Real Net Income: Comparisons (Hansard, 26 April 1983)

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

§ The Minister of State for Trade (Lord Cockfield)
My Lords, for a married man with two children, with constant real gross earnings equivalent to £45,000 a year at 1983–84 prices, real take-home pay will be about 18 per cent. higher in the current tax year than in 1978–79, and about 2 per cent. lower than in 1979–80. The changes in real net income for unemployed people will depend upon their precise circumstances, but for the married man with two young children on supplementary benefit the real value of net income is about 8 per cent. higher than in November 1979.

§ Lord Hatch of Lusby
My Lords, I thank the Minister for his Answer, but I wonder whether his attention has been drawn to the study made by an independent organisation, the Institute for Fiscal Studies, in which they found that in real terms the income of an average man with £45,000 a year has risen by £120 a week since 1979, which is a rise of 25 per cent., whereas an average unemployed man is now taking home, in real terms, £15.30 per week less than in 1979, a decrease of 21.3 per cent.

§ Lord Cockfield
My Lords, the figures are as I have in fact given them. The unemployed person who is receiving supplementary benefit and who has two young children is now better off, in real terms, than either in November 1978 or in November 1979. So far as the person with a substantial income is concerned, the position is that during the lifetime of the previous Administration the rates of tax charged went up to 98 per cent. on investment income and 83 per cent. on earned income. These rates were not sustainable and were bad from the point of view of the economic health of the country.

§ Lord Shinwell
My Lords, as I understand the noble Lord's Answer to the Question, he admits that there is a disparity between a person who earns £45,000 a year and a person on unemployment benefit. If he admits that, would the noble Lord the Minister be kind enough to tell us how he is going to correct it?

§ Lord Cockfield
My Lords, as I have said, the difference arises from the changes which were made in 1979. Those changes were to put right what in effect were excessive and insupportable levels of taxation. The important point which emerges from the noble Lord's Question is that the position of an unemployed person who has young children and is on supplementary benefit has actually improved since 1979.

§ Lord Gisborough
My Lords, is my noble friend aware that these figures represent a differential of approximately 20 times by way of spending money? Does my noble friend find it interesting that after 60 years of socialism in the egalitarian state of Russia the differential is approximately 40, if one excludes conscript soldiers, where the differential is 256, and that in the egalitarian state of China, where there are millions of unemployed, the differential is infinity because there is no unemployment pay at all?

§ Lord Cockfield
My Lords, I am most grateful to my noble friend for that most interesting information.

§ Baroness Gaitskell
My Lords, would it not be true to say that the Minister's reply has absolutely no meaning for people who are out of work and in this position—no meaning whatsoever?

§ Lord Cockfield
No, my Lords; I am afraid I cannot accept what the noble Baroness says. I was asked specifically for certain information. That information I have given. I drew attention to the most interesting fact, upon which I have commented; namely, that the position of the unemployed person with young children, on supplementary benefit, is actually better now than it was in 1979.

Lord Bruce of Donington
My Lords, is the encouraging aspect of the taxation position which has been given by the noble Lord consistent with the Government's abandonment of the taxation and prices index, which they issued with such a fanfare of trumpets on 29th August 1979, when, of course, they promised the electorate that they would lower the burden of taxation? Is the noble Lord further aware, or need he be reminded, that only last week his right honourable friend in another place admitted in an Answer that in order to restore taxation to the position which existed in 1979 there would have to be a 7p deduction from the current rate of income tax?

§ Lord Cockfield
My Lords, I was under the impression that I was being criticised from the Benches opposite for the size of the reductions made in taxation. I am therefore most encouraged by the support given to me by the noble Lord, Lord Bruce of Donington, who is advocating further substantial reductions in taxation.

§ Lord Beswick
My Lords, I wonder if the noble Lord could make it absolutely clear, so that we may follow these matters more fairly, whether the improvement in the take-home pay, as he puts it, of the unemployed man is due to a change in the taxation rate or whether it is due to the fact that the unemployed man gets rather more unemployment pay now as a result of the higher contributions?

§ Lord Cockfield
My Lords, there seemed to be some innuendo in the noble Lord's question, which I hope he will forgive me if I ignore. So far as the figures are concerned, the position of the unemployed man, as I have given it, is not affected by taxation.

§ Lord Beswick
No, my Lords, but is not the question relevant to taxation? Would the noble Lord make it absolutely clear that as a result of the taxation policy of the present Government a man taking home that kind of pay was worse off from 1979 to 1982 because of the changes in taxation, and the only reason why the noble Lord can point to this increase of £8 a week is because unemployment pay and supplementary benefits are higher?

§ Lord Cockfield
My Lords, if the noble Lord would care to read the Question, it related to the position of a person on £45,000 a year income and the position of a person who is unemployed. I gave the figures relating to those two circumstances. If there are any further or more detailed figures which the noble Lord would like, I shall be only too pleased to send them to him, if he will specify precisely what he requires.

Viscount St. Davids
My Lords, will the noble Lord the Minister please clarify one point? Is not inflation itself a form of taxation? Is it not the form of taxation that occurs when we do not have the political power to tax ourselves properly? Is it not an extremely unfair form of taxation, because it hits the poorest people worst of all?

§ Lord Cockfield
My Lords, I entirely agree with the noble Viscount. This is why we have set the reduction of inflation as one of our top priorities. We have made very significant progress in that direction.

§ Lord Hatch of Lusby
My Lords, is the noble Lord, Lord Cockfield, aware that he has not answered my original supplementary question? If he cannot do so this afternoon, will he be so kind as to write to me, comparing the figures given by the Intitute of Fiscal Studies with the selective figures he has given? Further, will he tell the House whether it is correct that his defence of the reduction of taxation on the high income groups was that it was to give an opportunity for an increase in investment and in production? But has this not been followed by a drastic decrease in investment and an even more catastrophic fall in production?

§ Lord Cockfield
My Lords, the noble Lord is committing the common fallacy of post hoc propter hoc. The fact of the matter is that the long-term health of the economy demands a lower level of taxation than that which existed during the lifetime of the previous Administration. That was the reason for the reductions which were made in 1979 and which have been debated on many occasions both in your Lordships' House and elsewhere. I shall always be happy to write to the noble Lord on this or on any other question.

§ Lord Mishcon
My Lords, will the noble Lord the Minister accept that, whatever may be the increase or decrease in other rates, his own rate of cynicism 804 increases month by month? Will he also agree that the whole purpose of this Question is the concern of the House—certainly on this side—with the misery of 4 million unemployed? That was the whole basis of the Question, and is the Minister not equally concerned?

§ Lord Cockfield
My Lords, the noble Lord's attempts at levity in the first part of his supplementary question belied the nature of the attack that he was endeavouring to launch upon me. So far as the point of substance is concerned, I drew attention to the fact—and I thought it was a matter for some satisfaction—that the position of the unemployed person, with the circumstances I have mentioned, is in fact better than it was in 1979. I would have thought that the noble Lord would have taken some satisfaction from that fact, as I and the other members of my party do.