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Taxation

Volume 178: debated on Friday 12 October 1990

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5.

To ask the Chancellor of the Exchequer what proportion of gross earnings a married couple with one earner on average earnings, with two children, paid in tax, treating child benefit as negative income tax, in 1978–79 and in 1989–90.

A one-earner couple, with two children, on average male earnings saw the proportion of gross earnings paid in income tax fall from 14·4 per cent. in 1978–79 to 12·3 per cent. in 1989–90.

I thank the Minister for that answer, but it would be good if he answered the question on the Order Paper. Does he agree that the information given by the Library shows clearly that in 1979 the tax referred to in the question that the Minister has not answered was 35·2 per cent. and is now 36·6 per cent. and that that represents for the average family an increase in taxation of £300 a year? Does not that underline what many are saying—that the Government are the Government of high taxation?

I answered the hon. Gentleman's question. He may have asked the wrong question but I gave the right answer. The level of taxation for average households has fallen considerably. A further fact, of which he may not be aware but which is worth sharing with him, is that real net income for the average household has risen by 34 per cent.

Does my hon. Friend agree that, despite massive reductions in income tax rates, we have seen over the past decade a massive increase in income tax yields? The top 10 per cent. of taxpayers now contribute nearly 30 per cent. of the yield as opposed to 24 per cent. when we came to power. That demonstrates that tax reductions help the country to find the money to spend on social services.

My hon. Friend makes the point well. Very high tax rates provide no benefit at all for the country. They do not result in extra tax yields but drive successful people who are on high incomes overseas to be taxed elsewhere. That is of no benefit to anyone. The only other thing that they do is to appease socialist spite and envy.

The Minister must know that one person's tax dodge is another's tax burden. Is not it time that tax dodges by a wealthy minority, such as those publicised inThe Sunday Times last Sunday, were brought to an end? That question was put to the Economic Secretary and, significantly, was not answered. Why do the Government permit the easy avoidance of tax by a wealthy few using offshore trusts while ordinary families have to pay every single penny that is imposed on them?

The short point is that, above all, what creates tax avoidance and made the tax avoidance industry in the 1970s one of the most successful industries in the country is a high level of taxation and complicated tax laws. Of course, there may be a problem here and we are looking closely at it. If the right hon. and learned Gentleman thinks that the right way to deal with such complicated international matters is to leap to instant conclusions, I am afraid that we part company with him.

Is it the case that four out of five families with children of school age are direct tax payers? If that is so, will my hon. Friend tell the House how their family lot could possibly be improved by the high taxation policies of the Labour party?

When a party proposes reckless increases in spending, as the Labour party has, the only ways in which that can he paid for is either by increasing taxation, which would hit precisely the families to which my hon. Friend refers, or by borrowing. We all know the disastrous effects that that had in the 1970s.

6.

To ask the Chancellor of the Exchequer what proportion of non-oil gross domestic product he forecasts taxes and national insurance contributions will represent in 1990–91.

My right hon. Friend will publish a forecast of tax receipts in the autumn statement.

In view of the fact that last year, in 1989–90, the proportion of non-oil GDP taken in taxes and national insurance contributions was 36·75 per cent., which compares with 34 per cent. in 1978–79, whatever the Government say by huffing and puffing at the polls, will the Minister now admit that the Conservative party is the party of high taxation?

That is an odd contention in view of the much lower levels of taxation that now prevail. The Government fund their spending honestly by taxation and not by borrowing. When the previous Labour Government left office they had a PSBR of no less than 5 per cent. of gross domestic product. We have chosen to reverse that and to raise honestly the money that the Government spend, by taxation. If Labour's tax regime had remained in force in the way that it was in 1979, the tax burden would now have increased by £12 billion a year.

Does my hon. Friend agree that the Opposition's promises on benefits and public spending mean that the proportion of taxation taken by any Labour Government would be vastly increased, to the detriment of ordinary taxpayers as well as the rich?

That would be the inevitable consequence. Such reckless promises—of which the Labour Front Bench cannot even keep count—would have to be funded either by higher levels of taxation on everybody or by borrowing, which would be disastrous.

The Financial Secretary is wrong if he believes that Labour is the party of low taxation—[Laughter.] Will he confirm that the percentage of GDP taken in taxation has been much higher during this Conservative Government's years in office compared with the halcyon days when Labour was in office—[Laughter.] Oh yes, the figures are there to prove that, and the Financial Secretary does the House no good by trying to deny them. When will he tighten up the offshore tax concessions that have proliferated during the past 10 years? When will he bring down taxation for the British people to what it was in the 1970s?

It is good fun to be lectured by a member of the Labour Front Bench for being a party of high taxation, compared with the Labour party's wonderful history of low taxation—although under Labour taxation levels rose to 83 per cent. and 98 per cent. in the pound. If that is low taxation, thank heavens Labour never went in for high taxation.