HC Deb 30 June 1994 vol 245 cc937-9
10. Mr. Betts

To ask the Chancellor of the Exchequer what assessment he has made of the effect of Government policies on changes in disparities in income levels during the 1980s.

Mr. Clarke

Government policies are focused on improving incentives and encouraging business enterprise. That is the only way to ensure improved living standards for all.

Mr. Betts

Has the Chancellor read any of the reports produced recently which show that income disparities grew during the 1980s? For example, the "Economic Trends" survey shows that the poorest 20 per cent. of the population saw their share of disposable income fall from 10 to 7 per cent. during the 1980s; and the Institute of Fiscal Studies report shows that the poorest 10 per cent. of the population saw their real incomes fall by 15 per cent. during the 1980s. Does the Chancellor accept that all those reports show that the increase in unemployment, the transfer from high-paid skilled jobs to low-paid unskilled jobs, and the switch to indirect taxation have hit the poorest in the community the hardest and are responsible for the increased disparity? Will he accept Government responsibility for those matters, and will he explain to the House whether they are a result of Government incompetence or a deliberate result of their economic policies, for which he and his colleagues should be thoroughly ashamed?

Mr. Clarke

Many of the studies to which the hon. Gentleman refers in his question are, in my opinion, a complete misuse of the statistical information available to us. Average incomes have increased by 35 per cent. in the time that the Conservatives have been in office. The increase has obviously varied at different levels, but average incomes for all sections of society have increased by about 35 per cent. in real terms. That is after a period when they were very static, in the 1970s. It is true that there has been a widening of incomes, although there have been increases at all levels

Mr. Betts

There have not.

Mr. Clarke

It is true. That is why we are giving such priority to raising education standards, raising the level of skills and putting in place the new system of national vocational qualifications. In a modern economy, there will be a widening of that gap, and one has to give more people the skills that they require.

The research that the hon. Gentleman mentioned, which talks about the bottom 10 per cent., is totally misleading. That group always includes many people who declare that they have had absolutely no income of any type during the year. They include self-employed people who have accounts for that year showing a loss. If one examines individual groups, all wage-earners' real incomes have increased. People on benefit have done better. Pensioners' incomes have increased by 40 per cent. The 1980s was a period when, throughout the social spectrum, people in this country became very much better off.

Mr. Paice

Is not what really matters to those people on lower incomes the absolute income, not the comparison with higher levels, which is simply the politics of envy? Can my right hon. and learned Friend tell me whether there is anywhere in the world where a policy of making the rich poorer has succeeded in making the poor richer?

Mr. Clarke

I can remember one country, which is the United Kingdom, where a policy of trying to do that did immeasurable harm to the economy, and immeasurable harm to the incomes of most groups in the country, during the 1970s. It is obvious, from the questions that Labour Members ask, that the Labour party would revert to that policy again if ever it had the chance.

Ms Harman

In view of the anger and dismay in the country about the prospect of VAT on gas and electricity increasing from 8 to 17.5 per cent. in April, is the Chancellor prepared to reconsider that increase on VAT on gas and electricity, or is he still determined to press ahead with it?

Mr. Clarke

The increase has already gone ahead. It has been accompanied by compensation for poor groups and all retirement pensioners, although, as my right hon. Friend the Paymaster General said, not all of them appreciate that it was added to an uprating which was quite low because inflation is now so low. Parliament has approved the second stage of the introduction of VAT on fuel, and it will be accompanied by a parallel package of compensation, which will again ensure that all retirement pensioners and all people on benefit will be compensated for the costs.