HC Deb 11 May 1983 vol 42 cc839-44
Mr. Robert Sheldon

I beg to move, as a manuscript amendment, in page 8, line 13, leave out '£14,600' and insert '£12,800'.

Mr. Deputy Speaker (Mr. Bernard Weatherill)

With this, it will be convenient to take the other manuscript amendments:

  • In page 8, line 13, leave out '£14,600' and insert `£12,800'.
  • In page 8, line 16, leave out '£7,100' and insert `£6,250'.
  • In page 8, line 19, leave out '£14,600' and insert `£12,800'.
  • In page 8, line 20, leave out '£2,600' and insert '£2,300'.
  • In page 8, line 21, leave out '£4,600' and insert '£4,000'.
  • In page 8, line 22, leave out '£7,100' and insert '£6,200'.
  • In page 8, line 23, leave out '£7,100' and insert `£6,200'.

In page 8, line 24, at end insert— '(1A) Nothing in this section requires any change to be made in the amounts deductible or repayable under section 204 of the Taxes Act (pay as you earn) before 31st August 1983. (1B) Notwithstanding anything in the preceding provisions of this section, the amounts deductible or repayable under section 204 of the Taxes Act on and after 11th May 1983 and before 31st August 1983 may be such as would be requisite to give effect to the provisions as to higher rate tax and the investment income surcharge contained in a Resolution passed by the House of Commons on 21st March 1983.'

Mr. Sheldon

These amendments would increase revenue by about £300 million which could be used in many beneficial ways. The money will be taken from those who have been well treated in the past four Budgets. It had been intended to continue that treatment in this Budget. The Opposition are saying, through these amendments, that those advantages are coming to an end and that those people will now pay their fair share of tax.

My hon. Friend the Member for Edinburgh, Central (Mr. Cook) reminded us in Committee that those people are earning in excess of £17,000 a year, when one takes personal allowances into account, up to and beyond the highest income tax band which is in excess of £33,000 a year, plus personal allowances. We are therefore dealing with people who earn substantial incomes and saying that they should not be treated so favourably, bearing in mind the consideration that they have received in previous Finance Bills.

The concession that such people were given on capital transfer tax of about another £50 million, the concession on investment income surcharge of about £25 million and the concession of £10 million on capital gains tax amount to about £300 million. Those people represent less than 5 per cent. of the population. They have obtained tax advantages under this Government and should be compared with the 95 per cent. who have been disadvantaged in several ways given the proportion of income that they must pay in tax. Tables that express that have been a constant feature of the Official Report for the past few months. They show how people earning three quarters and one and a half times average earnings, for example, are faring. Thus we have been able to see how much the well-off have benefited and how badly the less-well-off have been treated.

These measures are not what we should like them to be by a long way, but they are those that are available to us now to put matters right. They are not vindictive which, the Chief Secretary to the Treasury has so frequently said. It is not vindictive to say that the times of ever reducing taxation for the well-to-do and ever increasing taxation of the less-well-off are coming to an end. These amendments are a signal that that time has now come.

Mr. Brittan

In moving his manuscript amendments, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) has given a wholly distorted picture of the Budget's impact. He has expressed his views without attempting to mention the fact that the Budget would have increased by 14 per cent. the tax threshold at the basic rate. To fail to mention that and to talk only about the redress of the comparative burden is a gross distortion. This amendment will hold the threshold at which people begin to pay the higher rate of tax and the investment income surcharge threshold to the 1982–83 levels rather than increase them by the 14 per cent. that we proposed to increase all the levels. It is, therefore, quite right to say that what the right hon. Gentleman has proposed is mean, vindictive, petty and entirely in accordance with the approach that has been adopted in the discussions about what parts of the Bill should go through. The only reason for accepting what the right hon. Gentleman proposes is the parliamentary circumstances which make it necessary to get the Bill through. However, for reasons that I shall explain, the amendment is not only mean and petty; it is nugatory.

7.30 pm

I undertake that as soon as the Conservatives are returned to office in June we shall introduce a new Finance Bill to reinstate the provisions that we advanced for this clause and others with which I shall deal later. The effect on the taxpayer will be as though the amendment had never been carried, because not only will it have no effect after a new Finance Bill is introduced but it will have no effect in the interim.

Although the amendment is irrelevant, it will be highly instructive to hon. Members, especially to Labour Members, and their constituents if I point out what it would entail. If the amendment had a permanent impact, it would mean that people would be liable to higher rates of tax once their taxable income was more than £12,800 instead of the £14,600 that we propose. About 300,000 taxpayers will be pulled into higher rates of tax and to the marginal rate of 40 per cent. Many others higher up the income scale will be pulled into even higher marginal rates.

A cursory glance at the figures shows that we are not talking about the rich people whom Labour Members deride. With a threshold of £12,800, and assuming no relief other than the basic personal allowance, a two-earner couple would pay a higher rate of tax when their joint income was less than twice the average male earnings. A single person would pay higher rate tax at less than one and two thirds average male earnings. We are talking not about the millionaires and billionaires of the Opposition's imagination, but mostly about middle managers and professional people making their way in business—those who are essential to ensuring growth and the creation of wealth, prosperity and jobs.

Mr. Cook

The Chief Secretary will not wish to mislead the House or the country about the impact of the measures. He is fully aware, because he has seen the figures in Hansard and heard the figures that we gave in Committee, that the effect of the amendments will be to extend the higher rates to 4 per cent. of all taxpayers as opposed to the 3 per cent. to whom it would have been confined had the clause as originally drafted been passed. We are talking about the 4 per cent. of taxpayers who are well paid and not the other 96 per cent. of the taxpaying public.

Mr. Brittan

The hon. Gentleman's remarks do not contradict what I said. I stated the figure precisely. Anyone who has heard the figures for actual income and for the relationship with average male earnings knows that I am right to say that middle managers and professional people will be adversely affected by the mean-mindedness of the Opposition. The nervousness with which the hon. Gentleman responded to the point shows that Labour Members are already beginning to doubt their political wisdom in insisting on the amendments.

There is no question of special treatment for the rich, as the right hon. Member for Ashton-under-Lyne had the effrontery to suggest. Our proposal was for a uniform 14 per cent. increase across the board. That is what will happen to personal allowances, a provision that the Opposition are wise enough not to challenge. It is what we proposed for higher rate taxpayers, and there is no question of us wishing to treat them more favourably than other taxpayers. Our sense of fairness is such that there is equally no good reason to treat them less favourably.

What about the point at which people are liable to the 15 per cent. investment income surcharge? The effect of the amendment is to leave that at £6,250 compared with our proposal of an increase to £7,100. No one should pretend, with those figures, that we are talking about preventing the rich from enjoying the huge rewards of unearned income. If the amendment were to take effect, 45,000 more people would be liable to investment income surcharge, many of whom will be pensioners and widowers who have worked hard all their lives and invested prudently for their retirement. The Opposition seek to extract a penalty from them to satisfy their pique in the last few days of this Parliament.

All the groups that are liable under the proposals to the higher rates of tax should take note of what a Labour Government would mean for them if they had the power to do what they wish. They should also take note of another interesting point that might otherwise escape their attention. Although, for the reasons that I have explained, it is wrong to provide for increases of less than 14 per cent., it would have been easier to understand the Opposition's attitude if they had proposed that the high rate thresholds should be indexed, or increased by about 5.4 per cent., which was the rate of inflation in the year up to December 1982, and which is the relevant figure for the so-called Rooker-Wise increases. That compares with the 14 per cent. that we gave on the basic allowances. The Opposition could have argued that that was a natural and neutral proposal, but their pettiness and mean-mindedness is such that they will not even concede that. They want an increase in the burden of tax on middle management and others—

Mr. Straw

rose—

Mr. Brittan

The hon. Gentleman must contain himself. I hope that he can produce a better point than did the hon. Member for Edinburgh, Central (Mr. Cook). It is fantastic that Labour Members are not prepared to allow ordinary indexation, let alone an increase of 14 per cent.

Mr. Straw

Does the Chief Secretary accept that since the beginning of the Government the burden of high rates ha, more than kept pace with inflation? It is much lower in real terms than it was in 1978–79, and, despite the cancellation of the increases in this Budget, those on higher incomes are still doing better than they were in 1978–79, whereas those on lower incomes are faring much worse.

Mr. Brittan

The burden on those with higher incomes in 1978–79 was crippling initiative and driving people away from Britain. I make no apology for the actions of my right hon. and learned Friend the Chancellor in his first Budget. The hon. Member for Blackburn (Mr. Straw) might wish to bear in mind that in 1981, when fiscal prudence required us to reduce the public sector borrowing requirement, to increase taxes and not to increase allowances, all taxpayers were treated in the same way. There was no increase in allowances at any level. The proposal in this Budget was to do exactly the same in a year in which we could improve the position of taxpayers.

I assure taxpayers that under the arrangements already made their employers will apply the new codings resulting from the Budget, which allow for the 14 per cent. increase. By sheer coincidence, those new codings come into effect today, and they will continue to apply until August. If a Labour Government were elected in the meantime and the provisions in this amendment were to stand, arrangements would no doubt be made for the necessary amount to be clawed back from the taxpayer. However, a Conservative Government are pledged to reinstate at the earliest opportunity the provisions that we originally made. The effect will be that the present codings will continue beyond August, and for the taxpayer this amendment will be irrelevant and will not harm him.

This petty, nasty amendment will be relegated to a minor footnote of fiscal history showing only the spiteful meanness exerted by the Labour Party in the dying days of this Parliament.

Mr. Robert Sheldon

The Chief Secretary said that he will reinstate this proposal in another Finance Bill. It is a pity that he did not make this clear earlier because we could have dropped this Finance Bill and dealt with all those matters in another Bill. However, he seemed reluctant to do that when he realised that this Parliament was coming to an end. That might have been the sensible way to proceed, but I note his second thoughts on the matter.

As to the investment income surcharge, we should remember that the £7,100 mentioned in the clause presupposes a capital sum of about £70,000. We are talking not about people of modest means, but about people of reasonable means. They are affluent enough to pay the amounts of tax that we believe are right, bearing in mind that they may have other incomes.

The right hon. and learned Gentleman said that at the very least we should have indexed on the Rooker-Wise principle. He has failed to take account of what happened as a result of the previous four Finance Bills. We are merely saying that in the Government's fifth Finance Bill the same sort of assistance should not be provided. The Minister talked about removing the burden of the higher rates of tax, which he claimed were crippling industry. Surely industry has been crippled over the past four years. The withdrawal of the higher rates of tax seems to have done no good at all. If there is the relationship that the right hon. and learned Gentleman claims, it must be sinister and evil and capable of producing great dangers for our economy.

We are concerned about the way in which the tax concessions have been made as a matter of high principle. We know that the Government have carefully nursed and cosseted their friends. We argue that the burden of taxation must be decided on principles that are much fairer and more sensible than those that have been adopted by the Government. More thought must be given to the future growth of the economy than is reflected in the Government's principles. The principles that we have introduced, which have been operated in the past and which have been in abeyance over the past four years, will have an influence in the Finance Bills that are introduced by the next Labour Government.

Amendment agreed to.

Manuscript amendments made: In page 8, line 16, clause 12, leave out `£7,100' and insert `£6,250'.

In page 8, line 19, leave out '£14,600' and insert `£12,800'.

In page 8, line 20, leave out `£2,600' and insert `£2,300'.

In page 8, line 21, leave out `£4,600' and insert `£4,000'.

In page 8, line 22, leave out `£7,100' and insert `£6,200'.

In page 8, line 23, leave out `£7,100' and insert `£6,200'.

In page 8, line 24, at end insert— '(1A) Nothing in this section requires any change to be made in the amounts deductible or repayable under section 204 of the Taxes Act (pay as you earn) before 31st August 1983. (1B) Notwithstanding anything in the preceding provisions of this section, the amounts deductible or repayable under section 204 of the Taxes Act on and after 11th May 1983 and before 31st August 1983 may be such as would be requisite to give effect to the provisions as to higher rate tax and the investment income surcharge contained in a Resolution passed by the House of Commons on 21st March 1983.'—[Mr. Robert Sheldon.]

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