HC Deb 28 November 1985 vol 87 cc1001-2
4. Mr. Michael Forsyth

asked the Chancellor of the Exchequer what information he has as to how the level of income tax threshold for the single man in the United Kingdom compares with equivalent thresholds in other developed countries.

Mr. John Moore

The United Kingdom tax threshold for a single person is close to the average for European Community and OECD countries as a whole.

Mr. Forsyth

I am grateful to my hon. Friend for his answer, but is it not a fact that in the United Kingdom people start to pay tax at a very much higher basic rate than is the case in other countries, such as the United States, where they begin at 11 per cent.? Does not the combination of high basic rates of tax and means-tested benefits result in a very high effective rate of tax on the low-paid, which results in increased unemployment? Will my hon. Friends therefore concentrate on cutting rates, rather than on raising thresholds, to deal with this problem?

Mr. Moore

My hon. Friend is right to draw the attention of the House to the fact that thresholds are only part of the story. Relative earnings are a key factor. My hon. Friend is also right to draw our attention to the starting rate. Hon. Members will be interested to know that, among our main competitor countries, the United States and Japan have a starting rate of 11 per cent. and France starts at 10 per cent., while our starting rate is 30 per cent. That shows that there is a clear difference in this area. That is unlike our average position on thresholds, where we are the second highest in the OECD.

Mr. Ashley

Can the hon. Gentleman assure the House that he will not be preoccupied only with single men when he considers tax thresholds, and that he will also take account of the problems of women and married couples? They have grave problems as well, especially those who are on low pay, and therefore need more help than those in the upper brackets.

Mr. Moore

I note what the right hon. Gentleman says. He will be aware that I was asked specifically about single men. I know that he will be delighted with the Government's record over the past three years of raising the tax thresholds by 20 per cent.

Sir William Clark

Does my hon. Friend agree that single men start paying tax at 30 per cent. as soon as they earn £42.40 a week? Does he also agree that, as the national average wage is now well over £170 a week, this threshold is derisory and that the first priority for any tax cuts must be an increase in the threshold?

Mr. Moore

I know that my right hon. Friend the Chancellor is listening with great care and will consider that point when drawing up the Budget for 1986. The point that my hon. Friend was seeking to make was that both thresholds and rates can be a deterrent to the work ethic.

Mr. Blair

Before the Financial Secretary gets carried away by the prospect of tax cuts, will he admit that were it not for the sale of £5,000 million worth of assets and special assets, as well as other sales, last year alone, the Government would be talking not about cutting taxes but about raising them?

Mr. Moore

The hon. Gentleman is aware that the Government's ability or inability to raise taxation is a reflection of their overall ability to run a successful economy.