Taxation on Family Income (Hansard, 9 November 1982)

§ Lord Hatch of Lusby
My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

§ The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Trefgarne)
The percentage of income, including child benefits, taken in income tax is estimated at 19.9 per cent. this year for the couple on average earnings, compared with 19.1 per cent. in 1978–79. For the couple on five times average earnings, the figures are 42.1 per cent. and 48.1 per cent. respectively.

§ Lord Hatch of Lusby
My Lords, is the noble Lord the Minister aware that according to a Written Answer given in another place the total tax burden on the average family living on an average wage is now 14.7 per cent. higher than it was in 1979, whereas the tax burden on those who are earning five times the average is 6.5 per cent. less than it was in 1979?

§ Lord Trefgarne
Yes, my Lords, I agree with the figures which the noble Lord has advanced. The top rate of tax when we came into office was something like 98 per cent. on unearned income and about 83 per cent. on earned income. These rates were widely believed, certainly so far as the Government were concerned—and, I believe, so far as many Members of the Opposition were concerned—to be insupportable.

§ Lord Hatch of Lusby
My Lords, is the Minister saying that the Government have fulfilled the pledge which was given in the Conservative Party's manifesto to cut income tax at all levels?

§ Lord Trefgarne
My Lords, if the manifesto of the party opposite had been put into effect as a result of the general election at that time, the level of tax now would be vastly greater than it is.

§ Lord Hatch of Lusby
My Lords, would the Minister answer my question?

§ Lord Trefgarne
My Lords, I do not deny that we should have preferred to move faster in reducing the general level of taxation than has in the event proved possible. The main thrust of our economic policy was 96 first to get down the rate of inflation so that the money left in people's hands was worth more. The fact is that the real income of people now is greater than it was when we came into office.

Lord Morris
My Lords, would my noble friend agree that the contribution of this Government in increasing the net disposable income of the people of this country by virtue of the almost dramatic reduction in inflation has made a great contribution effectively to the state of this country?

§ Lord Trefgarne
Yes, my Lords, that was the point I was trying to make: that the money available to the average income earner is significantly greater now, in real terms, despite the fact that we have been unable to reduce taxation as fast as we would wish. And that is as a result of the main thrust of our policy, which is to get inflation under control.

§ Lord Molloy
My Lords, naturally everybody will rejoice that the rate of inflation has been brought down, but would not the noble Lord acknowledge that, although this Government have brought down inflation, they sent it rapidly rising within six months of taking office and that the corollary of their policy is that we have had a massive increase in unemployment?

§ Lord Trefgarne
My Lords, it has certainly been necessary during the course of our period in office to ensure that inflation is brought under control and, as part and parcel of that policy, that public expenditure is kept under control also. As I have already said, we should have wished to move faster in reducing the level of taxation. That has not proved possible, but we hope that it will prove possible in due course.

§ Lord Blyton
My Lords, is the Minister aware that the ordinary working-class woman cannot understand how inflation is going down when every week prices are rising so far as her purse is concerned?

§ Lord Trefgarne
My Lords, the containment of the rate of inflation which we have achieved to a very remarkable extent, I believe, during the time we have had responsibility for these matters started in the face of the real difficulties which are now widely accepted and public knowledge. We are not suggesting that prices are being reduced. It is the rate of increase initially which we have sought to contain, and we have been very successful in doing that.

Baroness Sharpies
My Lords, is my noble friend aware that the price of many foods, especially fresh fruit and vegetables, is much cheaper than a year ago?

§ Lord Trefgarne
My Lords, I am certainly aware of that, and it contributes to the figures to which I have referred.

§ Lord Glenamara
My Lords, considering the burden of taxation, does not the noble Lord agree that direct taxation is only half the story? There is also indirect taxation. If such increases as the increase in the price of gas, which is simply another form of taxation, are taken into account, the burden of taxation on the 97 people of this country is enormously higher than it was when the Conservative Government came into office?

§ Lord Trefgarne
My Lords, I would not for a moment agree that the price of gas being set at a proper market level is some element of taxation. Of course it would be possible to give away gas. Of course it would be possible to give away electricity generated or created at the public expense. But that would be a most unwise policy and would not in any way represent Government thinking.

§ Lord Jacques
My Lords, would the Minister explain to the House how he arrives at the market level when there is only one seller of a commodity like gas?

§ Lord Trefgarne
My Lords, gas is a form of energy. There is a very clear market level for the right price for a particular source of energy when compared with other sources.

§ Lord Kaldor
My Lords, is it not true that, at the beginning of their term, the Government announced it as their policy to increase gas prices by 10 per cent. more each year than the prevailing rate of inflation and that this was done in the face of the strongest opposition by the board of the British Gas Corporation?

§ Lord Trefgarne
My Lords, it is certainly the case that we have sought and have achieved increases in the price of gas faster than the increase in inflation, but that, as I have explained, was to bring the price of gas up to a clear comparison with other forms of energy. Prior to that gas, which is a very attractive form of fuel for many purposes, was being sold well below the proper market price. Quite apart from the economic considerations, this was not a proper husbanding of scarce resources.

§ Lord Harmar-Nicholls
My Lords, does my noble friend not think that if we are going to discuss the effect which gas has on the general economy we ought to remember history; that when the cost of gas was going up it was a Minister of the previous Government who put all the extra cost on to industry, which may well have helped to bring up the figures of unemployment? Ought we not to make up our minds as to where our priorities lie—to help bring down unemployment by helping industry or merely to make propaganda points for the sake of getting them on the record?

§ Lord Trefgarne
My Lords, if I was to list the unwise policies of the previous Administration, I should be here all day.

§ Lord Elwyn-Jones
My Lords, is not general electioneering beginning a little early?

§ Lord Trefgarne
That may well be, my Lords, but it was the noble Lord, Lord Hatch of Lusby, who tabled this Question.