§ 3. Mr. Andrew F. Bennett
asked the Chancellor of the Exchequer what recent representations he has received about the higher marginal rates of tax.
§ The Financial Secretary to the Treasury (Mr. John Moore)
Most recent Budget representations have given priority to increases in thresholds, but a number have suggested reductions in the basic or higher rates of income tax.
§ Mr. Bennett
Will the Financial Secretary confirm that someone who earns £80 a week has a marginal rate of taxation which is effectively far higher than the marginal rate of taxation for someone earning £800 a week? Is that by design, or by accident?
§ Mr. Moore
I am sure the hon. Gentleman knows that one has to distinguish between the impact of increases in benefits, which have been increased generously in real terms in the past four or five years, and the consequence of that on the marginal rate as opposed to the failure commensurately to increase tax thresholds. It is that confluence which creates the marginal problem. It is quite different from the impact of the burden of tax on the poor as opposed to the impact of marginal taxes as a disincentive.
§ Mr. Forman
Will my hon. Friend strongly support the case for raising tax thresholds rather than cutting the rates of income tax? Does he recognise that the most cost-effective way of helping those upon whom the incidence of marginal rates bears hardest—the working poor with families—would be to raise child benefit by a generous amount?
§ Mr. Moore
I recognise my hon. Friend's point in terms of the role of child benefit, but in the past few years a consequence of the generous increases in benefits has been to add to the problems of unemployment and the poverty trap. From a tax point of view, the help can best be given by raising the thresholds as resources permit.
§ Mr. Wainwright
Does the Financial Secretary agree that, whatever the great advantages of raising the tax thresholds may be, it is an extremely cost-ineffective way of rescuing people from the poverty trap? Does he agree also that even if his right hon. Friend were to devote some £4 billion next year to raising the tax thresholds that would be likely to remove only about one in ten from the poverty trap?
§ Mr. Moore
The hon. Gentleman is right, in that it is extremely expensive to remove the basic problem created 1006 by the poverty trap. However, one should not focus on the relative size without in any way denying the difficulties within the poverty trap. According to the 1983–84 forecast of the 5.75 million working families with children in Britain, approximately 161,000 families or 2.8 per cent. of the working family population are in the poverty trap.
§ 4. Mr. Winnick
asked the Chancellor of the Exchequer what representations he has received over direct and indirect taxation measures for his forthcoming Budget.
§ The Chief Secretary to the Treasury (Mr. Peter Rees)
My right hon. Friend has received numerous representations about most aspects of both direct and indirect taxation.
§ Mr. Winnick
When the Chancellor is working out his Budget, will he bear in mind that Treasury figures show that only those who earn more than £29,000 a year pay less tax than they did in 1979? Does that not give a lie to all those Tory promises about cutting taxes for everyone? Why should pensioners on small incomes continue to have their housing benefit reduced, even under the revised scheme, while those who earn as much as £60,000 a year are receiving substantial tax reductions?
§ Mr. Rees
I am sure that my right hon. Friend has listened with attention to the hon. Gentleman's representations, but my right hon. Friend will also recall with some satisfaction that the Tory Government have brought down the marginal rates of 98 and 83 per cent., which I regarded as confiscatory, and have increased thresholds in real terms by 6 per cent.
§ Mr. Tim Smith
Will my right hon. and learned Friend suggest to the Chancellor that we should take steps in the forthcoming Budget to move towards revenue neutral treatment of savings by reducing stamp duty on the purchase of shares, while reducing tax relief on life assurance premiums?
§ Mr. Rooker
If the Government's record is good, why is it that at the end of five years of this Administration full-time workers who happen to be on the bottom end of the earnings scale are worse off in real terms than they were when the Administration took office?