HL Deb 22 May 1990 vol 519 cc752-4

3.4 p.m.

Lord Monson asked Her Majesty's Government:

Whether, in the light of the recent Institute of Fiscal Studies report that families earning between £150–£300 a week will lose on average £190 a year from the change from domestic rates to the community charge whereas those with £600–£1, 000 a week will gain on average £210 a year, they will consider altering income tax allowances and thresholds to restore the relative net spending power of high and low earners to the levels prior to the introduction of the charge.

The Paymaster General (The Earl of Caithness)

My Lords, my right honourable friend the Chancellor will determine the level of income tax allowances and thresholds in his Budget in the usual way, taking account of the economic circumstances prevailing at the time.

Lord Monson

My Lords, I thank the noble Earl for that non-committal reply. Does he not agree that the central issue is that the flat rate poll tax has transferred large sums of money from those who are only modestly well of f to those who are very well of f. It is that specific aspect of the poll tax which nearly everybody in this country, regardless of political affiliation, considers to be unfair. If only for the sake of self-preservation, while the Finance Bill is still in Committee in another place, will the Government not consider amending the Bill so as to restore the relative net spending power of high and low earners respectively to what it would have been if domestic rates had not been superseded by the poll tax?

The Earl of Caithness

My Lords, one would then have to arrange a survey of a new set of figures different from that on which the IFS made its survey. It made the survey taking as a base the 1989-90 rates bills uplifted for inflation. It has not attempted to estimate what rate bills would have been this year. Your Lordships will be well aware that local authorities have imposed a 34 per cent. rate rise this year.

Lord Boyd-Carpenter

My Lords, will my noble friend also have in mind the fact that the greater part of the expenditure of local authorities is provided from national taxation which follows a system of graduation for which the noble Lord, Lord Monson, has such enthusiasm?

The Earl of Caithness

My Lords, one must remember that about half or a large proportion of local authority finance comes from the taxpayer. Another part comes from the business community and the third and final part from the community charge payer.

Lord Bruce of Donington

My Lords, without in any way diminishing the thrust behind the Question of the noble Lord, Lord Monson, would it not be in the public interest for the Government to kill two birds with one stone; that is, to abolish this ridiculous poll tax and also to secure the early retirement of the Prim; Minister who has imposed it upon the nation?

The Earl of Caithness

My Lords, as usual the noble Lord is very quick to criticise but offers nothing in its place. Will the noble Lord tell us what he has in mind for the ro of tax?

Baroness Carnegy of Lour

My Lords, does my noble friend agree that the Institute of Fiscal Studies' figures have probably been totally invalidated by your Lordships' recent decision to ring fence an enormous area of taxpayers' money which is to be spent through local government? Would it not be better to postpone that decision until we know whether the House of Commons agrees that that transfer of money to the taxpayer should be upheld?

The Earl of Caithness

My Lords, my noble friend has a valid point. It is also worth putting on record that the IFS study does not take account of very generous transitional relief offered by the Government to the taxpayer. It does not take into account the take-up of community charge benefits which an; substantial and greater than those that existed under the rating system. It does not take account of the charge capping of high spending authorities. The Government have put forward a lot of money in support of those on low pay. However, in order to help mitigate community charge bills, I understand that some of your Lordships are betting on Lord Bertie which is running this afternoon at Salisbury races.

Lord Monson

My Lords, when the noble Earl says that community charge benefits are substantial, is he aware that young people earning less than £94 per week gross may have to pay as much as 10 per cent. of their income in community charge, which hardly suggests that the benefit system is very well structured?

The Earl of Caithness

My Lords, as the noble Earl will know, under the inequitable rating system only some 18 million households paid rates. Some 36 million adults will pay the community charge. The benefits system which the Government have put forward means that about 10 million people—that is, one charge payer in four—will qualify.

Lord Molloy

My Lords, in view of the facts mentioned by the noble Lord, Lord Monson, is it right, as I have read in some newspapers, that the Prime Minister has decided that changes must be made? If that is so, when will they be made?

The Earl of Caithness

My Lords, the noble Lord will recall that we were constantly changing the rating system in order to make it fairer and we are presently looking at certain representations submitted to us.