HL Deb 11 November 1999 vol 606 cc1446-8

3.27 p.m.

Earl Cathcart asked Her Majesty's Government:

By how much the burden of taxation has increased in the United Kingdom since May 1997.

Lord McIntosh of Haringey

My Lords, as a result of the last Budget, the tax to GDP ratio is lower this year than last year. The tax ratio in the two following years will also be lower than last year. Under the previous government's plan these rates would have been higher than the latest projections in this year and both of the next two years.

Earl Cathcart

My Lords, I thank the Minister for that Answer. Given the fact that before the last election the Prime Minister vowed that he had, no plans to increase tax at all", and went on to say: This is my covenant to the British people. Judge me upon it. The buck stops with me", can the Minister reconcile these pledges with the figures from the House of Commons Library, which show that over the life of this Parliament taxes have increased by over £40 billion, or £1,500 per taxpayer?

Lord McIntosh of Haringey

My Lords, the Prime Minister said that he would not increase taxes. He did not say that there would be no increases or decreases. He did not say that there would be no changes in taxes. There have been substantial reductions in taxes which have benefited the ordinary people of this country. We have never accepted the figures produced by the House of Commons Library, as the Chancellor made clear at the earliest opportunity.

Lord Taverne

My Lords, is it not a slightly sterile debate to concentrate on which proportion of the increased tax burden has been caused by the policies of the previous government and which proportion has been caused by those of the present Government, especially as so much depends on the growth rate of the economy? Is not the real question, given the strong state of the Government's finances, and even with the greatest respect to the demands of the Lady Prudence, whether we should give priority to tax cuts, as the Conservatives want, or to more spending on schools and health, as the Liberal Democrats want? Does the Minister agree that the priority this time should be given to the better provision of public services?

Lord McIntosh of Haringey

My Lords, the grain of truth behind what the noble Lord says is that the tax to GDP ratio is a percentage which is the difference between two very large figures. The tax figure is, of course, under the control of government; the GDP ratio is less directly under the control of government, although this Government have been outstandingly successful in achieving growth at a time when the Opposition said only a year ago that we were on the brink of an economic abyss. Under those circumstances I think that the achievement of sustainable growth is the correct objective and decisions on both tax and expenditure follow from that.

Lord Clark of Kempston

My Lords, does not the Minister agree that a categoric assurance was given at the previous general election that taxes would not be increased? While the Minister will not accept the House of Commons Library figures, has he looked at the international figures which confirm the House of Commons Library research? Is it not high time, in view of the promise given, which has been sadly broken, that the Government should admit that they misled the general public and should apologise?

Lord McIntosh of Haringey

My Lords, I assume from what the noble Lord says that he refers to the OECD report which was published last month. I have to tell him that that report was based on tax levels in 1997, for four months of which his own party was in power, and on preliminary estimates only for 1998. This is certainly not up-to-date information.

Earl Ferrers

My Lords, with regard to the Deputy Chief Whip's earlier answer, is he suggesting that the House of Commons Library gave incorrect information?

Lord McIntosh of Haringey

My Lords, I could give a long lecture on the different ways of interpreting—

Noble Lords


Lord McIntosh of Haringey

My Lords, I know that noble Lords would not want me to do that. There are two basic ways in which it is possible to define the tax burden: one is the cash basis, which the Treasury uses; the other is the national accounts on an accruals basis. There are variations within that. What we do—which is the honourable thing—is to make it possible for both of these methods of estimation to be calculated from the pre-Budget report and from our other financial documents.

Lord Brooke of Alverthorpe

My Lords, can my noble friend the Minister say how many, if any, tax increases that have occurred have been attributable to the previous government's tax plans? Further, can he say what was the burden of debt that we inherited? What steps have been taken to reduce that and what has been the cost of doing so?

Lord McIntosh of Haringey

My Lords, on the question of the previous government's tax plans, I think that we ought to look at the forecast in the FSBR of 1996, which was the previous Conservative government's final Budget. The figures for tax as a percentage of GDP are as follows: for 1998–99 the figures are 36.6 compared with our figure of 37.4; for 1999–2000 the figure is 37.1 under the Conservatives and 37.0 for us. For 2000–20001, the figures are 37.6 for the Conservatives as opposed to 36.8 for us. I believe that that is a more useful measure than some of the more detailed figures which my noble friend would like me to give.

Viscount Trenchard

My Lords, is the Minister able to tell the House whether the Government propose to compensate pension funds for the reduction of income amounting to more than £5 billion a year that they are suffering as a result of the abolition of advanced corporation tax credits? Is he also able to tell the House whether he proposes to compensate charities which, starting this year, will progressively be similarly penalised?

Lord McIntosh of Haringey

My Lords, the announcement in July 1997 of the change to the taxation of pension funds was based on the abolition of a tax credit for tax benefits which pension funds did not receive. It was therefore a correction of an anomaly and no compensation is therefore required. The noble Viscount will know that in the pre-Budget report statement on Tuesday considerable help is to be given to charities by the Chancellor.

Lord Avebury

My Lords, does the noble Lord agree that the figures published in the Guardian yesterday show that there is an enormous disparity between the wealth and incomes of the top 10 per cent. and the poorest in our community? Does he therefore also agree that it was a pity that the Prime Minister constrained this Government not to increase tax rates on the highest incomes in the country?

Lord McIntosh of Haringey

My Lords, if we have disparities in income between the richest and the poorest in this country—I certainly agree that these disparities exist—surely the right approach to the problem is the approach of this Government; namely, to seek to improve the conditions of those most in need in this country. That has been the object of our tax policy and of our social policy for the past two and a half years and we shall stick to it.