Family Income: Tax Contribution (Hansard, 26 March 1986)

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

§ The Secretary of State for Employment (Lord Young of Graffham)
My Lords, the share of taxes and national insurance contributions for a family on average earnings has risen by two to two and a half percentage points since 1978–79.

§ Lord Hatch of Lusby
My Lords, in view of that Answer from the noble Lord, can he explain how it comes about that the Government, who were elected on a pledge to reduce taxation, have in fact increased it?

§ Lord Young of Graffham
Yes, my Lords, I am glad to enlighten the noble Lord. If we look at what counts with people, which is the amount of money that they take home and not the amount of money that they pay in taxes, we find that the income of those on average earnings between 1973–74 and 1978–79 went down by 2.9 per cent., whereas since 1978–79 their income has gone up by 18.2 per cent. in real terms. It is your income that you spend and not your taxes.

§ Lord Glenamara
My Lords, can the noble Lord say whether the figures he has given take into account the fiscal element in fuel charges since the Government came into office?

§ Lord Young of Graffham
My Lords, I am assured that the figures take account of both direct and indirect taxes and national insurance.

§ Lord Hatch of Lusby
My Lords, in view of the second answer of the noble Lord, is he aware that the actual answer to my Question is 34.6 per cent. in 1978–79 and 37.3 per cent. in the current financial year? Does this not show that the average family—the average by definition of this Government—is paying higher taxes today than it was at the time of the election of the Government, when they were pledged and elected on a manifesto that promised reduced taxation irrespective of take-home pay? Does this not show that that promise has been breached?

§ Lord Young of Graffham
No, my Lords, because the only matter that counts surely is the amount which a family has to spend on rent, rates, food, living and everything else, including VAT. If we take the net expenditure after deducting for taxes, we find, whether a person be single, married with no children or married with two children, on half average earnings or on double average earnings, he will have far more in net take-home pay now than in 1979. Perhaps, for the benefit of all your Lordships, I will cause the figures to be placed in the Library.

§ Lord Maude of Stratford-upon-Avon
My Lords, does my noble friend agree that the Conservative Government were elected on a manifesto which undertook among other things to transfer taxes on income to indirect taxes on expenditure, the reason for that being that it was thought better to allow more people to spend their own money in the way they chose?

§ Lord Young of Graffham
Yes, my Lords. But the Government were also brought into power in order to see the economy become wealth-creating again. What these figures represent is the fact that year after year those of us in work, and even those of us out of work, can see an improvement in our net income in real terms.

§ Lord Stoddart of Swindon
My Lords, is not the noble Lord a little worried about the figures he has given and the implications? Have not people on half average earnings had their tax increased by 100 per cent., while those on 10 times average earnings have had their tax reduced by 22 per cent? In addition, those on 10 times average earnings have had much higher wage or salary increases than those on average and half average earnings. Therefore, those at the top of the scale in every respect have done very much better than those at the bottom. Are not the Government operating a Robin Hood policy in reverse?

§ Lord Young of Graffham
No, my Lords. I think all your Lordships can take comfort from the fact that those on half average earnings have seen, since this Government came to power, an increase of about 15 per cent. in real terms. It is also true that there are many now on perhaps 10 times average earnings, and maybe even more. But is it merely a coincidence that that has come about at the same time as we have seen 1395 a vast increase in the wealth-creating ability of this country?

§ Lord Harmar-Nicholls
My Lords, is my noble friend aware that, however much the Opposition try to denigrate the obvious, the increase in national savings and in spending in the shops shows quite clearly that people who are in work have been infinitely better off over the last six years than they were before?

§ Lord Young of Graffham
Yes, my Lords, and I hope they will continue to be as long as this Government follow the same policies over the next decade.

§ Lord Molloy
My Lords, does the noble Lord agree that nobody wishes to denigrate his or the Government's efforts? But were there not many schoolchildren in 1979 who in 1986 are teenagers in families? Perhaps the father is earning a bit more than he did in 1979 but he has a much bigger burden to bear if he has teenage children on the dole, and they have no chance whatsoever of spending their money where they like. They have to scrape together every ha'penny from their unemployment benefit. That is still the scourge of this nation.

§ Lord Young of Graffham
My Lords, I am not in the slightest bit complacent about unemployment; no one could be in view of the current figures. However, we are unique in providing for the first time in Europe—indeed, I believe in the industrialised world—three years as a guarantee for all 16 year-old school leavers; two years on YTS and one year available to those on the new workers scheme. That will ensure that for all young people leaving school this year at the age of 16 unemployment is becoming an option, and I hope that it is an option that they will not take.

Lord Bruce of Donington
My Lords, in view of the Minister's endeavour to prove that the essence of my noble friend's Question is not a matter that he would like to answer, will he now proceed to answer quite factually the Question?

§ Lord Young of Graffham
My Lords, the noble Lord asked a very simple Question. He asked: what change there has been in the share of the average family's gross earnings taken in total taxes since 1978–79". I pointed out that they have gone up by 2 to 2½ per cent. But I should be guilty of misleading the House if any noble Lord gained the impression that that meant that people were worse off than they were in 1978–79. In fact, they have seen an unequalled growth in real incomes. That is something at which all Members of your Lordships' House should rejoice.

§ Lord Underhill
My Lords, are we to take it from the Minister's reply that the position is not as responsible financial organisations have declared; that there has been a change in society insofar as the rich have become better off under this Government while the poor have become poorer? Is he challenging such statements by responsible organisations?

§ Lord Young of Graffham
My Lords, I do not know to which responsible organisations the noble Lord refers. I am merely saying that those on half average earnings are, if they are single, 15.3 per cent. better off in real terms; if they are married with no children, 14.8 per cent. better off; and if they are married with two children, 14.9 per cent. better off. To me, that means an increase in real terms in living standards.

§ Lord Mackie of Benshie
My Lords, the noble Lord said that we were unique in Europe in having a scheme to provide training for school leavers. Will he tell the House how many countries in Europe have as high a percentage of unemployment as we have?

§ Lord Young of Graffham
My Lords, there are countries with higher unemployment. As concerned as we are all with unemployment, it seems slightly strange—does it not?—that every question that I am asked, no matter on what subject, always ends up with unemployment.

§ Lord Stoddart of Swindon
But the noble Lord is the Employment Minister, my Lords; he is the Secretary of State!

§ Lord Young of Graffham
My Lords, if the noble Lord wishes to put down a Question dealing specifically with that point, I shall be glad to answer it. Our unemployment is by no means the worst in Europe. Indeed, I would suggest that in regard to young people we are making the best efforts to deal with the problem and that our record stands comparison with any other country in Europe.

§ Lord O'Hagan
My Lords, does my noble friend not agree that the figures in Brussels show that this country is creating jobs at a faster rate than any other member state of the European Community?

§ Lord Young of Graffham
My Lords, we are a long way from the Question. If we may keep to it, I think that would be of advantage.