HC Deb 28 April 1983 vol 41 cc980-1
2. Mr. Soley

asked the Chancellor of the Exchequer what has been the increase between 1978–79 and 1983–84 in the burden of direct tax, income tax and employees' national insurance contributions combined, as a percentage of income for a married man with two children, wife not working, on (a) average earnings and (b) three quarters average earnings.

The Chief Secretary to the Treasury (Mr. Leon Brittan)

For a married man with two children, in 1983–84, the percentages of gross earnings taken in income tax plus national insurance contributions less child benefit are 22.6 per cent. and 17.1 per cent., respectively, at average and three quarters average earnings. Corresponding figures for 1978–79 are 21.2 and 15.1 per cent. This is an increase of 1.4 percentage points at average earnings and 2.0 percentage points at three-quarters average earnings.

Mr. Soley

As that represents increases of about £7 and £8 a week, respectively, if child benefit is taken out, is it not a classic case of the Tory party misleading the people? How does the Minister justify the Chancellor of the Exchequer's comments on 22 April 1979 that:

"personal taxation at all income levels must be substantially reduced."?

Mr. Brittan

That is well tilled territory, as hon. Members who have been present for debates on the Finance Bill will know.

Mr. Jack Straw (Blackburn)

It is fertile territory.

Mr. Brittan

What really matters in the end is the take-home pay, which has increased at all levels for all sections of the community.

Mr. Horam

In the light of the Minister's answer to the hon. Member for Hammersmith, North (Mr. Soley), and the answer given to me recently by the Financial Secretary to the Treasury, that the total burden of taxation since the Government came to power has increased by the equivalent of 7p in the pound on the standard rate of income tax, which by any standards is a huge increase, what has been the effect of that increase in tax burdens on incentives?

Mr. Brittan

The hon. Gentleman will recall that one change in incentives, to which great importance should be attached, is the change in the basic and higher rates of income tax. That will have a considerable impact on incentives.

Mr. John Townend

Does my right hon. and learned Friend agree that his reply emphasises the need for the Government to redouble their efforts to reduce public expenditure so that they can further reduce taxation?

Mr. Brittan

I agree with my hon. Friend. I am not tempted to go down the path proffered by the Opposition, who blatantly say that we can finance increased spending and reduced taxes by borrowing. That is the road to disaster, and that is why the Opposition will not be followed by many people.

Mr. Shore

I am sure that the House will be grateful to the Chief Secretary for his candid admission that the burden of direct taxation has increased for families of average and below average size since the Government came to power. The House and the country will note the stark contrast between their performance and the most specific of their pledges before the 1979 general election.

To reinforce the point made by the hon. Member for Gateshead, West (Mr. Horam), I repeat the question that he put to the Chief Secretary. If the whole argument for reducing taxation was to increase incentives, what effect has the increase in direct taxation had upon those incentives? Increased taxation must have had a deleterious effect on work, output and incentives.

Mr. Brittan

I am surprised that the right hon. Gentleman should approach such matters as though he is hearing about them for the first time. He is well aware that the burden of income tax has been reduced for those on three quarters average earnings and above. That was made clear, despite the comments of the hon. Member for Blackburn (Mr. Straw), during the Finance Bill debates. As to income tax and national insurance contributions, the position is as described. The reductions in the basic and top rates of tax are a significant contribution to incentives. If the right hon. Gentleman is saying that we have not gone far enough, I agree with him. If he is proffering a package that he believes would allow us to go further, as I said, that could be done only by courting financial disaster through grossly increased borrowing.