge tax advantages to the top 14·5 per cent. of earners. The Low Pay Unit, in its 1989–90 Budget report, entitled "A Major Setback for the low Paid" said:"Nevertheless, the figures show that since 1985 there has been a large increase in the number of families with children who are facing marginal rates of more than 70 per cent., from 240,000 in 1985 to 390,000 before the Budget for 1989–90. The introduction of Family Credit has played a significant role in this change. Thus, more people are suffering from the effects of marginal rates, although they are not suffering from rates of more than 100 per cent."
"After ten years in which the better off have received substantial help in the form of tax cuts, the 1990 Budget gave no help at all to the 7 million low paid who also pay tax. While Mr. Major's first Budget contained tax cuts for companies, savers and the City, it offered nothing to help the poorest wage-earners meet the extra costs of higher rents, mortgages and the poll tax.
The Low Pay Unit said that the direct tax burden on a family of four on half average earnings is now proportionately three times as big as it was in 1978–79. Taking account of the poll tax coming into effect in April, that family will be about £1·80 a week worse off after the Budget changes. In addition, they will have to pay an extra 91p a week in spending taxes. Overall, two households in three will lose. Nearly 60 per cent. of households earning less than £75 a week will lose. The analysis shows that more people will be drawn into dependence on means-tested benefits. This, combined with the fact that 85,000 more people will be drawn into tax, because allowances have not kept pace with earnings, has resulted in increased numbers caught in the poverty trap. That ugly truth is a far cry from page 13 of the Conservative's 1979 manifesto promise, which states:In this … analysis, we show who has gained and who has lost from the combination of Budget changes and the poll tax when it came into force in April."
What an affront to working people in 1979 when, in reality, over the next 10 years every Budget was to be a full frontal attack on the low paid and those on benefits. Most of the losses faced by the poor result from the poll tax, but the Chancellor failed, beyond a largely cosmetic change in capital limits for poll tax rebates, to ease the burden for the low paid. In some respects, he has made matters worse. I said that a family on half average earnings lost £1·80 a week and that a household on earnings equivalent to the Council of Europe's decency threshold of £163 a week lost £2·54 a week. In addition to that, a close inspection and analysis of the Budget shows that 64 per cent. of households will lose out, some by as much as £15 a week from 1 April this year. Nearly 60 per cent. of households earning below £75 a week, nearly 60 per cent. of home owners and 56 per cent. of tenants will lose out. Three quarters of married couples will lose out, as will 60 per cent. of single households. The average loss to a married couple is more than £2 a week and £2·35 for households with children. Nearly four in five couples in which the wife works will lose on average £2·79 a week. For heads of households earning £157 a week—the Low Pay Unit's threshold of low pay—the changes mean a weekly loss of up to £10 a week. Let consider tax burdens since 1979. The 1990 Budget did nothing to redress the shift in the burden of direct taxation from the rich to the poor. Families on half average earnings now pay nearly three times as much of their income in direct taxation as they did under the previous Labour Government. The tax burden has risen most steeply for families, largely as a result of the freeze on child benefit, which is a real loss of more than £360 million over a tax year.> Again, I am not the only person saying this. On 4 June I received a letter from the Child Poverty Action Group stating that, in relation to the poverty trap, the burden of taxation and child benefit, the situation is getting worse. The letter said:"Raising tax thresholds will let the low paid out of the tax net altogether, and unemployment and short-term sickness benefit must be brought into the computation of annual income."
We should link that to what is happening to the top 14·5 per cent. of earners in Britain. The letter continued:"Dear Ian, 350,000 households (1,175,000 individuals) have a marginal rate of tax between 70 and 90 per cent. ie between 70 and 90 pence is withdrawn from every extra pound of their earnings."
That is only 16 per cent. of the total tax cuts. The letter continued:"Only 7 per cent. of single and married people pay tax at the higher rate of 40 per cent. the changes in tax over the past 10 years have given huge benefits to the already rich. Tax units earning under £5,000 have gained an average of £110 a year, £480 million in total 2 per cent. of the total in tax cuts given away. Tax units earnings between £10,000 and £15,000 have gained an average of £690 a year, £4,390 million."
That is a staggering £5,770 million or 21 per cent. of the total tax cuts which has gone to the small group of the highest earners in Britain. That is the reality of the Government's income tax cuts over the past 10 years. The CPAG's letter went on:"For tax units at the very top end, earning £70,000 or more, they have gained on average £36,060 a year."
That is an increase of 25·6 per cent. So much for a Government elected on the basis that they would cut the tax burdens for those on middle incomes and for the poor. According to the CPAG letter, if we consider income tax and national insurance alone"the burden of overall taxation has in fact increased for the average taxpayer (married couples with a non-earning wife)—in 1978–79 they paid 14·4 per cent. in income tax, 6·5 per cent. national insurance and 2·7 per cent. VAT. (26·3 per cent. in total). In 1990–91 the equivalent figures will be 12·7 per cent., 7·9 per cent. and 5 per cent."
"in 1989–90 the tax burden for those with income under £5,000 increased by 37 per cent., while it decreased by 46 per cent. for those earning £70,000 and above.
That staggering tale of woe should be added to the disastrous and wholly unfair shift in wealth from the poor to the rich and to the effects of the poll tax, which directly attacks the principle of the ability to pay, undermines family incomes in a hugely disproportionate way and is seen by the nation outside the bunker at No. 10 Downing street as grossly unfair and unworkable. Thirty six million people are now liable to pay the poll tax. At least 26 million of them will be major losers. That is 73 per cent. of the adult population. Budget changes in capital rules, when applying the rebates, will help only 0·8 per cent. of all poll tax losers. The summer heat is on, but it is not on the Labour party. The Daily Telegraph today reported our 23 per cent. lead in the opinion polls. The Conservatives have dipped below 30 per cent. for the first time. If that trend continues the Secretary of State for Defence will be asking for D notices on opinion polls from now until the general election. The heat is on the Government, the Prime Minister, the Chancellor and the rest of the motley crew. The British people have rumbled the Tory tax cuts fantasy. They realise that over the past 10 years the vast majority of them have been paying additional tax to featherbed the rich and powerful. The Tories' attempt to give the impression that they are the party of low taxation is no more than an ad-man's hype. The brutal truth is there for us all to see. The Chancellor was interviewed on 22 May this year on Channel 4 News about Government tax policies. [Interruption.] Before I quote what the Chancellor said, I will have another glass of gin. I have borrowed this from the hip flask of my hon. Friend the Member for Warrington, North (Mr. Hoyle).The Chancellor could have increased child benefit by £2·45 a week per child (and equivalent amounts in income support and child benefit) for the cost of a 1p cut in the basic rate of tax. This would be a fairer way of handing out money than increasing tax allowances or reducing income tax for the very privileged and very rich in society".
Actually, it is vodka.
Vladivar, I do apologise. Of course vodka is distilled in Warrington.In that interview, the Chancellor said
Clearly, he knew what he was talking about—"I'm, I'm not going … I, I, I,"—
He was absolutely right. We are perfectly aware of his policies. Those policies have been rejected in the European elections, in local government elections and in the by-elections at Mid-Staffordshire and Bootle. Over the summer, the Government will wilt under the twin forces of the nation's anger and Labour's plan to bring back fairness, justice and equity into Britain's taxation system. That is a moral and economic crusade and we will win. I commend the motion to the House."I am going to deal with taxation in Budgets. I have told people what our taxation policy is. They know perfectly well what our policy is."
I congratulate the hon. Member for Makerfield (Mr. McCartney) on his good fortune in coming first in the ballot. Many of us have worked with him in Committee and we know him to have an absolutely excellent sense of humour which, towards the end of his speech, once he had got the appalling business of delivering it out of the way, began to shine through.It was pretty obvious to Conservative Members that the hon. Member for Makerfield took his opportunity of coming first in the ballot to raise a subject which, for many of us, was a really funny one for the comrades opposite to debate today. The outrageousness of the subject reminds me of the wonderful story about the chap who murdered his parents and then threw himself on the mercy of the court claiming to be an orphan. To hear the Opposition talking about the appalling evils of high taxation is one of the greatest outrages, albeit a humorous one which it is extremely difficult to take seriously, that we have ever heard in these enjoyable Friday morning debates. I begin with an admission. For many Conservative Members it is a matter of great regret that it took our Government, who were first elected in 1979, as many years as it did to begin to bring down the burden of taxation to the levels that we are enjoying now. I remember very well the logic of my right hon. Friend the Prime Minister's position then; it was not an easy position to take, but one that she took with the integrity and strength of character that are entirely typical of her. In 1979, she said,
That is the reality of life under the last Labour Government, and there are few people of any political persuasion who are not perfectly aware of it."Such is the state of the economy that we have inherited that we will never be a party that will follow the policies of the Labour party—a party that taxed to spend, borrowed what it could not tax, and printed what it dared not borrow."
Will the hon. Gentleman help hon. Members by talking in common terms? Will he refer to any reductions in taxation as reductions in income tax, and not confuse them with the reduction in the burden of taxation? Of course we accept that the level of income tax has been reduced, but the real burden of taxation, including value added tax, national insurance contributions and so on, has increased. It would help all hon. Members if we kept our terms clear. The burden of taxation is different from income tax.
I am grateful to the hon. Gentleman for that useful clarification. I shall deal with income tax because it is a particularly interesting example of the progress that we have been making. I shall leave the question of the overall burden of taxation in the capable hands of my hon. Friends.Those who have experience of not only personal tax but corporate tax are in no doubt that the lessons that can be drawn from income tax can equally be drawn from corporation tax. The vivid lessons that we draw from income tax are those that impress themselves most readily on the consciousness of ordinary voters. It was with the greatest regret that one noted that Her Majesty's Government were unable more quickly to reduce the burden from 33p in the pound, which is what it was when we came to office in 1979, to the 25p in the pound rate that we currently enjoy. The taxation policies of the two sides are fundamentally different in their philosophical nature and approach. The Opposition can never escape from that essential element of Socialism, the politics of envy—the idea that wealth is evil, that success is to be criticised and that those who create and initiate should never be allowed to be rewarded. We have had a genuinely illuminating exchange. Opposition Members can talk about top salaries, for example, without ever once taking into account the fact that, in the world market, if we want to get top people who have the entrepreneurial skill and talent to make our companies successful and, as a recent survey showed clearly, the best in performance terms in the whole of Europe—28 of the top 50 companies in Europe were British-—that talent might cost money. Why? If we choose to pay those people the national average wage, and no doubt a future Labour Government would intend to do so, they will exercise the choice—provided, of course, that a future socialist Government allowed them exit visas, and experience of previous Socialist Administrations shows that that is not long behind—and I have not the slightest doubt that they will vote with their feet. They will go to Europe, the United States and elsewhere and make other companies the most successful in the world. Who will be the beneficiaries and losers under that policy? Of course, hon. Members know that to juxtapose a man earning £750,000 a year with somebody earning £60 a week is not to look at one of the most important social dilemmas that a free market is likely to present. That must be a matter of concern to all hon. Members. Conservative Chancellors have never broken from the tradition that in their Budgets they, too, are involved in the process of redistributing incomes. That is what differential rates of direct taxation are all about. The cardinal difference between the approaches of the two supplicants for votes is that the vision of the gulf between us drives Opposition Members to destroy incentive and success and to believe that one somehow makes the poor richer by making the rich poorer. The belief that property is theft contrasts starkly with Conservative Members' belief that there will be hewers of wood and drawers of water, that we must recognise skills and enterprise, and that we must reward it if we want to keep it. It is only by allowing the creation of wealth that we can understand the mechanism by which we distribute it.
The hon. Gentleman is making a great point about a possible brain drain under the future Labour Government. Is he aware that there is at present a brain drain of scientists whom we can ill afford to lose? Scientists Abroad, which is supported by all hon. Members, has drawn attention to that fact. The Government are driving those people overseas. Is the hon. Gentleman aware of that? He should be, given his position as Parliamentary Private Secretary to the Secretary of State for Trade and Industry, and he should be concerned about it.
I have heard various debates between my right hon. and hon. Friends at the Department of Education and Science and Opposition spokesmen in which there has been a vigorous discussion of the validity of the statistics that have been adduced about the apparent brain drain. Many studies have concluded that there has been a net migration to Britain of people from elsewhere in the world to exploit the opportunities of British universities. The hon. Gentleman will know that, as a proportion of gross domestic product, our research and development expenditure is higher that it is in Japan and the United States of America. We need not detain ourselves indefinitely on that point. I wish to refer, as I am sure the hon. Member for Warrington, North (Mr. Hoyle) would want me to, to taxation.
What percentage of research and development money is spent on military expenditure as opposed to civil expenditure?
The hon. Gentleman makes a valid point that there is a difference between military and civil research and development. I have no doubt that one of the benefits of the peace dividend, as we understand it to be, is that that balance is likely to change. To obfuscate the essential truth of a point that Conservative Members make time and again is, frankly, not relevant to the issue today.We heard from the hon. Members for Bolsover (Mr. Skinner) and for Makerfield a typical exchange between a couple of dyed-in-the-wool Socialists. "It's absolutely appalling, isn't it, that people should be rewarded on the basis of what they are worth. It is appalling and morally corrupt and we should stamp on the idea that people should earn more than the national average wage and that there should be differences in wealth that might be based on something as peripheral as ability." My goodness me, we must contrast that view with what is recognised by many western observers who have now had the benefit of examining the Soviet economy in its desperate struggle to turn itself into a free market economy: what the Soviets come up against time and again are not all the other inherent failures of socialism, with which we could occupy all our deliberations this morning if we had a mind to, but the fact that, when there is absolutely no distinction in terms of reward between those who might take on responsibility for management and those who might as well have a cushy life pushing a broom, people simply cannot be bothered to take on those responsibilities. As a result, the Soviet economy is in a state of total collapse. That is the reality of the social engineering that lies behind Socialist taxation policy. There can never be merit in taxation policies that do not recognise that incentive is desirable and that success is not a dirty word, but one that we should be prepared to be proud of and to reward.
Does the hon. Gentleman think that it is worth giving way?
Yes, of course.
I rise to help the hon. Gentleman and to offer him a few words of reassurance from a representative of the hewers of wood. But first I reassure the hon. Gentleman that he will, of course, be allowed to flee the country in the event of a Labour election victory in 1991 or 1992.On differentials, my hon. Friend the Member for Makerfield (Mr. McCartney) mentioned the chairman of Glaxo Holdings, who rejoices in the splendidly English name of Sir Paul Girolami, who earned £598,081 last year. Does the hon. Gentleman really think that the chairman of a company the size of Glaxo should be paid just over £0·5 million for a year's work?
I am desperately disappointed by the hon. Gentleman's intervention. After all, he is a Front-Bench spokesman for a party that pretends to be a party of Government. We all enjoyed the speech of the hon. Member for Makerfield. After all, Fridays in this place can be desperately tedious and it is a good thing to kick off with a fun debate in which the Opposition pretend that they are horrified by high taxation. I congratulate the hon. Member for Makerfield on his very good choice of subject.However, it is interesting to hear a Labour Front-Bench spokesman laying down a clear marker about the way in which a future Labour Government would regard a company with the history of Glaxo. I had not come to this debate prepared to discuss the history of Glaxo, but I shall link what I know of it to the observations of the hon. Member for Warrington, North (Mr. Hoyle). The hon. Gentleman will find that Glaxo has one of the best records for R and D of any major company in Britain. It is an excellent company, which is taking on more workers all the time and developing life-saving products for the benefit of the British economy and others. I believe that the shareholders of Glaxo, who are ultimately repsonsible for approving the salary accorded to their chairman, took those factors into account when fixing his remuneration and I, for one, am not in the business of second-guessing them.
Does my hon. Friend agree that quite apart from the new drugs that it has supplied, Glaxo provides a great deal of assistance to our national health service, without which it would not be so successful?
My hon. Friend is entirely correct.It is a serious matter to hear Opposition Front-Bench spokesmen making statements that appear to sit uncomfortably alongside the progammes in which some of their hon. Friends are supposed to be indulging when they go round the City, clapping people on the shoulders, saying, "Do not worry, when a Labour Government come in, you will be all right on the national average wage because we will have a wonderful welfare system." It is interesting that over the past few weeks the financial press has made it clear that, despite the Labour party's protestations to the contrary, the City has not been conned by a word of what the Labour party has said. It is when the mask slips and one hears such observations from Labour party spokesmen that one realises why the City has been sensible enough not to be taken in. The Labour party's argument about the evils of wealth is invalid in practical terms. I refer to the figures, which the hon. Member for Makerfield was sensible enough to acknowledge, which show clearly that as the burden of the top rates of tax has fallen, the amount paid in tax by the top 5 per cent. of earners has comprised a bigger proportion of our total tax take. It is extraordinary that even the Labour party's theorists accept—this acceptance is not yet circulating among Labour Back-Benchers—that there is a law of diminishing returns in terms of top tax rates. If one were to push top tax rates back up to their level under the last Labour Government—for the benefit of the hon. Member for Nottingham, North (Mr. Allen), I am referring to both income tax and corporation tax—people would simply put their incomes elsewhere. As anyone who was involved in business in the 1970s knows—the figures can be examined—corporation tax became a voluntary tax because companies employed armies of lawyers and accountants to work their way through page upon page of Labour tax law. The rates were so punitive that it was in companies' interests to develop one of the most extraordinary industries of all—the tax avoidance industry. One would have thought that the Labour party would have learnt the lesson that as the top tax rate has been reduced to 40 per cent., the top 5 per cent. of earners are no longer contributing 25 per cent. of the total tax take, but 31 per cent. Any hon. Member who has experience of business knows that there is one great difference between the way in which company financiers looked at their businesses in the 1970s and the way in which they did so in the 1980s. In the 1970s when I was involved in running the finances of a company, three quarters of our time was spent on tax planning and only 25 per cent. on managing the business. The great thing now is that the proportions have been reversed. Companies are devoting their time and their financial resources to making their businesses more efficient and entrepreneurial. Fortunately, tax planning occupies much less time because the rates are perceived as being bearable and reasonable. In a sense, one could set all that to one side, except for one vital consideration. The Labour party not only deludes itself into believing that the poor are made richer by making the rich poorer and that the interests of those who are poor, homeless and who do not receive adequate services are served by attacking the mythical super-rich—who, incidentally, on the best estimates contribute about one fortieth of what might be needed to finance Labour's programmes, if one aggregates the spending that would be needed for all the statements that Labour party spokesmen have made—but it commits an even greater philosophical illogicality because none of its great discussions on how the wealth of the country is to be dispersed has ever referred to the way in which that wealth is created. As Conservative Members have often said, the difference between socialism and capitalism—which is, after all, the essence of the difference in the taxation policies of the two main parties in the Chamber—is that socialism is what one believes in at the age of 20 and capitalism is what one realises is right when one is 30. There is an old adage about that, but I shall not bore hon. Members with it because we have all heard it many times. The fact is that capitalism works. Even with what Opposition Members would regard as its manifest inequities, capitalism allows us to create the wealth with which we can then begin to address Britain's social problems. The country as a whole, not only Conservative Members, has seen the truth that in the Britain of the 1970s, a Labour Government, who were elected on what I grant them were the best possible motives, genuinely believed that the problems of our nation—neither side would dispute the problems of homelessness, poverty and social disequilibrium—could be addressed by a high-spend, high-tax, high-borrow and high-print policy. However, those great and magnificent plans crumbled into the dust because the Labour Government never recognised that to finance public expenditure at any level, one must first set in place the economic conditions that will allow wealth to be created. Whatever the economic difficulties of Britain, whether short term or longer term, underlying difficulties, the Conservative Government are dedicated to the proposition that a country must generate wealth before it can afford to indulge itself in discussions about how that wealth is to be dissipated. No wealth creator worthy of the name seriously believes a word of the policies being peddled by the Labour party on taxation. We know that by effectively removing the ceiling on national insurance contributions and introducing an immediate 50 per cent. top tax rate, Labour will tax people at 60 per cent. immediately. We also know from the commitments that we hear from Labour Front-Bench spokesmen every day of the week for every Department that they shadow that a Labour Government could never keep pace with Labour's spending commitments. What price the prospect of returning to the days under a Labour Government when we enjoyed—if that is the appropriate word—a rate of tax payable on so-called unearned income of 98p in the pound? The Labour Government wondered why capital and enterprise fled Britain when the prospect was working to make one's company or oneself a pound and being left with tuppence. If I may be forgiven for using the worst politician's euphemism of all time, in the real world people are not prepared to work for tuppence in the pound. Yet that is the prospect under the next Labour Government. When the mask slips we see our prospects under a Labour Government—a society in which wealth is regarded de facto as evil and reward is something that must be attacked. The salary of the chairman of Glaxo must be reduced because it is somehow obscene for shareholders to determine the appropriate level of his reward. The Labour party assumes that Glaxo will still be the thrusting company which my hon. Friend the Member for Bedfordshire, North (Sir T. Skeet) so accurately described. Contrary to what the hon. Member for Makerfield said about a lead or otherwise in the opinion polls, as is happening now, the policies——
Does my hon. Friend agree that the hon. Member for Newcastle upon Tyne, East (Mr. Brown) has scored a remarkable own goal in suggesting that there is something unacceptable in Sir Paul Girolami of Glaxo being paid £0·5 million? First, the British pharmaceutical industry is an international leader. No pharmaceutical company in the world has the same track record in research and development—to which my hon. Friend referred—or the same quality of products in its current registration pipeline. If the Labour party suggests that a putative Labour Government should ensure that the chairman of Glaxo was not paid at the same level as the chairmen of Merck, Eli Lilley, Bayer, Hoechst, Boehringer or Ciba-Geigy, it is declaring war on one of the most successful industries——
Order. The hon. Gentleman is making an intervention, I hope, not a speech.
It is entirely proper of you, Mr. Deputy Speaker, to intervene but I was enthralled by my hon. Friend's intervention. At least he had the decency to pronounce the name of the chairman of Glaxo correctly. There was a hint of real sarcasm—Hansard will not have conveyed it, so I wish to place it on the record—in the way in which the hon. Member for Newcastle upon Tyne, East expressed the name of the chairman of Glaxo. That told us a great deal about the Labour party's attitude towards business generally. If I have any qualification to add to the statement of my hon. Friend the Member for Stamford and Spalding (Mr. Davies), with which I entirely agreed, it is that not only in pharmaceuticals—which has brought many benefits, for example, to the north-east where the industry is a large employer and to the whole country—but in industry generally the approach of the hon. Member for Newcastle upon Tyne, East will be the hallmark of a future Labour Government.Not only has the hon. Member for Newcastle upon Tyne, East predictably shot himself in the foot, but the hon. Gentleman who moved the motion has given us a useful weapon to use in the battle of convincing sensible people, who are as yet uncommitted about how they will employ their vote at the next general election, to vote for us. We have been given some very useful ammunition. Despite the introduction of all the filofaxes and red braces of the Labour party, and the fact that they have listened to the advice of my right hon. Friend the Chancellor of the Exchequer in the Budget debate that the most sensible thing that they could do was to smarten up and shut up—my goodness that is what they are doing—and even though Labour Members are under strict instructions not to say a word about the future spending plans of a Labour Government or their real attitude to business, it is on these quiet Friday mornings that we see the true face of Labour in the form of an innocent little motion. Guess what? It has not changed one iota from the old familiar face that we knew and, in a way, some of us even loved. I am rather glad that it has not changed. It would have been terribly boring if all that stuff about mobile telephones and braces had moved from these Benches, where it is rampant, to the Opposition Benches. I love the old class struggle. It is so pathetic as an intellectual argument that one can derive real pleasure from debates such as this.
My hon. Friend is right that we are now seeing tooth and claw the politics of envy of the Labour party. It is the same politics of envy that we saw in the 1970s. The people on whom the hon. Member for Makerfield (Mr. McCartney) based his arguments were those on half average earnings. Of course, the people on half average earnings when the politics of envy were in full flood under the Labour Government saw their real take-home pay increase by a grand total of 4 per cent. over the period of that Government. Under this Government, the real take-home pay of the same group, with all the problems that Labour Members say that they have, has increased by about 27 per cent. That is the difference between the failure of the politics of envy and the success of the politics of rewarding enterprise.
I am extremely grateful to my hon. Friend. I hope that he may catch your eye, Mr. Deputy Speaker, during the debate to expand on those points.I finish with this thought. Conservative Members still regard the burden of taxation in Britain as too high. We believe that, in general, taxation is a disincentive to intitative and enterprise. It is much preferable to finance an expanding public sector from a smaller slice of the infinitely larger cake that we can create in terms of the wealth of the nation. I hope that Her Majesty's Government will continue to reduce taxes only when it is prudent to do so. Their record over a decade shows that that is exactly what they will do. [HON. MEMBERS: "The hon. Gentleman hopes so."] I do not have to hope because I know that the Government are committed to further reductions in taxation and I look forward to them as soon as they can arise. I say that not out of any wish simply to massage the paypackets of people in the top 5 per cent. of income, but because, as my hon. Friend the Member for Fulham (Mr. Carrington) rightly said, our policy has delivered better living standards, record numbers in employment, record output, record tax revenues and, therefore, record public expenditure in real terms for all the citizens of Britain to enjoy. The motion is amusing and trivial as it relates to the world that ordinary British people recognise. We should reject it out of hand. The gap between the two sides on tax and the central mangement of the economy is as chasmic as ever. The choice which the British people will be offered at the general election could not be starker. It is the choice between an economic system that has been roundly rejected throughout eastern Europe, where it held sway for 40 years at the point of a gun, and a system that has delivered record prosperity to the people of Britain, as I hope it will continue to do in the years to come.
It is always a pleasure to follow the hon. Member for Epping Forest (Mr. Norris) whose bunkum is always delivered with great elegance and style. He is here on a temporary visit once more, this time representing Epping Forest. I only hope that when we are in government some opportunity at a by-election will be found for him, so that he can return again to the House, representing one of the few Conservative seats that will be left.The hon. Gentleman and I first clashed in the Committee considering the Football Spectators Bill. His arguments were based on the political philosophy and values of Swindon Town. In other words, one makes one's way as best one can and uses the system to achieve one's ends. He argues with style and even seems to believe what he says.
Is the hon. Gentleman saying that the Labour party approves of the demotion of Swindon Town from the first to the third division?
As a Sunderland supporter, I certainly approve. I hope that the football league will act correctly and say that Sunderland should be promoted to the vacated position. However, as I live near Sheffield Wednesday, my remarks may not endear me to some of my constituents.I congratulate my hon. Friend the Member for Makerfield (Mr. McCartney) on his motion, especially on referring to the unfairness of taxation burdens. He stressed that a great number of flat-rate taxes had been introduced and that the burden of taxation had been shifted by changing the method of collection, which had produced greater problems and greater levels of taxation than in the past. He includes the poll tax within the flat-rate provisions. I am pleased that the poll tax is mentioned in the motion because otherwise Conservative Members, making use of the sophistry that they always produce on this matter, would argue that we could not discuss it in this debate because it is not a tax, but a charge. They argue that the poll tax is a flat-rate charge, like goods in a shop, whereas taxation is different. The motion correctly recognises that the poll tax is a tax. The poll tax has massive and serious effects on masses of people who are criticised and accused of the politics of envy. The politics of envy are significant in today's society because some people have a great deal to be envious of. They are envious of a decent way of living, a reasonable home and the opportunity to bring up a family in decent conditions. Those are basic provisions and any reasonable Government, even if they believe in the engine of the market and capitalism, should be redistributing them.
Does my hon. Friend agree that it is not the politics of envy, but the politics of ambition? Working people desire a proper standard of living for their families—their children and their grandchildren. Because of the Government's taxation and other policies, no matter how hard those people try, however hard they work, even if it is seven days a week, and however much they are exploited, they never get out of the hole. They are not envious of greed, but are ambitious to have the quality of life that others seem to have as a matter of right, whether or not they work hard.
The problem with the word "envy" is that it suggests that the legitimate ambitions of poorer people to improve their conditions are in some way unreasonable and can only be seen as envy of what others have got justifiably, or so it is held, by their endeavours. Often those endeavours are associated with luck, such as where people are born and their power in society. Many people wish to get in a little on that act. They want to redistribute wealth to ensure that their living standards are decent and dignified. They want society to adjust, so that they have a proper role to play within it. The notion of democracy is important in that. Tory Members should realise that through their taxation policies and the burdens that result, they are hammering the operation and functioning of democratic society.Since the franchise was extended in the late 19th and early 20th centuries, working-class people have used the vote to seek an improvement in their circumstances and some redistribution of the wealth produced, without ever having adopted a policy of an outright socialist nature to change the basis of society. They have tried to use the democratic system to improve their lot. The first improvement probably came in the 1870s with the Education Act. That followed the enfranchisement in 1867 of various sections of the working class—the more skilled—labour in urban areas. Foster argued that we must educate our masters. People used pressure to ensure that it was recognised that they had a right to education. Now that very education is under serious attack as a result of the poll tax which is considerably reducing the sums available to local education authorities to run a decent education system. Democracy requies that a Government should respond to the concerns of society. If whole sections of society begin to be detached from the democratic process and feel that there is nothing in it for them, serious social consequences will result. As I said earlier, I wish to refer to the poll tax in particular. It is the most unfair taxation system that has ever been introduced into any western democratic system. The poll tax that existed in the 14th century operated in three stages. Initially, there was a flat-rate payment. Then there was a graduated contribution, such as this Government may be pushed towards. Finally, as there was so much evasion among the upper classes, the flat-rate method was reintroduced, which led to the 1381 rebellion. The Government should he clear that if they pursue their present tactics, they will start to break the social bond. They should remove the poll tax because of its serious democratic implications. Economic and social policies cannot be divorced from the operation of democracy. Under the poll tax everyone within a given district area except for those who are eligible for rebates and a small number who are exempt, pays the same, be they a duke or a dustman, a miner, a midwife or a millionaire. That cannot be right. The Government argue that the total tax burden should be considered because, when we do so, we see that the rich pay a higher rate of tax than the poor, so that adjusts the picture. Yet we know that that, too, is under attack. Indeed, we should probably look at the general pattern, as my hon. Friend the Member for Makerfield did, and point out that the total burden has increased, and that the maldistribution involved in certain forms of taxation has been seriously worsened. There are pressures to achieve some harmonisation of the charges. The objective is a common payment system that operates throughout the country. There will be a flat-rate payment irrespective of the financial standing of the individual. There are exemptions, but they are not based on any principle of decency, fairness or justice. We are told that the principle of accountability is being applied, but that is what is wrong with the poll tax. Accountability means attaching the poll tax to the electoral register. There are two registers that are closely interlinked and interconnected. Who are exempted from the poll tax? There are some who deserve to be, but they have been exempted because they happen not to be on the electoral register, not because they are deserving cases. The severely mentally handicapped are thereby excluded from having to pay poll tax but the severely physically handicapped, who may well need the same provisions as are required by the severely mentally handicapped merely to exist, are not excluded. One group is on the electoral register and the other is not. There are many others who do not deserve to be exempted from contributing through taxation to the services from which they benefit. Visiting overseas forces were subject to the rating system, but they are to be exempted from poll tax charges. Diplomats, who have immunity from so many things to which others have accountability, will not be subject to the poll tax. If anyone goes to prison, he is liable to be exempted. That is because the prisoner will not be on the electoral register, unless he is imprisoned for not having paid poll tax. There will be second-class prisoners who will be obliged to pay the charge. The Government had the clever notion that they would introduce the pressure of imprisonment, so there will be imprisonment for the poorest in our society. It will be a threat for those who do not have earnings to attach and who do not have sufficient goods in their home to make them subject to the operation of the bailiff system. The Government recognised that there had to be a fall-back penalty to catch the poor. The result is that many people are drifting into debt. There is increasing indebtedness under this Government as people try to overcome the pressures that are introduced by poll tax charges. Much is made of the rebate system, but those who benefit from it often find that their circumstances are worse than they were under the rating system, which similarly entitled them to rebates. The Government worsened the rebate arrangements by introducing the 20 per cent. poll tax charge, which is linked to housing benefit.
The introduction of the poll tax was based in part upon electoral accountability. It was argued that those who pay poll tax, even the so-called minimum 20 per cent., have a responsibility and a right to expect services provided by the local authority to be Government approved. How does that argument square with the Government's policy of spending £4 million of taxpayers' money to advertise in South Africa, Zimbabwe, Canada and Australia? The Government are appealing to those who left the United Kingdom sometimes over 20 years ago—in many instances people who ratted on this country or who benefited from the apartheid system in South Africa—to register here and to vote in the next general election. How does that square with the so-called accountability that poll tax is said to introduce?
My hon. Friend has made a powerful intervention. I do not favour the notion that the payment of a tax is a qualification to vote. One of my major objections to the poll tax is that the franchise extends only to those who pay the charges. As a result of many inconsistencies there is, in effect, a voluntary franchise. There is so much fiddling and manipulation. Expatriate voters will not pay poll tax charges and neither will they pay any of the other forms of taxation that are referred to in the motion. Worse still, they do not receive any of the benefits that can be provided in a democratic society. Therefore, they will not be concerned about the quality of life in the United Kingdom. This debate is of no significance to overseas voters but it is of great significance to the many poor people in this country—those on average or below average earnings who will find themselves in great difficulty because of the many flat-rate taxes that are being levied on them. This taxation will be increased by the introduction of poll tax charges. Another significant factor will be the increase in water rates, an issue which was raised on points of order at the beginning of the debate.Those who can afford to contribute to the provision of local services will enjoy fantastic benefits under the poll tax system. Many hon. Members, especially Conservative Members, will benefit by as much as £1,000, £2,000 or £3,000 a year. The money that they do not contribute will have to be found elsewhere. In other words, it will have to be paid by others, including those who are eligible for a rebate. As I have said, the Government's policies are supposed to assist the poorest, but many of those who are on rebates will have to pay more than ever in poll tax charges. There has been talk about free riders, and the term has been applied to those who have said that they will not pay poll tax charges. The free riders are not those who oppose the poll tax by the tactic of non-payment. Rather, the free riders are wealthy people who have enjoyed fantastic reductions in their contributions to local services with the introduction of the poll tax, and who will continue to enjoy them year after year for as long as the system is in place. They will be the perpetual free riders. They will be riding on the backs of the poor and ordinary people in our society who have little to manage on and who in many instances are in the most desperate circumstances.
Is my hon. Friend aware that the poll tax is so unpopular that the majority of those who benefit from it are extremely unhappy about their position? There has been a remarkable sea change in attitudes in Britain over the past decade. There has been a fundamental change from "Me, me" to thinking about others. That is one of the major reasons why the Government are running into trouble. I am dealing with the case of a 19-year-old student who is studying for more than 21 hours a week. Her mother and father are unemployed. On her 19th birthday her income support of £27 a week was withdrawn. Her parents have no income and she has to pay 20 per cent. of a poll tax charge of £382. As I have said, she has no income. All her benefits were withdrawn on her 19th birthday.
The longer the poll tax operates the clearer will become the circumstances of individuals, and more and more cases of the sort to which my hon. Friend has referred will emerge. There are those who are subject to the standard community charge as distinct from the collective community charge. They will have to pay a charge on second properties, but some of them may be obliged to own those properties. For example, a pub landlord might have a small terraced house in the street next to the one in which his pub is situated. He needs to have that property because he could be required to leave the pub at any time.There have been numerous alterations to the law and to legal agreements following the introduction of the poll tax and the abolition of the rating system. The result has been a dramatic increase in social problems. Many people never realised that they would face deprivation because of the high charges. The Government say that because it is a new tax there are complexities, but that they will get round to adjusting things. Some people cannot wait for that and have been driven into increasing indebtedness. They have failed to pay not because they are part of an orchestrated compaign not to do so, but because they cannot meet that bill. The Government are reluctant to give us any decent information about the levels of taxation raised in different areas and the link between that and the grant provided by them. Perhaps by the end of the year we will be in a position to understand the full pattern. I have tabled a host of written questions but it is like detective work trying to draw bits of information from the Government. I have sought to discover how much of the money raised is accounted for by grant, the national business rate and the poll tax. In Committee and in the propaganda produced for the poll tax we were told that roughly 50 per cent. of moneys would come from Government support, 25 per cent. from the national business rate and only 25 per cent. from the poll tax. It is clear that that has not happened. The only way in which the Government could try to claim that some 48 per cent. of the sum involved comes from them is to throw everything into that figure. They would have to include all the provisions connected with their contributions to the rebate scheme and all Government grants inside and outside the aggregate external financial provisions. However, if one merely takes into account the revenue support grant and the figures that make up the standard spending assessment, one is confronted with an entirely different pattern. Instead of 50 per cent. being contributed from the Government it is clear that contributions from the Government, the national business rate and poll tax payers are equivalent to one third each. That represents a serious maldistribution among those groups. Instead of the Government providing twice as much in grant as is raised through the poll tax, they are providing the same amount, or perhaps even less. If the Government lived up to the promises they gave when they were pushing the tax through Committee and in their party-political broadcasts there would be a significant reduction in the level of the poll tax. Instead, the Government have engaged in a nonsense of fiddling the SSA and a poll tax-capping operation. That operation is directed at Labour authorities that are desperately trying to provide services for the mentally handicapped, as well as services such as meals on wheels and educational provision. Money will be taken away from those authorities and it will be yet another windfall for those who are already saving between £1,000 and £3,000 a year. Although that money might come as a relief to those in poorer circumstances it will not represent much of a relief for those on rebate. Instead of poll tax capping the Government should provide a grant in place of the money raised through the poll tax in those areas. The poll tax-capped authorities would then be able to provide the services for which people have always voted. Those services represent a redistribution of the fruits of the engine of capitalism and market forces, which now run rampant in society. The majority of voters have little or no stake in the operation of society and therefore there should be a redistribution of resources to them. The social, democratic and constitutional consequences of the poll tax are horrendous. The poll tax has led to a fiddling of the franchise based on the principle of accountability. If we compare mid-term estimates of the number of 18-year-olds in the population with those on the electoral register, we see that 600,000 people are now missing from that register. Throughout the 1980s, there was, as one would expect, a connection between those figures, but in 1987 things began to change. Then, in Scotland, people began to disappear from the register and the same has happened in England and Wales. Now on average 1,000 people per constituency are missing off the electoral register. People in desperate circumstances will take desperate measures and they have sold their franchise rights in an attempt to evade a tax they cannot pay. Such is the fear caused by the poll tax. No Government should put people into such desperate circumstances. That has not happened in Northern Ireland because the poll tax has not been introduced there. The poll tax has led to a desperate franchise fiddle together with the other fiddles to do with overseas votes mentioned by my hon. Friend the Member for Makerfield—there are many others one could add if this was a general debate about the franchise. The poll tax has had a serious impact on the franchise, but that impact is not uniform. Its impact is felt much more seriously in Glasgow and other major Scottish cities, Liverpool and other odd patches of the country where people have failed to register. In Finchley, the Prime Minister's constituency, 8·5 per cent. of the population are missing from the electoral register —3·9 per cent. were missing in 1989 and 4·6 per cent. in 1988. Who or what is fiddling the franchise in Finchley and other areas? Opinion polls suggest that, in various circumstances, the Conservatives might just hold on to Finchley. That does not take into account any expatriate votes that Denis Thatcher has been able to organise for that seat; nor does it take into account those who are missing from the electoral register. The Prime Minister, in a desperate attempt to hold on to her Government as well as her seat, is involved in the most significant fiddle of the franchise in Europe since that perpetrated by Mussolini. I am not saying that it is the same as that undertaken by him; it is a more sophisticated, marginal fiddle. When a Government believe that they should perpetuate their term in office they start fiddling the franchise. Mussolini did it in an exaggerated way, but the Government are more subtle. We have not been able to observe it, nor have we been able to speak about it as we should have in this House.
As the Member representing Barnet may I point out that there has been a concerted attempt to improve the accuracy of the electoral register throughout the borough, as my hon. Friend the Member for Chipping Barnet (Mr. Chapman) can confirm? The register was seriously inaccurate because the dead and those who had moved from the area were still appearing on it. The improvements may account for the drop that the hon. Gentleman has noticed. Can he enlighten the House about what happened in the St. Pauls ward in Finchley during the local elections when the three Labour councillors lost?
Order. It is difficult to see any connection between that and the motion on the Order Paper.
The Prime Minister wrote to me about the franchise after I had raised with her the type of difficulties about which I am speaking. She wrote that the shortfall that had occurred in the franchise in 1988 had probably been due to the postal strike of September of that year. But there was no postal strike in September 1987, at the very time when a similar shortfall was occurring in Scotland.It is odd that while in certain places, such as Liverpool and Glasgow, a tidying-up of the electoral register is taking place, a similar exercise is not occurring in other areas. The shortfall is often linked to the working-class make-up of areas, even sections of Barnet. In 1988 in the Rochester and Medway area there was a shortfall of 11 per cent. in electoral registrations. The situation has improved somewhat, perhaps because a tidying-up exercise has been happening there. Has some of the shortfall been made up by the use of poll tax information? I understand that the shortfall has fallen from 11 per cent. to about 7·5 per cent. There is a large immigrant population in that area, with many people living in poor circumstances. When large numbers of people live together in households, many of them will not appear on the electoral register. Unfortunately, those who most frequently are not on the register are the attainers, those coming up to age 18 who were not on previous electoral registers. Generally speaking, one can discover the names of those who are missing—they may be missing for poll tax purposes—because they appeared on previous electoral registers. With the introduction of the poll tax, we find that the two registers are interlinked by computer in district council areas. It is disgraceful that, living in a democratic society, we should have taken such a step. It has resulted in our having a tax on qualifying to vote. It is like Chile when the referendum took place on Pinochet's future; to qualify to vote, one had to pay the equivalent of a month's employment training money to get on the register. In other words, the vote that took place against him——
Order. I regret having to interrupt the hon. Member, but it seems that he is speaking more about the weaknesses, as he sees them, of the electoral system than about the burden of taxation.
I have endeavoured to point out the problems that the poll tax is creating for the taxation system and the ramifications of that for the living conditions of ordinary people. But those problems have serious democratic implications. I argue that redistributed elements should be a natural part of democratic taxation systems, as is the case in many other countries. We should be debating the nature and extent of our taxation system and whether the burden is too great and causes other problems. We should not have a flat-rate system of taxation which is linked to the electoral register.I accept that my example of Chile might have taken us far from today's debate. I made the point only to show that the vote that went against Pinochet did not occur on a full franchise, because vast numbers of people did not qualify to register. I fear that we in this country will find ourselves with that type of peculiar democracy—dernocracy with a bit chipped off, one might say—which could allow odd results to emerge. In other words, I fear that we shall return to the system we had before the introduction of the universal franchise. That was introduced in two stages. Women finally got the vote on the same basis as men, and the system was based on residence, in 1918 and 1928 respectively. We must at all costs avoid going back to what we appear to have had in some areas, with 40 shilling franchises and provisions designed to cull people out of voting. It seems clear that the introduction of the poll tax is akin to our legislation on representation of the people being amended. I appreciate that new legislation is not bound by earlier legislation, but at present we must operate under the Representation of the People Act 1983, apart from the nonsense of extending its provisions to expatriate voters, an amendment against which I voted at every opportunity.
How did the shadow Cabinet vote on that?
The members of the shadow Cabinet can make their own speeches. This is my speech.We in Britain are supposed to have a system of democracy, having fought for it, but many people are now finding that they are oppressed by recent legislation. From the 1275 Statute of Westminster, which allowed free elections, to the latest Representation of the People Act——
Order. It seems to me that the hon. Member is talking much more about the electoral system than about the burden of taxation to which the motion refers. I hope that he will address his remarks more closely to the terms of the motion.
I think that I have said enough to make my argument about electoral representation. I believe that my comments have been relevant to the motion, which refers to the objectionable nature of the taxation burden that has been introduced by the Government, about the shifts that have occurred in the burden of taxation and about the consequences of the poll tax. My argument is that those consequences are not simply of a social and economic nature, but are also of a democratic and constitutional nature.Twenty Labour authorities have been poll tax capped. The system has been manipulated to enable that to happen because, in terms of expenditure levels, many Conservative authorities—in Oxfordshire, Bedfordshire and elsewhere—should have received the same treatment. There was no reference in the Conservative manifesto to poll tax capping, for it was held that people would be able to decide the levels locally. The leader of the Conservative party in Doncaster was ousted, but he is haunting the local people, as it were, by the actions of the Secretary of State, who has poll tax capped the area. That, in turn, has led to the destruction of local education and other services which are essential——
Order. The motion refers to public services, but it is not about public services. I hope that the hon. Member will recognise that other hon. Members are waiting to speak to the motion. Will he please address his remarks to the motion or resume his seat?
A constituent of mine wrote a letter which appeared in the local paper on 25 April of this year. John E. Thurley pointed out that on the poll tax form he received, it listed the different amounts available from Government grant, business rates and the amounts that were expected to be raised by the poll tax. He then calculated correctly that those amounts meant that the Government grant amounted to 13·5 per cent., the business rate to 33·4 per cent. and the poll tax payer was expected to pay 53·1 per cent. Those are the figures that the Government oblige councils to publish on the forms that are sent out.The Government have operated the most nonsensical formula to ensure that certain areas of the country would have to bear that great burden. The formula that they used for the standard spending assessments means that an authority would not get a full grant if people worked outside the area seeking to raise money. The Government made some small argument of the fact that the authority would not need as many food inspectors or as much street cleaning if people left the area. If people go into an area the authority can raise money from car parking facilities and other provisions but the authority loses out if people leave the area. An authority will also lose out if it contains an intermix of middle class and working class areas——
Is the hon. Gentleman's obvious desire to filibuster his hon. Friend's motion a reflection of a confession of hopelessness at the possibility of developing a coherent argument in favour of the motion from a Labour point of view?
When I saw that the motion had been tabled in the name of my hon. Friend I said, "Eureka" because I have been trying for some considerable time to get a debate in the House—an Adjournment debate, or come lucky in the ballot—so that I could discuss the democratic and constitutional implications of the operation of the poll tax. I have taken this opportunity to do that. You, Mr. Deputy Speaker, have held me in line.
Order. That is quite clearly what is causing some resentment in the House. I must remind the hon. Gentleman again that no matter how strong his desire to debate those matters, that is not what the motion is about.I hope that he will address himself to the motion that is before the House, and not one that he might have hoped was before the House.
I am addressing the motion before the House, although my arguments could have been produced in favour of a different motion. The motion before us talks about the poll tax, the taxation burden and the consequences and evils of that Government legislation and I was seeking to conclude——
Order. There are a number of other nouns in the motion but that does not mean that it would be in order to have a full debate on any of those other nouns. I hope very much that the hon. Gentleman will respond to the sense of the motion—the burden of taxation. Otherwise I hope that he will resume his seat and let another hon. Member speak.
As I said in conclusion, Mr. Deputy Speaker, I was making a point about the unfairness of the burden that has been placed on local authorities and poll tax payers in particular areas because of the Government's peculiar policy and their manipulation of the operation of standard spending assessments. That has led to a silly formula for catching particular areas. My district authority in Derbyshire, North-East, in representations to the Minister, showed the inequities of the system being used, which means that if the areas are a mix of rural and urban areas——
Does my hon. Friend agree that it would be absurd to talk about the weight of taxation on the people of Britain without discussing the poll tax, which is the newest and most onerous burden on our people——
Order. I hope that the hon. Lady is not encouraging her hon. Friend to defy my ruling, and I hope that the hon. Gentleman will observe what I have said to him.
I was making the point that if people live in an area which is both rural and urban they lose out on the grant for sparsity of population and on a grant for concentration of population. That has affected my constituency in particular, and Derbyshire county council, which is one of the poll tax capped authorities.Also, if an area is mixed in class terms, with middle and working-class areas, working-class people in the area will suffer. Because of that mix they will miss out on various grants. On the social deprivation index there will not be a sufficient percentage of the socially deprived from working-class areas to get a grant. For example, in my constituency the eastern section is identical to that of my hon. Friend the Member for Bolsover (Mr. Skinner), yet the grant provision to the district council in Bolsover is more generous. The people in the eastern section of my constituency—and others in the western section—cannot get such a reduction. Any formula that is based on such odd priorities, and which hits specific types of authority, especially those in the north of England, is terribly biased and unjust, and that is relevant to the nature of the evils of the tax that I am discussing. I could go on to develop discussions about some of the other elements mentioned in the motion, such as the unfairness of value added tax, but, given that there is certain impatience with my contribution—not from Opposition Members but from Mr. Deputy Speaker—I feel that I have made my point about the economic, social, constitutional and democratic consequences of what we are discussing. It is time that the House faced up to those democratic and constitutional considerations because the poll tax is the most monstrous measure of taxation—among many of the other horrors that my hon. Friend the Member for Makerfield has talked about and that we could go on about—that the Government have introduced. The poll tax is by far the worst. I hope that Conservative Members who are now ready to jump up will tell us that they have seen the light and that we will get rid of this obnoxious measure.
I congratulate the hon. Member for Makerfield (Mr. McCartney) on coming top in the ballot and on the subject that he has chosen for debate. A debate on taxation, especially when initiated by the Opposition, is always riveting.Today marks the 75th birthday of my hon. Friend the Member for Harwich (Sir J. Ridsdale) and the 64th birthday of my right hon. Friend the Member for Woking (Mr. Onslow). It is a matter of regret to the House, as it is to the Financial Secretary to the Treasury, that neither my hon. Friend nor my right hon. Friend can be here to contribute to the debate. They are in their constituencies toiling away on their constituents' behalf. I want to draw the attention of the House to crucial words in the motion of the hon. Member for Makerfield—
I begin by saying something that will not be welcome to my hon. Friend the Financial Secretary. The most unfair tax invented is that which is called inflation. That tax has been unauthorised by Parliament."the growing burden of less fair taxes".
What about income tax?
I am coming to that. I hope that I shall carry the hon. Gentleman with me during part of my speech. I shall give way to him, or to one or more of his hon. Friends, if they wish to intervene.Only Governments can cause inflation; only Governments can cure it. There has been one occasion in your lifetime, Mr. Deputy Speaker—you will remember it well, since you were a member of the Administration at the time—when the recorded rate of inflation was 26·9 per cent. Today it is 9 per cent. plus, and probably rising. In my opinion, the Labour party was not responsible for, although it was in office, the rise in the rate of inflation to 26·9 per cent. It was my belief at the time, and it remains my belief today, that responsibility for that inflation figure of 26·9 per cent. rests with my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath) and my noble Friend Lord Barber. They were, respectively, the First Lord of the Treasury and Chancellor of the Exchequer during the period of between 18 months and two years which preceded that inflation figure, which occurred in 1975–76. Since I blame my right hon. Friend the Member for Old Bexley and Sidcup and my noble friend Lord Barber for causing that inflation, I also assert that the cause of the inflation in 1975–76 was an increase in the growth of money supply at a rate far greater than the increase in the supply of goods and services. Inflation of 9 per cent. plus—and possibly 9 per cent. rising—is the direct cause and the inevitable consequence of the fact that somewhere between 18 months and two years ago the growth of money supply was much greater than the rate of growth in the supply of goods and services. If the hon. Gentleman's motion that he has enabled us to debate today has rendered any service, it is, I hope, this: that when the Financial Secretary replies to the debate he will renew the Treasury's acknowledgment that excessive monetary growth is the inevitable cause of inflation. The inflation from which we are suffering today, and which is in prospect, could have been avoided. I remind my hon. Friend of the manifesto upon which he and I, the Chancellor of the Exchequer and my right hon. Friend the First Lord of the Treasury fought the June 1983 election. For the sake of accuracy, I have the precise words:
In 1987—almost exactly three years ago to the day—my hon. Friend the Financial Secretary went before the people of St. Albans and my right hon. Friend the First Lord of the Treasury went before the people of Finchley and said, according to the election manifesto:"In the next Parliament, we shall endeavour to bring inflation lower still. Our ultimate goal should be a society with stable prices."
It was not the second or third objective; it was the first. The manifesto continued:"The Conservative Government will continue to put the conquest of inflation as our first objective."
I want my hon. Friend to repeat in your hearing, Mr. Deputy Speaker, and in the hearing of the mover of the motion that the Government remain committed to achieving stable prices, with inflation eradicated altogether. We are allowed to remind ourselves about that commitment this morning because we are talking about fair taxes. The most unfair tax of all is inflation. It is a major source of envy, jealousy and malice; it is the unauthorised robber of those who have saved; it is a major disincentive to investment—notably to investment from overseas. Inflation is also the principle parent of unemployment. If we are talking about fairness—it was the hon. Member for Makerfield who chose to put the word "fair" on the Order Paper—let us have from the Financial Secretary his reaffirmation of the commitment to end the unfairness of inflation. I shall now cease to carry the Opposition with me and will cause no further embarrassment to my hon. Friend the Financial Secretary. We can be certain that the words which my hon. Friend intends to utter will satisfy me. He and I hold identical views on this matter. I know that. I shall be wholly reassured by what he will say. I do not blame him for what happened; he was not at the Treasury at the time. A fascinating exercise for the House, and relevant when a motion such as this is moved by a Labour Back-Bencher, is to ask what would be the consequences of electing a Labour Government. My hon. Friend the Member for Epping Forest (Mr. Norris) told the House that the previous Labour Government borrowed when they dared not tax and printed what they could not borrow. He was right. The motion contains a reference to levels of taxation and spending, but we can be absolutely certain that if there were ever another Labour Governent there would be a massive increase in spending and borrowing. A Labour Government would be unable to borrow enough to finance their extra spending, so the printing presses would inevitably be set to work. One consequence of the policies that my right hon. and hon. Friends on the Treasury Bench have followed, with my warm approval—to repay debt instead of to borrow—is an overall increase in the proportion of gross domestic product that is used to finance public expenditure. My hon. Friend will correct me if I am wrong, but in present day money the borrowing of the previous Labour Government was about £40 billion."We will not be content until we have stable prices, with inflation eradicated altogether."
Of course, I shall give way. I gave an undertaking to give way and I shall fulfil that undertaking.
I thank the hon. Gentleman for his typical generosity. It may be prudent to borrow less, given the policy that the Government have pursued in raising interest rates. If one borrows less one has less to repay. The hon. Gentleman will accept the logic of that. Will he go on to the next stage and acept that the Government are no longer repaying debts but are starting to borrow again. Public sector borrowing is increasing. Should not the hon. Gentleman look a little further than the straightforward monetarism he has put forward so far?
I should not have given way to the hon. Gentleman because he is not correct. For the past three years and for the present financial year we shall be repaying debt. There is no longer any justification in drinking a White Lady to achieve a reduction in the public sector borrowing requirement. The consequence of drinking a White Lady today is to increase public sector debt repayment, and that is a very good thing.The present policy of high interest rates will result in the abatement of inflation. I am pleased that we are debating this motion today because the inevitable consequence of a future Labour Government will be higher taxes and, using the words of the motion, the terrible unfairness of higher inflation and the rising unemployment which will follow any inflationary policy.
I am grateful for the opportunity to follow the hon. Member for Eastbourne (Mr. Gow). I have followed him on many occasions in debates on Northern Ireland, and it is a pleasant and refreshing change to follow him in this debate. May I say how much I welcomed his refreshing and objective remarks. He said that the inflation figure of 26·9 per cent. was a direct consequence of the policy followed by the former Prime Minister, the right hon. Member for Old Bexley and Sidcup (Mr. Heath) and the former Chancellor, Lord Barber. I recall 17 December 1973—the date is engraved on my heart—when the credit expansion that had been introduced by Lord Barber came to an end. The vast credit expansion that led to an unprecedented boom in property and property development ended when the Government imposed restrictions, and, because inflation takes two years to work its way through the system, there was massive inflation in 1975.
Although the scenario that the hon. Member for Eastbourne (Mr. Gow) painted was most seductive, I warn my hon. Friend not to go too far in saying that inflation is entirely the product of national Governments printing money. There are many other important factors, notably the actions pursued by other national Governments. While I do not wish to detract from my hon. Friend's attack on the hon. Member for Old Bexley and Sidcup (Mr. Heath) and Lord Barber, we should remember the shock of oil price increases which fed into the high inflation figures under the last Labour Government.
I am grateful to my hon. Friend for anticipating my speech. The next point in my notes refers to the oil price rise, but my hon. Friend is certainly right to refer to the actions of other governments. I remember Mr. Giscard D'Estaing, who became President of France, saying that the American war in Vietnam led to the exporting of inflation from the United States into Europe. My hon. Friend is perfectly right to say that there is a clear connection between our inflation and what happens in other countries.The great oil price shock in 1973 after the Yom Kippur war, when the price of a barrel of oil rose from $3 to $11, was mirrored in 1979 when the price of oil quadrupled, leading to an inflation rate of 21 per cent. in 1981 under a Conservative Government. One of the reasons why there has been a reasonably stable inflation rate in the 1980s, leading to stability in Governments throughout the western world, has been the fact that the prices of oil and other raw materials have been relatively stable. On the back of that stability we have been able to maintain the inflation rate reasonably well. To add to the refreshing comments of the hon. Member for Eastbourne, of course, there have been other factors since 1974. Lord Barnett wrote an excellent book called "Inside the Treasury" and I hope that my hon. Friends on the Labour Front Bench and the Treasury Ministers have read it with great interest and understand the absolute importance of keeping a strong control on expenditure commitments that may appear in a manifesto. I disagree with the final remarks of the hon. Member for Eastbourne when he prophetically referred to what he envisages as the consequences of a future Labour Government. There is not the slightest prospect of a future Labour Government borrowing to the extent that the hon. Gentleman suggested. At the very first Labour party conference I attended in 1976, Lord Callaghan, the then Prime Minister, said that the days when Governments could borrow or spend their way out of an economic crisis were over. The Labour party has learnt those lessons and there is not the slightest prospect of a future Labour Government entering the money markets to the extent that the hon. Member for Eastbourne has suggested and borrowing money. Nor is there the prospect that a future Labour Government would print money. All Governments throughout the western world understand perfectly well what happens when Governments resort to the printing press. The hon. Gentleman was perspicacious in his references to the consequences of inflation. Inflation destroys savings and the principle that one should even try to save or put money aside, as it is eaten away by inflation. So inflation will be a paramount consideration to any future Labour Government and in my modest capacity as a Back-Bench spokesman, I give a commitment that a future Labour Government will not borrow to the extent that the hon. Gentleman suggests and certainly will not print money.
I hope that I do not anticipate my hon. Friend's remarks once again, but I invite him to allude to current Government borrowing, particularly in the past three months. The hon. Member for Eastbourne appeared not to be aware of the situation. Having been a net repayer of debt, with a general election approaching we are now starting to borrow again in ever greater amounts.
Order. Once again the debate is moving away from the motion before the House. It is a debate not about the general economic financial situation but about the burden of taxation.
The hon. Member for Eastbourne said that inflation was the greatest tax that we could impose on future generations and he was perfectly right.
The hon. Gentleman was being invited to discuss the potential borrowing of a future Labour Government.
The hon. Member for Eastbourne was warned when he said that the Government are not borrowing money that the Government have dipped into the money markets of late to balance their books, but I shall leave it at that.The motion mentions
We all remember the early 1980s when the Government used the prices of gas, electricity and water, which were all nationalised industries, as indirect taxation. They increased the charges for those services and telecommunications. That was indirect taxation used by the Government to pave the way for reductions in the rate of income tax. One of the great tragedies of the past 10 years under this Government and under the United States Government is the view that has crept into our thinking that high taxation is wrong. I believed in 1970 that it was a great pity that Mr. Wilson as he then was lost the election. He tried to persuade the people that they should accept high taxation for the high standard of services that could be rendered. Unfortunately, that battle was lost in 1970. In the 1980s, we have lost ground still further, because the concept in the public's mind is that they do not really want increased taxation. I am aware that, if people are interviewed for an opinion poll, they may say that they would like increased taxation and would like to pay more for better services, but that is not the reality, as is shown in this country and elsewhere. Many years ago, Hugh Gaitskell said that the Labour party was the party of high taxation, but we have evolved over the years. To use the words of my right hon. and learned Friend the Member for Monklands, East (Mr. Smith), Labour is now the party of fair taxation. We fully accept the concepts of fair taxation, of value for money and of paying our way in the world. We will not return to a situation when the Government tried to persuade the British public that they should pay high taxes. We fully accept that the country wants a fair taxation system and value for money. The hon. Member for Eastbourne talked about the inflation rate. One of the great tragedies of our time in economic terms was the Chancellor's decision to reduce the highest income tax rate from 60 to 40 per cent. Financially, that could be said to be a small change, but overall it gave a signal to the public that the good times were here and that we could spend more than we were earning. It resulted in a boom which created our present financial difficulties. We all remember the shift under the Conservative Government from direct taxation to indirect taxation. We will never forget the shameless promise in 1979 not to increase VAT, and then it doubled. That sleight of hand created a framework for lower direct taxes. When referring to previous Labour Governments and taxation rates we should remember that under a Labour Government the taxation rate was 25 per cent. for those on lower incomes. We have not moved far from the view of taxation in those years. Taxation levels overall under the Conservative Government are higher than they were under a Labour Government and the consequences are felt by every family. Families know the taxation burden that they face and they will not accept the sleight of hand so often shown by those on the Treasury Bench."savage cuts in the quality of public services".
We have heard some interesting speeches, including a thoughtful one by the hon. Member for Middlesbrough (Mr. Bell). My hon. Friend the Member for Eastbourne (Mr. Gow) said that inflation was the killer and the primary tax. One point that distinguishes this country from others in western Europe is that mortgage interest in not included in the retail prices index in those countries. Inflation in the United Kingdom might be assumed to be 9·5 per cent. but it is really about 2 per cent. below that. That is a long call from the 26·9 per cent. to which my hon. Friend referred.
Surely the hon. Gentleman is not suggesting that the crippling monthly repayments that most people are suffering under the Government should be removed from the RPI calculation. Whether it is in or out of that calculation, there is still growing debt among mortgagors and still a problem of trying to meet growing demands. People are having great difficulty meeting the higher burdens imposed by the Government's economic policies.
The hon. Gentleman makes his point. We are now in Europe and I suggest that we should conform to European standards. As mortgage interest is not included there—and the hon. Gentleman is very much in favour of that sort of thing—perhaps my proposal should be investigated.The Conservatives have a good taxation record. They have been cutting borrowing, paying off debt—£25 billion in three years and saving £2·5 billion in interest payments, which could provide for the running of 150 hospitals for a considerable time. The hon. Member for Newcastle upon Tyne, East (Mr. Brown) referred to the prospects of some of our prosperous companies such as Glaxo and made a point which I think he will regret in future. It is a big exporter for the United Kingdom and a producer of many new drugs. It is a wealth creator, not a wealth consumer. There have been three Labour Governments since the war, for terms of roughly four to six years. They were the wealth destroyers. The Labour party came into office after the Conservative Government had built up wealth, and then the Labour Government distributed it. There have been 13 years of previous Conservative Governments, the present Government have been in office for 10 years, and the term is likely to be extended further. Wealth creation can be brought about only by having appropriate incentives, not denigrating some of our best companies.
I am grateful to the hon. Gentleman for letting the wealth destroyer intervene. It is not my intention to denigrate Glaxo as a company. Of course, it plays an important part in the British economy. I said nothing that could have possibly been taken by anyone to be a denigration of Glaxo. I raised the issue of the desirability, or the necessity, of paying its chairman £500,000 a year. That seems a lot of money, even for someone as hard working as the chairman.
The hon. Gentleman has made his point, and we shall read it carefully in Hansard. It is a matter of interpretation, and that is not my interpretation.If the Labour party ever assumed the leadership of this country, high salaries would be the first things to be removed, and some of the people who have been producing this country's wealth would be affected. We have seen some of Labour's party pieces and it has suggested its programme. We must take account of the taxation required to meet those commitments which has been assessed at roughly 33p in the pound, instead of the current 25p in the pound. We would return to the conditions of previous years. To take one item, it will be extraordinarily expensive to deal with the roof tax. Is the hon. Member for Newcastle upon Tyne, East prepared to tell us how he will operate that tax? It is a property tax plus a local income tax. I assume that the hon. Gentleman would prefer to leave that answer to some other occasion, and perhaps that might be a good idea.
May I take the hon. Gentleman back to the issue of Glaxo? My point was not the pay that that gentleman receives but the fact that he had a 51 per cent. increase. If workers at Glaxo or elsewhere asked for even one quarter of that, Conservative Members would be the first to be up on their hind legs attacking the consequences of inflationary wage demands.I remind the hon. Member for Bedfordshire, North (Sir T. Skeet) that during Prime Minister's Question Time a few weeks ago the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) prompted the Prime Minister on the issue of high wage rises feeding through from the boardroom downwards. In response, the Prime Minister distanced herself from that and attacked the way in which company chairmen and others were giving themselves huge pay rises of between 50 and 110 per cent. because they gave the wrong impression and the wrong image to the rest of the workers in the economy.
Yes, I can see envy entering the matter again. It seems that people must not be allowed to earn too much, even though they pay a substantial element of tax. Envy creeps out from every corner and it eventually formulates policy. We do not want to drive company chairmen from the United Kingdom. If they can earn more in Europe or the United States, they will go there and we will be the poorer.
No, I want to make only a comparatively short speech.The hon. Member for Derbyshire, North-East (Mr. Barnes) referred to the community charge. On that, I must depart from the generality of feeling in the House which is totally in support of the Government. There are nearly 11·2 million married women in the United Kingdom, of whom 3·9 million have no paid employment and 3·4 million are termed economically inactive. Of them, 2·4 million state that their main reason for staying at home is to look after their husbands and families. That is a very creditable motive with which many people would agree. If we argue that those non-earning married women should have a considerable rebate on their community charge payments—as much as 80 per cent.—it will cost the Government a great deal of money. However, I do not argue for an exemption because I think that it would be unqualified. The community charge is a good tax—if it may be termed a tax. Formerly only 18 million people paid rates out of a total of 36 million. Therefore, the community charge is a good tax in the sense that its coverage is wide and accountability is there for all to see. I predict that in future the Labour party will throw aside its roof tax and adopt the existing tax on the statute book. However, the community charge has some ragged edges. Although reform may be expensive for the Government—in one scenario the cost would be £1·8 billion—the problem could be abated because many people involved are eligible to receive rebates anyway and it would be unfair to suggest that if women had considerable investment income or had large capital funds of their own, they would qualify for rebate. Of course, they would have to pay the full sum. Many people are caught between Scylla and Charybdis. Some have minuscule earnings. On the one hand they face the rapacity of local authorities, which seem to have little desire to control expenditure, and on the other an absurd structure for local government which accommodates too many tiers of administration. We must overcome that problem. I am trying to help the Government, who are going to review the community charge shortly. I hope that they will consider that problem very carefully. Why do I argue that the non-working married woman should qualify for rebates under the community charge? Those women are now taxed separately under section 32 of the Finance Act 1988. If they are separately taxed, the burden should be distributed equally between the parties and they should be accountable for their share. If they are accountable for their share, but cannot pay it, some compensation must be paid in the form of a rebate. I suggest that they should pay only 20 per cent. of the charge unless they fall within exceptional circumstances. Another of my arguments why non-working women should qualify for rebates is that many wives do not wish to approach their husbands for money because relations in marriage as a consequence might prove difficult. We must recognise that 35 per cent. of marriages break down. Some are very shaky and asking for money is a real problem. Another argument is that those women have no legal right to a specific part of their husband's salary. He may be irritated at having to bear the legal responsibility for her charge. That is very significant and the further one travels north, the more powerful that point becomes until it is very powerful in Scotland. In England we are trying to be a little more reasonable. Another argument is that most married women have no savings. Of a total of 13 million women, 65 per cent. have under £3,000 in savings, 30 per cent. have between £3,000 and £10,000 and 5 per cent. have more. It is obvious that most married women have no money from which to pay the charge except through the leverage from their husband and the law that stands behind him. It is unreasonable not to modify the law in that regard. Another argument relates to the difficult position of widows and single parents who look after children. It might be helpful to the Goverment, as they are reviewing the community charge, if I offer a few suggestions. I am certain that the review will be successful and when it is successful people will say to themselves, "Why didn't we think of that?" The hon. Member for Derbyshire, North-East made one good point. Under the Rating (Disabled Persons) Act 1978 all severely handicapped persons were entitled to a rates rebate. However, under the community charge, relief is allowed only for the mentally disabled. I see no reason for that restriction. Perhaps the relief could be extended.
The hon. Gentleman has made an important point. I have two disabled constituents who, as a consequence of the poll tax, must find just under £800, but they cannot meet the bill. The legislation failed to take account of amendments pursued by hon. Members on both sides of the House from the Front and Back Benches. The Government were intransigent and refused to look after that group of severely disabled people.
Yes, the Government have a problem. They must weigh up what concessions are practicable in the circumstances. One would not want to thrust on the Government an impossible condition. However, that anomaly could be rectified.We must also consider the second house anomaly. That provision is so absurd that people are trying to find a way round it. I received a letter from my hon. Friend the Minister for Local Government and Inner Cities in response to a constituent's letter which I believe was very helpful. My hon. Friend the Minister wrote:
I can see the light at the end of the tunnel. I believe that the Government will come up with some good ideas. The responsibility lies not with the Government, but with the interpretation of the principles laid down by local authorities. Unfortunately, they assess a person as earning over 20 per cent. on his or her investment when it is quite impossible to reach that figure. Most people's investments return about 10 per cent. If they are to be charged a high amount against the possibility of securing a rebate, one is taking away with one hand what one is granting with the other."If it appears that local authorities have not made sufficient use of their discretion we will certainly consider whether we ought to alter the provisions relating to this type of property. Indeed the Department have just issued a Press Release which expresses our concern that in some cases local authorities appear not to have made responsible use of their discretion."
Will the hon. Gentleman give way?
No. I should proceed because other hon. Members wish to speak. I want to make some important points as the review will be held shortly.Overall, the Government have been very successful. The proportion of GDP taken by income tax fell from 11·1 per cent. in 1978–79 to an estimated 9·5 per cent. in 1989–90, which is a reduction of 14 per cent. The spending power of higher salaries is important. The Labour Government were in favour of a displacement of direct taxation in favour of indirect taxation. That is precisely what has been happening in the United Kingdom. One has control over one's indirect taxation because one need not buy a certain product. One may be tempted—
What about gas and electricity?
Gas and electricity are not subject to VAT, and nor is the food that we buy. We have kept them on a zero rate, and it is right that we should maintain that policy. I agree that most foods are not subject to VAT, but one or two are. The system is fair and it should be extended.It was said that many people are concerned about the amount of money that could be provided to build health services. The Labour Government spent about £8 billion in their last year. We now spend about £30 billion on health services, which is a big contribution. It is absurd to suggest that we are conducting an unfair system of taxation. There are one or two ways in which I should like modifications to be made, particularly to help people who are in a fix. Let us bring about a change. Let us make a fair system even fairer. Let us bear in mind that inflation is the biggest tax for the investor and for the man who lives in a small house anywhere in the United Kingdom. After all, we are one nation, but we are looking at the problem from only two sides.
I am glad to have the opportunity to congratulate the hon. Member for Makerfield (Mr. McCartney) on securing the debate, on choosing the subject, and on a first-rate speech that built an impressive edifice on a slender foundation. Unfortunately, his speech was undermined by his descent into personal attacks on able and successful people, including right hon. and hon. Members. None the less, the hon. Gentleman's speech served a useful purpose—I am sure that he will learn his lesson because he clearly lost the support of the House when he descended into personal attacks—because he illustrated that the mainspring of Labour tax policy is not a desire for fairness, but envy, and not a desire to help, but malice. That point was made clear and it is always helpful for it to be pointed out to the House and to the nation. I shall refer to the constructive aspects of the hon. Gentleman's contribution and his motion after I have dealt with some of the points that were made by other hon. Members.We heard a sparkling contribution from my hon. Friend the Member for Epping Forest (Mr. Norris), followed by an epic contribution by the hon. Member for Derbyshire, North-East (Mr. Barnes), who gave us the benefit of his historical learning and sense. He conveyed the historical sense so grippingly at times that I thought it was delivered in what computer experts call real time. I shall refer his contribution to my hon. Friend the Minister for Local Government and Inner Cities, who will doubtless study it closely. As always, my hon. Friend the Member for Eastbourne (Mr. Gow) made a riveting contribution. It particularly riveted me because it was clearly directed at me. I was challenged to say whether I agree with his analysis and conclusions. I do. I accept that the Government are responsible for securing and maintaining a stable currency. I confirm that we shall not be satisfied until we have again secured a stable currency. There is no point in trying to blame others for the problems, and we do not do so. We recognise that we must get inflation down, and we are taking hard and difficult measures to do that. The electorate will, with the benefit of hindsight, recognise that when given a choice of a party that is prepared to admit that, following the stock market slump in 1987, it unnecessarily and excessively relaxed monetary policy. They were egged on at the time by the Opposition to do even more. We do not blame anyone else. We recognise that that must be undone and that a painful period of high interest rates is therefore necessary. There is no shirking that. The hon. Member for Middlesbrough (Mr. Bell) made an extremely sensible speech, which explains why he is still on the Opposition Back Benches. Although he affirmed that Labour Front-Bench Members have been converted, they have not, and that is why he is still unacceptable on their Front Bench. My hon. Friend the Member for Bedfordshire, North (Sir T. Skeet) tellingly highlighted the importance of wealth creation rather than wealth consumption. His detailed and interesting points about the community charge will be studied closely by my hon. Friend the Minister for Local Government and Inner Cities. The motion is a great compliment and an encouragement to the Government. The greatest compliment that an opposition party can pay to the Government is to judge them not by its own socialist standards but by Conservative standards. That is what the motion does. It judges us on our success in reducing the burden of taxation rather than, as one might expect from a socialist party, on how much we have raised public expenditure. It judges us on our success in improving the quality of public services rather than the normal Labour obsession with quantity. It judges our success in improving work incentives and reducing marginal rates and marginal effective rates rather than, as the Labour party normally does, in raising the social wage. The motion is a compliment to us, but it is also encouraging for us because history shows that whenever a party abandons faith in its own standards and values and tries to ape those of its opponents, it loses the next general election. There is an absolute correlation on that front, ranging from the time the post-war Labour Government lost faith in socialism, went in for a bonfire of controls and thereby ushered in a Conservative Government. The electorate said, "If they are both offering the same thing, let's have the real McCoy, not the ersatz variety. Let's have the people who believe in it."
Mr. McCartney rose——
I shall give way to the hon. Gentleman in a moment when I have amplified my point. Let us remember that when Gaitskell tried to move the Labour party to Butskellism he simply heralded, in 1959, the greatest Conservative victory for many years. Sadly, when the Conservative Government lost faith in their own values and started trying to push those of their opponents, favouring high spending, indicative planning and so on, they heralded the return of a Labour Government in 1963. Similarly, after the U-turn in the mid-1970s, we heralded the return of a Labour Government. Whenever a party abandons faith in its own distinctive philosophy and tries to ape that of its opponents, it does not work electorally. Nevertheless, we welcome it now.
The Conservative party seems to be making a schizophrenic attack on me. The hon. Member for Epping Forest (Mr. Norris) said that my mask had slipped and that I was a tooth and claw socialist. The Minister is now attacking me for aping the Government's Thatcherite policies. Who am I to believe? Am I to believe the hon. Member for Epping Forest or the Minister's analysis of my speech?
Apes have teeth and claws. My point is that the Opposition have not changed. Their underlying policies and attitudes remain the same, but they are trying to pretend to the elctorate that they have changed. However, the electorate will see through the Labour party, as it always does on such occasions. If the Opposition made a genuine change, as has the Labour party in New Zealand, and clearly and distinctly abandoned the socialism of their past, moving full-bloodedly towards the policies that the Labour party in New Zealand has espoused, they might be as successful as the Labour party in New Zealand. But we have not yet seen that sort of transformation in the Labour party here.I shall consider each of the main points of the motion in turn. I refer first to the allegation that taxation has risen to a higher level under this Government than under the previous Government. The fiscal burden imposed on a nation is measured by the share of its resources that is spent and taken by the Government. We are talking about the percentage of GDP that is spent by the Government because every £1 of public expenditure has to be financed from taxation either now or, if it its deferred by borrowing, later.
Mr. Allen rose——
I shall give way to the hon. Gentleman although I am told that it is improper for me to give way to those who are committing sartorial solecisms.
The hon. Gentleman may yet regret giving way for another reason. I refer him to a parliamentary answer given by the Financial Secretary—[Interruption.]
That is me.
I am sorry, I meant the Economic Secretary. I had forgotten that the hon. Member for St. Albans (Mr. Lilley) had been promoted. I congratulate him on his very important position.When asked on 8 June 1990 about the total tax burden as a percentage of GDP—I am glad that the Financial Secretary accepts that that is an important indicator—the Economic Secretary replied that in 1979 it was 28·3 per cent. of GDP and that in 1988 it was 30·4 per cent. Therefore, according to his hon. Friend's definition, the burden has increased.
I forgive the hon. Gentleman for forgetting who I am, even if he is not forgiven for forgetting his coat.The total tax burden imposed on an economy is what is spent—whether that amount is financed currently by taxation or whether the taxation is deferred by borrowing. Under the last Labour Government, spending reached a peak of 48·5 per cent. of GDP and averaged about 44 per cent. Under this Government, spending has been reduced to 39 per cent. of GDP. The reason why the hon. Gentleman can quote figures purporting to show that the proportion of tax has risen is simply that for a period the Labour Government borrowed instead of taxing. They deferred taxation, but the bill had to be picked up eventually. Indeed, it had to be picked up with interest. We have to finance not merely the honest expenditure that we are incurring, but the interest on the debt that we inherited from the Labour Government.
Does my hon. Friend agree that those who criticise the current level of taxation should state which programme of expenditure they would cut to reduce it?
My hon. Friend is absolutely right. The very charge made by the motion—that the Government have imposed a higher tax burden than our Labour predecessor—is not merely invalid when analysed properly, but is bound to boomerang on the Labour party, just as my hon. Friend pointed out, because it invites three obvious questions. If the Labour party really believes that the tax burden under the Government is too high, why did it vote against each cut in income tax? It would be perfectly reasonable for Opposition Members to vote against increases in taxes. If they believe that the total burden is too high it seems perverse to vote against reductions in taxes. Opposition Members voted against every single reduction in tax that we introduced.Secondly, if Opposition Members believe that the total burden of tax is too high, why in the Labour party's recently issued programme did it not promise a reduction in taxation? It is clear that through all the subterfuge there is no promise to reduce taxation. Indeed, the shadow Chancellor of the Exchequer has admitted that his changes will not be neutral but will raise taxation. Thirdly, if the Labour party believes that the total burden of tax is too high, why does it keep promising extra spending which must mean extra taxation either now or, if put off for a little by borrowing, in due course?
Will the Minister give way?
No. If the hon. Gentleman wants to intervene again he really must get dressed.The second major claim in the motion is that for most families lower income tax has been offset by higher VAT and local government taxes. That ignores the fact that the most sizeable increase in the tax yield under this Government has come from corporation tax, rather than from taxes on households. In the last year of the previous Labour Government, corporation tax was just over 2 per cent. In the last year for which we have figures, corporation tax was almost 4 per cent. of GDP. That was the result of our reducing the rate of corporation tax to one of the lowest in any European or major international country. We have spread it more equably across the revenues of companies by spreading allowances over the economic life of projects. Thereby we increased the tax yield as the profitability of British industry increased, which was welcome to us all. The tax burden rose—to the extent that it did—because it was necessary to pay for the expenditure previously financed by borrowing. It rose not least as a result of improved profitability and, therefore, the improved tax take from British industry. In any case, the reduction in income tax has been significant. If we had simply maintained the rates of tax that we inherited from Labour and increased the allowances only by inflation, the average household on average earnings would pay more than £1,000 extra in income tax every year—more than £20 a week. That would have been the result of not changing the income tax system that we inherited from Labour. That more than offsets any rise in VAT. The clear evidence that everyone has in their pockets is that take-home pay has risen rapidly under this Government and outstrips taxation. That is in real terms after taking account of price rises, including rises in indirect taxation. The real take-home pay of the average man on average earnings with a couple of children has risen during the past decade by 32 per cent. after all taxes. Under the Labour Government the same chap had an increase in living standards of just 0·5 per cent. Even those on lower incomes, about whom Opposition Members rightly expressed anxiety, have seen only a 25 per cent. increase in their real take-home pay. But under the Labour Government their pay increased by only 4 per cent. I believe that on the whole they would much rather see their incomes rise by six times as much as they did under Labour than worry about whether others are doing better still. The third point of the hon. Member for Makerfield was that national insurance contributions have been, as he says, "cynically used as a tax". That is a real own goal. After all, the Labour Government imposed the national insurance surcharge on employers' contributions—the notorious tax on jobs. We had to abolish that at considerable cost to the Revenue, but we did so because of the damage that it did to jobs. What is more, one of the few clear and certain aspects of the Labour party's latest policy document is that it proposes to abolish the upper earnings limit on national insurance contributions. That means that all earnings above £8,200 will be taxed at 9 per cent. It will be a cynical tax, not an extension of the charge and contribution system, because the extra money will not earn extra benefits or extra SERP entitlements in due course. The hon. Gentleman is shooting himself in the foot. The hon. Gentleman's final point was that a large number of workers face combined tax and benefit withdrawal rates of 70 per cent. or more. Any generous and well-targeted benefit system will inevitably involve some disincentive effect of this sort. We have gone to great lengths to reduce the extent of the problem. The social security review had as a key feature the relating of benefits to income net rather than gross of tax. That ensured that nobody would pay a combined tax and withdrawal rate of more than 100 per cent. The reductions in the basic rate of income tax have contributed to reducing the problem. The higher thresholds have taken about 1 million people out of tax and last year's reforms reduced the effective marginal rate below 70 per cent. for tens of thousands of people. In all his points the hon. Gentleman has failed to make his case, but has instead pointed to the great inadequacies of the Labour party's position. He has highlighted Labour's tax proposals and I know that my hon. Friends will do so further, so I shall restrict my remarks to the one which Labour Members imagine will be the least unpopular, which is to raise the top rate of tax to 50 per cent,. or 59 per cent. including the surcharge. They think that that will affect only 1·7 million people and their families, but I do not believe that it will prove so harmless. The rest of the country is not foolish. They recognise that in the long term onerous taxes on the better off do not yield much in revenue. If anything, they do great damage to the economy as a whole.
Will the Financial Secretary give way?
No. As we have reduced penal top rates of tax, revenues from the better off have increased both in absolute terms and as a proportion of the total income tax revenue raised. There is every reason to suppose that if the process were reversed, the consequences for the yield would also be reversed in due course.
Will the Minister accept a question on that point?
No. I draw the hon. Gentleman's attention to the remarks of Tiberius Caesar, who responded to a number of governors who wanted him to introduce burdensome taxes with these words, which I shall translate for the benefit of Labour Members:
It is important to have taxes that raise revenue rather than simply cause pain. The whole range of other tax measures that are implicit in the Labour party document would do little more than cause pain. They would be inadequate to finance the heavy extra commitments to expenditure which the Labour party clearly has up its sleeves. They would bring great problems to the country and return us to the ruinous position that we faced at the end of the 1970s."It is the role of a good shepherd to shear his sheep, not to flay him."
It is interesting that the Financial Secretary follows Tiberius Caesar, because he was followed by Caligula. [Laughter.] Perhaps this is a memorable occasion after all, because the Financial Secretary has made a good joke and I congratulate him on it. It is the second that I have heard him make in my three years dealing with Treasury affairs.
The hon. Gentleman has heard the first several times.
That is true, but the hon. Gentleman has had to listen to the recycling of my jokes, including the one about the Lilley of Lacuna.
Ho, ho, not again.
The hon. Gentleman is checking how many times it has been used.Before taking up the main theme of the motion and the debate I shall deal with the reference of the Financial Secretary to the speech of my hon. Friend the Member for Middlesbrough (Mr. Bell) who said that he agreed with the points made by Lord Barnett in his book "Inside the Treasury". My hon. Friend was speaking authoritatively. Lord Barnett's book contains insights that any Labour Treasury team would be foolish to ignore. The Financial Secretary is wrong to assume that my hon. Friend's views on economic affairs, which are entirely orthodox from the Labour party's point of view, are keeping him from the Opposition Front bench. The Financial Secretary should know that my hon. Friend resigned from the Opposition Front Bench to deal with a particular issue in his constituency. If the Financial Secretary followed current affairs more closely he would not have made that comment. My hon. Friend the Member for Makerfield (Mr. McCartney) reminded us of the Chancellor of the Exchequer's interview on Channel 4 news on 22 May. As my hon. Friend said, the Chancellor said that he would deal with taxation in Budgets and that he had told the people what the Government's taxation policy was. He added:
That was the right hon. Gentleman's statement on the Government's taxation policy. I am sure that the entire House will be grateful to my hon. Friend the Member for Makerfield for tabling the motion and enabling us to discuss the Government's taxation policy rather more fully than would seem to be the Chancellor of the Exchequer's wish. My hon. Friend has generously given the Government a chance to play at home following their away game defeat on Monday 14 May. The motion invites us to discuss the taxation policy of the party that has governed our country for the past 10 years. Given that the Conservative party has formed the Government for the past 10 years, it is surely reasonable to look for a common theme, some consistency, some sense of direction and some coherence in taxation matters. It is not always easy, as my hon. Friend has already said, to reconcile what the Government have said with what they have done. They claim to be committed to reducing taxation. That is a claim which the Conservatives make time and again, but they have done nothing of the sort. The overall tax burden has increased substantially as a proportion of gross domestic product since the Conservatives came into office. When the Government talk about their success in reducing taxation, they mean income taxation. Even then, they are talking about income tax rather than income tax and national insurance. I thought that the Financial Secretary was pushing his luck when he said that the national insurance surcharge was a tax on jobs. In effect, he said, "Look what the wicked Labour Government did. The Conservative Government abolished the surcharge." Did unemployment decrease when the surcharge was abolished? The answer is that it did not. The Conservative party won the 1979 general election with the slogan, "Labour isn't working". The implication of the slogan was that the Conservative party would reduce unemployment. As we all know, unemployment tripled before it started to decrease. It is still higher than when the Conservative Government came into office. The Conservative party claim to be committed eventually to achieving a basic rate of income tax of 20p in the pound. That commitment and claim are worth exploring. During the debate on the Labour party's taxation policy, which was initiated by the hon. Member for Hertford and Stortford (Mr. Wells) on 14 May, there was much boasting about the commitment and claim. That did not prevent the hon. Member for Richmond and Barnes (Mr. Hanley)—I think that he spoke on the Government's side—saying:"They know prefectly well what our policy is."
He added:"The 20p level remains the Government's stated policy. However, that level would be wrong in present circumstances."
It should be noted that the hon. Gentleman referred to "another spending spree". He went on to say, more out of loyalty than intellectual conviction;"if tax rates were reduced to 20 per cent. now, that might encourage another spending spree just when we are trying to restrict retail sales."
That the hon. Gentleman felt it necessary to make that latter point, having just explained why it was wrong, says a lot about the present struggle being waged in the Conservative party between pragmatism and ideology. The hon. Gentleman managed to personify that struggle. He received support for his reluctance to endorse the practicality of a 20 per cent. income tax rate from no less an authoritative figure than the Chief Secretary to the Treasury. During Treasury Question Time yesterday I did my best to support and defend the Chief Secretary, but I got no thanks from the Chancellor for my pains. He said that I was being cheeky, but that was a little hard on someone who was trying to defend his right hon. Friend. On 13 May on the BBC programme "On the Record" the Chief Secretary said:"However, 20p remains a Government priority."—[Official Report, 14 May 1990; Vol. 172, c. 624.]
That is what we heard after 10 years of a Government whose stated objective was to reduce the overall burden of taxation; after 10 years of a Government who have ritually boasted about their prudent management of the economy. After 10 year of working towards that policy they are now reduced to saying that there is "little room for manoeuvre" and one must ask what type of organisation they could be trusted to manage. The central point of the debate is that the reduction in direct taxation has been accompanied by a substantial increase in indirect taxation, which now accounts for just over half of all the revenues the Government have available to them. The position is exacerbated by the use of national insurance payments as a concealed method of levying income tax. The Financial Secretary's attempt at denying that was wholly unconvincing. Reductions in the basic rate of income tax have been partially offset by rises in the rate of national insurance."The prospect of tax cuts at the moment does not look very good. These things are always uncertain but we have very little room for manoeuvre."
Does the hon. Gentleman deny that the current Labour party policy to remove the upper ceiling on national insurance contributions, if by some mischance it came to power, would mean precisely what he is now accusing the Government of—using the national insurance system as a covert means of taxation?
When we form the Government after the next general election the hon. Gentleman will be positively encouraged to flee the country—voluntarily of course. The hon. Gentleman's explanation of our policy is absolutely correct. It is our intention to remove the ceiling on national insurance payments so that those who earn more than £18,000 a year will continue to pay national insurance. The hon. Gentleman should remember that we shall also introduce a banded system of taxation so it does not necessarily mean that the whole amount of the national insurance contribution would bite at that immediate level. We believe that it is unfair that a single person who earns £36,000 a year is paying national insurance—effectively income tax—only on half of that amount whereas a couple earning £18,000 each pay national insurance on the full amount. There is no justice in that, because the couple's expenses would be greater than those of the single person. There is an essential injustice there.
Is the hon. Gentleman denying the basic principle of independent taxation?
That is a bit rich coming from a Government who have made married couples joint and severally liable for their poll tax and focused the married couple's allowance on the man rather than on either the man or the woman. Of course I am not denying the important principle of independent taxation. The Labour party advocated it well before the Government got round to attempting to do something about the broader parameters of it.I understand, however, why Conservative Members are so fascinated about our tax policies. They had their chance on 14 May, when they tabled a motion to debate our tax policies, and on that occasion we had a robust knockabout discussion. It is now our turn. The Government are playing at home today and the Labour party is playing away.
Has the hon. Gentleman noticed that only three Members are present on the Labour Benches?
In that case, the Labour party is playing well away.The Government would have a more credible case on national insurance increases had the extra money that has been raised been ploughed back into the provision of social services and welfare benefits. Had that occurred, they might have sustained a moral case, but they have done nothing of the sort. They have used national insurance as a covert method of raising income tax. That brings me to the main charge that must be levied against the Government's taxation policies, and it was rightly levied by my hon. Friends the Members for Makerfield and for Derbyshire, North-east (Mr. Barnes). It is that the Government's approach to taxation is essentially socially divisive, heavily biased in favour of the well off and against the generality of the population. Indeed, when Conservatives talk about middle-income families they really mean the top 15 per cent. of taxpayers. They talk of people on incomes of £20,000 to £30,000 as if somehow they are the middle range. In fact, 85 per cent. of all taxpayers have incomes of under £20,000 a year. About 70 per cent. of all full-time employees and close on 85 per cent. of all women working full-time earn £14,000 a year or less. So inevitably the least well off have been hurt the most by the shift from direct to indirect taxation and by the accompanying cut in child benefit. A family of four on half average earnings has seen its tax burden more than treble since the Conservatives came to office. At the other end of the scale, the Government reduced the top rate of income tax in the 1988 Budget for the wealthiest in society. Now, only one taxpayer in 25 pays at the higher rate of income tax. I will make a deal with the hon. Member for Stamford and Spalding (Mr. Davies), a deal from which we could both benefit. I will accompany him to the constituencies in which he would wish to speak and I will mispronounce the names of the chairmen of Glaxo and other great British companies—those chairmen with foreign names—and will do that as though it were some sort of incitement to class warfare, if the hon. Gentleman will come with me to the constituencies that I would wish to visit. There, he may defend in the most upper-class accent he can possibly affect the earnings in British industry of top executives of £500,000 a year or more. If he will stand on a platform and say, as he just said, "What is wrong with someone who is in a position to do so doubling his pay to £500,000? People should be free to do that."——
They earn it.
They decide whether or not they earn it. If the hon. Gentleman will come with me to the hustings at the next general election and defend that course of action in a strident, upper-class accent, I will accompany him to his meetings.
I shall be delighted to debate in any context with the hon. Gentleman, but he has completely missed the thrust of my remarks. It is not sensible for politicians, Governments or bureaucrats to try to second guess what should be the appropriate pay scale for anyone, and anybody who attempts to go down that road is a victim of a fatal illusion. If I had more time for this intervention, I could cite a list of countries as long as my arm in which economic systems based on that principle have ended in economic disaster.
The hon. Gentleman is presumably assuming that the rest of the country believes it to be fair and equitable that a person who is in a position to do so—because he is in charge—should double his salary from a clearly unworthy £250,000 to £500,000 a year. There are many people in society on much lower incomes than that who would like to be in a position to take such action.I hear what the hon. Gentleman says about it being wrong to decide what earnings should be in particular industries. I hope that when he is eventually promoted to the Government Front Bench, he will be put in charge of public sector pay, and has a chance to apply those philosophies. I think that he will get on well with the Chief Secretary to the Treasury when he is doing so. The Conservative policy for top rate taxpayers seems to favour the very rich, rather than those whom the Conservatives prefer to describe as on middle incomes. In their pathetically and, appropriately enough, out-of-date Conservative research department document entitled, "Labour and the Economy—the Essential Guide" they charge:
Since we have not said that we would do anything of the sort, that seems a rather unfair charge, even by Conservative standards, to levy against the Labour party. The document is dated May 1990, which was after the Chancellor's Budget statement, and after publication of the Finance Bill. Clearly a lot of infighting is going on among the Conservatives. I am sure that the inclusion of that paragraph in the Conservatives' "Summer Heat On Labour" document is not intended as a real criticism of the Labour party, because it could not be sustained. We have not said that we would do anything of the sort. What is intended is a veiled attack on the present Chancellor of the Exchequer, who froze the higher rate of tax threshold and, in so doing, has dragged an extra 300,000 people into the higher rate tax band. The Conservative research department clearly condemns him for doing so. One wonders which of the Chancellor's rivals for the future leadership of the Conservative party put the research department up to that. Who is in charge of the Conservative research department now? Who is in charge of Conservative central office?"the freezing of the rate for higher rate tax progressively drags more people into Labour's new, higher rate tax bands."
The hon. Gentleman is right to complain in the terms that he does, and he has an excellent opportunity to put matters right. Surely to sustain the spending promised up and down the country by Labour spokesmen on housing, social security, education and training and to pay for more civil servants, the Labour party would either have to set the higher rate tax band so far down the income scale that many people would be included in it or raise the basic level of taxation so dramatically that people would be robbed blind. If that is untrue, he must tell us where the money will come from. Otherwise, he cannot complain about assertions made in Conservative research department documents.
The hon. Gentleman has clearly come to the wrong game. He should have come to the debate on 14 May. As we are not pressed for time, I will give him a full answer. He is absolutely right when he says that I hope to have a chance to put matters right in the near future. Just after the next general election I hope that, along with my hon. Friends, I shall be in a position to address those points.
Perhaps the hon. Gentleman will not be chosen.
Yes, there is always that possibility. However, I hope to be able to address those points when I am in government and not in opposition.The hon. Member for Harrow, West (Mr. Hughes) seems to be a little jealous that our shadow Chief Secretary is more effective among her colleagues than the Chief Secretary to the Treasury is among his. Let me spell out again, probably for the third time in as many debates, exactly what the Labour party stance is. Taxation will play a full part in the overall management of the economy. Public expenditure, that the country can afford, and no more, will play its full part in the overall management of the economy. Public expenditure commitments will have to take their place in the queue, behind the two that have been agreed, as is well known—pensioners and child benefit. Other commitments will have to bid in exactly the same way as happens under the Government. We are not in a position to forecast what a future Labour Chancellor's taxation levels would be. I remind the Financial Secretary to the Treasury of what the deputy leader of the Conservative party said yesterday about making statements on what the future standard rate of income tax will be. To a packed House he said:
I shall not be as unkind to the hon. Gentleman as the deputy Prime Minister was to my hon. Friend the deputy Leader of the Opposition, my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley), but I hope that he understands that that point was made firmly and well by someone on his own side whom I am sure he respects."In all the questions asked by shadow spokesmen over many years that one beats all records for stupidity."—[Official Report, 7 June 1990; Vol. 173, c. 783.]
The deputy leader of the Conservative party is none other than Lord Whitelaw. The hon. Gentleman's description of the deputy Prime Minister was inexact. I am afraid that his economic forecasting is equally inexact.
The problem is that on the the Conservative side they change hats and titles so often—and they even change Houses. I apologise for not having got the Leader of the House's title exactly right, but I am grateful to the hon. Gentleman for intervening to correct me. I am sure that it was done in a helpful, friendly spirit and as a matter of good will.The Conservative party's "Summer Heat on Labour" document, which is about the way our party would manage the economy, has caused much harmless amusement on our side. I welcome it, if only for that reason. The Conservative party defends its reduction of the rate for top rate taxpayers by saying that it has generated more revenue. Even Conservative Members would not argue that that trend will continue indefinitely, but it is right to explore a little further the argument about optimum rates of taxation. By "optimum" I mean setting a rate to derive the maximum possible revenue from it. We have to ask ourselves how the Conservative party has succeeded in reducing the top rate of income tax while managing to get more money. The reason the tax take from a reduced top rate has increased is because those who have to pay tax at the higher rate have been paying themselves more money. That does not apply across the board, but it applies at the upper end. I suspect that prior to the reduction in the top rate of income tax, executives took their reward package in perks rather than in income; then it became more tax efficient to take it in income. Last month a survey conducted by The Guardian, involving 100 of Britain's top companies, found that the highest-paid executives had awarded themselves pay increases of, on average, 33 per cent. That is four times the British inflation figure and over three times greater than pay rises. Average earnings of top-paid executives amounted to £380,000 per annum. Reference has been made in the debate to the 51 per cent. increase that the chairman of Glaxo awarded himself. Even the Prime Minister has condemned executives who have awarded themselves excessively high pay rises. I agree with her and support her remarks. I am sorry that the hon. Members for Epping Forest (Mr. Norris), for Stamford and Spalding and for Bedfordshire, North (Sir T. Skeet) and even the Prime Minister's own Financial Secretary do not support her concern about the affront that she knows many ordinary people feel when they see such excessive and selfish takings by people at the very top. The Prime Minister was right to condemn excessive greed. I am song, and I am sure that she will be sorry, that her expression of concern has not been echoed by her Treasury Ministers. Would the Financial Secretary and Conservative Members who have taken part in the debate consider any rate of pay to be too much, or do they think that powerful executives should be entitled to continue looting as long as they can get away with it? I thought that the Financial Secretary would have referred to the role of the taxation system in the broader management of the economy. After 10 years in government, what have the Conservative party's taxation policies done for our inflation rate, our current interest rate, the trade deficit or economic growth which is forecast at 1 per cent., putting us at the bottom of the growth league? What have they done for investment? If the Conservative party's taxation policies have been successful after 10 years in government why are the Government forecasting negative growth in the 1990s? What have Conservative taxation policies done for unemployment, which is set to rise? The Conservative party takes the view that if rich people have more of their own money to spend they will spend it and create jobs for the poor. But if unemployment is rising, that does not seem to be happening. What are we to make of that ultimate admission of ignorance about taxation policy—the poll tax? The House does not have to give a verdict on that, because the electorate will do so. The Financial Secretary confidently asserted that the Labour party was trying to adopt Tory policies, that the electorate would see through that and would vote for the real thing rather than for some shoddy imitation. The Labour party is not trying to adopt Conservative party policies. Indeed, when we have won the next general election, it will give us great pleasure to discard them, and I assure the House that the poll tax will be one of the first things to go—[Interruption.]—It is no good Conservative Members shouting from a sedentary position.
Since the hon. Gentleman is critical of the level of taxation currently levied by the Government, is it the objective of the Labour party to reduce the burden of taxation?
My criticisms are directed at the Conservative Government because they pledged to reduce the overall burden of taxation, yet after 10 years in government they have made it rise rather than go down. The Labour party does not make such a promise. We believe in an adequate level of taxation commensurate with the needs of the economy, but when Ministers state that the Labour party will increase taxation it should at least occur to them that they have already done that. Taxation has risen to its present level because of Conservative policies, so why should Conservative Ministers assume that a Labour Government would increase taxation? They would not necessarily do so.
I shall not give way as I wish to conclude on an uncontroversial note and to soothe Conservative Members by reading to them from The Daily Telegraph today, which has something to tell them——
We can read it in the Tea Room.
I assure the hon. Gentleman that I read very nicely. I always thought that Conservative Members liked The Daily Telegraph and that it was their house magazine. The Daily Telegraph tells Conservatives about the popularity of their taxation policies over the past 10 years. Under the headline:
it states:"Tory hopes dashed as Labour stretches lead"
The polling is interesting. I like the bit that states:"The findings of the latest Gallup surveys for The Daily Telegraph flatly contradict the widespread belief among Conservatives that the party's fortunes are beginning to improve following the short-lived furore over the poll tax."
I think that the figures might help to answer the question that the hon. Member for Hendon, South (Mr. Marshall) wanted to ask. Forty two per cent. thought that they would be better off under Labour; 28 per cent. thought that they would be worse off; 26 per cent. thought that there would be no difference; and 5 per cent. did not know. The article stated:"Unhappiness with the Government's record combines with growing confidence in Labour to create what is now a widespread sense that voters and their families would be better off—or at least no worse off—under a Labour Government than they are now".
"The results of this last question are crucial for the Conservatives.
The electorate is judging us aright, even if the Conservative party, for whatever reasons, is not.Everyone who thinks that he or she is likely to be better off under a Labour Government is likely to vote Labour. Everyone who thinks that he or she would at any rate be no worse off is, in an important sense, available to the Labour party."
If the hon. Member for Newcastle upon Tyne, East (Mr. Brown) is right about that Gallup poll and if there is to be a Labour Government, people will soon find that history repeats itself. As my hon. Friend the Financial Secretary said, one need only look at the record. When people are in the awesome privacy of the ballot box—not just answering a question asked by someone who comes up to them in the street—and are voting for a Government, rather than voting in a by-election or local council election, they say to themselves, "Am I better off now than I was four or eight years ago?" History tells us, and my hon. Friend the Financial Secretary reminded us, that the take-home pay of people on average earnings—not the super-rich—has increased by 33 per cent. under the Conservative Government. That is the question that people will ask themselves in the ballot box in the general election next June or the following June. That is why I am confident that, whatever an opinion poll in The Daily Telegraph may say, we shall win the next general election.I congratulate the hon. Member for Makerfield (Mr. McCartney) on choosing this subject. As my hon. Friend the Financial Secretary said, it is usually a mistake in politics to pick as the ground for a fight the one on which the Opposition must like to fight battles. I had hoped that the hon. Gentleman would initiate a debate on the national health service or social security, perhaps, but he talked about the taxation burden. He was not so much throwing stones in the proverbial glass house as rolling boulders about. The hon. Gentleman should look at the record of previous Labour Governments and hark back to what the Conservative Government faced when they came into power in 1979. As my hon. Friend the Member for Eastbourne (Mr. Gow) and others said, there was a yawning £40 billion gap between income and expenditure. We are not ashamed to admit that the only way any responsible company, individual or Government could deal with that shortfall was to increase taxation. Of course, we had to increase taxation. We had made a commitment to cut direct taxation and increase enterprise, and we fulfilled it. The only course available to us was to increase indirect taxation, and we did that.
Why was that not in the Conservative manifesto?
It is no good the hon. Gentleman shouting at me from a sedentary position. I am prepared to give way if he wants to intervene.
If that was the attitude before the general election, why did not the Conservative party include in its 1979 election manifesto, in the section on taxation, the fact that its first act on coming into power would be to increase VAT from 8 per cent. to 15 per cent.?
It was a switch from direct to indirect taxation.
As my hon. Friend the Member for Littleborough and Saddleworth (Mr. Dickens) reminds us from a sedentary position, we made it clear that we intended to shift the burden of taxation from direct to indirect taxation, which is what we have done.I shall do a deal with Labour Members. I shall forgive them everything that they do in their first two years in office, if they get in—because, as they would say, they are clearing up the mess left behind by the previous Government—and I shall not judge them on the level of taxation and inflation. I shall judge them only on their final three years in office. I will judge them on that if they are fair to me and judge this Government on their record since 1981.
Does not my hon. Friend realise that if the Labour party ever came to office and tried to spend their £19·5 billion, within two years they would not be the Government of this country? The Government once again would be the International Monetary Fund.
That is exactly what happened then and it will happen again.It is interesting that Labour's document "Meet the Challenge, Make the Change", or whatever it is called now, makes a number of commitments. Opposition Members have reinforced a commitment today that the next Labour Government will definitely increase pensions and child benefit. That is their commitment on one side of the scales. On the other side they are prepared only to give a commitment to make modest increases in taxation—to increase the top rate to 50 per cent. and to give tax relief on mortgages only at the basic rate. Those are modest increases which could not possibly alarm anyone. As my hon. Friend the Member for Harrow, West (Mr. Hughes) said, the key point is that unfortunately 95 per cent. of taxation comes from the 24 million people who pay the base rate. I have done a little research, and I must confess that I had some help from the Conservative research department. But as the research is based entirely on the spoken and written words of Labour party spokesmen, I assume that it is right. My research showed that the Leader of the Opposition said in "This Week, Next Week" on ITV on 5 June 1988 with regard to Labour's tax plans:
The hon. Member for Brent, South (Mr. Boateng), the junior Opposition Treasury spokesman, claimed on Sky TV on 9 November 1989:"The great middle band, the huge majority, lets call them 25p people…would be no worse off".
All that is in line with what we read in Labour party policy documents. However, just as we do not read about what Labour will replace the poll tax with, we do not read what they will do with the base rate. I am prepared to give way to the hon. Member for Newcastle upon Tyne, East who has listened carefully to me, if he will give a commitment to the House not to increase the base rate."We don't want to put taxes up."
I am happy to explain our taxation policies yet again. As the hon. Gentleman is undoubtedly perfectly well aware, and as even the Conservative research department probably understands by now, the Labour party is committed to introducing a banded system which means that there will be more tax bands than at present. The rates will be different. It is our intention to have a lower rate of 20 per cent.—or possibly lower—to ensure that the low paid can retain more of their income. We have said that we will put taxes up and we have said specifically which ones would rise.We thought that the handout to the top rate taxpayers in the 1988 Budget was wrong and we intend to increase the rate for top rate payers from 40 per cent. to 50 per cent. All that is perfectly clear. If the hon. Gentleman believes that taking off the national insurance ceiling means that the rate would, in truth, he 59 per cent.—when Labour talks about national insurance it is income tax, but it is not when Conservatives are arguing their case—that would still bring the top rate of taxation back to one percentage point below what is was for most of the term of this Government.
That was a very long intervention, but it did not tell us very much. How long is a piece of rope? How far can we stretch a piece of elastic? The hon. Gentleman spoke vaguely about banding. I will give way to him again if he can tell me who will benefit from the lower rate of 20 per cent. given the large numbers involved. How much revenue will be raised given the relatively fewer numbers paying higher rates of income tax? How much revenue will be raised by increasing their taxation to 50 per cent.? What about all the evidence that shows that as taxation is increased for higher income earners so the kind of revenue return for which one would hope does not occur.
That raises an interesting point. Under the previous Labour Government we had a high rate of taxation of about 98 per cent. People were able to keep only 2p in the pound on their investment, which meant that our entrepreneurs, our risk takers, our job providers, our inventors and our professional people went overseas or offshore with their money, and that contributed to the wealth of other nations. If they could have stayed here under a sensible tax regime, they would have benefited our country, as they are now doing. Inward investment is pouring into the United Kingdom as a step into Europe, so our taxation policies have proved to be working. The previous Labour Goverment were an absolute shambles. We cannot increase all our benefits and all the things that the Opposition seek to increase if we do not create wealth. We must create wealth first and then we can do other things.
I am grateful to my hon. Friend.Two avenues are open to the Labour party. There is the Mondale route and the Dukakis route. The Mondale route is the honest route, which says, "I am on the left. I believe that spending on social services and public health provision should be increased. I accept what was in the 1987 manifesto, therefore I must put the base rate at 29 per cent." Hon. Members will remember that Walter Mondale lost rather badly. People do not like to be told that their taxes will be put up, but it is honest. The other route is the Dukakis route, which the Labour party is now following. That says, "We will not admit that we are going to put up taxes. We will not tell people what we will replace the poll tax with."
We are going to replace the poll tax.
The hon. Gentleman's party will replace the poll tax, but, as Mr. Bush asked, "Where's the beef'?" That is what we want to know. Let us have some facts and figures. It is no good saying, "We do not know. We are not in Government. We do not know what the situation is." The Opposition are following the Dukakis route. They are not being honest. They will prove as unsuccessful as Dukakis did. When it comes to the ballot box, people on the other side of the fence will say, "That is fudge arid mudge."
Can you tell us what the position with the poll tax will be by the end of July, in its form, size arid recommendations?
The hon. Gentleman addressed that question to you, Mr. Deputy Speaker. Perhaps you might be able to tell him. I shall give an answer from my point of view.It would be very dangerous if we were to give a general subvention to the poll tax from the income tax payer. Given the inefficiencies of local government, I fear that the money would be swallowed up in an enormous bottomless pit. That is my personal view—I cannot speak for the Government—and I am grateful to be given the opportunity to express it. I do not think that there should be an enormous subvention on the community charge from the income tax payer. The great value of the poll tax is that it has focused public attention on local government finances to an extent that we have never witnessed before. The debate is valuable. I hope that my hon. Friend the Financial Secretary to the Treasury is listening carefully. He made some general points about policy and where it leads us. We all accept that we have not got taxes down as much as we would like. I dredged up an interesting statistic which, funnily enough, was not in the research department briefing—[Interruption]. I do not know why it was not in the briefing. In 1979, the average tax bill, as a proportion of income, direct and indirect, on the average taxpayer was 27·8 per cent.; now it is 26 per cent. after nearly 12 years of Conservative Government. That is not good enough. We must do much better than that if we are to be true to what we believe in. If the statistics are right—I believe that they are—they prove one thing: at the next general election we should not consider a compromise or a consolidated manifesto, we should consider a radical manifesto. We should carry on our policies of tax-cutting and getting to grips with inflation. I shall give my hon. Friend the Financial Secretary a few ideas. Unless we are prepared to be radical, people will say, "We have a tired Government. They have run out of steam. Where are their new ideas?" They know that there are no new ideas among the Opposition. They know that they are a milk-and-water version of Thatcherism. If the Conservative Government can come forward with a radical manifesto and show that we are barely started on this route, there is no reason why we should not win the next general election. Here are some ideas. Let us continue the privatisation programme. Let us privatise the freight, parcels and inter-city side of British Rail. Let us privatise the Nottinghamshire coalfields. Let us look at all the services that can be contracted out in the health service and in local government. Competitive tendering has been successful, but there is widespread evidence of cheating and of direct labour organisations being allowed to fiddle the books. Not enough progress is being made. Where there has been real competitive tendering, in councils such as Westminster and Wandsworth, real savings have been made. However, we should think not only in terms of competitive tendering, but of local authorities being compelled to go for the lowest price. There should be a much closer audit of what they do to ensure that there is fair play and to avoid what happened in Humberside recently when the council—Labour, of course—deliberately fiddled the competitive tendering of its school cleaning services. It said that anybody submitting a tender had to do so for the whole authority. That was too vast a proposition and gave an obvious benefit to the direct labour organisation. When—surprise, surprise—the direct labour organisation got the job, it was because it had given a price that it could not fulfil. It refused to make anybody redundant or to improve working practices. The whole thing is going bust. That is a Labour-controlled council. We could make much more progress in terms of competitive tendering and privatisation. We could also look again at tax cuts. I shall give my hon. Friend some of my personal ideas on what we could do before I conclude. The most serious problem facing this country is the poverty and unemployment trap. We must address how we, as a Conservative Government, will create the sort of responsible society in which we believe. One route to which I am sympathetic and which the Government have announced that they intend to follow is to reduce the basic rate of income tax to 20p in the pound. That is a laudable aim, which I fully accept. The difficulty with that premise is that one comes up against the enormously powerful lobbies that are arguing for increased spending, especially on the national health service, social security and education. They are all laudable aims but they make it difficult to cut taxation. Therefore, we must encourage more and more ordinary people—I am not talking about people on higher incomes, but about those on average earnings—to make more provision for their own pensions and for private health insurance and to contribute towards their children's education. These are radical ideas. I do not necessarily suggest that there should be straight tax reliefs for people who put their money into private health insurance or into educating their children because I know that the Treasury will immediately say, "What about the problems of dead weight? You are giving money to people who already do those things." However, we could consider some of the following ideas. If we had a standard rate of national income tax—just one rate with no banding—and if we abolished all thresholds and allowances, at a stroke we would get rid of most of the problems of the poverty and unemployment trap. If we then returned to people a basic cash payment that would be portable between investing in children's education, or topping up that investment, on investing in private health care, or in renting or buying one's home——
What about a voucher system.
My hon. Friend has suggested a voucher system, but I am thinking of something more sophisticated. These ideas are radical, but I believe that they are ideas to which this Government, who have proved themselves to be radical and prepared to cut through many of the shibboleths of ordinary party political thinking since the second world war, should now be addressing their mind.But enough of that—let us get down to the basics for today. The hon. Member for Makerfield is to be congratulated. He has reminded the House that if we had a Labour Government everybody—ordinary people—would be much worse off.
As you know, Mr. Deputy Speaker, the second motion on the Order Paper is in my name. However, as this motion is of great importance to the House, it is unlikely that my motion will be reached. I understand that, because I think that my hon. Friend the Member for Makerfield (Mr. McCartney) has done us all—and the country—a singluar service in drawing attention to the tax burden under the Conservative Government and to what has happened to the low-paid workers who are paying 70 per cent. or more.The rag, tag and bobtail of Conservative Members who have spoken have made ill-founded and unjustified remarks that have been short of the mark. They did not talk about the burden of taxation but addressed their minds to direct taxation. One can understand why. What is the hon. Member for Epping Forest (Mr. Norris) interested in? It is no wonder that he is interested in direct taxation with all the other jobs that he has. The register of interests lists Steve Norris Limited, Steve Norris (Weston) Limited and until February 1990 he was with GTI Technology Group Ltd. At the same time he resigned from Glentronic (1988) Ltd. With all those additional jobs I, too, would be interested in direct taxation. The hon. Member for Eastbourne (Mr. Gow) also spoke. He was interested in Floyd Oil Participations until November 1988 but he is still an adviser to Cater Allen Holdings plc as well as being a solicitor. Again, one can understand that he has some interest in direct taxation. Then there is the hon. Member for Bedfordshire, North (Sir T. Skeet). He is a consultant to Associated Portland Cement Manufacturers. Again, he has an interest in direct taxation. Then we have the hon. Member for Gainsborough and Horncastle (Mr. Leigh) who has just spoken. He is always interested in justice. Of course, in the Standing Committee that considered the poll tax legislation he tabled a clause to imprison people who fail to pay the poll tax. He is the right person to talk about justice. If he wishes to challenge that I shall sit down.
The hon. Gentleman did not remind the House that that amendment was proposed by the Rating and Valuation Society. I tabled it on its behalf. He also did not tell the House that exactly the same provision existed under the old rating system. What the Bill, which has now become an Act, encompasses is no different from what was in the previous legislation.
I am quite interested in that intervention. The hon. Gentleman says that he is interested in poor people who cannot pay the poll tax going to prison.
Will the hon. Gentleman give way?
No. I shall not give way to the hon. Gentleman. One of my hon. Friends has been sitting here patiently, waiting to speak so I do not wish to take too long.The hon. Member for Epping Forest talked in the usual way that we hear from the Conservative side about Labour's policies of envy. He should have talked about our policies of justice. What we have on the Conservative side are the policies of greed. Conservative Members worry only about those who are at the top, those who are well able to look after themselves, the well-heeled people who occupy the bull ring. It would not be so bad if industrial bosses were successful in their jobs; if, indeed, our economy was booming in the way that the Japanese and German economies are booming. It would not be so bad if they could justify the high salaries that they repeatedly give themselves. But such salaries are completely unjustified. There are one or two exceptions in British industry, but by and large we are failing and falling miserably behind many of our competitors. Yet, time after time we hear people try to justify the obscene salaries that are paid to people in industry. Indeed, we heard it today. The hon. Member for Bedfordshire, North intervened during a discussion about the salary of the chairman of Glaxo, to say that the NHS benefited from the work of Glaxo. Does not the national health service also depend on the efforts of doctors, nurses, medical and scientific laboratory officers, speech therapists and all the others who work in the health service? Many are suffering immensely from the Government's indirect taxation policies. They are the ones who should be encouraged because it is on them, not those on high salaries such as the chairman of Glaxo, that the health service depends. Yet under this Government their burden has increased. No wonder Tory Members do not want to talk about the overall tax burden. It is easy for them to talk about how they have reduced the direct tax burden, particularly for those at the top. It is a different story when we consider those on medium-range and low salaries, and especially the effect on them of one of the Government's first actions in raising VAT from 8 to 15 per cent. That was followed up by the destruction of a third of manufacturing industry, which threw many people out of work. Tory Members talk about a recovery in industry, but it starts from a much lower level than existed in 1979. When Tory Members speak it always surprises me how often they refer back to what happened under the Labour Government in 1979. They have been in power for 11 years, yet I have never heard them mention the benefits of North sea oil revenues.
That is right. I am indebted to my hon. Friend for mentioning the figure. What has happened to the money? It has not been used to strengthen industry or to bring justice to the great mass of taxpayers and those who cannot afford to pay taxes. It has been frittered away. This morning we have heard only about those at the top of the tree.The real problems facing Tory Members is that they have been rumbled by the electorate. A bleak future faces many of them. Indeed, some who have spoken today may not be with us for much longer, so we shall not have the benefit of their pearls of wisdom. Just when they thought that things were settling down, their cover was once again blown. The Daily Telegraph opinion poll this morning shows the Conservatives falling below a figure which I did not think they could fall below. Their popularity rating now below 30 per cent., which brings increasing misery to them. The rumblings in the Conservative party against the Prime Minister and the dissatisfaction with her leadership will undoubtedly continue to grow. She is undoubtedly due to be denounced as the ex-Chancellor of the Exchequer was. Yet he was supposed to be the saviour. He masterminded the huge tax bonanza—the giveaway—to those who did not need it, which caused all the problems that the country now faces. He caused the wave of imports which are being sucked in against an industrial base which cannot match that of our competitors. We are getting into an economic mess. The good news is that we shall not have to put up with the Government for much longer. Nor, indeed, will ordinary people have to suffer the unfair direct and indirect taxation burden that has been imposed on them. I look forward to the day when my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) is helping to frame a Labour Government's first Budget, which will be based on social justice. It will consider the whole country, not just those at the top. It will bring justice to all British people. May that day come sooner, rather than later.
The hon. Member for Makerfield (Mr. McCartney) is to be congratulated on having opened something of a hornets' nest by tabling and introducing the motion. I think that the result is not that which he intended. We have had revealed to us the "wonderful" politics of envy of Labour Members. Those politics have so permeated their economic thinking over the years that they have become blinkered. I suspect that the public were starting to think that perhaps those politics had disappeared in the Labour party's policy reviews. It is now clear that they constitute a veneer or a coating of whitewash over the old and real beliefs of the Labour party.Labour Members seem to believe that those who earn lots of money form an evil section in our society and do not contribute to society. We have heard time and again today tirades against the highly paid. I have no brief——
Will the hon. Gentleman give way?
I shall finish my sentence and then I shall certainly give way.I have no brief for the chairman of Glaxo and how much he should or should not be paid. But I know that for the creation of wealth it is necessary that wealth should start at the top and spread downwards. Without the enterprise, initiative and skill of people who run companies, there would be no wealth to spread downwards. Does the hon. Member for Newcastle upon Tyne, East (Mr. Brown) wish to intervene now?
I have obviously made my point perfectly satisfactorily already.There is no question—I do not think that anyone would attempt to argue otherwise—but that the overall tax burden is at about the same level now as it was under the Labour Government. The Conservative Government have not been successful in reducing overall taxation as a percentage of gross domestic product. That is not satisfactory. As my hon. Friend the Member for Gainsborough and Horncastle (Mr. Leigh) said, the situation needs to be remedied and the next Conservative Government, following the general election, will need to consider it seriously. They will have to give urgent consideration to ways of reducing overall taxation as a percentage of the GDP. The position is unsatisfactory but we must look behind the numbers to see what has happened. There has been radical change in the nature of the taxation stucture and of GDP. As my hon. Friend the Financial Secretary said, we must consider Government expenditure, not only the sum which is being raised in taxation. My hon. Friend said that the Labour Government reached a peak when 48 per cent. of GDP was being spent by that Administration. Spending is now about 38 per cent. of GDP. That has been reflected in the change in the Government's borrowing, which has fallen from about 58 per cent. of GDP in 1976–77 to about 28 per cent. That is a major achievement and one explanation why the tax burden is still sufficiently high. The tax burden now pays for Government expenditure. Indeed, because of debt repayment it provides more than what is needed to meet Government expenditure. We are moving out of the period during which there were major payments to meet Government debt, but that debt is now sufficiently low—a historically low level—to enable a major achievement to be claimed. If the reduction in debt is sustained, it will produce long-term benefits. There has been a major change in the structure of taxation, with the shift from direct to indirect taxation. That is true especially of income tax. The burden of income tax and national insurance contributions was about 50·4 per cent. of the total tax take in 1978–79. In 1988–89 it was about 43·4 per cent. That is a major achievement. The Government have been able to reduce the amount of direct taxation from people's pay packets. As my hon. Friend the Financial Secretary said, that has been balanced to some extent by the major increase in corporation tax that is being paid by companies. It has been balanced, too, by the increase in value added tax by about 7·1 per cent. over the same period. That in itself is nothing of which we should be ashamed. There is a strong economic and fiscal argument for having lower income tax and higher indirect taxes. Indirect taxes have an element of discretion, but I accept that not all direct taxes are discretionary. But there are major exemptions from VAT on food, children's clothing, books and so on. Although VAT is not necessarily a tax on luxury goods, it bears heavily on goods that are likely to be the least purchased by people who are less well off. Therefore, a reduction in income tax is a major benefit. The principal reason for reducing income tax and national insurance contributions is the incentive that that gives to the health and growth of the economy. If people can spend what they earn they are much more likely to want to earn more so that they can spend it and exercise that choice. The proof of that can be seen in people's real take-home pay at all levels of income. My hon. Friend the Member for Gainsborough and Horncastle said that during the previous Labour Government disposable income rose by 0·6 per cent., but during the Government's term of office—admittedly longer than that of the Labour Administration—those on average pay have seen their disposable income rise by about 34 per cent. Under the Labour Government people earning half the average income saw their disposable incomes rise by only 4·2 per cent. whereas under this Government it has increased by nearly 27 per cent. The wealth of the people has increased as they have benefited from our economic policies. The dramatic change in our economy is a direct result of the shift away from direct taxation. That has provided the engine of growth in the economy, a boost in productivity and investment and the enormous incentive to industry to modernise to produce wealth. Another reason why the tax burden has not been reduced is economic management. Frequently we hear the gibe that the Government are trying to run their economic policy with a one-club golf set—the interest rate policy. I believe that interest rate policy is and must be the major element in economic management. There is, nevertheless, a strong role for fiscal management. In the past few years the Government have maintained a tight fiscal stance and have taken out of the economy money that they do not need to fund their expenditure. That has led to a dampening of demand, but it is an appropriate method by which to manage the economy and the Government would be foolish to ignore it. It is interesting that those who criticise the Government most for not reducing taxation are those who claim that the Government are using only one tool of economic management. At the very least the Government are using two tools of economic management—interest rates and, rightly, taxation. That we need to continue a tight fiscal stance is unquestionable, but taxation in itself is not an easy method of economic management—it is a blunt instrument. Changes in taxation are not easily implemented and their effects are not seen quickly. The Government have done what is needed; they have set up a solid framework of taxation with some certainty contained in clear guidelines on what will happen in the future. The target of reducing income tax from 25 per cent. to 20 per cent. is highly desirable and is one such certainty. That change has been well flagged and is expected to occur in the foreseeable future. Taxation is a crude instrument of economic management, but it is right for the Government to use it. Although I should like the burden of taxation to be reduced from its present level, I do not believe that it is realistic to expect that at the moment. But I hope that it will happen in the near future. The great fear is that if, by accident, the Labour party was elected at the next general election, we should witness a major increase in the burden of taxation which would have a bad effect on the economy and do much more harm than satisfy the aim of Labour Members to extract revenge against the well paid and those who have succeeded in creating wealth. An increase in taxation would undoubtedly choke off economic progress, hold back the resurgence of Britain as a major economic power and cause untold damage. So my message to the Financial Secretary is this: we must ensure that we do not reduce our fiscal stance earlier than we can, given the prudent management of the economy. But we must bear in mind the fact that in the medium term we need to reduce the burden of taxation to more reasonable levels.
The debate makes the central charge that the burden of taxation has increased under Conservative rule. That charge is stated clearly in the motion for all to see. Not one Conservative Member who has spoken has refuted that central thesis of the motion. In other words, my hon. Friend the Member for Makerfield (Mr. McCartney) has won the argument hands down.Nothing said today by Conservative Members can deny the fact that the overall burden of taxation is higher under this Government than it has been under any of their predecessors. One would have expected Conservative Members to produce some facts or figures at least to act as a fig leaf to protect the Government's record on taxation. They have not found it possible even to do that. The only disagreement seems to be over the extent of the increase in the burden of taxation. The Economic Secretary to the Treasury told me in a parliamentary answer—I referred to this earlier—that, as a percentage of GDP, the percentage taken in tax had increased from 28·3 per cent. in 1979 to 30·4 per cent. in 1988. It was not a question of the Economic Secretary stabbing his esteemed colleague the Financial Secretary in the back by giving those figures. The Government's Budget Red Book said that non-oil taxes were forecast to rise to 37 per cent. in 1990–91 compared with 34 per cent. in 1978–79. I could give other examples. For instance, Professor Atkinson's famous recent study said the increase would be from 34 to 38 per cent. But let us not be blinded by statistics. It is important for Opposition Members to make it clear that the Government have performed an economic miracle. They have pulled the wool over the eyes of the British people by concentrating on the myth that a reduction in general taxation has the same effect overall as a reduction in income tax. Income tax has undoubtedly been reduced, but virtually all indirect taxes have been increased. A classic example is that since the Conservatives came to power over 10 years ago, VAT has almost doubled. They have robbed Peter to pay Paul. The overall tax burden has increased enormously, and I congratulate my hon. Friend the Member for Makerfield on choosing his words so precisely that the British people will know for sure, should they read the reports of this debate, that people are poorer under the Tories, especially in terms of the burden of taxation. The tax burden as a whole has increased and it is game set and match to my hon. Friend the Member for Makerfield. The Financial Secretary made an attempt to ask sorne questions—rather lamely—which were demolished by my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) with his usual efficiency. The Financial Secretary did not wish me to intervene to answer his questions, so I took a careful note of them and will answer them now so that the record is clear. He asked which programmes Labour would cut. We are a long way away from the next Labour Government. It may be in a year, a little less, or a little longer, depending on what the right hon. Member for Henley (Mr. Heseltine) does and what shenanigans occur within the Conservative party. As a humble Back Bencher, let me give my view of which programmes will be cut. I think that the prime objective of the next Labour Government will be to secure economic growth. Therefore, no spending programme need necessarily be cut, but we shall certainly be looking to certain areas where prudent, planned growth in expenditure could take place on the basis of agreed priorities, which will obviously need extensive discussion by the future Labour Government's economic team. As a caveat I must say that my view is that even the present Government are beginning to come round to consider cuts in our defence programme—the so—called peace dividend—as a result of the tremendous democratic explosion in eastern Europe and the personal efforts made by President Gorbachev to free the Soviet economy, thereby leading to less military expenditure. At the moment the Government are not seizing that opportunity, but I hope that my Front-Bench colleagues in a future Government will grasp that opportunity with both hands. Therefore, that is one opportunity for cuts. Another opportunity will be to end the waste in so many areas, not merely economic waste, but the waste of lives. Money has been wasted in areas where it should not have been spent. One example is North sea oil revenue, which has already been referred to. It was stated earlier that people went abroad under the last Labour Government—the Mick Jaggers and all the rest, who are no doubt desparately important to the economic well-being of the country. Perhaps those people have stayed here under the Conservative Government. I do no t know. Perhaps they have passed the cricket test and decided to stay at home. Certainly money has gone abroad in increasing amounts year after year. Investment abroad now exceeds investment in this country. North sea oil revenue, which could have been such a. profitable well, and could have been used for expenditure. development and investment to emphasise and rebuild training programmes and the education of young people, has been frittered away. There is no prospect of that money coming back. We have heard the word "fairness" a number of times when talking about our spending programmes. That will be all-important. Whatever tax burden there may be under a Labour Government, be it a local tax, poll tax, roof tax or income tax at national level, the burden must be fairer. Certainly, the giveaway Budget of 1988, which was disowned so eloquently this morning by the Financial Secretary as the Budget that led to some of our current crises, which gave away money hand over fist to the richest while taking it away from some of the poorest, was one of the reasons why fairness has fallen flat on its face under the Government. I shall give way to the Minister, despite the fact that he refused to give way to me.
I did give way to the hon. Gentleman, as he is well aware. He has just said that I said something which I did not refer to. Last time that he referred to the Financial Secretary he was referring to someone else. May I take it that he is again confused, as he so often is?
The Financial Secretary to the Treasury referred this morning to the failure by the previous Chancellor of the Exchequer, the right hon. Member for Blaby (Mr. Lawson), to maintain monetary constraint. The right hon. Gentleman has gone on to richer pastures, earning six-figure sums in the City. That seems to be the reward under this Government for resigning or being sacked. His mistakes can now be openly admitted, even by Treasury spokesmen.
I referred to the reduction in interest rates and to the easing of monetary policy after the stock market collapse in October 1987. I was a Minister then and share the responsibility. I was not seeking to blame anybody else. I did not mention the 1988 Budget, although the hon. Gentleman imagines that I did.
The Minister must live with his own conscience. He must decide whether to stay in his job and continue to accept responsibility for the failures of the past.The Minister's second point related to tax levels. My hon. Friend the Member for Newcastle upon Tyne, East referred to yesterday's report in Hansard of the simple question that the deputy leader of the Labour party put to the deputy leader of the Conservative party in this House.
The deputy Prime Minister.
Yes—no one more eminent than he.
That is another well paid part-time job.
My right hon. Friend asked the deputy Prime Minister to outline what the Government's income tax level would be after their next Budget. Sadly, almost pathetically, the dead sheep fell into the elephant trap and made rather a fool of himself. One cannot predict absolutely precisely what that rate will be, even one year ahead, when one is in government. To seek, as poorly and lamely as the chairman of the Conservative party does, to pin down the shadow chancellor of the Exchequer on figures to be included in a Budget to be introduced under totally different economic and political circumstances in at least two years' time is more laughable than the laugh that was raised yesterday at the expense of the Lord President of the Council.One of the failings of my hon. Friend the Member for Newcastle upon Tyne, East is that he is too easy-going and generous towards top-rate taxpayers. My hon. Friend and his colleagues say that the top rate of tax for such people will be only 50 per cent. Until 18 months ago, this hard-hearted Conservative Government penalised those hard-working, well-rewarded and much-deserving top rate taxpayers to the extent of taking 60 per cent. of their income. Perhaps we are being a little too soft on them. Nevertheless, the Opposition's policy remains, and will remain in government, one of fairness in the tax system.
Following the much-vaunted press conference held by the chairman of the Conservative party at which he attacked our proposal, the remnants of Fleet street at Wapping rushed out an opinion poll, in the hope that the general public would attack the Labour party's proposals. The opinion poll that was published after the press conference suggests that the general public believe that our proposals are acceptable and will lead to a fairer redistribution of the tax burden. We have received public support for our proposals.
My hon. Friend has made another clear and strong point. The serious slide in support for the Government began with the giveaway Budget to the super rich in 1988 by the right hon. Member for Blaby—now retired to those lush pastures of Kleinwort Benson, or wherever he may have gone. That was when the reaction set in. Ordinary people felt a sense of revulsion that the Government were abusing the tremendous unitary power that we give the Executive by rewarding people on the highest salaries so crudely and grossly. It was offensive and even before the recent furore about the poll tax people started to become aware of the immorality in Government economic policy and found it unacceptable.The Financial Secretary's third question related to the tax burden, and I am sorry to say that that is where he really began to go wrong. As I pointed out earlier, the reductions in income tax are a con. They give money with one hand and take it away with the other through indirect taxation. Unfortunately there are only two tax bands: 25 per cent. and 40 per cent. and only one in 25 people pay 40 per cent. As such a minute proportion of the population pay the top rate, we really have only one tax rate; in effect we have a poll tax at national level which hits evenly across the board almost despite earnings, as the top rate of pay affects only one in 25 people. People increasingly consider that to be grossly unfair as it become more evident that the income tax reduction has been a con. We need to examine carefully what the Government have done in other areas of taxation. One of the recent examples was revealed in the Public Accounts Committee paper from the National Audit Office which shows that that although considerable efforts are made to prosecute individuals who may overclaim or be overpaid very minimal amounts of social security, and bands of people scour the country trying to find people who may have got away with a few pounds here and there, the Inland Revenue is now £5 billion short of taxation that should have been collected. Once again, it is a matter of economic and social priorities. Efforts are made to prosecute individuals who are almost always on very low incomes who may have got away with something beyond their entitlement, yet those who do not pay income tax, corporation tax or national insurance contributions on behalf of their employees can get away, almost with impunity, with creating very large tax debts that are currently sloshing around in the taxation system. Taxation other than income tax needs to be considered in some detail. The hon. Member for Eastbourne (Mr. Gow) made an eloquent speech which may be admired from afar. He was very clear about the tax that inflation places on individuals. The erosive effects of inflation blow apart the Government's policy on child benefit. Child benefit is nominally frozen, but the effect of freezing a benefit in any inflationary economy is that it loses its value. That essential truth is revealed by the fact that child benefit has not been increased in line with inflation or need as it should have been. Child benefit is being left to wither on the vine, and, electoral unpopularity apart, the Government will have to come clean about their proposals for child benefit and decide whether to keep it or do away with it. The burdens of taxation on individuals include the endless subsidies for agriculture. Apparently, we are being asked for more subsidies for beef producers. A large amount is given away each year to maintain the various stockpiles. I understand from an answer to a question that I asked last month that every person pays out £24 to ensure that the farm subsidies are continued.
My hon. Friend referred to farm subsidies, but we should consider a much more important and telling point—the extent of rural poverty. Considerable sums have been made available over the past decade through the European Community. Those sums have supposedly been pumped into the rural community, but those who live and work in the rural community are forming a growing percentage of the people in Britain who are described as poor and an underclass. They are poor in terms of their income and because of the house price explosion in rural areas, forcing them out of village life and the communities in which they were born and brought up.Rural poverty is one of the most serious forms of poverty in Britain. Because of the lack of knowledge about it, few, if any, resources are spent on alleviating it—even less than has been spent on urban programmes to attack deprivation. In rural areas, if a person is poor, he is forgotten. There is no possibility of private or public funds being provided to assist such people to get out of the poverty trap. Unfortunately, the issue of the tens of thousands of rural people caught in the poverty trap has not come out in today's debate.
My hon. Friend's expertise and his commitment to alleviating rural poverty are well known. He puts his points with his usual eloquence. The poll tax has compounded the problems. Many people did not believe that a wife at home would have to pay the poll tax. They believed that they would pay less because the poll tax was less than the rates bill, but the reality is that a wife at home pays the poll tax, just as it is paid by the husband who goes out to work. The news that a wife at home had to pay it came as a tremendous shock to many people.Local government has to extract more money because of the Government's failure to maintain support for local authorities. The Government have deliberately shifted the burden of taxation away from themselves to the local authorities. The extra burden on the rates was equivalent to 3·5p of the 8p in the pound reduction in the basic rate of income tax over recent years. The central Government contribution to local authorities has fallen from 59 to 42 per cent. of total local authority expenditure. The money must be found somewhere and made up somehow. Invariably, that means that the local authority must either cut services, such as education and meals on wheels, or make good that expenditure from other sources. Interest rates may now be called the John Major tax. It is not a painless way of extracting money from people to finance the mammoth trade deficit. It is not high-falu tin' economics. Because we are not paying our way in the world and are importing more than we are exporting, we have to find the money to make up the difference. That is done by higher interest rates which, in turn, mean that the individual mortgage payer has to pay much more. In my constituency, an individual mortgage payer now pays £80 a month more on average for the Government's mistakes, managerial incompetence and bungling. Exactly the same applies to industry. We learn in the press today that Coloroll, a major high street cornpany, might go into liquidation. One of the main reasons for that appears to be the high interest rates. That well-known high street name, which was probably thought to be impregnable or, in Conservative parlance, "unassailable" just a few months ago might now go down the tube causing a loss of jobs and a large number of closures throughout the economy. The press reports cite extremely high interest rates as the main reason for that. Any business that wants to borrow to develop must pay absolutely prohibitive and punitive interest rates and they find it next to impossible to maintain that borrowing because all the income to that company is committed to repaying the moneylenders.
One of the Government's commitments to industry in the shake-out of manufacturing in the early 1980s was that they would replace our manufacturing base with a service-based economy. The new service-based economy, in the high street providing goods and services, has declined in less than a decade. Coloroll will not be the only company that will go under with the loss of hundreds, if not thousands, of jobs between now and the next general election. Substantial numbers of the so-called sunshine industries which were supposed to provide new jobs to replace the thousands of jobs lost in manufacturing will no longer exist. In less than a decade they will have been forced out of business by the Government's high interest rates.
I referred to Coloroll because that is the latest example. That example could be rendered useless if the figures show that another company has been created. The Government will say, "Oh, we've lost one, but we've gained one." However, the new company may simply be a hamburger joint that has opened up in the constituency of the Financial Secretary to the Treasury. No doubt the Government would give that concern the same kind of weight as a multi-thousand pound and multi-thousand employee concern such as Coloroll.There are other hidden taxes which the Government do not include in the equation as they claim that the tax burden has gone down when they mean that the income tax burden has gone down. Among those taxes are those that I like to call the privatisation taxes. We have all built up the gas, electricity and water industries over the years by contributing to them through our bills. Those bills included extra amounts for investment to build those industries up. We are now paying for those industries all over again to allow those who can afford to buy large blocks of shares to make certain speculative killings. I am not talking about the small shareholder who has one or two shares; I mean the big institutions which make the big killings. When mentioning those privatisation taxes, we must consider the water company taxes. We have learnt today that over and above what we thought our water bills would be and what the Government admitted that they might be, there will be another 6·5 per cent. increase in taxation levied by the water companies. In other words, the consumer will have to pay more. Those privatisation taxes apply to the gas and electricity concerns. We must also take account of the green dowry being handed to the water companies. Similarly, we must all pay a nuclear tax of £5 a week. That figure does not appear on our income tax returns or on people's weekly or monthly salary chits. However, that tax exists, we must pay it and it is part of the big con. Similarly, in the health service, prescription charges have risen by 1,000 per cent. since this Government came to power. In connection with those hidden taxes we must bear in mind asset stripping, reports of which appear virtually weekly before the Public Accounts Committee. Reports show how the Government have sold assets that once belonged to the nation, such as Royal Ordnance or the British Airports Authority. Those reports show that major debts have been written off and that means that we, as income tax payers, must pay those debts. Money is given away because in some cases those assets are priced below their real value. We pick up the tab as income tax payers or, as is the case now, poll tax payers. It must be paid for. There is no such thing as a free lunch in these political days. The right hon. Member for Blaby may be enjoying the odd free lunch in his position, but the rest of us pick up the bill. The hon. Member for Eastbourne talked about borrowing, how the previous Labour Government borrowed and this, that, and the other. He has a nerve. Having paid back a number of borrowings, out of the revenue from resources that were created by nature in the North sea, the Government have stopped the repayment programme. The programme has not only stopped but is in reverse and borrowings have started to gear up again. The economy is in a mess, so we can understand the Government having to start borrowing once again. But there is an even more sinister motive. It is not to invest in the future, in the education of our children or in our industries, and not to rebuild the destroyed third of manufacturing industry; it is to invest in the 70-odd marginal seats that the Government need if they are to cling to power. We have seen how ruthless the Government can be with the poll tax. They framed the legislation so that Labour authorities were capped. At the same time, they massively funded Westminster, Wandsworth and other selected areas. Such political chicanery is now being funded by borrowing large amounts of money that the Secretary of State for the Environment will allocate to certain areas to ensure that the Conservatives have a better chance in marginal seats than they would if they were left to their own economic devices.
The leader of Wandsworth council said that, now that the election is over, he may have to introduce a poll tax of £409. My local authority has a poll tax of £392. After millions of pounds of cuts in education, it has found itself capped despite the fact that 106 authorities spend more money per head than it does. Money that should have been spent in our area to retain services without high levels of poll tax was syphoned off to pay for votes in Wandsworth, Westminster and other areas.
Further to that point, the Labour parliamentary candidate in Nottingham, South, Alan Simpson, has done a calculation. Our poll tax in Nottingham is £209. If we had received the same subsidy as Westminster city council, our council would not have collected £290—it would not have collected anything. If we had had that level of subsidy we could have sent a cheque for £100 to every poll tax payer in Nottingham. Let us all have a subsidy. Let us all get that amount of money. It is going to certain areas to ensure a slightly better chance that the Conservative Government will be able to save their skin.The Government's economic, income tax and general tax burden policies are just part of their catalogue of economic failure. They failed to control interest rates, which are now going through the roof and hitting mortgage payers and industry. They failed to control a trade deficit that is now totally out of order and is in a different realm from that of any of our competitors in the industrialised world—as a percentage of GNP, it is greater than that of any other industrialised nation in the world. That is the extent of the problem. That is the size of the trade deficit. The exchange rate is all over the place, despite the efforts of the right hon. Member for Blaby, who got his come-uppance when he tried to do something about it. Our inflation rate is creeping higher and higher. If the Government wish to ensure that the inflation rate continues on even that path, they will have to take some serious steps. Our investment record is absolutely appalling and falling. Even the Confederation of British Industry is saying that the Government are becoming separated from the people who were previously on their side. Conservative Members have referred to their relationship with the City. Yes, they still have a tenuous relationship with a number of people in the City, but their relationship with even the captains of industry is getting more and more tenuous——
It being half-past Two o'clock, the debate stood adjourned.