Taxation and Higher Incomes (Hansard, 24 June 2003)

§ The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)
My Lords, the Government have committed themselves not to increase the basic or top rates of income tax within the lifetime of this Parliament.

§ Baroness Miller of Hendon
My Lords, I thank the Minister for what is not really an unsurprising reply. Is it not a fact that since 1997 the tax burden has risen by £118 billion, which includes a 1 per cent rise on income tax, thinly disguised as a rise on national insurance? Given that that is already a huge tax hike, does the 137 Minister agree that his right honourable friend the Chancellor of the Exchequer needs no lessons at all from Peter Hain on how to pick the taxpayer's pocket? Perhaps he does not agree with that and believes that there is more yet for the Chancellor to learn.

§ Lord McIntosh of Haringey
My Lords, the figure that the noble Baroness, Lady Miller, gives, as she knows perfectly well because she is well instructed in these matters, is meaningless. Perhaps I may set out the position correctly. For the family of a single earner on average earnings, with two children, the effective rate of tax is 20.1 per cent compared with 20.9 per cent in 1997 and is in fact the lowest figure since 1979–80. If we consider the effective, as opposed to the marginal, rate of taxation and take into account the effect of tax credits, we have a progressive tax system in which the burden is one of the lowest in the developed countries in the world.

§ Lord Barnett
My Lords, does not the noble Baroness raise an important point, not least in her supplementary question and, if I may anticipate it, that of the noble Lord, Lord Saatchi? It exposes how impossible it is to have a serious debate on an important issue of taxation. But even worse, as I am sure my noble friend will agree, was the attitude of my right honourable friends the Prime Minister and the Chancellor of the Exchequer. It was quite intolerable to stop our right honourable friend Peter Hain even raising the issue, no matter how lacking he was in understanding the tax system. Does my noble friend accept that? He might even be promoted if he agrees.

§ Lord McIntosh of Haringey
My Lords, the answer is that which I gave at the outset. The Government have committed themselves not to increase the basic or top rates of income tax within the life time of this Parliament. Given that, discussion of tax rates is always worth while and valuable.

§ Lord Blackwell
My Lords, will the Minister confirm that the figures he quoted exclude national insurance, which rose in the previous Budget? Will he say whether the pledge not to raise higher rates of taxation also applies to national insurance rates?

§ Lord McIntosh of Haringey
My Lords, the noble Lord, Lord Blackwell, who is also well informed in these matters, knows perfectly well that the rise in national insurance to pay for extra expenditure in the health service follows very sound principles laid down by Beveridge in the 1940s. They are that those who are earning should pay for the health service, which is provided for those who are earning and those who are in retirement.

§ Lord Corbett of Castle Vale
My Lords, can my noble friend confirm that in the government led by the then Mrs Thatcher from 1979 for the next nine years the top rate of tax was 60 per cent and the marginal rate was 90 per cent?

§ Lord McIntosh of Haringey
My Lords, there were a number of different top rates of tax under the Thatcher and Major governments. I do not believe that I should be called on to summarise them in the context of Starred Questions.

§ Lord Newby
My Lords, we on these Benches agree with the Minister that there is great value in having a debate about the appropriate level of taxation. Does he accept that as a starting point for such a debate the Government might care to point out that if income tax were introduced at the rate of 50 per cent for all incomes over £100,000, that would raise £4.5 billion additional resources which might be used, for example, to scrap student fees, increase the basic pension or provide free care for the elderly? I inform the Minister that we on these Benches look forward to fighting the next election on that basis.

§ Lord McIntosh of Haringey
My Lords, the Liberal Democrat Party has been spending the extra money from a 50 per cent rate on incomes over £100,000 in different ways over the past few months and years. Only last week, we were told by those on the Liberal Democrat Front Bench in another place that it would be used to reduce council tax. I should he interested to see how the noble Lord, Lord Newby, squares that with his proposals today.

§ Lord Saatchi
My Lords, is the spectre of higher income tax just the good news from the Chancellor? Does not the Chancellor actually plan new capital gains tax on houses, a new wealth tax, higher stamp duty and higher VAT? All of those would help him to control our economy in the unlikely event that we joined the euro.

§ Lord McIntosh of Haringey
My Lords, I am glad that we on these Benches have resisted the temptation of anticipating the questions of the noble Lord, Lord Saatchi. He has a wider range of sources of irrelevant quotations than anyone else I have ever met. I am glad that he did not use them today. The noble Lord knows perfectly well that he is putting up an Aunt Sally. There are no plans to make the changes to which he refers.

§ Lord Harrison
My Lords, if the noble Lord, Lord Saatchi, says that that is so bad, why did the noble Lord, Lord Lamont, say that it was so good?

§ Lord McIntosh of Haringey
Well, my Lords, the noble Lord, Lord Lamont, has experience as a former Chancellor of the Exchequer, and his judgment on this matter and on this occasion was very sound.

§ Lord Marlesford
My Lords, if I congratulate the present Chancellor of the Exchequer on so bravely and wisely sticking to a top rate of 40 per cent tax, will the Minister join me in congratulating a previous Chancellor of the Exchequer, Nigel Lawson, on introducing the top rate of tax in 1988? Was the Minister as surprised as I was when he gave me a Written Answer last year which said 139 that if the top 98 per cent rate in force when Mrs Thatcher took over the government were applied at today's price level it would cut in at a marginal income of £76,000 a year?

§ Lord McIntosh of Haringey
My Lords, I do not believe that I could have been surprised by the Answer I gave to the noble Lord, Lord Marlesford. I must at least have read it first, even if I did not actually write it. However, the lesson from the past six years is surely that because of the Chancellor's success at management of the economy there are far more people in all of those higher income earnings brackets. For example, in 1997 only 100,000 people were earning more than £100,000 a year; now more than 400,000 do so. We should not merely consider their income in that regard; we should also refer to their wealth, including their housing wealth, which has increased by 40 per cent in the past six years. All of that makes marginal quibblings about what is called the "tax burden" appear rather irrelevant.