Income Tax

Oral Answers to Questions — National Finance – in the House of Commons at 12:00 am on 13th February 1992.

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Photo of Alan Haselhurst Alan Haselhurst , Saffron Walden 12:00 am, 13th February 1992

To ask the Chancellor of the Exchequer what assessment he has made of the impact on total tax revenues of the changes in the higher rate of income tax since 1979.

Photo of Mrs Maureen Hicks Mrs Maureen Hicks , Wolverhampton North East

To ask the Chancellor of the Exchequer what assessment he has made of the impact on total tax revenues of changes in the higher rate of income tax.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

The top 5 per cent. of taxpayers pay 32 per cent. of the total yield of income tax, compared with 24 per cent. in 1978–79.

Photo of Alan Haselhurst Alan Haselhurst , Saffron Walden

Does my right hon. Friend agree that those figures strikingly demonstrate that lower, rather than higher, tax rates are at once a fairer and more effective way to maximise revenue to sustain improvement in important public services?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

My hon. Friend is absolutely right. We inherited a situation in which there were penal rates of taxation, which we reduced. The effect was to increase revenue. The Opposition seem anxious to repeat the mistakes that they made before. They want to increase tax rates again. The whole country would like to know at what level of income they intend to increase the higher rate of tax. The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) says that it will be at £36,000, but the right hon. and learned Friend the Member for Monklands, East (Mr. Smith) will not tell us and says that he does not think that it is necessary to say so.

Photo of Mrs Maureen Hicks Mrs Maureen Hicks , Wolverhampton North East

Does my right hon. Friend agree that any proposal to raise the higher rate of income tax, as advocated by the Opposition, would he damaging for morale and prosperity, because such a move would not only destroy the will to work but drive some of our best brains out of the country? We Conservatives do not want that. Will my right hon. Friend confirm that we shall always be the party of lower taxes and the Opposition that of' higher taxes?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

My hon. Friend makes a good point. In addition to her arguments, I believe that the low rate of top rate tax is also an incentive to bring inward investment into the country. It is very much appreciated and gives us a competitive advantage.

Photo of Mr Max Madden Mr Max Madden , Bradford West

Does the Chancellor of the Exchequer realise that ability to pay must be the underlying and fundamental principle of any fair taxation policy?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

I do indeed, and we have a progressive system. What the hon. Gentleman does not seem to understand is that one can have a progressive system with two rates.

Photo of Terry Rooney Terry Rooney , Bradford North

Does the Chancellor of the Exchequer recognise that 2.700,000 people out there would welcome the opportunity to pay any income tax?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

What the hon. Gentleman does not answer is this question: by putting up—

Photo of Terry Rooney Terry Rooney , Bradford North

Answer the question.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

The point that the hon. Gentleman will not face up to is this—

Photo of Terry Rooney Terry Rooney , Bradford North

Answer the question.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

The point implicit in the hon. Gentleman's question is: what is the point of putting up the top rate of tax if one raises less revenue? What good does that do the poor of this country?

Photo of Quentin Davies Quentin Davies , Stamford and Spalding

To ask the Chancellor of the Exchequer how much income tax was paid by an average family with two children in 1979 and 1991, at constant prices.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

Income tax has been reduced from 14·5 per cent. of such a family's gross income in 1978–79 to 13 per cent. in 1991–92.

Photo of Quentin Davies Quentin Davies , Stamford and Spalding

Does my right hon. Friend agree—[Interruption.]

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. This is no longer funny.

Photo of Quentin Davies Quentin Davies , Stamford and Spalding

Does my right hon. Friend agree that the reductions in personal taxation have played a major role in the revival of enterprise and the increase in risk taking, productivity and output that we have achieved in the past decade? Does he agree that reductions in personal taxation are a highly efficacious means of stimulating simultaneously the demand and the supply sides of the economy?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

I entirely agree with my hon. Friend. The benefits of income tax cuts have been widely appreciated. The last thing that the country needs at this moment are the sort of enormous tax increases being advocated covertly by the Oppositionb—the tax increases implied by their sky-scraping public spending plans.

Photo of Mr Ronald Brown Mr Ronald Brown , Edinburgh Leith

Has not national taxation increased with higher levels of VAT and the introduction of poll tax? Is not it disgraceful that the Government are destroying living standards, yet they claim to believe in human values? Is not it also true that the Prime Minister claimed that he was concerned about third-world debt? As this country is also a third-world country, suffering a Tory Government, what is he going to do about that?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

I have long thought that the hon. Gentleman imagined that we were living in Ethiopia, having listened to some of his speeches about the economy. Equally fanciful is his assertion that we are destroying living standards. How he can use that phrase when living standards for a married man on average earnings with two children have risen by about 35 per cent. after increases in VAT and increases in the cost of living, I do not know. The answer lies in the real increase in take-home pay.