HC Deb 09 July 1987 vol 119 cc499-500
3. Mr. Chapman

asked the Chancellor of the Exchequer what proportion of his gross wage a single person receiving half average industrial earnings pays out in income tax and national insurance contributions.

The Chief Secretary to the Treasury (Mr. John Major)

A single person on half average male manual earnings will this year pay just under 21 per cent. of his earnings in income tax and national insurance contributions. The corresponding figure for someone on half average earnings for all occupations is just under 25 per cent.

Mr. Chapman

I appreciate that that proportion has been reduced significantly, in particular as a result of the past three Budgets, but will my right hon. Friend confirm that people earning quite modest wages and salaries are still paying far too great a proportion of those wages and salaries in direct taxation of one sort or another? Will he confirm that it remains the Government's top priority to reduce those direct tax levels still further during the course of this Parliament?

Mr. Major

We are certainly keen to reduce taxation whenever and wherever it is prudent to do so. As my hon. Friend intimated, since 1979 there have been substantial improvements, not only in the basic rate, but in the thresholds, and, perhaps most important of all, the fact is that nearly 1½ million taxpayers have been entirely taken out of tax.

Mr. Rooker

Will the Minister confirm that the figure in the latter part of his first answer — that for all workers on half average earnings the share of their wages taken in tax and national insurance is just under 25 per cent.—is higher than the figure of 23.5 per cent. in 1978–79, the last year of the Labour Government? Every worker, married or single, on less than average earnings loses a bigger slice of his wages in tax and national insurance under this Government than he did in the last year of the previous Labour Government.

Mr. Major

The hon. Gentleman is half right, in that he correctly interpreted what I said a moment ago. As regards a comparison with 1978–79, the more accurate comparison would be the updated index figure under the system that applied before. On that basis the reduction still applies.

Mr, John Townend

The figures given suggest the reason why the population voted to return a Government who are dedicated to reducing rather than increasing taxation. Does my right hon. Friend agree that our starting basic rate for income tax, plus insurance, is still relatively high compared with our industrial competitors?

Mr. Major

My right hon. Friend the Chancellor quite clearly indicated his opinion on that in the last Budget, when he reduced the standard rate.