HC Deb 17 October 1991 vol 196 cc425-6
3. Mr. Amos

To ask the Chancellor of the Exchequer if he will make a statement on personal income tax.

The Financial Secretary to the Treasury (Mr. Francis Maude)

The basic rate of income tax has already been reduced from 33p to 25p in the pound. We intend to reduce it further to 20p in the pound over time.

Mr. Amos

Does my hon. Friend agree that people do not want to pay higher taxes? Indeed, they want to pay less tax. If people wanted to pay more taxation, the Labour party would not be so desperate to hide the truth about its extravagant spending policies.

Mr. Maude

It is conspicuous that the Labour party has not contested a single one of the spending pledges that we costed last summer. I assume that it accepts that every one is correct, and they are increasing almost day by day. My hon. Friend is entirely right that it would be impossible for any Labour Government to fund those extravagant spending pledges without raising the basic rate of income tax as, indeed, every Labour Government, except Ramsay MacDonald's first one in 1924, has done.

Mr. Beith

As it has been the Chancellor of the Exchequer's declared policy for quite some time to reduce income tax to 20p, what is holding him back? Is it the fear that public services are already so stretched for resources, particularly in areas such as education, that further cuts are not possible? Or is it the fear that the boom consequences that were generated when the right hon. Member for Blaby (Mr. Lawson) was Chancellor would be generated by a sharp cut in income tax rates?

Mr. Maude

There is nothing very dramatic about the position. We managed to reduce the basic rate of income tax over a period of years and, along with the whole tax-paying nation, we were glad that we did. We shall continue to reduce taxes when it is possible, prudent and safe to do so. In a time of recession, when tax revenues are inevitably less buoyant and when public spending increases, as it always does in a recession, it is not possible to do so at present.

Mr. Charles Wardle

Is the Minister aware that the Inland Revenue's new method of assessing mileage by voluntary drivers for hospital and other community work is causing a measure of dismay and confusion? Is he further aware that unless the method of assessment is modified, a number of those voluntary drivers will be deterred from offering their services?

Mr. Maude

I am aware that there has been a good deal of concern about the matter. I should stress that it is only the extent to which any mileage allowance exceeds the cost to the driver that is chargeable to tax. That has always been the case. That is the law as it has stood for many years, but as it is well understood that people who have been receiving the allowances have not been charged tax on that basis I have decided that the introduction of the charge to tax should be phased in gradually over a number of years.

Mrs. Beckett

In view of the state of our education and health services, and particularly of training and transport, will the Minister explain how it can be wise stewardship for the Government to contemplate using resources for tax cuts rather than for investment?

Mr. Maude

As the hon. Lady has taken the opportunity to rise to her feet, she may care to explain from which of the Labour party's pledges she is now resiling. [HON. MEMBERS: "Answer."] I will give the hon. Lady a straight answer. In the middle and late 1980s, we managed at the same time to increase spending on all those desirable objectives to which she referred, to run a substantial budget surplus and to reduce tax, and we shall be able to do so again.

Mr. Quentin Davies

Does my hon. Friend agree that the only possible consequence of placing an additional tax on savings income would be to reduce savings, which would be a thoroughly inept and dangerous policy for this country to adopt?

Mr. Maude

At a time when the consensus everywhere, outside the ranks of the Labour party, is that savings should be encouraged, it is remarkable that Labour Members cling to their antediluvian ideas about taxing savings ever higher. The Labour party hates people having savings, hates people being independant and wants to tax people's savings so as to discourage them from having any.