HC Deb 17 July 1986 vol 101 cc1157-8
2. Mr. Straw

asked the Chancellor of the Exchequer what comparative information is available to him on the relationship in Organisation for Economic Co-operation and Development countries, between the burden of taxation and unemployment.

Mr. MacGregor

High taxation inhibits job creation in other OECD countries, just as in the United Kingdom.

Mr. Straw

Why does the Chief Secretary continue to mislead the House and the country about the relationship between unemployment and taxation? Has he not worked out yet that Britain's unemployment record is the worst of any of the major OECD countries, but that a number of major OECD countries have higher tax burdens and lower unemployment?

Mr. MacGregor

I am not misleading the country or the House on the first point that the hon. Gentleman made. With regard to other OECD countries, the hon. Gentleman will know that in making those comparisons one also has to look at comparative economies. When one looks at advanced economies, it is not without significance that Japan and the United States, countries with the highest growth records, also have the lowest levels of taxation. If the hon. Gentleman wants to refer to the OECD, let me refer him to the recent communiqué of OECD Ministers, which stated: the control of public expenditures and budget deficits is essential to establish a stable domestic financial environment and to promote a durable reduction in real interest rates which will help private investment to expand and thus promote sustained growth worldwide. And that means jobs.

Mr. Forman

In view of the many different and complicated causes of unemployment in the OECD countries, does my right hon. Friend accept that one of the characteristics of both the Japanese and the American economies is that, through prudent policies, they have managed to maintain a relatively low burden of taxation and borrowing, which has contributed to low inflation rates, which has been good for jobs?

Mr. MacGregor

I am sure that my hon. Friend is right. Some of the studies that I have seen, which examine those matters, fail to take into account the effect on the supply side of a policy of lower taxation, which encourages enterprise and, in the long run, undoubtedly produces the jobs which a high expenditure policy would not.