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House of Commons

Friday 8 June 1990

The House met at half-past Nine o'clock

PRAYERS

[Mr. Speaker-- in the Chair ]

PETITION

Religious Education

9.34 am

Mr. Harry Greenway (Ealing, North) : I have the honour to present a petition to the honourable Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled, in the name of Mrs. Denise Bell of 42 Devonshire road, Ealing W5, and hundreds of my constituents and constituents throughout the borough of Ealing : "The Humble Petition of the residents of the London Borough of Ealing sheweth

That the agreed syllabus of religious education for the London Borough of Ealing contains no specifically Christian content and that this contravenes the intention of your honourable House in passing Section 8 and Schedule 1 of the 1988 Education Reform Act requiring all new agreed syllabuses to reflect mainly Christian religious traditions'."

My constituents and the petitioners are concerned that the syllabus produced by the former Labour council in Ealing, but still in force, contains no reference to the Bible, Jesus or God and no formal or informal indication of what aspects of Christianity might be taught and how the subject might be taught. The petitioners seek not to exclude the teaching of other world religions in schools, but to have the founder of Christianity, Jesus Christ, mentioned in the syllabus in which Christianity is required to be central, and they are determined about it. They look to the Secretary of State for Education and Science, to the House and to the Government to direct that changes be made. The new council shows sympathy to the petitioners' attitude. They hope that the Government and the council will come together and produce a syllabus which is directly Christian- centred but not exclusively so. The petition concludes : Wherefore your Petitioners pray that your honourable House will urge the Secretary of State for Education to direct Ealing local education authority immediately to withdraw its agreed syllabus and adopt a new agreed syllabus with clear and specific Christian content.

And your Petitioners, as in duty bound, will ever pray, &c. To lie upon the Table.

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Taxation

9.36 am

Mr. Speaker : We now come to the debate on the burden of taxation.

Mr. Dennis Skinner (Bolsover) : On a point of order, Mr. Speaker. Last night, as you know only too well, there was a long statement on beef and all the rest of it. I assumed that this morning there would be an announcement of another statement to be made by a Minister--about the scandalous announcement of an increase of 6.5 per cent. over and above inflation for water prices for the next five years. Has anyone informed you that the Secretary of State for the Environment will come to the House to make a statement on that scandalous matter? Water has been privatised. People are lining their pockets.

Mr. Speaker : Order. No request for such a statement has been made to me yet, but it does not have to be made until 10 o'clock, so one may well come. I think we should leave it at that.

Mr. Harry Barnes (Derbyshire, North-East) : On a point of order, Mr. Speaker. The subject that we are about to embark upon is taxation, its impact on many people in this country, and the serious effect of the Government's measures. Part of the debate will be about the poll tax. On top of the poll tax people have to pay their water charges. Might not it be appropriate for the Government to take action to get the Secretary of State for the Environment to appear during the debate, so that that subject can be aired, if no statement is to be made?

Mr. Speaker : These are interesting arguments which could well be advanced during the debate.

9.38 am

Mr. Ian McCartney (Makerfield) : I wish to call attention to the taxation burden under Conservative Governments and I beg to move, That this House notes that, despite savage cuts in the quality of public services, the burden of taxation has risen under this Government to a level higher than under any previous Government ; that for most households income tax cuts have been outweighed by the growing burden of less fair taxes such as the poll tax and VAT ; that national insurance contributions have been cynically used as an additional tax while benefits have been cut or abolished and that the combined effect of the Government's policies is that 320,000 low-paid workers face a combined marginal tax and benefit- withdrawal rate of 70 per cent. or more.

The debate will centre on destroying one of the Government's most carefully manufactured myths--that they are competent, fair and capable of managing a one-nation state. To place the debate in context, it is essential to remind ourselves of the current state of the economy and its relationship to the Chancellor of the Exchequer's 1990 Budget statement. There has been a sharp slowdown in growth. We have the highest interest rates in Europe. They have to be compared with West Germany's at 8 per cent. and France's at 10 per cent. Inflation is rising, and will continue to rise for a considerable period. The balance of trade deficit stands at almost £21 billion, imports are at their highest-ever levels and the overall tax burden is up yet again--to 37 per cent. of gross domestic product--that is without oil taxes--

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compared with 34 per cent. when the Government took office in 1979. It is a far cry from the heady days of the 1979, 1983 and 1987 Conservative manifestos.

When I was looking at research material for the debate, I thought that it was important to be fair to the Government--at least at the commencement of my speech--by starting at the beginning of the Government's term in office so that when I compare tax burdens I do so over the period of the last decade, not over a short period, and relate them to the promises and statements that were made when the Government were first elected in 1979. I was therefore grateful to receive from the research department at the Conservative party's headquarters copies of the 1979, 1983 and 1987 manifestoes. As a Scot, I am very glad that there was no charge for them.

On page 13--lucky for some--of the 1979 manifesto there is the statement under the heading "Cutting Income Tax" :

"We shall simplify taxes--like VAT : and reduce tax bureaucracy." I shall return to that later. A later paragraph under the same heading says :

"We must therefore be prepared to switch to some extent" that is the operative phrase--

"from taxes on earnings to taxes on spending. Value Added Tax does not apply,"--

the comma is very important--

"and will not be extended, to necessities like food, fuel, housing, and transport. Moreover the levels of state pensions and other benefits take price rises into account."

No mention is made of a promise to break the link between pensions and earnings. That was completely ignored, but was implemented immediately after the election. The 1979 manifesto's language was misleading and deceitful. The Government's real intention to switch the tax burden to the majority of the public--those with incomes of less than £20,000 a year, pensioners, the low paid and the most vulnerable who are in receipt of state benefits--was not made known. All that the 1979 manifesto said was that the Conservatives would "simplify taxes--like VAT". Where was the promise in the manifesto to increase VAT from 8 to 15 per cent.? They said :

"We must therefore be prepared to switch to some extent from taxes on earnings to taxes on spending."

The manifesto did not include the promise to increase indirect taxation to over 52 per cent. of all tax revenues. The manifesto was a deceitful attempt to ensure that the public did not know in advance of the election the real intentions of the incoming Conservative Government.

The weekly VAT bill for a family of four on average earnings amounted to £730 a year in 1989-90--roughly 5 per cent. of the family's earnings. That bill has to be compared with one of just £130 in 1978-79, representing 2.7 per cent. of a family of four's average earnings. National insurance contributions on employees' earnings have risen from 6.5 per cent. in 1978-79 to 9 per cent. today. As a result, a family on average earnings is paying 7.9 per cent. of its gross earnings on national insurance contributions in 1990-91, compared with 6.5 per cent. in 1978-79.

The massive surpluses in the national insurance schemes have not been used to reduce contributions or to increase pensions and other benefits. They have been used to subsidise the move out of state pensions into the private

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sector. That has led to the loss of millions upon millions of pounds, at the expense of working people who make proportionately far higher contributions to the scheme than do those on much larger incomes. Child benefit--formerly the child tax allowance--has been cut in real terms by £1.75 since 1979. For a family of four, that amounts to a loss of £182 a year.

As a result of those policies, the tax burden under the Government is greater for most taxpayers. If we include national insurance contributions, VAT and the effects of cuts in child benefit we see that the tax burden of a family of four on half average earnings has more than trebled--from 2.4 per cent. of its gross income in 1978-79 to 7.4 per cent. in the current financial year. A family of four on average earnings has seen a rise in its tax burden from 23.6 per cent. of its gross income in 1978-79 to 25.6 per cent. in the current financial year. Furthermore, the poll tax is not included in those figures. Statistics compiled by the House of Commons Library show that, even with rebates, 26 million people have lost out under the poll tax. Those losses affect 73 per cent. of the adult population. In his 1990 Budget statement the Chancellor of the Exchequer raised income tax by £380 million by freezing the top rate threshold, thereby hitting about 1.7 million taxpayers. The Government go on about how Labour's tax policies will hit middle income taxpayers. According, however, to their own definition of middle incomes, that is precisely what they did in the last Budget, as 1.7 million people with taxable incomes of £20,700--which means that they have a gross income of between £24,000 and £26,000--are paying £380 million more in tax as a result of that freeze.

The Conservative manifesto of 1983 contained a commitment to reduce tax bureaucracy. It said that the Conservative's policies had led to "greatly reduced tax bureaucracy. Manpower in the Inland Revenue and Customs and Excise has fallen from 113,400 in April 1979 to 98, 500 in April 1983, and is set to fall further."

What have been the consequences of removing that manpower from the Customs and Excise and Inland Revenue? A report to the House by the National Audit Office in March this year found that £5 billion in taxes had not been collected at the end of 1988 and that since 1978 the number of permanent staff employed on collection had been cut by over 18,000--more than one fifth of the total complement of the department.

An earlier National Audit Office report estimated that national insurance fraud by employers cost about £365 million in lost revenue--£1 million a day. That report was a consequence of the continued campaign in the House by my hon. Friend the Member for Bolsover (Mr. Skinner) through points of order and requests for statements regarding the truth about the cover-up by the Government of that huge loss of revenue.

As a result of the fraud, the Comptroller and Auditor General refused to ratify the Department of Social Security's accounts. The National Audit Office report revealed a huge backlog of returns containing incorrect, incomplete or inconsistent national insurance figures. Only half the target of 200,000 visits by national insurance inspectors to check employers' premises had taken place. An internal Department of Social Security report blamed

"inadequate resources, fragmented and diffused management and an absence of meaningful performance targets."

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The Government are soft on big tax dodgers while hounding claimants who are looking for work and those on sickness benefit.

Mr. Dennis Skinner (Bolsover) : Does my hon. Friend agree that one group of people have benefited greatly from tax cuts--not the people to whom my hon. Friend referred, but the wealthiest 1 per cent. of the population? According to the figures issued by the House of Commons statistics office, the wealthiest 1 per cent. have cumulatively reaped the benefit of £26.2 billion worth of tax cuts in the first 10 years of Conservative Government. That figure is almost equivalent to the amount of money we need to run the national health service for a year.

Mr. McCartney : My hon. Friend is correct. I shall demonstrate later that not only the wealthiest 1 per cent. of the population but the 13 per cent. below them have accumulated the overwhelming majority of tax cuts afforded under the Conservative Government. To pay for that, indirect taxation has increased and the position of those on benefit and those seeking additional benefit has been marginalised so that they are paying the equivalent of between 70 and 90 per cent. because of tax margins.

The Conservative claim of fairness in the distribution of the tax burden is the most fraudulent of all. As a percentage of gross domestic product, non- oil taxes are forecast to rise to 37 per cent. this year compared with 36.75 per cent. last year and 34 per cent. in the year that the Tory Government came to power.

The Tories talk only about income tax, conveniently forgetting to mention all the taxes that have risen during their years in government. Even when focusing on income tax, they never point out that some have gained far more than others, as my hon. Friend the Member for Bolsover pointed out a few moments ago.

Since 1978-79, the average gain from income tax cuts per taxpayer on an income of below £5,000 per annum is a measly £110 in 1990-91. The average gain for a taxpayer on an average income of £10,000 to £15,000 a year is £690 in the current financial year. In contrast, the average gain for a taxpayer on an income of more than £70,000 per annum is £36,060 or £693 per week. Such a taxpayer gains more in a week than those on average income gain in an entire year. The super rich on the Conservative Benches--I see that the hon. Member for Eastbourne (Mr. Gow) is here for the debate--argue that the rich need incentives to make them work harder and pay taxes. In Conservative language, incentive is a code word for huge pay rises and unfair tax concessions.

Increases in tax revenues from top-rate taxpayers have occurred because the rich are paying themselves more and not because they are willing to pay more tax. The Government argue that cutting the top rate of tax has led to an increase in tax revenues. Since the top rate was cut to 40 per cent., liability to the top income tax rate has increased by £3.1 billion or 40 per cent. in cash terms and 15 per cent. in real terms. But why has that happened? Huge pay rises for the rich are one reason why the tax take has been greater. Last July a survey of 86 of Britain's top 100 companies found that their highest paid executives had awarded themselves pay increases averaging 27 per cent.--three times the British inflation figure. Since then, a number of new top pay awards have been announced. The chairman of Glaxo has had a pay rise of 51 per cent., taking his salary to nearly £600,000 per annum. The

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insurance broker Bill Brown, the highest paid man in the City, has awarded himself a 108 per cent. pay rise and now earns £4.2 million per year. That is his salary and does not count all the other little freebies--legal or illegal--that he no doubt receives from his job in the City. Sir Denys Henderson, the chairman of ICI, has had a 25 per cent. pay rise and now earns £480,000 per annum. Lord Hanson of the Hanson Trust has had a pay rise of 24 per cent. and now earns £1.5 million a year. It does not stop there. What about Tory Members of Parliament and ex-Cabinet Ministers who earn full-time salaries for part- time jobs in the City? The rats are leaving the sinking ship.

Mr. Steve Norris (Epping Forest) : Given the obvious truth that top pay in Britain is actually rather low in comparison with the United States and most of Europe, for how long does the hon. Gentleman think that the shareholders of Glaxo would benefit from reducing the chairman's salary to the national average wage?

Mr. McCartney : More important than that, I wonder how much the workers of Glaxo would welcome such a pay award, as would all the other workers who are earning less than £80 per week. They earn less in a year than the chairman of Glaxo earns in a day. That is the real issue. We have poverty wages and taxes on the standard of living of low-paid workers. It is clear from that intervention which side Conservative Members are on.

Let us get back to the rats who are leaving the sinking ship. It is important to analyse just what the Government are up to technically and politically.

Mr. Doug Hoyle (Warrington, North) : Does my hon. Friend agree that the major beneficiaries from privatisation have been the chairmen and directors of the companies that have been privatised? They receive huge salary increases although the companies have not improved in efficiency, and have become less responsive to consumers. Privatisation has been a bad deal for the taxpayer. The people who have benefited have been those involved in the privatisation. Members of Parliament have taken the privatisation through Parliament and then joined the boards of the companies. If that is not sleaze I do not know what is.

Mr. McCartney : My hon. Friend is absolutely right and if he will bear with me for a few more moments I shall read out a list of the sleazy decisions that have been taken by Cabinet members who, within weeks of leaving the Cabinet, appeared on the boards of the companies that they had privatised, or on the boards of other companies. In one case, before the Minister had left the Cabinet there was an announcement that he had been placed on the board of a particular company.

Head of the shopping list must be the right hon. Member for Blaby (Mr. Lawson), whom Conservative Members now blame for all the Government's economic ills. He was the Chancellor to end all Chancellors. The Prime Minister continually referred to him as, "My Chancellor, my Chancellor", yet within weeks he became a non-executive director of Barclays Bank and a part-time consultant to Barclays de Zoete Wedd, the securities arm of Barclays Bank. It is not a bad little earner for a part-time job at £100,000 a year. Then, to top up his salary and pay his expenses, he earns £40,000 a year as a part-time director of an Irish aircraft leasing company.

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The former Secretary of State for Wales, the right hon. Member for Worcester (Mr. Walker), who has just left the Cabinet, has been appointed a non-executive director of a City securities firm Smith New Court. He has also been approached by N. M. Rothschild and Sons, the company which handled the privatisation of British Gas. I understand that he has joined the board. I do not know whether he has a full-time or part-time job as there has been no official statement yet, but one can rest assured that the pay and conditions are light years ahead of what any normal worker in Britain would expect during his lifetime, never mind in one year.

Mr. Skinner : My hon. Friend refers to the right hon. Member for Worcester (Mr. Walker) and the fact that he is now lining his pockets in respect of British Gas. I remind my hon. Friend that the right hon. Gentleman has been round that course before. When he was out of government before he became a director of Slater Walker and what happened? They ran it into the ground and the Labour Chancellor of the Exchequer had to bail out Slater Walker because the right hon. Member for Worcester and his mates had got it into such a state that it was bankrupt. I hope to Christ that the next Labour Government does not have to bail him out again.

Mr. McCartney : I am sure that my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) will put our minds at rest when he winds up the debate this afternoon.

Most interesting of all is the right hon. Member for Chingford (Mr. Tebbit), the man who continually attempted to attack workers who were trying to achieve a decent standard of living. He has directorships at BET plc, Manpower employment agency--formerly known as Blue Arrow--British Telecom, the company he privatised, Sears plc, the owners of Selfridges, J. C. Bamford and now he is an unpaid director of The Spectator : God help him, he has an unpaid job. In May 1989, The Times reported from a filing that Blue Arrow made to the United States Securities and Exchange Commission that the right hon. Gentleman was paid £17,500 a year with an all-expenses paid, company Jaguar, a chauffeur, office secretarial support and membership of the company's private health plan.

These are the people who are in the House on a regular basis undermining the living standards of working people.

Mr. Graham Allen (Nottingham, North) : Did my hon. Friend say that these are the people who are in the House on a regular basis? The right hon. Member to whom he referred, who unfortunately is not present today, is not present very often. Am I right in thinking that he is the same right hon. Member who accused nurses of

moonlighting--in other words, drawing a salary, yet disappearing to take other jobs? Will my hon. Friend put my mind at rest? Is he referring to that right hon. Member who is not present today?

Mr. McCartney : I am obviously far too kind. When I say "on a regular basis", I mean that that right hon. Member comes to the House when it matters--when there are votes on cuts in benefit, including housing benefit,

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implementation of the poll tax and privatisation of the health service. That is the type of regular employment to which I was referring.

Mr. Hoyle : Does my hon. Friend believe the statement by the chairman of British Aerospace to the Select Committee on Trade and Industry when I asked him about his personal adviser, the right hon. Member for Chingford (Mr. Tebbit)? The chairman said that the right hon. Gentleman was an unpaid adviser. Surely that goes against everything else that my hon. Friend listed. If the right hon. Gentleman is an unpaid adviser, one wonders what he is getting from British Aerospace.

Mr. Deputy Speaker (Mr. Harold Walker) : Order. I warn hon. Members against the tendency to move dangerously near to questioning the integrity of right hon. and hon. Members who are not here.

Mr. Hoyle : I would not question the integrity of any right hon. Member, certainly not the right hon. Member for Chingford. I think that you would agree, Mr. Deputy Speaker, that I was only seeking information. I was trying to throw light on that unusual statement by the chairman of British Aerospace. All of us know what an honourable person the right hon. Member is and has been over the years.

Mr. McCartney : I could go on for two hours listing all the sacked Cabinet and non-Cabinet Ministers who immediately on leaving Downing street with a knighthood, ended up in a company along the road from Whitehall on a huge director's salary.

The most interesting person of all those ex-Ministers is Lord Gowrie, the former Chancellor of the Duchy of Lancaster. He had to leave the Cabinet just as his career was blooming because he could not live on his salary of £33,000. To make up for that, he became a director of Global Asset Management, the Ladbroke Group and St. Quentin Ltd., chairman of Sotheby's UK and Sotheby's International, non-executive chairman of one interesting company, the Really Useful Company, and provost of the Royal College of Art.

Contrast that with the incentives to the poor. The Government have reduced their living standards by attacking their weekly income, squeezing them still further into the poverty trap and exploiting them by encouraging low wages, and by higher rents and mortgages, the poll tax and indirect taxation targeted at poor families who have to pay a much greater proportion of their income in taxation than the better off. That is not just an assertion made by the Labour party and other groups involved in the poverty lobbies. As a member of the Social Services Select Committee, I take the House back to that Committee's ninth report, "Social Security : Changes Implemented in April 1988". Paragraph 51 states :

"Marginal tax rates are instrumental in the effect known as the poverty trap where an increase in earnings can lead to a fall in total income through increased tax and reduced benefits. This is one of the major bugbears of the Social Security system. The Government contends that the current situation has improved substantially on the previous system and that currently there are no marginal tax rates above 40 per cent.' and that the maximum marginal reductions of tax and benefit combined do not exceed 100 per cent."

The evidence collated by the Committee resulted in the following response in paragraph 52 :

"The Government also argue that for most Family Credit recipients the use of passported benefits is likely to be irregular and infrequent' and that it would therefore be

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neither possible nor meaningful' to try to assess who might have marginal rates exceeding 100 per cent. in any particular week." That meant that the Government did not want to provide public evidence of the way in which they were attacking those on low incomes. The Committee continued :

"Nevertheless, the figures show that since 1985 there has been a large increase in the number of families with children who are facing marginal rates of more than 70 per cent., from 240,000 in 1985 to 390,000 before the Budget for 1989-90. The introduction of Family Credit has played a significant role in this change. Thus, more people are suffering from the effects of marginal rates, although they are not suffering from rates of more than 100 per cent."

Compare that with the Government's 1988 Budget giving £3 billion of tax cuts, mainly to the top earners. To rub salt in the wound, national insurance contributions now raise 64 per cent. of the revenue raised by income tax. National insurace is now an important "personal tax" which has been pushed up by the Government. They raised the standard national insurance contribution rate from 6.5 to 9 per cent. It is also a "regressive" tax, as the ceiling on national insurance contributions ensures that those on top incomes pay a smaller proportion of tax than those on lower earnings.

It is not just the Labour party or the Tory-dominated Social Services Select Committee or even the figures in the Red Book that say that the Government have increased the burden of taxation on the majority of the British people while giving huge tax advantages to the top 14.5 per cent. of earners. The Low Pay Unit, in its 1989-90 Budget report, entitled "A Major Setback for the low Paid" said : "After ten years in which the better off have received substantial help in the form of tax cuts, the 1990 Budget gave no help at all to the 7 million low paid who also pay tax. While Mr. Major's first Budget contained tax cuts for companies, savers and the City, it offered nothing to help the poorest wage-earners meet the extra costs of higher rents, mortgages and the poll tax.

In this analysis, we show who has gained and who has lost from the combination of Budget changes and the poll tax when it came into force in April."

The Low Pay Unit said that the direct tax burden on a family of four on half average earnings is now proportionately three times as big as it was in 1978-79. Taking account of the poll tax coming into effect in April, that family will be about £1.80 a week worse off after the Budget changes. In addition, they will have to pay an extra 91p a week in spending taxes. Overall, two households in three will lose. Nearly 60 per cent. of households earning less than £75 a week will lose.

The analysis shows that more people will be drawn into dependence on means- tested benefits. This, combined with the fact that 85,000 more people will be drawn into tax, because allowances have not kept pace with earnings, has resulted in increased numbers caught in the poverty trap. That ugly truth is a far cry from page 13 of the Conservative's 1979 manifesto promise, which states :

"Raising tax thresholds will let the low paid out of the tax net altogether, and unemployment and short-term sickness benefit must be brought into the computation of annual income."

What an affront to working people in 1979 when, in reality, over the next 10 years every Budget was to be a full frontal attack on the low paid and those on benefits.

Most of the losses faced by the poor result from the poll tax, but the Chancellor failed, beyond a largely cosmetic change in capital limits for poll tax rebates, to ease the burden for the low paid. In some respects, he has made matters worse.

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I said that a family on half average earnings lost £1.80 a week and that a household on earnings equivalent to the Council of Europe's decency threshold of £163 a week lost £2.54 a week. In addition to that, a close inspection and analysis of the Budget shows that 64 per cent. of households will lose out, some by as much as £15 a week from 1 April this year. Nearly 60 per cent. of households earning below £75 a week, nearly 60 per cent. of home owners and 56 per cent. of tenants will lose out. Three quarters of married couples will lose out, as will 60 per cent. of single households. The average loss to a married couple is more than £2 a week and £2.35 for households with children. Nearly four in five couples in which the wife works will lose on average £2.79 a week. For heads of households earning £157 a week--the Low Pay Unit's threshold of low pay--the changes mean a weekly loss of up to £10 a week.

Let consider tax burdens since 1979. The 1990 Budget did nothing to redress the shift in the burden of direct taxation from the rich to the poor. Families on half average earnings now pay nearly three times as much of their income in direct taxation as they did under the previous Labour Government. The tax burden has risen most steeply for families, largely as a result of the freeze on child benefit, which is a real loss of more than £360 million over a tax year. Again, I am not the only person saying this. On 4 June I received a letter from the Child Poverty Action Group stating that, in relation to the poverty trap, the burden of taxation and child benefit, the situation is getting worse. The letter said :

"Dear Ian, 350,000 households (1,175,000 individuals) have a marginal rate of tax between 70 and 90 per cent. ie between 70 and 90 pence is withdrawn from every extra pound of their earnings." We should link that to what is happening to the top 14.5 per cent. of earners in Britain. The letter continued :

"Only 7 per cent. of single and married people pay tax at the higher rate of 40 per cent. the changes in tax over the past 10 years have given huge benefits to the already rich. Tax units earning under £5,000 have gained an average of £110 a year, £480 million in total 2 per cent. of the total in tax cuts given away. Tax units earnings between £10,000 and £15,000 have gained an average of £690 a year, £4,390 million."

That is only 16 per cent. of the total tax cuts. The letter continued :

"For tax units at the very top end, earning £70,000 or more, they have gained on average £36,060 a year."

That is a staggering £5,770 million or 21 per cent. of the total tax cuts which has gone to the small group of the highest earners in Britain. That is the reality of the Government's income tax cuts over the past 10 years.

The CPAG's letter went on :

"the burden of overall taxation has in fact increased for the average taxpayer (married couples with a non-earning wife)--in 1978-79 they paid 14.4 per cent. in income tax, 6.5 per cent. national insurance and 2.7 per cent. VAT. (26.3 per cent. in total). In 1990-91 the equivalent figures will be 12.7 per cent., 7.9 per cent. and 5 per cent."

That is an increase of 25.6 per cent. So much for a Government elected on the basis that they would cut the tax burdens for those on middle incomes and for the poor.

According to the CPAG letter, if we consider income tax and national insurance alone

"in 1989-90 the tax burden for those with income under £5,000 increased by 37 per cent., while it decreased by 46 per cent. for those earning £70,000 and above.

The Chancellor could have increased child benefit by £2.45 a week per child (and equivalent amounts in income support and child benefit) for the cost of a 1p cut in the basic rate of

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tax. This would be a fairer way of handing out money than increasing tax allowances or reducing income tax for the very privileged and very rich in society".

That staggering tale of woe should be added to the disastrous and wholly unfair shift in wealth from the poor to the rich and to the effects of the poll tax, which directly attacks the principle of the ability to pay, undermines family incomes in a hugely

disproportionate way and is seen by the nation outside the bunker at No. 10 Downing street as grossly unfair and unworkable. Thirty six million people are now liable to pay the poll tax. At least 26 million of them will be major losers. That is 73 per cent. of the adult population.

Budget changes in capital rules, when applying the rebates, will help only 0.8 per cent. of all poll tax losers. The summer heat is on, but it is not on the Labour party. The Daily Telegraph today reported our 23 per cent. lead in the opinion polls. The Conservatives have dipped below 30 per cent. for the first time. If that trend continues the Secretary of State for Defence will be asking for D notices on opinion polls from now until the general election.

The heat is on the Government, the Prime Minister, the Chancellor and the rest of the motley crew. The British people have rumbled the Tory tax cuts fantasy. They realise that over the past 10 years the vast majority of them have been paying additional tax to featherbed the rich and powerful. The Tories' attempt to give the impression that they are the party of low taxation is no more than an ad-man's hype. The brutal truth is there for us all to see.

The Chancellor was interviewed on 22 May this year on Channel 4 News about Government tax policies. [Interruption.] Before I quote what the Chancellor said, I will have another glass of gin. I have borrowed this from the hip flask of my hon. Friend the Member for Warrington, North (Mr. Hoyle).

Mr. Hoyle : Actually, it is vodka.

Mr. McCartney : Vladivar, I do apologise. Of course vodka is distilled in Warrington.

In that interview, the Chancellor said

"I'm, I'm not going I, I, I,"--

Clearly, he knew what he was talking about--

"I am going to deal with taxation in Budgets. I have told people what our taxation policy is. They know perfectly well what our policy is."

He was absolutely right. We are perfectly aware of his policies. Those policies have been rejected in the European elections, in local government elections and in the by-elections at Mid-Staffordshire and Bootle.

Over the summer, the Government will wilt under the twin forces of the nation's anger and Labour's plan to bring back fairness, justice and equity into Britain's taxation system. That is a moral and economic crusade and we will win. I commend the motion to the House. 10.17 am

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