HC Deb 25 April 1983 vol 41 cc665-89
Mr. Straw

I beg to move amendment No. 5, in page 9, line 21, leave out '£2795' and insert '£2935'.

The Deputy Chairman (Sir Michael Shaw)

With this, it will be convenient to discuss the following amendments: No. 6, in page 9, line 24, leave out '£1785' and insert '£1875'. No. 7, in page 9, line 26, leave out —£3755" and "£2360— and insert —£3945" and "£2475"'.

Mr. Straw

It may be convenient for the Committee to take this debate as the stand part debate, although I understand that the Question on clause stand part will be put formally.

The Deputy Chairman

That is a matter of understanding, which has nothing to do with the Chair.

Mr. Straw

In the Budget, tax thresholds were increased by about 14 per cent. on the previous year's level. The single person's allowance was increased by £220, the married man's allowance by £350, and the age allowances by £290 and £460 respectively. The amendments increase the single person's allowance by £90, making a total of £1,875; the married allowance by a further £140 to £2,935; and the age allowances by £115 to £2,475 for a single person and by £190 to £3,945 for a married couple. The overall effect is to increase the allowances by about 20 per cent. above their level before the March Budget. Like earlier amendments, the purpose is at least to make progress towards restoring the burden of taxation to the position that existed when the Labour party left office.

8.45 pm

Even if we increased allowances by a full 20 per cent. this year the burden of taxation on the hardest hit—the poor—would still not be restored to the position when we left office. Indeed, the low pay unit has estimated that tax allowances will need to be increased by well over 30 per cent. if the tax burden on the poor is to be reduced. It estimates that the allowance for a married couple would need to be increased by 32 per cent. or £783 and that for a single person it would have to be increased by £586 or 37 per cent.

The debate gives us a further opportunity to examine the Government's appalling tax record. I know that many of my hon. Friends will wish to take advantage of that opportunity, but I warrant that not a single Government Back Bencher will take advantage of it. This first day of our consideration in Committee of the Finance Bill on the Floor of the House has been characterised by the fact that not a single Government Back Bencher has risen to defend the Government's tax record. We all know that if we had been debating a tax on the banks, or if we had been debating, in the middle of the night, some change to the regulation of Lloyd's of London, the Government Back Benches would have been full. However, when it comes to discussing the Government's record on taxation their supporters rightly skulk in their tents because they know, as we know, that the Government's record does not bear serious examination.

As many of my hon. Friends have pointed out, during the last general election and for three or four months after it, Conservatives pledged categorically to reduce taxation at all levels of income. I shall not weary my right hon. and hon. Friends with quotations from the Chancellor of the Exchequer or the Prime Minister, but the Chief Secretary's election address always bears repetition. It is no wonder that he has already decided to cut and run and to seek the safer haven of Richmond. He promised the electors of Cleveland and Whitby an improvement in law and order and said that the Conservatives would get Britain moving again. He also promised that taxes on income would be cut at all levels.

The Chief Secretary is a lawyer and chooses his words carefully. He knows that there is a difference between taxes on income and income tax. He knows that taxes on income include national insurance contributions as well as income tax. Indeed, if he does not know that—he has implied that, despite his expertise as a lawyer he does not —the Chancellor of the Exchequer does. In his Budget speech, the Chancellor of the Exchequer said: It is the basic rate—plus, of course, the national insurance contributions—which represent the deterrent effect of tax on additional earnings".—[Official Report, 12 June 1979; Vol. 968, c. 260.] As has been said, the Government's record on taxation is made doubly bad by the fact that the increase in the tax burden has not been shared evenly. I am glad that that is gradually sinking in. People are morally offended by the fact that someone earning £800 a week has had the proportion of his income taken in tax reduced from 50 per cent. to 43 per cent. while someone earning a measly £80 a week has had the burden of his direct taxation increased by well over half, from 12.5 per cent. to 17.8 per cent. The burden of direct taxation has even increased for those on average or twice average earnings. In cash terms, the average family is paying about £7 a week more in taxation today than in 1979, adjusting for inflation, while those on £50,000 a year are paying £24 a week less.

The Financial Secretary has offered explanations for questions that he and his right hon. and learned Friend the Chancellor have answered in the past 18 months. Through our questions we have dragged from the Government an explanation of what has happened to the burden of taxation in the past four years. The most contorted explanations have been made in the past three weeks by the Financial Secretary about why questions that he has answered in the past 18 months about the position of families with children should not now be believed. He gave an elaborate and unconvincing explanation. It is clear that he was not convinced by his answers and did not comprehend them. Tonight we heard an elaborate and unconvincing explanation of why child benefit should be regarded differently from the way that it was treated in his answers.

Why were the objections not raised before? I applaud the Minister's desire to answer questions exactly as they are put, but if there had been a serious objection about the way that I phrased the question and about how the Chief Secretary answered it, that could have been referred to on 10 December 1981 when my original question was answered. That answer is contained in half a column of small print and footnotes, but there is no reference to the reservations that the Minister now has about child benefit.

As my hon. Friend the Member for Edinburgh, Central (Mr. Cook) made clear, if one takes national insurance contributions and income tax together, the burden of taxation for those earning less than £360 a week has increased under this Government. The Government cannot wriggle out of that. They cannot fiddle the figures to disprove it. The taxation burden has increased for married couples with children, for childless couples and single persons. Childless couples and single persons are not affected by child benefit so whatever reservations the Government now have about the answers that they have given to me, the figures cannot apply to childless couples or single people.

What makes the Government's position so much worse is that when they are challenged about the way in which the rich are favoured by the Government they say that the shift to the rich is only "a small switch". They say that we should not worry about it because it is so small.

The Financial Secretary, on Second Reading said: there has been a small switch. Even if it were reversed, it would not do much, but would raise allowances by 4 per cent. more, or £1.25 a week for a single person and £.1.90 a week for a married man, or reduce the basic rate of income tax from 30p in the pound to 29½p in the pound."—[Official Report, 14 April 1983; Vol. 40 c. 1028.] The largesse offered to the rich is justified on the ground that if it were distributed evenly among the rest of us it would make only a small difference.

It is a sign of the Government's perverted sense of values that they continuously refuse to make modest but important changes in the supplementary benefit system. For example, they refuse to allow more free prescriptions to the chronic sick. Throughout the country, they have refused to permit the building of much needed hospital improvement schemes that have been on the stocks for years. Such improvements, which cost only tens of millions of pounds, are refused on the ground that the expenditure is too great. But the Government then justify the tax giveaway to the already well-off on the ground that the sum involved — £700 million — is small. As the Financial Secretary admitted, that is the amount by which the burden of taxation on the very rich has been reduced over the past four years.

Here is a new Conservative law of arithmetic—£700 million spent on the rich is a small sum, but £700 million spent on measures to reduce unemployment, to help the poor or to build hospitals or schools, is an enormous sum and cannot be afforded.

Philanthropic Conservatives such as Shaftesbury and Disraeli — whose memory is respected by those who belong to the genuine Conservative tradition—must be turning in their graves as the Government do violence to Conservative principles that at least sought to temper profit with compassion. No wonder true Conservatives recoil in horror at the lack of compassion of a Government who are not committed to Tory values but to 19th century Liberal values.

When Ministers reply to our charges, they seek to justify what has happened to thresholds in a number of ways. First, they claim that tax thresholds have increased by about 6 per cent. over their 1978–79 value. That is not a figure with which we would argue, but as my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) made clear, there is another way of describing the present level of allowances. They are 1 per cent. below the level in 1979 as a proportion of average earnings. In other words, in terms of average earnings, people come into tax earlier than they did in 1978–79.

Even if we accept the 6 per cent. figure as the bench mark, the Chief Secretary knows that although that is true as far as it goes, it is by no means the whole story. Two other major changes in the taxation system have offset that, and by more. First, there was the abolition of the reduced rate band and, secondly, there has been the increase in national insurance contributions by 2½p to 9p in the pound, the combined effect of which has increased the overall tax burden.

That combined effect means that Britain now occupies the top of the league table for combined income tax and social security contributions. Our starting rate is the highest by far of any European Community country, and far higher than it was when the Prime Minister complained about it when in Opposition. The threshold is the second lowest in the European Community. The starting rate of 39p in the pound should be compared with a starting rate in the Common Market as a whole of well under 27p in the pound. Having had to accept that the tax burden has increased — I hope that we shall have less wriggling from the Chief Secretary than we had from the Financial Secretary on that issue—

Mr. Brittan

indicated dissent.

Mr. Straw

So we shall have a great deal of wriggling and weasel words to the effect that the tax burden has not really increased. Ministers now understand that the tax burden has indeed increased but, having had to face that, they now come up with a series of excuses. The first excuse is that, according to the Chancellor, real take-home pay for an average family has risen by 5.5 per cent. So what? We are not discussing the level of take-home pay but the burden of taxation. Even though for some groups, although by no means all groups, real take-home pay has risen under the Government, those individuals who have benefited from an increase in real take-home pay are still paying a higher proportion of their income in taxation than they would have done under Labour's tax regime in 1978–79. Therefore the burden of taxation for those earning up to £500 a week is higher now than it was in 1978–79

It is odd that the Government should be proclaiming the rise in real take-home pay, as almost all of it is due to the rise that took place in 1979–80 as a result of the Clegg commission and related awards to which, I thought, Conservative Members had objected at the time and have regretted ever since.

Mr. Cook

A post-dated cheque.

9 pm

Mr. Straw

Conservative Members described it as a post-dated cheque. My hon. Friend is right.

The improvement in real take-home incomes has applied only to some groups. It is symptomatic of the Government's sense of values that those who have benefited in real disposable income have exclusively been the better-off while those who have suffered have been the pensioners and those on low incomes. The Institute of Fiscal Studies made a series of calculations, which were quoted in The Sunday Times on 20 March. It considered the overall effects of the Government's Budgets and of their other expenditure decisions — for example, the forcing up of fuel prices and rents and rates—to see who had fared better and who had fared worse. It will come as no surprise to my right hon. and hon. Friends to learn that a company director on £44,700 a year has benefited to the tune of £119.80 a week while a couple on a pension, despite the increases they have received, have lost £1.42 a week. The semi-skilled worker on £129 a week—that is a good wage for a skilled worker in my constituency — who lives in a council house has lost £8.05 a week. Worst of all, the jobless man with a family has lost £15.30 a week. I hope that we shall hear less from Conservative Members about how there has been an overall increase in real take-home pay.

As my hon. Friend the Member for Edinburgh, Central pointed out, if instead of taking the highly selective examples of individuals' real take-home pay, which are not published in any official series, we take the series that is published each month in Economic Trends, which shows real disposable income per head — a series that unshamedly includes pensioners, retired people and the unemployed all of whom have living standards to maintain and now have their incomes taxed—we find that, far from real living standards per head having risen under the Government, they have fallen by 2 per cent. to 3 per cent. whereas, under the Labour Government, they rose by 12 per cent. That last figure is consistent with what happened to the overall economy. Conservative Members may again be reluctant to recall that total national income under the Labour Government rose by 12 per cent. while under this Government it has fallen by a least 3 per cent.

When we charge Conservative Members and Ministers with having broken every promise that they made during the 1979 election campaign about reducing the tax burden, they claim that they had to increase national insurance contributions, which have borne the brunt of increased taxation, to pay for the cost of unemployment. We heard tonight that it was necessary to increase the contributions to pay for the cost of increased pensions. That was trotted out only recently. When we have charged the Prime Minister with failing to keep any of the promises that appeared in the Conservative manifesto prior to the election, her traditional excuse is that benefits and pensions have increased. So, too, has the cost of keeping 3.5 million on the dole.

Why are Conservative Members surprised? Why did they not include these factors in the costings that I imagine they carried out prior to the general election? We knew that the number of pensioners would increase. The fact that the number of people moving into the 60 to 65 bracket has increased should not have surprised those who carried out costings on behalf of the Conservative party. Before the general election we said that Conservative policies would lead to a substantial increase in unemployment. We all remember that Conservatives denied that. In a notorious speech at Darlington on 23 April 1979 the Prime Minister said: Another Labour accusation is that Conservative policies will lead to a rise in unemployment, but we are the party of opportunity. She said that there would be an increase in real jobs under a Conservative Government while Labour is the party of unemployment. We made it clear that Conservative policies would lead to a rise in unemployment, and so did many of the newspapers. Shortly before the general election the Daily Mirror, in a front page editorial, charged the Prime Minister with pursuing a false prospectus of spend, spend, spend. It charged the Conservative party with advocating policies that did not add up. The Conservative party was promising major tax cuts while advocating economic policies that were bound to lead to a rise in social security spending.

Conservatives denied these charges. The Chief Secretary said that the Conservative party would be able to do all that it said it would do. It was said that a Conservative Government would not increase or double VAT and would not reduce the standard of living of the unemployed. Conservatives told the electorate that at the same time a Tory Government would reduce taxes substantially.

We all know what has happened. In the light of the Government's record, we need no lectures from Conservative Members on election bribery. The Conservative party bribed its way into Government with promises of more jobs, greater national wealth and more effective law and order. However, no bribe was greater than its claim that it would cut taxes. It was the largest of its 30 pieces of silver. No Conservative bribe has been more completely dishonoured. By the Government's taxation policies they have made the rich richer and the poor poorer. They have a shameful taxation record and the amendment goes some way to restoring fairness in the taxation system.

Mr. Tom Clarke

I shall fully understand my hon. Friend the Member for Darlington (Mr. O'Brien) seeking to catch the eye of the Chair during this debate. Perhaps my hon. Friend and I can claim that we have the most recent experience of judging public opinion. We have heard what the people are actually saying as opposed to reading reports in the popular press of what they are supposed to say and feel. We know how people relate their feelings to the expression of views through the ballot box.

I recall attending a meeting in Darlington at which my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) gave an account of a survey which had been made shortly after the last general election. Under it, every Labour candidate had been invited to give an account of the election in his or her constituency and to explain the major issues, as they saw them, and particularly those issues which had had the most profound influence on the result of the election. Without exception, they expressed the view that the biggest single influence on the 1979 election had been the pledge by the Conservatives to reduce taxation. There is no doubt now that that pledge had a considerable bearing on the result of the election, so we are right to examine publicly what happened to those pledges and to relate them to the realities that people face.

The Daily Express—in my part of the country it describes itself as the Scottish Daily Express, printed in Manchester—said today that we had had a dull Budget. I agree that the paper was saying that in another context —Fleet Street has apparently taken upon itself the right which was once entrusted to No. 10, namely, to decide the date of the general election—but I do not recall that newspaper or many others describing it as a dull Budget at the time, althought it was. Indeed, the legislation that we are discussing tonight reflects its dullness and the irrelevance of the measures that the Government are introducing in the light of the difficulties that the nation faces. The burden of taxation has been readjusted in a way that is unsuited to the burdens people are bearing. Because the emphasis is on indirect rather than direct taxation, those least able to bear those burdens are being asked to do so.

I recently tried to secure a Second Reading for a Bill which dealt with youth unemployment and training. It endeavoured to ensure that youngsters going in for the various YOP programmes and earning £25 a week could receive some amelioration if their travelling and similar expenses were just less than £4. In other words, if their expenses are £3.99, they have to meet them out of the miserable £25 they received.

Their burdens do not end there. The American civil war was fought on the slogan, "No taxation without representation." Some youngsters related to me their experience of being asked to pay taxation at unacceptable levels, even before getting the vote at 18.

A young lady, who is a trainee in hairdressing, was served with a notice from the Inland Revenue asking her to pay tax not on the tips that she was getting, which were poor anyway, but on the tips that the Inland Revenue assumed her—and presumably other young trainees—to be getting. Who are we to assume that people are as generous as the Inland Revenue assumes they are or that young people are in receipt of an income when there is no evidence to support that that income is there to be received? Why should we be so firm about taxation on those young people when people at the top, as we have heard time after time, can get the best advice from their accountants, the legal profession and so on, and deal with taxation in a way that young people could not dream of.

9.15 pm

As my hon. Friend the Member for Blackburn (Mr. Straw) said, there is a case for saying that that approach has gone far enough. We are entitled to ask, "Do the Government relate their policy on taxation to the problems that we face? Given the high unemployment that our country faces, what output is there from our taxation policies that will lead to new investment, job creation and so on?" I have seen no sign of it.

If one gives tax concessions to those who earn £40,000, £50,000 or £60,000 a year, there is not a shred of evidence that that money comes back, is reinvested and creates the jobs that the country so desperately needs. Nevertheless, there is overwhelming evidence that if we gave to the people in the lower income brackets more opportunities to purchase, given the demands on them and the need to purchase goods, food, clothing for their children and so on, the money would he used in a way that is not only morally but economically right, and would justify a change in the tax system.

In the past four years there has been a readjustment of the tax system, so we are entitled to ask, "Where is the money coming from? How do those in the top income brackets manage to benefit?" That is happening because intolerable burdens are being placed on public bodies, particularly the local authorities. Local authorities have found year after year that the rate support grant settlement has been reduced in real terms. In Scotland the housing grant settlement has been reduced in real terms. Therefore, ordinary people who have not benefited one iota from the Government's taxation policy are being asked to pay more in rents and rates and more for the services that local authorities of all shades of opinion believe are important. They cannot say that taxation has improved their lot, because they have to meet extra demands.

I belong to a party that believes—its view is worthy of support and over many years it has had a great deal of support —that that our tax system should mean from each according to his means, to each according to his needs. I support the amendment because it takes closer to that philosophy than does the Finance Bill.

The great mass of the British people has been remarkably patient. When the Chancellor first presented his Budget, I pointed out that more than 80 per cent. of my constituents lived in council houses and asked whether these provisions would give the slightest help to the majority of my constituents. Since the general election, my constituents have faced unacceptable and rising unemployment, rent and rate increases and the daily practical problem of fuel poverty. Clichés, slogans and popular jargon may be used, but for my constituents fuel poverty is a reality. I know of elderly people who switch their lights off at a certain time in the evening, who cannot afford to have heating at weekends, and so on. Female old age pensioners are quite unreasonably taxed up to the age of 65, so they cannot say that they have any tax benefits to compensate for all the extra demands on their resources.

It is right that we should consider the details of Government policy in these matters, but the Government's record must also be examined on a global scale. We are entitled to ask how the nation has benefited from Government policy. I do not believe that it has benefited at all. We must ask about the impact on our constituents and what it means for ordinary people. As my hon. Friend the Member for Blackburn made clear, there is every sign that people are becoming increasingly aware that Treasury Ministers have allowed a gap to develop between their own thinking and that of the great mass of the British people. That will become increasingly apparent as debate on the Bill proceeds. Moreover, when the British people are given the opportunity to make their comments and pass their verdict, I believe that that verdict will be inconsistent with Government policy but consistent with the philosophy to which the Labour party is committed—from each according to his means, to each according Ito his needs.

Mr. Oswald O'Brien (Darlington)

I hesitated to rise immediately after my hon. Friend the Member for Blackburn (Mr. Straw) as I naively expected that a Conservative Member would wish to follow him and to argue against what he had said. Perhaps because of my newness to the House I expected too much. I have sat here for about four hours, but I can recall no speech from a Conservative Back Bencher. Apart from the occasional intervention earlier in the evening, we have heard only official replies from official briefs.

A few weeks ago, during the by-election campaign in which I was victorious, it was virtually impossible to engage my Conservative opponent in discussion of the Budget. I had to challenge him to talk about it. The same hesitancy seems to be reflected in the Chamber today. That is not surprising as the Conservatives' case is weak and the record that they have to defend is scarcely defensible.

That being so, I shall attempt to put the Conservative case as I understand it. Their manifesto, and indeed the Chief Secretary's election address, stated that their approach to economic policy would be, first, to cut public expenditure. This, they said, would enable them to reduce taxation. That would increase incentive which, in turn, would miraculously increase productivity in the factories of this country, many of which have, in fact, disappeared. We were told that out of that increase in productivity would come an increase in real pay, that would lead to an increase in demand in the economy because it would stimulate investment and production, and we would have an increase in jobs and a reduction in what was described at the time as the unacceptable level of unemployment.

Looking at each of those attempts at some kind of logical policy, we see that none of them can be described as successful. The Government have had to cut public expenditure, and we see the effects in the country. In county Durham, for example, we see their severity, and we know what they have meant to education and social services. In the National Health Service the Government claim to have made a real contribution of about 2 per cent., but we know that that in itself is not sufficient for the needs of the service, even simply to stand still.

In the cuts in those services, we see demonstrated clearly that the Government are quite unable to bring in their consequential pledge on that reduction in public expenditure to reduce taxation. Part of the reason is that some of the reduction in public expenditure has had to be offset by increases. The consequences of other aspects of Government policy have led to a massive increase in the unemployment figures, which they were so ready to criticise in 1979. Today, 3.2 million are people officially unemployed. Taking into account the recent change by the Government to the methods of calculation, which no longer takes account of those who are not registered, the figure may be four million or more. The Government have had to increase public expenditure to pay for those who are out of work. Whether the figure is £15,000 million or £17,000 million, the amount of money that has been draining away and preventing the Government from reducing taxation is huge.

We have heard a lot of wriggling words from the Treasury Bench about whether they have been successful. The Financial Secretary tried to prove that taxation had decreased. But he was dealing with only one part of the argument. As my hon. Friend the Member for Blackburn and others have shown, if we take account of the national insurance contributions as well, the burden of taxation has increased quite considerably.

There has been no attempt to deny that the overall burden of all taxes has risen during the life of this Government. Taxes account for about 39 per cent. of national income, compared with 34 per cent. when the Labour Government left office. If the Government got back to the levels that people enjoyed during the life of the Labour Government it would mean a 7p tax cut. We know that there is no chance of the Government doing that. They have not done it, and they will not do it before the next general election, whether it be in June, October or the spring of next year.

The Government's inability to fulfil those pledges means that the third item in their so-called logical sequence of policy development has proved impossible of achievement. They talked about reducing taxation to increase incentives. We have seen tonight that what Conservative Members think of as incentives and what we think of as incentives are two different things. This was clearly demonstrated, especially by the Financial Secretary when he was bemoaning the fate of the very rich and comparing the records of the Labour and Conservative Governments. It is only for that section of the population that he and his party think incentives have any meaning.

This is a strange approach to incentives and a strange argument. The Prime Minister keeps talking about Victorian values and the need for hard work, but if these are to be brought about, it is the people who do the work who should be given the incentives and not those with the vast amounts of wealth. They are being let off by the Tory party tax policies. The Financial Secretary was talking about marginal rates of taxation and was concerned about the very rich. If the marginal rates for the very poor are the same as they are for everybody else, the disincentives for the poor will be great. The Conservative party is not only not able to carry out its philosophy, but it does not want to think out that philosophy to its logical conclusion.

The Tories have failed to provide the incentives, partly because of the increase in unemployment—there cannot be any incentive for those out of work to produce any more. They have failed through their general policies of cuts in social services and their general callousness and lack of concern for the people. The Tories are not producing the incentives that they set out to produce, and therefore there have not been the increases in productivity that they claimed would result from their policies.

Recently, the Tories have claimed that there have been increases in productivity and that this is a sign of success for the policies that they have been pursuing for the past four years. As I endeavoured to show two weeks ago, the increases in productivity have not come from Government policies except in the sense that they have resulted from the high levels of unemployment. The increases are not the result of financial incentives or increases in real take-home pay, as has been claimed by the Conservative party. The increase in productivity comes as a direct result of the increase in unemployment and the relativity of that increase to production.

There has been no increase in productivity and only a slight increase recently in real pay. As my hon. Friend the Member for Blackburn showed, that is not the only figure that must be taken into account when looking at the overall circumstances and standard of living. The comparative performances of the Labour Government and this Government do not bear looking at. There was a 12 per cent. increase in the standard of living under our Government and a reduction of about 3 per cent. over the four years of this Government.

9.15 pm

If there has been an increase recently in real pay it has probably been because deflation has resulted in a decrease in inflation to its present low level, and because, in spite of the high level of unemployment, the unions have been able to resist the Government's intention to cut wage increases below the level of inflation. It is perhaps only for that reason that there has been some slight difference in the rate of inflation and take-home pay.

Perhaps the important thing to bear in mind about this is that the reduction in inflation has probably come too late and is too little to do anything to stimulate the economy and bring about an increase in the number of jobs. Indeed, the Budget is based on an expectation that unemployment will continue rising and go up by about 300,000 in the next few months. If that is the case, and the policy of the Government even in their so-called expansionary Budget, taken with the things about which I have been talking, is still further deflation, from where is the increase in demand which they say is the logical result of their policies to come?

An increase in demand would provide the incentive for entrepreneurs and manufacturers to invest in the economy. It is through investment in the economy that we shall have an increase in productivity and in overall production. But there has not been that increase in investment. It has been demonstrated on several occasions tonight that investment, and every other economic indicator that we can look at, are at their lowest for many years and, in some cases, at record low levels.

A couple of weeks ago the Chief Secretary said that the position is changing and that recovery is on the way. No doubt he will say the same tonight. But we must recall that that recovery is from a very low level. It has nothing to do with the Government's policies on taxation, incentives or any of the other subjects about which I have been talking.

Mr. Campbell-Savours

Does my hon. Friend also recall that there have been annual pledges that the economy was about to take off? In each Budget statement since 1980 Treasury Ministers have come to the Dispatch Box to tell us that we are about to enter a period of boom, but it has never come about.

Mr. O'Brien

That is so, and the purpose of those annual statements from the Government was to con the British people into thinking that the Government's harsh policies would in the end come right and that it was in their best interests to go along with them. That is the line that they are pursuing again now. They have never believed it themselves. Indeed, their figures have shown that that could not be the case. That is also the evidence of what is happening in industry throughout Britain, in my part of the world as well as in former prosperous areas such as the west midlands. I notice that in recent weeks the west midlands has been given special attention. The Government are not prepared to have a development agency in my part of the world nor a Minister with special responsibility but they are prepared to do so in the west midlands.

I pay little regard to the Government's annual statements. At best, they are probably whistling in the dark and at worst they are conning the British people. Before many months are out we shall find that the British people will not be conned. They will look at the realities and outcomes of Government policies over the past few years and will see that they have not meant the increase in jobs that was promised in 1979 and in successive statements since, to which my hon. Friend the Member for Workington (Mr. Campbell-Savours) referred, but have meant a greater loss of jobs for Britain than for any other major industrialised country. There was some deindustrialisation previously but since 1979 that has quickened and during the Government's four years in office jobs have been lost at a rate of about 10 per cent. compared with an average of 3 per cent. throughout the EC. It follows that the premises upon which the Government's policies are built are wrong, and therefore that the edifice that has been built upon those premises must be wrong. That has inevitably led to the catastrophic consequences that Britain is now witnessing.

Instead of, as was the case in 1979 compared with 1974, an increase in the number of people in employment in Britain, we have not only an increase in unemployment but a reduction of those in jobs as well. Those consequences are the direct result of the failure of the Government's policies; not only their policies but their philosophy. The sooner the British people have the opportunity to pronounce on those policies and their failures and to elect a Government prepared to reverse them the better.

The Second Deputy Chairman (Mr. Paul Dean)

Before I call the next hon. Member, I remind the Committee that we are discussing personal reliefs. I allowed the hon. Member for Darlington (Mr. O'Brien) a wide range but we should narrow the debate to the subject in hand.

Ms Harriet Harman (Peckham)

It is ironic that the Prime Minister and her Chancellor should regard themselves as resolute. What does that resolution mean in terms of carrying out the Government's promises and manifesto commitments? It is a resolution to do no more than dupe the electorate by persisting in the lie that everyone has benefited from tax cuts. The path of the Prime Minister and her Chancellor is littered not only with wasted talent, as represented by the growing army of the unemployed, but with broken promises about cutting personal taxation.

Behind all the talk about lower inflation lies the plain fact that, while the rich are enjoying tax cuts, the poor are being hit hard. My constituents often ask me, "Despite all this talk of low inflation and tax cuts, why am I and my family getting worse and worse off?" The reason is that people who do not live in Southwark or Peckham and who earn £50,000 a year are £24 a week better off in terms of the tax that they must pay than a family in my constituency with an income of £80 a week whose tax burden has increased by 57 per cent.

The people who are being affected in that way are those who run our vital services, such as hospital workers, those who provide school meals, those who work as home helps and single parents who work part-time. They are already low paid and, to cap it all, they are being hit by increases in personal taxation.

Clause 16 will not only take from those who are worse off and give to those who are better off, but will penalise women. When we discuss low pay, we also discuss women workers. The tax burden has shifted, but services have been cut, and rates and rents have been forced up so the tax burden has been doubled. The Government are taking more out of small incomes not only in direct taxation, but in indirect taxation by cutting Government grants to local authorities. Therefore, the services on which the low paid rely have been cut. The low paid are suffering a double burden.

In that context, talk of incentives is nonsense. Clause 16 is simply part of a design to create an irreversible shift in wealth away from working people and their families. I hope that, after the next general election, we shall have a Labour Goverment who are committed to use taxation for its intended purpose — to create equality rather than inequality, which is how it is now being used.

Mr. Austin Mitchell

The jiggling and juggling in clause 16, which the Opposition are trying to counteract with amendment No. 5, is a logical extension of the Government's technique. Their approach to the economy and matters financial is one of verbal prestidigitation. In other words, they say one thing and do another. That is a classic technique of Government which was first developed by Right-wing Governments in Australia and New Zealand by Messrs Fraser and Muldoon.

The Prime Minister was a natural learner from such Governments during her visits to the antipodes. Indeed, she is already convinced that everything she does is right so it does not matter what she says or does, she is right. That technique has been used to most devastating effect in the promises of tax cuts. Such promises have already been quoted at length, but it is worth reminding the House of them, especially the Prime Minister's unequivocal promise during the general election campaign to provide incentives by lifting the tax burden so that it would pay to work. The Chancellor of the Exchequer made an equally unequivocal commitment. The Conservative party is committed to reducing the burden of taxation, but that reduction has been carried through only for those who earn £50,000 a year or more.

9.45 pm

A married couple would have to earn £568.59 a week, and a single person would have to earn £551.36 a week, to pay a smaller proportion of their income in tax as a result of the Budget than was the case when the Conservative party came to power with its promises of reducing taxation. That means that 97 per cent., 98 per cent. or 99 per cent.—perhaps the Chief Secretary will give us the accurate figure—of the working population pay a higher proportion of their income as a result of the achievements of this tax cut promising Government.

The Government were right to increase the allowances, as they have done belatedly, but they have not increased it to the extent that they should. The low paid were hit by the 1981 freeze on the thresholds, which was carried through when inflation was 15 per cent., they were hit by the abolition of the reduced rate band of 25 per cent. and they were badly hit by the unnecessary increase in national insurance contributions, which were raised from 6.5 per cent. to 9 per cent. The increases in allowances in the Bill do not compensate for that. The low paid have suffered more than most under this Government, and our amendments seek to help them.

For a married couple with a joint income of £86 a week, which is about half the average male wage—there are many such couples in Grimsby, which is a centre of low earnings—the proportion of their income paid in tax and national insurance contributions has increased by more than one third. The proportion for a single person has increased by more than 13 per cent. By contrast, for a married couple on 10 times average earnings, or £1,723 a week—there are not many such couples in Grimsby although there may be some on the Conservative Benches —there has been a 15 per cent. decrease in the share of their income that they pay in taxation. If the Chancellor wishes to do justice to the low paid and to cut the proportion of the income that they pay in tax, he should have increased the allowances more substantially.

To take people back to the pre-Conservative level in terms of the proportion of income paid in tax would require an increase of £586, or 37 per cent., in the single person's allowance, or of £783, or 32 per cent., in the married couple's allowance. The Bill has not made an impression on the problems, which have become increasingly severe, thanks to the Government's economic policies. It will make hardly any impression on the poverty trap, to whose removal we are all dedicated, but which has become worse under this Government. The Government talked about alleviating the poverty trap, but they have increased it. The Chancellor claimed that 1.25 million people would be removed from tax, but 500,000 of those will have come out because of statutory indexation.

The proportion of working people paying tax is greater than if was in 1978–79. The Chancellor said that 10,000 families will be taken out of the poverty trap by the increase in allowances. That does not compensate the 63,000 people who have gone into the poverty trap since the previous Budget. The number of people caught in the poverty trap has doubled since 1978. Any alleviation thanks to the Budget is transitory because the family income supplement increases in November will push people back into the trap.

Although the Chancellor talks of increasing incentives, only those earning more than £50,000 a year benefit from the incentives. The 122,000 families with children in the poverty trap are in the ludicrous position that an increase in their wages produces no increase in their income. The tax system is as vicious as ever and has been getting steadily more vicious as the decades pass. The tax threshold as a percentage of average earnings in 1960 was 76 per cent.; by 1976 the figure was 46 per cent., and by 1979 it was 45 per cent. The fall had decreased under Labour but by 1981 the figure was 39 per cent. and in 1982 it was 41 per cent.

That produced a ludicrous position in which the Prime Minister, in another promise and commitment, pointed out in 1977: We pay the highest rate of income tax at the lowest level of income of any country in the EEC. That is the measure of Socialism—the effect on the poorer people of this country."—[Official Report, 29 March 1977; Vol. 929, c. 293.] Britain's starting rate of tax is still higher, by a wide margin, than that of any other country in the European Community. With the exceptions of Italy and Greece, Britain has the lowest tax threshold within the Common Market. In those two countries, tax becomes payable at the rate of 16p and 7.6p in the pound, compared with Britain's starting rate of 30p.

Contrary to the Prime Minister's protestations, this Government have increased the starting rate of tax and reduced the level of income at which people start to pay tax. This has happened because two parts of Tory party philosophy clashed. The people who suffered were the low paid; they got no incentives. The Government believe in incentives especially for the better off and for chaps like themselves who really deserve incentives and who can be guaranteed to send their money overseas as quickly as possible. Incentives will cause those earning more than £50,000 a year to work harder, but not the rest of the population. Those people have received no incentives.

Although the Government believe in incentives, they also believe in the discipline of unemployment. They have followed an economic policy of deliberate depression and deflation that has used unemployment as a whip and scourge on the working people of this country, to break the power of the trade union movement and to break the pressure for wage increases; people became so frightened for their jobs that they dared not ask for wage increases. That is the technique of the Government. That technique of economic management has produced the disaster in which Britain now has the highest rate of unemployment of all the OECD countries bar one.

Only Belgium has a higher rate than Britain. Britain's rate has been increasing far more rapidly than that of Belgium. Our unemployment increased, from December 1979 to December 1982, by 144 per cent. The figure for Belgium is marginally higher, but then the figure for unemployment in Belgium was much higher in 1979 than the figure in Britain. Contrary to what the Government say, our rate of unemployment has grown more than twice as fast as that in Belgium, and much faster than that in any other OECD country.

We are suffering the most from this self-produced depression. As an oil power, we should have been immune to it. A country that is self-sufficient in oil should not have been plunged into such a depression, but it may have been a deliberate policy decision to plunge us into this depression in order to discipline the working classes and break the power of the trade unions. That is the Government's triumph of economic management. As a result, the tax burden is great. In order to finance the increasing level of unemployment and to carry through their policies of social retribution, the Government have had to increase the tax burden and cannot, as a result, implement their policies for incentives.

The burden of taxation has increased to pay for unemployment, and it is pressing on a shrinking production base. That is the economics of bedlam. That is why we are dealing with this pathetic increase in allowances. That is why we are trying to improve the situation. Various estimates have been given of the cost of unemployment. The Manpower Services Commission estimated in 1981 that each unemployed person cost £4,328. The House of Lords Select Committee estimated that if forgone tax revenue, the loss of VAT through the reduction of purchasing power and the cost of benefits was included, the total amounted to £5,000 per unemployed person—a total tax burden of £15 billion to £18 billion. I do not have the calculations with me and it is difficult to work them out now that the figures have been "Tebbitised" and we do not know what the real figures are. However, let us say that the cost of financing unemployment is a tax burden of £15 billion. That means that the budgetary stance is in substantial surplus once unemployment is allowed for. In other words, the Government's budgetary stance is deflationary. With unemployment at that level, they are deliberately deflating the economy.

That is why the Government cannot fulfil their promises—because of the unemployment that they have created. The Government's disastrous economic performance has led to its own ruinous financial consequences in the Budgets presented to us by the Chancellor of the Exchequer. Last week, at the CBI, the Prime Minister produced a fitting epitaph to that performance. She mentioned the song "Maggie May". It is an appropriate epitaph for the Government, because "Maggie May" also specialised in personal reliefs, and it is therefore relevant to quote her in this debate. The song that the Prime Minister produced as the epitaph for this Government goes: To well I do remember when I first met Maggie May, She was cruising up and clown old Canning Place"— or Downing street— With a figure so divine like a frigate of the line, And me, being a sailor, I gave chase. Next morning"— that is to say now, as the election approaches— I awoke, I was flat and stony broke, No jacket, trousers, waistcoat could I find. When I asked her where they were, she said to me 'Kind sir, They're down in Kelly's pawnshop, number nine. That is an epitaph to this Government's economic "achievement".

Mr. Brittan

At last we have had some entertainment in the characteristic fashion that many of us learnt to expect from the hon. Member for Grimsby (Mr. Mitchell) in his better days on the small screen. This is our third debate today, but I would challenge any passer-by to tell the difference between this debate and the earlier debates. Most people would feel that stale mutton had been heated up for the third time, despite the passionate concern expressed by the hon. Member for Grimsby.

It is extraordinary, but not surprising, that the Opposition should tepidly table amendments and then seek —as they did on Second Reading and during the Budget debate—to talk about almost anything but the measures in the Budget and their proposals to amend it. In this third tranche of stale mutton we have heard some generalised criticisms of the Government's economic policy and some suggestions about where we stand.

10 pm

The only interesting aspect of the Opposition's presentation of the argument in the last few debates is that weeks ago the Opposition spokesmen decided that it was opportune to pooh-pooh any apparent improvements in the economy and to argue either that they did not exist or that they would go away. Faced with a crescendo of figures —[Interruption.] That is correct, whether one considers what the construction industry or the CBI say.

There is a nuance in the Opposition approach. I detect a ritual denunciation of the figures. The Opposition argue that the figures are not real, but when one listens carefully to the fine gradations of their arguments one realises that they are saying, "Oh well, this is an improvement but from a low base."

We are witnessing an interesting shift arid a recognition, as the evidence becomes strong, that recovery has begun—albeit from a low base. The Opposition are rewriting the script and attempting to pooh-pooh the recovery. So far as I am aware no Government spokesman today or in the past has forecast anything that could be described as a boom. Indeed, Government spokesmen have gone out of their way to say that that is not what is expected and that there is a difference between a gradual emergence from the recession, or an upturn, and a boom.

Mr. Straw


Mr. Campbell-Savours

Will the right hon. and learned Gentleman give way?

Mr. Brittan

No. I must give way to the hon. Member for Blackburn (Mr. Straw) first. However broad the approach, one must recognise that if one is making a serious attempt to debate these issues—

Sir Kenneth Lewis (Rutland and Stamford)

On a point of order, Mr. Dean. Am I right in assuming that the right hon. Member for Huyton (Sir H. Wilson) has rejoined the official Opposition? We are pleased to see him sitting on the Opposition Front Bench.

The Chairman

That is not a point of order, but the hon. Gentleman has made his point.

Mr. Brittan

If one tries to portray the economic position, a measure of precision is called for and I welcome the opportunity to explain that.

Mr. Campbell-Savours


Mr. Brittan

I shall give way to the hon. Member for Blackburn — I am sure that the hon. Member for Workington (Mr. Campbell-Savours) would not wish to forestall that pleasure.

Mr. Straw

If the crescendo is moving so fast, when will manufacturing production return to its May 1979 level?

Mr. Brittan

I thought that the hon. Member for Blackburn was about to say something new, but perhaps I should have known better. He knows that no Minister would attempt to answer such a question. The hon. Gentleman reflects the spirit of the debate. The Opposition are reluctant to consider the clause. It is difficult to understand from the tenor of the Opposition's argument that in the clause that they seek to amend the Government propose a 14 per cent. increase in personal allowances —an increase two and a half times above the level of inflation and the level required to comply with the indexation provisions. The Opposition go further and seek to raise the main personal allowances by about 20 per cent. The cost would be £870 million a year, but, to put it mildly, the financing of that extra cost was touched on only lightly by the Opposition.

The suggestion that a pot of gold is available simply by not increasing the higher rates of tax is manifestly inadequate. If the thresholds were held at their 1982–83 levels, as the Opposition propose, that would not yield a third of the money needed for the extra increase in the allowance. Even the reintroduction of the absurd higher rate schedule of 1978–79 would not yield sufficient to do the trick.

As my right hon. Friend the Financial Secretary pointed out, it is significant that, if given the chance, the Opposition propose to go to some unspecified point on the way back to 1978–79, but not the whole way. This is an entirely characteristic Opposition exercise. Faced with a proposal to increase allowances, which was favourably received by all concerned—not surprisingly, as it was 14 per cent. compared with the 5 per cent. required for indexation—the Opposition, in a characteristic fit of irresponsibility, propose a further increase at a cost of £870 million.

To justify that, we have not been given a serious argument as to the economic consequences or even a serious argument about the alternative ways of financing it, such as the tax that should be forgone. Instead, we have had a plethora of denunciation of the Government for the changes that they introduced at the higher rate levels. But even if reversed in full, which the Opposition are not calling for, that would not be sufficient to finance this further change in allowances.

On top of that, there have been a series of wholly misleading comparisons between 1982–83 and the Government's entire tax record. It is relevant and proper to compare the tax changes introduced in the Budget with the situation in 1982–83. It is relevant to point out that the number of taxpayers will be reduced over and above the number who will be taken out of tax had indexation alone been introduced. It is also relevant to point out that the average of income tax will be lower at all income levels.

It is no use the hon. Member for Coatbridge and Airdrie (Mr. Clarke) saying that none of his constituents will see any benefit. They may complain about other aspects of policy or events, but it does no service to rational debate to pretend that an increase in allowances of 14 per cent. is of no significant benefit. That is a ludicrous argument. Why, in the period before the Budget, did everyone ask for a substantial increase in allowances? Indeed, the vast majority of those who proffered their own budgets in the newspapers suggested an increase in allowances substantially below the figure proposed by the Government.

Mr. Tom Clarke

With respect, the Chief Secretary has missed the point. My constituents, in common with the vast majority of taxpayers, were not given the kind of tax concessions that the Prime Minister promised when she fought and won the election. My second point is that my constituents must pay so much in rent, rates and fuel increases that the clause is nothing more than a pin prick.

Mr. Brittan

The hon. Member for Coatbridge and Airdrie certainly said those things, but he also said—it was the only thing relevant to the consideration of clause 16 — that the clause did not benefit his constituents. What is manifestly true is that, whatever things in the past, or now, have not helped his constituents, clause 16 is bound to do so. It does no service to sensible debate to pretend that an increase in the allowance of about 14 per cent. — substantially higher than required under indexation and substantially higher than called for by most commentators—is of no benefit. To say that is to turn rational argument on its head. It is the case that the percentage of income going in income tax and national insurance contribution will be lower than in 1982 for all those contracted in and for most of those contracted out. Real net incomes are expected to be higher at all earnings levels as a result of the change put forward in the Budget, which will be implemented in the Finance Bill.

The hon. Member for Blackburn does not like the concept of real net incomes. He prefers disposable incomes. He complained that the concept of real net incomes does not appear in any published series. It appears to me strange that the concept must be denied because it does not appear in a series. There is nothing magical about the series. His alternative of disposable incomes is misleading because of course it is the case that those who are not in employment cannot expect that a tax change of this nature can reflect favourably on them. Therefore, compared with last year, which is the relevant year for considering a Finance Bill change, the benefits and improvements are substantial and real. If one compares the Government's record as a whole, with 1978–79, it is the case, as we explained in an earlier debate, that tax thresholds are higher in real terms than in 1978–79. That was conceded by the Opposition at the end of the argument.

The Opposition can produce other figures, but this debate is about tax thresholds. It is therefore entirely relevant in making the comparison of the records to point to the fact that tax thresholds are higher in real terms than in 1978–79—5 per cent. higher than with the statutory indexation of 1978–79 and 6 per cent. higher for the financial year 1983–84 compared with the financial year 1978–79. The percentage of income going in income tax is lower than in 1978–79 for those on three quarters average earnings and above, that is the great majority of married men. All the attempts of the hon. Member for Blackburn to escape from the net in which he was cast by my right hon. Friend the Financial Secretary the other week do nothing to detract from that point.

It is the case that real net earnings—take-home pay —are substantially higher than in 1978–79 for taxpayers whose earnings have gone up in line with earnings generally. It is the case that since 1978–79 the balance has shifted slightly in favour of families with children. I am content and would be content to rest the case for the Budget and for the Finance Bill on the comparison with last year, but the Opposition seek to make the comparison with 1978–79. But if we are to dig back into the past, they cannot escape—

Mr. Straw


Mr. Brittan

—an examination of their own record. It is worth considering what happened when the Labour Government were in power. Under Labour Governments presided over by the right hon. Member for Huyton (Sir H. Wilson), from whose distinguished company we are benefiting this evening, and by his successor, the right hon. Member for Cardiff, South-East (Mr. Callaghan), income tax thresholds fell in real terms by 20 per cent. for single people and 5 per cent. for married men.

Mr. O'Brien


Mr. Brittan

I am coming towards the end of my remarks. The hon. Member for Darlington (Mr. O'Brien) has had his say.

It is the case that income tax rates were higher under the Labour Government. Their basic rate went up to 35 per cent. at the time when there was no lower rate band. It stood at 33 per cent. in 1978–79. It is the case that the Labour Government's higher rates reached 83 per cent. at the maximum, compared with 60 per cent. under this Government. No country in the Western world can seriously defend such a rate. The burden of income tax and national insurance contributions increased substantially under the Labour Government, substantially more than under the present Government. For those on average earnings, the proportion of gross earnings taken in tax and national insurance contributions increased from 1973–74 to 1978–79 by 3.6 per cent. for the single. It has increased by 1.3 per cent. since 1979.

10.15 pm
Mr. Campbell-Savours


Mr. Brittan

No, I shall not give way. The proportion increased by 2.3 per cent. from 1973–74 to 1978–79 for the married. It has risen by 1.6 per cent. since 1979. It increased by 2 per cent. for married men with two children under Labour Governments compared with 1.4 per cent. since 1979. If we are to have the record, let us have a fair presentation of it.

Mr. Campbell-Savours


Mr. Brittan

If we are to talk about the Budget and the Finance Bill, let us do so fairly. I ask my right hon. and hon. Friends to reject the Opposition's proposals and to vote down the amendment.

Sir Kenneth Lewis: On a point of order, Mr. Dean. As we have the distinguished company of the right hon. Member for Huyton (Sir H. Wilson), the ex-Labour Prime Minister, on the Opposition Front Bench, can we have a speech from him instead of from the hon. Member for Blackburn (Mr. Straw)? If we had a speech from the right hon. Gentleman, it might bring into the Chamber a few Opposition Members. We should then have the advantage of being able to say to the right hon. Gentleman, "Come back. All is forgiven. They need you."

The Chairman

Order. The hon. Gentleman knows that that is not a point of order.

Mr. Straw

The hon. Member for Rutland and Stamford (Sir K. Lewis) has made the longest contribution that we have had from any Conservative Back Bencher throughout the debate. That shows how little Government Back Benchers think of the Government's taxation record. The Government have not been able to muster one Conservative Back Bencher to enter the Chamber to support their taxation record. No amount of bluster from the Chief Secretary about what happened under the Labour Government can derogate from the fact that at the general election the right hon. and learned Gentleman promised that the burden of direct taxation would be reduced. In fact, the burden of direct taxation has increased.

Mr. Brittan

The hon. Gentleman talked of bluster, which is usually a contrast to facts. Is he suggesting that any one of the facts that I gave about the record of the Labour Government, who presumably he would have supported had he been here to do so, is wrong?

Mr. Straw

In fact, I supported the Labour Government.

Mr. Brittan

What about the facts that I have given?

Mr. Straw

I shall check them later. The Chief Secretary read them so quickly that none of us could hear them properly. The Labour Government did not go to the country promising that there would be reductions in direct taxation at all levels of income only to renege on that pledge, except in respect of the very rich. In 1979 the Conservatives went round the country promising that direct taxation would be reduced at all levels of income. The Chief Secretary knows that direct taxation has been increased at all levels of income, except for the very rich. That is an incontrovertible fact and no amount of bluster from the Chief Secretary, or reference to what happened between 1974 and 1979, can derogate from that. The fact is that the level of direct taxation which was achieved under the Labour Government in their last year was lower for all incomes under £500 a week than it has been under this Government. That is a fact that the right hon. and learned Gentleman does not like.

The debate has been notable because of the contributions of three of my hon. Friends who have entered the House as a result of by-elections which the Labour party won. We had an excellent contribution from my hon. Friend the Member for Coatbridge and Airdrie (Mr. Clarke). He said that the claimed improvements in real living standards that we heard about from the Chief Secretary have not been shared equally throughout all sections of the population. He was right to say that in his constituency, where 80 per cent. of the population live in council houses, virtually no one will benefit from an increase in real net take-home pay and in real living standards as a result of the Government's policies.

We had a distinguished speech from my hon. Friend the Member for Darlington (Mr. O'Brien), who explained carefully why the Government are now in a mess. The increase in the burden of taxation that has occurred under this Government is a direct consequence of the failure of their economic policies. As he said, their policy was postulated on the basis that cuts in public expenditure and in taxation would lead to an incentive economy, an increase in output and an increase in jobs. None of that has happened and the cuts in public expenditure have added to the deflation that the Government have caused in other ways in the economy. That has increased the number of unemployed, public spending and the burden of direct and indirect taxation.

From my hon. Friend the Member for Peckham (Ms. Harman) we had a short but penetrating speech about the way in which lower income people, particularly women, have been penalised by the Government. From my hon. Friend the Member for Grimsby (Mr. Mitchell) we had his usual entertaining contribution, in which he pointed out that it was unfortunate for the Prime Minister to speak about the song "Maggie May" and say that she was an expert on personal reliefs, but personal reliefs of a different kind.

The Chief Secretary referred to these three debates as stale mutton heated up for the third time. That would be a more appropriate description of the Chief Secretary's wild claims of recovery being just around the corner—claims which we have heard about every four months for the past two years. If we do not believe them now, the right hon. Gentleman has only himself to blame, because early in 1981 he was predicting recovery and in May 1981 he said that only the most blinkered pessimist could fail to see evidence of recovery all round.

From our point of view there will not be any recovery until at the least the levels of total output, including manufacturing output, have returned to the levels that the Conservatives inherited in May 1979. The Chief Secretary knows that there is no way in the world that the Conservatives can go into the next election—be it in June, September or next May — with manufacturing output, let alone manufacturing employment, not at the levels at which they inherited them in May 1979 and with even the prospect of total output being well below those levels—and that from a Government who went into the last election promising that their policies would lead not to what has been the most catastrophic levels in manufacturing we have seen this century, but to an increase in manufacturing.

The Chief Secretary rightly said that it was a debate about tax thresholds. We have proposed that they should be increased not by 14 per cent. but by 20 per cent. to try to restore the burden of taxation to the level at which it was when the Labour Government left office in 1979. It is untrue and unworthy of the right hon. and learned Gentleman to suggest that in moving the amendment we have not taken account of the cost, which he said would be £850 million. As we have made repeatedly clear, we wish the burden of taxation on the rich, in terms of income and capital taxation, to be restored to the level at which it was when Labour left office. As the Financial Secretary has admitted to me in answer to parliamentary questions, the total now being handed out to the rich annually in real terms is well over the cost of the amendment, because it is costing about £950 million a year.

The incontrovertible truth is that the burden of taxation for all levels of income below £500 a week has gone up under the Conservatives, who bribed the electorate, dishonoured that bribe, been found out and do not like it. The amendment is designed to restore some honour to Parliament and to ensure that the burden of taxation is brought back at least to the level at which the Government found it in 1979, and I commend it to the Committee.

Question put, That the amendment be made:—

The Committee divided: Ayes 177, Noes 249.

Division No. 130] [10.25 pm
Adams, Allen Davis, Terry (B'ham, Stechf'd)
Allaun, Frank Deakins, Eric
Archer, Rt Hon Peter Dean, Joseph (Leeds West)
Ashley, Rt Hon Jack Dewar, Donald
Atkinson, N.(H'gey,) Dixon, Donald
Bagier, Gordon A.T. Dobson, Frank
Barnett, Guy (Greenwich) Dormand, Jack
Barnett, Rt Hon Joel (H'wd) Duffy, A. E. P.
Benn, Rt Hon Tony Dunnett, Jack
Bennett, Andrew(St'kp't N) Dunwoody, Hon Mrs G.
Bidwell, Sydney Eadie, Alex
Booth, Rt Hon Albert Ellis, R. (NE D'bysh're)
Boothroyd, Miss Betty English, Michael
Bray, Dr Jeremy Ennals, Rt Hon David
Brown, Ron (E'burgh, Leith) Evans, Ioan (Aberdare)
Buchan, Norman Evans, John (Newton)
Callaghan, Jim (Midd't'n & P) Field, Frank
Campbell, Ian Flannery, Martin
Campbell-Savours, Dale Foster, Derek
Canavan, Dennis Fraser, J. (Lamb'th, N'w'd)
Carter-Jones, Lewis Freud, Clement
Cartwright, John Garrett, John (Norwich S)
Clark, Dr David (S Shields) Golding, John
Clarke,Thomas(C'b'dge, A'rie) Graham, Ted
Cocks, Rt Hon M. (B'stol S) Grimond, Rt Hon J.
Coleman, Donald Hamilton, James (Bothwell)
Concannon, Rt Hon J. D. Hamilton, W. W. (C'tral Fife)
Cook, Robin F. Harman, Harriet (Peckham)
Cowans, Harry Harrison, Rt Hon Walter
Craigen, J. M. (G'gow, M'hill) Haynes, Frank
Crowther, Stan Heffer, Eric S.
Cryer, Bob Home Robertson, John
Cunliffe, Lawrence Homewood, William
Cunningham, G. (Islington S) Hooley, Frank
Cunningham, Dr J. (W'h'n) Horam, John
Dalyell, Tam Hoyle, Douglas
Davidson, Arthur Huckfield, Les
Davies, Rt Hon Denzil (L'lli) Hughes, Robert (Aberdeen N)
Hughes, Roy (Newport) Roberts, Ernest (Hackney N)
Janner, Hon Greville Roberts, Gwilym (Cannock)
Jay, Rt Hon Douglas Robertson, George
John, Brynmor Robinson, G. (Coventry NW)
Johnson, James (Hull West) Rooker, J. W.
Johnston, Russell (Inverness) Roper, John
Jones, Barry (East Flint) Rowlands, Ted
Kaufman, Rt Hon Gerald Sever, John
Kerr, Russell Sheldon, Rt Hon R.
Kilroy-Silk, Robert Shore, Rt Hon Peter
Lamond, James Silkin, Rt Hon J. (Deptford)
Leighton, Ronald Silverman, Julius
Litherland, Robert Skinner, Dennis
Lofthouse, Geoffrey Smith, Rt Hon J. (N Lanark)
Mabon, Rt Hon Dr J. Dickson Snape, Peter
McCartney, Hugh Soley, Clive
McDonald, Dr Oonagh Spearing, Nigel
McKay, Allen (Penistone) Spriggs, Leslie
McKelvey, William Stewart, Rt Hon D. (W Isles)
MacKenzie, Rt Hon Gregor Stoddart, David
Maclennan, Robert Stott, Roger
McTaggart, Robert Strang, Gavin
McWilliam, John Straw, Jack
Marshall, D(G'gow S'ton) Taylor, Mrs Ann (Bolton W)
Marshall, Jim (Leicester S) Thomas, Dafydd (Merioneth)
Martin, M(G'gow S'burn) Thomas, Mike (Newcastle E)
Mason, Rt Hon Roy Thorne, Stan (Preston South)
Maxton, John Tilley, John
Meacher, Michael Tinn, James
Mikardo, Ian Varley, Rt Hon Eric G.
Millan, Rt Hon Bruce Wainwright, E.(Dearne V)
Mitchell, R. C. (Soton Itchen) Wainwright, R.(Colne V)
Morris, Rt Hon A. (W'shawe) Walker, Rt Hon H.(D'caster)
Morris, Rt Hon C. (O'shaw) Warden, Gareth
Moyle, Rt Hon Roland Watkins, David
Newens, Stanley Weetch, Ken
Oakes, Rt Hon Gordon Welsh, Michael
O'Brien, Oswald (Darlington) White, Frank R.
O'Halloran, Michael Whitehead, Phillip
O'Neill, Martin Whitlock, William
Owen, Rt Hon Dr David Wigley, Dafydd
Park, George Willey, Rt Hon Frederick
Parker, John Williams, Rt Hon A.(S'sea W)
Parry, Robert Wilson, Rt Hon Sir H.(H'ton)
Penhaligon, David Wilson, William (C'try SE)
Prescott, John Woodall, Alec
Price, C. (Lewisham W) Woolmer, Kenneth
Race, Reg Young, David (Bolton E)
Radice, Giles
Rees, Rt Hon M (Leeds S) Tellers for the Ayes:
Richardson, Jo Mr. George Morton and
Roberts, Albert (Normanton) Mr. Austin Mitchell.
Roberts, Allan (Bootle)
Aitken, Jonathan Braine, Sir Bernard
Alexander, Richard Bright, Graham
Alison, Rt Hon Michael Brinton, Tim
Ancram, Michael Brittan, Rt. Hon. Leon
Arnold, Tom Brooke, Hon Peter
Aspinwall, Jack Brotherton, Michael
Atkins, Rt Hon H.(S'thorne) Brown, Michael(Brigg & Sc'n)
Atkins, Robert (Preston N) Browne, John (Winchester)
Baker, Kenneth(St.M'bone) Bruce-Gardyne, John
Banks, Robert Bryan, Sir Paul
Beaumont-Dark, Anthony Buchanan-Smith, Rt. Hon. A.
Bendall, Vivian Buck, Antony
Benyon, Thomas (A'don) Budgen, Nick
Benyon, W. (Buckingham) Bulmer, Esmond
Berry, Hon Anthony Burden, Sir Frederick
Best, Keith Butcher, John
Bevan, David Gilroy Carlisle, John (Luton West)
Biffen, Rt Hon John Carlisle, Kenneth (Lincoln)
Biggs-Davison, Sir John Carlisle, Rt Hon M. (R'c'n )
Blaker, Peter Chalker, Mrs. Lynda
Body, Richard Channon, Rt. Hon. Paul
Bonsor, Sir Nicholas Chapman, Sydney
Boscawen, Hon Robert Churchill, W. S.
Bottomley, Peter (W'wich W) Clark, Hon A. (Plym'th, S'n)
Boyson, Dr Rhodes Clark, Sir W. (Croydon S)
Clarke, Kenneth (Rushcliffe) Lawrence, Ivan
Cockeram, Eric Lawson, Rt Hon Nigel
Colvin, Michael Lee, John
Cope, John Lennox-Boyd, Hon Mark
Cormack, Patrick Lester, Jim (Beeston)
Corrie, John Lewis, Sir Kenneth (Rutland)
Costain, Sir Albert Lloyd, Peter (Fareham)
Cranborne, Viscount Loveridge, John
Crouch, David Luce, Richard
Dickens, Geoffrey Lyell, Nicholas
Dorrell, Stephen McCrindle, Robert
Douglas-Hamilton, Lord J. Macfarlane, Neil
Dover, Denshore MacGregor, John
du Cann, Rt Hon Edward MacKay, John (Argyll)
Dunn, Robert (Dartford) McNair-Wilson, M. (N'bury)
Durant, Tony McNair-Wilson, P. (New F'st)
Dykes, Hugh McQuarrie, Albert
Eden, Rt Hon Sir John Madel, David
Eggar, Tim Major, John
Elliott, Sir William Marland, Paul
Emery, Sir Peter Marlow, Antony
Eyre, Reginald Marten, Rt Hon Neil
Faith, Mrs Sheila Mather, Carol
Farr, John Mawby, Ray
Fenner, Mrs Peggy Mawhinney, Dr Brian
Finsberg, Geoffrey Maxwell-Hyslop, Robin
Fisher, Sir Nigel Mayhew, Patrick
Fletcher, A. (Ed'nb'gh N) Meyer, Sir Anthony
Fletcher-Cooke, Sir Charles Mills, Iain (Meriden)
Fookes, Miss Janet Mills, Sir Peter (West Devon)
Forman, Nigel Miscampbell, Norman
Fowler, Rt Hon Norman Moate, Roger
Fox, Marcus Monro, Sir Hector
Fraser, Rt Hon Sir Hugh Montgomery, Fergus
Fraser, Peter (South Angus) Moore, John
Fry, Peter Morgan, Geraint
Gardiner, George (Reigate) Morris, M. (N'hampton S)
Gardner, Sir Edward Morrison, Hon C. (Devizes)
Garel-Jones, Tristan Morrison, Hon P. (Chester)
Gilmour, Rt Hon Sir Ian Murphy, Christopher
Glyn, Dr Alan Myles, David
Goodhew, Sir Victor Neale, Gerrard
Goodlad, Alastair Needham, Richard
Gorst, John Nelson, Anthony
Gray, Rt Hon Hamish Neubert, Michael
Griffiths, E.(B'ySt, Edm'ds) Newton, Tony
Griffiths, Peter (Portsm'th N) Oppenheim, Rt Hon Mrs S.
Grist, Ian Page, Richard (SW Herts)
Grylls, Michael Parkinson, Rt Hon Cecil
Gummer, John Selwyn Parris, Matthew
Hamilton, Michael (Salisbury) Pawsey, James
Hampson, Dr Keith Peyton, Rt Hon John
Hannam, John Pink, R. Bonner
Hastings, Stephen Pollock, Alexander
Hawksley, Warren Porter, Barry
Hayhoe, Barney Prentice, Rt Hon Reg
Heddle, John Price, Sir David (Eastleigh)
Henderson, Barry Proctor, K. Harvey
Heseltine, Rt Hon Michael Raison, Rt Hon Timothy
Hicks, Robert Rathbone, Tim
Higgins, Rt Hon Terence L. Rees, Peter (Dover and Deal)
Holland, Philip (Carlton) Rees-Davies, W. R.
Hooson, Tom Renton, Tim
Howe, Rt Hon Sir Geoffrey Rhodes James, Robert
Howell, Rt Hon D. (G'ldf'd) Rhys Williams, Sir Brandon
Hunt, David (Wirral) Ridley, Hon Nicholas
Hunt, John (Ravensbourne) Roberts, Wyn (Conway)
Hurd, Rt Hon Douglas Rossi, Hugh
Irvine, RtHon Bryant Godman Sainsbury, Hon Timothy
Irving, Charles (Cheltenham) St. John-Stevas, Rt Hon N.
Johnson Smith, Sir Geoffrey Shaw, Giles (Pudsey)
Jopling, Rt Hon Michael Shelton, William (Streatham)
Kaberry, Sir Donald Shepherd, Colin (Hereford)
Kellett-Bowman, Mrs Elaine Shepherd, Richard
Kershaw, Sir Anthony Shersby, Michael
King, Rt Hon Tom Silvester, Fred
Knox, David Sims, Roger
Lamont, Norman Skeet, T. H. H.
Lang, Ian Smith, Tim (Beaconsfield)
Latham, Michael Speed, Keith
Speller, Tony Vaughan, Dr Gerard
Spence, John Viggers, Peter
Spicer, Jim (West Dorset) Waddington, David
Sproat, Iain Wakeham,John
Squire, Robin Waldegrave, Hon William
Stanbrook, Ivor Walker, B. (Perth)
Stanley, John Walker-Smith, Rt Hon Sir D.
Steen, Anthony Warren, Kenneth
Stevens, Martin Watson, John
Stewart, A.(E Renfrewshire) Wells, Bowen
Stokes, John Wells, John (Maidstone)
Stradling Thomas, J. Wheeler, John
Tapsell, Peter Wickenden, Keith
Tebbit, Rt Hon Norman Williams, D.(Montgomery)
Thomas, Rt Hon Peter Wolfson, Mark
Thompson, Donald Young, Sir George (Acton)
Thorne, Neil (Ilford South) Younger, Rt Hon George
Thornton, Malcolm
Townend, John (Bridlington) Tellers for the Noes:
Townsend, Cyril D, (B'heath) Mr. Archie Hamilton and
Trippier, David Mr. Douglas Hogg
van Straubenzee, Sir W.

Question accordingly negatived.

Clause 16 ordered to stand part of the Bill.

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