HC Deb 03 February 1994 vol 236 cc1012-3
3. Mr. Byers

To ask the Chancellor of the Exchequer how many people will begin paying income tax in the next financial year as a result of the freezing of personal allowances.

11. Ms Coffey

To ask the Chancellor of the Exchequer what his estimate is of how many more people will have to pay income tax by December 1994 as a result of the decision to freeze income tax allowances.

Mr. Dorrell


Mr. Byers

Does the Financial Secretary remember the written reply that he gave to one of my hon. Friends in which he said that some 400,000 individuals would be brought into the tax net as a result of the freezing of personal allowances? How will those 400,000 mainly low-paid workers manage to pay that tax without being led into even greater poverty? Does he accept that the freezing of personal allowances will mean that about £1.1 billion will be taken from taxpayers' pockets? Given the Government's broken promises, will the Financial Secretary tell the House why the country should ever again trust the Tories on tax?

Mr. Dorrell

The hon. Gentleman is wrong about an important point. If someone pays tax next year because his income exceeds the personal allowance whereas it does not do so this year, the reason is not that the Government have cut the allowance—we have not—but that his income has increased.

Ms Coffey

Does the Financial Secretary accept that the tax increases that he has introduced, which include the extension of VAT to fuel, mean that the tax burden is being borne disproportionately by the least wealthy? Does not he think that that is unjust and unfair and a betrayal of the fundamental principle of taxation, which is that it is based on the ability to pay?

Mr. Dorrell

The hon. Lady has very wisely moved off the subject of her main question, but the ground on which she has chosen to question me is no better. If she examines the distribution effect of the Budgets introduced by my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) last March and by my right hon. and learned Friend the present Chancellor in November she will find that, broadly speaking, the burden is distributed evenly across the income scale. That is not a coincidence but the result of the deliberate plans of both those people.

Mr. Dickens

Does my hon. Friend recall the dark days of the previous Labour Government and their tax regime, which drove overseas all our inventors, scientists, engineers, entrepreneurs, risk-takers and job-providers? Was not that the result of socialism and should not we be fighting back? Why should we take lectures from the Opposition? Let us go for them.

Mr. Dorrell

My hon. Friend asked if I remembered the dark days of the previous. Labour Government. The answer is only just. If one examines that Government's record on the specific subject about which the hon. Member for Wallsend (Mr. Byers) questioned me, one finds that during their five years in office the single person's allowance fell in real terms by 21 per cent. whereas under this Government it has risen by 25 per cent. I do not think that we need to take lectures from the Opposition about the merits or demerits of indexing personal allowances.

Mr. Congdon

Is not the marginal rate of tax as important as the numbers eligible for taxation? Do not the Government deserve great credit for having a basic rate of 20p in the pound, unlike the Opposition's rate of 33p in the pound? Does not that prove that people are better off under this Government?

Mr. Dorrell

My hon. Friend is absolutely right. It is as a result of the introduction of the 20p band that 4.8 million people are this year paying income tax at a marginal rate of 20p whereas, as my hon. Friend rightly says, when Labour left office the basic rate of income tax was 33p in the £1.