HC Deb 06 July 1989 vol 156 cc456-7
4. Mr. Summerson

To ask the Chancellor of the Exchequer what is his estimate of the extra yield of income tax if the basic rate were raised to 33 per cent.

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

An 8 per cent. increase in the basic rate of income tax to 33 per cent. would yield about £13.5 billion extra in a full year at 1989–90 income levels, assuming that there were no behavioural effects.

Mr. Summerson

Will my right hon. Friend confirm that it is no part of Government policy to increase the burden of income tax, whereas, so far as anyone can tell, that is precisely the policy of the Labour party?

Mr. Lamont

As my hon. Friend knows very well, we have reduced the burden of taxation and shall continue to do so. Judging by the expenditure plans put forward by the Labour party, if the Opposition ever came to power they would be well on the way to putting tax up to the level it was when they were last in office, which was 33p. Every day we hear of Labour policies such as a pensions increase equal to 1p on income tax, an increase in overseas aid equal to 1p on income tax, increased child benefit, a carer's allowance, renationalisation of the water industry and of British Telecom, and the introduction of a minimum wage. They would all have only one result, which would be to increase the basic rate of income tax to all taxpayers.

Mr. Frank Field

Why do the Government put so much effort into boosting the nanny welfare state for taxpayers? Will the right hon. Gentleman confirm that if the Government phased out all tax benefits we could have a standard rate of tax of between 12p and 15p in the pound? Would that not be a radical tax policy and, if so, why do the Government not introduce it?

Mr. Lamont

As the hon. Gentleman knows, in the Budgets this year and last year the Government blocked a significant number of loopholes. In last year's Budget, some £800 million was raised by the blocking of loopholes. We have taxed the use of company cars and blocked the forestry loophole. I agree that we should get marginal rates down and get average rates up.

Sir William Clark

Does my right hon. Friend agree that, historically, a reduction in taxation has meant that there has been a greater take for the Chancellor of the Exchequer? Does my right hon. Friend agree that if taxation were increased, revenue to the Exchequer would decrease?

Mr. Lamont

That, of course, was the point to which I referred when I spoke of behavioural effects. There must be some tax maximising rate. It cannot be true for ever that, however much taxes are cut, more revenue will be raised. What we have done, especially at the top end, has increased the tax take.