HC Deb 20 July 2000 vol 354 cc530-1
7. Mr. James Clappison (Hertsmere)

What proportion of gross domestic product was represented by net taxes and social security contributions at the latest date for which information is available. [130134]

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

The Treasury updates its fiscal and economic forecasts and the ratio of tax receipts to gross domestic product twice a year, in the Budget and the pre-Budget report, and most recently in the Budget Red Book, which showed the share falling from 37 per cent. of GDP last year to 36.9 per cent. this year and to 36.7 per cent. in 2003–04. As the Chancellor said on Tuesday, the combination of a stronger economy leading to higher revenues and £4.5 billion lower spending meant that the net debt repayment last year was not £11.9 billion, as we said at the time of the Budget, but £18.1 billion.

Mr. Clappison

Can the Chief Secretary tell us whether the tax burden now is greater or less than it was when the Government came to office?

Mr. Smith

The figures are set out in the Red Book for the hon. Gentleman and the world to see. It is clear that the tax burden is falling. Moreover, the day after the Budget, the shadow Chancellor said on the "Today" programme that the Red Book which is the document that accompanies the Budget shows that the Government expects the tax burden to fall during the next parliament, which is exactly what we expect.

Mr. Geraint Davies (Croydon, Central)

My right hon. Friend is aware that borrowing is a third form of taxation. When one adds taxation and borrowing as a share of GDP when the Tories left office, it was almost 2 percentage points higher than it is now, which is equivalent to some £19 billion of expenditure or 7p on the basic rate of tax. Is it not the case that the current Government can spend more and tax less because there are an extra 1 million people in jobs, because we have replaced the chaos and calamity of the Tories with the stability and success of the Labour party?

Mr. Smith

My hon. Friend is right. The previous Administration wrecked the public finances, doubling borrowing, so that for every extra pound that they spent, 42p went in debt interest and social security, whereas we are now able to get that down to just 17p, so that we can put more than 80 per cent. into the front-line priorities—health, education, fighting crime, and transport. When the Conservatives left office, the debt to GDP ratio was 44 per cent. On the plans that we set out this week, we will get it down to a third of GDP—33 per cent. That shows a Government running the economy properly, with sound and strong public finances.

Mr. Peter Lilley (Hitchin and Harpenden)

Can the Minister confirm that in 1979 the share of national income taken by spending and tax in this country was slightly higher than in the rest of the European Union, and that by 1997 it was substantially lower than the rest of the EU, giving the UK an enormous relative advantage? Can the right hon. Gentleman confirm that, on his own projections, that gap between us and our competitors on the continent is set to narrow, eliminating at least part of the great advantage that we built up over 18 years?

Mr. Smith

That was rather a long way of explaining that the figure rose under the Tories.