§ Mr. Dudley Fishburn (Kensington)
I beg to move,That this House congratulates the Government on achieving reductions in direct taxation with the consequent encouragement of initiative and enterprise; urges the Government to continue its taxation polices of proven success; and warns the British people to recognise that the Labour Party's promises of increased public spending can only be achieved by substantial increases in taxation.This is the second time this year that your hand, Mr. Speaker, has pulled my name out of the ballot for private Members' motions, and I should not like to go any further before thanking you and my good friend Lady Luck for making that possible.
I should like to use today's debate to try, at least at the start, to draw on a broader canvas than we usually can in the House and to look at the philosophy of taxation and at how in a modern society government lifts—if that is the word—about 40 per cent. of the national income from its citizens. I should like to examine how it should do that in a way most painless for those citizens, most effective for the economy, and most in keeping with modern life.
The principles of taxation go back to its birth in the 18th century. It was Burke, in this House, who made the bedrock remark on taxation:To tax and to please, no more than to love and to be wise, is not given to men.That is clearly understood on both sides of the House; and it was also clearly understood on both sides of the Atlantic. It was Benjamin Franklin in Philadelphia who realised that tax would be ever with us:In this world nothing can be said to be certain, except death and taxes.The 18th century was the time when we moved from primitive taxation—taxes on imports and levies, which were regressive forms of taxation that discouraged trade and wealth creation—towards the first taxes on income, inheritance and capital. It is not surprising, therefore, that the lasting principles that were to be the foundation on which modern tax systems were built, not merely in Britain but in Europe and the United States, were drawn up by Adam Smith in "Wealth of Nations", published in 1776. I quote Adam Smith not as some great guru of the right who has been hijacked by that wing of politics, and not because the Conservative Benches are today populated by fellow Scots, but because, with Lord Keynes, he was the greatest economist that Britain or the world has produced.
§ Mr. Tam Dalyell (Linlithgow)
I attended a remarkable ceremony at Greyfriars churchyard in Edinburgh to celebrate the 200th anniversary of Adam Smith's death. At a conference there, Professor Wassily Leontief and Professor Laurie Klein two of the seven Nobel prize winners in economics who were present, argued convincingly that Adam Smith could have been a socialist. Every one of the seven Nobel prize winners emphatically agreed that he would have been violently opposed to the poll tax.
§ Mr. Fishburn
One can do many wondrous things with history. Whatever side Adam Smith would have been on if he were alive today, we are agreed that in 1776 he was a great economist.
§ Sir Nicholas Fairbairn (Perth and Kinross)
Does my hon. Friend agree that the hon. Member for Linlithgow 1157 (Mr. Dalyell) could and should have been a Tory, and that it would be much wiser for him not to be a socialist? Adam Smith was wise enough not to be a socialist.
§ Mr. Fishburn
The principles laid down by Adam Smith in "Wealth of Nations" are still followed today in taxation policy. Smith's first great rule was that any tax should be related to the ability to pay, provided that it did not become a disincentive to further work or capital accumulation. His second rule was that a tax should always be certain and clear and should never be arbitrary and changing. He said that the state should make payment as convenient as possible. Smith's fourth principle was that taxation should raise as much money as effortlessly as possible, and that collection should be as cheap and efficient as possible.
More than 200 years later, those principles still stand. In those days, only 10 per cent. of the gross national product of the United Kingdom was taken by the Government. However, at that time the economy was far less robust than it is today. About 40 per cent. of the money that the Government raised then was used to repay the national debt. Given their good housekeeping record, today's Government would look aghast at such a percentage. About 33 per cent. of the money raised 200 years ago was spent on defence.
§ Mr. Tony Favell (Stockport)
I should like to join in this exchange between Scottish Members. What would Adam Smith have thought about Labour's policy for taxing the capital value of property?
§ Mr. Fishburn
I shall deal with that later. I have no doubt that any economist would find such capital taxes inefficient and socially regressive. They run counter to the rules that I have set out.
In 1776, only 27 per cent. of the income raised by Government, using far better methods of taxation than those proposed by today's Opposition, was spent for the relief of the poor. Although as a proportion of GNP the amount raised was far lower than today, the way in which it was spent towards the end of the 18th century was far less intelligent.
To those four principles upon which the Inland Revenue has been built over the past two centuries three more have been added. The first is the principle of John Locke, echoed by the French philosophers of the 18th century, that man is entitled to the fruits of his labour. That leads to the clear philosphical belief that it is a contradiction in a free society for government to take more than half the fruits of a man's labour.
The second addition is the clear principle that taxation should never be used as a tool for social engineering; but, in essence, Government spending is such a tool because its whole purpose is to redistribute wealth and to help those who are unable to help themselves. Government must also finance the defence of the realm and afford protection to the poorest in society. To design a tax specifically to achieve a social purpose is not merely economically inefficient but socially divisive, and has never been accepted by free civilised societies as a sensible way forward.
The seventh principle upon which taxation is based was abundantly clear 200 years ago but has been truly noticed only in the past 20 to 30 years. It is that, no matter how 1158 much politicians huff and puff, no country can afford to enter on its own a cul de sac of taxation quite separate from the systems of its neighbours. No open and free trading society, such as Britain, which has more than 30 per cent. of its GNP in international trade, can adopt a taxation system removed from that of its neighbours and competitors. It cannot go in a different direction from that taken by societies similar to its own.
The amount of money taken in taxation from Britain's citizens is within one percentage point of that taken from their citizens by most European countries. It is within one percentage point of the European average and, at 39 to 40 per cent., is exactly the same as the percentage in Germany, Italy and Ireland. It may be thought that taxation can be dragged in one direction or another, but no society in the west can afford to march in a direction different from that taken by history, our neighbours, friends and competitors. That has always been so.
The first death duties and capital taxes were founded between 1650 and 1680 in Britain, France and Prussia. Income tax was introduced in Britain, in three other European countries and in the United States in 18 months in 1799–80. That shows that economic ideas travel as rapidly today as they did 200 years ago.
The seven principles that I have outlined—four from Adam Smith and three that have been added to the taxation system—can be used to build a modern and effective taxation system. That is exactly what the Government have done over the past 10 years. They have stuck to all those principles; their clear policy over that time has been to move taxation away from direct tax towards taxes on spending. That reflects the growth of the consumer society, and Government policy has been to allow people to keep as much as possible of their earned income. By choosing where to spend their money, people may choose where to yield up their taxes.
The general trend so successfully set by the Government of lowering marginal rates of personal taxation and taxes on corporations so that they have more money to invest, of lowering direct and raising indirect tax, has been adopted by all our major competitors. Britain and the United States have led the way with such policies.
What it is possible to discern from Labour party policy on taxation seems to contradict not one or two of the fundamental principles but all seven. Let us consider, first, the bedrock that taxation should be built upon ability to pay without causing the disincentive of an individual to work or to form capital. The single clear policy of which the Labour party is so proud is to increase the income tax of high earners to 59 per cent.
§ Mr. Gordon McMaster (Paisley, South)
Perhaps the hon. Gentleman will apply Smithsonian principles to the community charge—the poll tax—and tell us how that was linked to ability to pay or to cheap and efficient collection.
§ Mr. Fishburn
I am talking about primary tax. Poll tax, rates or a council tax are paid with moneys that are available after income tax has been paid. Such taxes are not primary taxation.
The one clear principle that is enunciated by those who sit on the Opposition Front Bench is that it is their intention to raise to 59 per cent. income on the high paid. That goes against the first concept that tax should be linked to ability to pay. It is worth noting that in a modern society income tax is no longer the fairest way of raising 1159 income. That is stated clearly in a rather good pamphlet entitled "Direct and Indirect Taxation: A Socialist Approach", which was published by the Fabian Society a year or so ago. One passage in the pamphlet states:The idea that direct tax is more progressive than indirect tax is not true.The Labour idea that income tax hits the rich harder than the poor is also wrong. That is because the notion that income is the only way of achieving graded taxation is out of date. As we are now a consumer society, and as the spread of wealth throughout society has taken the form that it has throughout the west, the fairest taxes that are most directly linked to ability to pay are those that are specifically consumer taxes, not general income taxes.
Were income tax to be increased for the higher paid to 59 per cent., it would take the marginal rates of tax in Britain from near the lowest that now reign in the Organisation for Economic Co-operation and Development countries to the highest. That is an easy and quick debating point, but it is not the whole point. We must consider the amount of money that is already taken from the highest earners. Higher taxation begins to be levied in this country when someone is earning only two and a half times average earnings. In Italy, the highest rate of tax is only 50 per cent., not 59 per cent., as proposed by the Labour party. Furthermore, someone in Italy will have to pay this highest rate only when he is earning 11 times average earnings. In France, the threshold is six and a half times average earnings. Under the Labour party's proposals, the higher paid would begin to pay 59 per cent. income tax on earnings that were a mere two and a half times more than the average. That is the principle that makes such taxation so repugnant.
§ Mr. Nicholas Brown (Newcastle upon Tyne, East)
Will the hon. Gentleman explain how he arrived at that calculation?
§ Mr. Fishburn
I arrived at it through the considerable work that has been done by a number of accountants. If the hon. Gentleman refers to The Economist of 8 June, he will find set out the work that has been done by Coopers Lybrand and Deloitte.
§ Mr. James Paice (Cambridgeshire, South-East)
No such source would dare to put himself in that position.
§ Mr. Fishburn
I listened to last night's debate when the commitment to a 59 per cent. rate of income tax was made. It is clear that if a Labour Government were to increase child benefit rates and pensions and to respond to continuing spending pressures, they would have to increase tax revenue. Without that increase, there would not be a sufficient tax base to raise the money. Even if a Labour Government were to double the threshold—something which the Government have been unable to do over 10 years, for sound fiscal reasons—at which income tax would be paid at 59 per cent. that would still make the marginal rate of tax in Britain higher than in any other country in the OECD. That is the scandal of high direct 1160 taxation. It is not linked, necessarily, to ability to pay, and certainly not to modern work practices that seek to encourage incentive and capital formation.
Despite all that has been properly done by the Government, income tax still takes 32 per cent. of a British executive's pay. That is 32 per cent. for the Treasury from someone who is admittedly on high earnings of, say, £50,000 a year. That is already a much higher take than that which is to be found in competitor countries. The consequences of the Labour party's apparent policy would be economically horrifying and socially disastrous.
§ Mr. McMaster
I am interested in the hon. Gentleman's calculations. He has referred to someone earning about £50,000 a year and paying 32 per cent. of his income to the Treasury in the form of income tax. Has he calculated the percentage that the senior citizen pays from his old-age pension as a result of the increases in value added tax that the Government have imposed?
§ Mr. Fishburn
The increases in VAT are linked to expenditure and not to income. I am talking about income. The one clear promise that we have had from the Labour party is that tax will be increased on high earners to 59 per cent. An increase from a 32 per cent. take to 59 per cent., irrespective of whether, by some miracle, thresholds were increased so that the highest rate came into operation only when someone's earnings were three or four times average earnings would result in British executives being taxed more heavily than their counterparts in the OECD by a long chalk. That cannot square with the running or an efficient, competitive or modern economy.
§ Mr. James Arbuthnot (Wanstead and Woodford)
Does my hon. Friend agree that an intervention about the increase in VAT rates would have come rather better from a Labour Member who had voted against them? As Labour Members did not vote against the increase, such an intervention can properly be ignored.
§ Mr. Fishburn
I knew that I had good reason to allow my hon. Friend to intervene. I am grateful to him.
§ Sir Geoffrey Finsberg (Hampstead and Highgate)
An even better reason for ignoring such an intervention is that pensions kept ahead of increases in prices, and price increases include VAT. It was a red herring coming from red Scotland.
§ Mr. Fishburn
I shall move on to the second principle which Adam Smith laid down and which the Government have done well to observe. That is that when a nation is taxed the taxation should be certain and clear. The Government have succeeded in making their tax policy simple and clear since they came into office. From the very start the Government enunciated the principle that they would move from high marginal rates of taxation to lower direct rates and higher indirect taxes. They announced that they would encourage savings and link, as far as possible, capital taxes and income taxes; and that they would encourage industry by lowering corporation tax. These are clear policies which have allowed British industry and individuals over the past 10 years to plan their tax. That is why Smith was so wise to say that if one is clear and certain, the Government will be able to take their share of national income from people in a way that is most efficient and least painful.
1161 When we consider the Labour party's spending plans, which we need to do because its taxation plans seem to be limited to the disastrous increase in income tax to 59 per cent. at the top level, we see that tax under a Labour Government would be anything but certain and clear.
§ Sir Nicholas Fairbairn
Does the figure of 59 per cent. include unthresholded national insurance contributions, or are they additional?
§ Mr. Fishburn
The figure includes national insurance contributions. To be fair and open-handed, each time I have made international comparisons, I have included the national insurance contributions in other countries. If national insurance contributions are included, the top rate in Britain would be 59 per cent. In Italy, the average tax of someone earning £50,000 a year would be 38 per cent.; in Germany it would be 30 per cent., in France it would be under 30 per cent., and in Canada, Japan and the United States it would be nearer 25 per cent. The figures for all those countries include national insurance contributions. Under the suggestions of the Labour party, the average person in Britain earning £50,000 a year would be paying 59 per cent.
§ Mr. Deputy Speaker (Mr. Harold Walker)
Order. I am sorry to interrupt the hon. Member, but he should avoid turning his back on the Chair. It is not only a discourtesy to the Chair, but it makes things difficult for the Hansard reporters.
§ Mr. Nicholas Brown
The hon. Gentleman's figures for the top marginal rates of taxation in Italy and the other countries are wrong. If he is including social security taxes, the top marginal rate in Italy, for example, would be 63.9 per cent.
§ Mr. Fishburn
The hon. Gentleman is reading his own piece of paper and not listening to my argument. The figures have been calculated and apply to an executive working in Europe or in Britain who earns £50,000 a year. It is the real take that matters, because the figures take account of the thresholds at which taxes are levied. The real lift—the stealing from the pocket—would be 59 per cent. on someone earning £50,000 a year in Britain. As I made abundantly clear, it would not be anything like that in other countries.
It strikes me that the essential principle that taxation should be certain and clear is being violated by the Labour party's suggestions. They are only suggestions because the spending policies have not been spelt out; there have been promises and ideas, but they have not been costed. We must remember that every spending policy has to be matched by an increase in taxation. Even if it is matched in the short run by an increase in borrowing, that is merely deferred taxation.
The third and fourth principles outlined by Adam Smith—that payment should be as convenient as possible and that collection should be as cheap as possible—are, of course, essential to a modern tax system. The Government are much to be congratulated on increasing the efficiency of the Inland Revenue, on having brought on stream modern tax-collection methods such as computerisation, 1162 and on lessening the burden of tax collection by lessening the number of taxes to be collected. The abolition of taxes over the past 10 years—one or two in almost every Budget—has meant that the cost of collection has gone down.
§ Mr. Alex Carlile (Montgomery)
Does the hon. Gentleman agree that although there have been improvements in the efficiency of tax collection, there could be considerable further improvement? Does he think that we might benefit from the introduction of a self-collecting income tax system such as is used in the United States and in this country for the collection of value added tax?
§ Mr. Fishburn
That idea is worth pursuing. There are objections to self-assessment, and one is that it transfers the costs from the Inland Revenue to the individual. The net amount of cost is not saved. If one considers money spent on raising taxes in the United States, the country with the longest record of self-assessment, one finds that it is no less than the amount spent in Britain. The money is spent by the taxpayer rather than the state.
However, I agree with the hon. and learned Gentleman that the subject is worthy of debate. It should not be slapped down straight away, but should be aired. I should like to encourage the House—this is one of the purposes of the debate—to consider the ways in which an efficient tax system can be created.
Another idea that could be pushed by the Government's computerisation of the tax system is that tax returns should be increasingly filed by corporations and individuals, who so wish, by computer. There is no reason for tax returns to be bound by paper. Now that the Inland Revenue has been successfully computerised, one would like to see much more action in that direction.
The most efficient way of lowering the cost of the collection of tax is, of course, to have fewer taxes. The abolition of many taxes is enormously to the Government's credit. That is why, on the principles that payment should be as convenient as possible and collection should be as cheap as possible, one must look askance at the Labour party's suggestions and its record when it was in government. Then the Inland Revenue was bogged down terribly as it sought to digest new tax after new tax. One remembers the backlog in the income tax department of the Inland Revenue in the 1960s and the 1970s and the chaos that selective employment tax—surely one of the worst taxes on the new and burgeoning service industry—caused among tax collectors.
The logical consequence of a system of clear taxes and cheap collection is that the Government must have as few taxes as possible and that they must be as easily collectable as possible, with self-assessment, as for value added tax, and computerisation, as for income tax and corporation tax. Over the next 10 years, I hope that the Government will press on with this line of reform, because it will lighten the tax burden and spread it more evenly in our community.
Let me consider the principle enunciated by John Locke that every citizen has the right to the fruits of his labour. The top rate of tax in this country is now fixed at 40 per cent., which means that someone paying that rate is working 24 minutes in every hour for Her Majesty's Government. That is no small tax on time and effort. If that tax were raised to 59 per cent., as is proposed, it would mean that 36 minutes of an individual's hour would be 1163 spent on Government labour. That is 12 minutes longer than is spent at present. That means that an executive working a 10-hour day and paying 59 per cent. tax would spend two more hours working for the Government. How does that square with John Locke's idea of every citizen being entitled to the fruits of his own labour?
We must remember that taxation policy takes not merely money but time from an individual. Time itself is an incentive. The Opposition's suggested increase in taxes is nothing more than an indication that under a Labour Government we would be slaves to Her Majesty's Treasury for a greater amount of the day. The time that an individual might have to create his own capital, to provide his own incentive, to take risks and to produce wealth and prosperity would be diminished by a new tax burden.
The old concept, which seemed to rule the country for so long, that held that it was somehow noble to spend public money but ignoble to produce and create private money must be reversed. The nobility, dignity and success of the nation depend not on the spending of public money, but on the creation of private wealth.
When people are subjected to a high marginal rate of tax, they work less hard and less productively. As taxes have been lowered on the top 5 per cent. of earners, the amount that they contribute to the Treasury has gone up sharply. When the top rate of tax was 83 per cent. and 98 per cent. on investment income under the previous Labour Government, and almost all of a rich man's time was enslaved to the Government, the top 5 per cent. of earners in this country contributed only 24 per cent. of income tax revenue to the Treasury. When direct taxes were lowered, people's desire to work grew rapidly. Less time was spent fiddling taxes; they were paid more willingly. As a result, the amount of money that went to the Treasury from those lower rates of taxation increased rapidly. When the top 5 per cent. of taxpayers were paying 40 per cent. only, they contributed 32 per cent. of the overall tax revenue.
§ Mr. Peter Bottomley (Eltham)
Most of us now realise that the Labour party's idea of a square meal is a £500 snack in Park lane. Perhaps the Labour party should inquire from its supporters how many of its professional advisers now pay a reduced tax bill compared with when the Labour Government's taxation rates went up to 98 per cent. If the Labour party's millionaire supporters can confirm that they now pay their taxes openly when previously they found all sort of ways of legally avoiding paying them, my hon. Friend's message may be taken in by the Labour party.
The Labour party should also consider that it cannot run its show on £500 meal tickets. It must get contributions from the great raft of ordinary people who support it. The same principle applies if the Opposition increase taxation in order to increase spending.
§ Mr. Fishburn
I agree with my hon. Friend, and I am sure that his point will be taken. The wealthy supporters of the Labour party—good luck to it that it should have them —will be less wealthy should it succeed in its intention to form the next Government.
§ Sir Nicholas Fairbairn
My hon. Friend mentioned the top rate of tax of 98 per cent. on income as set so short a time ago under the Labour Government. I remember returning to the Palace with the late Lord Arran in a taxi. He gave the taxi driver a 10p piece and said, "There's a 1164 fiver for you, cabbie." The taxi driver said, "No, no, that is only a 10p piece. What do you mean?" Lord Arran replied, "Yes, but I had to earn a fiver to give it to you."
§ Mr. Fishburn
The result is that Lord Arran probably earned fewer fivers and probably took fewer taxis. It is notable that the lower the rate of marginal taxation, the greater the contribution an individual makes to the national treasury. I am not suggesting that that is of itself a good idea, for we should not make the mistake of equating high revenue to the Treasury with successful policy. Successful policy means high revenue to individuals and relatively low revenue needed by the Treasury.
If we accept the notion that in a modern western society approximately 40 per cent. of national income needs to go to Government for Government expenditure, for heaven's sake we should look through the clear lens of economic efficiency, not through that of the politics of envy and the dogmatism of socialism, to discover how to raise that money from the unsuspecting public.
Western society has now concluded that taxes of more than 50 per cent. are morally repugnant and old fashioned. To take more than half of the fruits of man's labour is no longer acceptable practice. My hon. Friend the Economic Secretary to the Treasury may cite two or three European countries where the marginal rate of taxation is theoretically more than 50 per cent., but, in reality, no European country takes more than half of the fruits of a man's labour in direct income tax.
§ Mr. John Battle (Leeds, West)
Would the hon. Gentleman go as far as to support the view that, if a person rents a house privately to another individual and demands more than half of his income in rent, that is unjust? Surely the landlord is asking more in rent than that person can earn. Would the hon. Gentleman apply the same principle to prices as he does to taxation? If prices are too high, people cannot earn enough to pay them.
§ Mr. Fishburn
I am not sure that I understand the question. We are talking about whether a Government have the moral right to take more than half of the fruits of a man's labour. It is an entirely different matter if people agree to such lunacy in a private contract.
I did not expect the hon. Member for Leeds, West (Mr. Battle) to catch the point. We are talking about whether the Government of the people have a right to take mandatorily more than half the fruits of a man's labour. I doubt whether a Government with good sense would pursue such a policy. In the old days, the Labour party found that notion repugnant, as did 18th century progressive thinkers such as Locke and Hume.
Whenever taxes are raised, it must be done in the most efficient way. To tax with the idea of forming such-and-such a pattern of society is wrong. To spend with the idea of forming such-and-such a pattern in society is entirely justifiable. To spend is the way to produce the society desired. Raising the necessary revenue for that, however, must be done in a way that is blind to the social engineering costs. It must be done in the most productive and efficient way.
That principle has been widely understood for the past two centuries in western society. The redistribution of income is achieved through Government spending, not through the revenues that they raise. That was not understood by the previous Labour Government, and that is one reason why the country went downhill rapidly and 1165 became bankrupt. The last time we had a Chancellor of the Exchequer from a Labour Administration it was his avowed policy to squeeze the rich "until the pips squeak". It was not his avowed policy to raise money from the rich in the most efficient manner, to maximise the nation's income. That would have been entirely understandable. Instead, his idea was to tax the rich until the pips squeaked. His policy was one not of economic efficiency but of social engineering—not one that would increase the revenue that could be spent on the poor, but one that would discourage those people who helped to create wealth. They are perhaps a small section of society, but to the right hon. Gentleman they were nothing less than the enemies of the people.
§ Mr. Nicholas Brown
Does the hon. Gentleman accept that, following Labour's policy review, the policies that he describes are nothing like those of today's Labour party?
§ Mr. Fishburn
I am a great follower of U-turns. It is extraordinary how two U-turns make a straight line. Labour has made so many U-turns that it is hard to say where it is at the moment.
It is possible so to tax a society that the social benefits of fairly-spread taxation benefit it. One of the most socially progressive and welcome moves of the past 10 years has been to give women control over their own tax affairs. That reform was introduced by my right hon. Friend the hon. Member for Blaby (Mr. Lawson), and will stand as his most lasting contribution to this country's tax reform. That measure, while not seeking to change the nature of society by tax policy, recognised the changing nature of society. I hope that the Government are even now considering other ways in which tax raising can fairly reflect the way in which British society is developing.
The politics of envy and social engineering, which seek to use tax to exploit one group of people at the expense of another, is not the right way forward, but methods that recognise modern work practices, the part that women play in society, on the role of those who are past the age of retirement but want to remain economically active, should be taken on board in our tax philosophy. This should alter to reflect the changing nature of modern life.
When we make international comparisons, we bump into something that politicians do not like very much—absolute reality. Earlier I said that even in the 17th century tax methods in western Europe were almost identical. If a tax was introduced by the Stuart court, it was only a matter of years before it was adopted by the Hanover, Prussian and French courts. Tax is an international phenomenon.
§ Mr. Dalyell
Before the hon. Gentleman says more about international considerations, will he reflect on the fact that near his own constituency—in fact, in his constituency—there is to be found the Natural History museum, in south Kensington? Is the hon. Gentleman aware of the international outrage felt by those concerned with taxonomy and the basic data of science that this country does not seem to have the money to keep going the internationally famous institution that is to be found in the hon. Gentleman's own constituency?
§ Mr. Fishburn
I am aware of the hon. Gentleman's interest in the Natural History museum, and have heard 1166 him speak on that subject in Adjournment debates. I may point out that the Natural History museum is not, alas, in my constituency. I have to put up with the House of Commons as an example of fine Victorian architecture. In any event, the hon. Gentleman refers to spending, and not to tax raising.
I was making the point that western societies have precisely the same needs for raising tax. If one looks at the chart produced by the Organisation for Economic Co-operation and Development, one sees that over the past 10 years countries overseas have marched hand-in-hand in their requirements for the amount of tax that they need to take from national income. In all European countries, that amount has increased year by year. The percentage of the national income taken in 1979 was about 35 per cent. in the United Kingdom, and today it is nearly 40 per cent. The same is true of the country whose economy is nearest in size to our own—Italy. In 1979, it took 29 per cent. of its national income in taxation; today it takes the same as we do.
That reality points a mocking hand at both sides of the House. Over the past 10 years, the Government have done much huffing and puffing over how they have cut this and that and are spending less—yet the figures show that public expenditure accounts for an increased share of national income. One wonders why the Government allowed themselves to be so regularly hit over the head when they were saying that this and that was being cut when—despite the remarks of the hon. Member for Linlithgow (Mr. Dalyell) about the Natural History museum—the amount of national income being taken and spent, even during years of great economic growth, rose remorselessly year after year.
Is it the Government who should feel ashamed of themselves or the Opposition who, year after year, led attack after attack suggesting that services should be cut or not enough money was being provided in Government expenditure? If the Opposition were to examine the figures, they would know very well the clear, simple and published truth that more money, and a higher percentage of the national income, was spent year after year. All the arguments in this Chamber and elsewhere in the country to the effect that the Government were cutting back and not spending enough were wholly bogus. The reality was that a higher share of national income was being spent each year. One questions whether it is the intention of the Government—or would be the intention of a Labour Government—to increase the share of national income still further. Unless that question is answered clearly, all the rest is so much political garbage. If it is true that we will hold on to taking just 40 per cent. of national income for public expenditure, we must stay with the same patterns and amounts of expenditure.
§ Mr. Peter Bottomley
The House knows that there are some questions that the Labour party answers with a 200-word sentence, and others to which it gives answers running to four pages of transcript in Walden-type interviews. My hon. Friend asked whether it is Labour's intention to increase the percentage of national income taken in tax. The answer must be yes, no, or that Labour has not thought about it. Can my hon. Friend encourage the Opposition to give a clear answer today, because it must be one of those three?
§ Mr. Fishburn
I am sure that the hon. Member for Newcastle upon Tyne, East (Mr. Brown) will at least attempt to give a clear answer. He may find himself in some difficulty, because he must recognise that the amount of money available for public expenditure is directly related to any growth in the economy, and that only if the economy grows will it be possible to increase expenditure, or to hold it at 40 per cent. of national income. That would be one possible and honest answer.
Alternatively, the hon. Gentleman will have to admit that Labour, having examined its expenditure plans, has decided, if not to make a dash for growth, to make a dash for expenditure. He would need to acknowledge that, while all other European countries are converging on a 40 per cent. share of national income, Britain under a Labour Government—at a time when it is emerging from a recession—would be seeking to pursue a unilateral policy of increasing the share of the national income taken by the Government from the European average of 40 per cent. to 45, 46, 47, 48 or 49 per cent.—perhaps the hon. Member for Newcastle upon Tyne, East will tell us.
I can say categorically that if the hon. Gentleman accepts the second argument, that would be an economic disaster for this country as it enters the 21st century. If he accepts the first argument, it follows as night follows day that all the blarney that we hear in the House about how much a Labour Government would spend on public services is nonsense and as dust before the wind. In the end, we will have to spend the same amount of national income.
§ Sir Nicholas Fairbairn
Does my hon. Friend consider that the proposed national investment plan, for which industry will have to pay, and the proposed training tax, which is the selective employment tax in wolves' clothing, would affect the dash for growth?
§ Mr. Fishburn
There would be a dash, but it would be a dash into foreign investment and away from further capital creation in Britain. It would not be a dash for growth in the circumstances that my hon. and learned Friend depicts. It would be a dash to the past and, I am afraid to say, to a rapid contraction of our economy.
The Government's taxation policies in the past 10 years have followed the seven principles on which tax raising has been founded in all west European countries in the past two centuries. Their policy was clear from the start. They have lowered direct taxation and increased indirect taxation. Greater individual freedom has been given; the individual can choose where he yields up his taxes. It may be on his habit of cigarette smoking, or on his car by paying more in petrol tax. It will be on this, that or the other item; as he spends, he will pay tax. That is a fair and modern way of raising revenue.
Because of the diminution of marginal rates of taxation, people who earn more are now making a greater contribution to Treasury funds. The Government have put into practice a major principle enunciated by Adam Smith: tax must be related to the ability to pay.
The Opposition are muddled. They have proposed nothing that counts as a clear policy, and have not said whether their spending policies would increase or maintain the share of national income taken by government. I hope that the Government, when they are returned to office 1168 after the next general election, will continue with their clear policies and will hold—in time, I hope, diminish—the amount of national income taken from the taxpayer.
§ Mr. John Battle (Leeds, West)
We are increasingly aware of what could be described as anti-tax language. It is not confined to Conservative Benches; it is used widely in society. People believe that taxes are an unjust confiscation of a citizen's deserved earnings and that the purchase of goods and services from the private sector is an exercise of individual freedom. Phrases such as "consumer sovereignty" are used. That reinforces the myth that the consumer is all-powerful. However, it rings hollow in the ears of millions of people who cannot exercise choice because their incomes are too low.
Government figures show that poverty is increasing. The view that we are all consumers neglects to take account of the fact that we are also citizens.
§ Mr. Battle
I refer the hon. Gentleman to the Library where he can look at the latest Government figures on households on low incomes. They make it plain that people on benefit are living in poverty and many people who are not on benefit are living below the poverty line. We regularly debate that subject in the House. The Government try to hide behind statistics. They have redefined the terms on which a person is considered to be unemployed and denied benefit to 17-year-olds.
I am sure that you will rule me out of order, Mr. Deputy Speaker, if I continue on that subject. If the hon. Member for Cambridgeshire, South-East (Mr. Paice) does not believe that there is poverty in Britain because he cannot agree on a definition, he should test his eyes and ears by talking to his constituents who are struggling to live on unemployment benefit. Perhaps the hon. Gentleman will remind me how much that benefit is. It is £41.40 a week. That is much less than the amount that Conservative Members earn.
§ Mr. Battle
Not at the moment. I shall develop my argument, and then I shall graciously give way to the hon. Gentleman.
Are Conservative Members still expressing the view that taxes are a moral evil and, at best, a burden begrudgingly paid? During the election campaign in America, a pro-Bush car sticker read "Every man is born free and taxed to death"—notably it referred only to men. I was interested in some of the annual reports of the charities, such as the Convert Aid Society. Its report contained sentiments that were typical. It stated:Inheritance tax now takes a substantial toll even from quite modest estates—if you own your own house it is unlikely that your heirs will escape.However, since bequests to charities are exempt from tax, the question you might wish to ask is whether you would prefer merely to enrich the Exchequer or help give a home." The Exchequer is seen as a malign, imperial figure—[Interruption.] We are hearing echoes of that from the Conservative Benches. Contributing anything in taxes is considered a moral evil.
1169 I recently read the illuminating book by Nigel Tutt "The History of Tax Avoidance". It is interesting to look at all the guides to tax avoidance that are to be found on bookshop shelves. They reinforce the impression in my mind that tax legislation is a vast playground for special interests that plead for exemptions and use loopholes to get people with some pull off the hook. That is also the impression given by some of the Conservative amendments to the present Finance Bill.
The common view outside the House is that tax is a tedious, mysterious world of codes and numbers, and is a matter for experts. I agree with the hon. Member for Kensington (Mr. Fishburn) that taxation is central to government. Sabine's "A Short History of Taxation" makes it clear that we can have taxation without government, but we cannot have government without taxation. Taxation is part of the contract of civilisation. It is part of the social, economic and political development of society.
The question is not whether taxes should be raised at all, despite the slogans of the new right or the recent north American, so-called "Tax Freedom Days", which present the view that paying taxes is like throwing money away. They reinforce the view that the public sector is a burden on citizens and limits their freedoms. Attacks on taxation in principle are thinly disguised attempts to soften the public to attacks on the public sector. That is the agenda. There is an attempt to deny the fact that any public sector activity provides crucial and vital services that benefit the whole of society. In a democracy, we can collectively agree to raise funds by taxation to a common Treasury for those activities. I fail to understand how reducing services enhances individual freedom.
I remember when proposition 19 was introduced in California. The fire service was privatised and people were told that, through the insurance policy on their house, they were contracted out to an individual fire service. It seemed to work for a while, but when a home in Beverly Hills was burned down—thankfully, no one was injured—and the owners thought that they would claim back on the insurance to rebuild the property, they were told that they could not do that because the contract had been with a fire service whose engine had been out elsewhere that night, so the cover was broken. They did not get their money back. Within months, a public fire service was reintroduced in California and taxes were increased to put on the road fire engines to which the whole community had access. Why do we need to go around the wheel of reinventing public services by privatising them, only to discover that they need to be brought back into public ownership so that the community does not suffer—for example, by catching typhoid if there are no public health facilities?
Conservative Members agree, because in practice they are not opposed to taxes. The Conservative party pretends that it is not taking money through taxes. In yesterday's debate, a Conservative Member referred to the Government's slashing of taxes. It would be more honest if Conservative Members spelt out the truth under the Government—taxes have increased from 34.75 per cent. in 1978–79 to 37.75 per cent. this financial year. The Government are taking more taxes from the British people. The Government may say that they have switched to indirect taxation. What did they do when they needed 1170 money to make good the damage of poll tax? They switched to indirect taxation and shoved up VAT to 17.5 per cent. The Government have massively increased indirect taxation.
§ Mr. Battle
Conservative Members can hardly ask how we voted on the poll tax. We voted 170 times against the poll tax, whereas Conservative Members voted for it on practically every possible occasion. They now have the nerve to tell the country that they are against the poll tax, that they have dropped it and are now introducing something else—so much for all their talk of principles when it was introduced. As my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) said in an intervention, we were told that ability to pay was no longer relevant. Because the Government imposed such a burden on people, the only way out was to increase VAT and to tell people that they would get £140 back. The hon. Member for Wanstead and Woodford (Mr. Arbuthnot) may like to explain why many people have not received that money back. As the Secretary of State for the Environment revealed, the £140 was a headline figure. It was not money in pockets. People at the bottom of the scale did not get their £140 back. That is typical.
The anti-tax campaign has been a cover story, because the key aim has been to discredit progressive taxation. The aim has been to undermine the idea that the rich should pay a larger proportion of income than the poor. The 1980s were the decade of the yuppie, of quick fortunes on the futures market and of overnight killings on real estate and property development. They will not be remembered for consideration or for any caring for the poor. They will go down as the "loadsamoney" decade and as the age of record sales in Christie's and Sotheby's.
The hon. Member for Kensington referred to Adam Smith, but I was surprised that the hon. Gentleman did not quote the writings in which Smith said that the tax system should overcome some of the inequalities in wealth and income. Adam Smith argued for a progressive taxation policy and said:It must always be remembered that it is the luxurious and not the necessary expense of the inferior ranks of people that ought to be taxed.Selective quotations by Conservative Members will not lead in a helpful direction.
Adam Smith's principles have not been followed. Under the Government, tax reform has always meant lighter taxes for the wealthy and a financial squeeze on everyone else. Mr. John Hill, in "Changing Tax"—which I recommend to hon. Members—spells out what happened since 1979 in tax and benefit changes. He says:Remarkably what has happened has been a virtual zero net cost reform. The cuts in direct taxes have been entirely paid for by cuts in the generosity of benefits. There has indeed been a major redistribution from those on low incomes to the better off. Overall, the bottom 60 per cent. of the income distribution has lost, while the top 30 per cent., especially the top 10 per cent., has gained. The losses for the bottom 50 per cent. average out at nearly £8.50 per family—a substantial proportion of their net incomes—while the top 10 per cent. have gained nearly £40 per family. Overall, the bottom half of the population has lost £6.6 billion of which £5.6 billion has gone to the top 10 per cent., and indeed £4.8 billion has gone to the top 5 per cent.The tax-cutting 1988 Budget reduced the taxation rate for top earners from 83 to 40 per cent. The take from capital 1171 gains, inheritance and capital taxes has decreased. There has been a redistribution of wealth, but it has been from the poorest to the richest.
§ Mr. Bill Walker
Does the hon. Gentleman accept the principle that the objective of taxation is to raise money to meet the Government's expenditure programme and, therefore, a change to a lower tax rate produces a larger gain from those on higher incomes than occurred at a higher tax rate? Surely that achieves exactly what the Government want. Did not that happen with the reduction down to 40 per cent?
§ Mr. Battle
If that were true, I should be interested in the argument, but the rules have favoured the rich. I shall come to the precise details of how that works in practice when I examine the salaries of the top earners. They found that their tax payments were massively reduced. Therefore, they are now putting in for massive pay increases because they can benefit from low taxation.
By 1980, 86 countries had substantially reduced their tax rates. I was interested in the remarks of the hon. Member for Kensington about the tide of history. Was it Fukuyama who decided to announce the end of history? Perhaps it is the end of economic history and the hon. Gentleman believes that we can go in no other direction. In Bolivia, 75 per cent. of income tax is collected from labour; only 20 per cent. is collected from capital. Has that resulted in a reduction in poverty? No; it has resulted in a massive increase. What has been the result of the Government's policies here? There has been an increase in poverty, and people in poverty have been watching the highest earners increase their rewards.
§ Mr. Arbuthnot
I am listening with increasing incredulity to the hon. Gentleman. That he should rely on the Bolivian tax system to tell us how to operate is extraordinary. He said that we reduced the top rate of income from 83 per cent. in the 1988 Finance Bill. Would he care to confirm that it had been reduced from that rate long before?
§ Mr. Battle
I am pleased to accept the hon. Gentleman's correction. The rate was reduced between 1979 and 1988. Let us make no bones about it—the Government reduced the top rate to that level.
Conservative Members challenge me about the figures. In the Conservatives' campaign guide, which I suppose is given to all Conservative Members and to prospective candidates, they say: "The Government's consistent aim has been to bring down the tax burden when it is prudent to do so … Progress has been considerable. The tax burden as a proportion of national income or Gross Domestic Product, has fallen steadily from its peak in 1981–82.On the very next page of the same campaign document, there is a table which clearly shows that tax, measured as a proportion of national income, has increased from 34.75 per cent. in 1978–79 to 37.75 per cent. in 1991. Not that I expect clear statements from Conservative Members when we heard the Chief Secretary to the Treasury on the "Today Programme" come out with the remark:We cut income tax, we cut tax rates overall—it's the burden of taxation—because we have run honest public finances.I am tempted to add that it depends what one means by the word "honest". It seems that the Chief Secretary was being economical with the language because, according to the latest figures produced by the Central Statistical Office in 1172 March this year, between 1979 and 1988 the burden of taxation increased for people on middle and low incomes, while it decreased only for those at the top. In 1979, taxes as a percentage of gross income for the bottom fifth of households, ranked by incomes, were 30.5 per cent. and in 1988 they were 39.7 per cent.; taxes for the middle fifth were 37.6 per cent. in 1979 and 39.2 per cent. in 1988; and, for the top fifth, taxes were 37.6 per cent. in 1979 and 34.5 per cent. in 1988. The poorest have paid more, because their tax burden has increased by 9.2 per cent., while those on top incomes have enjoyed a decrease of 3.1 per cent. of the taxes that they pay.
When we hear about salary increases for top earners, we should be aware that the top executives of the largest companies are given pay rises that are running at 19 per cent.—twice the rate of inflation and the growth in average earnings—yet at the same time the very same people are urging their work forces to accept modest wage rises in the national interest or even pay freezes. In one case, in Leeds, they are asking the work force to take a 7.5 per cent. wage cut, which the work force accepted on behalf of the company. When one man is paid £4,194 a day and has just taken a 17 per cent. rise, despite a fall in his company's earnings, it rings hollow to be told that he needs to be left out of taxation as an incentive.
The hon. Member for Cambridgeshire, South-East asked me for a definition of poverty. I offer him a definition of the word "rich". In our society being rich has come to mean being hard to tax and being able to employ armies of highly paid accountants and tax lawyers, who themselves make a handsome living by working out ingenious ways to beat the system to ensure that they keep all their income.
When Conservative Members refer to Labour's tax policy for fair taxes and before we get the lurid headlines in the tabloid press—as we always do—saying that Labour intends to tax everyone off the face of the earth, it is worth reflecting on and answering the question, "Why should hon. Members not pay a little more tax on their basic salaries to ensure that funds are available for pensioners, for the unemployed, for the health service, for those needing income support, for the schools system, housing, transport and environmental protection?" There has to be some redistribution of income in our society. We cannot allow the maldistribution that has gone on under the Conservatives to continue.
§ Mr. Paice
I am fascinated to hear the hon. Gentleman say that he thinks that people on the salaries of Members of Parliament should pay more tax. However, I find it difficult to relate that to the Labour party's position on child benefit in the past few years—the hon. Gentleman said that it should be universally increased. However well off one is, one's benefit would thus be increased and it seems odd that he is saying that the wealthy should pay more tax but on the other hand should receive more benefits.
§ Mr. Battle
If the hon. Gentleman is opening the debate to include child benefit, I am more than happy to enter into the argument. He will remember that child benefit was a part of the income tax system as family allowance and was deliberately taken out and made into a non-means-tested benefit. It was shifted from the earnings of the adult parent as it was for the cost of bringing up children, to ensure that 1173 it reached children—the child benefit book is in the mother's name. There was a switch in the system and there is no inconsistency in that.
Some Conservative Members would like child benefit to be taxed and if that is the case those hon. Members should stand up and argue it in the House. Some of us would then have an argument about that. However, the hon. Gentleman is hardly in a strong position, because child benefit has been frozen by the Government. There was a little release this year in the Budget, but for years the value of child benefit was frozen. Its value has yet to catch up with its 1979 value in real terms. The Government have cut child benefit and I am sure that the hon. Gentleman is aware of all the rows in the House and outside about the iniquities of that sort of policy.
I recommend a book by the Bishop of Manchester called "Taxes, Burden or Blessing" in which he argues:Every decision about taxes involves important moral considerations about justice and economic well-being for all and not simply the majority.He argues that taxes offer an opportunity to bring society into a vision of justice, equality and participation by all and he calls for aradical change in our attitudes towards what we do in common and how we pay for it.I disagree with the hon. Member for Kensington as I do not think that we can separate the distribution of services from the purposes of raising the money in the first place. People want to know what their taxes are spent on. That is why when asked questions in opinion polls some people—in the most recent polls it is now a majority—say that they would be prepared to pay a bit more tax according to their means so that, for example, the health service can be properly funded.
Democracy is about people having a role in determining the level of taxation and the distribution of taxes and not simply being consumers. A Government who are the real friend of the taxpayer take their trust and understanding with them and the consent to use the money collected wisely on behalf of the whole community according to principles of distributive justice and the common good.
If we want society to be rather more than a mere collection of individuals, we must tackle the common needs and problems of society. That means tackling environmental issues and also poverty, housing, education and health in our society. Our proposals for a fairer distribution of tax and a fairer taxation system—that is all that we are asking—are essential, because they will bring the rich and the poor into a closer relationship. Because people understand that and do not want further divisions in society, with the rich getting infinitely richer and the poor getting poorer, they will vote for our fair and just taxation policies at the next election and there will be a Labour Government to implement them.
§ Mr. Dalyell
On a point of order, Mr. Deputy Speaker. It is nearly 11 o'clock and, not wishing to interrupt a parliamentary colleague's speech, may I ask whether there has been any request from the Government for a statement on the serious situation relating to intact Iraqi nuclear weapons which may be stored near the Turkish border and the issue of monitoring the nuclear centre at Tuweitha? In the light of Christopher Gunness's report, which was the second item on the news at 6 and 7 o'clock this morning 1174 on BBC radio, perhaps the Government would like to make a statement and to clarify what action they will take through the United Nations on reports which, if true, represent an appalling situation.
§ Mr. Deputy Speaker
I have not received any requests for permission to make a statement. Doubtless what the hon. Gentleman has said will be conveyed to the appropriate Minister.
§ Mr. Arbuthnot
On a point of order, Mr. Deputy Speaker. As it is nearly 11 o'clock, may I say that I understand that today, at about 11.30, the retail prices index figures are due to be published. I wonder whether I could ask the Minister to refer in his speech to the retail prices index figures, because we never hear enough about them.
§ Mr. Deputy Speaker
Again, that is not a matter for me. I am sure that the Minister's speech will be in order when he makes it, if he catches my eye.
§ 11 am
§ Miss Emma Nicholson (Torridge and Devon, West)
The debate reveals the deep and unbridgeable divisions between Conservative and socialist philosophy. Conservatives stand for freedom of the individual, the family, the community and the country. Labour stands for statism, centralism and patronage, representing a corrupt and discredited political modus vivendi, more appropriate to the South American mafia than to the proud and distinguished country which is the United Kingdom.
It is unusual to have the chance to discuss the distributive nature of modern Governments. The distributive nature of modern Government expenditure is seldom questioned. Therefore it is to the credit of my hon. Friend the Member for Kensington (Mr. Fishburn), who initiated this private Member's debate, that we have this chance to debate that subject. I warmly congratulate him on his thoughtful and interesting speech, which outlined points that many of us do not have much chance to consider politically during the rough and tumble of our normal debates. This is a very unusual opportunity which I warmly welcome.
The fundamental difference between the Conservative and Labour parties is that while socialist dogma dictates that everyone's earnings belong to the state, Conservatives know that they belong to the individual who then freely, and with no guilt, gives back to the state—to the Treasury—a proportion of his or her income to carry out programmes that that individual supports or which, in a democracy, the majority of voters have said that they support.
Furthermore, it is clear that the individual voter wishes the Government to achieve on his or her behalf the least taxation for the maximum effect on those packages of expenditure in public life that have been deemed to be more effectively and more economically carried out by the public purse. It is seldom questioned in our society, but I believe it to be true that it is not the amount that we raise that we should question so much as the way in which we spend it. In many senses, it is not a question whether the Government raise 39, 40 or 41 per cent. in taxes. I wish it to be very much less than that. It is a question of how economically and effectively the Government use the funds that they have raised. The key question should always be: will that package of work be more effectively carried out 1175 if it is not undertaken by the Government? When we look at the redistributive nature of our modern taxation system and Government expenditure today, again it is true to say that, in contrast to the Opposition, Conservatives want everyone to earn a handsome living. That phrase was used a moment ago in a wholly derogatory sense.
Child benefit is a universal benefit, and—
§ Miss Nicholson
Perhaps the hon. Gentleman will allow me to complete my sentence. Child benefit is a universal benefit, and it is our desire that state taxation systems should help the poorest of the poor. Universal benefits do just the reverse. That is the great weakness of universal benefits, if we want to help the poorest members of society. Universal benefits spread exactly the same sum of money throughout the whole of society.
§ Mr. Dalyell
Before we leave the question of what is or is not handsome, was the hon. Lady pleased and flattered by the statement that she was the only Conservative lady Member of Parliament who dresses as well as the Labour lady Members of Parliament? Would she not be better, given her opinions this morning, to stick to dress rather than politics?
§ Miss Nicholson
As I am not sexist, I would not wish to criticise Opposition Members for their looks or demeanour, or for their discourteous behaviour. However, Conservative Members know that Labour men as well as Labour women Members of Parliament have been Folletted. They were taken out because they were deemed to be so unattractive by members of their own party. It is not Conservatives who make sexist and rather dreary judgments of Labour men and women Members of Parliament. It was a leading member of the Labour party who said that, alas, they were so unpalatable that they had to be dressed up—that they had to be cosmetically altered from top to bottom.
I prefer the reality of a Labour Back-Bench Member. A colleague who sits in front of him saw that the television cameras were shining too brightly upon his bald pate, so the balding Member went out and bought a wig. A colleague who sits behind him was heard to refer to the dead rat that he now has to look at, sitting on the Bench in front of him. Conservatives believe in the diversity of human nature and, therefore, of human appearance, so we do not fuss in any way about what we look like.
The hon. Member for Linlithgow (Mr. Dalyell) is an Old Etonian. They are well known for their great desire to look lovely all the time. I did not read the newspaper comment to which he referred. In any case, I have no interest in such things. I am a genuine politician. I am here for the good of my constituents. I am not here for this intolerable frivolity. I shall not give way to someone who, since he happens to be a Labour Member of Parliament, is sexist, dull, drab and badly dressed.
Socialist dogma—the belief that everyone's earnings belong to the state—fails to recall the lessons learnt in eastern Europe, which is that me and mine is more productive than us and ours. It is the Folletting effect—pulling all the dress money for those who sit on the Opposition Benches into the centre—that has given us this uniformity of padded shoulders and carefully contrived colour schemes. This is a job-lot purchase from the 1176 old-style state stores in Russia—soon to be privatised, I am delighted to say. Conservatives, however, believe in people being able to purchase exactly what they want.
More seriously, Mr. Deputy Speaker, me and mine is more productive than us and ours. That is why, when we look at the Labour legacy of taxation that we inherited in 1979, we see that, due to Labour's desire to take more control at the centre and to depress the individual's unique contribution to his or her life and to that of the community, the basic rate of income tax was increased from 30p to 35p in the pound, giving the United Kingdom the highest rate of income tax of any Organisation for Economic Co-operation and Development country, except Denmark. Personal allowances ceased to be index linked, with the result that more people paid tax and more people paid income tax at the higher rate than ever before.
By 1978–79, 1.8 million more people were paying income tax than in 1973–74. The starting points for higher tax rates and investment income surcharges were reduced and halved respectively. The top rate of tax on earned income was raised from 75 to 83 per cent., and the top rate on investment income increased from 90 to 98 per cent. It was a third-world taxation approach, surprisingly reminiscent of India's.
Despite Labour's fine talk about equal opportunities for women, the previous Labour Government did not reform taxation policies for married women. Despite their hurling charges against the Conservative Government, they did not care about women. Successive Conservative Chancellors made the major reforms to which my hon. Friend the Member for Kensington referred.
The Conservative women's national committee made the first move while the Labour Government were in power in the late 1970s. Joan Seccombe, who subsequently became a Dame and member of the House of Lords and who is now Conservative party vice-chairman with special responsibility for women, worked hard with national committee members such as Dame Margaret Fry and others to produce a keynote report proposing that when the Conservative party took office, which they so rightly foresaw, it should alter taxation policies for married women.
That tax reform had been overdue since Julius Caesar arrived in the United Kingdom. It is curious that when he wrote about the United Kingdom he said that Britain was not only a grey and rainy island but that we were the oddest nation because we were unique in treating men and women equally in law. It took a Roman invasion to destroy that fine principle and a Conservative Government to put it right.
§ Miss Nicholson
The hon. Gentleman has had his chance; I shall not give way to him.
Before the Married Women's Property Act 1851, taxation was relatively light and married women were not people in law. The same applied under the Labour Government, who did not alter taxation for married women. That Act allowed married women to own property and to inherit.
Previously, the only married women who had that right were rich city widows. No doubt Old Etonians from the Labour party would have been trawling the city in the last century to find rich city widows. They were rich because they were the only married women who were allowed to 1177 inherit property. That is why they are identified so finely in Chaucer's "Canterbury Tales". Even then, those widows had toy boys because they were able to inherit money. The 1851 Act corrected that, but it did not allow for independent taxation of women; it took a Conservative Government to do that.
Why did Labour make no changes? Presumably, because it costs money and the Labour party sacrifices any principle if it demands real financial commitment. That is a political prostitute's attitude—it cost money, so married women were not allowed independent taxation. Labour did not really care. I say that with some feeling, because when my right hon. Friend the Member for Blaby (Mr. Lawson), the then Chancellor, announced his momentous reform, the shadow Chancellor did not even refer to it. What a shoddy crowd the Opposition are; they really did not care.
I contrast that with the tax reforms of the Conservative Government, which were made because they are central to the Conservative philosophy and because we practise what we preach. Our goals were to reduce the basic rate of income tax, which we have done and will continue to do, from 33 to 25 per cent., with an achievable goal of 20 per cent. Another goal was to raise the thresholds at which tax become payable, which we have done, taking 2 million people out of the income tax system. We planned to switch from tax on earnings to tax on spending, which we have done with value added tax.
Before the Opposition bestir themselves from their political slumbers and complain about value added tax, I remind them that we have the second lowest VAT average in the European Community. VAT here ranges from zero to 33 per cent. That is an incredibly wide tax range and no harmonisation is planned or possible .because of that broad band. We have an average outturn of just over 11 per cent. That fine track record was achieved because 25 per cent. of all goods are zero rated.
We have encouraged savings through devices such as the tax-exempt special savings account, which was introduced by the present Prime Minister. We have simplified the tax system by abolishing seven major taxes—national insurance surcharge, investment income surcharge, capital duty, capital transfer tax, development plan tax, composite rate tax on savings and stamp duty charges on shares and on property outside London. In addition, as my hon. Friend the Member for Kensington said, we have carried out a massive computerisation programme of the Inland Revenue. It is one of the finest large computer systems in Europe and it will prove powerful and effective.
The Labour party has not admitted that it wants to bastardise the tax system by a mismatch that is alien to our political philosophies in the United Kingdom of putting together tax and benefits and by compiling a huge detailed record on each citizen in the United Kingdom to achieve what could only be a grotesquely unfair rates system.
We have helped business considerably by restructuring business taxation so that the new main corporation tax of 33 per cent. is one of the lowest in the industrialised world. We have reduced the small companies rate from 42 to 25 per cent. and brought it into line with the basic rate of income tax.
1178 I have some points to make on which I should be glad of clarification from my hon. Friend the Minister. The first is the question of advance corporation tax, which is paid by companies on their dividends and shareholders. It appears that companies investing abroad are penalised because when they distribute in the United Kingdom the overseas income generated, little or no relief is available for the advance corporation tax payer. Secondly, over the years, that causes severe cash flow penalties, compared with companies that are wholly or mainly investing in the United Kingdom. Thirdly, that depresses the market capitalisation, because lower earnings are reported where advance corporation tax is charged—against profit rather than against tax payable or profits earned in the United Kingdom. Thus, the market capitalisation is depressed.
Secondly, perhaps the Minister will comment on the issue of benefits in kind, with particular reference to company cars. After all, scale benefits are being increased dramatically to discourage the provision of company cars. Following that, it seems that there may be an inconsistency of approach by the Inland Revenue and Customs and Excise in taxing the benefits where cash alternatives to the provision of cars are not proposed by companies.
Thirdly, on foreign exchange gains and losses, current taxing legislation is unclear and uncertain, leading to potential muddle. Little progress seems to be happening on that front, despite the recently issued consultative document. I should welcome the Minister's comments on those three points.
I warmly welcome the greatly enlarged tax incentives for charitable giving. I have had the good fortune to be closely involved for many years with non-governmental organisations in the United Kingdom and overseas. Indeed, for 11 years I was .a staff member of the Save the Children Fund. Following that, I have been concerned with the World Association of Girl Guides and Girl Scouts, the Duke of Edinburgh's award scheme and others. Now that I am in Parliament, I have the opportunity as a volunteer to be heavily, and I hope constructively, involved in the workings of about 58 voluntary organisations carrying out crucial work in the United Kingdom and overseas.
All the institutions and groups with which I am concerned warmly welcome the splendid inititives that the present and previous Conservative Governments have taken in the last decade in easing giving to charity from tax perspectives. That has made an enormous difference to their income and we hope that further incentives will be forthcoming from the Government.
Overall, the Government's aim is to reduce the tax burden when it is prudent to do so, and in particular to reduce the basic rate of income tax. Much progress has been made, which I warmly welcome, and I am grateful to the Government for the fact that the tax burden as a percentage of gross domestic product has fallen throughout our period in office.
§ Mr. Alex Carlile (Montgomery)
I congratulate the hon. Member for Kensington (Mr. Fishburn) on choosing this interesting and tricky subject for debate. It has been an illuminating debate so far.
The hon. Member for Torridge and Devon, West (Miss Nicholson) raised the important issue of the taxation of married women. I agreed with the thrust of her remarks, 1179 possibly apart from her implication that the hon. Member for Linlithgow (Mr. Dalyell) might be regarded as a toy boy. She may agree that there is also cause for concern about the position of unmarried women, many of whom, rightly or wrongly, live as part of a couple. It is important to pay close attention—not only in relation to taxation but in other respects—to their legal position vis-a-vis their partners and the state.
The hon. Lady referred to charities, and I join her in welcoming the changes that the Government have made which are of benefit to charities. I hope that, with her great and respected experience of working in the charitable sector, she agrees that charities continue to labour under an archaic legal framework and that it is to be hoped that in the next Session of Parliament the Government will grasp the nettle, for which, unfortunately, they were not able to find time in this Session, for a wholesale review of charity law.
I raised that issue earlier in the week in Committee upstairs on the Finance Bill. Charities will not be able to operate in a sufficiently clear and predictable environment unless charity law is reformed and we are able to look at charities throughout the statutory framework in a modern context.
§ Miss Emma Nicholson
I am not sure whether toy boys must have slightly slenderer waists than the hon. Member for Linlithgow (Mr. Dalyell). I am not being discourteous to him when I say that I prefer him as a non-toy boy.
I welcome the remarks of the hon. and learned Member for Montgomery (Mr. Carlile) about charities. The purpose of revising charity law should primarily be to stop the public being ripped off by so-called charities which are not charities. I see that as the key initiative. Proper charities which wish not to fall into that trap can simply register as companies, when they come under the provisions of company law. The best charities do that now.
§ Mr. Carlile
I have some professional experience of dealing with frauds in the charitable sector. They cause great unhappiness and anger to many members of the public.
Paying tax hurts because it involves the compulsory removal of money which we feel we have worked hard to earn. Taxes should never leave more than that most basic and inevitable sense of injustice which we feel when we are compelled to give our money to the Government, like it or not.
Unjust taxes are ultimately uncollectable, as the Government recognised when they decided to abolish the poll tax. At best, we cannot expect even just taxes to gain more than a grudging acceptance from the public. Yet they are essential if we are to sustain a society in which there are as few illiterate, poor, sick and homeless people as possible. The duty of government is to raise the taxes that are necessary to avoid those social evils which are self-evidently unacceptable and divisive.
That has not happened under the present Government, whose achievement falls short of their often-expressed ambition. Marginal rates of tax have been reduced, but many of our citizens—especially those with small businesses living on tight financial margins—say that under Conservative rule they have found themselves paying more tax than ever before.
The uniform business rate is a tax. It is not in proportion to the earnings of businesses. It is related to the 1180 size of premises, which may often, for historical reasons, bear no relationship to the prosperity of the business. It has gone up by 10.9 per cent., way ahead of inflation, and it greatly hurts small businesses.
I see that starkly in my rural constituency of Montgomeryshire. For example, there is an old established post office in the very small town of Llanfair Caereinion. The uniform business rate for that shop is so great that the family that has owned it for some time has had to place it on the market. The business rate has been the final nail in the financial coffin of its future. It has been rated so highly because 100 years ago the shop sold everything from food to basic agricultural equipment. Today, the public go to the B and Q and Payless stores to buy their garden spades, ironmongery and so on. As a result, the range of services offered by village shops is necessarily reduced.
The uniform business rate is a tax which has hurt small business very much. The new council tax promised by the Government is barely more just than the poll tax because, like the Labour party's proposals, it remains based on what seem to be notional or often fictitious property values which bear little relation to reality.
It is right to say that the very rich have benefited under this Government. The most articulate who have gained the most under the Government's taxation policies. That fact tends to distort the public report on the effect of the Government's policies on personal taxation. When one analyses carefully what has happened, it can be seen clearly that the gap between the very rich and the very poor has increased enormously under this Government at least partly as a result of their taxation policies.
I should like to be able to say that we can at least have confidence in the Government's predictions about the economic climate in which they can frame future tax policies. Unfortunately, however, their forecasting is so bad that it is not possible to have such confidence. I shall give just one example.
In the 1989–90 Red Book, the Government forecast a cumulative public sector debt repayment of £19 billion for the period 1990–93. In this year's Red Book, they predicted an increased deficit of £19 billion over the same period. That means that the forecast of cumulative public sector debt repayment for that period is £38 billion out. That is hardly a cause for trust or confidence for the future.
I also suggest that the Government have shown a surprising lack of imagination in dealing with the tax regime. It is especially surprising because, when he was Chancellor, the right hon. Member for Blaby (Mr. Lawson) often spoke about reforming the tax system and modernising it for the future.
National insurance contributions are, in reality, a tax. The very term "national insurance contributions" is a lie which has been perpetuated for many decades. The truth is that from the moment a Labour Government introduced national insurance contributions immediately after the war the contributory principle has never applied. Those of us who pay money into private pension schemes know that our money goes into a pension fund and that, subject to the performance of the fund managers, when we reach the beginnings of our dotage we shall receive an income related to the performance of the investment. National insurance contributions go into the same fund as road fund licences, betting pool duty and every other tax. Therefore, the term "national insurance contributions" is a fiction. It is high time that the Government took steps to 1181 integrate income tax and national insurance contributions and described the NIC as the tax that it really is. They should thereafter integrate the tax and benefit system.
The personal tax system is very difficult for ordinary members of the public to understand. Even people who work in relatively straightforward jobs with a straightforward pay-as-you-earn code find it impossible to explain to their friends and neighbours—let alone to themselves—exactly how the tax—the pounds and pence—that they pay is calculated. Under a unified tax and benefit system it would be easier to understand personal taxation and benefits.
As for benefits, I am given to understand that in Department of Social Security offices there is now a four-volume looseleaf explanatory encyclopaedia that explains to the experts sitting behind the counter what the legislation means. That cannot possibly be the comprehensible, realistic and useful system to which we should aspire in a society in which the citizen should be able to understand at least the basics of Government activity.
It is time that we considered seriously the question of self-assessment of income tax. It is right to acknowledge the improved efficiencies in the Inland Revenue, although our accountants do not always find it easy to locate them in the bureaucratic system. Nevertheless, the Inland Revenue is a huge department dealing with vast complexities. It exercises a wide range of discretions and interprets legislation in many ways, perhaps nearly as many as there are collectors of taxes.
The self-assessment system works quite well for value added tax. There are now many refinements of VAT which have also made that system complicated, and I question whether they are all necessary. However, the system works reasonably well. The inspections carried out by Her Majesty's Customs and Excise reveal that, for the most part, people assess their VAT honestly and that in many businesses there may be a tendency to underclaim rather than overclaim inputs. Why could not a similar system work for a simplified income tax?
The hon. Member for Kensington rightly said that self-assessment involves considerable expenditure to the assessor, to the trader, to the individual who must assess his own tax. However, if one considers the bills that self-employed people—and, as one of them, I declare an interest—pay to their accountants, I do not believe that it could cost very much more. I hope that my accountant reads this speech—perhaps I should send him a copy. I do not believe that people could pay very much more to their accountants if the system was drawn sufficiently clearly. It would certainly save the Government a great deal of money in the long term, although it would take some time and expense to set up.
§ Sir Nicholas Fairbairn
The hon. and learned Gentleman probably could not work out his income tax himself, so he would have to send details to his accountant and the bill would be multiplied by 10.
§ Mr. Carlile
I doubt that. I suspect that if there was a self-assessment system, as there is in the United States, the basis of the calculation would have to be very much simpler than at present.
Should we have confidence in what might happen to taxpayers under a Labour Government? I have talked 1182 about reforming the system, but we have heard little about that from the Labour party. We have heard merely about the raising of more taxes.
Let us consider—and the Labour party cannot run away from this issue—what would happen under Labour's proposals to, for example, a police inspector with five years' service. He is an important public servant, but he would be significantly worse off.
To take another example, the Government and, indeed, all political parties talk a great deal about encouraging enterprise. We should not underestimate the importance to national prosperity of the high income earners who earn several times the national average but fall far short of the absurd salaries claimed by some chairmen of public companies. A range of entrepreneurs will be discouraged from enterprise if they are overtaxed. The Labour party's proposals are unjust to precisely those people upon whom the national wealth depends.
The Labour party's proposals are fuzzy in the extreme. Labour has spoken of introducing a reduced rate band of 19 per cent., but has not told us why or when. Surely that proposal would be regressive compared with raising basic tax allowances. Why has not the Labour party recognised that allowances are much more progressive than reduced income tax rates? That seems to be a basic arithmetical fact which it has failed to recognise, and gives us cause for concern about its competence to deal with Treasury matters.
It is possible to produce a personal tax structure which is fairer than the one we have by raising basic tax allowances—a progressive measure; by adjusting the NIC ceiling to nearer the upper point of the basic rate band; by increasing personal taxation—something which my party has never sought to hide—but only for those who are earning several times national average earnings, in a way which would not discourage enterprise; by paying for local services by a tax related to the ability to pay, rather than by an unfair system based on property values which are often arbitrary; and by spending the revenue raised in a way which is seen as an investment in the country's future rather than merely profligacy, incompetence or muddle by government.
We should start with a clean sheet of paper in our consideration of taxation policy. We need to achieve the ends that will satisfy the taxpayer, so far as he or she will ever be satisfied by taxation, yet ensure that the national wealth remains intact.
§ Mr. Arbuthnot
On a point 'of order, Mr. Deputy Speaker. I understand that the retail prices index figures have now come out and show that inflation has fallen—
§ Sir Nicholas Fairbairn (Perth and Kinross)
I enjoyed the speech of the hon. and learned Member for Montgomery (Mr. Carlile). It seemed to be sound and rational. I only regret that his party's policies on Scotland are not equally sound and rational.
I heard from the hon. Member for Leeds, West (Mr. Battle) something that I already knew about socialists—that they like spending other people's money. He essentially declared taxation to be a virtue. Under the proposals of all parties but ours, Scotland would pay even 1183 more tax than any other part of the kingdom. We would pay income tax, corporation tax and national insurance tax—I agree with the hon. and learned Gentleman that we should call it a tax when it is a tax. Tax is a simple three-lettered word. We would also have to pay an assembly tax. Scotland would have the great privilege of enjoying the virtue that the hon. Gentleman claimed taxation was. We would not just have the present polygamy of taxes; we would have a further two wives. Scotland would have the privilege of additional beggary.
I take a simple view of tax: it is a form of slavery. A slave must work for his master for nothing. The extent to which a slave must work for his master for less than his worth is to that percentage slavery. If half one's income is taken by one's slave master, the Treasury or the Government, one is half slave and only half free. If 60 per cent. is taken, one is two thirds slave and one third free. Every increase in taxation is an exercise in the extension of the concept of slavery. Slaves, apart from excellent, charitable workers, such as my hon. Friend the Member for Torridge and Devon, West (Miss Nicholson), are the only people who work for nothing.
There is a certain lesson to be learnt about the Labour party's proposals and its concept of taxation from its attitude to a matter which was discussed in the House this week—the tolls on the Forth and Erskine bridges. It is the Labour party's avowed view that the socialist-controlled joint boards should spend as much as they can on those bridges and resist the increase in the tolls to demonstrate that tolls are unjust. That seems to be a fairly perverse approach to taxation, but it is the Labour approach. To object to a toll of 60p, which is less than the cost of half a pint of beer, to travel by car from Fife to Edinburgh and instead to go by a nationalised train which costs £1.60 seems to be perverse.
Fundamental to the whole concept of socialism is the idea that money is like air—cosmopolitanly available. All one need do is to breathe in and out as often as one wants or to spend money as often as one wants because it is always there. I am not sure whether there will be all that much oxygen if the world population continues to increase as it is doing. One principle that is basic to economics—I do not suggest that I understand economics—and which my hon. Friend the Member for Kensington (Mr. Fishburn) introduced is that the lower the tax, the higher the revenue, and the higher the tax, the lower the revenue. That is absolutely certain.
To propose to the nation an increase in taxation and an increase in public expenditure is a conundrum that could have been invented only in the acidic tank of socialism—they are contradictory ideas, as the financial and fiscal policies of the past 10 years have shown. The less we enslave those who earn, the more they earn and the more they contribute in taxation at a lower rate. That should be added to the ten commandments.
While I am on a biblical theme, let me say that I am reminded that there is a phrase in the Bible to the effect that the labourer is worthy of his hire. I have looked in vain for any text in either Testament to suggest that, having been worthy of it, he should have it taken off him afterwards and spent by someone else who is not in the vineyard. We are a rich and successful country, but this country was the poorest in western Europe in 1979 and Scotland was the poorest part of this country. Thanks to the Government's policies since then, Scotland has become 1184 the richest part of this country. I do not want it beggared by a tax-raising assembly or any of the other proposals advanced by the Opposition parties.
§ Mr. McMaster
I am very interested to learn that Scotland is now the richest part of the United Kingdom. Will the hon. and learned Gentleman elaborate the basis for his information so that I can try to convince my constituents who have lost their jobs and who are living in poor housing?
§ Mr. Deputy Speaker
Order. I hope that the hon. and learned Gentleman will not be persuaded to pursue that line.
§ Sir Nicholas Fairbairn
You have my double assurance on that, Mr. Deputy Speaker—with tax. The average industrial wage in Scotland is the highest in the United Kingdom with the exception of that in a small part of the south-east of England. I spend half the week in the south of England and half among the glories of the civilisation and quality of life in Scotland, so I know that the costs here are about double what they are there.
The philosophy of socialism is the philosophy of beggary, in two ways. Socialism has beggared every country in which it has been tried. I am not as familiar with Bolivia as is the hon. Member for Leeds, West—perhaps it is part of his constituency—but I am aware of the socialist Cuban economy and of the economy in the Union of Soviet Socialist Republics, which has been so beggared by socialism that Mr. Gorbachev, if he is still in place, is going to the G7 meeting to beg capitalism to bail out the corruption, rottenness and poverty of every socialist republic in his quarter of the globe.
Malawi, a socialist country, cannot feed itself. Mozambique, seven times the size of France with a coastline longer than that of Florida and the best soil on earth, not to mention a population only twice the size of Scotland's, cannot feed itself because it is run by socialists. I can think of no country in the world run by socialists which has not been beggared. I can think of no marxist or socialist regime which has ever created prosperity.
Not only does socialism beggar whole countries; it is itself based on a philosophy of beggary—we should for ever be whingeing and asking for handouts from bureaucrats of the state.
In Bulgaria, which sits next to Bolivia in the United Nations, one can see what socialist taxation policies do to a nation.
I have been to Poland on innumerable occasions over the past 20 years. Lorry loads of medical supplies were: taken there through east Germany and given to the priests because if they had been given to the socialist bureaucrats they would have stolen or sold them. The only way to survive under the socialist Government of Poland was to have about 10 jobs or to go to western countries for a few years, earn some money and then return. Under Poland's previous Government a doctor earned about £40 a month. That is an example of a national health service under socialist tyranny. Socialist taxation policy would beggar this Country in the way that it beggared it before. A rate of 98p in the pound is slavery, and 59p in the pound is fairly close to slavery.
Hon. Members who were properly brought up—in view of the speech by my hon. Friend the Member for Torridge and Devon, West I shall not mention in this context the hon. Member for Linlithgow (Mr. Dalyell)—will 1185 remember the story of Red Riding Hood. For the purposes of my speech, the redhead who is the Leader of the Opposition is Red Riding Hood, and the Labour party is the grandmother. If Red Riding Hood tossed grannie out of bed and took her place in this cottage—and I hope that such a misfortune will never befall the British people—the Labour party would take off its lace cap and remove its undergarments and the wolf of taxation, theft and public ownership would be back at our throats.
Like the wolf dressed up as the grandmother, Labour taxes bear false names. They are called investment taxes, training taxes, assembly taxes and property taxes. The Opposition propose renationalisation, whatever they call it, without compensation, and will increase company tax and impose a tax on the value of property, which is a fatuous concept. A person who on marrying bought a flat for £100 may find that it is worth £100,000 by the time he is 80. On his retirement he will have to pay tax based on the value of a property which he has not improved, and which has increased in price purely because of an outside market force. The Opposition propose that people should be taxed on the value of an asset which produces no income with which to pay that tax. It is an iniquitous proposal.
I shall return to the philosophy of beggary and slavery. Under a Labour Government, a postmistress, a nurse, a postman or a traffic warden who saves a proportion of income for retirement and invests it in the glorious shares of the Scottish power companies would have to pay tax on the income from savings on which he has already paid tax. That is double taxation at its worst. It is a quadratic equation.
The welfare state results in many iniquities. For example, if a layabout has an accident and he has spent his unemployment benefit payments and any other moneys that he might have, he will be given legal aid to sue the district nurse who diligently made savings. She will not be given legal aid because she has savings, but the layabout will get it. Surely that is an immoral principle, but it is central to the Labour party's philosophy. The idea that a bureaucrat should hand out money from one person's pocket to the pocket of another, from the most thrifty to the least thrifty, is based on a principle that is objectionable in every characteristic.
The Russian Republic has today rejected socialism along with socialist taxation and all the implications of it. It has done so with a resounding cheer. Romania, Bulgaria, Czechoslovakia, Yugoslavia, Poland, East Germany, Lithuania, Latvia and Estonia have all taken the same course. Is Britain to do the opposite? Are we to contribute from our income to cure the beggary of socialism in Russia? Is East Germany to be saved from socialist taxation and socialist principles by West Germany? I was in East Berlin on that great hogmanay when the first part of the wall came down. I watched it happen. I was in the Unter den Linden and the Kaiser Friedrichstrasse at the Brandenburg gate. I saw about 250,000 people celebrating freedom from socialism. I should be appalled to think that our nation would go back to such a thing.
I am glad to say that the great horses on the Brandenburg gate, which used to face west and were turned east by the socialists to allege that our system was 1186 decadent and theirs glorious, have been turned back again to the west, to the values of western civilisation. [Interruption.] In talking of the four horses of the apocalypse, one apocalypse that this country must not suffer is the return of a Labour Government and Labour policies, however disguised, mollified and embalmed they would be.
I have some business interests. I have certain companies that are hoping to make major investments in Scotland from all over the world. Not one of them would go ahead—I am talking about hundreds of millions of pounds—if a Labour Government were to be returned. That may be a good price for the hon. Member for Leeds, West, who could worship at the hideous altar of taxation, but I do not think that it is a price which the electorate would appreciate once it had come to pay it.
§ 12.4 pm
§ Mr. Tam Dalyell (Linlithgow)
I definitely came out second best on my ill-advised intervention in the speech of the hon. Member for Torridge and Devon, West (Miss Nicholson). I shall not pursue the subject of the four horses of the apocalypse nor, in the presence of my hon. Friend the Member for Glasgow, Pollok (Mr. Dunnachie), what was said about devolution. However, he has prompted me to question the Treasury seriously about Forth Bridge tolls. I represent the toll collectors of the Forth road bridge toll station.
There is much talk in Scotland about a second Forth road bridge. Some of us think that before we embark on that expenditure, there should be a serious discussion about whether we should continue with toll collection which, in itself, is responsible for many of the traffic jams from Fife, Perth, Kinross and elsewhere. They are a serious headache for the people who suffer from them. Nevertheless, one must ask: is not toll collection a contribution to the road problems west of Edinburgh? There are other problems such as the Barnton and the Newbridge roundabouts, but there should be an urgent discussion on whether collecting tolls should be continued because it boils down to the fact that the road goes over water. Collection per pound in tolls used to be twelve and a half times as expensive as the collection of the standard rate of income tax. I should like the Treasury to comment on that.
On a Friday, we can discuss tax matters out of the yah-boo of the normal give and take of party politics. I wish to raise with the Treasury the rather complex issue of the terms and philosophy on which it thinks it has a continuing obligation in matters in which it has accepted property as tax in lieu of death duties. The specific case I have in mind, of which I have given short notice to Treasury officials, is that of beutiful Heveningham hall in Suffolk. To cut a long story short, I was told by Lord Schreiber that I ought to take an interest in the matter.
As a result, I tabled a number of pointed questions and wrote to Ministers. Yesterday, I visited Heveningham hall and I have never been so impressed as I was by the standard of restoration that is being conducted by the owners, whomsoever they are, under the guidance of Hussan Khamoud, Nicholas Playfair and Ralph Parry. I thought that the hall was superb because of their concern for detail and accuracy. They have also replaced the original fittings of this great house lost after a fire. Their work was absolutely commendable.
1187 The Treasury should put its mind to monitoring what happens to a property once it has been accepted in lieu of death duties—even if it is in the guardianship of the National Trust—in the light of what happened to Heveningham hall in the mid-1980s. The Treasury should discuss the matter with the Department of the Environment, which is well aware of many of the issues.
§ Mr. Dalyell
As the hon. and learned Gentleman is chairman of the Historic Buildings Council for Scotland, of course I shall.
§ Sir Nicholas Fairbairn
The hon. Gentleman raises an important point. An even more important one is the fact that much of our heritage is no longer restored because its owners are dissuaded from doing so because they have to pay value added tax on repairs. If one knocks all the windows out, puts on a flash-Harry roof, and other hideous things, as one is allowed to by the planning regulations, it becomes a new building and value added tax is not paid. However, the repair of historic houses is still subject to VAT.
§ Mr. Dalyell
That is a problem—especially at Heveningham hall, where, as I understand it, the entire cost of the work—including the expensive leading of the roof, which has been superbly done—is being met by the owners. The woodwork and plasterwork, on which I am to some extent qualified to comment, is also superb. However, the VAT problem is very real. Ian Richardson and the local group were wholly justified in expressing their concern over the past decade. I am very much in favour of local groups taking an interest in great buildings.
On Wednesday, I have the good fortune to have an Adjournment debate on the taxation of areas that are potential world heritage sites, such as Mar lodge. How does the state, in the form of the Treasury, place a value on ancient forests? Unless we come to grips with our capacity to protect our own ancient Caledonian forest, how can any right hon. or hon. Member lecture Sarawak, Brazil, Zaire, or wherever on how to look after their rain forests? It is almost impossible to value ancient woodland. It is not a simple forestry equation but a question of how we protect the only remaining part of the ancient European forest, which places us under a special obligation in respect of Mar lodge, in relation both to European heritage and world heritage sites.
In view of my Adjournment debate on Wednesday, I have written to the Prime Minister about how Scotland and the Scottish Office can be helped financially in relation to the designation of world heritage sites, which is the responsibility of the Department of the Environment. I understand that the transfer of funds from the Department to the Scottish Office is a very real problem. In the circumstances, I ask the Treasury to review that aspect before the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton) replies to my Adjournment debate on Wednesday night.
On a Friday, one can probably get away with saying something good about Treasury Ministers. I want to place on record the appreciation of many of us of the alteration in the Finance Bill on the treatment of gifts from big firms—particularly Hewlett-Packard, which dreamt up the scheme on its American experience, and its managing 1188 director, David Baldwin. In the hope that this will help academic institutions, I ask the Minister to explain how the Government will monitor the way that the scheme operates in practice. It is no use just saying that it has worked well in the United States, which it has. I should like to know in year two or three how academic institutions have benefited.
My next point concerns a matter that I raised in some detail in the Scottish Grand Committee, and I do not apologise for raising it again. I refer to the treatment of the sale of assets by universities to meet short-term crises. I have in mind the terrible state of the university of Edinburgh which, by any standards, is one of world importance. After a century and a half, it may have to sell its Audubon books, which are among one of the first editions purchased. Audubon, who was the great historian and painter of American birds, worked in Edinburgh between 1826 and 1839. It seems tragic to the Scots that these sales may have to take place to meet what one hopes are fairly short-term financial considerations and to close a crisis gap in expenditure. What is the Treasury's attitude?
§ Mr. Dalyell
I anticipated that you would find it difficult, Mr. Deputy Speaker. Knowing that you were in the Chair, I took the precaution of having the motion by me. Itwarns the British people to recognise … the Labour Party's promises of increased public spending".I am speaking on the issue of increased public spending, which I hope brings me within order. I have done rather better with you, Mr. Deputy Speaker, than I did previously.
§ Mr. Dalyell
In a letter on 29 May, the Chief Secretary to the Treasury stated:During the Public Expenditure debate on 15 May, you asked me about the sale by Edinburgh University of the Audubon book on birds, and I undertook to look into the matter.You will have been referring to the decision by Edinburgh University on 13 May to identify for possible sale an edition of Audubon's 'Birds of America'. This was acquired by Edinburgh last century from its general funds, and the University is entirely free to dispose of unencumbered assets as it sees fit.Edinburgh University forecasts a deficit of £5 million in the current academic year. It has accepted full responsibility for its current situation and is now determined to resolve its problems.The letter goes on to refer to autonomous institutions.
That is not an adequate answer. It is a national problem. Edinburgh university, like Leeds and Glasgow universities, has buildings all over its city.
There is an added problem, which I wish to raise with the Treasury—that of universities with great and famous medical schools. Medical professors and lecturers are paid significantly more than anyone else in any other department. Those moneys must come out of the total grants to the university, so departments such as engineering or physics are seriously disadvantaged if there is a large, distinguished medical school. I ask the Treasury to consider hiving off and detaching medical school expenditure from that of universities in general.
1189 That brings me from Edinburgh to London and to the public expenditure issue at London zoo. I can put it no better than the considered opinion of Roger Wheater, writing as chairman of the International Union of Directors of Zoological Gardens. He is also the Edinburgh director. He said:with decision day looming ever closer, I felt that I must place on record my feelings with regard to the future of London Zoo which has found its way into the hearts and minds of countless millions of British citizens and visitors to these shores during the 160 years of its existence. I do understand the Government's disquiet at the failure of the Zoological Society of London to get its Regent's Park house in order. I believe that it is right and proper to question why, despite funding already provided by Her Majesty's Government which was presumably given on the basis of a sound management strategy, it has not lifted itself out of the financial morass into which it had fallen.However, I do hope that your tough attitude"—that is how Mr. Wheater addresses Treasury and Environment Ministers—and I have no problems with this approach, is getting the answers you require but is also indicative of a desire to carefully examine the proposals which I know the Zoological Society of London are now putting to you which will dramatically reduce the size of the collection, thus providing more space for the species that remain. These plans should reduce the operating costs and in addition to space for the animals will allow for the development of exhibits which demonstrate much more clearly the environmental issues which face us in the world today and the positive way in which these conservation issues are being tackled. There is no doubt that the work already being carried out by zoos like London is rather understated. Indeed, the Chairman of the Select Committee"—the Select Committee on the Environment, the hon. Member for Hornsey and Wood Green (Sir H. Rossi)—complained that he was totally unaware of the considerable scientific, conservation and education activities of the Society. The slimmed-down collection would seem to offer an excellent opportunity to promote these activities and those of other organisations involved in wildlife conservation, including it should be added, the Department of the Environment itself who might use the location as a shop window to publicise the considerable work of the Department in environmental matters, much of which I suspect is no better known to the public than the current work of the Zoological Society of London.I am certain that all those who have some knowledge of London will hope that whatever mistakes, errors of judgment or timing that may have been made in the past by the Society, this will not be used as an excuse for disbanding one of the famous institutions of the world and one which for many years was pre-eminent in the world of zoology. I feel quite certain that the Regent's Park site provides excellent opportunities for the continuation of a living collection of animals with a commitment to conservation breeding, research and education paid for at least in part by the recreational activities of the visitors to the collection.On the knotty question of finance, there seems to me to be little doubt that whatever shape the Zoo may take in the future, it will require some financial assistance from the public purse. Our colleagues in major zoos overseas are amazed that London is expected to operate without such assistance, subsidised as they are up to as much as 60 per cent. of operating costs as well as the provision of capital funding. This should not come as a surprise to the Department of the Environment as you will be aware of the financial commitment to museums and botanic gardens and what such support represents in terms of subsidy per visitor to the institutions concerned.Minister, a zoo of London's scientific standing is no different from these other institutions. Particularly relevant are the botanic gardens who are responsible for living collections of plants in the same way as zoos are responsible 1190 for living animals. There seems to me to be profound cultural and historical reason for viewing these institutions as being so different and yet their activities, particularly at this time, are in fact so similar. It is frankly rather foolish to put forward the argument that because Kew Gardens has been financially supported by Government for 150 years that this makes it more deserving for support than a similar organisation which has managed until recently to remain financially solvent. I presume that over 150 years ago the government of the day made the decision that financial support from the public purse was essential for the future of Kew Gardens and made it available. I suggest that the wisdom that prevailed at that time and which allowed Kew to develop into its world pre-eminence, should once again prevail to ensure a similar future for Regent's Park.I do not believe that any financial commitment should be made, however, without a clear understanding and approval of the new policy for the London Zoo site and I believe that within any future funding must be included the appointment onto the Council of ZSL representatives of the Department of the Environment to ensure that the financial commitment from the public purse to the institution is used for purposes which follow the new policy for the collection and which develop and enhanced the excellence of its work.In view of the public expenditure involved in London zoo, this House ought to have a debate before the middle of July or whenever—
§ Mr. Deputy Speaker
Order. The hon. Gentleman is opening the way for a debate now, if the Chair would permit it. I had hoped that by now he would have related his remarks to the central theme of the motion, which is about taxation.
§ Mr. Dalyell
That brings me directly to paragraph 9.40, entitled "Tax and Accounting", of the House of Lords report on scientific innovation which says:One massive disadvantage which is faced by British industry is the high cost of capital in the United Kingdom compared to that in competitor countries. High interest rates, and the expectation by investors of high financial returns, can discourage industrial investment in innovation. In these circumstances it is important that wherever possible obstacles to investment should be reduced.Paragraphs 9.40 to 9.43 of the House of Lords report are of crucial importance to this country. Thanks to the Foundation for Science and Technology, I attended a presentation last week on the House of Lords report which was introduced by the noble Lord Caldecote, at which Professor Rothwell and Mr. Oscar Roith, one of the advisers to the Committee, also spoke. I think that there ought to be a discussion of this document before the end of July, important as it is to taxation.
Finally, those of us who represent hundreds of people who work for ICI are very bothered about the consequences, if Lord Hanson goes ahead with his bid. Unlike a large number of my colleagues, I have good experiences of Lord Hanson. On the occasion when I raised—
§ Mr. Deputy Speaker
Order. I hope that the hon. Gentleman intends to show me how this relates to the substance of the motion.
§ Mr. Dalyell
Yes. The motion concerns public expenditure, which is certainly involved in the potential takeover of ICI. However, you have been very lenient with me, Mr. Deputy Speaker, and as there are other hon. Members who wish to speak in the debate I shall only refer to the case that I should have liked to make concerning the article by Sir John Harvey-Jones in the Observer—that he wishedLord Hanson would take his money and go away.1191 I would simply register the fact that the ICI issue is central to the political concerns of many of us. I hope that the Government will take note of the various delegations that will be going to see Ministers next week.
§ Sir Geoffrey Finsberg (Hampstead and Highgate)
It is always a pleasure to listen to the hon. Member for Linlithgow (Mr. Dalyell) when he is not on one of his hobby horses. He analyses issues very closely. We do not always have the opportunity to listen to him in the sort of mood that he is in today. I found great delight particularly in his reference to public buildings and in his comments about London zoo, to which I have now referred in passing and from which I shall pass on before I run any risks.
I wish to refer to the speech of the hon. Member for Leeds, West (Mr. Battle). I believe firmly that it is every citizen's inalienable right in a democracy to pay as little tax as is legally possible. That has been the view of our courts since time immemorial. I well remember, in the days of high taxation, men on the production lines in the factories where I worked coming to me and saying, "How can we pay less tax on our overtime money—tax that is being imposed on us by this Labour Government?" They were advised about how they could pay less tax legally. These are not millionaires but production workers. It is also interesting that the hon. Member for Leeds, West referred to the decade of various troubles but that he forgot to talk about that decade as the decade of Liverpool and Hatton, so vividly brought to our screens by "GBH." That is a subject which the Labour party wants to avoid as much as it can.
My hon. Friend the Member for Kensington (Mr. Fishburn) is having a well-deserved break, having been here all the time so far, but he will have the opportunity to read in Hansard what I say. In his opening speech he analysed taxation policies, going a long way back, in a way that we have not heard in the House for a very long time. I do not propose to refer to Adam Smith. The only Adam with whom I was particularly familiar was Old Adam who had a gardening strip in the Sunday Express. He also was a wise old bird—as was Adam Smith. We would do well to learn from both. I have already told my hon. Friend the Member for Kensington that I cannot, alas, stay until the end of the debate, but I, too, will read what is said in my absence.
My hon. Friend began by giving us a history of taxation. History teaches us lessons. We should be very unwise if we failed to observe the lessons that history teaches us. One lesson that cannot be learnt often enough is that Labour is the party of high taxation. It is also the party which has always left office with this country more in debt than when it was elected. At the next election there will be millions of first-time voters who did not experience the nonsense of selective employment tax, which was a tax on jobs, or 98 per cent. taxation, or this folly of taxing overtime very heavily and who did not—
§ Sir Geoffrey Finsberg
If I may finish this statement I shall, of course, give way.
They did not experience the humiliation of the International Monetary Fund dictating our policy—a 1192 policy which meant that the then Labour Chancellor of the Exchequer had to cut hospital building for the only time in our history. Labour has always presided over the devaluation of sterling. We must continue to drive home those lessons.
§ Sir Geoffrey Finsberg
Nor did the previous Labour Government, but they still got us into a mess. The hon. Gentleman was not a member of that Government, but he should read their pious declarations and the book of Lord Barnett in which he says how he tried to cope with their follies but failed because he was unable to control their mad spending desires. He will then see the need to drive those lessons home.
§ Sir Geoffrey Finsberg
No. The hon. Lady has been opening letters for the past 10 minutes. She came in late, and I shall not give way to her.
We have a duty to remind the public of those facts and that they will experience the dangers of a socialist Government even if they vote for the Liberal Democrats, who kept the previous Labour Government in power for a year longer than was necessary to taste the crumbs of power.
As the hon. Member for Newcastle upon Tyne, East (Mr. Brown) said, Labour policies sound attractive—they always do. The pill is always sugar coated, but, my God, when one gets below the sugar, one suffers. Labour policies always seem achievable, but they never are, except at exorbitant cost.
All too often, Labour produces a menu without prices, but they have been smoked out. It fell for the media hype that there would be a summer election and was forced to rush out its policies, which are now being analysed by the City and by economists and are being shown to be bogus. They will involve immense costs if Labour is elected.
To pay for Labour's programme, police sergeants, senior nurses and deputy head teachers will be clobbered by having to pay higher taxes and national insurance contributions. We are told that they are the super rich because they earn £20,000 a year. We have been told how many people will pay higher taxation, but it will be interesting to discover whether the hon. Member for Newcastle upon Tyne, East can clear up our anxiety and uncertainties. The shadow Chief Secretary said that one in 20 will pay higher taxes; the Leader of the Opposition said that it will be one in 18; and the shadow Chancellor says that it will be one in eight. It will be interesting to know which of those is right, but it is crystal clear that under Labour everybody will pay higher taxes because its rates will force up the cost of living. In addition, its jobs tax will lead to fewer jobs, so all of us will pay more.
Almost every Labour party spokesman says that more must be spent, but not necessarily all at once. Yet, some of them are saying, "We do not need to raise taxation." That does not add up. It sounds fine, but the various interest groups that are pushing for more expenditure will ask, "How much will be spent on us?"
At no time in our history since 1948—and this will be so in the next 10 years—have we spent enough on the national health service. We can never spend enough on the 1193 national health service because medical science is advancing all the time. The vast increases that have been given in the past 11 years have not been, and never could be, sufficient to keep up. A Labour Minister once said that the needs of the NHS were infinite and that the resources would always be finite. The sooner the Labour party realises that and stops trying to kid the public that Labour would spend more on the NHS, the better it will be for the peace of mind of the people.
Joe Soap public will have to pay higher taxes under a Labour Government when they come to power in 1999 or the year 2000. Labour certainly will not get in next time. Despite the blarney and blandishments of Labour Members, the City now begins to realise that behind the acceptable face of socialism portrayed by the Labour spokesman to whom I have referred, there are those, such as the former chairman of the Labour party, who tell us that we will see the real agenda of the Labour party when Labour is elected, and we know that to be a fact.
In the manner of the hon. Member for Leeds, West, Labour Members attack high salaries. They attack British Telecom for high profits. Why do they always conceal the truth? The Post Office used to run our telephone service. We then had outdated equipment—basically, it was Strowger, the invention of an American undertaker pre-1914. We had to share party lines because there were not enough lines, and we had to wait months for new phones. We as taxpayers had to foot the losses of the Post Office.
I know about that in detail because I was for several years chairman of the postal and telecommunications committee of the CBI and a member of the Post Office Users' National Council until I was sacked by Shirley Williams because I was Conservative. She did not have the guts to tell me herself. She got one of her junior Ministers to tell me.
British Telecom is now private. There are no shared party lines. With its massive digital equipment, one may wait a couple of weeks for a new phone. Calls are now a fifth cheaper than when it was privatised. Shareholders get dividends, the Exchequer gets taxation on those dividends, and it gets corporation tax on BT's profits, instead of having to ask the taxpayer to fund the country's telephone system. That is the story that Labour Members never dare tell us. That is why they know in the end that the public will not fall for their nonsense of renationalising—by 2 per cent. more, or whatever the figure may be—of BT.
§ Ms. Abbott
On a point of order, Madam Deputy Speaker. Is it in order for the hon. Gentleman to talk about British Telecom without mentioning the astronomic rise in directory inquiry call charges?
§ Madam Deputy Speaker (Miss Betty Boothroyd)
That is barely a point of order for the Chair. All hon. Members are responsible for the speeches that they make in the House.
§ Sir Geoffrey Finsberg
The hon. Lady, in raising that bogus point of order, should have reminded us that costs to the general public have come down by 6 per cent. as a consequence of charging for directory inquiry calls, so that only those who use that service pay, instead of all of us 1194 paying. Let us have no more of that sort of intervention, although it was helpful, which the hon. Lady did not intend it to be.
The capital programmes today of BT and all our nationalised industries, now privatised, can go ahead without the Treasury trying to treble guess everybody. That was the trouble in the past, though not under Conservative rule. In the past, when those industries were nationalised—as we heard in a brilliant speech last week from my right hon. Friend the Member for Chingford (Mr. Tebbit)—an industry worked out what it wanted, went to the sponsoring Ministry, which reworked it, and it then went to the Treasury, which re-reworked it. The Treasury then replied, "Of course you would like three digital exchanges, but we have a bridge to build and we regard that as more important." Now, when any of the privatised industries wants to carry out a capital project, it does so without recourse to taxation and the Treasury, which is a saner way of managing things. All that would disappear were a Labour Government to be elected again. We have seen and heard about the open agenda and the hidden agenda. I prefer to believe, from experience, that the hidden agenda would operate. There is one basic difference between the Tory party and the other parties: we believe that it is better to let people's money fructify in their own pockets. We do not believe that we know better how to spend other people's money. The choice is simple: high taxation under the socialists and Liberal Democrats, or low taxation under the Tories.
§ Mr. Gordon McMaster (Paisley, South)
I am grateful for the opportunity to participate in the debate. I was delighted to be third in the ballot for private Member's motions, but I was beginning to suspect that we might not get that far today. Therefore, I welcome the opportunity to participate in the debate on taxation.
We have heard much rhetoric about the effect of the Government's policies on taxation over the past decade, but I shall concentrate on the real effects, as I know them from my constituency and elsewhere, on real people. Many hon. Members did not try to hide the fact that during the past 10 years the Government have made the rich richer and the poor poorer. Every report and all the statistical evidence shows that to be the case.
We have heard some carefully reasoned arguments today, but we know that some adherents of the Conservative cause argue openly elsewhere that they want to apply the law of the jungle in what should be a sophisticated civilisation so that the strong should be rewarded and the weak left to founder. No one would dispute the wisdom of encouraging the strong to prosper, but to do that at the expense of the weak and of people who cannot therefore contribute to the economy is not good. I have always believed that we should judge a civilisation not by how great its national assets are, but by how it treats the weakest in society. Judged by that criterion over the past decade, the Government do not fare at all well.
Specific groups have been mentioned today. The hon. and learned Member for Perth and Kinross (Sir N. Fairbairn) referred to someone who is unemployed and able to receive legal aid, whereas a district nurse was unable to do so. I do not dispute that, but that criterion 1195 —or hidden tax—could also be said to apply to other groups. Let us consider, for example, the senior citizens who have worked all their lives and contributed to their works pension funds, but now discover that any income that they receive from that source is deducted pound for a pound so that they are not entitled to a reduction in community charge or to housing benefit. They are, in many cases, no better off for having contributed to their works pension schemes, which is clearly wrong.
I had intended to refer in my private Member's motion to the fact that the case for the disabled is equally strong, but I shall leave that for the moment except to issue a word of caution to the Government. The disabled community of Great Britain comprises about 6.5 million people, in addition to their families and those who care for them. It would be folly for anyone to ignore their wishes or those of all the voluntary and lobby groups that support the disabled. I ask the Minister to spell out how the cuts in direct taxation have helped such people in the past decade, as the groups involved say that they do not understand it. Disabled people have had their benefits changed and are now worse off. They now pay a higher proportion of their earnings in value added tax and find it increasingly difficult to find a place in the job market.
§ Mr. Bill Walker
The hon. Gentleman is not alone in being concerned for the well-being of the disabled. I hope that he is not suggesting that because someone is disabled he or she cannot do a job. Many disabled people do jobs and earn substantial incomes, and I include myself in that category.
§ Mr. McMaster
I certainly accept that we do not have a monopoly of concern for the disabled. That is not in dispute. My point is that if the Government continue to pursue their policies on the disabled, the partnership and consensus will be in jeopardy.
I have personal knowledge of the work that disabled people can do and the role that they can play in the community. For 10 years I taught horticulture in a Glasgow college. For the last two of those years I was seconded to a project to help disabled people into employment. During that period I learnt the salutary lesson that disabled people can make a contribution. Is a person who is wheelchair-bound any less able to do a secretarial job? Is someone with a learning difficulty any less able to do many jobs? There is a good example in this Chamber: is someone with a hearing impairment any less able to do this job? There are many such good examples.
I am aware that I am straying wide of the debate and I shall return to it. The purpose of taxation is to provide services at the point of need. Those in need include groups in the community with particular disadvantages. Much has been made of the Government's targeting of income tax and the philosophy that lies behind it. In 1985 when my hon. Friend the Member for Monklands, West (Mr. Clarke) was promoting the Disabled Persons (Services, Consultation and Representation) Act 1986 he said at a press conference:The principal purpose is to ensure greater representation of disabled people in decisions which affect their own lives. Disabled people should not be continually done unto.This morning Tory Members have applied that argument to all people. They have said that they want to give everybody more control of their lives, more say and more freedom, and that the Government should not do unto them. There is consensus on that point when it is applied 1196 to disabled people and an opportunity for partnership, but only if the Government apply to them the policies to which the Government say they are committed.
An important aspect of taxation relates to the 1986 Act. For six years the disabled community and all the organisations that serve it have believed that the Act would be implemented. Government agencies, voluntary agencies and local authorities have already spent considerable sums of taxpayers' money training staff to cope with it, only to find now that the Act will not be implemented. That is a serious waste of taxpayers' money.
§ Ms. Abbott
Does my hon. Friend agree that cuts in direct taxation do absolutely nothing for those on benefit and those who depend on state social security? Those people have suffered during the past 12 years. Does he further agree that the unpleasant gloating of the hon. Member for Hampstead and Highgate (Sir G. Finsberg) over the Government's success in allowing rich people's money to fructify in their pockets, Swiss bank accounts and offshore trusts, and his complete lack of concern for people on benefit, pensioners, the low paid, women dependent on social security and those who have suffered under the Government, will ensure that he is replaced in short order by Miss Glenda Jackson, the Labour party candidate in his constituency?
§ Mr. McMaster
I certainly agree. The old adage has come to life: to make the rich work harder, pay them more; to make the poor work harder, pay them less. That is the Conservative philosophy and it completely misses out disabled people who do not even have the opportunity to work and pay taxes.
The Government's failure to implement the 1986 Act has another effect on disabled people. The Act provided for assessment of needs. If the Government intend, as they say they do, to target their resources where they are required, how can they proceed without an assessment of needs? Globally speaking, no new legislation has superseded the 1986 Act—the only new element has been the right of appeal.
Last night I had the good fortune to be in the company of and to hear a speech by the only Member in the House who is as wise as and even more distinguished than you, Madam Deputy Speaker. I refer to Mr. Speaker himself, who said:Parliament should not only deal with issues affecting all the people. It should deal with issues which affect any of the people.The disabled are being discriminated against still and the Government have the legislation in place to do something about that—if only they will implement the 1986 Act.
A few weeks ago I tabled a parliamentary question to the Secretary of State for Scotland asking how many manufacturing jobs had been lost in the area with a Paisley postcode. The answer was that 76 per cent. of such jobs in that area had been lost. There used to be 19,100; now there are 4,500. So 14,600 people, three quarters of those who worked in manufacturing industry, have lost their jobs. That is the real effect of the Government's taxation and economic policies.
§ Mr. Bill Walker
Will the hon. Gentleman reflect on the fact that this week Babcock, a name which he will recognise, is celebrating 100 years of successful business in Scotland? Will he further reflect that in the past few years Babcock's work force has fallen from more than 6,000 to 1197 between 1.500 and 2,000—yet productivity is higher than before? Now the company has sure jobs in a difficult and competitive international market and it is no longer vulnerable, as it was when too many people worked for it. I was told all this by the chief executive of the company—does the hon. Gentleman dispute it?
§ Mr. McMaster
Babcock is actually in the constituency of my hon. Friend the Member for Paisley, North (Mrs. Adams), but the last time I visited it to talk to the management—it was during the Gulf crisis—I learnt that when the company had to freeze its contracts the Government would not give it a bridging loan. So there is everything to be proud of when productivity is improved but nothing to be proud of if, when it has been improved, the opportunity to expand is not taken up. Babcock is capable of doing many other things and of entering many other markets. It is an excellent company, but when it was in difficulty it did not receive Government support.
Less than half a mile from Babcock used to be a company called Howden's. It was a world leader in renewable energy—a fashionable idea—and at the forefront of environmentally friendly renewable energy products. While still in profit, the company closed down due to a combination of factors, not least among which were high interest rates and the associated economic problems of this country. Rolls-Royce is another example. It has just made redundant 6,000 workers, some of whom worked in the Hillington engine factory. Rolls-Royce announced today that it is to open a factory in Germany. How can it be called economic success when workers are losing their jobs? They are not getting a chance to improve productivity because their jobs are going to other countries. There must be lessons to be learned from that.
§ Ms. Abbott
My hon. Friend ably describes the shrinking of our manufacturing base. Does he agree that the tentacles of the recession reaching into the south-east and affecting white collar jobs in the service industries that were set up in the latter half of the 1980s will ensure that the Government are swept away at the next general election?
§ Mr. McMaster
I agree. I knew that incomes in the south-east were higher than in Scotland, but I am a new Member and in the six months that I have been here I have seen many poorly clad children in London. That is because all family income is used to fund high-interest mortgages.
The motion refers to the "initiative and enterprise" which Government taxation policies have created. I am disappointed that the hon. and learned Member for Perth and Kinross (Sir N. Fairbairn) is not in his place, because he takes a great interest in and is an expert on the fashion industry. I was one of the four Labour Members present when the hon. Member for Torridge and Devon, West (Miss Nicholson) and my hon. Friend the Member for Linlithgow (Mr. Dalyell) spoke about alleged Folletting in the Labour party. We did not look as if we had been Folletted. In the spirit of the initiative and enterprise mentioned in the motion, I suggest that some Conservative Members should be "Fairbairned". That would certainly bring some colour to the House.
Ten years ago Paisley was famous for its thread mills, but they have all closed as a result of the Government's economic policies. The paisley pattern is world renowned. 1198 I am wearing a paisley-patterned tie, as are some other hon. Members. Not a single stitch of the paisley pattern is now sewn in Paisley. For many months the local authority and I and my hon. Friend the Member for Paisley, North and others have been trying to persuade industry to manufacture paisley-patterned goods in Paisley. That is bound to be an economic success, but we have not found the enterprise and initiative that are necessary to bring it about.
Conservative Members have spoken about high indirect taxation. The rich can only spend so much of a tax cut. It would make far more sense to give the majority of consumers more money, and that can be done only through a measure of wealth distribution. The Labour party has plainly said that it will not promise anything or do anything that it cannot afford. We have also said that people such as pensioners and the disabled, who have suffered over the past decade, must be given more spending power.
Wealth must be created before taxes can be paid. Employed people make a great contribution through pay-as-you-earn, so it makes sense to get more people back to work. In that regard the Government have singularly failed. Worse than that, they have pursued policies that have put people out of work.
The Chancellor of the Exchequer said—I am sure that many Conservative Members are fed up hearing my colleagues quote the right hon. Gentleman's statement, but we shall continue to do so—that unemployment was a price well worth paying. I can assure Conservative Members that the electorate in my constituency and other electorates elsewhere think that unemployment is a price which the country cannot afford to pay. It is an issue which will guide the electorate generally when it comes to place its cross on the ballot paper at the general election.
Among the many who have been disfranchised from employment are the disabled. That has had many effects, including economic effects. If disabled people do not work, they cannot contribute to the income tax system. That means that they do not have a chance to contribute to the economy, and there is a dignity to be gained from making that contribution. There is also an economic benefit in getting people back to work.
Self-esteem is much enhanced if someone feels that he is contributing to society. That leads to improvements within the community generally and to many social benefits. It would do us all well to remember that none of us can say any more than that he or she is temporarily able-bodied. Some people are born disabled and others become disabled. We do not know what lies before us, so concern for the disabled is something which we should all share.
Having worked on a project with disabled people, I believe that there is a tremendous pool of untapped talent among the disabled community. It was made evident in the film "The Rain Man" that if someone has a disability there tends to be a compensatory ability. That is why we should always emphasise ability rather than disability.
When disabled people who want to work are kept out of work, their disabilities are emphasised and their abilities become diminished. That leads to personal and social problems as well as economic problems. As I have said, it is important that disabled people should be able to contribute to the community.
There is much employment discrimination. For many years there has been a legislative requirement that 1199 employers should meet the 3 per cent. quota and ensure that 3 per cent. of the work force comprises the disabled. We all know that that requirement has not been enforced and that it has become almost a voluntary objective. I served as the leader of a council and I know that the Department of Employment gave awards to employers who ensured that 1 per cent. of their work force were disabled people. In other words, they were given awards for breaking the law by two thirds.
The Government's record is not honourable. I tabled a question to the Secretary of State for Scotland a few weeks ago asking him to state the extent to which the Scottish health service had succeeded in meeting the target quota. I selected the Scottish health service because I thought that a public spending body would have some sympathy for and empathy with those with disabilities. I discovered that over a 10-year period the employment of disabled people as a percentage of the work force had declined from 0.5 per cent. to 0.2 per cent. It seems that the shortfall is becoming worse.
I was fortunate last night to receive a reply to a question from the Member for Berwick-upon-Tweed (Mr. Beith), in his capacity as a representative of the House of Commons Commission. I am sorry to inform the House that, far from our meeting the quota, only 0.6 per cent. of those employed in this place are disabled. The place that enacted the legislation has not implemented it. Indeed, it is more than two thirds short of the quota.
There is a great deal to do if we are to get disabled people back into the community and ensure that they are given a full place in it. Another problem—it is one that many employers would identify—is getting those who are registered disabled to take employment. From my experience as a councillor and in my place of work before I became a Member, I know that it can be difficult to get the registered to take up employment. That is because they do not want to carry that label with them. I am conscious that I am straying from the point, Madam Deputy Speaker, but the simple answer would be to amend the legislation so that anyone who is registered or eligible to be registered as disabled comes under the remit of the Disabled Persons (Service, Consultation and Representation) Act 1986. That is what we could do.
To return to the subject of taxation which I should be discussing, the question is: how can we get the weakest in our community back into employment? I suggest in my motion that if employers deliberately—rather than accidentally—fail to achieve the quota, we should consider penalising them for not doing so. The money then raised should be paid into an equalisation fund which could be distributed for aids to access, rehabilitation and support for disabled people.
We have heard an important principle advanced by Conservative Members today. They suggest that only those who use British Telecom's directory inquiry service should pay the charges. That principle could be adopted to ensure that only bad employers were forced to pay. In fact, there could be tax incentives for good ones. The first report of the Select Committee on Employment in 1990–91 supported such a measure and the tightening of the quota system. That Committee, of course, has a Conservative majority.
The Government's tax policy has penalised many people, especially the most vulnerable in the community. I reiterate my earlier point that Conservative Members seem to be arguing that to make the rich work harder, one has 1200 to pay them more, but that to make the poor work harder one pays them less. Everything that Conservative Members have said today convinces me that that is their view.
It should be emphasised that the Labour party has stated that it would have lower taxes for those on the lowest earnings—they would be even lower than now. There should also be tax incentives for good employers, especially those who invest in training and in becoming a good employer. We would, therefore, increase wealth by increasing tax income through getting people back to work.
§ 1.7 pm
§ The Economic Secretary to the Treasury (Mr. John Maples)
The hon. Member for Paisley, South (Mr. McMaster) has made an eloquent plea on behalf of the disabled. He obviously has a serious and deep knowledge of the subject, and I am glad that he was at least able to make the opening speech of the debate that he had hoped would follow this one by topping and tailing his speech with a little bit about the Labour party's tax policy. Concern for the disabled is widely shared in the House. He will find that the Government's record on increasing spending on the disabled is pretty good.
I congratulate my hon. Friend the Member for Kensington (Mr. Fishburn) on picking the subject of taxation policy for the debate. His motion gives us an opportunity to examine the stark difference between the Conservative Government's policy on taxation and that of the Opposition. It will enable us to strip away the fig leaves of respectability with which the Labour party has sought to conceal its plans for vastly increased public spending, leading to vastly increased taxes.
In the speech of the hon. Member for Leeds, West (Mr. Battle) we heard the authentic voice of socialism—a hatred and envy of personal success that motivates many Labour Back Benchers, if not those on the Front Bench who are hungry for office. Those plans and the envy mean that the Labour party has a secret agenda of tax increases, not just for the so-called rich but for all taxpayers. As my hon. Friend the Member for Hampstead and Highgate (Sir G. Finsberg) reminded us, the Labour party's definition of the so-called super-rich will have to include nurses, police inspectors and teachers or there will not be any money to pay for its spending pledges.
To the contrary, the Government seek to distribute the growth of the economy in a balanced way, part of it going in increases in spending on the priority public service arid part of it going to reduce the tax burden.
The Labour party, as always, seeks to increase public sector spending, while giving none of the benefits of growth to the taxpayer. What is more, with its hostility to all the measures that we have taken to improve efficiency in the public sector, there is absolutely no assurance that increased public spending would do anything but raise wages and employment in the public sector. That is unlikely to improve the service. It is right to debate these issues properly as they represent a significant difference between the Conservative and Labour parties. Some Opposition speeches have borne that out.
My hon. Friend the Member for Kensington drew on the comparative history of what has happened when Labour and Conservative Governments have been in office.
1201 The hon. and learned Member for Montgomery (Mr. Carlile) called for a review of charity law. Many people believe that there are problems with that body of law. However, I am sure that he will accept it when I say that that is not one of my responsibilities. I know that his concerns and those of others are widely known, and I am sure that they have been heard.
The hon. and learned Gentleman suggested that we should have a system of self-assessment for tax. Most taxpayers in the United Kingdom are on PAYE—pay as you earn—and do not have to make any tax return. I am not sure whether there is an advantage in putting those people on self-assessment. The Treasury is publishing shortly a consultation document on schedule D taxpayers, the self-employed. I do not know what that document will say, but in the context of the debate on that subject it is appropriate to discuss it now.
I am sorry that my hon. Friend the Member for Wanstead and Woodford (Mr. Arbuthnot) has not been to the Skinner school on the rules of order; otherwise he would have been able to slip in the fact that the inflation rate for May has fallen. Unfortunately, my hon. Friend was stopped from doing so. The inflation rate has fallen to 5.8 per cent. and that shows that the Government are on course for our target of 4 per cent. by the end of the year.
§ Mr. Maples
The underlying rate fell from 6.8 per cent. to 6.6 per cent. That shows that the headline rate of inflation, which the hon. Gentleman—
§ Mr. Maples
I will not give way as I have already answered the hon. Gentleman. The hon. Gentleman used to say that most attention should be paid to the headline rate of inflation. Is he suggesting that we should use an inaccurate definition of the underlying rate of inflation that leaves the VAT increase in but takes the community charge decrease out? He knows as well as I that that is an extremely misleading definition of the underlying rate of inflation. That is pure mischief making by those who use that old definition.
At the heart of the debate lies the question of which policies are more likely to produce faster and sustainable growth. Only growth can provide the resources for increased spending on priority services and only growth can provide higher take-home pay. If growth is low, more public spending means heavier taxation. If growth is fast, the resources are there to increase spending where needed, to reduce the tax rates and to increase take-home pay.
The growth dividend that we achieved in the 1980s enabled us to increase public spending in real terms by 7 per cent. while reducing it as a proportion of the gross domestic product from more than 47 per cent. to just over 40 per cent. That growth also enabled us to slash the public sector borrowing requirement from 5 per cent. of GDP when we took office. I should remind the House that it was more than 9 per cent. in 1975–76, which is the equivalent now of £60 billion. We have had a substantial surplus in two of the past three financial years and a small surplus in the most recent financial year.
1202 The growth dividend has also enabled the real take-home pay of a married man on average earnings with two children to rise by no less than 37 per cent.—about £70 a week. That is a measure of what the growth dividend has achieved and the way in which it has been possible to divide it. If we had sought to spend the entire dividend in the public sector, and had raised taxes to do so, we would never have achieved the growth that has enabled us to achieve those three objectives.
Despite the huge reduction in Government borrowing, the tax burden on all multiples of average earnings is lower today than it would have been had we done no more than index the tax regime that we inherited in 1978–79.
Between 1974 and 1979, when the Labour party was in office, it became clear that if one was soft on spending, the state sector would grow as a proportion of GDP. That is inevitable, as is the fact that the tax burden rises. If that happens, average tax rates and marginal tax rates will rise. That is what happened under Labour. The Conservative Government understand that and we have limited the growth of the public sector to what the taxpayer can afford. That has enabled public spending to grow at the same rate at which the economy has grown—in fact, slightly faster—without increasing the tax burden. Without a benchmark, public spending would soon be out of control. Labour would not only be without such a benchmark—we have set a target of around 40 per cent.—but has a whole raft of spending commitments that would obliterate in weeks any target that it set. That is what happened before. We remember what occurred when the right hon. Member for Leeds, East (Mr. Healey) was Chancellor of the Exchequer and public expenditure ran out of control.
Borrowing consistently on a large scale does not solve the problem either. In 1979, the Government were borrowing 5.5 per cent. of gross domestic product—down from nearly 10 per cent. a few years earlier. At today's prices, 5.5 per cent. is £30,000 million—taxes that were not raised at the time, but have to be paid for with interest now. If one had accumulated 5.5 per cent. a year of GDP since 1979, it would have added nearly £200 billion to public debt. That would have required nearly £20 billion per year in interest to service, which alone would be the equivalent of lop on income tax or a substantial cut in a sector of public expenditure. Borrowing is not an alternative to tax. It simply defers the cost, making the next generation pay for the excesses of the current generation.
Even if we assume that Labour, on taking office, ran a 2.5 per cent. public sector borrowing requirement, at the end of five years it would have added £72 billion to public sector debt, involving more than £7 billion of debt servicing, or 4p on income tax, or an equivalent cut in public expenditure.
The last Labour Government tested the limits of what could be levied in taxation. In 1979, the basic rate of income tax was 33p, having been 35p before the election. The top rate was 83p, and there was an extra 15p on investment income. There were six higher rate tax bands. Corporation tax was 52 per cent.
It was not only the rich who were howling at those tax rates. As the then Prime Minister, now Lord Callaghan, said in 1978:If you talk to people in the factories and in the clubs, they all want to pay less tax.1203 They still do. It is no wonder that such high rates of tax were a disincentive. Between 1975 and 1979, some of the country's most valuable managers and qualified staff emigrated, with the brain drain taking 68,000 well-qualified people away from Britain.
Tax reform is only one aspect—albeit a vital one—of the Government's commitment to an irreversible improvement in the supply side. We demonstrated that commitment almost as soon as we came to office by demolishing the edifice of control that had incarcerated British firms for so long. Pay, price, and dividend controls were abolished. Hire purchase controls went. Foreign exchange controls were dismantled. Those steps had a decisive influence on the behaviour of companies, which no longer had to compete with one hand tied behind their back.
Equally important were our measures to make the labour market work better. Changes in trade union legislation introduced more democratic procedures and made unions more accountable under the law. The result was that last year the number of stoppages due to industrial disputes was the lowest since 1935. Firms across the world now see the United Kingdom as a prime site for industrial investment. In 1988 and 1989, the United Kingdom took almost two fifths of all inward investment into the EEC.
Two vital ingredients are supply side policy and lower marginal tax rates, and competition. Labour does not appear to believe in either. Over the past week or so the Financial Times has examined various aspects of Labour party policy and how it appears to have improved. They were summed up in a leader entitled "Labour as government". In the context of lower tax rates and competition, that article made two points that I could not put better myself:Labour's proposed multi-band income tax is unnecessarily unwieldy and the implicit top rate—59 per cent.—too high … and the intention to sustain substantial public borrowing is worrying.Nevertheless, the most serious doubts lie elsewhere. Labour may try to talk about the market, but it is a foreign language. Whenever it tries to utter a complex thought, Labour returns instinctively to its dirigiste native tongue. From Vancouver to Vladivostock, the importance of competition and individual choice were the most appealing themes of the 1980s. Most people find the ability to make choices for themselves more attractive than the right to a tiny voice in collective decisions. Furthermore, the resulting competition provides a spur to improved performance and disciplines the arrogance of organised producers.That article adds that the "hole in the heart" of Labour policy isthe resistance to competition and individual choice, a resistance demonstrated as much in its plans for education and health as in its plans for BT.Those are two essential ingredients on the supply side. They were essential for the growth of the economy that was achieved in the 1980s.
Public spending, which peaked at nearly 50 per cent. of national income, was simply too high for the taxpayer to sustain. It is no surprise that during the 1970s the United Kingdom was at the bottom of the league table of economic growth. In the 1980s, it was near the top of the European growth league. Indeed, the United Kingdom was the only member of the G7 to have a better average growth rate in the 1980s than in the 1970s.
Under the Government, non-oil gross domestic product has grown by an average of 1.9 per cent. a year—that is, after taking account of the downturn in the 1204 second half of 1990. Under the previous Labour Government, non-oil GDP grew by only 1.2 per cent. What is more, growth in the 1980s was much more broadly spread than in the previous decade. Investment grew faster than consumption, and that did not happen between 1974 and 1979. During that period, annual capital formation grew by 0.3 per cent.—yes, 0.3 per cent. —a year. The non-oil economy grew at an average of only 1.2 per cent. Inflation averaged 15½ per cent. We should remember that in the context of today's announcement. Unsurprisingly, we were bottom of most international growth leagues.
After we sorted out the mess that we had inherited, the British economy grew strongly. Between 1981 and 1990 it grew at over 3 per cent. a year. In the 1980s, the United Kingdom economy grew faster than those of Germany and France. In fact, our performance was better than that of all major European Community countries except Spain. We also did better than West Germany or France on investment growth and manufacturing productivity.
There are many reasons for that better performance. A vital ingredient has been the Government's approach to taxation and the lower marginal rates now imposed. We made our approach clear in our 1979 manifesto. We felt that direct taxes were too high and that marginal rates were far too high. As my hon. Friend the Member for Kensington said, there has been a switch from direct to indirect taxation. That enables people to make their own decisions about spending, and thus about the level of tax, at least at the margin, imposed on them.
Since 1981 we have corrected the previous Labour Government's borrowing binge. The overall tax burden has been reduced from 40 per cent. to just under 38 per cent., and is forecast to fall to 37 per cent. in 1991–92. Marginal rates of tax have also decreased substantially. The basic rate of income tax is down from 33p to 25p—lower than at any time since the 1930s. Personal allowances have risen by over 27 per cent. more than prices, taking almost 2 million people out of the tax system. Nine higher rates of income tax have been reduced to a single higher rate of 40 per cent. Corporation tax at 33 per cent. is one of the lowest in the industrial world. In addition, six major taxes have been abolished—national insurance surcharge, investment income surcharge, capital duty, capital transfer tax, development land tax and the composite rate of tax on savings. Next year, stamp duty on share transfers will also be abolished.
We have introduced the independent taxation of husband and wife under which 3 million people will pay less tax, including 1 million elderly couples.
I believe that it is no coincidence that growth in the 1980s was faster than in the 1970s, with lower marginal rates of tax for everyone. The high-rate taxpayers have been paying a greater share of the total. In 1976 the top 10 per cent. of earners paid 35 per cent. of total income tax; last year they paid 42 per cent. The bottom 50 per cent. of taxpayers have seen their share of the income tax bill fall from 20 to 15 per cent. Between 1983 and 1989, a net 30,000 professional and managerial people came back into the United Kingdom from abroad.
It is a fallacy to say that high rates of tax create high revenue; they do not. They create jobs for tax avoidance specialists, which was, I confess, one of the only growth areas of the economy between 1974 and 1979.
The hon. Member for Newcastle upon Tyne, East (Mr. Brown) will no doubt point out that the overall burden of tax increased slightly by about 1 per cent. in the 1980s.
1205 However, he will not tell us that there was a public sector borrowing requirement of 5 per cent. of GDP in 1978–79 which no longer exists. If the total tax burden and the PSBR—which is simply deferred tax and imposes burdens on later generations—for 1975–76 are added together, the total burden was 46 per cent. In 1978–79, the Labour Government had managed to reduce it to about 40 per cent. Next year it is forecast to be 38½ per cent. That is a substantial reduction in the Government's imposition on this and future generations of taxpayers. In addition to doing that, we have succeeded in repaying £30 billion of the national debt, which now stands at 28 per cent. of GDP compared with a terrifying 51 per cent. when we came into office in 1979.
To get some idea of what the Labour party's tax policies might be like if it were in government, it is worth looking back to what they were like when they were in government in the 1970s. If we had taken the tax regime that we inherited in 1978–79 and simply indexed it for inflation, taxpayers would be paying an extra £28 billion in tax this year—more than £1,000 per taxpayer, or £20 a week—and tax would be running at 42¾ per cent. of GDP. That would represent someone on average earnings paying 36 per cent. of his income in tax compared with 33 per cent. now.
It is astonishing that we should be attacked for the slight increase in taxes as a percentage of GDP—not taking account of the PSBR. First, it pretends that the PSBR does not exist and that it is not simply deferred taxation. Secondly, it seems that Labour's answer to what it calls the too-high tax burden is to raise it even further.
§ Mr. Paice
My hon. Friend referred to a clear mathematical calculation of the extra taxes that would be paid now if the Labour party's 1979 taxes had been carried through. Does he agree that that would never have happened? Those penal levels of taxation would have continued to deter effort and invention, resulting in many more wealthy people taking their money abroad. The net effect would have been a reduction in the tax take, rather than the increase which mathematically one would assume.
§ Mr. Maples
My hon. Friend is obviously right. One would not raise tax at 98 per cent. rates, because it is not worth working for that. More and more of my friends were finding that this was an impossible place in which to live and work and that it was pointless to put any effort into doing so.
§ Mr. Dalyell
Last Tuesday, with my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore), I attended a seminar at University College London in the Institute of Contemporary History. It was on the Labour Government between 1964 and 1970 and took place in the presence of Sir Alexander Cairncross, who was chief economist, and others.
One of the features of that Government is that there were never more than 700,000 unemployed people. Recently there have been a couple of million or more. It is all very well the hon. Gentleman saying how difficult he found it to work, but under a Labour Government many other people were only too thankful to be in a job.
§ Mr. Maples
It is interesting that the hon. Gentleman raised that point. One of the other unfortunate and uncomfortable facts from the point of view of the Labour party is that unemployment has grown under every Labour Government. It has risen under a good few Conservative Governments, too.
§ Mr. Maples
It was much higher than when Labour entered office.
So far, Labour has promised higher spending and higher taxation. Labour cannot promise that there will be higher growth, because its policies will lead in the future, as in the past, to lower growth.
I turn to the visible part of Labour's programme. To pay for Beckett's law—higher pensions and higher child benefit—higher tax rates will go up, we are told, and national insurance contributions will rise. Anyone earning more than £20,300 a year will therefore pay higher national insurance contributions. That may sound a high salary to Opposition Members; if it does, it shows how out of touch they are with what is going on. This year average male earnings will be slightly over £16,000. We are talking, therefore, about someone earning about 25 per cent. more. About one quarter of male workers already earn more than that. We are talking about a quarter of the population being asked to pay more in taxes.
§ Mr. Maples
I should like to finish this point about what Beckett's law would cost us.
The promised higher rates would affect anyone earning more than £29,000 a year, which is less than twice average earnings. It is not a very high salary. It includes all Members of Parliament and, as my hon. Friend the Member for Hampstead and Highgate pointed out, a good few people in the middle grades of the public services. That would affect 1.7 million people, and that is merely step one.
§ Mr. Brown
The Minister has foolishly been reading the Conservative research department's campaign guide. I shall offer him some detailed corrections to it when I make my speech. However, the Minister must not say that the Labour party is proposing to increase the employee's contribution to national insurance because we are proposing nothing of the sort. When he recalls that statement—that we intend to increase the rates, which we do not—he might also remind the House, in all humility, that the Conservative party clagged an extra 2.5 per cent. on employees' contributions to national insurance.
§ Mr. Maples
Is the hon. Member for Newcastle upon Tyne, East now telling us that it is not his party's policy to remove the upper earnings limit on national insurance contributions?
§ Mr. Maples
Another fig leaf comes away, does it not? The marginal rate of tax will be increased by 9 per cent. for anyone earning more than £20,300 a year if there is a Labour Government. That is right, is it not?
§ Mr. Maples
That is a quarter of the working population whose marginal rate of tax will be raised from 25 to 34 per cent. if there is a Labour Government. The Opposition told us about this, but they obviously feel uncomfortable even about matters that they have confessed to.
British taxpayers cross the threshold for the top rate of income tax at a much lower level than in most other countries. As my hon. Friend the Member for Kensington said, we have the second lowest rate of marginal tax of the big seven economies. However, if Labour's rate of 59 per cent. were imposed, it would make it the second highest, pushing it slightly ahead of rates in other big European countries but well above the rate in America.
§ Mr. Maples
The hon. Gentleman mutters that that is not true. He can give his own figures, but I usually find that the leading articles in The Economist are a pretty good source of information. The article says that these figuresunderstate Britain's existing tax burden. The truth is that Britain is already a high income tax country. Its executives pay more income tax than most of their foreign counterparts because although the top marginal tax rate is low, the threshold at which they reach that rate … is much lower. A married man with two children enters the higher tax bracket at only about twice average earnings compared with four times earnings in America, and more than six times in Japan and the big European economies. Taking America's fatter allowances for mortgage interest relief into account the gap between America and Britain is even wider.The truth of the matter is that the position would be much worse than it appears on the surface. However, these tax increases are simply to pay for Beckett's law—the two public spending promises that the Opposition have confessed to. We hear their spokesmen announce further public spending increases every day from the Front Bench—"We must spend more on this or that"—and say that the next Labour Government will sort out underfunding of the national health service, will uprate disability benefits and will improve capital spending on schools. There is a raft of promises that the hon. Member for Derby, South (Mrs. Beckett) tries to pretend do not exist. However, we and the public know that they do. It is not possible to pay for them by milking the so-called rich—the 5 per cent. who pay the higher rate of tax.
The matter becomes interesting because the hon. Member for Derby, South, in "On the Record" on 19 May, stated:we've certainly said that we have no intention of raising the national insurance contribution rate"—I think that that was the hon. Gentleman's point—or the VAT rate. We don't intend to raise the basic rate of corporation tax either".The hon. Member for Newcastle upon Tyne, East recently said that there is no intention of raising the capital gains tax rate. I invite my hon. Friends to suggest whether there is any way to raise substantial revenue other than by raising the basic rate of income tax. There is no other way, and of course that is what will happen.
§ Mr. Maples
That does not avoid the fact that the basic rate of tax will have to increase. If the hon. Gentleman is 1208 saying that anything has ever been made clear by a speech by the Leader of the Opposition, he is obviously capable of translating his speeches in a way that is not available to us.
The Leader of the Labour party has made a series of conflicting statements about whether spending will come from growth, from higher tax or from the rich, and every time he makes a speech his right hon. and learned Friend the Member for Monklands, East (Mr. Smith) has to hop up and put it right. It is very entertaining, from our point of view. We hope that the Leader of the Opposition continues the habit. We are getting a stereophonic view of what Labour's tax policy would be. We know that the burden of taxation would increase under Labour, either by bringing more people into tax or by raising one of the taxes that they have pledged to maintain, if they do not intend to raise the basic rate of tax. Perhaps this is the British version of "Read my lips".
The net income of a family consisting of a married man on average male earnings, with a wife and two children, has increased by about £70 a week, in real terms, since 1979. That is one of the benefits of the supply side policies and the lower rates of income tax that we have imposed. That rise of nearly 37 per cent. compares with a rise, under the last Labour Government, of 0.6 per cent., or £1 a week, in the real living standard of a man on average earnings. At half average earnings, the increase has been £33 a week, or 32 per cent., compared with 4 per cent. under the last Labour Government. Even on the lowest decile, the lowest 10 per cent. of male earnings, take-home pay since 1979 has gone up by 15 per cent.
This policy works. It raises people's living standards and raises public spending, with lower taxes and lower borrowing. When we look in the history books, we find that the Labour party's policies did not succeed in doing that in the past, and we do not believe that they will do so in the future.
§ Mr. Dalyell
At least under the last Labour Government universities, for example, did not have to sell their priceless assets. To repeat a question that I have asked the Treasury, do the Government approve of the universities being forced into such a position that they have to sell their treasures?
§ Mr. Maples
I dealt with the points raised in the debate by Opposition Members and by my hon. Friends who were here at the start of my speech. Now that the hon. Gentleman is here I shall deal with the points that he raised.
The hon. Gentleman asked about Heveningham hall, responsibility for which falls on the Secretary of State for the Environment. I believe that the hon. Gentleman knows that, so I hope that he will take up that point with my right hon. Friend. As for Mar lodge and the difficulties of valuing ancient woodlands and forests, I shall make sure that his points are passed on to the Minister who is to reply to him next Wednesday. If it is possible to raise that point with the Valuation Office and obtain an answer for him by then, I shall do so. We are grateful to the hon. Gentleman for his welcome of the tax reduction for business gifts to education. We shall certainly want to monitor that and to keep the cost of the operation under review to make sure that it does not become too expensive, but it is not thought that there is any serious danger of its getting out of control.
1209 As for the universities, everyone in the public sector has to operate on a budget. When the hon. Gentleman's party was in power, it had to impose cash limits. We cannot allow a school, university or health authority that has overspent its budget to say to the Government, "If you don't give us £X million, we'll have to do something that's politically rather unattractive." The hon. Gentleman understands, I am sure, that higher education is not a subject on which I have specialist knowledge. We are all sorry to see treasures such as that sold, but it seems to me that as long as they remain in Scotland, which is an appropriate place for them to be, and as long as they are available for the public to see, no great loss will be incurred.
To return to my point, living standards have consistently risen faster under Conservative Governments. If one looks back not just at the period when this Government and the last Government were in power but at the whole of the post-war period, the real net income of the average family went up, on average, by 0.8 per cent. a year when Labour was in office, a total of 14 per cent. For every year that a Conservative Government were in office, that average family enjoyed a growth in income of 2 per cent.—a total rise of 82 per cent. For every 14 per cent. rise in living standards under Labour Governments there has been an 82 per cent. rise in living standards under Conservative Governments.
A pointer to what Labour really thinks about the basic rate of tax is that it voted against every tax cut that this Government made. Labour now asks the country to believe that it will not increase taxation, except for the two examples already given—the top rate of tax, and the national insurance contributions ceiling. That is incredible to us. I believe that it is incredible to the British public, too. Moreover, I do not think that Labour honestly believes it. What is more, I am certain that most Back-Bench Labour Members of Parliament hope fervently that it is not true. The hon. Member for Leeds, West—the authentic voice of the Labour party—said that he would like people to pay more tax. The Labour party likes to milk people whom it thinks are rich—as far as I can see, anyone earning more than 10,000 a year.
§ Mr. Battle
I recall that I said that we would prefer a fairer system of tax. Does the Minister agree with that?
§ Mr. Maples
We think that we have a reasonably fair system of tax. It is monstrously unfair that people should pay 98 per cent. of their income in tax. That is one of the big tax reductions that we made—
§ Mr. Maples
The hon. Gentleman said that the Government had favoured the rich in their tax changes. That is bound to happen when correcting a monstrous injustice such as taking 98 per cent. of people's income from them. My hon. Friends understood from his speech that he hopes that the Labour party, if it ever takes office, will raise taxes to increase public spending. That is what he means by a fair tax system.
§ Mr. Peter Bottomley
Will my hon. Friend confirm that one of the tax changes being made is the abolition of the composite rate of tax for interest paid on bank and 1210 building society accounts? That would allow the poor to receive money without the wrong tax being deducted from them.
While my hon. Friend is considering that, will he say—if not now, next week—whether, if clause 50 of the Finance Bill is passed, and if the composite tax rate that has applied for the past four years begins to be undermined, that will expose the Government to judicial review, which may last a further five years?
§ Mr. Maples
I hope not, but I will think about it.
As we have shown in the past 10 years, a long-term reduction in the tax burden is not incompatible with increases in public spending. We believe that the Government will take the triple crown of higher real expenditure on public services, lower borrowing and lower tax rates. Labour offers only the wooden spoon of higher taxes, higher spending and lower growth.
§ Mr. Nicholas Brown (Newcastle upon Tyne, East)
I congratulate the hon. Member for Kensington (Mr. Fishburn) on his choice of subject. He follows in the steps of the hon. Member for Hertford and Stortford (Mr. Wells), who chose a similar subject on 14 May last year.
I do not know how much direct control the hon. Member for Kensington had over the wording of the motion, but I congratulate him on that, too, because it is a significant advance on last year's motion. I cannot say that I agree with its contents, but it comes closer to addressing the subject of debate than did last year's motion.
The motion makes four points: it congratulates the Governmenton achieving reductions in direct taxation".The way in which that is phrased is an advance, because, last year, the word "direct" was missing from the self-congratulation on taxation policy. It mentions theconsequent encouragement of initiative and enterprise"—I shall mention that later—andurges the Government to continue its taxation policies of proven success"—I assume that that is a reference to the poll tax—and goes on to be rude about the Labour party.
I shall deal with those points in order. The appropriate point to start is the congratulations that are offered to the Government on achieving reductions in direct taxation. It is true that the Government have reduced direct tax rates, particularly, as the Minister boasted, the top rates, but, as almost every hon. Member has said, it has been at a price—an increase in indirect taxation. The primary increases were in value added tax in 1981 and the extra 2.5 per cent. on national insurance rates.
The Government have had the benefit of that extra revenue, which has enabled them to take some 38 per cent. from the British economy—the gross domestic product—since 1981. When Labour left office, the total tax take from the British economy was 34.75 per cent.
We were told about workers being slaves to Her Majesty's Treasury. That argument applies not only to direct taxation but to all taxation, and if anybody has increased the tax burden—and thus, according to Conservative Members, enslaved the British people—it has been the Conservatives during the 1980s. When Conservative Members ask whether the Labour party is 1211 committing itself to reducing the tax burden the answer is no, but when they argue that we shall have to increase it, they forget that they have done precisely that.
§ Mr. Bill Walker
Does the hon. Gentleman intend to refer to borrowing? Is he aware that borrowing is simply deferred taxation? It is easier to defer and let somebody else pay the tax, as the last Labour Government did. If borrowing were included in his equation, what would be the impact?
§ Mr. Brown
The hon. Gentleman asks an important question. Reference was made during the debate to Lord Barnett's book entitled "Inside the Treasury", in which the noble Lord deals with the question of borrowing. I am a keen student of the book, as is my hon. Friend the Member for Derby, South (Mrs. Beckett). We have taken the lessons contained in it very much to heart and a future Labour Government will not borrow for revenue expenditure, as happened in the past. That mistake was made by the last Labour Government, and it was a mistake which we do not intend to repeat.
In boasting in the motion about their successes in respect of direct taxation, it is understandable that the Government do not point out that the reduction in direct taxation and the increase in moneys available to the Exchequer have been wholly accommodated by the increase in indirect taxation, which has had an effect on the spread of the tax burden.
Data from "Economic Trends" show that in 1988, the poorest retired households—those in the bottom one fifth of the income distribution for pensioners—paid nearly 40 per cent. of their gross incomes in tax. That was a higher burden of tax than that carried by the richest one fifth of non-retired households—in other words, people who are economically active—who paid just 34 per cent. of their incomes in tax. I took that to be the main thrust of the speech of my hon. Friend the Member for Leeds, West (Mr. Battle), rather than any call for a dramatic increase in the basic rate of income tax. It is important to realise that that shift in the tax burden has been due almost entirely to the changing rates of VAT.
The Conservative campaign document "Campaign Guide 1991", produced by the Tory research department, contains a number of errors and statements of political wishful thinking rather than of fact. It says, for example, that the Labour party remainssteeped in the politics of envy.Nothing could be further from the truth, unless the Conservatives describe a yearning for social justice as envy. Most people in Britain do not see it that way. We wish to redistribute the tax burden and ensure that those on low and average incomes shoulder less of the burden and that those on higher incomes shoulder more of it, not least because they are able to do so.
The Conservative campaign guide goes on to say that most people now pay a smaller percentage of their earnings in income tax and national insurance contributions and thatthe crucial test for most individuals and families is not the balance of the tax system, but their real take-home levels of pay.That is a gross distortion of the reality facing most of our fellow citizens. The poll tax, VAT and a wide range of other indirect taxes have had a major impact on the burden faced by all households. Such taxes are not as 1212 progressive as income tax, so it logically follows that that burden has been carried by the poorer rather than the wealthier citizens.
§ Mr. Maples
I am sure that the hon. Gentleman would not want to mislead the House on the question of real take-home pay. The figures that I used—and I expect that they are also used in the campaign guide—are those for real take-home pay after adjustment by the retail prices index, which includes increases in indirect taxation. Therefore, the real increase in take-home pay is calculated after increases in indirect taxation.
§ Mr. Bottomley
I suspect that the argument between the Minister and the hon. Gentleman will continue and that the Labour party will usually lose it, although the hon. Gentleman puts his case engagingly.
My question is less technical. The hon. Gentleman is right to talk about gross pay and the money that one keeps after taxation, especially direct taxation. I suggest that the people who went for a £500 snack in Park lane—they are all known to be Labour party supporters—should be asked what their gross income was last year and how much they paid in direct taxation. Then, we should have an idea of the effective tax rates of those who would like the Labour party to introduce higher rates not just for them, but for those on much lower incomes and for those who would not dream of paying £500 for a snack on Park lane.
§ Mr. Brown
I am willing to argue with the Minister about the shift from direct to indirect taxation and the fact that that places a heavier burden on poorer people than on others, but I am afraid that, perhaps for the first time in such a debate, I am unable to help the hon. Member for Eltham. That is not for want of trying, but because I cannot afford to attend dinners that cost £500 a head, as I do not have the necessary resources although I should like to have them. If I did have the resources, I should willingly give them to the Labour party. As for knowing millionaires and other wealthy contributors to our movement, I am grateful that such people exist, but I do not know them personally and know nothing of their affairs. I am sorry that I cannot help the hon. Gentleman. I should like to, but I have no direct responsibility for such matters, as Ministers say and as, I suppose, I must practise saying.
We discussed Labour's proposals for direct taxation and expecially that for a top rate of income tax of 50 per cent. but a higher marginal rate of 59 per cent. when one includes the removal of the ceiling on national insurance contributions. That proposal was denounced because it was said that it did not parallel the practices of our European competitors. Clearly there will be an argument about the figures.
I have a list of the top marginal tax rates of our European neighbours. Those rates include social security taxes. Of course, the structures differ in different countries, but if we include the 9 per cent. marginal adjustment in 1213 national insurance it is right to include the social security taxes of other countries. If we do so, the figures show that the top marginal tax rate in Austria is 60.35 per cent., in Belgium it is 67.07 per cent., in Denmark it is 68 per cent., and in France it is 65 per cent. Before anybody mentions it, I am aware that France relies more heavily on indirect taxation than on direct taxation. However, the argument is about the rates.
The German system is more like ours. The top marginal rate there is 60.5 per cent., in Greece it is 50 per cent. including 7.5 per cent. for social taxes, in Ireland it is 60.75 per cent. and in Italy it is 63.9 per cent. Although Japan is not a European country, it is worth pointing out that its top marginal rate including social taxes is 71 per cent. In the Netherlands it is 60 per cent., in Norway 57.8 per cent., in Spain 56 per cent. and in Sweden 50 per cent. The only two European countries where the rate is lower than that which we propose are Portugal, where it is 40 per cent., and Switzerland, where it is 30 per cent. I read those figures into the record because, compared with our European partners, our 50 per cent. plus 9 per cent. national insurance looks reasonable.
We intend to establish a consensus on top-rate taxation. We do not intend to ratchet the figure up. As my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) has made absolutely clear, we expect the 50 per cent. rate to endure. Although I understand why Conservative Members attack us for it, it is the rate which endured under their Government for most of the 1980s. Indeed, when the rate was reduced in 1988, the consequences were not met with universal acclaim.
We have heard the old red or blue herring about cutting the top rates of tax to create more revenue income. That case has often been made and answered. The most significant single reason for an increase in income following a reduction in the top rates of income tax is fiscal drag. I do not have the figures before me, but, from memory, an extra 400,000 or 500,000 people dragged into the top rate tax band creates substantially more income. Since 1979—I have this figure with me—more than 1 million more taxpayers who would otherwise pay basic rate tax have been paying tax at the 40 per cent. rate.
A further argument is that lowering the top rate of income tax encourages those who can affect these matters for themselves to take their remuneration package in income rather than in executive perks. That process was happening anyway, but it has been accelerated by the Government's treatment of the major executive perk, the company car, which is less attractive now than it was. I have no quarrel with the Government about that. Over the past few years we have seen executive pay substantially outstrip the pay of the rest of the work force. It is self-evident that the amount of revenue due to the Exchequer is increased as a result. Nothing that we are suggesting in our modest realignment of the top rate of income tax should affect that unduly.
It is important to set alongside that issue the fact that we are not saying that the 50 per cent. top rate will sit at the current 40 per cent. band. We are saying that it will come into play at a much higher income level. It is important that Conservative Members realise that we seek to introduce a banded system with more than two rates, including a different rate at the higher end—
§ Ms. Abbott
Does my hon. Friend agree that one of the virtues that the Government claimed for their cuts in top income tax rates was that they would provide incentives for entrepreneurs and people at the top of the tree? When such people have been asked, for surveys, what their motivation is, they have all said that they wished to build businesses and that money was a factor only at the margin. They are concerned about job satisfaction.
Did not the cuts in the top rates of income tax also feed, if only psychologically, into the Lawson boom and the terrible inflation from which we are now trying to escape?
§ Mr. Brown
I wholly agree with both points. It is not necessary to look for base motives when examining the remuneration of those who hold significant positions in private and nationalised industries. Such people are highly motivated and I do not think that modest adjustments to their salaries lie at the heart of that motivation. The Conservative party also argues in its campaign document that our increased top rate of tax proposal would cause a damaging brain drain as talented executives flee the country. We heard that argument again today. But I repeat that the top income tax rate in force for most of the years of this Government, until April 1988, was 60 per cent.—one percentage point higher than the top rate that we propose. The Daily Express, a source of much wisdom and learning for Tory Members, claims, however, that during the years when the top rate was one percentage point higher than the one we propose there was a net inflow of 30,000 high flyers to this country. The Conservatives seek the credit for that achievement, yet it took place under a higher rate than the one that we propose.
§ Mr. Arbuthnot
Surely the difference in those days was that this country was leading tax rates down? Rich people had nowhere else to go and they came here because our tax rates were falling. Now they have plenty of other places to go, and average tax rates are far lower than they would be under Labour's proposal.
§ Mr. Brown
The hon. Gentleman is one of the very few Conservative Members whom I would employ as a professional adviser had I the resources to do so. I follow his contributions in the Finance Bill Committee and on the Floor of the House with considerable respect. The only possible intellectual argument to justify this seeming anomaly is the one that he has advanced. He says that people came back to Britain because they knew that the Conservative Government would further reduce top rates of tax later on. He says that people had nowhere else to go. I have already read into the record what happens in other countries. The Economic Secretary rightly pointed out that some of their marginal top rates of tax bite at higher levels than they do in the United Kingdom. If they wanted to remain in the first world the only places to which they could go are countries such as Austria, Belgium, Denmark and France, all of which have higher marginal top rates of taxation than Britain.
§ Mr. Brown
It is difficult to arrive at a uniform figure for the United States because local income taxes differ from state to state, but the marginal rate in America is 38.65 per cent. That puts that great trading block against the trend of what is happening everywhere else, including Japan, which is a successful competitor of the United States.
1215 The motion deals not just with direct taxation but mentionsconsequent encouragement of initiative and enterprise;".That has brought us a balance of payments deficit of £13 billion and, in spite of a deep recession, the forecast is for a deficit of £6 billion. In 1983 Britain had its first-ever deficit in manufacturing since the industrial revolution, and the Conservatives have maintained that deficit ever since.
The underlying rate of inflation is 8.7 per cent., although it depends on how one calculates the figure. I think that the Economic Secretary prefers 8.6 per cent. In either case there has been a reduction of only 0.2 per cent. The Government's only way of bearing down on inflation is to bring about a recession. Any fool can bring inflation down by increasing unemployment. The trick is to bear down on inflation while working towards full employment, and Labour is committed to doing that. The Government boast about encouraging initiative and enterprise, but 2.2 million people are unemployed and another 70,000 of our fellow citizens were yesterday added to that total.
Unemployment is still rising. About 3,000 people a day are losing their jobs, yet the Government have the gall to boast about encouraging initiative and enterprise. Making people unemployed is a harsh way to do that. Anyone who takes Conservative philosophy at face value and tries to start a small business would probably first approach a bank. He would quickly find that bank lending rates to small businesses can be as high as 18 per cent. and that a rate of 16 per cent. is common place. That does not encourage initiative and enterprise. The Government's remedy, expressed by the Chancellor, is to call in the bankers and talk to them. That might help, but we have yet to see the fruits of that exercise.
The economy is still suffering from underinvestment. There is a crisis in the national health service, a matter which is debated almost daily in the House, and my hon. Friend the Member for Leeds, West spoke about the real and growing poverty in inner-city and rural areas.
§ Ms. Abbott
My hon. Friend has referred to theencouragement of initiative and enterprise".Instead, we have seen the deskilling of the work force. I grew up in north-west London. In the 1950s and 1960s, there were manufacturing estates, light engineering and light manufacturing all round Park Royal and west London generally. That activity was swept away, to be replaced by warehouses and hypermarkets. The children of men who were skilled tradesmen or craftsmen are offered nothing more by the Government than the opportunity to work in Wimpy bars or in a MacDonald's. One of the Government's priorities has been the deskilling of the British work force.
§ Mr. Brown
My hon. Friend is right. It is a tragedy that the position of her constituents in Hackney and Stoke Newington is paralleled in the community that I represent on Tyneside. That is perhaps surprising, because Tyneside is a community with traditional engineering and shipbuilding skills. There have been massive redundancies over the past 13 years, yet the employers that remain say that there are skill shortages in traditional areas of employment. At the same time, the waiting list for unskilled labourers at Swan Hunter, for example, is about 2,000 strong. That is the scope of the problem. The solution is clear to everyone who applies common sense to 1216 it. The need for training and the repositioning of those who are unemployed seems to be self-evident. Everyone takes that view except, unfortunately, the Government.
My hon. Friend the Member for Linlithgow (Mr. Dalyell) spoke of increasing congestion on our roads and, implicitly, in the railway system. What is the Government's response? Instead of taking the action that my hon. Friend outlined, they freeze British Rail's investment programme. At the same time, we have a continuing economic recession. Do the Government describe that asconsequent encouragement of initiative and enterprise"?The Government are kicking the guts out of people who want to show enterprise and initiative. They do so, in effect, by not taking the responsibility that the Labour party confidently asserts is the responsibility of government. The motion continues and urgesthe Government to continue its taxation policies of proven success".The Government boast about the taxes that they abolished, and the Labour party has no intention of reinstating those forms of taxation when it forms a Government. However, the Government do not talk about the tax that they invented, the poll tax. I understand that it still has its supporters and adherents on the Conservative Benches, from the former Prime Minister, the right hon. Member for Finchley (Mrs. Thatcher), onwards.
§ Mr. Battle
The Minister suggested that taxes had decreased for everyone. He referred to an average figure and gave the impression that everyone was better off under the Conservative Government. I was surprised that he did not refer to the written question that he answered on 13 May, which makes it plain that a one-wage-earner family with two children aged four years and six years is worse off in real terms than in 1987 at every level of gross earnings up to £170 a week. The position is the same for similar families with three children aged three years, eight years and 11 years. Those families are also worse off. I have referred to the Minister's answer, which came from the Government's tables, yet he tried to fob us off with the average figure. The fact is that the poor have become worse off.
§ Mr. Brown
My hon. Friend is right. The Economic Secretary has a tendency to try to slide away from his written answers. I remember his telling the House that the growth rate under this Government was 1.75 per cent. when averaged out over their period in office. Today, however, the Minister has tried to kid the House that economic growth has been higher under Conservative Governments than under Labour Governments. In fact, the reverse is the truth.
§ Mr. Maples
I am sure that the hon. Gentleman will acknowledge that the figures are crucially dependent on the dates that are selected and the periods that they embrace. The answer to the written question to which the hon. Member referred was 1.75 per cent. It was a conveniently contrived question to produce exactly that answer. The truth is that the rate of growth under this Government has been considerably higher than under Labour Governments.
§ Mr. Brown
That is nearer to the truth. These figures depend crucially on the dates that are included in the question. I understand the argument of the Conservative party that there is a residual with which they have to cope 1217 in the moves from Labour Governments to Conservative Governments. Presumably that also applies when there are moves from Conservative Governments to Labour Governments. If we take the historical periods for both Labour and Conservative Governments, growth rates have been higher under Labour Governments than under recent Conservative Governments. That is why we have asked the relevant questions.
I should be happy for the Economic Secretary to the Treasury to confirm that previous Labour Governments achieved acceptable rates of economic growth that bear comparison with anything that Conservative Governments have done. As Conservative Members like to extrapolate from the past what will happen in the future, it seems reasonable for them to admit that a future Labour Government could expect to attain reasonable rates of economic growth.
Let us move on to the part of the motion whichurges the Government to continue its taxation policies of proven success".Clearly, that is a reference not to the poll tax, but presumably to the increase in value added tax. If it is a reference to increases in value added tax so far, the hon. Member for Torridge and Devon, West (Miss Nicholson) pointed us in the direction of future Conservative party policy. She said that, although Labour Members moan about VAT rates, this country has one of the lowest VAT regimes in Europe. What on earth is the point of drawing our attention to that important fact, if it is not to set the scene for increasing the rates of value added tax to bring us further into line with our European partners?
It is clear that the hon. Member for Torridge and Devon, West, who has the affection of many Labour Members, is honestly and perhaps disingenuously pointing the way forward for Conservative taxation strategists. If they wish to bring direct rates down, they will put indirect rates up. That may advantage the better-off, who do not like paying high top rates of taxation, but it will not help—
§ Madam Deputy Speaker
I think that the hon. Member for Tayside, North (Mr. Walker) sought to raise a point of order.
§ Mr. Walker
Thank you, Madam Deputy Speaker. You will be aware that many of us have been in the Chamber since the beginning of the debate, but the hon. Member for Newcastle upon Tyne, East (Mr. Brown) has spoken for 40-odd minutes and it looks at though he will continue for some time. Is it in order for Front-Bench spokesmen to speak for so long and not allow those of us representing the far-flung parts of the United Kingdom—further north than Newcastle—the opportunity to put the Scottish view?
§ Madam Deputy Speaker
I am sure that the hon. Member is aware that the Chair has no control or authority over the time that hon. Members seek to speak. I have noted that a number of hon. Members have been in the Chamber throughout the debate, patiently waiting to speak, and I regret that I have not been able to call them.
§ Mr. Brown
It was my impression that I was winding up the debate following the speech of the Economic Secretary to the Treasury, and that we were dividing the time between us. I did not notice any protest from Conservative Members during the Minister's speech. I am never churlish about such matters and if I am allowed, I will happily draw my remarks to a premature conclusion—if, regrettably, to their own disadvantage—so that the hon. Member for Tayside, North (Mr. Walker) is able to put a few remarks of his own on the record, should he catch your eye, Madam Deputy Speaker.
Among the issues that the hon. Gentleman may wish to discuss are the effects of the Conservative party's taxation policies on the very poorest section of our society who are retired. In 1979, the poorest fifth of pensioners paid 27.9 per cent. of their income in tax. In 1988, that fifth paid 40 per cent. of their income in tax.
The hon. Member for Kensington protested that British executives pay tax of 32 per cent., yet he said nothing about the poorest one fifth of pensioners who pay 40 per cent. from substantially less resources. It is a concomitant of Conservative tax policy that in 1979, the richest one fifth of non-pensioners paid 37.6 per cent. of their income in tax, and in 1988 the same people—individuals who are economically active—paid 33.7 per cent. of their income in tax. If Conservative Members can find the justice in that, I cannot.
On 6 March 1984, the future Economic Secretary, the hon. Member for Lewisham, West (Mr. Maples), summed up his personal taxation and economic policy with these words:A successful man is someone who can earn more than his wife can spend."—[Official Report, 6 March 1984: Vol. 55, c. 803–4.]
§ Ms. Abbott
I know the wife of the Economic Secretary, because I worked for her many years ago. She is both an economical and a high-earning lady in her own right. On her behalf, I much resent the tone of the Economic Secretary's remarks.
§ Mr. Maples
Just for the record, in case my wife reads it, I should point out that I was not married to her at the time that I made that remark. The second line to the joke is that a successful woman is one who can find such a man.
§ Mr. Brown
One is tempted to say that one is sorry that the Economic Secretary's wife did not, but although I can be fairly firm with Conservative Members, it is not my intention to wreck their marriages. Instead, I will remind the House of the taxation policy that the hon. Gentleman shared with right hon. and hon. Members on 1 May 1984:I did some simple calculations that showed that if one adopted such a broad brush approach—" —to direct taxation—which would obviously be tempered to cope with various problems—a basic rate of tax of 10 per cent. levied up to average earnings, of 20 per cent. to twice average earnings and of 25 per cent. thereafter would yield more revenue than the present income tax system.Addressing himself to the then Chancellor of the Exchequer, the hon. Gentleman added:I hope that he will consider the theory of removing deductions and lowering the rates when he reforms income tax. The result would be a fairer, simpler and more economically neutral tax system with a basic rate of 10 per cent." —[Official Report, 1 May 1984; Vol. 59, c. 258–59.]1219 There is the Conservative agenda clearly set out by an hon. Gentleman who, on the basis of that speech, was promoted to the Treasury Bench. We can see in which direction Government policy will go. How high will indirect taxation have to be? And how deep will be the cuts in public sector services to bring about such an economic miracle? The electorate can draw their own conclusions. It is not a question of a secret agenda. It is out in the open, spelt out for us in Hansard.
It was my intention to take Conservative Members through some aspects of Labour policy on which their own campaign guide misinforms them, but I would rather allow the hon. Member for Tayside, North participate in the debate—particularly as I can see that that is your personal wish, Madam Deputy Speaker.
I conclude by thanking the Government for having arranged this further training debate for Ministers. It helps to ensure an orderly transfer of power, and I am glad that the Government acknowledge the inevitability of what is to happen. The real difference between the Labour party and the Government is that the Government propose further cuts in direct taxation—they will put that policy to the electorate—but we make no such pledge. We believe that the fruits of economic growth should be spent on much-needed investment in public services. That issue forms the gulf between us. The electorate will have to make up their mind.
Since the Conservative party started its summer assault on the Labour party's economic policies, events in Monmouth and the opinion polls have moved steadily and remorselessly in our favour. I advise the Economic Secretary to quit while he is ahead.
§ Mr. McMaster
On a point of order, Madam Deputy Speaker. Conservative Members have been present during the debate. It is clear that they want to speak now rather than earlier so that we do not reach private Member's motion No. 3.
§ Madam Deputy Speaker
Order. That is not a point of order for the Chair. Hon. Members are waiting to speak on motion No. 1.
§ Mr. Bill Walker (Tayside, North)
What the hon. Member for Paisley, South (Mr. McMaster) said is humbug. He spoke in the debate. If he wanted to deal with motion No. 3 he should have refrained from speaking and we would have had more time.
The hon. Member for Newcastle upon Tyne, East (Mr. Brown) spoke for 45 minutes. What did he tell us? He said that the Labour party proposed a modest realignment. He also said that it would not borrow to pay revenue expenditure and that it is committed to growth and full employment. Those were his words, not mine.
1220 I remind the hon. Gentleman what growth and full employment meant under a Labour Government. For the steel industry, it meant organisations running at massive losses, with the tab picked up by the taxpayer. For the car, coal, aerospace and shipbuilding industries, it meant organisations running at massive losses, with the tab picked up by the taxpayer. That was the Labour Government's record.
The Labour party talks about jobs, but it does not talk about job security or a tax regime that encourages British industries to compete effectively in the world. It has no new ideas; just tinsel dressing.
It is interesting that the hon. Member for Linlithgow (Mr. Dalyell) drew attention to the tolls on the Forth road bridge. He did not tell the House that a quarter of those takings cover the cost of employing the collectors. That could be avoided by implementing a system of throwing coins into baskets. The hon. Gentleman is a splendid parliamentarian. He is honourable and has integrity, and I have always respected him. He would not attempt to discuss a tax-raising Scottish assembly, and I understand why.
As my hon. Friend the Member for Kensington (Mr. Fishburn) said when he introduced this worthwhile debate, massive problems are created if a country gets into a cul-de-sac of taxation that is at a higher level than that of its neighbours. That is what the hon. Member for Linlithgow and I know will happen to the country that we care deeply about—Scotland—if the mad proposal to have a talking-shop in Edinburgh that raises taxes is ever implemented. That has to be linked to the promises that have been made by every Labour Front-Bench spokesman for the spending departments. Every one of them stands up and makes promises about what they will add to expenditure. This morning the shadow Treasury Minister was unable to tell us how that would be paid for. The answer was that it could not be paid for, because the Opposition will not borrow to pay the revenue expenditure; they will merely have modest realignments. However, they will impose upon us in Edinburgh, an assembly with tax-raising powers, so that the Scots will suffer more than anyone else. That will be the obvious outcome of any future Labour Government.
§ Mr. Dalyell
On a point of order, Madam Deputy Speaker. Is the Minister of State, Foreign and Commonwealth Office courteously coming to the House because the Government want to make a statement on the increasingly serious Iraqi nuclear situation, as we understand it from the BBC?
§ Madam Deputy Speaker
Order. To the best of my knowledge, Mr. Speaker has not been informed that any statement is to be made.
It being half-past Two o'clock, the debate stood adjourned.