HC Deb 04 June 1981 vol 5 cc1056-7
4. Mr. Winnick

asked the Chancellor of the Exchequer what plans he has to reduce levels of taxation.

The Chancellor of the Exchequer (Sir Geoffrey Howe)

The burden of taxation will be reduced as soon as economic circumstances allow.

Mr. Winnick

In view of the Tory manifesto pledge at the last election that all levels of income tax would be cut, can the Chancellor explain why a married couple on average earnings with two children are now paying considerably more in income tax as well as in indirect taxation? Why did the manifesto not tell the truth and say simply that it would only be the rich and those on high earnings who would benefit from the Tory tax cuts?

Sir Geoffrey Howe

The position is not as the hon. Gentleman has described it—[HON. MEMBERS: "It is."] The recent Budget imposed its largest tax increase on those with the highest incomes. Taking account of other factors since 1979, real after-tax incomes rose by 17 per cent. between1977 and1980, and, even after taking account of the tax burden as it now stands, all households are considerably better off in real terms than they were in1978–79.

Mr. Stokes

Will my right hon. and learned Friend confirm that reducing taxation primarily depends on reducing Government expenditure?

Sir Geoffrey Howe

I am only too glad to confirm what my hon. Friend has said. I wish that one were able to look forward to Opposition support for that proposition comparable with that which my hon. Friend has given.

Mr. Shore

I hope that the Chancellor will be more forthcoming than the Chief Secretary when answering questions. What are the facts about the increased burden of taxation? Is it or is it not the case that it has increased on the great mass of people at work—taking account of national insurance contributions—during the period in which the right hon. and learned Gentleman has been responsible for our affairs? Is that not a flat contradiction of all the pledges which the Chancellor and his colleagues made during the last general election?

Sir Geoffrey Howe

The facts are absolutely clear. During a time when national production has not been growing, the percentage burden of tax on income has increased; there is no mystery about that whatever. It has been said thousands of times. But that fact must be viewed in the context of the rise in real personal incomes which has otherwise taken place. When those two things are put alongside each other, it will be seen that real personal disposable income for the great bulk of households is substantially higher this year than it was when the Labour Party was in Government. There is no prospect of getting taxes down unless we have the support of the Labour Party—which I very much doubt—for reductions in public expenditure.

Mr. Kenneth Carlisle

When there is a capacity to reduce taxation, will my right hon. and learned Friend think hard about first acting to reduce the national insurance surcharge which will do most to restore the profitability of industry and hence its capacity to employ more people?

Sir Geoffrey Howe

My hon. Friend's point deserves consideration. As I said in the Budget Statement, the purpose of the tax changes being made was to lighten, as far as possible, the burdens on industry, even at the cost of a higher burden on personal taxation. However, other considerations must also be taken into account.