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Tax Burden

Volume 461: debated on Thursday 14 June 2007

4. What assessment he has made of the change in the overall burden of taxation in the last 10 years; and if he will make a statement. (142564)

This year’s Budget Red Book estimated that net taxes and national contributions were 37.2 per cent. of GDP in 2006-07. The Red Book also showed that that will stay below the peaks of the 1980s over the period ahead and well below the average for the EU 15.

This Chancellor likes to remind the House of historical context. Will the Chief Secretary acknowledge that over the past 10 years the Chancellor has introduced more than 100 new stealth taxes, doubling the tax code, raising more than £40 billion in extra tax each year, costing every family more than £1,300 each, and making every taxpayer have to work a week longer to pay for it? Is not he the biggest tax-grabbing Chancellor in history?

I am glad to be able to refute all that. Let me remind the hon. Gentleman that the ratio that I mentioned was lower in the 1970s. In the 1980s, it rocketed, and for most of the 1980s it was at a higher level than it is now. His historical comparison is therefore entirely misplaced.

Does the Chief Secretary agree that if there are 2.7 million more people in work and 700,000 new firms, all paying taxes, tax revenue will rise? Has not this Chancellor cut corporation tax and income tax to some of the lowest levels that we have seen in Britain and shown that 21st century socialism equals cutting taxes, and will he keep it up as Prime Minister?

My right hon. Friend is absolutely right. Not only are there more people in jobs and therefore paying taxes, but their earnings are up as well. Those are the results of economic success and the policies that my right hon. Friend the Chancellor has been pursuing over the past decade.

A recent YouGov poll said that the majority of Labour party members would like a higher tax band for higher rate taxpayers. Does the Minister agree with them, or does he think that they are wrong?

I can reassure the hon. Gentleman that the UK remains lightly taxed by international comparison. We are determined to maintain the approach that we have taken. It would have been helpful if he and his hon. Friends had been more supportive in the Finance Bill Committee of the measures that we have been taking to tackle tax avoidance, because that would have been a valuable step. What is true is that we have taken steps to put right chronic underinvestment in public services and will continue to do so.

On the balance of taxation, does my right hon. Friend agree with Nicholas Ferguson, chairman of private equity firm SVG Capital, who recently said that highly paid private equity executives paying less tax than a cleaning lady could not be right? Has he any measures in mind to assuage Nicholas Ferguson’s conscience—possibly raising the effective 10 per cent. rate that many partners in private equity firms currently pay?

I have seen the recent debate about the matter in the newspapers. My hon. Friend knows that we had a review on the subject in March, well before the recent public debate, and we await its outcome.

In 1997, the UK’s tax burden was lower than Germany’s by 6 per cent. of GDP. Ten years later, that competitive advantage has been lost as our tax burden overtakes Germany’s. That reflects a trend of Organisation for Economic Co-operation and Development countries cutting their tax burden while ours has increased. Given the economic challenges of the 21st century, will the Chief Secretary explain whether that helps or hinders the UK’s long-term competitiveness?

Let me begin by welcoming the hon. Gentleman to the Front Bench. The OECD comparison makes it clear that the UK remains a lightly taxed economy internationally. Enterprise and competitiveness in the UK have benefited hugely from the unprecedented decade of stability in the economy that we have just experienced. That is why the UK enjoyed more foreign direct investment last year than any other country in the world—certainly more than Germany. A brief examination of the economic record of this country and that of Germany in the past decade shows that ours is a great deal stronger.

My right hon. Friend referred to the Finance Bill Committee. I have served on six of the last seven Finance Bill Committees—[Interruption.] As a volunteer. Does my right hon. Friend share my experience that, in those Committees, the Conservative Opposition often made proposals to featherbed the rich and preserve their tax loopholes such as that of family trusts?

My hon. Friend served with distinction on all those Finance Bill Committees. He is right about the approach that Opposition Members have taken far too often.