HC Deb 14 April 1988 vol 131 cc336-7
13. Mr. Ian Taylor

To ask the Chancellor of the Exchequer what information he has as to what will be the higher rates of income tax in each of the major industrial countries in 1988–89.

18. Mr. Sackville

To ask the Chancellor of the Exchequer what information he has about the higher rates of income tax in each of the major industrial countries in 1988–89.

Mr. Major

The higher rate of income tax in the United Kingdom is now one of the lowest of any major industrial country. I shall arrange for the relevant information to be placed in the Official Report.

Mr. Taylor

I thank my right hon. Friend for that information. Does it not prove that as a result of the Budget Britain is one of the most attractive countries internationally? Will it not lead to an increased number of industries moving into this country, providing more jobs and thus increasing the amount of revenue coming to the Exchequer, for the benefit of all citizens?

Mr. Major

We certainly hope and expect that there will be an increased flow of inward investment. However, there has been a substantial amount of inward investment in recent years. There was £6.1billion in 1987 alone, the largest figure ever recorded, and £2.6million in Scotland alone over the past few years.

Mr. Sackville

Does my right hon. Friend agree that penal rates of taxation damage the economy as a whole and help no section of society? Does he further accept that there may be no economic justification for any level of income tax higher than the basic rate?

Mr. Major

I am certainly prepared to agree with my hon. Friend on the subject of penal taxation. The subject of a single rate of taxation might be a matter for another day. However, I recall that Mr. Disraeli once proposed the abolition of taxation in an election manifesto and lost.

Mr. Tom Clarke

In view of the proposals for capital taxation, why does the Government's philosophy of easing dependence apply to those who seek social security but not to those who benefit from inherited wealth? Can the Minister offer a scrap of evidence that the sons or daughters of those who benefit from unearned income will use that for the greater good? Why should they be dependent? Why should the enterprise ethic apply purely to the poorest of the poor?

Mr. Major

I am not entirely sure that the hon. Gentleman's question follows from the specific question on the Order Paper. In any event, I think that his premise is wholly mistaken.

Dr. Reid

Do not the Minister's answers represent two-nation Toryism at its worst? Does he recall the answer given to my hon. Friend the Member for Fife, Central (Mr. McLeish) that a single person earning over £300,000 a year will benefit by £1,000 a week? Will he contrast that with the admission made yesterday by the Prime Minister that a single person earning less than £50 a week will be £7.80 a week worse off after the social security cuts? Does that not represent two nations, or are they both part of the same big happy family?

Mr. Major

Perhaps I might remind the hon. Gentleman that before any tax cuts were contemplated in the Budget an extra £2,000 million was allocated to social security expenditure for the forthcoming year. On the matter of higher and lower rates of tax, I must say that high taxes do not redistribute income; all they do is redistribute it to taxpayers and that is of no use to anyone.

Following is the information:

Higher rates of income tax (percentage) for a married couple without children Group of Seven countries
Country Top rates(s) Total number of rate-bands
Canada 39 3
43.5
France 49
53.9 13
56.8
Germany 56 n/a
Italy 53
58 9
62
Japan 65
72 12
78
United Kingdom 40 2
USA 34.7 2

Notes to figures in table:

  1. 1. The rates relate to employment income; it is assumed that this is all earned by the husband.
  2. 2. The figures reflect the latest enacted rates, as far as is known.
  3. 3. The figures for Canada include provisional taxes at the rate for Ontario; those for Japan include local taxes at the typical rate; those for the USA include State taxes at the Californian rate.
  4. 4. The German income tax system does not have rate bands as such. Rates rise gradually from the starting rate of 22 per cent. until the top rate of 56 per cent. is reached.