HC Deb 06 July 1989 vol 156 cc461-2
9. Mr. Bill Michie

To ask the Chancellor of the Exchequer, what proportion of gross earnings a one-earner family on average earnings with two children paid in value-added tax in (a) 1979 and (b) 1989.

Mr. Lilley

A married man on average male earnings with two children would have paid approximately 2.7 per cent. of his earnings in VAT in 1978–79 and 5 per cent. in 1988–89.

Mr. Michie

Does the Minister agree that the £5.76 per week that the average family would have had if VAT was still at the same proportion of earnings would be welcome to those families and would help them a little to offset the extra costs that they have to pay in massive mortgage repayments because of the Chancellor's policies?

Mr. Lilley

The significant fact is that over that period, which coincides with the lifetime of this Government, the average married man has had an increase in his real take-home pay—after taking account of prices and VAT —of more than 30 per cent. I do not think that people would have been prepared to trade that for the fiscal regime left behind by the Labour Government.

Mr. Boswell

Does my hon. Friend accept that spending and income must be considered together? Will he remind the House by how much the starting figure at which a comparable family pays income tax has increased in the same period?

Mr. Lilley

My hon. Friend is absolutely right and makes a valid point. We have increased the threshold by about a quarter in real terms, thus taking a considerable number of lower paid people out of the income tax regime altogether.

Dr. Marek

The Economic Secretary will have heard the Financial Secretary say a few moments ago that the burden of taxation as a proportion of gross domestic product has increased under this Government. Will he take the next step and admit that that means that the British people have been taxed more heavily in the past 10 years under this Government than they were taxed under the previous Labour Administration?

Mr. Lilley

We inherited public finances that were largely financed by borrowing. Initially, we had to finance part of that by increased taxation but more recently the burden of taxation as a proportion of GDP has been coming down. My right hon. Friend the Chancellor has made it absolutely clear that if ever a Government were elected—which they will not be—with the policies that appeared in the recent Labour policy review, taxes would go up and up and up.