HC Deb 14 June 1984 vol 61 cc1063-4
14. Mr. Pike

asked the Chancellor of the Exchequer what increase would be needed in the personal allowances to reduce the percentage of direct taxation paid by the average wage earner to the level paid in 1979.

Mr. Ian Stewart

For 1984–85 the percentage of average earnings taken in income tax is significantly less than in 1978–79.

Mr. Pike

The Minister tends to forget that, with national insurance, as he said in a reply to me some weeks ago, the total direct taxation is higher than in 1979. Remembering that the Conservative party at the 1979 election said that under the Labour Government taxation paid by the average person was too high, when do the Government intend to take action to reduce the tax paid by average wage earners and by those on lower than average wages? At present it is only the highest paid earners who benefit. I hope that the Minister will not give an answer about the level of wages, but will deal with the question on tax.

Mr. Stewart

The national insurance contribution is not a tax. It is a contribution towards benefits, the overall costs of which have been rising. I should have thought that the hon. Gentleman would welcome the fact that there has been a substantial rise in earnings under this Government. Average take-home pay since 1979 has risen by about 8 per cent. The average earnings taken in income tax has fallen for both married and single taxpayers during that period.

Mr. Bill Walker

Does my hon. Friend agree that one can obtain benefits and personal allowances only if one is paying tax, and that the individuals who will be coming to pick raspberries in my constituency shortly are not in the habit of paying tax because they are schoolchildren, yet they will have one third deducted from their earnings for tax purposes under an edict from the Inland Revenue? Is this not nonsense, and does it not put at risk the picking of the berries?

Mr. Stewart

I doubt whether anything will put at risk the picking of berries in my hon. Friend's constituency. It is clearly important that we should not have tax rates biting so low down the scale. Over the past three years the Government have raised the starting threshold for income tax in each Budget. I am sure that that is the best way to deal with the problem.