My Lords, there was therefore an £8 billion increase in revenue as a result of lowering tax by 5%. Would my noble friend agree that Labour’s policy of putting the tax rate back up would not increase revenue, but rather discourage entrepreneurs, who are so responsible for increasing employment?
My Lords, does the Minister recognise, along with most analysts, that the figures that he has just given have probably been distorted by the practice of forestalling? Does he realise that such practice by some top rate taxpayers meant that they delayed their returns from 2012 to 2013 to take advantage of the 5% top rate tax cut in the following year, after it was announced in the 2012 Budget? Instead of drawing glib conclusions from the figures that he has given, would he and Her Majesty’s Revenue & Customs not realise that each 1% increase on the top rate of income tax can generate an extra £1.1 billion? Therefore, a cut can lose £5 billion in any year following the first year after the tax cut. When we have—
My Lords, I am afraid that the noble Lord’s figures are just completely wrong. The figures produced by HMRC, which I am sure he has read, showed that its central estimate of the effect of reducing the top rate from 50p to 45p was a cost of £100 million, against which should be set—among other changes that this Government have made that exclusively hit the very affluent—the changes in disguised remuneration, which brought in £3.5 billion this Parliament, and the reduction in pensions tax relief, which will bring in £5 billion a year.
My Lords, following up on the question from the noble Lord, Lord Kinnock, does the Minister accept that a by-product of the much welcomed coalition pressure on banks and other organisations in the City to reduce bonuses, which I assume is welcomed by the Labour Party, has been a reduction in tax revenues?
My Lords, there has been a reduction in the amount paid in bonuses in the City. This will undoubtedly have meant a fall in the amount of tax on those bonuses, but I am sure that the whole House will welcome that development and hope that it will lead to something of a change in bank culture.
My Lords, I refer the Minister to a recent ONS study which looked at the combination of direct and indirect taxation and found that the group paying most—paying more than the really well-off—was in the bottom quartile. Is not the big social injustice in the tax system in this country that the poorest are indeed paying the most? That is not helped by the Chancellor, George Osborne, and his cohorts rubbishing social security and welfare payments. Does the Minister not agree that that only compounds and exacerbates the problem that we have in our iniquitous tax system?
But, my Lords, the top 1% of income tax payers is now paying between 27% and 28% of all income tax, which is a higher proportion than at any point during the last Labour Government. The two changes that I have mentioned, which bring in more than £6 billion extra a year, apply only to the highest earners.
My Lords, despite the comments of the noble Lord, Lord Kinnock, is it not true that lowering tax rates increases revenue, and does that not make it rather surprising that the Liberal Democrats are not prepared to lower the top rate to 40%?
My Lords, does the Minister not acknowledge that in fact the very wealthy have various stratagems for reducing the impact of taxation? That is why, whatever the Government do, it does not produce the resources that the nation needs. Why does the Conservative Party not drop the idea that supporting the wealthy will somehow lead to a trickle-down advantage for the rest of the community, when the disparity between the wealthy and the poorest in our society is growing wider, and why do they not address themselves to the real issue, which is that the vast majority of people in this country are poorer under this coalition?
My Lords, I do not know which bits of that question to deal with first. However, given the time, I just point out to the noble Lord that the group of the population whose income, by percentage and absolute amount, has suffered most and which has lost the most is the top 20%. They have seen a 3% cut in their income, which is a greater cut than has been experienced by any other tranche. The noble Lord does not like it because it is an inconvenient truth, but it does not stop it being a truth.
My Lords, does my noble friend the Minister agree that during the life of this Government corporation tax has fallen from 28% to 21% but corporate taxation revenues from companies has increased from £35.8 billion to £39.3 billion? That underlines the point made by my noble friend Lord Borwick that a decrease in rates of tax helps to increase revenue, reducing the biggest problem that we face at the moment—the deficit.
My Lords, it is important to have competitive corporate tax rates, which is why we have reduced them, although it is obviously the case that you reach the point as you are reducing taxes when you lose revenue. The trick is to get the balance right, which is what we have done by reducing corporation tax, for example, and by putting capital gains tax up very significantly from the level it was under the Labour Government.