HL Deb 05 February 1991 vol 525 cc1061-3

Lord Donoughue asked Her Majesty's Government:

What response they have made to the submission to the Chancellor of the Exchequer by the Institute of Directors entitled Budget 1991: Reform in Difficult Times.

The Parliamentary Under-Secretary of State, Scottish Office (Lord Strathclyde)

My Lords, my right honourable friend has read the institute's submission with interest and will be meeting representatives shortly. Noble Lords will understand that I cannot anticipate my right honourable friend's Budget Statement.

Lord Donoughue

My Lords, I thank the Minister for that reply, which I am sure will give comfort all round. Is he aware that in paragraph 31 the report states that the claimed: tax reductions since 1979 have been illusory", and that the director general said that, contrary to popular belief, the burden of taxation has risen from 33% to 37% of national income since 1979"? Are the Government aware that the British public have been misled in that way? Can he inform the House who has been deliberately creating that illusion? Will the Minister promise that in the run-up to the election the public will not be deluded into believing that the tax burden has fallen but will be told the truth—that the tax burden has risen significantly?

Lord Strathclyde

My Lords, I do not know whether there has been an illusion, but I wonder whether it is an illusion that such a notable member of the Opposition should be talking about reductions in the tax burden. The noble Lord does not appreciate that what counts is take-home pay, and in real terms take-home pay has risen by 30 per cent. since 1979 for married men with two children on average earnings.

Lord Bruce of Donington

My Lords, is the noble Lord aware that one of the more considerable mistakes made by Her Majesty's Government since 1979 was to raise VAT from 8 per cent. to 15 per cent? Is he aware that one of the easiest ways available to Her Majesty's Government to bring down the rate of inflation is to restore the rate of VAT to what it was under a Labour Government, thereby reducing the rate of inflation by at least three points?

Lord Strathclyde

My Lords, we are not going to reduce the VAT tax burden. In the early 1980s we made it quite clear what we felt about VAT. Something else that we shall not do is to return to a public sector borrowing requirement which at its peak when Labour were in power was equivalent to 9¼ per cent. of GDP.

Lord Ezra

My Lords, is the noble Lord aware that in the document to which the noble Lord, Lord Donoughue, referred the Institute of Directors states that it has focused on the themes of commercial survival and the promotion of saving? Will he indicate whether the Government are also focusing on those themes and, if they are, what they are going to do about them?

Lord Strathclyde

My Lords, I am sure that my right honourable friend the Chancellor of the Exchequer will have those views very much in mind when he makes his decisions on the Budget.

Lord Stallard

My Lords, is the Minister aware that the document speaks of the danger of thousands of small firms being driven out of business unless the rate of interest is reduced? Have the Government any intention of listening to that opinion and taking the report seriously?

Lord Strathclyde

My Lords, as I have already indicated, my right honourable friend will be meeting the Institute of Directors to discuss the report.

Lord Stoddart of Swindon

My Lords, does it not worry the Minister and the Government that the Institute of Directors, which is very friendly to the Government and the Tory Party, should be embarking upon such wide and cogent criticism of their policy? Is it not a fact that this Government in their economic strategy are embarked upon a policy of economic sadism against the people of this country?

Lord Strathclyde

My Lords, that is quite clearly nonsense. Had it been true, we should never have won three election victories and we should not win a fourth one, which I am sure we shall.

Baroness Blackstone

My Lords, in responding to that part of the Institute of Directors' submission concerned with tax cuts, will the Minister say whether he thinks that the tax cuts of 1988 have brought about the economic prosperity that the Government predicted at the time?

Lord Strathclyde

My Lords, the tax cuts of the 1988 Budget have shown themselves to be a great success in restoring incentives.

Lord Peston

My Lords, I do not know which is more bizarre, the Minister's answers or the Institute of Directors' document. I certainly do not envy the Government in having to meet those peculiar people. Do the Government have any comment on one of the more bizarre suggestions, that following the precedent in New Zealand the salary of the Governor of the Bank of England should be inversely related to the inflation rate?

Lord Strathclyde

My Lords, that is a direct proposal which the Institute of Directors has made. No doubt my right honourable friend will consider it very carefully.

Lord Hailsham of Saint Marylebone

My Lords, if we are to speak of things bizarre, is it not more bizarre than anything else that the Opposition Benches, who perpetually ask us to spend more money on this, that and the other, should now talk about reducing the burden of taxation?

Lord Strathclyde

My Lords, I have to say to my noble and learned friend that I regard it as being very encouraging.

Lord Peston

; My Lords, I hope that the noble Lord has not been misled. None of my noble friends nor I have said anything about reducing the burden of taxation. Is he aware that if he cares to attend the economics debate next week, he will hear some quite interesting remarks on what ought to be done with fiscal policy?

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