HC Deb 13 March 1986 vol 93 cc1068-9
5. Mr. Chope

asked the Chancellor of the Exchequer what he estimates would be the additional revenue in the year 1986–87 if the marginal rate of tax on personal incomes in excess of £30,000 was increased to 100 per cent.

Mr. Lawson

Individual taxable incomes in excess of £30,000 total some £3½ billion, of which almost £2 billion is already paid in income tax. The theoretical additional yield of a 100 per cent. tax on this slice of income would thus be around £1½ billion, but the actual yield would be closer to zero as relatively few people are prepared to work for nothing.

Mr. Chope

I thank my right hon. Friend for his full reply. Does he agree that it is a grave deception for any politician to suggest that a public expenditure programme of an additional £24 billion could be financed merely by taxing the better off, because it would mean that even those on well below average earnings would have to pay substantially higher income tax?

Mr. Lawson

That is right. My hon. Friend is on the ball, if I may use an expression of a sporting nature. There is an alternative. As the Labour party has said that it would not raise the basic rate of income tax, it is possible that it might have recourse to VAT, in which case, arithmetically, it would require a 41 per cent. rate of VAT.

Mr. Wrigglesworth

Will the Chancellor of the Exchequer confirm that the burden of taxation on individuals has increased under the Government, and that, as a reply from one of his colleagues showed, the Government would have to reduce the basic rate by 5.7p to compensate for increases in taxation which people are paying in other spheres? Until he reduces the basic rate of tax by a further 5.7p, will he refrain from claiming that there have been decreases in taxation?

Mr. Lawson

First, my right hon. Friend the Chief Secretary was right in saying that the levels of income tax now are considerably lower than they were under the Labour Government, which the hon. Gentleman supported. Secondly, total revenue from taxation has increased, because incomes and prosperity have increased considerably. I welcome the fact that in future the hon. Gentleman would like to see a cut in tax. So would I.

Mr. Yeo

Has my right hon. Friend noticed that the sum which would result from increasing taxes to 100 per cent. on incomes above £30,000 would not only be insufficient to pay for a programme of £24 billion extra expenditure, but would be wholly inadequate to pay for the more modest programmes espoused by alliance Members?

Mr. Lawson

My hon. Friend is right. We have not yet been able to cost the proposals put forward by the Liberal party and the SDP. One difficulty is that the proposals frequently conflict, but we shall get down to that in due course. Meanwhile, we have been able to cost properly, correctly and objectively the Labour party's proposals, and it is interesting that Labour Members have not been able to deny the accuracy of that costing.