| 'Table of Rates of Tax | ||
| Portion of Value Lower limit £ | Upper limit £ | Rate of Tax per cent. |
| 0 | 80,000 | Nil |
| 80,000 | 130,000 | 30 |
| 130,000 | 190,000 | 40 |
| 190,000 | 317,000 | 50 |
| 317,000 | — | 60'. |
§ The Minister will not be surprised to hear that I had not expected to be on my feet quite so early. for reasons which I cannot fathom, we seem to be getting through this Bill at a faster rate than has been the case in previous years. No doubt others will have some speculative reasons as to why that is happening. This amendment—I make no apology for this—is tabled in a constructive spirit. We 435 contend that the Government have—leaving aside the philosophical argument for and against tax cuts and how those tax cuts should be applied—cut taxes at the top end of the scale more substantially than at the lower end. They have increased net payable taxes at the bottom end of the scale.
§ This amendment aims to modify the Government's enthusiasm for cutting taxes on inheritance, which have been reduced substantially in recent years and will yield in the current financial year about one third of the yield 60 years ago. No doubt the Conservative Government regard that as a great triumph of change, but it is a switch which is regrettable. The amendment represents a substantial uplift on the current level. The reason for that, rather than a straight indexation of the rates, is that we have taken on board the argument put forward about the increase in house prices. Houses are the single source of most people's wealth. This is a constructive amendment, which we hope Government Members will see in that light.
§ It may be appropriate to return to the wider argument, if we debate the question that the clause stand part, when I could elaborate on the alliance's view of how inheritance taxes and gift taxes should be developed. At this stage rest the argument on the contention that the right thing to do is to modify the relief the Government are proposing and to target that relief at the other end of the scale, so that under our proposals people with moderate estates — I believe that is the Government's stated objective—will benefit more than those with larger estates. That is a reasonable objective.
§ I have been somewhat surprised on the occasions when, either as a witness or a participant in the debate, I have heard Ministers argue about the burden of taxation on the low paid and those of relatively modest means and use that argument to describe the imbalance and to justify tax relief at the opposite end of the scale or right across the board. If the Government really are concerned about reducing the tax burden on people of modest means, they should be thinking in terms of limiting the relief that they are giving to people on higher incomes and targeting it to those at lower levels.
§ This is a modest amendment which is put forward in a constructive spirit. It seeks, as I said at the outset, slightly to modify the Government's enthusiasm in this direction, and we hope that it will be considered in that light.
§ The Chief Secretary to the Treasury (Mr. John MacGregor)The hon. Member for Gordon (Mr. Bruce) has put me in a little difficulty because he said that he would explain his party's wider views on inheritance tax and so on, in the clause stand part debate. Since his amendment simply proposes an alternative scale, and, therefore, we are talking about inheritance tax, it is much better for me to explain the clause and to deal with the amendment at one and the same time. The hon. Gentleman will have the opportunity in a later debate or in this debate to make his other remarks, but it would be more sensible for me to make one contribution.
Let me start with the actual rates to which the amendment is proposing changes—that is to say, what is in clause 147. In 1979 we came to office committed to drawing the teeth of the capital transfer tax introduced by the right hon. Member for Leeds, East (Mr. Healey). The combination of rampant inflation and the failure to index the starting point had meant that by 1979 capital transfer tax was a penal tax.
436 In 1980 we doubled the threshold for CTT. In 1981 we reduced the rate of tax on lifetime gifts. In 1982 we introduced the requirement to index the thresholds—to follow the income tax example—to avoid a repetition of the 1970s experience. In 1984 we reduced the death rate and made the rate on all lifetime gifts half the death rate. In 1986, in last year's Finance Act, we made a major reform—the abolition of CTT on lifetime gifts. It was then that the tax was renamed inheritance tax. That measure was widely welcomed as being of great help to those seeking to pass on to the next generation firms and farms that they had built up.
Our intention this year is rather different, but equally important. Since 1979 our policies have encouraged a large expansion in the owner-occupation of housing and the trebling of private direct share ownership. More and more people now own property—houses, shares, and so on—that they will wish to pass on to their children. If no action is taken, more and more of those modest estates will be brought into inheritance tax liability. The purpose of the clause is to take many of those small estates out of inheritance tax altogether and significantly to reduce the charge on the others.
Clause 147 increases the starting point for inheritance tax from £71,000, as it was up until this point, to £90,000. That is an increase of 27 per cent. Had we simply indexed that starting point, it would be £74,000. The result of this substantial increase is to reduce the number of estates paying inheritance tax this year by about one third. or some 12,000 estates in all, compared with the number that would be paying tax with indexation.
The new scale produces reductions in inheritance tax liabilities at all levels. The four point scale—replacing the present seven point scale — is in itself a welcome simplification. But—I make this point again the largest reductions are concentrated at the lowest end. An estate of £ 100,000 will see its tax bill reduced by some 60 per cent. The estate of around £1 million will see only a 3 per cent. reduction in its tax bill. As with the income tax changes which we debated yesterday, we have deliberately skewed the changes to give maximum benefit at the lower end.
The amendment is another example of the confusion that the alliance sometimes gets into in the way in which it approaches such matters. It is either that or it is an example of the alliance's neither-one-thing-nor-the-other approach or split-the-difference approach to policy. Or perhaps the alliance does not know what it is about. From the way in which the hon. Gentleman moved the amendment, I am not sure whether he knows what it is about.
It is true that the effect of the amendment is to increase the burden of inheritance tax, but it would reduce the starting point from £90,000 to £80,000. The effect would be to make 7,000 more estates liable for inheritance tax than would be the case under our proposal. That is why I was astonished to hear the hon. Gentleman say that those with modest estates would benefit more under his proposals than ours. The reverse is true.
§ Dr. Oonagh McDonald (Thurrock)The Chief Secretary is being a little unkind. He will have noted that the hon. Member for Gordon (Mr. Bruce) said that the debate had began too early. He obviously had not had time to work out the policy. The Chief Secretary should be a little more generous in his remarks.
§ Mr. MacGregorI think that the hon. Lady is right. We were told yesterday that the Liberals and Social Democrats needed a little more time to work out their income tax proposals and what they were going to do following the vote last night. Clearly, they have lacked the time to put forward this amendment, because they have got it wrong.
Not only does the amendment show confusion, but it underlines the difference between our parties. The Social Democrats and Liberals want to see more people paying inheritance tax. Moreover, their proposals would cause the greatest relative increase to those to whom we are giving the maximum benefit. Rather than impose the greatest additional charge on the largest estates, the Social Democrats' and Liberals' proposals would place the greatest additional charge on those at the lower end and that is completely alien to the spirit of our proposals. Therefore, I am sure that he will not be surprised to hear that we prefer our clause to his amendment and I would certainly urge my hon. Friends to oppose it.
Nor are the Social Democrats' and Liberals' proposals necessary to protect the yield of tax. Even after the changes that we are proposing. we are still expecting a yield of about £1,100 million in inheritance tax next year, well above the expected yield in 1986–87. That illustrates yet again the point that the Opposition parties have so often failed to grasp—that lower tax rates do not necessarily mean lower tax yields if they are underpinned by a buoyant and flourishing economy. Indeed, even more to the point, if, as has been happening under the Government, they help to bring about such an economy, that is very much their effect.
§ Mr. Campbell-SavoursIs there any connection between these substantial reductions in capital transfer tax, and, indeed, inheritance tax, over the past seven years, and the £110,000 million which has been shipped abroad in investment overseas since 1979? Is there a connection between the great collapse in taxation for rich people in society and the vast amount of money that has run away and been frittered away overseas?
§ Mr. MacGregorThere has not been a great collapse in taxation on the richest people. What has been done, and rightly, is that we have reduced the rates of income tax from the absurdly high levels that existed under the Labour Government and so given incentives and encouragement to people to earn more. We have also made some changes in other areas such as investment income surcharge, I believe correctly. I see no parallel between the changes that we have made and the fact that we have been so successful in building up overseas assets. That is due to a completely different set of circumstances.
Because Britain is so much better off under this Government than under the Labour Government, despite all the alleviations that we have introduced in CTT, and now inheritance tax, the yield of the tax will be almost 50 per cent. higher next year that it was in 1978–79. It is a favourite cry of Labour Chancellors and Shadow Chancellors that they will tax and tax until the pips squeak, but that demonstrates that squeaking pips do not produce money for the Exchequer. A resurgent economy based on widely distributed wealth does.
The amendment will be welcomed by all those who believe in a capital and property-owning democracy. As I have said so often before in the House, tht is what we are 438 constantly and increasingly achieving by increasing wealth and savings and by spreading it to ever wider numbers of the British people. The sale of council houses is but one of the many ways in which that is being achieved. For those who benefit from the sale of council houses, certainly in a generation to come, they will have a profound effect in bringing in financial and other assets and giving the opportunity of financial independence to millions more families. The proposal embodied in the clause enables us to take a further step in that direction.
I believe that the proposals will be welcomed by all who believe in the importance of encouraging the creation of wealth, rather than the vain attempt to use the tax system to achieve a redistribution of wealth that is inimical to its creation. They will be welcomed by those who think that it is a healthy development that more and more people, lower down the income scale than ever before, will be able to leave property to their children, and to enable them in turn to enjoy the independence that property ownership can bring. The proposals are a further modest contribution to our wider objectives, and as such I commend them to the Committee.
§ 5 pm
§ Mr. Ian Gow (Eastbourne)Nothing illustrates more clearly the confusion of thought in the minds of members of the Social Democratic party than the amendment moved by the hon. Member for Gordon (Mr. Bruce). As my right hon. Friend the Chief Secretary pointed out, the effect of the amendment is precisely the opposite to the intention that the hon. Gentleman explained to us. If we accepted it, we should penalise the least well off. It is quite extraordinary that the Social Democratic party should bring such an ill-thought-out, ill-considered proposal before the Committee. Mercifully, however, there is no prospect whatever of the amendment being accepted.
My right hon. Friend made another important point. The whole philosophy of the Government, rightly, is to reduce the burden of taxation on the British people. A major cause of the modest economic performance of this country since 1945 has been the burden of taxation. However, there is still too much of a guilt complex about reducing taxation, which some people think is somehow immoral. I make the opposite assertion. I say that high taxation is immoral, and that it has been a dead hand on the economic performance of the country. Now we are beginning to see that, as my right hon. Friend so clearly explained, lower rates of tax produce a higher yield and greater wealth in which all can share.
The hon. Member for Workington (Mr. Campbell-Savours) illustrated how out of touch he, his party and the Social Democrats are with what has been happening all over the United Kingdom since the right to buy was given for the first time to those who previously had no choice. One million houses and flats, whose tenants were previously condemned to live in them for ever as local authority tenants, have now been sold. My right hon. Friend was right to mention that the acquisition of that wealth by over a million former tenants will bring some of them nearly up to the figure that appears in clause 147. From now on, £90,000 will be the limit below which no inheritance tax will be paid. It is not far-fetched to say that the value of some former council houses is now approaching that figure. I welcome the raising of the threshold from £71,000 to £90,000, and the fact that we are 439 able to obtain a higher yield from lower rates and higher thresholds for inheritance tax is proof positive of the economic justification for the Government's proposals.
My right hon. Friend told the Committee that many estates in the coming year would have been subject to inheritance tax but for the proposed changes in clause 147. That will mean a significant reduction in the burdens placed upon the Inland Revenue. I do not know whether my right hon. Friend will speak again in this debate, but it would be interesting to hear from him whether there will be any reduction in the staff of the capital taxes office as a result of the changes that he proposes in the Bill.
I hope that, should there be any more contributions from members of the Social Democratic party or the Liberal party during the Committee stage of the Bill, they will be better informed than the hon. Member for Gordon.
§ Dr. McDonaldFirst, let me point out that we entirely agree with the Chief Secretary about the confusion contained in the amendment, and in what was said by the hon. Member for Gordon (Mr. Bruce). We do not intend to support what he said. The upshot of his amendment would be a decrease in the tax take from the present regime, but an increase in taxation on the proposals in the Bill.
I do not think that it is worth spending much more time on the points made by the alliance, as they were indeed confused. Perhaps by the time that the election comes, the alliance will have thought out its policy. But I feel that it is more important now for us to consider inheritance tax in the context of the general issue of taxation on individuals; and to bear in mind that, since 1979, the Government have reduced the annual yield of capital transfer tax — inheritance tax, as we now refer to it. Between 1979 and 1986, the reduction was about £488 million.
The Chief Secretary referred to some of the changes in capital transfer tax that the Government have made since 1979. However, he omitted to mention the costs as they were described in the Red Book. If I may take the most expensive example, the doubling of the threshold in 1980 cost £125 million. The full-year cost of clause 147 is estimated in this year's Red Book to be £170 million. That makes a total of £658 million by way of reduction in capital taxation.
The Chief Secretary made great play of reducing the rates and getting more tax. That does not fit very well with what the Minister of State, Treasury said in Standing Committee on last year's Finance Bill. He said:
There is no disagreement between the hon. Lady"—he was referring to me—and the Government that the yield from capital tax has fallen. The hon. Member for Workington (Mr. Campbell-Savours) and I had a prolonged exchange on the Floor of the House on clause 80 … I gave him a global sum that acknowledged that the yield had been substantially reduced during the life of the present Government." — [Official Report, Standing Committee G, 10 June 1986; c. 387.]At the immense full-year cost of £170 million, the Government have reduced the burden of capital taxation. That figure compares badly with the mere £10 million spent on special tax relief for the over-80s. The Government have shown plainly that they put their money in the pockets of their friends. They weep crocodile tears for the plight of the elderly, but spend a mere £10 million on them.The Chief Secretary also made great play of the benefits that the proposal would bring to home owners. But what 440 he forbore to mention was the extent of house price inflation, particularly in London and the south-east, where house prices are rising much faster than inflation. I see that the Chief Secretary is nodding away as though that just happens and as though it is no responsibility of the Government, but since 1979 the Government's record on both private and public sector house building has been dismal indeed. It is only recently that there has been an increase in private sector house building. Many Opposition Members are only too well aware of the fact that there has been no public sector house building whatsoever. It is not surprising, therefore, that house prices are inflated.
Many people have been able to buy their own homes, but those hon. Members with constituencies in London and in the south of England know that the price of a new house is well beyond the means of couples on average, or even above-average, incomes. Those who come to our advice surgeries are not worried about the amount of tax that they will have to pay on the house that they have inherited from their parents; they are worried about finding somewhere to live because they cannot afford to buy their own house or flat.
The price of a very tiny house in my constituency is about £50,000, which is well beyond the means of most people. They are therefore faced with a long wait for council accommodation. A young couple with a child may often be housed in the third bedroom of their parents' council house. Alternatively, they have nowhere to live at all. About 1 million people are far more worried about homelessness than they are about having to pay inheritance tax on their parents' home. The Chief Secretary pretends that the Government are concerned about such people but he has it all wrong and he is trying to give the wrong impression to the House. This clause is designed to deal not with the problems of home ownership but with the Government's determination to relieve the burden of taxation on the better off while increasing the burden on the worst off.
During Question Time today there was an exchange on the increase in the tax burden on those who are on half average earnings. A comparison of the 1978–79 tax system with the regime that applied up to the Budget—and in no way has it been altered by the Budget and the Finance Bill—shows that the top 1 per cent. of tax units on an income of £40,000 or more a year have had a reduction in the amount of tax for which they are liable of £7,700, while the bottom 50 per cent. of tax units have had a reduction of only £120. The Chief Secretary spoke at great length about helping people to own their own homes, but that is not the purpose of reducing the rates of inheritance tax. It is another part of the rigging of the tax machine to ensure that the better off pay far less tax while the poor pay tax to line the pockets of the rich.
We have seen at every turn during the last eight years that, sometimes blatantly and sometimes subtly, that is what has happened. The Parliamentary Private Secretary to the Chief Secretary to the Treaury is looking somewhat sceptical. I only wish that he would read Hansard from time to time, especially the Financial Secretary's answers to written questions in which he is forced to tell the truth and puts his name to very detailed answers that make that perfectly clear to all concerned.
441 5.15 pm
It is also somewhat disingenuous of the Chief Secretary to take this clause in isolation. It has to be seen in the context of all the measures that deal with inheritance tax in the Finance Bill. In clause 148 and schedule 13 the Government have accepted the principle of the amendents that were moved by the hon. Member for Corby (Mr. Powell) during the proceedings in Standing Committee on last year's Finance Bill. It will be interesting to find out why that was done, and we shall pursue the point in Committee. The Minister of State says more in Standing Committee than the Chief Secretary would like him to do. He is an open and honest man, and it is most refreshing for Opposition Members to hear all that he has to say.
Referring to the amendment that had been moved by the hon. Member for Corby, the Minister of State said:
The amendments deal with the effects of termination and creation of life interests … and are intended to probe the reason for those interests being treated in the same way as an absolute gift of free estate.The Minister of State then made it clear that these interests were fully discussed when the matter was first introduced in 1982. He said:The trust regime was subject to consultation in 1982 and it has been widely accepted … The Government propose to leave the present trust regime in being, as a defence against the death charge, to prevent the death charge becoming voluntary."—[Official Report, Standing Committee G, 10 June 1986; c. 389–91.]However, the thrust of the proposals of the hon. Member for Corby suddenly appear in other clauses of the Finance Bill that have been carefully left out of the proceedings in Committee of the whole House. The Minister will say that all will be made safe by the anti-avoidance provisions of schedule 13, but that schedule will be subjected to the strictest parliamentary scrutiny. It is not possible to rush through that schedule before the election.Once again we are deeply suspicious of the reduced rates of inheritance tax. The Chief Secretary put the best gloss on it that he possibly could from his point of view, but it has little to do with protecting the interests of the so-called modest home owner. It has much more to do with the Government's usual trick of lining the pockets of the rich. We reject the way in which the Government continue to rig the tax regime in their favour.
§ Mr. Campbell-SavoursI want to raise an issue on this amendment that was touched on by my hon. Friend the Member for Thurrock (Dr. McDonald). It relates to my theory about the effect of capital gains tax and capital transfer tax in the south of England on property prices. During the last seven years one of the greatest movements in property prices nationally has taken place in the home counties and also in many other areas where there are no Labour Members of Parliament. It is about time that the people in those areas, who in the last seven years have increasingly been willing to move towards Conservatism, stopped to consider what is happening, why they are paying higher and higher prices and why hundreds of thousands of young people in the southern counties cannot afford to buy a home. I can give them the answer tonight.
Large numbers of people in the south, when they buy a property, acquire substantial tranches of wealth, that arise directly out of the reductions in capital transfer tax that have taken place during the last seven years. The reductions that have taken place in capital gains tax as well, certainly as they affect some people, have also 442 liberated funds there for use in the purchase of property. It is those two things separately, and in their interaction, as they are used in the process of acquiring property, that force up property values in the south.
Perhaps I can give some examples. Let us take a Georgian house in my constituency. For what might be regarded as a typical London Georgian house, one would probably pay probably £20,000 to £25,000. In London the price might be £400,000. In the constituency of my hon. Friend the Member for Thurrock it might be £70,000 or £80,000. Although that is only one fifth of the price of a similar property in central London, it is still three times higher than the price of a similar property in the north of England. The reason is very simple. The money does not circulate in those communities in the north, in the midlands, or in Scotland in sufficient volume to influence the property market by being available for the purchase of property.
One of the most efficient ways of bringing some sanity back into property prices in the London area and the south of England and giving people the opportunity to buy their own homes — which, the Government tell us, is their policy—would be substantially to increase taxes in this area and take out of the economy this money, which is being used for industrial investment, and so on, overseas, and also for inflating the property boom in the south of England.
I tell people outside the House that they would do well not to sit and gloat over the substantial increases in their assets in London and other parts of the south. They ought, rather, to consider the hundreds of thousands, indeed millions, of people in the south of England who will never own a home if we allow the current tax regime to go on well into the future. We are not talking only about Labour voters. We are talking also about many Conservatives who also want to own their own homes but who will never have the opportunity to do so because of the fund of money that is being made available to prop up prices in the south.
One of the facets of the "two nation" argument that has developed over the past few years is this difference that exists in property prices between the south and the rest of the country. It is accentuated by the concentration of wealth here. If we were to look at the figures — this reduced tax base, but greater revenue, which the Minister tells us he is getting from these taxes—they would show that there is a heavy concentration of wealth in the south. It is all splashing about in what is geographically a very small area and it is inflating house prices in a way that is against the public interest. I think that the Government should act accordingly.
§ Mr. William Cash (Stafford)A recent survey in Stafford indicated the required income for a person who lived at the upper end of the income scale so that he could have a five-bedroomed house, a fairly substantial car and a child away at school, and also at the lower end of the scale, which is where the houses are somewhat cheaper. I have just bought a house in Stafford for £8,000, which was extremely interesting to me, and it leads me to the point that there are significant reasons—this is the other side of the argument of the hon. Member for Workington (Mr. Campbell-Savours) — why people should move to the midlands or the north, because they get significantly better value for money as regards the cost of living and the value of property in what is quite often a prosperous town.
§ Mr. Campbell-SavoursI am grateful to the hon. Member for giving way to me when I have just made a contribution.
Will he accept that the fact that people move north should be weighed against the fact that many do not move north because they are scared to jump off the escalator of property prices in the south? They are concerned that if they move from the south to the north they will never be able to move back to the south because they will not be able to afford to do so. That is part of the north-south divide.
§ Mr. CashThat is an interesting point, to which I have an immediate answer. GEC recently moved its transformer division to Stafford. The proof of the pudding is in the eating, because a substantial proportion of the people who lived in Broadstairs, when they saw what was on offer and what value they could get by moving to Stafford, did so with alacrity. I hope that I have dealt with the point that the hon. Gentleman made. There is a considerable incentive for people to move, because it is to their advantage.
We are here, however, dealing with inheritance tax. The hon. Member for Workington raised the question whether it was unfair that people on lower incomes were unable to acquire property and hold it in trust for, or for the benefit of, their children. It is the Labour party's policy of denying, or at any rate inhibiting, the right of people to buy council houses that is causing serious difficulties for those who would like to be members of the property-owning democracy.
§ Mr. Campbell-SavoursThat is not part of Labour's policy.
§ Mr. CashThat may be so, but there has always been this inhibition. It may be that this is a reaction to prospects of electoral success and the party is trimming its policies.
§ Dr. McDonaldI am sure the hon. Gentleman is aware that not only would we insist on people having the right to buy council houses, but that we would ask the hon. Member to accept the extension of the right to buy privately rented property. Is he prepared to go the whole hog on the question of private home ownership?
§ Mr. CashI am impressed by the hon. Lady's conversion. If she and her colleagues have now seen the light on this policy, which is fundamental to the Conservative philosophy, all I can say is that they really have got the skids under them and that their conversion to this policy, in electoral terms, is to be encouraged. If the goings-on in the far north, or rather, if I may say so, in the pockets of Militant Tendency and Left-wing politics in London and elsewhere, are shared by the Front Bench of the Labour party, we really will be travelling. But the reality is that the Left wing of the Labour party does not believe in the policies put forward, purely for electoral reasons, by the hon. Member for Dagenham (Mr. Gould).
I shall deal briefly with the alliance, because this is its amendment. Do the proposers of the amendment believe that it is a good idea to have a 100 per cent. inheritance tax? I have no doubt that the hon. Member for Gordon (Mr. Bruce) will give me quick, straight answers. Particularly with regard to agricultural land, should there be a complete prohibition of the opportunity for farmers to pass on their land to their children? Does the alliance believe that it is essential that farming land should be 444 nationalised? In the agricultural context, I believe it to be essential that farmers and those who own the sort of property that I have mentioned should have the opportunity to pass it on to succeeding generations. The hon. Member has indicated not, but I should like to hear it from his lips.
§ Mr. BruceThe hon. Member for Stafford (Mr Cash) asked three questions. The answers are no, no and no.
§ The First Deputy Chairman of Ways and Means (Mr. Ernest Armstrong)Does the hon. Gentleman wish to reply to the debate?
§ Mr. BruceI will reply briefly to the debate. As the Committee has indicated a wish to be tidy I will make a couple of other points so as to avoid having to speak again.
The exchanges at the beginning of the debate reminded me that in Scotland we are used to referring to the auld alliance. Speeches from the Tory and Labour Benches against me showed alliance at work and perhaps the reactions were predictable. The hon. Member for Eastbourne (Mr. Gow) must be under pressure from the alliance in his constituency, judging by the speeches which he constantly makes. He chose to launch a strenuous attack on an amendment which concedes the need to raise the threshold but is not as enthusiastic about it as the Government. I feel that he protested a little too much to be convincing.
On house prices, which I shall not deal with other than as they relate to the amendment, when the Government are raising thresholds, which we think is legitimate up to a point, it is reasonable to take account of house price increases, given that the home is the main capital asset of most families. The Government have to be careful that they do not get ahead of the field to the point where their tax changes actually fuel increases in house prices rather than reflect them.
We believe that the increases the Government have gone for are more likely to fuel than to reflect increases in house prices, especially when coupled with tax relief above the standard rate of income tax for the purchase of houses. That is why we have argued that mortgage tax relief, which should continue, should be restricted to the standard rate of tax and that the increase in inheritance tax should reflect rather than add to the increase in house prices. In our amendment we have sought to get the balance right. Certainly we feel that we are closer to the correct balance than is the Government's proposal.
The Chief Secretary made the slightly spurious and perhaps unprovable contention, which was echoed by some of his colleagues, that by cutting the incidence of tax the Government have boosted revenue. If they had not cut the burden of tax, would not the buoyancy of the revenue have been further enhanced? The reliefs that the Government have allowed over the years on capital taxes have accumulated to about £800 million. I think that we are entitled to assume that that should be available for spending on services which should have higher priority than increasing relief to the better-off members of the community, who have done exceptionally well out of the Government.
If more relief is given to the richer members of the community, the Government are less able to attack the 445 problems facing the people at the bottom. There is any amount of evidence to show that as a direct result of Government policy over the last eight years the rich have got richer and the poor have got poorer. The provisions of the clause will increase rather than reduce the gap. That is why we have drawn attention to it and have sought to modify the increase.
One argument that the Government use against both major Opposition groupings is that when we put forward plans for increasing investment in the Health Service, in education or in housing it is not possible to achieve that without paying for it. We acknowledge that. On the alliance Benches we have assiduously costed our plans and we will put detailed information to the electorate when the time comes.
The converse is that, if the Government go on giving away in extra relief substantial sums of money, their ability to fulfil their pledge to maintain standards in the Health Service and in education is shown to be a sham. The people know that these services have not been safe in the Government's hands because they have been keener on giving money back over-generously to the better-off and have therefore reduced their ability to provide funds for services needed by the whole population and for dealing with the problems of poverty.
The alliance believes that there should be taxes on capital and that there should be fair and effective methods of redistributing wealth. The Conservative Government have said nothing about the distribution of wealth; they talk only about its accumulation. As I have said, the distribution is getting more rather than less unequal.
§ Mr. CashThe hon. Gentleman has said that we are not interested in the distribution of wealth. Nothing could be further from the truth. By making the most of resources and by developing wealth from the basis of a profitable property-owning democracy, including the principle of inheritance, one is able to accumulate wealth and as a result to distribute it. The hon. Gentleman has demonstrated that he does not have the faintest idea about economics. I am surprised that he holds his present position in the alliance.
§ Mr. BruceThese interventions come from quarters of which we know the composition of the electorate the last time it was tested. Contrary to what the hon. Gentleman asserts, I repeat that the concentration of wealth has become more unequal during the eight years of the Government's tenure of office. That is a fact for which there is ample evidence and support.
In tabling the amendment we have recognised the changes that have taken place. I have already said that we think it proper to reflect changes in average house prices but that we do not think it right for the Government to go too far down the road so that they no longer have the ability to achieve balance and justice.
The Government should promote taxes on capital which are effective at redistributing wealth and which are seen to be fair. That is why we have argued the case for tighter taxation of lifetime gifts and have recommended consideration of an accession tax. That is a simple tax on the recipients rather than on the holders of wealth. The tax efficiency point is that, if a wealthy person chooses to distribute his or her wealth by dividing it among a large number of recipients, the total tax burden accruing to that 446 wealth is reduced. For example, if £1 million is given to one person, that person will inevitably pay a substantial amount of tax on accession of that wealth. If the money is given to 100 people, the total tax take to the Treasury will be reduced because the people receiving the gift will not reach the higher threshold. It is a simple tax-efficient system which would encourage wealthy people to distribute their wealth widely in a way that has not happened recently. As I have said, the reverse has been the case.
The debate has been worth while. It has opened up some interesting avenues. I acknowledge that the diference between our amendment and what the Government propose is not substantial but in our view it would be a more balanced approach to the problem. The purpose of the amendment was to secure the debate which we have had. We wanted to argue the case that the Government are going too far. I make no apology for repeating that, as the house price argument has been a major factor in justifying the Government's action, I believe that the Government have gone too far down the road and may be responsible for increasing house prices, particularly in the areas where prices are highest. In those circumstances, I believe that our amendment has considerable merit.
Given the thinness of our numbers, for reasons which puzzle many of us and about which people outside speculate, I do not wish to press the amendment, but I thank the Committee for the debate.
§ Amendment, by leave, withdrawn.
§ Question put, That the clause stand part of the Bill.
§ The Committee divided: Ayes 186, Noes 69.
448| Division No. 150] | [5.40 pm |
| AYES | |
| Alison, Rt Hon Michael | Fox, Sir Marcus |
| Ashby, David | Franks, Cecil |
| Atkins, Rt Hon Sir H. | Fraser, Peter (Angus East) |
| Atkins, Robert (South Ribble) | Freeman, Roger |
| Baker, Nicholas (Dorset N) | Galley, Roy |
| Baldry, Tony | Gardner, Sir Edward (Fylde) |
| Banks, Robert (Harrogate) | Garel-Jones, Tristan |
| Bennett, Rt Hon Sir Frederic | Goodhart, Sir Philip |
| Biggs-Davison, Sir John | Gorst, John |
| Blaker, Rt Hon Sir Peter | Gow, Ian |
| Boscawen, Hon Robert | Grant, Sir Anthony |
| Braine, Rt Hon Sir Bernard | Greenway, Harry |
| Brinton, Tim | Gregory, Conal |
| Brooke, Hon Peter | Griffiths, Peter (Portsm'th N) |
| Browne, John | Grylls, Michael |
| Bruinvels, Peter | Hamilton, Hon A. (Epsom) |
| Buck, Sir Antony | Hamilton, Neil (Tatton) |
| Carlisle, John (Luton N) | Hampson, Dr Keith |
| Carlisle, Rt Hon M. (W'ton S) | Hannam,John |
| Cash, William | Harris, David |
| Chalker, Mrs Lynda | Harvey, Robert |
| Chapman, Sydney | Hawksley, Warren |
| Clark, Sir W. (Croydon S) | Hayes, J. |
| Coombs, Simon | Hayward, Robert |
| Cope, John | Heathcoat-Amory, David |
| Cormack, Patrick | Heddle, John |
| Corrie, John | Henderson, Barry |
| Couchman, James | Higgins, Rt Hon Terence L. |
| Dorrell, Stephen | Hind, Kenneth |
| Eggar, Tim | Holland, Sir Philip (Gedling) |
| Farr, Sir John | Holt, Richard |
| Fenner, Dame Peggy | Howarth, Alan (Stratf'd-on-A) |
| Forman, Nigel | Howarth, Gerald (Cannock) |
| Forth, Eric | Howell, Ralph (Norfolk, N) |
| Irving, Charles | Raison, Rt Hon Timothy |
| Jackson, Robert | Rhodes James, Robert |
| Johnson Smith, Sir Geoffrey | Rhys Williams, Sir Brandon |
| Jones, Robert (Herts W) | Ridsdale, Sir Julian |
| Jopling, Rt Hon Michael | Rippon, Rt Hon Geoffrey |
| Kershaw, Sir Anthony | Roe, Mrs Marion |
| King, Roger (B'ham N'tield) | Rossi, Sir Hugh |
| Knight, Dame Jill (Edgbaston) | Rumbold, Mrs Angela |
| Knowles, Michael | Ryder, Richard |
| Lang, Ian | Sackville, Hon Thomas |
| Latham, Michael | Sainsbury, Hon Timothy |
| Lawler, Geoffrey | Sayeed, Jonathan |
| Lawrence, Ivan | Shaw, Sir Michael (Scarb') |
| Lawson, Rt Hon Nigel | Shelton, William (Streatham) |
| Lennox-Boyd, Hon Mark | Shepherd, Richard (Aldridge) |
| Lester, Jim | Silvester, Fred |
| Lewis, Sir Kenneth (Stamf'd) | Sims, Roger |
| Lightbown, David | Skeet, Sir Trevor |
| Lilley, Peter | Smith, Sir Dudley (Warwick) |
| Lord, Michael | Speller, Tony |
| Lyell, Nicholas | Spencer, Derek |
| McCrindle, Robert | Squire, Robin |
| McCurley, Mrs Anna | Steen, Anthony |
| MacGregor, Rt Hon John | Stern, Michael |
| MacKay, Andrew (Berkshire) | Stevens, Lewis (Nuneaton) |
| Maclean, David John | Stewart, Allan (Eastwood) |
| McLoughlin, Patrick | Stewart, Andrew (Sherwood) |
| McNair-Wilson, M. (N'bury) | Stewart, Ian (Hertf'dshire N) |
| Major, John | Stradling Thomas, Sir John |
| Malins, Humfrey | Taylor, Teddy (S'end E) |
| Malone, Gerald | Tebbit, Rt Hon Norman |
| Maples, John | Temple-Morris, Peter |
| Marland, Paul | Thomas, Rt Hon Peter |
| Marshall, Michael (Arundel) | Thompson, Donald (Calder V) |
| Mates, Michael | Thompson, Patrick (N'ich N) |
| Mather, Sir Carol | Thorne, Neil (llford S) |
| Maude, Hon Francis | Thornton, Malcolm |
| Merchant, Piers | Thurnham, Peter |
| Miller, Hal (B'grove) | Townend, John (Bridlington) |
| Mills, Sir Peter (West Devon) | Tracey, Richard |
| Mitchell, David (Hants NW) | Trippier, David |
| Montgomery, Sir Fergus | Twinn, Dr Ian |
| Moynihan, Hon C. | van Straubenzee, Sir W. |
| Murphy, Christopher | Vaughan, Sir Gerard |
| Nelson, Anthony | Wakeham, Rt Hon John |
| Neubert, Michael | Waller, Gary |
| Newton, Tony | Wardle, C. (Bexhill) |
| Nicholls, Patrick | Warren, Kenneth |
| Onslow, Cranley | Watson, John |
| Oppenheim, Phillip | Watts, John |
| Oppenheim, Rt Hon Mrs S. | Wells, Bowen (Hertford) |
| Ottaway, Richard | Whitfield, John |
| Page, Sir John (Harrow W) | Wiggin, Jerry |
| Page, Richard (Herts SW) | Wilkinson, John |
| Percival, Rt Hon Sir Ian | Winterton, Mrs Ann |
| Powley, John | Wood, Timothy |
| Price, Sir David | Young, Sir George (Acton) |
| Prior, Rt Hon James | |
| Proctor, K. Harvey | Tellers for the Ayes: |
| Pym, Rt Hon Francis | Mr. Michael Portillo and Mr. Peter Lloyd. |
| Raffan, Keith |
| NOES | |
| Abse, Leo | Dalyell, Tarn |
| Archer, Rt Hon Peter | Davis, Terry (B'ham, H'ge H'l) |
| Beckett, Mrs Margaret | Dewar, Donald |
| Bidwell, Sydney | Dixon, Donald |
| Blair, Anthony | Dobson, Frank |
| Bray, Dr Jeremy | Dormand, Jack |
| Buchan, Norman | Dubs, Alfred |
| Callaghan, Rt Hon J. | Fatchett, Derek |
| Campbell-Savours, Dale | Faulds, Andrew |
| Canavan, Dennis | Field, Frank (Birkenhead) |
| Clark, Dr David (S Shields) | Foot, Rt Hon Michael |
| Clwyd, Mrs Ann | Foster, Derek |
| Cocks, Rt Hon M. (Bristol S) | Freeson, Rt Hon Reginald |
| Cook, Frank (Stockton North) | Garrett, W. E. |
| Corbett, Robin | Godman, Dr Norman |
| Cox, Thomas (Tooting) | Golding, Mrs Llin |
| Crowther, Stan | Gould, Bryan |
| Hamilton, W. W. (Fife Central) | Nellist, David |
| Harrison, Rt Hon Walter | Patchett, Terry |
| Hattersley, Rt Hon Roy | Pike, Peter |
| Healey, Rt Hon Denis | Powell, Raymond (Ogmore) |
| Heffer, Eric S. | Prescott, John |
| Hogg, N. (C'nauld & Kilsyth) | Ross, Ernest (Dundee W) |
| Kaufman, Rt Hon Gerald | Sheldon, Rt Hon R. |
| Leighton, Ronald | Shore, Rt Hon Peter |
| McDonald, Dr Oonagh | Short, Ms Clare (Ladywood) |
| McKay, Allen (Penistone) | Skinner, Dennis |
| McNamara, Kevin | Smith, (C.flsl'ton S & F'bury) |
| McWilliam, John | Spearing, Nigel |
| Madden, Max | Torney, Tom |
| Marshall, David (Shettleston) | Williams, Rt Hon A. |
| Maynard, Miss Joan | Winnick, David |
| Meacher, Michael | |
| Millan, Rt Hon Bruce | Tellers for the Noes: |
| Miller, Dr M. S. (E Kilbride) | Mr. Frank Haynes and Mr. Tony Lloyd. |
| Mitchell, Austin (G't Grimsby) | |
| Morris, Rt Hon A. (W'shawe) |
§ Question accordingly agreed to.
§ Clause 147 ordered to stand part of the Bill.
§ Clause 160 ordered to stand part of the Bill.
§ Clause 18 ordered to stand part of the Bill.