§ 9. Mr. LuffTo ask the Chancellor of the Exchequer by how much real take-home pay has risen for a married man on average earnings with two children since 1979; by how much the same measure rose between 1974 and 1979; and if he will make a statement.
§ Mr. Kenneth ClarkeReal take-home pay for a married man on average earnings with two children has risen by around £83 since 1978–79; it rose by only £1.50 between 1973–74 and 1978–79. The policies that we have in place create the conditions for sustained recovery which means more jobs and higher living standards.
§ Mr. LuffWill my right hon. and learned Friend confirm that it means, if my mental arithmetic is right, that real take-home pay has increased each year on average something like 20 times faster under the present Government than under the last Labour Government? Does not that mean that the increase would have been absolutely impossible if we had to meet the bill for the extra £38 billion of public expenditure that was promised by the Opposition at the last election?
§ Mr. ClarkeMy hon. Friend is right but, with his typical fairness, he asked a question that was rather generous to the Labour party when he referred to its period of office. If one uses the examples of single people and married couples without children, their real take-home pay fell while Labour was in office, so even the generous comparison that my hon. Friend makes cannot be made at all for a large section of the population.
§ Mr. StevensonWill the Chancellor accept that the real take-home pay to which he refers has been affected by the amount of money that is required for the common agricultural policy—for example, £28 per week is taken out of the take-home pay of the average family? It is estimated that an increase of some £6 billion will be required between 1992 and 1995 because of the agricultural policy. Will the Chancellor now give a commitment that that very effective indirect taxation on take-home pay will be resisted by the Government?
§ Mr. ClarkeThe hon. Gentleman knows that he and I agree to a large extent on the common agricultural policy and that we have committed ourselves to reforming it. We shall continue to do so and I very much trust that, as the tight constraints that now exist on the European budget begin to take effect, we will achieve more progress. While we seek to achieve that improvement in European conditions, however, we also seek to ensure that the costly and unhelpful provisions of the social chapter do not apply to this country, that we deregulate the circumstances in which business operates and that we make the single market work properly by giving it state aids. Unfortunately, no member of the Labour party gives us any support on those issues, which have a big effect on increasing jobs and prosperity.
§ Mr. DuncanHas my right hon. and learned Friend had the opportunity to study the impact on average earnings that would follow the imposition of a minimum wage as proposed by the Labour party? Does he agree with me that, ironically, if there were such a minimum wage one might see the statistics for average earnings going up simply because hundreds of thousands of low-paid workers would be thrown straight on to the dole?
§ Mr. ClarkeI entirely agree with my hon. Friend, whose analysis is totally correct. Although members of the Labour Front-Bench team continue to say that they are in favour of a minimum wage, the more candid continue to concede that it would cost jobs. Unfortunately, as with everything else, the Labour party will not say what the minimum wage would be, so we can only guess at the scale of the damage that it would do to employment in the United Kingdom.
§ Mr. DarlingGiven that an increasing amount of take-home pay is being eaten up by value added tax, is the Chancellor aware that in 1979 the typical family paid £2.50 a week in VAT, whereas in 1994 the same family will pay £20 a week in VAT? Why should we believe a single word that he says when he promises not to increase the rate or scope of VAT again?
§ Mr. ClarkeFirst, as I have already said, the average net take-home pay is up by £83 since 1978–79 and, as a lot of this bandying of figures tends to demonstrate, if real incomes go up people pay more tax. That is undoubtedly the case. The taxation that we are now imposing, however, is necessary in order to bring our borrowing under control and it will not affect the rising prosperity and continued growth of the economy in the medium term. As regards what we may impose VAT on in the future, that silly game is starting rather early before a November Budget and no doubt it will be played again between now and then, and I shall continue to say that I never give any advance undertakings on what may be in the Budget. As my hon. Friend the Paymaster General said, the biggest threat to zero rates, whatever anybody decides to do here, would come if the Labour party had its way, as set out in its European manifesto, and a majority vote in the European Parliament would decide whether we have zero rates.