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followed by an epic contribution by the hon. Member for Derbyshire, North-East (Mr. Barnes), who gave us the benefit of his historical learning and sense. He conveyed the historical sense so grippingly at times that I thought it was delivered in what computer experts call real time. I shall refer his contribution to my hon. Friend the Minister for Local Government and Inner Cities, who will doubtless study it closely.As always, my hon. Friend the Member for Eastbourne (Mr. Gow) made a riveting contribution. It particularly riveted me because it was clearly directed at me. I was challenged to say whether I agree with his analysis and conclusions. I do. I accept that the Government are responsible for securing and maintaining a stable currency. I confirm that we shall not be satisfied until we have again secured a stable currency. There is no point in trying to blame others for the problems, and we do not do so. We recognise that we must get inflation down, and we are taking hard and difficult measures to do that. The electorate will, with the benefit of hindsight, recognise that when given a choice of a party that is prepared to admit that, following the stock market slump in 1987, it unnecessarily and excessively relaxed monetary policy. They were egged on at the time by the Opposition to do even more. We do not blame anyone else. We recognise that that must be undone and that a painful period of high interest rates is therefore necessary. There is no shirking that. The hon. Member for Middlesbrough (Mr. Bell) made an extremely sensible speech, which explains why he is still on the Opposition Back Benches. Although he affirmed that Labour Front-Bench Members have been converted, they have not, and that is why he is still unacceptable on their Front Bench.
My hon. Friend the Member for Bedfordshire, North (Sir T. Skeet) tellingly highlighted the importance of wealth creation rather than wealth consumption. His detailed and interesting points about the community charge will be studied closely by my hon. Friend the Minister for Local Government and Inner Cities.
The motion is a great compliment and an encourage-ment to the Government. The greatest compliment that an opposition party can pay to the Government is to judge them not by its own socialist standards but by Conservative standards. That is what the motion does. It judges us on our success in reducing the burden of taxation rather than, as one might expect from a socialist party, on how much we have raised public expenditure. It judges us on our success in improving the quality of public services rather than the normal Labour obsession with quantity. It judges our success in improving work incentives and reducing marginal rates and marginal effective rates rather than, as the Labour party normally does, in raising the social wage.
The motion is a compliment to us, but it is also encouraging for us because history shows that whenever a party abandons faith in its own standards and values and tries to ape those of its opponents, it loses the next general election. There is an absolute correlation on that front, ranging from the time the post-war Labour Government lost faith in socialism, went in for a bonfire of controls and thereby ushered in a Conservative Government. The
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electorate said, "If they are both offering the same thing, let's have the real McCoy, not the ersatz variety. Let's have the people who believe in it."Mr. McCartney rose--
Mr. Lilley : I shall give way to the hon. Gentleman in a moment when I have amplified my point. Let us remember that when Gaitskell tried to move the Labour party to Butskellism he simply heralded, in 1959, the greatest Conservative victory for many years. Sadly, when the Conservative Government lost faith in their own values and started trying to push those of their opponents, favouring high spending, indicative planning and so on, they heralded the return of a Labour Government in 1963. Similarly, after the U-turn in the mid-1970s, we heralded the return of a Labour Government. Whenever a party abandons faith in its own distinctive philosophy and tries to ape that of its opponents, it does not work electorally. Nevertheless, we welcome it now.
Mr. McCartney : The Conservative party seems to be making a schizophrenic attack on me. The hon. Member for Epping Forest (Mr. Norris) said that my mask had slipped and that I was a tooth and claw socialist. The Minister is now attacking me for aping the Government's Thatcherite policies. Who am I to believe? Am I to believe the hon. Member for Epping Forest or the Minister's analysis of my speech?
Mr. Lilley : Apes have teeth and claws. My point is that the Opposition have not changed. Their underlying policies and attitudes remain the same, but they are trying to pretend to the elctorate that they have changed. However, the electorate will see through the Labour party, as it always does on such occasions. If the Opposition made a genuine change, as has the Labour party in New Zealand, and clearly and distinctly abandoned the socialism of their past, moving full-bloodedly towards the policies that the Labour party in New Zealand has espoused, they might be as successful as the Labour party in New Zealand. But we have not yet seen that sort of transformation in the Labour party here.
I shall consider each of the main points of the motion in turn. I refer first to the allegation that taxation has risen to a higher level under this Government than under the previous Government. The fiscal burden imposed on a nation is measured by the share of its resources that is spent and taken by the Government. We are talking about the percentage of GDP that is spent by the Government because every £1 of public expenditure has to be financed from taxation either now or, if it its deferred by borrowing, later.
Mr. Allen rose --
Mr. Lilley : I shall give way to the hon. Gentleman although I am told that it is improper for me to give way to those who are committing sartorial solecisms.
Mr. Allen : The hon. Gentleman may yet regret giving way for another reason. I refer him to a parliamentary answer given by the Financial Secretary-- [Interruption.]
Mr. Allen : I am sorry, I meant the Economic Secretary. I had forgotten that the hon. Member for St. Albans (Mr. Lilley) had been promoted. I congratulate him on his very important position.
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When asked on 8 June 1990 about the total tax burden as a percentage of GDP--I am glad that the Financial Secretary accepts that that is an important indicator--the Economic Secretary replied that in 1979 it was 28.3 per cent. of GDP and that in 1988 it was 30.4 per cent. Therefore, according to his hon. Friend's definition, the burden has increased.Mr. Lilley : I forgive the hon. Gentleman for forgetting who I am, even if he is not forgiven for forgetting his coat.
The total tax burden imposed on an economy is what is spent--whether that amount is financed currently by taxation or whether the taxation is deferred by borrowing. Under the last Labour Government, spending reached a peak of 48.5 per cent. of GDP and averaged about 44 per cent. Under this Government, spending has been reduced to 39 per cent. of GDP. The reason why the hon. Gentleman can quote figures purporting to show that the proportion of tax has risen is simply that for a period the Labour Government borrowed instead of taxing. They deferred taxation, but the bill had to be picked up eventually. Indeed, it had to be picked up with interest. We have to finance not merely the honest expenditure that we are incurring, but the interest on the debt that we inherited from the Labour Government.
Mr. John Marshall : Does my hon. Friend agree that those who criticise the current level of taxation should state which programme of expenditure they would cut to reduce it?
Mr. Lilley : My hon. Friend is absolutely right. The very charge made by the motion--that the Government have imposed a higher tax burden than our Labour predecessor--is not merely invalid when analysed properly, but is bound to boomerang on the Labour party, just as my hon. Friend pointed out, because it invites three obvious questions. If the Labour party really believes that the tax burden under the Government is too high, why did it vote against each cut in income tax? It would be perfectly reasonable for Opposition Members to vote against increases in taxes. If they believe that the total burden is too high it seems perverse to vote against reductions in taxes. Opposition Members voted against every single reduction in tax that we introduced.
Secondly, if Opposition Members believe that the total burden of tax is too high, why in the Labour party's recently issued programme did it not promise a reduction in taxation? It is clear that through all the subterfuge there is no promise to reduce taxation. Indeed, the shadow Chancellor of the Exchequer has admitted that his changes will not be neutral but will raise taxation.
Thirdly, if the Labour party believes that the total burden of tax is too high, why does it keep promising extra spending which must mean extra taxation either now or, if put off for a little by borrowing, in due course?
Mr. Allen : Will the Minister give way?
Mr. Lilley : No. If the hon. Gentleman wants to intervene again he really must get dressed.
The second major claim in the motion is that for most families lower income tax has been offset by higher VAT and local government taxes. That ignores the fact that the most sizeable increase in the tax yield under this Government has come from corporation tax, rather than from taxes on households. In the last year of the previous Labour Government, corporation tax was just over 2 per
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cent. In the last year for which we have figures, corporation tax was almost 4 per cent. of GDP. That was the result of our reducing the rate of corporation tax to one of the lowest in any European or major international country. We have spread it more equably across the revenues of companies by spreading allowances over the economic life of projects. Thereby we increased the tax yield as the profitability of British industry increased, which was welcome to us all. The tax burden rose--to the extent that it did--because it was necessary to pay for the expenditure previously financed by borrowing. It rose not least as a result of improved profitability and, therefore, the improved tax take from British industry. In any case, the reduction in income tax has been significant. If we had simply maintained the rates of tax that we inherited from Labour and increased the allowances only by inflation, the average household on average earnings would pay more than £1,000 extra in income tax every year--more than £20 a week. That would have been the result of not changing the income tax system that we inherited from Labour. That more than offsets any rise in VAT.The clear evidence that everyone has in their pockets is that take-home pay has risen rapidly under this Government and outstrips taxation. That is in real terms after taking account of price rises, including rises in indirect taxation. The real take-home pay of the average man on average earnings with a couple of children has risen during the past decade by 32 per cent. after all taxes. Under the Labour Government the same chap had an increase in living standards of just 0.5 per cent.
Even those on lower incomes, about whom Opposition Members rightly expressed anxiety, have seen only a 25 per cent. increase in their real take-home pay. But under the Labour Government their pay increased by only 4 per cent. I believe that on the whole they would much rather see their incomes rise by six times as much as they did under Labour than worry about whether others are doing better still. The third point of the hon. Member for Makerfield was that national insurance contributions have been, as he says, "cynically used as a tax". That is a real own goal. After all, the Labour Government imposed the national insurance surcharge on employers'
contributions--the notorious tax on jobs. We had to abolish that at considerable cost to the Revenue, but we did so because of the damage that it did to jobs. What is more, one of the few clear and certain aspects of the Labour party's latest policy document is that it proposes to abolish the upper earnings limit on national insurance contributions. That means that all earnings above £8,200 will be taxed at 9 per cent. It will be a cynical tax, not an extension of the charge and contribution system, because the extra money will not earn extra benefits or extra SERP entitlements in due course. The hon. Gentleman is shooting himself in the foot.
The hon. Gentleman's final point was that a large number of workers face combined tax and benefit withdrawal rates of 70 per cent. or more. Any generous and well-targeted benefit system will inevitably involve some disincentive effect of this sort. We have gone to great lengths to reduce the extent of the problem. The social security review had as a key feature the relating of benefits to income net rather than gross of tax. That ensured that nobody would pay a combined tax and withdrawal rate of more than 100 per cent. The reductions in the basic rate of income tax have contributed to reducing the problem. The
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higher thresholds have taken about 1 million people out of tax and last year's reforms reduced the effective marginal rate below 70 per cent. for tens of thousands of people.In all his points the hon. Gentleman has failed to make his case, but has instead pointed to the great inadequacies of the Labour party's position. He has highlighted Labour's tax proposals and I know that my hon. Friends will do so further, so I shall restrict my remarks to the one which Labour Members imagine will be the least unpopular, which is to raise the top rate of tax to 50 per cent,. or 59 per cent. including the surcharge. They think that that will affect only 1.7 million people and their families, but I do not believe that it will prove so harmless. The rest of the country is not foolish. They recognise that in the long term onerous taxes on the better off do not yield much in revenue. If anything, they do great damage to the economy as a whole.
Mr. Allen : Will the Financial Secretary give way?
Mr. Lilley : No. As we have reduced penal top rates of tax, revenues from the better off have increased both in absolute terms and as a proportion of the total income tax revenue raised. There is every reason to suppose that if the process were reversed, the consequences for the yield would also be reversed in due course.
Mr. Allen : Will the Minister accept a question on that point?
Mr. Lilley : No. I draw the hon. Gentleman's attention to the remarks of Tiberius Caesar, who responded to a number of governors who wanted him to introduce burdensome taxes with these words, which I shall translate for the benefit of Labour Members :
"It is the role of a good shepherd to shear his sheep, not to flay him."
It is important to have taxes that raise revenue rather than simply cause pain. The whole range of other tax measures that are implicit in the Labour party document would do little more than cause pain. They would be inadequate to finance the heavy extra commitments to expenditure which the Labour party clearly has up its sleeves. They would bring great problems to the country and return us to the ruinous position that we faced at the end of the 1970s.
12.43 pm
Mr. Nicholas Brown (Newcastle upon Tyne, East) : It is interesting that the Financial Secretary follows Tiberius Caesar, because he was followed by Caligula. [Laughter.] Perhaps this is a memorable occasion after all, because the Financial Secretary has made a good joke and I congratulate him on it. It is the second that I have heard him make in my three years dealing with Treasury affairs.
Mr. Lilley : The hon. Gentleman has heard the first several times.
Mr. Brown : That is true, but the hon. Gentleman has had to listen to the recycling of my jokes, including the one about the Lilley of Lacuna.
Mr. Irvine Patnick (Sheffield, Hallam) : Ho, ho, not again.
Mr. Brown : The hon. Gentleman is checking how many times it has been used.
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Before taking up the main theme of the motion and the debate I shall deal with the reference of the Financial Secretary to the speech of my hon. Friend the Member for Middlesbrough (Mr. Bell) who said that he agreed with the points made by Lord Barnett in his book "Inside the Treasury". My hon. Friend was speaking authoritatively. Lord Barnett's book contains insights that any Labour Treasury team would be foolish to ignore. The Financial Secretary is wrong to assume that my hon. Friend's views on economic affairs, which are entirely orthodox from the Labour party's point of view, are keeping him from the Opposition Front bench. The Financial Secretary should know that my hon. Friend resigned from the Opposition Front Bench to deal with a particular issue in his constituency. If the Financial Secretary followed current affairs more closely he would not have made that comment.My hon. Friend the Member for Makerfield (Mr. McCartney) reminded us of the Chancellor of the Exchequer's interview on Channel 4 news on 22 May. As my hon. Friend said, the Chancellor said that he would deal with taxation in Budgets and that he had told the people what the Government's taxation policy was. He added :
"They know prefectly well what our policy is."
That was the right hon. Gentleman's statement on the Government's taxation policy. I am sure that the entire House will be grateful to my hon. Friend the Member for Makerfield for tabling the motion and enabling us to discuss the Government's taxation policy rather more fully than would seem to be the Chancellor of the Exchequer's wish. My hon. Friend has generously given the Government a chance to play at home following their away game defeat on Monday 14 May. The motion invites us to discuss the taxation policy of the party that has governed our country for the past 10 years. Given that the Conservative party has formed the Government for the past 10 years, it is surely reasonable to look for a common theme, some consistency, some sense of direction and some coherence in taxation matters. It is not always easy, as my hon. Friend has already said, to reconcile what the Government have said with what they have done. They claim to be committed to reducing taxation. That is a claim which the Conservatives make time and again, but they have done nothing of the sort. The overall tax burden has increased substantially as a proportion of gross domestic product since the Conservatives came into office.
When the Government talk about their success in reducing taxation, they mean income taxation. Even then, they are talking about income tax rather than income tax and national insurance. I thought that the Financial Secretary was pushing his luck when he said that the national insurance surcharge was a tax on jobs. In effect, he said, "Look what the wicked Labour Government did. The Conservative Government abolished the surcharge." Did unemployment decrease when the surcharge was abolished? The answer is that it did not. The Conservative party won the 1979 general election with the slogan, "Labour isn't working". The implication of the slogan was that the Conservative party would reduce unemployment. As we all know, unemployment tripled before it started to decrease. It is still higher than when the Conservative Government came into office. The Conservative party claim to be committed eventually to achieving a basic rate of income tax of 20p in
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the pound. That commitment and claim are worth exploring. During the debate on the Labour party's taxation policy, which was initiated by the hon. Member for Hertford and Stortford (Mr. Wells) on 14 May, there was much boasting about the commitment and claim. That did not prevent the hon. Member for Richmond and Barnes (Mr. Hanley)-- I think that he spoke on the Government's side--saying :"The 20p level remains the Government's stated policy. However, that level would be wrong in present circumstances."
He added :
"if tax rates were reduced to 20 per cent. now, that might encourage another spending spree just when we are trying to restrict retail sales."
It should be noted that the hon. Gentleman referred to "another spending spree". He went on to say, more out of loyalty than intellectual conviction ;
"However, 20p remains a Government priority."--[ Official Report, 14 May 1990 ; Vol. 172, c. 624.]
That the hon. Gentleman felt it necessary to make that latter point, having just explained why it was wrong, says a lot about the present struggle being waged in the Conservative party between pragmatism and ideology. The hon. Gentleman managed to personify that struggle. He received support for his reluctance to endorse the practicality of a 20 per cent. income tax rate from no less an authoritative figure than the Chief Secretary to the Treasury.
During Treasury Question Time yesterday I did my best to support and defend the Chief Secretary, but I got no thanks from the Chancellor for my pains. He said that I was being cheeky, but that was a little hard on someone who was trying to defend his right hon. Friend.
On 13 May on the BBC programme "On the Record" the Chief Secretary said :
"The prospect of tax cuts at the moment does not look very good. These things are always uncertain but we have very little room for manoeuvre."
That is what we heard after 10 years of a Government whose stated objective was to reduce the overall burden of taxation ; after 10 years of a Government who have ritually boasted about their prudent management of the economy. After 10 year of working towards that policy they are now reduced to saying that there is "little room for manoeuvre" and one must ask what type of organisation they could be trusted to manage.
The central point of the debate is that the reduction in direct taxation has been accompanied by a substantial increase in indirect taxation, which now accounts for just over half of all the revenues the Government have available to them. The position is exacerbated by the use of national insurance payments as a concealed method of levying income tax. The Financial Secretary's attempt at denying that was wholly unconvincing. Reductions in the basic rate of income tax have been partially offset by rises in the rate of national insurance.
Mr. Quentin Davies : Does the hon. Gentleman deny that the current Labour party policy to remove the upper ceiling on national insurance contributions, if by some mischance it came to power, would mean precisely what he is now accusing the Government of--using the national insurance system as a covert means of taxation?
Mr. Brown : When we form the Government after the next general election the hon. Gentleman will be positively encouraged to flee the country--voluntarily of course. The
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hon. Gentleman's explanation of our policy is absolutely correct. It is our intention to remove the ceiling on national insurance payments so that those who earn more than £18,000 a year will continue to pay national insurance. The hon. Gentleman should remember that we shall also introduce a banded system of taxation so it does not necessarily mean that the whole amount of the national insurance contribution would bite at that immediate level. We believe that it is unfair that a single person who earns £36,000 a year is paying national insurance--effectively income tax--only on half of that amount whereas a couple earning £18,000 each pay national insurance on the full amount. There is no justice in that, because the couple's expenses would be greater than those of the single person. There is an essential injustice there.Mr. Lilley : Is the hon. Gentleman denying the basic principle of independent taxation?
Mr. Brown : That is a bit rich coming from a Government who have made married couples joint and severally liable for their poll tax and focused the married couple's allowance on the man rather than on either the man or the woman. Of course I am not denying the important principle of independent taxation. The Labour party advocated it well before the Government got round to attempting to do something about the broader parameters of it.
I understand, however, why Conservative Members are so fascinated about our tax policies. They had their chance on 14 May, when they tabled a motion to debate our tax policies, and on that occasion we had a robust knockabout discussion. It is now our turn. The Government are playing at home today and the Labour party is playing away.
Sir Trevor Skeet : Has the hon. Gentleman noticed that only three Members are present on the Labour Benches?
Mr. Brown : In that case, the Labour party is playing well away. The Government would have a more credible case on national insurance increases had the extra money that has been raised been ploughed back into the provision of social services and welfare benefits. Had that occurred, they might have sustained a moral case, but they have done nothing of the sort. They have used national insurance as a covert method of raising income tax.
That brings me to the main charge that must be levied against the Government's taxation policies, and it was rightly levied by my hon. Friends the Members for Makerfield and for Derbyshire, North-east (Mr. Barnes). It is that the Government's approach to taxation is essentially socially divisive, heavily biased in favour of the well off and against the generality of the population.
Indeed, when Conservatives talk about middle-income families they really mean the top 15 per cent. of taxpayers. They talk of people on incomes of £20,000 to £30,000 as if somehow they are the middle range. In fact, 85 per cent. of all taxpayers have incomes of under £20,000 a year. About 70 per cent. of all full-time employees and close on 85 per cent. of all women working full-time earn £14,000 a year or less. So inevitably the least well off have been hurt the most by the shift from direct to indirect taxation and by the accompanying cut in child benefit.
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A family of four on half average earnings has seen its tax burden more than treble since the Conservatives came to office. At the other end of the scale, the Government reduced the top rate of income tax in the 1988 Budget for the wealthiest in society. Now, only one taxpayer in 25 pays at the higher rate of income tax.I will make a deal with the hon. Member for Stamford and Spalding (Mr. Davies), a deal from which we could both benefit. I will accompany him to the constituencies in which he would wish to speak and I will mispronounce the names of the chairmen of Glaxo and other great British companies--those chairmen with foreign names--and will do that as though it were some sort of incitement to class warfare, if the hon. Gentleman will come with me to the constituencies that I would wish to visit. There, he may defend in the most upper-class accent he can possibly affect the earnings in British industry of top executives of £500,000 a year or more. If he will stand on a platform and say, as he just said, "What is wrong with someone who is in a position to do so doubling his pay to £500,000? People should be free to do that."--
Mr. Geoffrey Dickens (Littleborough and Saddleworth) : They earn it.
Mr. Brown : They decide whether or not they earn it. If the hon. Gentleman will come with me to the hustings at the next general election and defend that course of action in a strident, upper-class accent, I will accompany him to his meetings.
Mr. Quentin Davies : I shall be delighted to debate in any context with the hon. Gentleman, but he has completely missed the thrust of my remarks. It is not sensible for politicians, Governments or bureaucrats to try to second guess what should be the appropriate pay scale for anyone, and anybody who attempts to go down that road is a victim of a fatal illusion. If I had more time for this intervention, I could cite a list of countries as long as my arm in which economic systems based on that principle have ended in economic disaster.
Mr. Brown : The hon. Gentleman is presumably assuming that the rest of the country believes it to be fair and equitable that a person who is in a position to do so--because he is in charge--should double his salary from a clearly unworthy £250,000 to £500,000 a year. There are many people in society on much lower incomes than that who would like to be in a position to take such action.
I hear what the hon. Gentleman says about it being wrong to decide what earnings should be in particular industries. I hope that when he is eventually promoted to the Government Front Bench, he will be put in charge of public sector pay, and has a chance to apply those philosophies. I think that he will get on well with the Chief Secretary to the Treasury when he is doing so.
The Conservative policy for top rate taxpayers seems to favour the very rich, rather than those whom the Conservatives prefer to describe as on middle incomes. In their pathetically and, appropriately enough, out-of- date Conservative research department document entitled, "Labour and the Economy--the Essential Guide" they charge :
"the freezing of the rate for higher rate tax progressively drags more people into Labour's new, higher rate tax bands."
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Since we have not said that we would do anything of the sort, that seems a rather unfair charge, even by Conservative standards, to levy against the Labour party.The document is dated May 1990, which was after the Chancellor's Budget statement, and after publication of the Finance Bill. Clearly a lot of infighting is going on among the Conservatives. I am sure that the inclusion of that paragraph in the Conservatives' "Summer Heat On Labour" document is not intended as a real criticism of the Labour party, because it could not be sustained. We have not said that we would do anything of the sort. What is intended is a veiled attack on the present Chancellor of the Exchequer, who froze the higher rate of tax threshold and, in so doing, has dragged an extra 300,000 people into the higher rate tax band. The Conservative research department clearly condemns him for doing so. One wonders which of the Chancellor's rivals for the future leadership of the Conservative party put the research department up to that. Who is in charge of the Conservative research department now? Who is in charge of Conservative central office?
Mr. Robert G. Hughes (Harrow, West) : The hon. Gentleman is right to complain in the terms that he does, and he has an excellent opportunity to put matters right. Surely to sustain the spending promised up and down the country by Labour spokesmen on housing, social security, education and training and to pay for more civil servants, the Labour party would either have to set the higher rate tax band so far down the income scale that many people would be included in it or raise the basic level of taxation so dramatically that people would be robbed blind. If that is untrue, he must tell us where the money will come from. Otherwise, he cannot complain about assertions made in Conservative research department documents.
Mr. Brown : The hon. Gentleman has clearly come to the wrong game. He should have come to the debate on 14 May. As we are not pressed for time, I will give him a full answer. He is absolutely right when he says that I hope to have a chance to put matters right in the near future. Just after the next general election I hope that, along with my hon. Friends, I shall be in a position to address those points.
Mr. Dickens : Perhaps the hon. Gentleman will not be chosen.
Mr. Brown : Yes, there is always that possibility. However, I hope to be able to address those points when I am in government and not in opposition.
The hon. Member for Harrow, West (Mr. Hughes) seems to be a little jealous that our shadow Chief Secretary is more effective among her colleagues than the Chief Secretary to the Treasury is among his. Let me spell out again, probably for the third time in as many debates, exactly what the Labour party stance is. Taxation will play a full part in the overall management of the economy. Public expenditure, that the country can afford, and no more, will play its full part in the overall management of the economy. Public expenditure commitments will have to take their place in the queue, behind the two that have been agreed, as is well known--pensioners and child benefit. Other commitments will have to bid in exactly the same way as happens under the Government. We are not in a position to forecast what a future Labour Chancellor's taxation levels would be. I
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remind the Financial Secretary to the Treasury of what the deputy leader of the Conservative party said yesterday about making statements on what the future standard rate of income tax will be. To a packed House he said :"In all the questions asked by shadow spokesmen over many years that one beats all records for stupidity."--[ Official Report, 7 June 1990 ; Vol. 173, c. 783.]
I shall not be as unkind to the hon. Gentleman as the deputy Prime Minister was to my hon. Friend the deputy Leader of the Opposition, my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley), but I hope that he understands that that point was made firmly and well by someone on his own side whom I am sure he respects.
Mr. John Marshall : The deputy leader of the Conservative party is none other than Lord Whitelaw. The hon. Gentleman's description of the deputy Prime Minister was inexact. I am afraid that his economic forecasting is equally inexact.
Mr. Brown : The problem is that on the the Conservative side they change hats and titles so often--and they even change Houses. I apologise for not having got the Leader of the House's title exactly right, but I am grateful to the hon. Gentleman for intervening to correct me. I am sure that it was done in a helpful, friendly spirit and as a matter of good will.
The Conservative party's "Summer Heat on Labour" document, which is about the way our party would manage the economy, has caused much harmless amusement on our side. I welcome it, if only for that reason. The Conservative party defends its reduction of the rate for top rate taxpayers by saying that it has generated more revenue. Even Conservative Members would not argue that that trend will continue indefinitely, but it is right to explore a little further the argument about optimum rates of taxation. By "optimum" I mean setting a rate to derive the maximum possible revenue from it. We have to ask ourselves how the Conservative party has succeeded in reducing the top rate of income tax while managing to get more money. The reason the tax take from a reduced top rate has increased is because those who have to pay tax at the higher rate have been paying themselves more money. That does not apply across the board, but it applies at the upper end.
I suspect that prior to the reduction in the top rate of income tax, executives took their reward package in perks rather than in income ; then it became more tax efficient to take it in income. Last month a survey conducted by The Guardian, involving 100 of Britain's top companies, found that the highest-paid executives had awarded themselves pay increases of, on average, 33 per cent. That is four times the British inflation figure and over three times greater than pay rises. Average earnings of top-paid executives amounted to £380, 000 per annum.
Reference has been made in the debate to the 51 per cent. increase that the chairman of Glaxo awarded himself. Even the Prime Minister has condemned executives who have awarded themselves excessively high pay rises. I agree with her and support her remarks. I am sorry that the hon. Members for Epping Forest (Mr. Norris), for Stamford and Spalding and for Bedfordshire, North (Sir T. Skeet) and even the Prime Minister's own Financial Secretary do not support her concern about the affront that she knows many ordinary people feel when they see such excessive and selfish takings by people at the very top. The Prime
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Minister was right to condemn excessive greed. I am sorry, and I am sure that she will be sorry, that her expression of concern has not been echoed by her Treasury Ministers.Would the Financial Secretary and Conservative Members who have taken part in the debate consider any rate of pay to be too much, or do they think that powerful executives should be entitled to continue looting as long as they can get away with it?
I thought that the Financial Secretary would have referred to the role of the taxation system in the broader management of the economy. After 10 years in government, what have the Conservative party's taxation policies done for our inflation rate, our current interest rate, the trade deficit or economic growth which is forecast at 1 per cent., putting us at the bottom of the growth league? What have they done for investment? If the Conservative party's taxation policies have been successful after 10 years in government why are the Government forecasting negative growth in the 1990s? What have Conservative taxation policies done for unemployment, which is set to rise?
The Conservative party takes the view that if rich people have more of their own money to spend they will spend it and create jobs for the poor. But if unemployment is rising, that does not seem to be happening. What are we to make of that ultimate admission of ignorance about taxation policy-- the poll tax? The House does not have to give a verdict on that, because the electorate will do so. The Financial Secretary confidently asserted that the Labour party was trying to adopt Tory policies, that the electorate would see through that and would vote for the real thing rather than for some shoddy imitation. The Labour party is not trying to adopt Conservative party policies. Indeed, when we have won the next general election, it will give us great pleasure to discard them, and I assure the House that the poll tax will be one of the first things to go-- [Interruption.] --It is no good Conservative Members shouting from a sedentary position.
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