Taxation (Hansard, 6 July 1989)

§ 6. Mr. Couchman
To ask the Chancellor of the Exchequer what is his estimate of the number of people who would face a higher marginal rate of tax and national insurance if the top rate of income tax were raised to 50 per cent. and the employees' national insurance limit were abolished.

§ 19. Mr. Jacques Arnold
To ask the Chancellor of the Exchequer what is his estimate of the number of people who would face a higher marginal rate of tax and national insurance if the top rate of income tax were raised to 50 per cent. and the employees' national insurance limit were abolished.

§ Mr. Norman Lamont
If the higher rate of income tax were raised to 50 per cent. and the employees' upper earnings limit for national insurance contributions were abolished, about 3.4 million single people and married couples, about 15 per cent. of the total, would face higher marginal rates of income tax or national insurance.

§ Mr. Couchman
I am grateful to my right hon. Friend for that answer. Does he agree that this would raise the marginal rate to 59 per cent. and that such a calamitous rate would encourage another exodus of the skilled and the entrepreneurial? Would it not provide fuel for that pernicious industry of creative personal accounting which was so prevalent when the Labour party was in power?

§ Mr. Lamont
My hon. Friend is, of course, right. That is not the only way in which the Labour party is proposing to increase taxes. As my hon. Friend said, it would put up the marginal rate for nearly 3½ million people, of whom 2 million are basic rate taxpayers, and another 1 million people, half of them pensioners, would lose as a result of the reintroduction of investment income surcharge. Another 24 million people in 12 million couples would also lose as a result of freezing the married couples' allowance and on top of all that, Labour would introduce a local income tax. That would take us straight back to the policies which destroyed incentives and crippled our economy in the 1970s.

§ Mr. Jacques Arnold
What advice would my right hon. Friend give to the 2 million people who currently have a marginal tax rate of 25 per cent. and who would, nevertheless, be penalised by an extension of national insurance contribution? Is it not significant that 2 million families would be hit in that way if we had a Labour Chancellor of the Exchequer?

§ Mr. Lamont
My hon. Friend is right. I am sure that thanks to him and to my hon. Friend the Member for Gillingham (Mr. Couchman) raising these matters, the warnings will be heeded and people will think carefully before voting Labour.

§ Mr. Mullin
To keep the level of hyprocrisy to a minimum, will the Financial Secretary confirm that the percentage of gross domestic product consumed by taxation has increased since his Government came to power?

§ Mr. Lamont
The percentage has increased, but the percentage taken by income tax has decreased. What we have done—and what the previous Government should have done—is to replace borrowing by sound finance.

§ Mr. Ashton
Surely, it is the people at the top who live in the biggest and poshest houses—[Interruption]—who will also benefit most from the poll tax. Why should they have cuts at both ends of the scale—from the poll tax and income tax?

§ Mr. Lamont
I am sorry that I did not hear much of the hon. Gentleman's question, except that I understand from the grin on his face that he is obsessed with people who live in the biggest and poshest houses.

§ Mr. Marlow
If the purpose of taxation is to raise revenue rather than to punish people, is it not the case that since the Government have reduced the higher rates of taxation they have raised more revenue?

§ Mr. Lamont
My hon. Friend is right. As I have observed before, the Conservative Government have found a new way of soaking and clobbering the rich.

Mr. John Smith
Following the point made by my hon. Friend the Member for Sunderland, South (Mr. Mullin), can the Financial Secretary confirm that under this Government the proportion of national income paid in taxation has increased from 34.25 per cent. to 37.5 per cent.—a substantial increase? Will he explain what sense of equity there is in imposing on a person on £100,000 a year exactly the same liability in total national insurance as a person on £16,900 a year? In the case of the lower salary, that is 8 per cent. of income whereas in the case of the higher it is 1 per cent. of income. Is that not standing fairness on its head?

§ Mr. Lamont
I have already answered the question from the hon. Member for Sunderland, South (Mr. Mullin). On the upper earnings limit for national insurance contributions, we have always adhered to the principle that it is important that the contributory principle should be recognised. If the right hon. and learned Gentleman wants to put up taxes, let him do so and not call it national insurance.