HC Deb 16 December 1976 vol 922 cc1715-7
12. Mr. McCrindle

asked the Chancellor of the Exchequer how many representations he has received in 1976 about the level of direct taxation.

Mr. Denzil Davies

I have received many representations from different sources.

Mr. McCrindle

I thank the hon. Gentleman for that illuminating answer. Following yesterday's indication that we might look forward to some measure of relief of income tax in 1977, will he say whether it is predominantly in the mind of the Government to assist in particular those for whom incentives have totally disappeared over the past few years and those who, as a result of the operation of phases 1 and 2 of the incomes policy, have found their standard of living falling more than most?

Mr. Davies

The Government accept, as my right hon. Friend has said on a number of occasions, that the rates of direct taxation at the margin, the lower levels, as much as at the higher levels—perhaps more so at the lower levels—are too high, and this is something that we should wish to remedy. But there are constraints, as the hon. Gentleman is well aware, in relation to the Government's borrowing requirement and the needs of public expenditure.

Mr. Frank Allaun

If there is to be a reduction in income tax, as suggested, would it not be fairer, instead of reducing the rate of tax which helps the very wealthy, to increase the personal allowances, which would help those at the bottom end of the scale?

Mr. Davies

My hon. Friend is quite right to some extent, but whichever way we do it we shall assist people right along the tax scale. It may very well be that increasing the personal allowances is fairer than decreasing the rates of tax, but any increase in the personal allowances would benefit most people right up the scale.

Mr. David Howell

Now that the Chancellor of the Exchequer has changed his mind and discovered that direct taxation discourages effort and efficiency, will the Minister recognise that next year—supposing that there were 15 per cent. inflation, and, say, at the very least, a 10 per cent. growth in personal incomes—if he does not increase the personal allowances or change the thresholds, this will constitute an enormous increase in direct taxation? Should not Treasury Ministers and others make that clearer than they have done so far?

Mr. Davies

The hon. Gentleman knows very well that we have made perfectly clear—my right hon. Friend has said it on a number of occasions—that we have not been able to uprate the personal allowances in line with inflation over the last few years. This must remain our aim, but, as I said previously, there are constraints and there are also questions of the level of public expenditure which have to be taken into account.