§ 10. Mr. Sackvilleasked the Chancellor of the Exchequer what is his latest estimate of the proportion of 844 income tax revenue paid by the 10 per cent. of taxpayers with the highest incomes; and what was the comparable proportion in 1979–80.
§ Mr. MacGregorThe proportion is 37½ per cent. in 1986–87, compared with 34 per cent. in 1979–80.
§ Mr. SackvilleIs that proportion not further evidence that the sky-high tax rates of the last Government were counter-productive and that our reductions in those rates produced a greater, not a smaller, tax yield, to the benefit not only of high rate taxpayers but taxpayers in general?
§ Mr. MacGregorMy hon. Friend is right. It demonstrates what we have always said—that lower taxes provide encouragement and motivation leading to greater earnings and hence to greater achievement. As my hon. Friend has implied, that is in sharp contrast to the Labour party's policies. It is fairly clear that at the moment the Labour party simply cannot add up the figures. Recently, the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) made a speech in which he said that people earning more than £30,000 a year would have to pay more tax. Just to get anywhere near the yield that the right hon. Gentleman seeks would mean total confiscation of earning over £30,000 a year. It is hard to say how that encourages motivation or provides greater tax yields.
§ Mr. Campbell-SavoursIs it not true that, once again, the right hon. Gentleman misrepresents the figures? [Interruption.] He knows that a Labour Government would increase—[Interruption.] Mr. Speaker—
§ Mr. SpeakerOrder. Mr. Campbell-Savours.
§ Mr. Campbell-SavoursThe Minister knows that the next Labour Government will increase capital gains tax and capital transfer tax, and by raising those revenues, in addition to the revenues raised from those who are paid higher levels of salary, we will fund Labour's programme.
§ Mr. MacGregorBecause of the—
§ Mr. Campbell-SavoursJust stick to the facts.
§ Mr. MacGregorBecause of the growth in the economy and growth in capital values, the yield from capital taxes has also gone up under this Government. I will stick to the facts. The facts are that the yield from the capital taxes, which the Labour party says it will increase, will fall far short of financing the programme put forward by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) and his party. An additional £1.9 billion would be required—I am giving the facts—and even if, as the right hon. Gentleman said, people earning more than £30,000 had to pay more tax, with the implication that others would not, and even if they all were prepared to go on earning at their present rate, with total confiscation of all earnings above £30,000, it would yield only £1½ billion. Those are the facts, and they show that the policy is nonsense.
§ Mr. FallonDoes my right hon. Friend agree that his target of 25 per cent. income tax may just be a marker to some people, but means a great deal more to millions of low-paid workers? If he cannot convince his colleagues that consolidation is no policy for the poorly paid and disadvantaged, how can we persuade the public?
§ Mr. MacGregorMy hon. Friend is right. The purpose of the tax changes in the Budget and of the long-term target of 25 per cent. is meant to be of great benefit and is mainly directed to those on modest incomes.
§ Mr. PenhaligonIs not another interpretation the possibility that those job-destroying pay rises, to which the Chancellor referred, have gone to those who are already the highest paid?
§ Mr. MacGregorNo. If unit labour costs as a whole are going up, that cannot mean that they are confined to only a small band of income earners. The truth is that it is happening across the whole field. That is why the tax changes we have introduced in the Budget will, I hope, help to prevent those rises taking place.