HC Deb 16 June 1988 vol 135 cc554-5
2. Mr. Nellist

To ask the Chancellor of the Exchequer by how much the gross pre-tax incomes of the top 5 per cent. of taxpayers have risen from 1978–79 to 1987–88; and if he will make a statement.

The Financial Secretary to the Treasury (Mr. Norman Lamont)

Gross incomes of the top 5 per cent. of taxpayers rose by about 43 per cent. in real terms between 1978–79 and 1987–88.

Mr. Nellist

Given that the real rise in pre-tax incomes among the rest of the population was less than half that, does that not show that when the Chancellor claims that cutting the rate for the top 5 per cent. of taxpayers produces more tax, that is merely a by-product of the rich getting richer over the past nine years compared with the rest of the population? For example, a person with an income of £50,000 per year has gained tax cuts of £500 per week since 1979, whereas a couple on half average earnings of £120 a week will be paying £4 per week more after tax and national insurance are taken into account. Is that not poverty in the midst of conspicuous abundance?

Mr. Lamont

The premise of the hon. Gentleman's question is wrong. Although the share of pre-tax gross incomes among the top 5 per cent. has increased two percentage points, their contribution to the Inland Revenue tax take has increased by four percentage points, so the hon. Gentleman is wrong. He seems to believe that there is something surprising about the fact that when one gives people incentives, their salaries increase. That is exactly what we expect and it is not in any way surprising. The hon. Gentleman may be interested to learn that 5 million taxpayers on less than half average earnings have enjoyed a 22 per cent. reduction in their tax burden as a result of the Budget.

Mr. Andrew Mitchell

Is not my right hon. Friend's response and the figures that he used of particular interest, because they put the final nail in the coffin of the suggestion that sky-high taxation raises extra revenue for the Exchequer?

Mr. Lamont

My hon. Friend is right. The tax take from the top 5 per cent. has increased by one third in real percentage terms. That is the overall increase in the whole take of the Inland Revenue, and that result is of benefit to the whole country.

Mr. Nicholas Brown

The Financial Secretary to the Treasury is being unusually brazen with the House this afternoon. He says that the wealthiest 5 per cent. of people in our society have benefited to the extent of 43 per cent. in real terms over the period that this Government have been in office. I do not blame him for neglecting to explain —but I invite him to do so now —why the Government felt it necessary to give that most privileged of groups an additional £3 billion in tax cuts on top of what they have already received in this year's Budget.

Mr. Lamont

The object of tax cuts is to improve the performance of the economy. The overwhelming evidence is that they have achieved precisely that.

Mr. Boswell

Does my right hon. Friend agree that there was not very much point in earning an extra £1 when one needed to earn an extra £50 to keep that pound? In those circumstances it would have been far better to go to a Socialist country, such as New Zealand, with a top tax rate of about one third, as applied under the previous Labour Administration.

Mr. Lamont

My hon. Friend is right; and he might have added that post-tax real income at all multiples of earnings in this country has increased dramatically under this Government, whereas for some people, especially the lower paid, it declined under the previous Labour Government. The Opposition may believe that there is some point in Socialism that makes people poorer, but most find that concept rather puzzling.

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