Income Tax (Hansard, 16 May 1991)

§ 2. Mr. David Shaw
To ask the Chancellor of the Exchequer what were the basic and highest rates of income tax in 1978–79; and what are the equivalent rates in the current tax year.

§ The Financial Secretary to the Treasury (Mr. Francis Maude)
The basic and highest rates of income tax on income in 1978 –79 were 33 per cent. and 98 per cent. respectively. The equivalent current rates are 25 per cent. and 40 per cent.

§ Mr. Shaw
Will my hon. Friend confirm that, since they have been in office, the Government have consistently kept their promises to reduce the rates of income tax? Will he confirm that all past Labour Governments have increased income tax rates? Will he further confirm that under the last Labour Government, the brain drain reached record levels, with management figures going abroad because they were too highly taxed in this country?

§ Mr. Maude
I can certainly confirm that we have consistently and steadily brought down income tax rates and we propose to continue doing so. My hon. Friend was not quite right about the record of past Labour Governments. In fairness to the Labour party, I should say that the Attlee Government briefly reduced the basic rates of income tax before putting them up again, and the Ramsey MacDonald Government of 1924, during its nine months in office, failed to put up basic tax rates. But with those exceptions, Labour Governments throughout history have always raised income tax.

§ Mr. Cousins
Does the Financial Secretary agree that the combination of the tax system and the benefit system means that low-income families are being taxed by a combination of tax and benefit withdrawal at a rate of more than 90 per cent.? Does he agree that, in the new classless society that has been created, we have incentives for the rich, but not for the poor?

§ Mr. Maude
Absolutely not. The intention behind the tax reforms that we have introduced was to take out of tax 2 million people who would have paid tax if the regime left by the Labour Government had remained in force. Two million people who would have paid tax under a Labour Government do not pay any tax at all. The benefit reforms that we have introduced were specifically designed to reduce the high marginal rate of the combination of tax and withdrawal of benefit to which the hon. Gentleman refers. It is better now than it was under the regime left by the Labour Government.

§ Mr. Peter Bottomley
Does my hon. Friend believe that enough people have understood the point made by the Labour party that it intends to introduce a savings penalty of 9 per cent. on all savings income of more than £3,000? Would not that reduce the funds to building societies and cut the chances of people borrowing money to own their own homes?

§ Mr. Maude
I find it difficult to understand how the Labour party can in one breath proclaim the merits of saving and investment and say that it proposes to increase the tax on savings. We believe that it is right that people should save. It is good for individuals and for families because it makes them more independent and less dependent on the state and it increases the funds available for investment. That is important. It will be interesting to hear how the Labour Front Benchers square that with their proposal to increase the tax on savings, or does Labour simply not care?

§ Mrs. Beckett
rose ——

Hon. Members
Answer.

§ Mrs. Beckett
I am not allowed to answer at Question Time, at least not until we sit on the Government Benches.
Having given the figures for income tax in 1979 and the present year, will the Financial Secretary now give the figures for national insurance contribution rates in 1979 and the present year, for value added tax rates in 1979 and the present year and for the overall tax burden in 1979 and the present year, which include both those figures as well as the cuts in income tax?

§ Mr. Maude
As I understand the rules of the House, if the hon. Lady wishes to table a question to me about these fascinating and important matters, I shall provide her with a detailed and specific answer. However, as this question is about something completely different, I shall decline to do so. The hon. Lady mentioned the overall tax burden now compared with—[Interruption.] The hon. Member for Derby, South (Mrs. Beckett) asked a question about the tax burden and I shall provide an answer. If Labour Front Benchers would quieten down, they would have an opportunity to hear it.
It is right to say that the tax burden in 1980–81 increased substantially compared to that in 1978–79. It was necessary to raise taxes to pay off the enormous burden of debt levied on the country by the Labour Government—the right hon. and learned Member for Monklands, East (Mr. Smith) was a member of the Cabinet. The Labour Government reduced the tax burden, but they did so at the expense of increasing the tax burden on future generations. That is not a responsible way to proceed. Since 1980–81 the total tax burden has steadily fallen and it continues to do so.