Taxation (Hansard, 4 March 1999)

§ 5. Mr. Robert N. Wareing (Liverpool, West Derby)
If he will make a statement on Her Majesty's Government's policy towards the balance between direct and indirect taxation. [72417]

§ The Chief Secretary to the Treasury (Mr. Alan Milburn)
The Government are building a tax system that is fair and that supports work, enterprise and families. That is why we pledged not to increase the basic or top rates of income tax, and not to extend VAT to food, children's clothes, books and newspapers and public transport fares. We stand by those pledges.

§ Mr. Wareing
I thank my right hon. Friend for that answer. In 1978–79, at the end of the last Labour Government, taxes on products and production were 3.9 per cent. of total taxation. By 1997–98, that figure had risen to 39.1 per cent. Could the Chancellor consider, as an alternative to a 10p rate of income tax, reducing 1202 regressive indirect taxation and shifting the balance further towards direct taxation, which is more progressive and more equitable?

§ Mr. Milburn
We judge tax proposals according to a number of criteria, one of which is fairness. We have made it clear repeatedly that, when we are able to do so and when we judge that the time is right—

§ Madam Speaker
Order. I cannot hear the Minister. He will please address the House.

§ Mr. Milburn
We want to introduce a 10p tax rate when the time is right. Some of the other measures that we have introduced, such as cuts in VAT on fuel and changes to the national insurance contributions rates, are major steps towards a fairer tax system. That is the Government's approach, and we shall continue to advocate and implement it.

§ Mr. Stephen Dorrell (Charnwood)
On Tuesday, we were told that the Prime Minister was lecturing his socialist colleagues in Europe on the lessons that Europe could learn from what he described as the extraordinary capacity of the United States to create wealth and work. Yesterday, the Prime Minister was forced to admit that, far from emulating the American example, it was the Government's plan to increase both the direct and indirect tax burden on the British economy. When will the Chancellor of the Exchequer stop undermining the Prime Minister?

§ Mr. Milburn
I am not sure whether the right hon. Gentleman is making a late bid for a Front-Bench job, but he knows fine well that last year's pre-Budget report set out the position very clearly indeed. The tax burden under this Government is projected to be less than that for which the Tories had planned.
The Tories increased taxes before the general election; they had planned to continue to do so if, heaven forbid, they had won that election; and, if they had their way now, they would continue to increase the tax burden, most notably by getting rid of the working families tax credit. I should be interested to know the right hon. Gentleman and his Front-Bench colleagues' views on VAT on fuel, because the last Tory Chancellor of the Exchequer pledged to increase it to 17.5 per cent.

§ Mr. Peter L. Pike (Burnley)
When considering direct taxes and duties, should we not take into account the amount of beer and cigarettes that are daily brought across the channel for sale in this country to avoid tax and duties? That puts our people out of work. It is appropriate to discuss that issue in a week when the Stena line is organising trips for people to go across the channel to buy cars, which will have implications for our motor industry.

§ Mr. Milburn
As my hon. Friend knows, those matters are rightly for my right hon. Friend's Budget, which will be announced next Tuesday.

§ Mr. Nick Gibb (Bognor Regis and Littlehampton)
Which of the following does the Chief Secretary regret the most: promising before the election not to raise taxes, the fact that the Government have broken that promise by 1203 raising taxes by £40.7 billion, or the fact that they have been caught out raising taxes by the Prime Minister's gaffe in the House of Commons yesterday?

§ Mr. Milburn
What I regret is that the hon. Gentleman has not learned the lessons of history. It was the Tories who broke their promises on tax. In 1979, they promised not to increase VAT, but at their first Budget they increased it—indeed, they doubled it. [Interruption.] The hon. Gentleman does not want to listen, but I remind him of what the then Prime Minister, the right hon. Member for Huntingdon (Mr. Major), said on 27 March 1992: We have no need and no plans to extend the scope of VAT. Within a year, the Tory Government had increased VAT and had extended it to fuel. If it had not been for the Labour party and this Parliament, they would have continued to increase it.