HL Deb 19 November 1981 vol 425 cc563-7
Lord Molloy

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether they will comment on the OECD report which states that taxes rose more sharply in Britain last year than in any other leading industrial country and, further, that only the very highest paid are taxed less than when the present Government came into office and the poorest paid have suffered the biggest rises.

The Minister of State, Treasury (Lord Cockfield)

My Lords, the increase in the total tax burden last year was needed to meet the higher level of Government expenditure which was due, in the main, to the effects of the recession. In terms of the overall tax burden, the OECD report shows the United Kingdom at the centre of the range occupying the eleventh place out of 23 countries. The OECD report does not comment on the burden of tax at different income levels. But in making comparisons of this kind it is necessary to bear in mind the big increases in wages and salaries which took place in the years in question.

Lord Molloy

My Lords, although I appreciate the need for the fantasy in the noble Lord's very brave reply, does he not really appreciate that, among other things, it is this report that is causing many people of all political opinions on both sides of industry and commerce to think that it is time that the Government acknowledged that there should be a relaxation of their tough attitude? The people, of all political shades, who are protesting do not wish to see the British economy, through strict adherence, sacrificed on the altar of a disastrous and unjust political dogma.

Lord Cockfield

My Lords, no; the noble Lord is entirely mistaken. The OECD report contains no comment of any description other than on technical statistical matters, which I imagine are of limited interest to the noble Lord. As regards his criticism of the increase in the proportion of the gross national product taken in taxation, as I say, this is a reflection of the increase in the proportion of the GNP taken by expenditure; and if the noble Lord wishes to see a reduction in the proportion of taxation, presumably he supports a reduction in the level of Government expenditure.

Lord Oram

My Lords, on the question of statistical information to which the noble Lord has just referred, does he recall that soon after this Government took office they introduced the tax and prices index in the expectation that taxes would go down and that the combined index would show a more favourable image than the retail prices index? In fact, that new index has risen more steeply than the RPI. Would it be helpful, therefore, if I were to suggest that the Government might now stop publishing the tax and prices index, as it has failed to meet the cosmetic purpose for which it was introduced?

Lord Cockfield

My Lords, the index was never introduced for a cosmetic purpose. However, I note the noble Lord's suggestion that information that he does not like should be suppressed.

Lord Oram

My Lords, does the noble Lord recognise that I very much welcome the revelation of the truth through that index? I was only trying to be helpful to the Government in their usual efforts to disguise the truth.

Lord Cockfield

My Lords, the Government are more than capable of looking after themselves without the assistance of the noble Lord. The fact that levels of taxation increased this year is a matter for regret. I have explained the reason for it in the House on many an occasion. The noble Lord simply has to make up his own mind whether he wishes the present level of expenditure to be maintained, despite the effect it has on the level of taxation, or whether he is pressing the Government to reduce the level of Government expenditure.

Lord Kilmarnock

My Lords, will the noble Lord not agree that the raising of the employee's national insurance contribution on the average wage from 6.5 per cent. to 7.75 per cent. is simply another form of disguised taxation? Will he not further agree that the only way in which to put our tax and social security system in order is by the introduction of a tax credits scheme along the lines proposed by his own party in 1972 and 1973?

Lord Cockfield

My Lords, if I may say so, I had a considerable measure of personal responsibility for the introduction of that scheme, and, therefore, I am as familiar with it as is the noble Lord. As regards the national insurance contribution, it is not a tax; it is a payment for benefits, and the amount of the contribution is linked to the amount of the benefits. Nor is it disguised, otherwise the noble Lord would not have spotted it.

Lord Beswick

My Lords, without in any way wishing to contest the proposition that the noble Lord the Minister is capable of looking after himself, I should like to ask him the following question. Is it or is it not a fact that during the lifetime of this Government the general burden of taxation has moved from the higher paid to the lower paid?

Lord Cockfield

My Lords, in 1979 we reduced the absurdly high rates of tax on the top incomes. Tax rates of 83 per cent. on earned and 98 per cent. on investment income were completely unsupportable on any basis. As regards the last Budget, the fact that we were unable either to revalue personal allowances or to revalorise the bands meant that the increase in taxation on the higher income groups was proportionately greater than the increase on the lower income groups.

Lord Beloff

My Lords, will my noble friend the Minister agree that the election of a socialist Government in France is likely to mean that at least one of our major competitors will be having a very much higher tax burden than ourselves?

Lord Cockfield

My Lords, I am most grateful to my noble friend for drawing attention to the problems associated with socialist Governments. I can assure him that a socialist Government in this country would be even worse.

Lord Bruce of Donington

My Lords, is the noble Lord aware that my noble friend Lord Molloy, of Ealing, is just as interested in the technical aspects of the OECD report as is the noble Lord, and is probably more knowledgeable about them than the noble Lord, as he would modestly be prepared to admit? Is the noble Lord further aware that, despite all the verbal dexterity that he exhibits from time to time in this House, the fact of the matter is that both direct and indirect taxes have risen very considerably and are in complete contradiction to the election pledges of the party opposite, which proposed to reduce taxation in order to release incentives among our people? Their performance suggests—

Several noble Lords

Speech!

Lord Bruce of Donington

My Lords, their performance suggests that the people who require more incentives are the higher paid in this country.

Lord Cockfield

My Lords, I am most grateful to the noble Lord for drawing attention to the statistical expertise of his noble friend Lord Molloy. I trust therefore that he will gain great interest from reading the statistical introduction to the OECD report. If the noble Lord does so he will find that it lends no support whatever to the long, and totally misleading, dissertation he gave about the policy of Her Majesty's Government.

Lord Beswick

My Lords, would the noble Lord be kind enough to return to the question that I asked and give me a simple answer, Yes or No? Is it or is it not a fact that from the lower paid there is a greater proportion of revenue now than there was at the time the Government took office?

Lord Cockfield

My Lords, I have already answered the noble Lord's question in detail, but in dealing with complex matters one can never give a simple Yes or No. This is the fallacy known to the logicians as plurales questiones, and I suggest that the noble Lord turns his attention to that matter.

Lord Morris

My Lords, is my noble friend aware how much a great parliamentary performance is appreciated by noble Lords at least on this side of the House?

Lord Cockfield

My Lords, I am most grateful to my noble friend for his assistance.

Lord Kaldor

My Lords, would the noble Lord not agree that, if the Government tried to increase the gross national product instead of doing everything to reduce it, this would be the best way of reducing taxation as a percentage of the GNP?

Lord Cockfield

My Lords, the noble Lord's assumptions are entirely unwarranted. An increase in the gross national product is obviously the best way of improving our fortunes. This is why the Government's policy has been directed to providing incentives, to removing controls, and to pressing for improvements in manning levels and in productivity practice.

Lord Kaldor

My Lords, why have the noble Lord's Government reduced the gross national product by 7½ per cent. since they came into office?

Lord Cockfield

My Lords, this is where I say that the noble Lord is totally mistaken in his prior assumption. The reduction in the gross national product was not the result of Government policies. It flowed partly from the world recession; and it flowed partly from the uncompetitiveness of the British economy, which, as the noble Lord himself has pointed out on many an occasion, has built up over a long period of years.

Lord Molloy

My Lords, is the noble Lord aware that he is quite correct when he says that Britain is halfway on that table of 22, but the fact still remains that, although that is our position, the rich are taxed least, at the expense of the poor, and because of adherence to this policy of monetarism—

Noble Lords

Question!

Lord Molloy

I hope the noble Lord and his colleagues behind him will not find anything humorous in 3 million colleagues who are on the dole. My question is this: Will he please be good enough to look very hard at the report, and ensure that people are requested that the policies involved are at least looked at? That is not an unreasonable request.

Lord Cockfield

My Lords, if the noble Lord studies the report he will find that the proportion of the GNP taken in taxation in this country is not exceptional compared with that of other countries, and he will also find that in countries such as Germany and the United States, which over the years have had a much better performance in economic terms than this country has, there are much greater inequalities of income both before and after tax than exist here. We all deplore the present level of unemployment. The Government feels that it is a tragedy for the British people. We have pointed out many directions in which the situation could be improved.