Taxation Levels

HC Deb 24 February 1977 vol 926 cc1620-2

10. Mr. Gow

asked the Chancellor of the Exchequer what representations he has received about the need to reduce taxation.

Mr. Healey

I have received a number of representations recommending tax reductions for my forthcoming Budget. I am considering these very carefully.

Mr. Gow

Does the Chancellor recollect the passage in his letter to Dr. Witteveen on 15th December in which he wrote that the present levels of direct taxation have discouraged effort and efficiency in this country? Does he accept that the present levels of taxation are imposed by him and that he is therefore responsible for discouraging effort and efficiency in this country?

Mr. Healey

I must admit that the words quoted by the hon. Gentleman are never out of my mind. I am well aware of their importance and their origin. I hope to do something about this in the next Budget, but it depends, of course, on a number of considerations that I have explained more than once to the House.

Mr. George Rodgers

Does my right hon. Friend agree that any substantial switch in the method of collecting revenue from direct to indirect taxation would be not only highly inflationary but very disadvantageous to lower income groups?

Mr. Healey

I am afraid that I cannot agree with my hon. Friend. A switch to indirect taxation would certainly raise prices—that goes without saying—but whether it would be more disadvantageous to lower income groups than, for example, a failure to raise the income tax thresholds is arguable. My hon. Friend will know that VAT, for instance, covers only 45 per cent. of all goods consumed by the average person and that the goods that are zero-rated appear more frequently in the spending patterns in the poorer sections of the community, whereas income tax at its present levels and thresholds falls even on some people whose income qualifies them for supplementary benefit. Therefore I cannot agree with my hon. Friend's general remarks.

Mr. McCrindle

Is the Chancellor aware of further evidence that has become available in recent days about the discouragement which his tax policies bring about—evidence in the shape of the managing director of Cable and Wireless? Will he realise that whether it is in private or public industry, the lack of incentive and encouragement to accept promotion and responsibility are one of the major matters that should be reversed in his Budget?

Mr. Healey

There is something in what the hon. Gentleman says. I have watched with the closest interest the affairs of Cable and Wireless and the various members of its board. I cannot accept the hon. Gentleman's general proposition that no one will work unless paid very highly for it. If that were the case, there would be very few inhabitants of either Front Bench here.

Mr. Ioan Evans

While he is giving consideration to reducing taxation in his Budget, will my right hon. Friend also give the highest priority to reducing unemployment?

Mr. Healey

Any stimulus to demand in this country will tend to reduce unemployment, but that is a different matter from the question whether taxation should be raised or lowered.

Sir G. Howe

When the Chancellor makes his Budget Statement, will he be particularly careful about using the word "reduce" in relation to taxation? Does he realise, for example, that in order simply to lighten the real burden of taxation to the level at which it stood at the time of last year's Budget he would have to give away £1,500 million in respect of personal allowances alone? Will he therefore be careful to distinguish between reducing the apparent and the real burden of income tax?

Mr. Healey

In recent weeks I have noticed with increasing pleasure the alarm of the right hon. and learned Gentleman at the prospect that I might actually produce a popular Budget on this occasion. I shall bear in mind all the precedents in this matter, including tax policies and the relationship between the raising of tax thresholds and the movement of prices under the Administration of which the right hon. and learned Gentleman was a member. I have no doubt that he will be reminded of some of these factors by my right hon. Friend, perhaps in the very near future.