FlNANCE

Part of Indication of Prices (Beds) Order – in the House of Commons at 12:00 am on 3 April 1979.

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Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury 12:00, 3 April 1979

The right hon. Lady is rather naughty because she is seeking to put words into my mouth. She could not have been in the House when the Leader of the Opposition made it clear that we would match the pensions promised by the Prime Minister for this autumn. That disposes once and for all of the insinuation which the right hon. Lady is trying to put about.

I was talking of the long-term future. The right hon. Lady, with all her zeal, must realise that in a year of declining national wealth, which we might well have, there cannot be more for pensioners, and that indeed there might have to be less. In a year of growing national wealth, there can be more. It is the inflexibility of the right hon. Lady's mind to link what is available with what is produced that is the weakness of her case.

It is extraordinary that the taxation levelled by the Labour Government has been counter-productive. The higher the taxes screwed from the people, the less we have had in growth and in taxation yield. One of the effects has been that as a result of the Chancellor's policies tax.

evasion has spread on a massive scale. We know from the Inland Revenue that possibly between 7½ per cent, and 15 per cent, of gross domestic product is not being disclosed for income tax purposes, which might amount to as much as £10 billion. That could yield £3 billion or £4 billion in tax. I am afraid that as taxes are increased, more and more people tend to find ways round paying tax, either legally or illegally. I refer to people in all walks of life. The bulk of the money we lose comes from the large numbers of people who are "on the fiddle", as the chairman of the Inland Revenue recently put it. If one worker in eight does not declare £1,000 a year, that would result in 15 per cent, non-declaration of gross domestic product.

The danger is that as one decreases rates of taxation people find it less easy to bring themselves to come back to the straight and narrow. The effect of Labour's penal taxation policy has been to discredit income tax, to gather less money than otherwise might have been gathered, and at the same time greatly to restrict the growth of the economy. When this is coupled with an amnesty for Fleet Street casual workers, I believe that many people feel a deep and burning sense of injustice. That causes further disrespect for the tax system and causes the problems to multiply.

The verdict on the Chancellor has been that he has so misused the taxation machine that he has made the dream of the right hon. Member for Blackburn of increasing child benefits infinitely harder to realise.

We are now forced as a nation to transfer much more of the revenue-raising need from income tax to indirect taxes and VAT. That is perhaps regrettable, and many Labour Members may have wished that it had not happened. But it is their fault because they have made income tax appear so intolerable in the mind of the least well off, as well as of the better off, that they have been forced to find ways round the system. The position has now become so grievous and serious that the present system can no longer be considered as a fair vehicle for the collection of a large quantity of tax.

The comparison between the harassment of the self-employed, the sole traders and the unincorporated businesses and the amnesty granted to Fleet Street casual workers has probably done more harm in highlighting this injustice and in making other people feel that they, too, must save themselves from being fully honest to the tax system, so that a switch to indirect from direct taxation is now a necessity which any Chancellor will have to allow for in his next Budget. That proves that for many years my right hon. Friends were right in seeking to take such a step.

Finally, it must be realised that the taxable capacity of our nation, whether by direct or indirect taxes, rates or any other form of taxation, even through the erosion of values through inflation, has reached a point where it has become directly counter-productive. I do not think that there is any chance of paying £4 per week child benefits and in maintaining the value of that figure, or of putting £4 on the pension and maintaining the value of that pension in the years ahead, unless we do something to arrest the decline in the productive capacity and effort of this country. That makes it essential that income tax as well as spending should be cut.

The right hon. Member for Blackburn is therefore wrong to look at the matter in terms of giving money to the rich or to the earners. What she has misled the House about, and what she has left out of her calculations, is the fact that, unless we do something to make people earn more, declare more and pay more in tax, the standard of living of those of us who depend on the State cannot be maintained.