HC Deb 16 December 1999 vol 341 cc385-9
6. Mr. James Clappison (Hertsmere)

What was the proportion of gross domestic product represented by net taxes and social security contributions on (a) 1 May 1997 and (b) the latest date for which information is available. [101770]

10. Mr. Philip Hammond (Runnymede and Weybridge)

In which quarters since May 1997 the percentage of GDP taken by the Government in tax over the previous 12 months has risen. [101774]

12. Mr. Graham Brady (Altrincham and Sale, West)

In which quarters the percentage of gross domestic product taken by the Government in tax over the preceding 12 months has fallen since May 1997. [101776]

The Chief Secretary to the Treasury (Mr. Andrew Smith)

Decisions on the public finances are taken on a financial year basis. Financial year figures for the tax-GDP ratio can be found in the pre-Budget report. They show that the tax-GDP ratio is lower this year than last. It will be lower in the two following years than last year. Under the previous Government's plans, those rates would have been higher than the latest projections, in this year and for the next two years.

Mr. Clappison

As the Minister is unable to provide the figures that were specifically requested in my question, may I put this to him? Will he simply say whether the tax burden is greater or lesser than when the Government came to office?

Mr. Smith

The pre-Budget report shows—[HON. MEMBERS: "Answer."] The hon. Gentleman asked for figures. The pre-Budget report shows that the share of GDP going on tax this year is 37 per cent. Last year, it was 37.4 per cent; for next year the projection is 36.8 per cent. That shows a tax burden that is falling, not going up.

Mr. Hammond

As the right hon. Gentleman seems to be having some difficulty, let us deal with the matter in multiple-choice terms. Does he agree with the Chancellor, who said on Tuesday that the tax burden was increasing, or with the Prime Minister, who said on 24 November—this can be found in column 609 of Hansard—that it was decreasing?

Mr. Smith

My right hon. Friend the Chancellor did not say that the tax burden was increasing, because it is not increasing. I shall give the hon. Gentleman the figures again. They are 37.4 per cent. for last year, 37 per cent. for this year and 36.8 per cent. for next year. That is a tax burden that is decreasing, not increasing. Moreover, it is smaller this year, and will be smaller next year and the year after, than it would have been under the Conservatives.

Mr. Brady

The Chief Secretary really ought to come clean. The Chancellor made it clear on Tuesday that, since the Government had taken office, the tax burden had become larger than it was in 1997. Does the Chief Secretary agree with that? Will he now make it clear that it is the case?

Mr. Smith

I will take no lectures on coming clean from Opposition Members who broke the promises that they had made about tax when they were in government. We are keeping each and every promise that we made about tax at the election.

Mr. Dale Campbell-Savours (Workington)

I had a very interesting meeting with some business men last week. They told me—[Interruption.] The Tories would do well to listen. They told me that they wanted the tax burden to increase. [Laughter.] Yes, and they are telling the Tories the same. They say that that would reduce demand, and would take the pressure off interest rates. Is that not an interesting case which business men are now making?

Mr. Smith

I am sorry to disappoint my hon. Friend, but I cannot assure him—or, through him, the business people to whom he has been talking—that the tax burden is increasing. I have already given the House the figures, which show that the tax burden is decreasing.

I should have expected those business people to welcome particularly the cuts that we have made in corporation tax, which mean that our rate is the lowest in the industrialised world.

Ms Rosie Winterton (Doncaster, Central)

Is my right hon. Friend aware that organisations such as the Royal Automobile Club and the Automobile Association were extremely critical of the tax burden placed on motorists by the Tory Government, who introduced the fuel duty escalator? Is he aware that those organisations have welcomed the hypothecation of future real-terms revenue increases in fuel duty? Will he ensure that there is a continuing dialogue with organisations such as the RAC, which is very supportive of the Government's choice of priorities for the purpose of spending the extra revenue?

Mr. Smith

Yes, indeed. My hon. Friend is right: the AA, the RAC and other organizations —and motorists in general—were very concerned about the continuation of the fuel duty escalator introduced by the last Government, and have welcomed my right hon. Friend the Chancellor's decision.

Mr. Owen Paterson (North Shropshire)

Why is it going up?

Mr. Smith

I am telling the House about my right hon. Friend's decision to end the escalator introduced by the hon. Gentleman's party. As my hon. Friend the Member for Doncaster, Central (Ms Winterton) said, that decision will be greatly appreciated by motoring organisations, by motorists and, indeed, by the general public, who will— as she says—benefit from the hypothecation of revenues over and above inflation for public transport and improvements in our road network.

Yes, there will be continuing dialogue on these matters.

Mr. Geraint Davies (Croydon, Central)

Does my right hon. Friend agree that the long-term tax reductions that the Government are introducing are based not just on cutting headline income tax and corporation tax, which they are doing, but on the fundamentals of lower interest rates, lower inflation rates and job security? Indeed, an extra 750,000 people are in jobs. A return to the boom and bust of the Jurassic park party opposite would simply inflict an extra 22 Tory taxes on the British people.

Mr. Smith

Yes indeed. The sensible and sound policies that we are following on fiscal matters complement our decisions to put a sound monetary framework in place and our measures to raise productivity, to equip our country with skills and to ensure that we are more competitive in future. My hon. Friend is right. The contrast could not be clearer than that between the Conservative party, which imposed 22 tax rises and broke its promises to the British people, and the Labour party, which has kept and is keeping each and every tax promise that it made on tax, as on everything else.

Mr. Francis Maude (Horsham)

It is scarcely credible that, even after the Chancellor admitted on Tuesday that the tax burden has risen since Labour came into office, the Chief Secretary is still arguing the toss. I remind him that the Government's own figures show that the tax burden was at 35.6 per cent. when they took office. It has gone up in every single quarter since then and is 37.7 per cent. now. Where does that leave the Prime Minister's pre-election promise that Labour had

"no plans to increase taxes at all"?

Does he agree with the Prime Minister's official spokesman, who is quoted in today's press as saying that getting at the truth on the tax burden is just a "game"?

Mr. Smith

I am sorry, but the right hon. Gentleman has missed again. My right hon. Friend the Chancellor did not say that the tax burden was rising; he said that it was falling. He said that because it is.

The right hon. Gentleman refers to promises made before the general election. I will tell him and the House what we promised. We promised not to raise the basic or top rates of income tax throughout the next Parliament and we have not. We said that our objective was a lower starting rate of income tax of 10p in the pound, a promise kept; we have delivered it.

We said that we would cut VAT on fuel to 5 per cent. when Conservative Members wanted to make it higher. We kept that promise and cut VAT on fuel. We said that we would not extend VAT to fuel, children's clothes, books, newspapers and public transport. We have not and we will not. We said that the welfare to work programme would be funded by a windfall levy on the excess profits of the privatised utilities. It was much derided and opposed by Conservative Members, but that is the policy that has delivered the new deal and cut youth unemployment by more than 60 per cent. and long-term unemployment by 50 per cent. The contrast could not be clearer between the party that keeps its promises on tax and the party that broke its promises.

Mr. Maude

The Chief Secretary still does not get it. The Prime Minister said before the election:

We have no plans to increase taxes at all. Was that a promise? What does the Chief Secretary understand that to have meant? The fact is that Labour got elected by promising not to increase taxes at all. Once elected, almost the first thing it did was to raise taxes massively by stealth. In every quarter since the election, the tax burden has increased. Ministers do not just deny it; they claim the opposite—that taxes are falling. Now that the Chancellor has finally admitted that the tax burden is remorselessly rising, what does he say? He says that Labour did not make that promise in the first place. When will we eventually see the end to the great Labour lie on tax?

Mr. Smith

I can only repeat: the Chancellor did not say that the tax burden is increasing because it is not. It is going down. I can give the figures again: 37.4 per cent. last year, 37 per cent. this year, 36.8 per cent. next year. More importantly for families and the taxes that they are paying, as a consequence of our tax changes, the average household is £380 a year better off and families with children are £740 a year better off—benefits which the Conservative party would clearly take away from them.

Mr. Roger Casale (Wimbledon)

Does my right hon. Friend agree that Labour Members have no lessons to learn from Conservative Members when it comes to setting tax levels? We keep our promises—on introducing the working families tax credit, lowering the starting tax rate by 1 p, and introducing the 10p tax rate—whereas, in office, Conservative Members broke their promises, raising tax not once, not twice, but 22 times.

Mr. Smith

Yes. The electorate will no more forget those 22 Tory tax rises than they will the boom and bust that went with them and that inflicted such incalculable damage on our economy.

Mr. Matthew Taylor (Truro and St. Austell)

The Prime Minister yesterday admitted that, to overcome the Conservative deficit that the Government had inherited, tax had been increased in the their first two years in office, and promised that taxes would start to decrease. Does the Minister feel entirely comfortable with cutting 1p off income tax next year, even though the Secretary of State for Health has had to abandon waiting list targets, and out-patient waiting lists have not only doubled but, on current spending plans, are set to increase further?

Mr. Smith

Very comfortable—because it is absolutely in line with the promises that we made at the general election and not least because we are investing £21 billion extra in health.

Mr. David Chaytor (Bury, North)

Does not the obsession with the overall tax take conceal the very important matter of tax distribution? Is it not indisputable that, since 1997, hundreds of thousands of low-income families have been taken out of the tax bracket entirely?

Mr. Smith

Yes, indeed. Furthermore, 1.4 million households are benefiting, by an average £24 a week, from the working families tax credit—which is a real advantage and a tax cut that Conservative Members would remove from them.