HC Deb 13 March 1997 vol 292 cc481-3
3. Mr. Olner

To ask the Chancellor of the Exchequer by how much the amount of tax paid by a typical family has changed since 1992. [18521]

The Chancellor of the Exchequer (Mr. Kenneth Clarke)

A family on average earnings should be around £370 better off next financial year, 1997–98, after tax, inflation and earnings growth, relative to the current financial year, 1996–97. This takes the total rise in real take-home pay for the typical family to more than £1,100 since 1991–92.

Mr. Olner

Will the Chancellor take this last opportunity before the general election to come to the Dispatch Box and apologise to my constituents in Nuneaton for the 22 Tory tax rises that they have suffered, which have put them £2,000 out of pocket since this Government came to office? Will he join Labour in not pursuing increases in VAT on food, children's clothing, books and newspapers?

Mr. Clarke

Untypically, the hon. Gentleman does not appear to have paid any great attention to my answer. The average family in Nuneaton is £1,100 a year better off compared with the year before the last election, after taking account of changes in incomes, tax and inflation. If the Labour party had been elected—it had pledged to increase taxes and has since opposed everything that we have done to get the recovery going—families would have been poorer.

People face the prospect of being asked to elect a Labour Government, but the Labour party cannot explain how it would raise £12 billion in the first two years. Labour would make people poorer if they turned to it. The hon. Gentleman's constituents are better off under the Conservative Government and, to quote another occasion, he should rejoice in that fact rather than try to find ways of getting around it.

Sir Sydney Chapman

Does my right hon. and learned Friend accept that, as the typical family is earning much more today than in 1979—it has an extra £1,000 a year in its pockets—people are quite happy to pay a few more pounds to protect our vital public services? Will he also accept their thanks for the 25 tax cuts that he has made in his last two Budgets?

Mr. Clarke

When people are able to earn more in cash terms in a successful economy, they tend to pay more in tax. We have made tax rises, tax reductions and made the economy thrive. As a result, the typical family is much better off. I am sure that that is what matters to any sensible, intelligent constituent of my hon. Friend or mine.

Mr. Malcolm Bruce

Does the Chancellor acknowledge that living standards have risen in spite of the Government's tax increases, not because of them? Will he acknowledge that the cut in the basic rate of income tax and overall cuts in income tax have been financed by the receipts of privatisation and North sea oil and the extension of the tax base in other areas? Is that why he told The Grocer magazine that the next challenge was to ensure that VAT on fuel was put back up to 17.5 per cent.?

Mr. Clarke

That is absolute nonsense; the economy would not have recovered if we had not tackled borrowing. That is why I had some tax increases in my first two Budgets, and thereby controlled public spending. By controlling public spending thereafter, we reduced borrowing. As my hon. Friend the Member for Chipping Barnet (Sir S. Chapman) said, we have had 25 tax cuts as well. The lady from The Grocer who spoke to me was surrounded by other journalists, who failed to hear any reference that she says I made to tax on fuel, and what she says I said does not represent my views.

We have had tax-cutting Budgets for the past two years because we have done what was necessary to get borrowing on course and, therefore, the economy on course. The average family is therefore becoming better off and will continue to do so for so long as we stick to my Budget plans.

Mr. Spring

Will my right hon. and learned Friend confirm that we shall soon be having the lowest basic rate of tax for 60 years? Will he confirm also that it is his intention to move towards a 20p basic rate of tax, thus further boosting the living standards of the average British family?

Mr. Clarke

My hon. Friend is right. In April, the income tax rate will come down to the lowest since Stanley Baldwin was Prime Minister before the war. That gives credibility to our pledge to reduce the standard rate of income tax to 20p in the pound when, and only when, it is safe to do so, and consistent with keeping the economy on the strong growth pattern that it is maintaining at the moment.

Ms Primarolo

Will the Chancellor of the Exchequer take this opportunity to explain to the House exactly what he meant when he said to the reporter from The Grocer that the challenge now is to get VAT on fuel up to 17.5 per cent. Will the right hon. and learned Gentleman deny that it is the Government's intention, if re-elected, to do that?

Mr. Clarke

I was surrounded by other journalists and others, none of whom recalls my making that remark, which does not in any event represent my views. If we stick to my published Budget plans, in due course we shall maintain our tax-cutting agenda. If a Labour Government are elected, they will have to raise £12 billion in the first two years, because a Labour Government would not follow the policies to which we are committed to deliver our Red Book projections. They would have to raise taxes and increase borrowing. It is the Labour party that has to explain its tax intentions when its figures do not add up, as it has presented them so far.

Mr. Garnier

Is it not the case—indeed, is it not certain—that whereas dogs bark and lambs bleat, Labour Governments increase taxes? Is that not the only way in which the Labour party will be able to fill the enormous black hole that it has in its public spending plans?

Mr. Clarke

Just so. The Labour party is already committed to raising the windfall tax, which will increase the total burden of taxation on the people of this country and raise their fuel bills. It is on top of that that the Labour party is £12 billion short in the first two years and £30 billion short over five years. My hon. and learned Friend is right: on all past and present form the Labour party will turn to taxation to raise that money and thereby make the public worse off.