To ask the Chancellor of the Exchequer what is his latest estimate of (a) corporation and (b) income tax revenues in (i) the fiscal year 1988–89 and (ii) the fiscal year 1987–8.

The estimates for corporation tax are £19·8 billion for the current year and £15·7 billion in 1987–88. The corresponding figures for income tax are £42·1 billion and £41·4 billion. The forecasts for 1988–89 are those made at the time of the Budget.

Will my right hon. Friend confirm that that is further proof that a low-tax, high-incentive regime is not only more effective in raising revenue but that, because the top 5 per cent. of taxpayers pay a higher proportion of the tax take, it is also more equitable? Does he agree that demographic changes over the next 25 years will mean that we shall have a higher proportion of elderly people, and that for their needs to be properly met it is essential to continue with such policies?

My hon. Friend is absolutely right. He may have noticed that income tax receipts in the current year are 6½per cent. higher than for the corresponding period last year, indicating the great buoyancy of the economy. We predict that receipts from corporation tax will be some 26 per cent. higher than they were last year. Both those examples illustrate the point made by my hon. Friend—that it is possible to cut rates and generate higher revenue as well. That has been illustrated in change after change that we have made in the tax system, and I am grateful to my hon. Friend for underlining the point.

The Chancellor told us that the main reason for cutting income tax was to encourage investment in industry. Does the Minister agree with those in the City who say that most of the money given back in income tax—more than 80 per cent., I understand—has been spent on luxury goods and has thus added to our balance of payments problem?

I do not know what evidence the hon. Lady has for that last assertion, but she has produced none. Investment is at an all-time high. Investment in manufacturing industry is experiencing strong growth this year and investment in the economy as a whole has never been higher. The hon. Lady's question has little substance.