HC Deb 21 May 1998 vol 312 cc1096-8
10. Mr. Bob Blizzard (Waveney)

If he will assess the advantages of introducing lower taxation rates for those on lower incomes. [41682]

The Financial Secretary to the Treasury (Dawn Primarolo)

The introduction of lower tax rates will make those on lower incomes better off. The working families tax credit, together with the introduction—when it is economically right—of the 10p tax rate, will help those on lower incomes by allowing them to keep more of what they earn.

Mr. Blizzard

Does my hon. Friend share my view that one of the most depressing features of our society is that some unemployed people with families want to work, but cannot afford to, because they would take home less than they receive on benefits? That is depressing not only for those people, but for the people who foot the benefits bill. Does she agree that the combination of the 10p tax rate, the new working families tax credit, changes to national insurance contributions and a national minimum wage will tackle the iniquitous poverty trap that was devised by the previous Government, and redress the situation whereby those on the lowest incomes pay a higher marginal rate of tax than those on the highest incomes?

Dawn Primarolo

My hon. Friend is right. To the list of excellent policies that he identified, I would add the increase in child benefit, which is particularly helpful to families. As he knows, we inherited from the previous Government a situation whereby more than 500,000 families paid tax to the Inland Revenue while receiving family credit. The Labour Government's policy of reforming tax and benefits, as part of our welfare reform programme, is designed to ensure that people keep more of what they earn, have the chance to be lifted out of the poverty trap and can participate in the world of work on a decent wage.

Miss Anne McIntosh (Vale of York)

Is the Financial Secretary aware that she has the right to apply for a discretion under European law to levy reduced VAT rates on labour-intensive industries? That could be used to reduce VAT on repair and restoration work on churches and other historic buildings. Why has she decided not to apply for and exercise that discretion? Perhaps she can also explain why she does not sign her letters to parliamentary colleagues.

Dawn Primarolo

That is the first pro-European comment that we have heard from a Conservative Member, even if the assertion is incorrect. The Government are not pursuing the reduced rate on VAT, which was presented to Governments as an option to assist employment, because we believe that our welfare-to-work programme, the new deal, working families tax credit and the reforms that we are undertaking are the positive route to creating more jobs.

The hon. Lady does get her letters answered. Ministers give replies in exactly the way that Conservative Members did when they were in government. Perhaps she should concentrate a little more on dealing with those who are unemployed and welcome the Government's new deal, instead of making silly points on the Floor of the House.

Mr. Harry Barnes (North-East Derbyshire)

To return to the original question, might not lower taxes for those on lower incomes be assisted by higher taxes for those on higher incomes, in extra national insurance contributions if not in income tax? That may be felt to be a problem because of electoral pledges on income tax, but it is possible for Governments to be persuaded to change their position in line with public opinion, and it might be time for a "can pay, want to pay" campaign.

Dawn Primarolo

We must have fair taxes, and the high marginal rates on those on lower incomes that we inherited from the previous Government need to be tackled, to ensure that people make a contribution to public services through their taxes on a fair basis.

Dr. Vincent Cable (Twickenham)

Does the Financial Secretary accept that the combined effect of the tax changes of the past two Budgets has been to make the tax system as a whole more rather than less regressive? If she disputes that proposition, will she agree to publish promptly the Treasury statistical series, which has been discontinued, and which enabled us to see the combined effect of direct and indirect tax burdens?

Dawn Primarolo

I do not accept that proposition. The Government cut VAT on fuel, raised child benefit, introduced a windfall tax to help the unemployed and are introducing working families tax credit, with an element to assist child care. All those measures are helping precisely the households to which the question refers.