HC Deb 08 December 1977 vol 940 cc1634-5
14. Mr. David Mitchell

asked the Chancellor of the Exchequer what would be the cost to public funds of making the top marginal rate of income tax 50 per cent. for earned income and 65 per cent. for investment income.

Mr. Joel Barnett

To make the top marginal rate of tax 50 per cent. whilst retaining the additional rates on investment income would cost about £480 million for 1977–78.

Mr. Mitchell

Does the Minister agree that if the top earned income rate were reduced to the amount I suggest it would enable a large number of small businesses trading as sole traders or partnerships to retain sufficient funds for expansion and the creation of new jobs? All of that could be done for less than the losses on one nationalised industry in one year.

Mr. Barnett

I do not accept that. The hon. Gentleman is absolutely wrong. Any successful small business will not be paying tax at 83 per cent. It will pay hardly any tax at all because of the policies introduced by this Government since 1974. The hon. Gentleman knows very well that, with the 100 per cent. first-year investment allowance and the stock relief, most successful expanding small companies pay no tax at all.

Mr. Clemitson

Might it not be desirable to use whatever public funds are available to help the poor rather than the rich?

Mr. Barnett

I agree with my hon. Friend, but one has to get this in proportion. What we would consider poor on this side of the House is not quite the same as Opposition Members would consider poor. They have in mind people with incomes in excess of £20,000 per year, the level at which the marginal rate of tax at 83 per cent. starts. I accept that there is a very high level of tax on those levels of income, but the matter must be kept in proportion.

Mr. Peter Rees

Will the Chief Secretary take this opportunity of repudiating the proposal emanating from Transport House that mortgage interest relief should be limited to income tax at the basic rate?

Mr. Barnett

I am not sure whether the hon. and learned Gentleman read correctly what was said. He will agree that it is worth considering having building society interest allowable under a system other than the present one, because of the administrative problems, apart from anything else. I am not ready to dismiss anything quite as quickly or glibly as is the hon. and learned Gentleman.