HC Deb 27 October 1994 vol 248 cc996-7
7. Mr. Matthew Banks

To ask the Chancellor of the Exchequer by how much the basic rate of income tax would have to rise to fund a £35 billion increase in public spending; and if he will make a statement.

Mr. Aitken

To raise £35 billion from income tax, the basic rate would almost have to double.

Mr. Banks

Does my right hon. Friend agree with me about the importance of continuing to control public expenditure? Does he agree that, by contrast, the Labour party continues to want to spend more and more, which must mean more taxation and—without a shadow of a doubt—taxing not just the mythical undeserving rich but, by implication, all middle-income earners?

Mr. Aitken

I certainly agree with my hon. Friend's first point—that tight control of public expenditure is vital to a healthy economy. The Labour party's policies are still in a somewhat amorphous and unveiled state, but it is clear from its conference pledges alone on such matters as the minimum wage that it has still not shed, or come anywhere near shedding, its well-deserved reputation as the high-spend, high-tax party.

Mr. Malcolm Bruce

On the subject of tax increases, will the Minister confirm to the House that the tax increases which will come into effect this month, coupled with those which will come into effect between now and April, add up to the equivalent of just under 3p in the pound? Are not the Government presiding over tax increases while talking about tax cuts?

Mr. Aitken

Income tax rates have not gone up by 3p in the pound, and we have reduced income tax rates time and again. We inherited an income tax rate as high as 83 per cent. at the top rate, which we brought down to 40 per cent. We also inherited from the Labour party a standard rate of some 30 per cent., which we brought down to 25 per cent., and we now have a standard band of 20p which 5 million people enjoy. We are a low-tax, tax-cutting Government, and we will get back to our core belief of cutting taxes as soon as it is prudent to do so.

Mr. John Townend

I congratulate my right hon. Friend on the recent announcement that the Treasury will be setting an example in reducing the Government's overheads. Does he appreciate that there is enormous support on the Conservative Benches and in the party for his efforts to cut the public expenditure total this year, so that we can change from being a tax-increasing Government and resume our natural position as the party of low taxes?

Mr. Aitken

I regard praise from my hon. Friend, who is something of a Robespierre of public spending, as praise indeed. Painful decisions have been made about the Treasury and the fundamental expenditure review, but it is worth reminding the House that the administration costs of Government and the running costs of Whitehall are approximately £15 billion per year, which is £13 of taxation for every household. It is entirely right that the Government should look hard—as they have in the past and are now doing again—at reducing that burden of public expenditure where it is prudent to do so.

Mr. Skinner

Will the Minister admit that the £35 billion referred to in the question is almost equivalent to the amount of money that could be saved if we managed to get those 4 million people who do not have jobs into work? There is another way, of course. That is to increase taxes on those who have received £50 billion in tax cuts in the last 15 Tory years, which would mean taxing people like Al Fayed and all his friends.

Mr. Aitken

I shall resist the temptation to say anything about the gentleman mentioned in the hon. Gentleman's question.

The £35 billion figure is in fact the amount by which the Labour party would have increased public expenditure if it had been elected. Those were the pledges that it made. This Government have been doing their best to reduce the burden of public expenditure. We are now doing so, and we hope to bring it down to a satisfactory amount between now and the next election.

Mr. Brazier

As a fellow Kentish Member, will my right hon. Friend join me in agreeing that local spending as well as central spending must be controlled in the interests of taxpayers? Does he agree that it is quite wrong that the county that we share, which is controlled by a Lib-Lab coalition, should spend £750,000 this year on entertaining and conferences?

Mr. Aitken

My hon. Friend is quite right. The spending of Kent as a local authority under Lib-Lab control is giving great cause for concern. It seems to be a case of canapés for the boys, and that should be restrained as much as possible.