HC Deb 08 February 1996 vol 271 cc457-9
5. Mr. Miller

To ask the Chancellor of the Exchequer if he will make a statement on real personal disposable income levels in the United Kingdom between January and December 1995. [12677]

11. Mr. Mudie

To ask the Chancellor of the Exchequer what is the Treasury's most recent estimate for the level of real personal disposable income in 1995. [12646]

The Chief Secretary to the Treasury (Mr. William Waldegrave)

Last November's Budget forecast showed real personal disposable income rising by 2 per cent. in 1995. We do not yet have the final figures.

Mr. Miller

Is it not the case that, after tax and inflation, someone on average earnings will see his or her real income fall by the sharpest rate in 1995 since 1981, or is it that the only real disposable income in which the Government are interested is that of the likes of Cedric Brown?

Mr. Waldegrave

The hon. Gentleman is partly right and partly wrong. It is true that people's take-home pay fell last year. That is because earnings were restrained. That was responsible behaviour by trade unions and employers, which helped to cause unemployment to fall fast. None the less, real personal disposable income rose sharply last year. I guess that the hon. Gentleman does not understand that dividend income, which goes into pension funds that belong to people, has risen sharply, so people are better off in the assets they own.

Mr. Mudie

The Minister's figures disguise the fact that the typical family is £800 a week worse off this year because of tax increases and that, despite the changes in the Budget, the family will be £670 a year worse off because of tax increases. In view of the fact that the Conservatives committed themselves, on page 5 of their manifesto, to reducing taxation further, are those tax increases incompetence or straightforward deceit?

Mr. Waldegrave

I think that the hon. Gentleman got the decimal point in the wrong place when he was talking about £800 a week. He is on very weak ground. Take-home pay increased by 1 per cent. during the whole period of the last Labour Government. It has increased by not far short of 50 per cent. under the Conservative Government since 1979. That is very weak ground for the Opposition parties to try to fight on.

Mr. Bill Walker

Does my right hon. Friend agree that the important thing is how this country has helped those who were unfortunate enough to be affected by the recession and that it is rich for the Opposition, who are always telling the Government to act, to complain when the Government have done so? They should consider how that is reflected in our performance when compared with that of every other European Union country.

Mr. Waldegrave

My hon. Friend is perfectly right. In a recession, it was right to protect public services. If we had not taken the tough steps that my right hon. and learned Friend the Chancellor of the Exchequer took to correct the budget deficit afterwards, we would be facing a serious situation. The implication of the Labour party's questions is that Labour would not have put taxes up, in which case the debts would have been completely unsupportable. That is a nonsensical policy, like many of those put forward on the economy by the Labour party.

Mr. Viggers

Is it not true that, by their firm action on the economy, the Government have held down interest rates and provided the lowest mortgage rates for 30 years? Will that not have a significant effect on disposable incomes? Has my right hon. Friend had any representations on interest rates from the Opposition?

Mr. Waldegrave

Opposition policy on interest rates is an enigma wrapped in a mystery; they never tell us whether rates should move higher, lower or sideways. They have no views on the matter whatsoever. It is true that the firm handling of these matters by my right hon. and learned Friend the Chancellor of the Exchequer has meant that we have the lowest mortgage rates for a generation, inflation is in effect at its lowest rate since the war and the economy is growing faster than those of its main competitors in Europe. That is a formidable record.

Mr. Andrew Smith

Is it not the truth that the very assumptions behind the Government's claim that people are an extra £9 a week better off in terms of living standards have been shot to pieces, on the one hand by the Government's driving up taxes and charges—putting up rail fares, driving up the council tax by at least 8 per cent., as the Chief Secretary admitted, and with prescription charges going up as well, as we will see today—and, on the other hand, by the fact that millions of public sector workers will not now receive a full 4 per cent. increase in 1996? Those are the very figures on which the Chancellor's assumptions were based. Is it not the case that living standards are not safe with the Conservatives and that the £9 a week claim is yet another broken Conservative promise?

Mr. Waldegrave

I can answer that very shortly. The answer is no, because the forecast took into account the matters to which the hon. Gentleman refers. If he wants to fight on living standards rises under different Governments, he is on the weakest possible ground for Labour. There was complete stagnation in take-home pay under the last Labour Government.