§ Question proposed, That the clause stand part of the Bill.4.33 pm
§ Mr. Robin Cook (Livingston)
After the blow-out on Tuesday, when the higher rate bands were allowed to guzzle their way through £280 million, we are now picking over the crumbs that remain. The situation is slightly unusual, because normally the crumbs are left for household pets or, in their absence, the Door. The curious and distinctive feature of the Bill is that there is no room for the poor within it. The aspect that we find most offensive is that it contains not one provision that will relieve the tax burden of the poor or of the average earner. There are measures to reduce the tax burden on those who pay higher rates of tax. There are measures to reduce the tax burden of those who own small companies. There are measures to reduce the tax burden of those with the largest mortgages. There are even measures to reduce the tax burden of those who — presumably for reasons other than the weather—have chosen to take up domicile on the Channel Islands.
Those we find picking over the crumbs in clause 8 are the wealthy. On Tuesday, we dealt with those who are rich in income and today we are faced with a provision to reduce the taxation of those who are rich in wealth. There is an overlap between the two categories. Indeed, they are the same people down to the last 1 per cent.
Let us be clear in our minds whom we are talking about. The beneficiaries of this measure will be those who have a minimum estate of £60,000. They will be taxable only on the sum in excess of £60,000. For example, once the Bill is enacted, an estate valued at £80,000 will be liable to a CTT charge of only £6,000. We are aware from experience in our constituencies that an £80,000 estate is not normally achieved by the average income earner. Nor can such an estate be achieved by the curious statistical concept that we discussed on Tuesday and which was advanced by the occupant of the Treasury Bench—two males who are married, living together and each being in receipt of the average male wage. On the whole, estates of £80,000 can be achieved only by those who are comfortably off. I have in mind the sort of household that was able to use granny's inheritance to purchase shares in Cable and Wireless and which can now sell them off at 424p each.
That sort of household has been liable to a tax charge over the past century. Until the Government came to power, there was a consensus that the inheritance of wealth was a proper subject for taxation. That consensus stretches back even beyond Lloyd George. It goes back some 300 years to the foundation of probate duty in 1694. I suspect 1032 that some Conservative Members would find themselves more comfortable and more at home if they were able to go back to those times.
The consensus was founded on three propositions. First, it was recognised that households which managed to leave such large estates could afford to pay some tax. Secondly, it was recognised that at the point of transfer of the estate there was a mobile asset and, therefore, sufficient liquidity to enable the household to pay a tax charge. Thirdly, it was accepted that when viewed from the perspective of the recipient, the inheritance of a large sum was entirely arbitrary and due to no other virtue or act on his part than the good fortune of being born in the right household.
That brings me to wider considerations of economic policy. The previous Chancellor of the Exchequer, who addressed himself to capital transfer tax in his last two Budget statements, was given to characterising CTT as a tax on enterprise or, as he said in March, as a tax "penalising personal endeavour". On the whole, the United Kingdom is not full of elderly wealthy couples who are scouring the country in search of individuals who show enterprise and endeavour and who will be suitable recipients of their fortunes.
The reality is that there is a low correlation between enterprise and wealth. I am reluctant to disturb the prejudices of Conservative Members with the facts, but the unfortunate truth from their perspective is that research demonstrates repeatedly that the most common reason for people dying wealthy is that they were born wealthy. The most recent study took place in 1979 and was conducted by Harbury and Hitchins. It was discovered that two thirds of those leaving large estates had inherited large estates. It is worth noting that, of the remainder, one in 12 left a large estate on death because he or she had married well. I suppose that that might be described as enterprise of a kind.
§ Mr. Tony Marlow (Northampton, North)
Does the hon. Gentleman discount altogether the fact that some people wish to acquire wealth and assets so that they can pass them on to their families, so that after their lifetime their families will benefit from what they did during their lifetime? Does he discount that altogether? Does he think that there is something wrong with that? Does he think that there is something wrong with the family? Does he think it wrong that a family should give people the initiative to be enterprising and therefore to create the wealth that will attract taxation and enable the welfare services to be run in this country?
§ Mr. Cook
That was an interesting interruption. Conservative Members become hot under the collar when we discuss these matters in a rational manner, which is exceedingly revealing. I shall repeat what I was saying before the hon. Gentleman intervened, because it appears that he has not grasped my argument. Perhaps I should have anticipated that it would be necessary to repeat the argument twice before the hon. Gentleman would be able to grasp it. I was saying that two thirds of those who die and leave estates of the sort that we are discussing are able to leave such estates because they in turn inherited like estates at birth.
Very few families are capable of scraping together, saving and putting aside through thrift and hard work £80,000 out of anything approaching a normal or average 1033 income. The vast majority—not just 90 per cent., but 95, 96 or 97 per cent.—of all households that manage to find some form of wealth to leave to their children, which is a perfectly proper activity and a laudable incentive, are in no way touched by the effect of capital transfer tax. What we are considering in the clause is to what extent we diminish the tax on those who leave large sums. We are talking about the wealthy section of the community and about those who are wealthy because primarily they were born wealthy or, as in the minority, because they married wealthy people.
Given that the most common cause of being wealthy is being born wealthy, whatever the hon. Member for Northampton, North (Mr. Marlow) may say about the disincentive effect of taxation on the accumulation of wealth, there is precious little evidence that the taxation of wealth has as yet discouraged anyone from seeking to inherit it. The hon. Gentleman and his colleagues might want to ponder whether it is economically desirable that the primary source of wealth should be the accident of birth or the good fortune of marriage. The reason why I urge the hon. Gentleman and his colleagues to ponder upon that is that, although parents can arrange for their children to inherit their wealth, they cannot arrange for their sons to inherit the ability to put that wealth to good use for themselves and society.
There is, therefore, no reason why we should regard CTT as an economic handicap. On the contrary, we could argue that there is a robust case that so far as CTT might succeed in breaking up the concentration of wealth, it is economically progressive. I shall quote Keynes. I hope that the Minister of State will forgive me if I refer to someone whom I know Conservative Members regard as a dissident author who should be reduced to samizdat copies only. Keynes said:The hereditary principle in the transmission of wealth and the control of business is the reason why the leadership of the capitalist cause is weak and stupid.If that was true 30 years ago, how much more true it is as we look at the Conservative Benches. Keynes stated further:It is too much dominated by third generation men.Therefore, we might argue that it would be economically progressive to encourage the dissemination rather than the concentration of wealth. Let me recap. We have established that there is a consensus that inheritance of wealth is a proper subject for tax. We have also established that in so far as we can trace an economic effect from that taxation, it is benign rather than malign.
I shall refer to the recent history of the tax. There has been a steady decline in revenue from taxation on the inheritance of wealth over the past century. In 1914, estate duty produced 16 per cent. of all Government revenue —a substantial proportion. By 1945 that proportion had shrunk to 9 per cent. By 1975 that proportion had shrunk further to 4 per cent. In 1975, as the Committee will be aware, CTT was introduced. Since its introduction, the revenue from taxes on inheritance has barely increased in cash terms, and in real terms it has more than halved, whether one measures the real sum as an absolute figure or as a proportion of the revenue of the Treasury. I say to Conservative Members and the previous Chancellor of the Exchequer that those who believe that taxation on capital and inheritance is economically regressive might wish to 1034 ponder the fact that the period in which revenue on the taxation on inheritance was lightest was also the period of the most disastrous economic performance in Britain.
What is impressive about the reduction in the burden of CTT is that there has been no parallel increase in the other capital taxes, which have gone through a similar reduction. The revenue from capital gains tax and investment income surcharge has declined under the present Government. It has been calculated—the figures are available in a Treasury answer—that during the four years of the Government's previous term of office revenue from CTT, CGT and investment income surcharge together declined by £600 million compared with the level that they inherited in 1979.
It is striking that at the same time as we witnessed a reduction in revenue from the tax on capital, we witnessed a sharp increase in the tax on income. In the decade since the introduction of CTT, taxes on income have gone up fourfold in cash terms. It is exceedingly strange that given the choice between putting the burden on capital or on income, the Government, strikingly, have chosen to place the greatest burden of all on income. It is a choice that would have convinced Marx of the priorities of the capitalist establishment.
Before the Minister proceeds to pounce on the fact that the Labour Government failed to increase revenue from CTT, let me openly admit that we are disappointed at the low revenue from CTT. There is no doubt that had we had the responsibility of office when it became clear that CTT would not produce the revenue that was expected or desired, we would have sought to remedy the situation by making sure that changes were made to increase the yield and return it to approximately the previous yield from estate duty. The charge that must be laid against Conservative Members is that having been in office when the information became available that the tax was failing to raise the expected revenue, far from taking action to remedy the problem, they set about wilfully dismantling the revenue that continued to come in from CTT.
It is appropriate that we should debate the clause immediately after the return of the present Chief Secretary to the Treasury team. When he was in his previous incarnation as Minister of State, Treasury, he, more than anybody else, set about the demolition of CTT with a will. In 1980 he doubled the threshold for CTT and thus removed from the tax two thirds of those who were eligible for it before. Before departing from the Treasury in 1982, he again took up his demolition sledgehammer and struck out the cumulative principle from CTT. That was an interesting choice. In removing the cumulative principle, he effectively reduced CTT to a tax—[Interruption.] I am pleased that the Minister has now joined us. When he destroyed the cumulative principle in the 1982 Budget, he effectively converted CTT back to estate duty. As The Times observed after the 1982 Budget:For many people the tax on their estates will be almost wholly avoidable if they start planning early enough.What is striking and significant about the avoidability of CTT now is that that was the clear and distinctive feature of estate duty and the reason why the Labour Government sought to reform estate duty by introducing CTT that applied the tax over all transfers during lifetime as well as at death.
Conservative Members never liked that change. When CTT was introduced in 1975, Conservative Members in 1035 the Committee railed against the change in positively histrionic terms. Mr. Stephen Hastings, who regrettably is no longer with us, reminded the Committee in 1975 that a tax on capital provoked the fall of Rome and the invasion by the Vandals. There is no sign that CTT has been a similar threat to the British constitution and the fabric of life in Britain. The present Financial Secretary also took part in that debate. He said that he had never liked estate duty, which was being replaced by CTT, but that the advantage of estate duty was that one did not actually have to pay it.
When we debated this provision in April I asked the Financial Secretary whether he was satisfied with the present form of CTT. To my great delight, he assured me that the Treasury had reduced CTT to a suitable form. I assume from that that he now regards it as being, like estate duty, in a form in which it can be avoided, but there is one key difference between estate duty and the Government's CTT regime. The thresholds that the Treasury operate for CTT are much higher than those which operated for estate duty, with which it is now almost identical. In other words, the burden of CTT is now less onerous than the estate duty to which it is so similar.
The Committee must judge the clause against that background. If the clause goes throught intact, it will concede a £40 million to £50 million reduction in the CTT charge in a full year. Since the Goverment came to power in 1979 they have reduced the burden of CTT by £190 million. That sum must be set against this year's expected revenue of a mere £540 million. In other words, the various ways in which the Treasury has tinkered and struck at CTT and sought to chip away at its effectiveness have reduced its revenue by no less than one quarter.
Cedric Sandford, the expert on this subject, writing in the Financial Times, which at that time was still being published, said:In this Budget Sir Geoffrey Howe continues the process, as in all his previous Budgets, of drawing the teeth of CTT. He has been an effective dentist.The dentistry being practised by the Chancellor is to index the thresholds for CTT by more than the rate of inflation. In the Budget speech in March this year the then Chancellor said:On capital transfer tax, I propose to increase the threshold and rate bands broadly in line with indexation." — [Official Report, 15 March 1983; Vol. 39, c. 152.]The Financial Secretary admitted in April that the indexation is 2 per cent. higher than the rate of inflation —that is, 2 per cent. higher than is strictly required by indexation. That is a generous margin. It happens to be identical with the percentage by which the same Government are fiddling the pension to ensure that pensioners do not get the full indexation. I am sure that many pensioner households would cheerfully settle for a pension broadly indexed in the same way as CTT if it meant that they would receive 2 per cent. more rather than 2 per cent. less.
There is no possible justification for this generosity —this expensive sum of loose change flung on top of the general indexation for the wealthy. There is no justification in terms of fiscal prudence, economic progress or social justice. There is only one possible explanation.
§ Mr. Cook
My hon. Friend is characteristically more blunt than I. In a spirit of charity and seeking to understand 1036 the Government's motivation, I suggest that the explanation is the congenital affection of the Conservatives for the very wealthy. I remind my hon. Friends that affection is a positive human attribute and its rare flowering under the present Administration is welcome, however exclusive the corner in which we find it.
When we gaze upon the evidence of the Government's affection as measured by the additional 2 per cent. to the very wealthy, however, we cannot forget—nor can we forgive—that the same Government have proved mean and vindictive to the unemployed, whose benefit has been cut by 2 per cent. this year and who are threatened with further cuts. Even as we have debated the Bill, the Government have again proved mean and vindictive in the cuts that they have imposed on the Health Service. It is against that background that we must measure the £40 million that the clause will give to the wealthiest members of our society.
For that reason, the Opposition will take extra pleasure in voting against the repugnant double standards that the clause represents.
§ Mr. Richard Wainwright (Colne Valley)
It is a commonplace that philistines can often get away with wrecking or dismantling a structure if the structure was originally so badly designed and constructed that few would rally to its defence. That is the fundamental mischief of capital transfer tax. Although its objects are wholly laudable it is badly constructed, as we made clear at the time, especially as it falls on the donor and not on the recipient. I hope that Treasury Ministers will not take advantage of that gift to them in dealing with this clause.
The Red Book informs us that the change in the threshold will cost approximately £50 million to the Revenue in a full year. Therefore, there is an immediate problem of priorities. It is up to Treasury Ministers to try to convince the House that this is a proper priority. It is difficult to see how they can do so in two respects. First, what evidence can they produce that CTT now bites so hard or so unfairly that £50 million is well spent on restoring some equity? I do not believe for a moment that CTT in its present emasculated form bites unfairly on a substantial number of taxpayers, but I hope that we shall hear from Treasury Ministers if that is their view.
Secondly, it is of the utmost importance that Ministers explain why they are continuing to give priority to the loss of £50 million to the Revenue in a full year when the Chancellor only last week openly confessed that the expenditure side of the March Budget had come seriously unstuck. That clearly creates a new situation in which Ministers must try to convince the Committee that this is still a justifiable priority. I think that they will be hard put to do so after the cuts that were announced last week which, as we all know, were only the first instalment. It is beyond my imagination how Treasury Ministers can justify going ahead with the proposal to provide the comfortably off with an additional £50 million relief.
Those two tasks are firmly laid on Ministers. I hope that they will face them before we reach a decision on this.
§ Mr. Marlow
I shall be brief. The hon. Member for Livingston (Mr. Cook) made a speech of Victorian proportions with Victorian vindictiveness about the well off and the people who have succeeded in society. As the Opposition make great play of the Prime Minister's 1037 referring to Victorian values, they would do better not to show Victorian spite in the way in which they approach these matters.
The hon. Member for Livingston referred to the amount of money that is to be liable to capital transfer tax as if it were riches beyond the wildest imagination. The limit that we are discussing is rather less than the value of Arthur Scargill's house. The hon. Gentleman talked of giving away. The Opposition always make that mistake. Conservative Members realise that the money belongs to the people and that what is raised in revenue, the Government are taking from the people. The people are not giving that money. If the Government do not take the money they are not giving money away, they are just not forcing people to give it to the Government.
The hon. Member for Livingston said that the money could be spent in other ways and on more worthy programmes. The Government proposed their programme in the Budget, saying what they would spend and what they would take. The Conservatives put that forward in the election campaign and made a commitment to the British people that that was how we would proceed. That is how we should proceed for one good reason. There are two alternatives in the circumstances in which the Government found themselves. They could either contain public expenditure within the limits that they committed themselves to or they could raise taxation.
There is pressure in Government Departments, pressure from the work force in Government Departments and the pressure of programmes continually to spend more money. If the Government gave in and said, "Every time there is a problem in the public service we shall increase taxation," what would be the lesson? The lesson would be, "Spend, spend, spend, the Government will pay the bills." It is up to the public sector, public authorities and Departments to sort themselves out and live within the means that the Government and the people have given them. If those Departments and authorities were to get the message, "If you spend the money the Government will raise it," where would we go from there? Every time they spend more and the Government raise more, more burdens are put on our people and our industry. If we do that, the golden goose that raises the money that we need will be shot, killed, roasted and destroyed.
As I said to the hon. Member for Livingston in an intervention, we need to provide the services for those who dearly require them, but if we put more burdens on our people there will be no money, wealth or welfare services. That is the direction in which the hon. Member for Livingston pointed the country in his speech. We must not go that way. We must stick within our budgetary limits and carry out the commitment and the promise that we made. On this side of the Committee, when we make promises we believe in keeping them.
I seldom find myself agreeing with the Liberal party, but the hon. Member for Colne Valley (Mr. Wainwright) said that it would be far better if the tax were on the recipient rather than the giver. We should seriously consider moving from a capital transfer tax of this type to an inheritance tax. That would be far better from the point of view of distribution of wealth. It would be far better for those who think that it is wrong that a few people should 1038 receive great riches. It is far better that riches, which should be provided and which people should wish to create in their lifetime, were distributed among more people. That would be of far greater benefit to society. It would also be far more fair. I beseech the Government to consider moving in that direction.
§ Mr. David Winnick (Walsall, North)
There should be much anger at what the Government are doing. This is by no means an obscure matter. We know that £50 million is involved, but it is the principle that should cause the greatest alarm.
Once again, a Tory Government are taking steps, as soon as possible after a general election victory, to give benefits to the rich. There can hardly be any doubt that, shortly before the recess or immediately after our return, we shall hear of more public expenditure cuts that will affect our constituents, especially those who live on the smallest incomes. No doubt there will also be cuts in public services. We are now debating giving more relief to people who need it least. The increase is utterly unjustified. It is intended once again to reduce the burden of tax liability on the richest people. There is not much doubt that the Conservative party has never favoured any form of capital transfer tax. It is almost a matter of principle for Tories that a small number of people should gather a vast concentration of private wealth.
One of the fictions that has grown up is that Britain has changed considerably with regard to private wealth. We are told that we are a more equal society, that we are nearly all middle class, that the class divisions of the turn of the century and before have been substantially eroded. That is far from the truth. The figures give a quite different picture. One quarter of all personal wealth is still owned by a mere 1 per cent. of the adult population. That is in the 1980s. Almost one third of all personal wealth is owned by 2 per cent. of the adult population and the top 10 per cent. own almost 60 per cent. of private wealth. The hon. Member for Northampton, North (Mr. Marlow) might be interested to know that that information does not come from a Left-wing publication. I am quoting the Inland Revenue's statistics for last year. That is one side of the picture, which destroys the myth that there is no longer a rich minority. Unfortunately there has been little move towards equality, even under Labour Governments. I regret that the previous Labour Government did not do more. At least Labour Governments have not helped the wealthy as the present Government are.
The Low Pay Unit has just issued a report saying that more than 1 million children are in poverty or near-poverty because of their parents' low wages. It also says that 11–5 million people in nearly 7 million families earn no more than 40 per cent. above the level of supplementary benefit. Thus we have two Britains. The one is a small rich minority that carries on as before. It is being considerably helped by the Government. At the other end of the social scale are the millions who live in poverty or near-poverty. That is a disgrace.
If we are to give priority to a group of people and there is money to be given away, surely justice demands that we give it to those who need it most—the poor, the near-poor and the children who live in such households. What possible justification can there be for giving priority to the rich minority? Ministers cannot possibly justify giving them more assistance from the public revenue. That is why I started by saying that there should be the utmost anger 1039 at what the Government are doing. The Prime Minister and her colleagues talk of what they call, "the Left" being concerned with class struggle and class war. It is the Government who are conducting class warfare.
At Question Time today, the Prime Minister again refused to give any pledge about unemployment benefit being increased in line with prices after this year. All the signs are that the unemployed and those who receive short-term supplementary benefits will discover that they get no increase in line with prices next year and, possibly, thereafter. The children in such households will suffer. I wonder what sort of Government supporters can go through the Division Lobby tonight, or on any other occasion, to use their votes to give more to the rich minority and to deprive the millions who continue to live in poverty or near-poverty. That is why we shall constantly remind the Government of what they have done, especially when they refuse to update short-term supplementary and unemployment benefits next year. How many Conservative Members will benefit as a result of this clause? We shall use every occasion inside and outside Parliament to show how the Government are using their majority to aid their rich friends. That is our indictment, our accusation, against the Government.
§ Dr. Jeremy Bray (Motherwell, South)
The taxation of wealth is a problem about which hon. Members on both sides of the Committee become muddled. Conservative Members regard such taxation as an infringement of ancestral rights, and when it is questioned we hear from the Macmillans, Sainsburys, Aitkens and Ancrams of this country. Those hon. Members are loaded on to Select Committees discussing wealth tax, and the great barrage of claims for relief for the wealthiest families in the land is brought into play.
Opposition Members show an extraordinary naivety in attacking the arguments of the Conservative party. The problems of the taxation of wealth, and the avoidance of that taxation, are complicated and tangled. None of our constituents write to us about those problems, and we have no reason to consider them for any constituency interest. We are hopelessly naive and ill-informed, until something happens, such as the Labour Government in 1974 setting up a Select Committee to consider a wealth tax. I hope that a future Labour Government will revive the principle of the taxation of wealth.
I shall demonstrate the basis on which we propose a change in the structure of tax. The hon. Member for Colne Valley (Mr. Wainwright) made an interesting speech, but he is wrong to believe that the basis of change can be a tax on accessions. That tries to tax wealth only when it moves, which is the easiest method of taxation to avoid. The more elaborate the legislation to prevent avoidance, the greater the gains and the more complicated and difficult the system becomes. Change can be brought about only by taxing wealth where it rests. That was the principle of the wealth tax proposed in the 1970s, which went wrong because it was discussed only in terms of horizontal equity —equity between the holders of great wealth and those who enjoy high incomes. If it was unfair to tax people with high incomes when people with great wealth got away with paying little tax, there was a prima facie case for taxing the wealth. Conservative Members were prepared to consider a reconstruction of capital taxation on that basis. However, if one regards the purpose of taxing wealth not as horizontal equity but as vertical equity between those 1040 who have and those who have not, whether it be income or wealth, different sets of principles and approach are needed.
It is not enough to consider what will happen to the rates of tax either on wealth or on the movement of wealth. We must consider what we wish to do with the assets that that wealth represents, such as stately homes, private companies or forests. If we set up a system for the taxation of wealth that has exemptions for farmland or forestry, the value of those assets will be hopelessly inflated because they will be tax avoidance measures. Those who wish to make an honest living from farming or foresty would be unable to do so because ownership of such things would become a tax avoidance racket. We must ask on what basis we wish the private or public ownership of assets to be taxed. The Opposition believe in principle, although they have not had the courage to put it into practice, that Britain's assets — whether they be production assets, land, stately homes or our national heritage—should be for public enjoyment and benefit. That does not mean that it would be sensible for a Labour Government to eliminate the private ownership of wealth, but we should be realistic about the levels of wealth that it is reasonable to expect people to hold. It is reasonable not to knock the small garage owner or the owner of the sweetie shop. However, if we allow the man who has built up a business worth £50 million to believe that he has a God-given right to keep that money and not to share it with those who helped him to build up the business, that is plainly wrong.
After considering the use of the assets and the extent of the redistribution that we seek, we must ensure that we leave adequate provision to encourage the savings needed to finance the investment required in society and productive industry. That is not a problem, because in recent years the savings ratio has been high and is increasing. The vehicle by which it has increased has been the growth of pension schemes and investment trusts, so we now have a high level of personal savings that is adequate to fund the necessary investment.
I hope that my hon. Friends will be courageous in tackling the taxation of wealth, be prepared to have a go fundamentally and not to listen to the hogwash that we hear from the Conservative party about the economic arguments, and get on with the social and practical economic adjustments that must be made.
§ Mr. Campbell-Savours
My speech will be unashamedly emotional because I am angry about what the Government are doing in this clause. I had no intention of speaking in the debate until I heard the Prime Minister at Question Time today. In a disgraceful spectacle, which every British voter should have seen, she showed that she had no sensitivity about unemployment and that she does not understand that some British people are doing without. Her Government are spending this £50 million, which the people need to secure decent living standards.
Today the Prime Minister said that no Government had been able to define levels of poverty, but I must tell her and the members of her Cabinet that if they want to see poverty they should come to our constituencies, to our housing estates, where people live in deplorable and miserable conditions. It is about time that they left Whitehall and the House of Commons — many Conservative Back-Benchers could go with them —and went into the real outside world.
1041 During the past week, £450 million has been given back to the 3 per cent. in society who are most wealthy. That is a disgrace. This is the last but one measure in the Bill that once again legislates for that transfer back to the people who have in this society, to be paid for by the people who have not. The Government disgrace the Dispatch Box, Parliament and all the British people by bringing forward such legislation when they know that they have no mandate from the British people to give back that money in the way that they have.
§ Mr. James Hamilton (Motherwell, North)
Is my hon. Friend aware that just before the election a report on the population was prepared by the social working party in Strathclyde? It showed that one in five of the population of Strathclyde, which is the largest region in Scotland, and probably the largest region in the United Kingdom, lives in abject poverty, and that that figure was an increase of 35 per cent. since the Tories came into office in 1979. The Glasgow people feel as resentful about this as does my hon. Friend. I can understand his anger and frustration because there does not seem to be any hope of the Government doing anything to ease the poverty that prevails in many parts of the world.
§ Mr. Campbell-Savours
In every constituency of my right hon. and hon. Friends, and in yours Mr. Walker, there is great poverty, yet the Government believe that they have a mandate to hand back £400 million to the 3 per cent. income and wealth holders in our society.
Last week I raised a point of order asking that the Government, in the form of the Chancellor of the Exchequer, be given the right to come to the Dispatch Box to withdraw this Bill, which favours those who have and takes away from those who have not. For seven days I have waited for them to come forward. Even today, when the Prime Minister was at the Dispatch Box, there were calls from my hon. Friends for the withdrawal of the Bill. The Minister and his friends know that it is immoral and offends the dignity and peace of mind of respectable citizens. Tonight, once again, I ask the Government to withdraw the Bill. Our people who have nothing cannot afford to pay for it. There is an obligation on decent Government to make sure that they are not required to pay it.
§ The Minister of State, Treasury (Mr. Barney Hayhoe)
The hon. Member for Livingston (Mr. Cook) implied that he and his hon. Friends would be voting against the clause, but ranged somewhat wide of the detailed content of the clause itself. I make no complaint. He did so on the evening of 25 April when he made a similar speech on clause 63 of the previous Bill. He would be the first to acknowledge that much of what he said today, particularly in some of his more telling phrases, was what he said in his speech in April.
The clause is relatively modest and has attracted more than its fair share of the invective of envy and the old phrases of the class war from some Labour Members. It has also led to thoughtful comments by the hon. Member for Motherwell, South (Dr. Bray), at least in the earlier part of his speech, and to the hon. Member for Colne Valley (Mr. Wainwright) challenging the basis of the capital transfer tax and saying again what he has said on previous occasions—that his preference lies towards an 1042 inheritance tax. He was joined by my hon. Friend the Member for Northampton, North (Mr. Marlow), who commended that approach.
Perhaps it would be best if I were briefly to remind the Committee of the background of the clause. Last year's Finance Bill recast the capital transfer tax scales both for lifetime transfers and those on death. It provided that, unless Parliament otherwise determined, those scales should for the future be automatically increased in line with changes in the retail price index over the year ending the previous December. In other words, the Finance Act 1982 legislated for an automatic increase of the level and scales of this tax.
The Finance Bill 1983, introduced earlier this year, proposed in clause 53 rate bands similar to those for 1982 after indexation by reference to the change of the price levels over the year ended last December. The amounts for most bands were somewhat more than the rounding to the nearest £1,000 stipulated by section 91 of the Finance Act 1982. The extra rounding was mainly intended to provide a more sensible gradation.
The Opposition saw fit to oppose the modest extra rounding that was proposed and clause 63 was therefore dropped from the pre-election Finance Act. In introducing those provisions into this Finance Bill, we are carrying through, as has been acknowledged, our statements, before and during the election, that we would re-enact those portions of the earlier Finance Bill dropped because of the election and because of the insistence of the Opposition that they be dropped in order that the Act should go through.
Clause 8 reintroduces those provisions. It will take effect from the same day as clause 63 in the Act earlier this year, 15 March 1983. If the clause were not enacted, the indexation would take effect from 1 April. Thus, there is a fortnight's difference. When I come to refer to the cost, that will be taken into account in the overall assessments and estimates that I can give of the cost involved in this clause.
The capital taxes office has not finally settled tax liability on transfers made on or after 15 March and therefore there is no administrative difficulty. As to the effect of the changes, it is recognised throughout the Committee that the change from the old scales—those produced by indexation—to the new scales, set out in an appendix that has also been made available to Members, will leave no estate worse off.
The effect of the clause is broadly to maintain the burden of capital transfer tax at the same level in real terms as last year. I acknowledge that the rounding out in the increase in thresholds is a little more—
§ Mr. Hayhoe
I am dealing with the clauses before the Committee. Except for estates up to about £80,000, the burden of the capital transfer tax rates scale remains heavier, despite this measure, than—
§ Mr. Hayhoe
I understand why the hon. Gentleman wishes to intervene, but let me finish the point I am making. Except for estates up to about £80,000, the burden of capital transfer rates scale remains heavier after the enactment of this clause than when the tax was introduced by the Labour 1043 Government. The hon. Members for Livingston and for Walsall, North (Mr. Winnick) acknowledged that by their embarrassment in recognising that, when the party that they supported was in power, it was not pursuing the policies that those hon. Members would have wished. It is important to remember that.
Much of the passion and criticism of this clause has concentrated on the costs that are involved, and has been based on a gross overestimate of those costs. I believe that there has been a misunderstanding of the true position, because I do not for a moment think that the figures were quoted in the knowledge that they were wrong. The cost of the proposals in the clause this year amount not to £50 million, but to £5 million. Indexation is the result of the Finance Act 1982, but the cost of this measure will increase those costs over and above indexation by £5 million this year, £10 million next year, and £15 million for a full year.
§ Mr. Jack Straw (Blackburn)
Surely the Minister does not deny that when we debated the matter before the general election the then Financial Secretary gave figures for the total cost of these changes, including indexation, of £40 million this year, £50 million next year, and £60 million in subsequent years.
§ Mr. Hayhoe
The hon. Gentleman's intervention leads me to believe that perhaps some Opposition Members knew the truth about the cost and thus might—I hope inadvertently — have misled the Committee. We are debating clause 8. We are not debating the provision that was enacted in last year's Finance Act. The choice before the Committee in this debate is to accept the scales laid down in clause 8 or—
§ Mr. Hayhoe
It is not a play on words. If the clause is defeated, the effect would not be a saving of £50 million of tax revenue; it would be a saving of £5 million.
§ Mr. Cook
The Minister of State was unable to be here on Tuesday, but had he been here at the start of our proceedings he would have heard me raise a point of order of some substance and length, in which I referred to the Opposition's frustration in tabling amendments to the Finance Bill. I am pleased to see that the Economic Secretary recollects that. If it will assist the Minister of State, let me tell him that we would willingly and cheerfully have tabled an amendment to suspend indexation for this year. However, any such amendment would he nugatory, because it would have been ruled incompetent on the basis that it would have raised an additional tax charge.
We object to the £50 million for this year, for which the Government must take responsibility. In this clause, the Government relieve themselves of indexation provisions in subsection (1) so that they may go beyond them in subsection (2). Elemental forces have not driven them to give away those millions in indexation. They could have chosen to stop at subsection (1), in which case the £50 million would not have been given away.
§ Mr. Hayhoe
One could be hypothetical and talk about "might have beens". However, we are in Committee, 1044 taking decisions on a Bill. Our choice is either to accept this clause, which I hope the Committee will do, or to reject it. If the clause is rejected, the cost will be £5 million, not £50 million. However Opposition Members seek to camouflage the true position, it remains as I have stated.
I want to make a further comment, because of what my hon. Friend the Member for Northampton, North said about the deep divide that is apparent in the Committee. The Opposition talk about the Government giving away, when in fact we are taking less. We are talking about the amount of tax that will be charged. The division between us—and I acknowledge that it is a deep and important division — arises because the Opposition want to tax more, and, indeed, not just on capital taxes. The record of Labour Governments is to increase taxation whereas, broadly speaking, Conservative Governments decrease taxation.
§ Mr. Hayhoe
Of course, we can argue about some of the details, but it is clear that Labour Members believe that Governments give away when they reduce taxation, whereas Conservative Members believe that we take less. That demonstrates the great divide between us. Nevertheless, I hope that the Committee will approve the clause.
§ Mr. Robin Cook
I want to say a few words to the hon. Member for Northampton, North (Mr. Marlow), who is not in the Chamber at present. I shall give him some time to return here, because I am quite sure that having intervened in the debate, he does not want to miss the wind-up speeches. I therefore await his return.
Meanwhile, I shall comment on what the Minister has just said. I do not know which Conservative Government he has in mind, but it is certainly not true that the last Conservative Government reduced the burden of taxation. Time after time in the House we have debated the fact that. without any shadow of doubt, the last Conservative Government increased the burden of taxation on income. Tonight we are debating the fact that, side by side with that increased burden on income, there was a reduction in the tax charge on capital, and the combination of a reduction in the tax on capital and an increase in tax on income has to be the result of the clear, deliberate priorities of this Government.
I say to the Minister, with a heavy heart, that it is not true that Labour Governments always increase taxation, particularly capital taxation. I remind the Minister of the figures that were given by the Financial Secretary at the close of our debate at midnight on 25 April. He said that in 1970–71 the revenue from estate duty was £1,645 million, that in 1975 it was £1,026 million, and that by 1979 the revenue from CTT had fallen to £638 million. This year it will be £540 million. I do not make a partisan point — [Interruption.] I regret that Conservative Members are incapable of seeing the case for looking at the trend, and are blinded by the partisan points that they constantly wish to score.
Over that 15-year period there has been a steady reduction in revenue from tax on capital. During that time the revenue has fallen from £1,600 million in 1970 to £540 million this year, in cash terms. In other words, the burden of tax on capital has fallen within 15 years to one third of its former level. That is the extent to which capital and 1045 wealth are now failing to meet their full responsibility to contribute to the legitimate necessities of the state to maintain public expenditure. It has happened at the very same time—again I do not make a partisan point—when the tax on income has increased throughout that period, under all three Administrations that were in power.
To be candid, I find it offensive, as does my hon. Friend the Member for Workington (Mr. Campbell-Savours) and, I suspect, although I did not detect it in the academic dissertation that he made to the Committee, my hon. Friend the Member for Motherwell, South (Dr. Bray), that at the very time that tax on income is rising, tax on capital should be falling.
§ Mr. Winnick
The Minister accused Labour Members of always wanting to increase taxes. Is it not appropriate to remind the Minister that it was his Government who subjected the unemployed to double taxation, which will continue until November? That is the result of unemployment benefit being taxed since last year and the fact that the 5 per cent. abatement has not been restored and will not be restored until the end of the year. Surely Conservative Members are the last people to give us lectures about taxation.
§ Mr. Cook
I recall the Minister vigorously refusing in our debates in 1982 to repay the 5 per cent. abatement. As we said time and again then, if a category of society other than the unemployed were made subject to the double jeopardy of double taxation, Conservative Members would rise in revolt and call upon their Government to remedy the iniquity of it. My hon. Friend anticipates me because the parallel to the treatment of the wealthy that we see in this clause is the treatment of the poor.
§ Mr. Campbell-Savours
My hon. Friend commented on the reducing tax taken under successive Governments, including Labour Governments. Surely he will ensure that the record is correct. Under the change from death duties to capital transfer tax, the new rules concerning spouses were the greatest contributor to tax reduction and it was not our intention to reduce the liability that fell on the better-off in society.
§ Mr. Cook
I agree entirely. The previous Labour Government had no intention to reduce the yield from taxation on capital. Conservative Members must take responsibility for pressing for the many concessions from a Government who had no majority with which to resist them, and which resulted in a decline in the yield.
§ Mr. Alan Howarth (Stratford-on-Avon)
The hon. Gentleman expresses concern for the unemployed but does he not recognise that if we destroy capital we destroy the seed corn from which the jobs of the future will grow?
§ Mr. Cook
There might have been some force in that point were it not that the decline in the revenue from tax on capital also coincides with a historic period in which there has been a positive stampede from investment in industry by the personal sector and the fact that the hole in investment created by that is being filled by the institutions, which has nothing to do with the tax that we are discussing in the clause.
The hon. Member for Northampton, North has not returned to the Chamber, which I regret since he chose to make an intervention. In his absence I regret that I shall 1046 have to say some unkind things about him. I must warn him that he should stop saying nasty things about Victorian values if he wants to graduate from the Back Bench to the Treasury Bench. His observations today that it is the Opposition that effulge Victorian values will not go down well with the Prime Minister.
It is not credible to argue that if we maintain indexation rather than give indexation plus 2 per cent. to those who hold estates of £60,000 or more we shall destroy the incentive to work. If the hon. Gentleman is seriously concerned about the incentive to work, the people he should be expressing concern and anxiety about are those struggling on lower than average earnings who find that they are subject to a marginal tax on every pound earned of 39 per cent. to 30 per cent. standard and 9 per cent. national insurance contributions. If they have a means-tested benefit they then have a marginal tax rate in excess of that 39 per cent. Those are the people who are having to pay for the concessions that we are giving to the very rich in this clause and those are the people who are subject to a disincentive to work.
The hon. Member for Northampton, North has at long last returned to the Committee. If he were concerned about disincentives, those are the people about whom he should be addressing the Committee with passion. Since it was not those, one is driven to the conclusion that all the persiflage about incentives are nothing other than a cover for the class prejudice of Conservative Members and the people to whom they wish to give tax relief.
The Minister, in trying to exculpate himself from the £50 million, used weasel words in his reply. As a Minister who belongs to the Treasury, he must accept his responsibility for the clause that he has put before the Committee. That clause has the effect of conceding £50 million to the very rich. If it were the view that the Treasury could not afford that £50 million it was open to it to do the very thing that it did to income tax payers in 1981, and that is to suspend indexation for this year. If it could do that for the generality of income tax payers in 1981 in a way that put a particularly grievous burden on the low income tax payer, it could have done it for the very rich this year.
Therefore, our conclusion must be that it is the Treasury's judgment that it can afford and find the £50 million to finance the concessions in clause 8. The Committee must ask how it is that it can find £50 million to finance those concessions. How is it that it can find £50 million—to use the Minister's own words—to take less from the very rich when it has admitted within the past week that it cannot afford to maintain the present level of unemployment benefit or to maintain the present expenditure of the National Health Service?
Those are priorities that I find provide a revealing insight into the prejudices and values of Conservative Members. They are values that I completely reject and that every Labour Member will wish to reject. For that reason we shall vote against the clause.
§ Question put, That the clause stand part of the Bill:—
§ The Committee divided: Ayes 211; Noes 108.1049
|Division No. 22]||[5.47 pm|
|Adley, Robert||Arnold, Tom|
|Alexander, Richard||Ashby, David|
|Aspinwall, Jack||Harris, David|
|Atkins, Rt Hon H. (S'thorne)||Hayhoe, Barney|
|Atkins Robert (South Ribble)||Hayward, Robert|
|Atkinson, David (B'm'th E)||Heathcoat-Amory, David|
|Baker, Nicholas (N Dorset)||Heddle, John|
|Baldry, Anthony||Hickmet, Richard|
|Banks, Robert (Harrogate)||Hind, Kenneth|
|Batiste, Spencer||Hirst, Michael|
|Bellingham, Henry||Hogg, Hon Douglas (Gr'th'm)|
|Bennett, Sir Frederic (T'bay)||Holland, Sir Philip (Gedling)|
|Bevan, David Gilroy||Holt, Richard|
|Biggs-Davison, Sir John||Howard, Michael|
|Blackburn, John||Howarth, Alan (Stratf'd-on-A)|
|Blaker, Rt Hon Peter||Howarth, Gerald (Cannock)|
|Body, Richard||Howell, Rt Hon D. (G'ldford)|
|Boscawen, Hon Robert||Hunt, John (Ravensbourne)|
|Bottomley, Peter||Jackson, Robert|
|Braine, Sir Bernard||Jessel, Toby|
|Brandon-Bravo, Martin||Jones, Gwilym (Cardiff N)|
|Bright, Graham||Jones, Robert (W Herts)|
|Brinton, Tim||Jopling, Rt Hon Michael|
|Brown, M. (Brigg & Cl'thpes)||Key, Robert|
|Bruinvels, Peter||Knight, Gregory (Derby N)|
|Budgen, Nick||Knowles, Michael|
|Burt, Alistair||Latham, Michael|
|Butterfill, John||Lawler, Geoffrey|
|Carlisle, John (N Luton)||Lawrence, Ivan|
|Carlisle, Kenneth (Lincoln)||Leigh, Edward (Gainsbor'gh)|
|Carttiss, Michael||Lennox-Boyd, Hon Mark|
|Chope, Christopher||Lester, Jim|
|Clark, Dr Michael (Rochford)||Lewis, Sir Kenneth (Stamf'd)|
|Clarke Kenneth (Rushcliffe)||Lightbown, David|
|Colvin, Michael||Lilley, Peter|
|Conway, Derek||Lloyd, Ian (Havant)|
|Coombs, Simon||Lord, Michael|
|Cope, John||Luce, Richard|
|Couchman, James||Lyell, Nicholas|
|Cranborne, Viscount||McCrindle, Robert|
|Critchley, Julian||McCurley, Mrs Anna|
|Currie, Mrs Edwina||Macfarlane, Neil|
|Dorrell, Stephen||MacGregor, John|
|Douglas-Hamilton, Lord J.||MacKay, Andrew (Berkshire)|
|Dover, Denshore||Macmillan, Rt Hon M.|
|Dunn, Robert||Major, John|
|Dykes, Hugh||Malins, Humfrey|
|Eggar, Tim||Malone, Gerald|
|Emery, Sir Peter||Maples, John|
|Evennett, David||Marlow, Antony|
|Fallon, Michael||Marshall, Michael (Arundel)|
|Favell, Anthony||Mates, Michael|
|Fenner, Mrs Peggy||Mather, Carol|
|Finsberg, Geoffrey||Maude, Francis|
|Fookes, Miss Janet||Maxwell-Hyslop, Robin|
|Forman, Nigel||Mellor, David|
|Forsyth, Michael (Stirling)||Meyer, Sir Anthony|
|Forth, Eric||Miller, Hal (B'grove)|
|Fowler, Rt Hon Norman||Mills, Sir Peter (West Devon)|
|Franks, Cecil||Moate, Roger|
|Fraser, Peter (Angus East)||Moore, John|
|Freeman, Roger||Morris, M. (N'hampton, S)|
|Fry, Peter||Moynihan, Hon C.|
|Gale, Roger||Murphy, Christopher|
|Galley, Roy||Needham, Richard|
|Gardiner, George (Reigate)||Nelson, Anthony|
|Gardner, Sir Edward (Fylde)||Neubert, Michael|
|Garel-Jones, Tristan||Newton, Tony|
|Glyn, Dr Alan||Nicholls, Patrick|
|Goodlad, Alastair||Normanton, Tom|
|Gorst, John||Norris, Steven|
|Gow, Ian||Ottaway, Richard|
|Greenway, Harry||Page, John (Harrow W)|
|Gregory, Conal||Page, Richard (Herts SW)|
|Griffiths, E, (B'y St Edm'ds)||Parris, Matthew|
|Griffiths, Peter (Portsm'th N)||Patten, John (Oxford)|
|Ground, Patrick||Pawsey, James|
|Grylls, Michael||Peacock, Mrs Elizabeth|
|Hamilton, Hon A. (Epsom)||Pink, R. Bonner|
|Hamilton, Neil (Tatton)||Prentice, Rt Hon Reg|
|Hanley, Jeremy||Price, Sir David|
|Hargreaves, Kenneth||Proctor, K. Harvey|
|Raffan, Keith||Terlezki, Stefan|
|Rhodes James, Robert||Thompson, Donald (Calder V)|
|Rhys Williams, Sir Brandon||Thorne, Neil (Ilford S)|
|Ridsdale, Sir Julian||Thurnham, Peter|
|Robinson, Mark (N'port W)||Tracey, Richard|
|Roe, Mrs Marion||Trippier, David|
|Rossi, Hugh||Viggers, Peter|
|Rost, Peter||Walden, George|
|Rumbold, Mrs Angela||Waller, Gary|
|Ryder, Richard||Wardle, C. (Bexhill)|
|Sainsbury, Hon Timothy||Warren, Kenneth|
|Sayeed, Jonathan||Watts, John|
|Shaw, Sir Michael (Scarb')||Wells, Bowen (Hertford)|
|Shelton, William (Streatham)||Wheeler, John|
|Shepherd, Colin (Hereford)||Wilkinson, John|
|Sims, Roger||Winterton, Mrs Ann|
|Soames, Hon Nicholas||Winterton, Nicholas|
|Speed, Keith||Wood, Timothy|
|Speller, Tony||Yeo, Tim|
|Spicer, Jim (W Dorset)||Young, Sir George (Acton)|
|Stanbrook, Ivor||Younger, Rt Hon George|
|Stevens, Lewis (Nuneaton)||Tellers for the Ayes:|
|Stradling Thomas, J.||Mr. Ian Lang and|
|Tapsell, Peter||Mr. David Hunt.|
|Adams, Allen (Paisley N)||Kaufman, Rt Hon Gerald|
|Atkinson, N. (Tottenham)||Leighton, Ronald|
|Barron, Kevin||Lewis, Terence (Worsley)|
|Beckett, Mrs Margaret||Lofthouse, Geoffrey|
|Bell, Stuart||Loyden, Edward|
|Bennett, A. (Dent'n & Red'sh)||McDonald, Dr Oonagh|
|Bermingham, Gerald||McKay, Allen (Penistone)|
|Bidwell, Sydney||McKelvey, William|
|Boothroyd, Miss Betty||McNamara, Kevin|
|Boyes, Roland||Madden, Max|
|Bray, Dr Jeremy||Marek, Dr John|
|Brown, Gordon (D'f'mline E)||Mason, Rt Hon Roy|
|Brown, R. (N'c'tle-u-Tyne N)||Meacher, Michael|
|Caborn, Richard||Meadowcroft, Michael|
|Callaghan, Rt Hon J.||Michie, William|
|Callaghan, Jim (Heyw'd & M)||Millan, Rt Hon Bruce|
|Campbell-Savours, Dale||Miller, Dr M. S. (E Kilbride)|
|Cohen, Harry||Molyneaux, James|
|Cook, Frank (Stockton North)||Morris, Rt Hon A. (W'shawe)|
|Cook, Robin F. (Livingston)||Nellist, David|
|Cowans, Harry||O'Brien, William|
|Cox, Thomas (Tooting)||Orme, Rt Hon Stanley|
|Crowther, Stan||Parry Robert|
|Cunliffe, Lawrence||Patchett, Terry|
|Davies, Rt Hon Denzil (L'ili)||Pavitt, Laurie|
|Davies, Ronald (Caerphilly)||Powell, Rt Hon J. E. (S Down)|
|Davis, Terry (B'ham, H'ge H'l)||Powell, Raymond (Ogmore)|
|Deakins, Eric||Prescott, John|
|Dixon, Donald||Radice, Giles|
|Dormand, Jack||Richardson, Ms Jo|
|Dubs, Alfred||Robertson, George|
|Dunwoody, Hon Mrs G.||Rogers, Allan|
|Eastham, Ken||Ross, Ernest (Dundee W)|
|Evans, Ioan (Cynon Valley)||Sheerman, Barry|
|Fatchett, Derek||Sheldon, Rt Hon R.|
|Field, Frank (Birkenhead)||Shore, Rt Hon Peter|
|Fisher, Mark||Short, Ms Clare (Ladywood)|
|Foot, Rt Hon Michael||Silkin, Rt Hon J.|
|Foster, Derek||Skinner, Dennis|
|Freud, Clement||Smith, C.(Isl'ton S & F'bury)|
|Garrett, W. E.||Snape, Peter|
|Godman, Dr Norman||Soley, Clive|
|Gould, Bryan||Spearing, Nigel|
|Hamilton, James (M'well N)||Stewart, Rt Hon D. (W Isles)|
|Hardy, Peter||Straw, Jack|
|Harrison, Rt Hon Walter||Thompson, J. (Wansbeck)|
|Hattersley, Rt Hon Roy||Tinn, James|
|Haynes, Frank||Wainwright, R.|
|Heffer, Eric S.||Wallace, James|
|Hoyle, Douglas||Wardell, Gareth (Gower)|
|Hughes, Sean (Knowsley S)||Wareing, Robert|
|Hughes, Simon (Southwark)||Welsh, Michael|
|Williams, Rt Hon A.|
|Winnick, David||Tellers for the Noes:|
|Woodall, Alec||Mr. Austin Mitchell and|
|Young, David (Bolton SE)||Mr. Hugh McCartney.|
§ Question accordingly agreed to.
§ Clause 8 ordered to stand part of the Bill.