HC Deb 22 December 1983 vol 51 cc549-50
4. Mr. Dubs

asked the Chancellor of the Exchequer if he is satisfied that current economic indicators confirm he will be able to achieve reductions in tax.

Mr. Lawson

Provided that we maintain firm control of public expenditure, I remain confident that we shall be able to reduce the level of taxation during the lifetime of this Parliament.

Mr. Dubs

Is not the truth that the Cabinet is going through desperate contortions in an effort to reduce taxes next April and that if that is achieved it will be at the expense of pensioners who cannot afford to pay their electricity bills, people who are in receipt of housing benefit and people who are desperately in need of decent local government services, which will be cut as a result of the Government's policies?

Mr. Lawson

The Government have published public expenditure plans for 1984–85, and I am sure that the House agrees that they are a prudent compromise between what is necessary to maintain essential public services and what is necessary to maintain a gradually declining proportion of our total national output accounted for by public expenditure, for the benefit of the economy as a whole and to give headroom for tax decreases, especially in the lifetime of this Parliament.

Sir William Clark

Did my right hon. Friend hear on the radio this morning the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) advocating not only a reduction in taxation but, at the same time, an increase in public expenditure? Does my right hon. Friend agree that such a policy would be disastrous for the economy, as it would increase not only overspending but interest rates, which would hit industry and cause the loss of many more jobs?

Mr. Lawson

My hon. Friend is right in saying that such an action would lead to a resurgence of the inflationary spiral which occurred when the Labour party was last in office.

Mr. Wainwright

Will the prospective increases in gross domestic product enable the Chancellor, even on his terms, to allow a larger amount of public sector borrowing than he had intended? If that is so, will that not provide leeway for urgently needed reductions in taxes on jobs and low pay?

Mr. Lawson

I am glad that the hon. Gentleman, in contrast to right hon. and hon. Members of the official Opposition, seeks to achieve lower taxation. I am sure that that is what the economy and the nation need. Public borrowing as a proportion of GDP must still be decreased.

Mr. Beaumont-Dark

Does my right hon. Friend agree that, now that the economy is showing signs of growth and he is giving his mind to tax reductions, it is important to raise the tax threshold so that those on the lowest incomes are relieved of some of their problems?

Mr. Lawson

I agree with my hon. Friend. There is a strong case for raising the tax threshold as soon as we can do so responsibly. It is especially bad that the poor pay such a large proportion of their income in taxation as they do at present. The only solution to that problem is to maintain firm control of public expenditure, and that is something to which the Opposition are antipathetic.

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