§ 2. Mrs. MahonTo ask the Chancellor of the Exchequer what was the cash amount paid in VAT in 1979 by a family on average earnings with two children; and what is his latest estimate.
§ The Chancellor of the Exchequer (Mr. Kenneth Clarke)A couple with two children on average earnings paid VAT of £12.95 per week in 1979–80, expressed in 1056 1993–94 prices, and an estimated £19.48 per week in 1993–94. Since 1978–79, the real take-home pay of such a family has risen by £83 per week.
§ Mrs. MahonDespite that last sentence, is the Chancellor not adding to the burden of VAT by imposing taxes on car insurance, holidays, domestic fuel and many other things? How does he expect families to meet that increased burden when the Government have created the mess that has led to that extra tax, and how can anyone ever trust the Tories on tax again?
§ Mr. ClarkeThe average family with one wage earner, two children and a mortgage of £33,000 is now about 30 per cent. better off than in 1990, only three years ago. That is why, although I have had to raise tax increases, people can look forward with confidence to rising living standards based on steady growth and low inflation. The tax, seen alongside spending changes that I have made, ought to produce sound public finances.
§ Mr. Bill WalkerDoes my right hon. and learned Friend agree that we fought the 1979 election on a clear promise that we would change from direct taxes to indirect taxes? That is exactly why the burden has been shifted and we make no apology for that because we have increased take-home pay substantially, producing disposable income which is greatly reflected in the collection of VAT.
§ Mr. ClarkeMy hon. Friend is perfectly correct. We fought elections then and since on the basis that we thought that the burden should be shifted from direct to indirect taxation. We argued the case for incentives and their effect on the economy and it has worked. That is why the average family is now £83 a week better off in real terms than before we started on that process.
§ Mr. Gordon BrownWhy impose VAT on fuel when the Government should be ending the tax privileges that are central to some of the worst boardroom salary abuses in the country? If the Chancellor really wants to act on the unacceptable face of capitalism, will he condemn Mr. John Cahill's tax-free hand-out, condemn Lord Young's £370,000 salary rise in one year and will he now fully tax executive share options? That would raise £200 million for vital public services, or is there under this Government one tax law for the boardrooms and another for everyone else?
§ Mr. ClarkeI frequently urge restraint on those who lead British industry at a time when we have to maintain our competitiveness and maintain low inflation. Individuals are cited who are wholly untypical of British management, most of whom have exercised such constraint. I do not believe in pay policies. I do not believe that Governments should direct the pay of individuals in the country and I hope that the hon. Gentleman, in the course of his revisionism, is not going back to pay policies for the Labour party.
§ Mr. CongdonDoes my right hon. and learned Friend agree that the welcome shift from direct to indirect taxation has significantly helped to improve our economic performance by enabling marginal tax rates to be reduced?
§ Mr. ClarkeI do, and that is why, at a time of very tough public spending constraints and some increases in taxation, we have preserved our marginal rates at 25 per cent., a top rate of 40 per cent. and a lower band of 20 per cent., despite the other pressures on us. It is important that 1057 we do that to keep the incentives going which made the British economy perform so well in the 1980s and which will make it perform well again in the 1990s.