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Income Tax

Volume 175: debated on Thursday 5 July 1990

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14.

To ask the Chancellor of the Exchequer if he has any plans for further reforms of the income tax system.

My right hon. Friend the Chancellor of the Exchequer intends to continue to reform, simplify and prune the tax system, and to reduce the basic rate of income tax to 20p in the pound when it is prudent to do so.

Does my hon. Friend accept that the actions of the Chancellor's two immediate predecessors to reduce the rate of income tax led to an increase in the incentive to work and an increase in the income tax take? Does he agree that it must be beneficial to go on reducing the rates of income tax as soon as it is prudent to do so?

I entirely agree with my hon. Friend. There is no doubt that lower marginal rates of tax improve incentive and the supply side performance of the economy. Sadly, that is a lesson the Opposition have not learnt— hence their plans to increase marginal tax rates, especially for the more successful members of society.

Are not the Government perpetrating a monstrous fraud on the British people by reducing the level of direct income tax but heaping up indirect taxation levels, so that people are more heavily taxed under the present Government than under any previous Government? Does the Minister not accept that most people, given the choice of improvements to provide decent services in this country, would vote for an increase in income tax?

There is a small element of consistency in the hon. Gentleman's position. Like the rest of the Opposition, he has voted against every cut in income tax that we have introduced, but at least he has been honest enough to admit that he favours a higher rate of income tax, which the policies of the Opposition would clearly require if they were honest enough to cost them.