Income Tax Yield (Hansard, 2 December 1998)

HL Deb 02 December 1998 vol 595 cc494-6 494

§ 3 p.m.

§ Baroness Castle of Blackburn asked Her Majesty's Government:

§ What would be the yield in tax revenue if the highest rate of tax were to be increased from 40 per cent. to 50 per cent. on taxable income of £150,000 a year and £100,000 a year respectively, and how many taxpayers would be involved in each case.

§ Lord McIntosh of Haringey
My Lords, if the top rate of tax was increased from 40 per cent. to 50 per cent. for taxable income over £100,000 a year, then this would yield £2 billion at 1998–99 income levels and 160 thousand people would pay more tax.
If the top rate of tax was increased from 40 per cent. to 50 per cent. for taxable income over £150,000 a year then this would yield £1.5 billion at 1998–99 income levels and 80 thousand people would pay more tax.

§ Baroness Castle of Blackburn
Have I heard the Minister aright, that there are only 80,000 people in this country with a taxable income of £150,000 or more and 160,000 people with a taxable income of over £100,000? Does that not show how wealth in this country is accumulating in a few hands? Is it not true that the previous administration, under the chancellorship of the now Lord Lawson, in 1988 gave these people a great tax hand-out? Has not the DSS itself, in its recent statistics, pointed out that the gap between rich and poor in this country is continuing to widen even under this Government? Will not the Government therefore consider at least taking back some of the disastrous largesse which the previous government gave to those rich few?

§ Lord McIntosh of Haringey
My Lords, my noble friend has a valid statistical point. It is true that the figures for the number of people earning more than those thresholds has increased over the past year, although we believe that is much more because of 495 self-assessment of income tax and better figures more readily available than actual riches. However, I hope that my noble friend is not inviting the Government to break their clear manifesto commitment; namely, their pledge not to raise the basic or top rates of income tax throughout the next Parliament.

§ Lord Lawson of Blaby
My Lords, I apologise to the House for intervening a second time on a single Question time but the noble Baroness, Lady Castle, mentioned me. May I put another statistical fact into the pot which may be of some relevance to this issue? As a result of the reforms which I introduced as Chancellor in 1988, over the past 10 years, both the proportion of total income tax yield and the absolute amount paid by the top 10 per cent. of income earners has increased and not diminished.

§ Lord McIntosh of Haringey
My Lords, I am grateful to the noble Lord for that historical apercu. It does not change our determination to carry out our manifesto.

§ Lord Razzall
My Lords, does not the noble Lord agree, without quite putting it in the same way as the noble Baroness, that, notwithstanding the Labour Party's pledge at the last election, were the amounts concerned to be raised in the way that the noble Baroness is suggesting, they would make a contribution towards fairness in our society and would make a contribution to the public expenditure aims which the noble Lord and I share?

§ Lord McIntosh of Haringey
My Lords, that is an entirely hypothetical question. Our commitment is very clear. The noble Lord can speculate as much as he likes. Over a drink, I might speculate with him. But it is not an issue of government policy.

§ Baroness Castle of Blackburn
Is it not a fact that the manifesto commitment to keep the Conservative taxing and spending plans related merely to the first two years of this Administration? Has it not been somehow magically extended in the minds of Ministers to avoid them embarrassment?

§ Lord McIntosh of Haringey
My Lords, with the greatest respect, I believe that my noble friend is confusing spending plans with income tax. We said that we should not change the previous government's spending plans for the first two years. As my noble friend knows, the comprehensive spending review announced this summer shows what significant changes are to be made in the following three years. But our commitment not to raise the basic or top rate of income tax was made explicitly for throughout this Parliament.

§ Lord Peston
My Lords, my noble friend used the expression "statistical point". Perhaps I may ask him to clarify another statistical matter. I take it that he is referring to what one might call income tax units as declared to the Inland Revenue in this country. Therefore, to revert to one of our favourite topics this 496 week, all those engaged in tax avoidance in the Channel Islands are not declaring their incomes over £100,000 per year for the 40 per cent. rate, or, therefore, for that matter, a 50 per cent. rate.

§ Lord McIntosh of Haringey
My Lords, the figures which I gave are based on an excellent survey of tax returns as submitted in this country and only in this country. They are based on 75,000 tax returns. It is a one in 10 sample of incomes over £100,000 and an even bigger sampling fraction of the very largest incomes. The figures are highly reliable for tax returns made in this country. They do not apply outside.