§ 9. Mr. HallTo ask the Chancellor of the Exchequer if he will make a statement on current levels of taxation. [17626]
§ Mr. Kenneth ClarkeCurrent levels of taxation have been set to ensure sound public finances and to fund the public services that people care about, such as schools, the national health service and the police. The Government are committed to reducing the basic rate of income tax to 20p, when it is prudent to do so.
§ Mr. HallDespite what the Chancellor says, taxes are higher today than they were under the Labour Government. As a result of the tax increases in the 1992 Budget, and those since, an average family will pay £800 a year more under the Conservative Government. Will the Chancellor confirm that that is why there is a feel-bad factor in the economy and why the Tories cannot be trusted on taxes?
§ Mr. ClarkeMy hon. Friend the Financial Secretary has just explained that that snapshot of 1979 conceals the fact that the Labour Government, on their way out, raised the level of borrowing to 7 per cent. of gross domestic product, which was tax deferred—as far as they were concerned—beyond the election. We now have the lowest basic rate of income tax that we have had for more than 50 years and we shall improve on that record when we get the rate down to 20p, which we shall as soon as we can afford it.
§ Mr. AshbyDoes my right hon. and learned Friend agree that we can forget about income tax for the moment and concentrate on corporation tax? Corporation tax means jobs and livelihoods. We have the lowest rate of corporation tax in virtually any industrialised nation. We are attracting jobs, and the small businesses that are creating jobs are thriving because of low corporation tax. Does my right hon. and learned Friend agree?
§ Mr. ClarkeI certainly do, and my hon. Friend is right. The United Kingdom has the lowest rate of corporation tax of any major industrialised nation. It is just 33 per cent., and it was 52 per cent. in 1979 when we took power. We also have a lower small business rate corporation tax, which I reduced again in the Budget. The successful economies in today's world will be low-taxation economies. The Opposition would make this country a high-taxation economy again if they ever came back to power.
§ Mr. Mike O'BrienIs the Chancellor really so out of touch that he does not understand how angry the British people are at broken promises on tax by the Tories? Each year, the typical British family will be hit by increasing tax, right up to the turn of century. Next year, the typical family will be £670 a year worse off than it was at the time of the general election in 1992.
Even if the Chancellor is so out of touch with the British people, what about his Back Benchers? Does he not remember the look of disappointment on the faces of his Back Benchers after he gave his Budget speech? It might be said that never, in parliamentary history, have so many waited so long for so very little.
§ Mr. ClarkeI think that the first part of the hon. Gentleman's remarks was written about some former Budget, not the latest one. In my last Budget, I reduced taxation—not just the standard rate either. I widened the 20p band and raised the threshold, taking some people out of tax altogether. I lowered tax on savings for all standard rate payers from 25p to 20p. We are reducing taxation by cutting public spending while increasing spending on schools, the NHS and the police.
The hon. Gentleman mentioned Government Back Benchers. Labour Members could not even take a view on any of the tax changes—they would not vote one way or the other. A recent survey in Tribune on 24 November 1995 showed that two thirds of Labour Members of Parliament were in favour of higher rates of income tax, which is what they would bring back.
§ Mr. NichollsDoes my right hon. and learned Friend agree that it is the most amazing cheek on the part of Labour to criticise, when the last Labour Government had a tax rate of 89 per cent. on earned income and of 98 per cent. on unearned income, and in one year introduced a special levy that brought in 104 per cent. on top slices of income? They even produced an investment income surcharge of 15 per cent., charged on old dears with a bit put aside in building societies. Would that not make even Dr. Goebbels blush?
§ Mr. ClarkeI can still recognise among Labour Members a few familiar faces of those who were Ministers in that Government and who defended those levels of tax. They are quite moderate men, but they were succeeded by more left-wing people who would have done much worse had they won in 1983—a lot of them still sit on the Labour Benches.
Comparing our respective records, one wonders what on earth Labour and the trade union movement pretend to be about. They are in favour of spending and of taxing. That is what they did before and it is what they would do again.
§ Mr. TrimbleLet me take the Chancellor back to his boast about corporation tax. Is he aware that the United Kingdom does not have the lowest corporation tax rate in the European Community, because the Republic of Ireland has a corporation tax rate of 10 per cent.? Is he further aware that the UK agencies responsible for trying to attract outside investment consider that not just Northern Ireland but Wales and the west of Scotland are significantly disadvantaged because of that? Should not the right hon. and learned Gentleman therefore consider reducing corporation tax further?
§ Mr. ClarkeI was not boasting; I was quoting the figures for major industrialised countries. Overall, it is to the advantage of the United Kingdom to let each country set its own tax—we defend that right absolutely. There is no question of qualified majority voting on setting tax rates. Competition between tax regimes usually works to our advantage because we have lower rates of corporate taxation than do any of the major countries on the continent. That, in turn, brings investment here.
My right hon. Friend has to pay special attention to Northern Ireland, however, where corporate tax rates are undercut south of the border. The Labour party would offer no redress for that. It proposes to give Scotland higher taxes for its work force than the rest of the United Kingdom, including Northern Ireland, would have to pay. So there might be some advantage in that: Scottish industry might be driven over to Ulster if a Labour Government ever implemented their crazy devolution plans.
§ Mr. RiddickWill my right hon. and learned Friend confirm that, under the last Labour Government, earners started paying income tax at 50 per cent. when their earnings reached £9,000, and started paying income tax of 75 per cent. when they reached £15,000? Does not that show what Labour does in government?
§ Mr. ClarkeIt has always been my misfortune to earn my living outside politics when we have had Labour Governments—a great injustice, that. I well remember the 448 high taxation of those days, which rapidly cut into people's incomes. There is absolutely no evidence that Labour's basic approach to taxation has changed. The Opposition seem to be ashamed of their policies now and will not reveal them in detail, but the great bulk of Labour Members look forward to putting taxes back up again.