HC Deb 18 April 1996 vol 275 cc836-8
12. Mr. Hoyle

To ask the Chancellor of the Exchequer what assessment he has made of the effect of current levels of taxation on (a) individuals and (b) the economy. [24326]

Mr. Kenneth Clarke

A family on average earnings is expected to be around £450 better off this year. I expect current levels of taxation to help to sustain a good level of recovery for the economy, with rising employment and rising prosperity.

Mr. Hoyle

Will the Chancellor confirm that the average family paid less total tax in 1979–80 than it does today? He says that cutting taxes is not a priority, yet the right hon. Member for Wokingham (Mr. Redwood) says that taxes must be slashed. Who is right? Is it any surprise that The Daily Telegraph today states that the Government are a disaster?

Mr. Clarke

The hon. Gentleman's proposition is wrong. The average family in 1979 paid less tax than now because it earned so much less and was much poorer. The average family today, after tax and inflation in today's money, is more than £4,000 a year better off than in 1979. It is true that in that year the Labour Government had got the percentage of taxation down to a low level, but they combined that with a 7 per cent. of GDP public sector borrowing requirement—which is merely taxation postponed. Indeed, the Conservative Government had to raise taxes in 1981 to pay for that. Now, taxation is falling, the economy is growing and personal living standards are rising. That would never have been achieved by the former Labour Government and will never be achieved by a future Labour Government.

Mr. Forman

Will my right hon. and learned Friend take every opportunity in his next Budget to see what further improvements can be made to the regime of corporate taxation, as it is vital that this country has a corporate tax regime that is competitive with the most competitive countries in the world?

Mr. Clarke

We continually look for ways to lighten the cost burdens on those who create employment and wealth. We already have the lowest rates of corporate taxation in western Europe, and we have a particularly low rate for small businesses. But I agree that this must be given a high priority in future policies if we are to continue to build up the kind of healthy enterprise economy that we want.

Mr. Mike O'Brien

Did I miss it, or did the Chancellor blunder into the admission that the share of tax take is higher now than it was in 1979?

Mr. Clarke

It is much lower than the average during the previous Labour Government. The economy is bigger, personal living standards are higher and taxation is now corning down. All that will be reversed if we return to the policies of the former Labour Government. I thought that only people like the hon. Member for Birmingham, Ladywood (Ms Short) sing the praises of the last failed Labour Government and claim that they will base themselves on that Government's policies, which took public debt and inflation to record levels, increased unemployment and brought this country to ruin-from which only a Conservative Government could rescue it.