Tax Burden (Hansard, 9 March 2000)

§ 3. Mrs. Jacqui Lait (Beckenham)
What his projection is of the tax burden for 2001–02 measured as a percentage of GDP. [112214]

§ 5. Mr. Stephen O'Brien (Eddisbury)
If he will make a statement on the number of quarters since May 1997 in which the percentage of GDP taken by the Government in tax over the previous 12 months has risen. [112217]

§ 6. Mr. Graham Brady (Altrincham and Sale, West)
What estimate he has made of the net increase in the amount of tax that will be paid in the five financial years from 1997–98 to 2001–02 as a result of his Budget measures to date. [112218]

§ 7. Mr. Edward Leigh (Gainsborough)
What projection he has made of the tax burden as a percentage of GDP in 2001–02; and if he will make a statement on the change in the tax burden since 1996–97. [112219]

§ The Chief Secretary to the Treasury (Mr. Andrew Smith)
As a result of last year's Budget, the tax:GDP ratio is lower this year than last year. The tax ratio in the two following years will also be lower than last year. Under the previous Government's plans, those rates would have been higher than the latest projections—not only in this year but in both of the next two years.

§ Mrs. Lait
Is not the Chief Secretary aware that, since his Government came into office, the overall tax burden has risen? The Organisation for Economic Co-operation and Development has said that—as have the Office for National Statistics, the House of Commons Library, his own Red Book, the pre-Budget statement and the Fabian Society. In today's papers, Chantrey Vellacott has said it. Is not it time that the right hon. Gentleman gritted his teeth and, on behalf of the Chancellor, admitted that the tax burden has risen?

§ Mr. Smith
I keep giving the Conservatives the figures, but they do not seem to listen. Last year, the tax burden was 37.4 per cent. This year, it is 37 per cent. Next year, it is due to fall to 36.8 per cent. on the measures to date. That is a tax burden that is falling, not rising.

§ Mr. O'Brien
Returning to the precise figures, the ONS pointed out that the tax burden has risen in all but two quarters since Labour came to power. In the two quarters when it did not actually rise, it remained the same. Last year, the Prime Minister said that it is clear, as the figures show, that the tax burden is falling.—[Official Report, 24 November 1999; Vol. 339. c. 609.] 1175 Will the Chancellor and the Chief Secretary explain what the Prime Minister was talking about when he made that statement?

§ Mr. Smith
I am tempted, in the interests of accuracy, to repeat to the hon. Gentleman the figures that I have just given. However, for his interest, I shall give him another set of figures that reflect the burden as it actually impacts on a typical family. The figures show that, when we came to office, the take was 21.5 per cent.; it then fell to 20.9 per cent.; this year it is due to fall to 20.4 per cent.; and next year it will be 18.9 per cent. Again, from the vantage point of the families who pay tax, that means less tax with Labour.

§ Mr. Brady
I suspect that the Chief Secretary's figures do not include all the stealth tax increases and the indirect taxes that have been piled on time after time. Is it not pathetic that the Government have to rely on semantics? When they are asked the straight question whether the tax burden has risen while they have been in office, they say that it is falling. Can they give the straight answer that the tax burden has risen, and will they stop relying on their own flimsy projections for what might happen in the future?

§ Mr. Smith
I do not have to rely on any flimsy projections; none of our projections are flimsy. Let me give the hon. Gentleman the flimsy projections that his Government were making before they left office. They said that, under their plans, tax under the Tories would have been 37.1 per cent. this year; it is lower with Labour. Next year, it would have been 37.6 per cent.; it will be lower with Labour. The year after that, it would have been 38 per cent.; with Labour the present projection is 37.2 per cent. In each and every case, our performance compared with the Conservative's projections shows a lower take in tax. We will not be lectured by Conservative Members, who broke every promise that they made on tax and imposed the 22 Tory tax increases and the boom and bust economics that did such damage to our economy. If they ever got the chance again, they would wreck the record rising living standards that we are now seeing in this country.

§ Mr. Leigh
Does the Chief Secretary recall that his former hon. Friend, the hon. Member for Brent, East (Mr. Livingstone), said: We haven't increased the top rate of tax or the standard rate of tax, but we have increased a lot of other taxes … we have done it with all these stealth taxes. I just think it would have been better to have honestly told people beforehand? Is not the truth of the matter that the Prime Minister told the British people at the general election that he would not increase taxes? He has increased taxes and every person in this Chamber is paying at least £1,500 more in tax than they were at the last general election. His candidate is 55 points behind the independent candidate for mayor because people are fed up with these lies; they want some truth.

§ Mr. Smith
The truth of the matter is that, unlike the Conservative party, we have kept each and every promise that we made on tax. We promised not to raise the basic or top rates of income tax throughout the next parliament. We have not and we will not. We said that we would 1176 bring in a lower starting rate of income tax of 10p in the pound, and we have. We said that we would cut VAT on fuel to 5 per cent.—the lowest level allowed—when the Conservatives put it up. We said that we would not extend VAT to food, children's clothes, books, newspapers and public transport fares, and we have not and will not. We said that we would bring in, with the windfall levy on the excess profits of the privatised utilities, welfare-to-work programmes and the new deals that have helped this country get 800,000 more people into jobs. They are all gains for hard-working families in this country that the Tories would take away.

§ Kali Mountford (Colne Valley)
Is it not right that where the tax burden falls is just as important as the overall tax take? Is it not right that the tax burden should not fall on those who can afford it least? A low starting rate of tax encourages people back to work and helps the economy, so it is good for Britain and good for taxpayers.

§ Mr. Smith
My hon. Friend is quite right. As a consequence of the changes that we have brought in, families with children are, on average, £740 a year better off. Moreover, thanks to steady growth, low inflation, stability, the introduction of the minimum wage and the working families tax credit—measures in which the Government take pride—the real take-home pay of average families in this country rose faster last year than at almost any time for the past quarter of a century. That is the measure of the extent to which this Government are on the side of hard-working families, whereas Conservative Members put the whole future of those families at risk.

§ Mr. Dennis Skinner (Bolsover)
Is my right hon. Friend aware that many of us in the House and in the country would not give a monkey's if the tax burden went up to 40 per cent., provided that the money went on the national health service, pensioners and the welfare state generally? I have a Budget proposal: we should put another tax—we can call it a stealth tax, if we like—on the Tories' outside earnings, and then we would hear them squeal.

§ Mr. Smith
All Budget representations to the Chancellor are very carefully considered.

§ Mr. Bill Rammell (Harlow)
Does my right hon. Friend recall that the only people in this country paying less tax in May 1997 than in 1979 were those earning over £64,000 a year? We will therefore take no lectures on fair taxation from the Conservative party. Is my right hon. Friend aware that the Conservative party has put forward a tax guarantee that it contradicts in the Chamber, week after week, by making additional spending pledges? Will he therefore make available the Treasury's computer model for the Conservatives' alternative Budget this year, so that the public can properly, rigorously and honestly work out the benefits and costs of their policies?

§ Mr. Smith
My hon. Friend indeed raises the £64,000 question. He is absolutely right to say that Conservative Members talk of the so-called Tory tax guarantee, which their former Prime Minister called mad and their former Chancellor of the Exchequer said was inoperable. The truth, as my hon. Friend said, is that it is not a Tory 1177 tax cuts guarantee, but a Tory NHS cuts guarantee, because it would put at risk the very welfare services that my hon. Friend rightly commends.

§ Mr. Barry Gardiner (Brent, North)
Does my right hon. Friend accept that the rise in gross domestic product that is forecast for next year, combined with the cut in the percentage of taxation, means not only that people will be better off as a result of the lower tax take, but that overall, as a result of the growth in the economy which the Government have achieved, they will be substantially better off in real terms under Labour?

§ Mr. Smith
Indeed, I have already said that last year people experienced the biggest real increase in take-home pay for a quarter of a century. I am confident that the Government's policies for stability, growth and economic responsibility and for getting people into jobs mean that during this Parliament we will see, as my hon. Friend says, a significantly bigger real increase in take-home pay than was achieved, on average, in the Tory years.

§ Mr. Matthew Taylor (Truro and St. Austell)
Does the Chief Secretary agree with the Prime Minister's comment in Question Time, that on coming to office Labour put up taxes to tackle the deficit left by Conservative mismanagement of the economy? That deficit was built on when the Conservative Treasury team, of which the shadow Chancellor was a member, mismanaged the economy in the early 1990s and forgot Baroness Thatcher's advice when she was Prime Minister that one cannot spend money that one does not have. Perhaps the right hon. Gentleman should listen to the previous Conservative Chancellor, who admitted that borrowing a deficit of that size was simply taxation deferred.
Having put that right, does the Chief Secretary now accept that the issue in the forthcoming Budget is whether he uses the benefit to cut tax or to invest in hospitals, schools and a decent increase in the pension, rather than the miserly 75p provided?

§ Mr. Smith
No.

§ Ms Sally Keeble (Northampton, North)
With Mothers' day coming up in a couple of weeks, does my right hon. Friend agree that the shift in the tax burden under the Government represents a clear shift from wallet to purse? With the children's tax credit, the child care tax credit and the record increases in child benefit, people will be able to choose between a Government with a commitment to families, and in particular to working women and mothers, and the Opposition, who would strip most of those benefits away.

§ Mr. Smith
My hon. Friend is right. The measures that we have taken have been of enormous benefit to working families. They have helped working women and working mothers, and we will continue to follow those policies during and after the Budget.

§ Mr. Michael Portillo (Kensington and Chelsea)
When we last had Question Time, I got the impression that the Chancellor had not got the hang of Question Time at all. While I was willing to make straightforward statements about Conservative policy, he was not willing to answer any questions. Is it not astonishing that today, when we 1178 have four questions on the basis of Government policy—the tax burden—and so much interest in the House, the Chancellor of the Exchequer will not answer the questions himself?
The Chief Secretary must begin by admitting that the Government are not publishing the figures that tell us the total burden of taxation—all taxes on families. Why is he withholding that information from the House and the British public?
I want to ask the right hon. Gentleman about the taxes that he is imposing on ordinary people. Why does he intend to abolish the married couples allowance and increase the tax on married people by £200? Their only sin is that they are married. Why does he intend to abolish mortgage interest relief and increase the tax on home owners by £225 a year, when their only sin is that they have saved for their houses? Why is he to make people who drive cars pay £178 more in petrol? Does he not know that those people have to drive their children to school and drive to work? Why has he taxed pensions, making people—[Interruption.]

§ Madam Speaker
Order. The right hon. Gentleman must understand that this is not a debate. There are other hon. Members who wish to ask questions.

§ Mr. Portillo
The Chancellor likes to claim to be the Iron Chancellor, but he is merely a Labour Chancellor. He increases taxes like every other Labour Chancellor, but instead of being straightforward, he does it by stealth, and instead of taxing the rich, he taxes ordinary people who serve and try to do the right thing.

§ Mr. Smith
I am sure that the right hon. Gentleman will get the hang of it, given time. I am surprised that with all his experience, he did not have the dexterity to come in on my right hon. Friend the Chancellor on questions 1 and 2, when he had every opportunity to question him. I am surprised, too, that the right hon. Gentleman has not learned to make his questions rather more pointed.
If there was ever a case of the Portillo trying to call the kettle black, that was it. The right hon. Gentleman was responsible for 22 Tory tax increases. It was he who was responsible for the biggest cut in the married couples allowance. He said at the time that the allowance appeared to be the most anomalous given to people, whether or not they were in work. He continued:
I doubt that the reduction to be made in the first year … could be held to be crucial for those deciding whether they should be married.—[Official Report, Standing Committee A, 22 February 1994; c. 347.] The right hon. Gentleman was the architect of the 22 Tory tax rises. He was the one who put VAT on fuel. He was the one who started cutting the married couples allowance. He was the one who put up national insurance. We have no lessons to learn from him on tax.

§ Mr. Portillo
Well, yes, the Conservatives did put up some taxes, and we paid a heavy price for it. The Labour Opposition criticised us at the time, so why are they putting up taxes now they are in government? Why are they taxing ordinary people on marriage, pensions, savings and petrol? Why are our public services getting no better? Why were 57,000 operations cancelled last 1179 year? Why are people waiting a day and a half on trolleys in hospitals? Why has the number of policemen been cut by 1,700? Why is crime rising? Why are a Government who promised us that we would pay less and get more making us pay more, yet we are getting less?

§ Mr. Smith
The right hon. Gentleman is not getting the hang of it very quickly. With a record of driving through 22 Tory tax increases, and having been one of those responsible for the policy of boom and bust, the people of this country will never trust him and the Conservative party on tax or public spending.
Next year, the burden on the typical family will be at its lowest level since 1972. Our management of the economy and public finances puts £40 billion extra into health and education to repair the damage that the Conservative party inflicted when it was in government. People are better off with Labour. Conservative party promises to end the new deal and reverse the working families tax credit would return us to boom and bust, stop-go economics and damage the prosperity of the people of this country, whereas this Government have achieved the fastest rise in living standards for a quarter of a century.

§ Mr. Geraint Davies (Croydon, Central)
Is my right hon. Friend aware of the recent Institute for Fiscal Studies report, which shows the distributional impact of post-tax income since 1997? It underlines not only his point that there are major increases in the take-home pay of the average family, but shows major increases in the pay of the majority of families, including the bottom 90 per cent. Does not that show that Britain is richer and fairer under Labour, through more take-home pay, more jobs and lower inflation?

§ Mr. Smith
My hon. Friend is right. Unlike the Conservative party, the Labour Government care about the low paid—that is why we introduced the minimum wage. We care about working families—that is why we introduced the working families tax credit. As my hon. Friend said, thanks to our management of the economy and our policies for fairness as well as for enterprise, those on half of average earnings will receive as big an increase in real take-home pay in this Parliament as they received in all the Parliaments of the previous Administration.