§ 3. Mr. Nellist
asked the Chancellor of the Exchequer how the tax position of a couple with two children, receiving half average earnings, has changed since 1979; and if he will make a statement.
§ The Financial Secretary to the Treasury (Mr. Norman Lamont)
Their real take-home pay is up by 17½ per cent., but despite that they pay almost £1 a week less in income tax and national insurance contributions than they would have if Labour's 1979 tax regime had simply been adjusted in line with inflation.
§ Mr. Nellist
I asked a question about the Tories' tax position, not Labours' tax position. Why does the Minister 396 not at least repeat the answer given in Hansard on 27 March this year—that the real position for a couple, with two children, on half average earnings is that in 1979 they paid 12 per cent. of their income in direct tax while today they pay 16.5, per cent. a real rise of over a third in direct taxation? At the same time, yuppy employees in the City of London on 2,000 times average earnings pay 25 per cent. less in direct taxation. The Prime Minister said before the 1979 and 1983 general elections that taxes should be cut. Taxes were not cut then, so why should we believe her today?
§ Mr. Lamont
I repeat, for the hon. Gentleman's benefit, that the take-home pay of a person on half average earnings is up by 17½per cent. That is a very substantial increase. As the hon. Gentleman is so indignant about the burden of taxation, perhaps he could say what the effect will be of Labour's policies.
§ Mr. Chapman
If national insurance conributions are included in assessing the take-home pay of a person on half average industrial earnings, as my hon. Friend the Financial Secretary said in his first answer, does he agree that, although great progress has been made in reducing the overall taxation and increasing the amount of take-home pay of such a person, it is still about a quarter of his total gross pay? Therefore, does he agree that it must remain a high priority to reduce taxation levels further for such people?
§ Mr. Lamont
Of course. We are very firmly of the view that taxes ought to be reduced, and we keep on saying that. It remains the Government's objective to reduce further the burden of taxation. As my hon. Friend said, this is particularly important for the lower paid.
§ Dr. McDonald
Why will Ministers not come clean about this issue? Tax and national insurance contributions for those on half average earnings have gone up, as my hon. Friend the Member for Coventry, South-East (Mr. Nellist) stated, from 12 to 16 per cent. According to the Government's answer, even 2p off the standard rate has made no difference in the proportion of tax paid. Is the Financial Secretary not aware that the post-tax pay increases for the top earners have been at double the rate of increase of those on half average earnings? Since this question refers to the total burden of tax, will he admit that indirect taxes, including VAT, cost the very poorest almost a quarter of their income but the richest merely one sixth? When will Ministers come clean about their distribution of the burden of taxation?
§ Mr. Lamont
If the hon. Lady is so indignant about the burden of taxation on the poor, why did she vote against reducing it yesterday?