HC Deb 15 January 1998 vol 304 cc476-8
8. Mr. Baldry

If he will make a statement on the number of (a) new taxes introduced and (b) increases in tax rates since 1 May. [21058]

The Chief Secretary to the Treasury (Mr. Alistair Darling)

At the election, we made a clear promise not to increase the basic or the top rate of income tax. We have kept that promise and we will continue to keep it.

We also promised to introduce a new tax—the windfall tax on the privatised utilities. We introduced it and, as a result, we are spending just over £3 billion on the new deal for young people; we are spending £350 million on the new deal for the long-term unemployed; we are spending more than £200 million on the new deal for lone parents; and we are spending £1.3 billion on repairing the fabric of our schools. None of those things would have happened but for the change of Government.

Mr. Baldry

That is patently not an answer to my question. Anyone listening to it would have assumed that there would be only one new tax and no tax increases. We know that not to be true. There have been some 17 tax increases since the Government came to office, although before the election they sought to give the impression that they would not increase the tax burden. Is not the simple truth that, month on month, the tax burden on the people of Britain is increasing under the present Government?

Mr. Darling

The hon. Gentleman should recall that, during the general election—I should have thought that Opposition Members might remember the general election, as I believe it left something of an impression on them—when those who presented our tax policies were rigorously examined and cross-examined by Conservative Members and by commentators, we made a promise in relation to the top and basic rates of income tax, which we have kept.

I am surprised that the hon. Gentleman did not return to the subject of advance corporation tax, as I rather thought he might. I wonder whether he noticed that in 1997 the overall return to pension funds was 16 per cent., whereas in 1996 it was only 10 per cent.

Jacqui Smith

Has my right hon. Friend found, as I have, that the Government's decision to cut VAT on fuel has been greeted with pleasure by families and by older people, and with some surprise by our constituents who are used to Governments' pledging to keep VAT at the same rate and then increasing it rather than keeping their tax promises as this Government have done?

Mr. Darling

My hon. Friend is quite right. Not only did we cut VAT on domestic fuel—in contrast to the actions of the previous Government—which has been greatly appreciated by elderly people in particular, my right hon. Friend the Chancellor announced a £200 million package to help poorer pensioners with their winter fuel bills and, of course, pensioners generally. None of that help would have been possible but for the change of Government last May.

Mr. Lilley

We might have hoped that the Chancellor himself would answer a question allowing him to defend his breach of a clear promise not to increase taxes in any way at all—the promise given by the Labour party before the election. The Chancellor, however, dodges questions about taxes just as the Paymaster General dodges taxes on his income. How do the Government justify imposing a tax of £5 billion a year on pension funds? How do they justify imposing taxes on those who have saved £50,000? Will they not make the situation worse by imposing an affluence tax on pensioners?

Does the Chancellor recall telling his predecessor that, before doing anything that would affect pensioners, he should tackle the taxation of offshore trusts?

Mr. Darling

A moment ago, my right hon. Friend the Chancellor and I were wondering why the right hon. Gentleman had not asked a supplementary question on Europe, when he might have clarified one or two points for us. For some reason he chose to say absolutely nothing.

I shall deal with the points that the right hon. Gentleman raised. The first and, perhaps, most important related to changes in advance corporation tax. We believe that it is for managers, not the tax man, to make investment decisions, and that the distortion in the corporation tax system ought to be removed. That has been widely welcomed by many people. We reduced the corporation tax rate to a lower rate than those of any of our major competitors and there is a further reduction to come in 1999.

On the subject of pension funds, perhaps I may repeat what I said to the hon. Member for Banbury (Mr. Baldry). Overall returns to pension funds last year were 16 per cent. and were only 10 per cent. in the year before that. Abolition of payable tax credits on dividends is estimated to have affected average performance last year by about 0.4 per cent. The overall judgment is that pension funds did well last year—in no small part due to the long-term view that the Government are taking. The half-hearted attack on us by the right hon. Member for Hitchin and Harpenden (Mr. Lilley) does not have any weight, especially when one remembers what the Conservative Government did in the last Parliament and the 22 tax rises that they imposed when they had promised not to do any of that.