HC Deb 02 February 1988 vol 126 cc859-62 3.50 pm
Sir Brandon Rhys Williams (Kensington)

I beg to move, That leave be given to bring in a Bill to end the taxation of personal income at higher than standard rate. On a number of occasions the House has allowed me to introduce a Bill under our old-established First Reading procedure, which afterwards has been put into effect by the Government. I hope that this may be another such occasion.

At this time of year the attention of hon. Members is particularly directed to matters of taxation. It is the particular responsibility of the House of Commons to resist taxation which is arbitrary, unfair or adverse to the health of the economy.

I think that the House knows that I am concerned that we have so many millions of people at the lower end of the income scale who are inhibited from working and saving, for the good of themselves and the economy as a whole, by our obsolete and unpopular system of income support. I believe in Sir Winston Churchill's policy that we should ensure that every citizen has an adequate basic income, but that above that level every citizen—male and female—should be encouraged to rise as high as they can.

I believe that it is quite wrong to use the system of taxation and benefit in such a way as to inhibit effort and thrift at any level of society. I have accordingly written to my right hon. Friend the Chancellor to suggest that in his Budget he should end the long-term capital gains tax; that he should reform the transfer-and-inheritance tax so that no one incurs a capital levy at a higher rate than the standard rate of income tax; and, in particular, that he should take this opportunity to end the higher rate taxes on income altogether.

It is wrong in principle to use the tax system to punish success. The British economy is not so successful that we can afford to restrain our most active entrepreneurs, or to drive them offshore. The countries of the Pacific area are streaking ahead of us. We cannot allow that situation to continue; but we should ask ourselves why. It is not because the British people have become inert or incompetent, but we do have systems which are inhibiting the growth of the economy, and they need urgent attention.

Higher rate tax was introduced in 1909. The 80 years that have followed have been years of relative economic decline for this country. The yield of personal tax, if the higher rates were abolished, would soon increase to overcome the possible loss of 1 or 2 per cent. of total revenue which might occur in the first year. Everyone in Britain would stand to gain from the reform, from the highest to the lowest, if the economy were set free to grow faster.

I would not be seeking leave to bring in this Bill if there were anyone in Britain who would suffer from it —except, of course, the armies of professional people who advise on tax avoidance. They could well be turning their agile minds to something more constructive. The higher rate tax is a survival of class-war attitudes which have no place in modern Britain; the reform that I am suggesting is one from which everyone would gain and no one would lose.

We know what is needed to make a free enterprise capitalist economy really fruitful. All that we need is the will power to do it. I have written accordingly to my right hon. Friend the Chancellor of the Exchequer as follows: The vigour of the people who are capable of earning the highest incomes and the discernment of the most far-seeing investors are the most precious assets of the economy. It is senseless to weaken their motivation and diminish their effectiveness by incorporating a discriminatory punitive mechanism in the tax system. Even if the sole object were to raise revenue, it would in a short time prove to be better attained by removing the limitations on the most active entrepreneurs, rather than by forcing them to adopt time-consuming tax avoidance routines or to take their energies and fortunes abroad. Britain should be a tax haven for its own citizens and a magnet for the best brains of other countries. I believe that the extreme simplification of the taxation and benefit system, for ease of comprehension and administration in the private as well as in the public sector, should be a major Treasury objective in its own right. Computers now make that possible, but I would prefer that everyone should be able to calculate their tax bill in their heads.

At present the national insurance contribution raises the marginal rate of tax for the majority of earners to 36 per cent. I would like therefore to suggest that the new standard rate of tax should include the national insurance contribution and should be set at not more than 35 per cent. I believe that that would be in line with other countries that are also contemplating considerable reductions in the higher rates of taxation for their citizens. There should be suitable exemptions to compensate those people whose investment income is not large enough to make them liable for higher rates of tax.

I hope that the House will see the logic of what I am suggesting and that my Bill will not be opposed. If there is a Division, I trust that there are enough true Thatcherites here to enable me to carry my Bill.

3.57 pm
Mr. John Battle (Leeds, West)

I do not really want to make a speech on this matter, but I wish to divide the House.

I find it strange that the hon. Member for Kensington (Sir B. Rhys Williams) is seeking to introduce this Bill yin the light of his previous comments on child benefit when there was some consensus.

I believe that the proposed Bill would clearly signal the time when the tax system increasingly favoured the rich. For those who have a good job the effect of the Bill wound be that they would be rewarded even more, but those with low-paid, part-time jobs would have to work even harder for even less. In other words, the tax system is clearly stacked in favour of the rich. The wealthier will get wealthier—as they do now—and the Bill will perpetuate that situation. Therefore, with the leave of the House, I seek to divide the House on this issue.

Question put, pursuant to Standing Order No. 19 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business)

The House divided: Ayes 58, Noes 180.

Division No. 160] [4 pm
Alexander, Richard Bevan, David Gilroy
Arbuthnot, James Biggs-Davison, Sir John
Ashby, David Blackburn, Dr John G.
Aspinwall, Jack Bonsor, Sir Nicholas
Bennett, Nicholas (Pembroke) Boswell, Tim
Boyson, Rt Hon Dr Sir Rhodes Montgomery, Sir Fergus
Burns, Simon Moss, Malcolm
Carrington, Matthew Paice, James
Coombs, Anthony (Wyre F'rest) Powell, William (Corby)
Coombs, Simon (Swindon) Rathbone, Tim
Davies, Q. (Stamf'd & Spald'g) Redwood, John
Dickens, Geoffrey Riddick, Graham
Dicks, Terry Rost, Peter
Dover, Den Shaw, David (Dover)
Evans, David (Welwyn Hatf'd) Skeet, Sir Trevor
Fookes, Miss Janet Smith, Tim (Beaconsfield)
Gill, Christopher Speed, Keith
Gorman, Mrs Teresa Stanbrook, Ivor
Griffiths, Peter (Portsmouth N) Stewart, Allan (Eastwood)
Hunter, Andrew Taylor, Ian (Esher)
Janman, Timothy Walker, Bill (T'side North)
Jones, Gwilym (Cardiff N) Warren, Kenneth
Jones, Robert B (Herts W) Wheeler, John
Kellett-Bowman, Dame Elaine Widdecombe, Miss Ann
Kilfedder, James Wiggin, Jerry
Knight, Dame Jill (Edgbaston) Wilkinson, John
Lawrence, Ivan Woodcock, Mike
Mans, Keith
Marlow, Tony Tellers for the Ayes:
Marshall, John (Hendon S) Sir Brandon Rhys Williams
Mitchell, Andrew (Gedling) and Mr. Edward Leigh.
Abbott, Ms Diane Cook, Frank (Stockton N)
Adams, Allen (Paisley N) Corbett, Robin
Allen, Graham Corbyn, Jeremy
Alton, David Cox, Tom
Archer, Rt Hon Peter Crowther, Stan
Armstrong, Ms Hilary Cryer, Bob
Ashdown, Paddy Cummings, J.
Ashton, Joe Cunliffe, Lawrence
Banks, Tony (Newham NW) Dalyell, Tam
Barron, Kevin Davies, Ron (Caerphilly)
Battle, John Day, Stephen
Beith, A. J. Dewar, Donald
Benn, Rt Hon Tony Dixon, Don
Bennett, A. F. (D'nt'n & R'dish) Doran, Frank
Bermingham, Gerald Duffy, A. E. P.
Blunkett, David Dunnachie, James
Boyes, Roland Dunwoody, Hon Mrs Gwyneth
Bradley, Keith Eadie, Alexander
Brazier, Julian Eastham, Ken
Brown, Nicholas (Newcastle E) Ewing, Mrs Margaret (Moray)
Bruce, Malcolm (Gordon) Fatchett, Derek
Buckley, George Fearn, Ronald
Caborn, Richard Fields, Terry (L'pool B G'n)
Callaghan, Jim Fisher, Mark
Campbell, Menzies (Fife NE) Flannery, Martin
Campbell, Ron (Blyth Valley) Forth, Eric
Campbell-Savours, D. N. Foulkes, George
Canavan, Dennis French, Douglas
Carlile, Alex (Mont'g) Fyfe, Mrs Maria
Clark, Dr David (S Shields) Galbraith, Samuel
Clarke, Tom (Monklands W) Galloway, George
Clay, Bob Garrett, John (Norwich South)
Clwyd, Mrs Ann Garrett, Ted (Wallsend)
Coleman, Donald Godman, Dr Norman A.
Golding, Mrs Llin Mowlam, Marjorie
Gordon, Ms Mildred Mullin, Chris
Gould, Bryan Murphy, Paul
Graham, Thomas Nellist, Dave
Grant, Bernie (Tottenham) Nicholson, David (Taunton)
Griffiths, Win (Bridgend) O'Brien, William
Grocott, Bruce O'Neill, Martin
Hargreaves, A. (B'ham H'll Gr') Parry, Robert
Harman, Ms Harriet Patchett, Terry
Hattersley, Rt Hon Roy Pendry, Tom
Haynes, Frank Pike, Peter
Heffer, Eric S. Powell, Ray (Ogmore)
Henderson, Douglas Primarolo, Ms Dawn
Hinchliffe, David Quin, Ms Joyce
Hood, James Redmond, Martin
Howarth, George (Knowsley N) Rees, Rt Hon Merlyn
Howells, Geraint Richardson, Ms Jo
Hughes, John (Coventry NE) Roberts, Allan (Bootle)
Hughes, Robert (Aberdeen N) Rogers, Allan
Hughes, Roy (Newport E) Ross, Ernie (Dundee W)
Hughes, Sean (Knowsley S) Ruddock, Ms Joan
Hughes, Simon (Southwark) Salmond, Alex
Illsley, Eric Sedgemore, Brian
Ingram, Adam Sheerman, Barry
Jack, Michael Sheldon, Rt Hon Robert
Janner, Greville Short, Clare
Jones, Martyn (Clwyd S W) Skinner, Dennis
Kaufman, Rt Hon Gerald Smith, Andrew (Oxford E)
Kirkwood, Archy Smith, Cyril (Rochdale)
Lambie, David Smith, Rt Hon J. (Monk'ds E)
Lamond, James Soley, Clive
Leadbitter, Ted Spearing, Nigel
Lewis, Terry Steel, Rt Hon David
Litherland, Robert Steinberg, Gerald
Livsey, Richard Stott, Roger
Lloyd, Tony (Stratford) Strang, Gavin
Lofthouse, Geoffrey Straw, Jack
McAllion, John Taylor, Mrs Ann (Dewsbury)
McAvoy, Tom Taylor, Matthew (Truro)
McFall, John Tredinnick, David
McGrady, E. K. Turner, Dennis
McKay, Allen (Penistone) Vaz, Keith
McKelvey, William Wall, Pat
McTaggart, Bob Wallace, James
Madden, Max Walley, Ms Joan
Mahon, Mrs Alice Wardell, Gareth (Gower)
Marek, Dr John Welsh, Michael (Doncaster N)
Marshall, Jim (Leicester S) Williams, Alan W. (Carm'then)
Martlew, Eric Wilson, Brian
Meacher, Michael Winnick, David
Meale, Alan Wise, Mrs Audrey
Michael, Alun Worthington, Anthony
Michie, Bill (Sheffield Heeley) Wray, James
Michie, Mrs Ray (Arg'l & Bute) Young, David (Bolton SE)
Millan, Rt Hon Bruce
Moonie, Dr Lewis Tellers for the Noes:
Morgan, Rhodri Mr. Harry Barnes and
Morley, Elliott Mr. Harry Ewing.

Question accordingly negatived.