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Taxation

Oral Answers to Questions — Treasury – in the House of Commons at 10:30 am on 30th June 2005.

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Photo of Boris Johnson Boris Johnson Conservative, Henley 10:30 am, 30th June 2005

What assessment he has made of the effect of the level of taxation on the state of the economy.

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

The Government's macro-economic framework has consistently delivered stability with strong growth and low inflation, thus establishing a track record that has been acknowledged internationally. The Government's approach to taxation balances the need to finance better quality public services, deliver fairness and promote sustainable development, while ensuring that the UK benefits from the advantages of being a lightly taxed economy.

Photo of Boris Johnson Boris Johnson Conservative, Henley

One of my constituents is a road sweeper of 18 years' service. He attracts no benefits or tax credits, so will the Minister undertake to explain to him the justice of his payslip, which he showed me recently? On gross earnings of £542 per fortnight, he pays £161 in tax and £86 in national insurance. On top of that, he has to find a further £50 for council tax. Does the Minister think that that is fair? The Government have raised the overall burden of taxation over the past eight years. Is it right that that burden should fall disproportionately on the poorest fifth of the population, who now pay almost 40 per cent. of their income in tax?

C

Well, Browne -- as is his habit -- didn't answer the question. But Boris's figures don't make any sense. A person earning £542 per fortnight -- about £14,000 per annum -- would pay about £1,800 pa tax and about £1,000 pa national insurance. Per fortnight, £70 and £40 rather than £161 and £86. Adding in the Council Tax, the total of tax paid per fortnight comes to about £160. Either he's...

Submitted by Chris Lightfoot Continue reading

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

If the hon. Gentleman is unable to explain to his constituent how the tax system is structured, I shall of course be happy to assist him. However, I have two observations that he may care to pass on. First, I am not aware that his party is proposing to change any element of the tax structure. Secondly, the hon. Gentleman has championed getting more investment for care of the elderly, especially in his constituency. Will he explain to his constituent how that would reduce the tax burden? Will he also explain how a fair tax burden delivers appropriate and better public services?

Photo of Dennis Skinner Dennis Skinner Member, Labour Party National Executive Committee

Is my hon. Friend aware that over the past eight years, the state of the economy and the level of taxation have caused unemployment in Bolsover to fall from more than 10 per cent. to less than 4 per cent.? That has happened because Treasury money has been used to improve the pit sites and turn them into industrial estates where people have been able to go back to work. Mr. Johnson should be more worried about the state of the economy at The Spectator. He has resorted to spreading graffiti around Parliament in an attempt to get people to buy it. Such is the state of those who went to Eton—they are educated beyond their intelligence.

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

I approach the Dispatch Box to answer that question with some difficulty, in the sense that I cannot match my hon. Friend's ability to put his finger on the pulse of the issue. He has in his constituency living evidence of the improvement in ordinary people's lives as a result of our investment not only in public services, but principally in the new deal, which was funded by a form of taxation that the Conservatives opposed. That may have been because of their ideological education in public schools, but I have no idea about that.

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury

When the Chief Secretary turns his attention from the economy in Bolsover to the international economic scene, something that the Chancellor has considered quite a lot lately, he may notice the well-documented and strong correlation between lower taxes and higher rates of economic growth. What conclusions has he drawn from that about the consequences for Britain's long-term prosperity of the Chancellor's policy of increasing taxes by a further 2.3 per cent. of gross domestic product over the next five years?

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

The hon. Gentleman is aware that since the turn of the century our growth rate has been equal to the best growth rates in the world, including the US growth rate. I am interested in, and follow carefully, the shadow Chancellor's consideration of the international scene, and I am aware that he has recently been to Estonia. No doubt at some stage he will be able to explain how Estonia provides an analogous model for the British economy. I am also interested in his comments that there has to be much more to our response to global economic change than just reducing tax, and that a tax policy is not a substitute for a proper economic policy. This Government have a proper economic policy and an appropriate tax policy, so to that extent I agree with the shadow Chancellor.

Photo of Barry Sheerman Barry Sheerman Chair, Education & Skills Committee

Does my right hon. Friend agree that it is not just the level of taxation that is important, but what we spend that taxation on? In the past eight years it has been spent on investing in skills, schools, education and our universities, and that is why we have such a successful economy. Perhaps my right hon. Friend could consider the tax affairs of Mr. Johnson, because he has several incomes and probably a very—

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

I shall restrict my answer to the first part of my hon. Friend's question. He is right that the investment of taxation is now beginning to pay significant dividends in all our communities. However, it is not only communities that have benefited from the tax and benefit measures introduced by this Government. In real terms since 1997, households will be on average £900 a year better off; families with children £1,400 a year better off; importantly, families with children in the poorest fifth of the population £3,200 a year better off; and pensioner households £1,500 a year better off. This is a Labour Government who deliver for the community and for the individual.

Photo of Mark Pritchard Mark Pritchard Conservative, The Wrekin

Part of the justification for the huge increases in taxation and, in particular, national insurance contributions is the Government's so-called investment in the national health service. Perhaps the Minister could correlate that investment with the 100-week wait for an MRI scan in my constituency.

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

The hon. Gentleman touched on that issue in the context of his own local election campaign, where he appeared to argue for more investment—more money—in the national health service. Of course, he will have to explain to his hon. Friends, including those who sit on the Front Bench, how that is consistent with the Conservative party's general policy of cutting investment in public services. However, the point that he makes about an ambition to reduce the waiting times of individuals in the NHS is, of course, important, and it is just that progression that our investment is delivering.