House of Commons Hansard Debates for 14 Jun 1991

Sir Nicholas Fairbairn : Does my hon. Friend consider that the proposed national investment plan, for which industry will have to pay, and the proposed training tax, which is the selective employment tax in wolves' clothing, would affect the dash for growth?

Mr. Fishburn : There would be a dash, but it would be a dash into foreign investment and away from further capital creation in Britain. It would not be a dash for growth in the circumstances that my hon. and learned Friend depicts. It would be a dash to the past and, I am afraid to say, to a rapid contraction of our economy.

The Government's taxation policies in the past 10 years have followed the seven principles on which tax raising has been founded in all west European countries in the past two centuries. Their policy was clear from the start. They have lowered direct taxation and increased indirect taxation. Greater individual freedom has been given ; the individual can choose where he yields up his taxes. It may be on his habit of cigarette smoking, or on his car by paying more in petrol tax. It will be on this, that or the other item ; as he spends, he will pay tax. That is a fair and modern way of raising revenue.

Because of the diminution of marginal rates of taxation, people who earn more are now making a greater contribution to Treasury funds. The Government have put into practice a major principle enunciated by Adam Smith : tax must be related to the ability to pay.

The Opposition are muddled. They have proposed nothing that counts as a clear policy, and have not said whether their spending policies would increase or maintain the share of national income taken by government. I hope that the Government, when they are returned to office

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after the next general election, will continue with their clear policies and will hold--in time, I hope, diminish --the amount of national income taken from the taxpayer.

10.33 am

Mr. John Battle (Leeds, West) : We are increasingly aware of what could be described as anti-tax language. It is not confined to Conservative Benches ; it is used widely in society. People believe that taxes are an unjust confiscation of a citizen's deserved earnings and that the purchase of goods and services from the private sector is an exercise of individual freedom. Phrases such as "consumer sovereignty" are used. That reinforces the myth that the consumer is all-powerful. However, it rings hollow in the ears of millions of people who cannot exercise choice because their incomes are too low.

Government figures show that poverty is increasing. The view that we are all consumers neglects to take account of the fact that we are also citizens.

Mr. Paice : Will the hon. Gentleman define the term "poverty" as he just used it?

Mr. Battle : I refer the hon. Gentleman to the Library where he can look at the latest Government figures on households on low incomes. They make it plain that people on benefit are living in poverty and many people who are not on benefit are living below the poverty line. We regularly debate that subject in the House. The Government try to hide behind statistics. They have redefined the terms on which a person is considered to be unemployed and denied benefit to 17-year-olds.

I am sure that you will rule me out of order, Mr. Deputy Speaker, if I continue on that subject. If the hon. Member for Cambridgeshire, South-East (Mr. Paice) does not believe that there is poverty in Britain because he cannot agree on a definition, he should test his eyes and ears by talking to his constituents who are struggling to live on unemployment benefit. Perhaps the hon. Gentleman will remind me how much that benefit is. It is £41.40 a week. That is much less than the amount that Conservative Members earn.

Mr. Bill Walker (Tayside, North) : Will the hon. Gentleman give way?

Mr. Battle : Not at the moment. I shall develop my argument, and then I shall graciously give way to the hon. Gentleman.

Are Conservative Members still expressing the view that taxes are a moral evil and, at best, a burden begrudgingly paid? During the election campaign in America, a pro-Bush car sticker read "Every man is born free and taxed to death"--notably it referred only to men. I was interested in some of the annual reports of the charities, such as the Convert Aid Society. Its report contained sentiments that were typical. It stated :

"Inheritance tax now takes a substantial toll even from quite modest estates--if you own your own house it is unlikely that your heirs will escape.

However, since bequests to charities are exempt from tax, the question you might wish to ask is whether you would prefer merely to enrich the Exchequer or help give a home."

The Exchequer is seen as a malign, imperial figure-- [Interruption.] We are hearing echoes of that from the Conservative Benches. Contributing anything in taxes is considered a moral evil.

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I recently read the illuminating book by Nigel Tutt "The History of Tax Avoidance". It is interesting to look at all the guides to tax avoidance that are to be found on bookshop shelves. They reinforce the impression in my mind that tax legislation is a vast playground for special interests that plead for exemptions and use loopholes to get people with some pull off the hook. That is also the impression given by some of the Conservative amendments to the present Finance Bill.

The common view outside the House is that tax is a tedious, mysterious world of codes and numbers, and is a matter for experts. I agree with the hon. Member for Kensington (Mr. Fishburn) that taxation is central to government. Sabine's "A Short History of Taxation" makes it clear that we can have taxation without government, but we cannot have government without taxation. Taxation is part of the contract of civilisation. It is part of the social, economic and political development of society.

The question is not whether taxes should be raised at all, despite the slogans of the new right or the recent north American, so-called "Tax Freedom Days", which present the view that paying taxes is like throwing money away. They reinforce the view that the public sector is a burden on citizens and limits their freedoms. Attacks on taxation in principle are thinly disguised attempts to soften the public to attacks on the public sector. That is the agenda. There is an attempt to deny the fact that any public sector activity provides crucial and vital services that benefit the whole of society. In a democracy, we can collectively agree to raise funds by taxation to a common Treasury for those activities. I fail to understand how reducing services enhances individual freedom.

I remember when proposition 19 was introduced in California. The fire service was privatised and people were told that, through the insurance policy on their house, they were contracted out to an individual fire service. It seemed to work for a while, but when a home in Beverly Hills was burned down--thankfully, no one was injured--and the owners thought that they would claim back on the insurance to rebuild the property, they were told that they could not do that because the contract had been with a fire service whose engine had been out elsewhere that night, so the cover was broken. They did not get their money back. Within months, a public fire service was reintroduced in California and taxes were increased to put on the road fire engines to which the whole community had access. Why do we need to go around the wheel of reinventing public services by privatising them, only to discover that they need to be brought back into public ownership so that the community does not suffer--for example, by catching typhoid if there are no public health facilities?

Conservative Members agree, because in practice they are not opposed to taxes. The Conservative party pretends that it is not taking money through taxes. In yesterday's debate, a Conservative Member referred to the Government's slashing of taxes. It would be more honest if Conservative Members spelt out the truth under the Government--taxes have increased from 34.75 per cent. in 1978-79 to 37.75 per cent. this financial year. The Government are taking more taxes from the British people. The Government may say that they have switched to indirect taxation. What did they do when they needed

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money to make good the damage of poll tax? They switched to indirect taxation and shoved up VAT to 17.5 per cent. The Government have massively increased indirect taxation.

Mr. Arbuthnot : Did the hon. Gentleman vote against that?

Mr. Battle : Conservative Members can hardly ask how we voted on the poll tax. We voted 170 times against the poll tax, whereas Conservative Members voted for it on practically every possible occasion. They now have the nerve to tell the country that they are against the poll tax, that they have dropped it and are now introducing something else--so much for all their talk of principles when it was introduced. As my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) said in an intervention, we were told that ability to pay was no longer relevant. Because the Government imposed such a burden on people, the only way out was to increase VAT and to tell people that they would get £140 back. The hon. Member for Wanstead and Woodford (Mr. Arbuthnot) may like to explain why many people have not received that money back. As the Secretary of State for the Environment revealed, the £140 was a headline figure. It was not money in pockets. People at the bottom of the scale did not get their £140 back. That is typical.

The anti-tax campaign has been a cover story, because the key aim has been to discredit progressive taxation. The aim has been to undermine the idea that the rich should pay a larger proportion of income than the poor. The 1980s were the decade of the yuppie, of quick fortunes on the futures market and of overnight killings on real estate and property development. They will not be remembered for consideration or for any caring for the poor. They will go down as the "loadsamoney" decade and as the age of record sales in Christie's and Sotheby's.

The hon. Member for Kensington referred to Adam Smith, but I was surprised that the hon. Gentleman did not quote the writings in which Smith said that the tax system should overcome some of the inequalities in wealth and income. Adam Smith argued for a progressive taxation policy and said :

"It must always be remembered that it is the luxurious and not the necessary expense of the inferior ranks of people that ought to be taxed."

Selective quotations by Conservative Members will not lead in a helpful direction.

Adam Smith's principles have not been followed. Under the Government, tax reform has always meant lighter taxes for the wealthy and a financial squeeze on everyone else. Mr. John Hill, in "Changing Tax"--which I recommend to hon. Members--spells out what happened since 1979 in tax and benefit changes. He says :

"Remarkably what has happened has been a virtual zero net cost reform. The cuts in direct taxes have been entirely paid for by cuts in the generosity of benefits. There has indeed been a major redistribution from those on low incomes to the better off. Overall, the bottom 60 per cent. of the income distribution has lost, while the top 30 per cent., especially the top 10 per cent., has gained. The losses for the bottom 50 per cent. average out at nearly £8.50 per family--a substantial proportion of their net incomes--while the top 10 per cent. have gained nearly £40 per family. Overall, the bottom half of the population has lost £6.6 billion of which £5.6 billion has gone to the top 10 per cent., and indeed £4.8 billion has gone to the top 5 per cent."

The tax-cutting 1988 Budget reduced the taxation rate for top earners from 83 to 40 per cent. The take from capital

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gains, inheritance and capital taxes has decreased. There has been a redistribution of wealth, but it has been from the poorest to the richest.

Mr. Bill Walker : Does the hon. Gentleman accept the principle that the objective of taxation is to raise money to meet the Government's expenditure programme and, therefore, a change to a lower tax rate produces a larger gain from those on higher incomes than occurred at a higher tax rate? Surely that achieves exactly what the Government want. Did not that happen with the reduction down to 40 per cent?

Mr. Battle : If that were true, I should be interested in the argument, but the rules have favoured the rich. I shall come to the precise details of how that works in practice when I examine the salaries of the top earners. They found that their tax payments were massively reduced. Therefore, they are now putting in for massive pay increases because they can benefit from low taxation.

By 1980, 86 countries had substantially reduced their tax rates. I was interested in the remarks of the hon. Member for Kensington about the tide of history. Was it Fukuyama who decided to announce the end of history? Perhaps it is the end of economic history and the hon. Gentleman believes that we can go in no other direction. In Bolivia, 75 per cent. of income tax is collected from labour ; only 20 per cent. is collected from capital. Has that resulted in a reduction in poverty? No ; it has resulted in a massive increase. What has been the result of the Government's policies here? There has been an increase in poverty, and people in poverty have been watching the highest earners increase their rewards.

Mr. Arbuthnot : I am listening with increasing incredulity to the hon. Gentleman. That he should rely on the Bolivian tax system to tell us how to operate is extraordinary. He said that we reduced the top rate of income from 83 per cent. in the 1988 Finance Bill. Would he care to confirm that it had been reduced from that rate long before?

Mr. Battle : I am pleased to accept the hon. Gentleman's correction. The rate was reduced between 1979 and 1988. Let us make no bones about it-- the Government reduced the top rate to that level. Conservative Members challenge me about the figures. In the Conservatives' campaign guide, which I suppose is given to all Conservative Members and to prospective candidates, they say : "The Government's consistent aim has been to bring down the tax burden when it is prudent to do so Progress has been considerable. The tax burden as a proportion of national income or Gross Domestic Product, has fallen steadily from its peak in 1981-82."

On the very next page of the same campaign document, there is a table which clearly shows that tax, measured as a proportion of national income, has increased from 34.75 per cent. in 1978-79 to 37.75 per cent. in 1991. Not that I expect clear statements from Conservative Members when we heard the Chief Secretary to the Treasury on the "Today Programme" come out with the remark : "We cut income tax, we cut tax rates overall--it's the burden of taxation--because we have run honest public finances."

I am tempted to add that it depends what one means by the word "honest". It seems that the Chief Secretary was being economical with the language because, according to the latest figures produced by the Central Statistical Office in

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March this year, between 1979 and 1988 the burden of taxation increased for people on middle and low incomes, while it decreased only for those at the top. In 1979, taxes as a percentage of gross income for the bottom fifth of households, ranked by incomes, were 30.5 per cent. and in 1988 they were 39.7 per cent. ; taxes for the middle fifth were 37.6 per cent. in 1979 and 39.2 per cent. in 1988 ; and, for the top fifth, taxes were 37.6 per cent. in 1979 and 34.5 per cent. in 1988. The poorest have paid more, because their tax burden has increased by 9.2 per cent., while those on top incomes have enjoyed a decrease of 3.1 per cent. of the taxes that they pay. When we hear about salary increases for top earners, we should be aware that the top executives of the largest companies are given pay rises that are running at 19 per cent.--twice the rate of inflation and the growth in average earnings--yet at the same time the very same people are urging their work forces to accept modest wage rises in the national interest or even pay freezes. In one case, in Leeds, they are asking the work force to take a 7.5 per cent. wage cut, which the work force accepted on behalf of the company. When one man is paid £4,194 a day and has just taken a 17 per cent. rise, despite a fall in his company's earnings, it rings hollow to be told that he needs to be left out of taxation as an incentive.

The hon. Member for Cambridgeshire, South-East asked me for a definition of poverty. I offer him a definition of the word "rich". In our society being rich has come to mean being hard to tax and being able to employ armies of highly paid accountants and tax lawyers, who themselves make a handsome living by working out ingenious ways to beat the system to ensure that they keep all their income.

When Conservative Members refer to Labour's tax policy for fair taxes and before we get the lurid headlines in the tabloid press--as we always do-- saying that Labour intends to tax everyone off the face of the earth, it is worth reflecting on and answering the question, "Why should hon. Members not pay a little more tax on their basic salaries to ensure that funds are available for pensioners, for the unemployed, for the health service, for those needing income support, for the schools system, housing, transport and environmental protection?" There has to be some redistribution of income in our society. We cannot allow the maldistribution that has gone on under the Conservatives to continue.

Mr. Paice : I am fascinated to hear the hon. Gentleman say that he thinks that people on the salaries of Members of Parliament should pay more tax. However, I find it difficult to relate that to the Labour party's position on child benefit in the past few years--the hon. Gentleman said that it should be universally increased. However well off one is, one's benefit would thus be increased and it seems odd that he is saying that the wealthy should pay more tax but on the other hand should receive more benefits.

Mr. Battle : If the hon. Gentleman is opening the debate to include child benefit, I am more than happy to enter into the argument. He will remember that child benefit was a part of the income tax system as family allowance and was deliberately taken out and made into a non-means-tested benefit. It was shifted from the earnings of the adult parent as it was for the cost of bringing up children, to ensure that

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it reached children--the child benefit book is in the mother's name. There was a switch in the system and there is no inconsistency in that.

Some Conservative Members would like child benefit to be taxed and if that is the case those hon. Members should stand up and argue it in the House. Some of us would then have an argument about that. However, the hon. Gentleman is hardly in a strong position, because child benefit has been frozen by the Government. There was a little release this year in the Budget, but for years the value of child benefit was frozen. Its value has yet to catch up with its 1979 value in real terms. The Government have cut child benefit and I am sure that the hon. Gentleman is aware of all the rows in the House and outside about the iniquities of that sort of policy.

I recommend a book by the Bishop of Manchester called "Taxes, Burden or Blessing" in which he argues :

"Every decision about taxes involves important moral considerations about justice and economic well-being for all and not simply the majority."

He argues that taxes offer an opportunity to bring society into a vision of justice, equality and participation by all and he calls for a

"radical change in our attitudes towards what we do in common and how we pay for it."

I disagree with the hon. Member for Kensington as I do not think that we can separate the distribution of services from the purposes of raising the money in the first place. People want to know what their taxes are spent on. That is why when asked questions in opinion polls some people--in the most recent polls it is now a majority--say that they would be prepared to pay a bit more tax according to their means so that, for example, the health service can be properly funded.

Democracy is about people having a role in determining the level of taxation and the distribution of taxes and not simply being consumers. A Government who are the real friend of the taxpayer take their trust and understanding with them and the consent to use the money collected wisely on behalf of the whole community according to principles of distributive justice and the common good.

If we want society to be rather more than a mere collection of individuals, we must tackle the common needs and problems of society. That means tackling environmental issues and also poverty, housing, education and health in our society. Our proposals for a fairer distribution of tax and a fairer taxation system--that is all that we are asking--are essential, because they will bring the rich and the poor into a closer relationship. Because people understand that and do not want further divisions in society, with the rich getting infinitely richer and the poor getting poorer, they will vote for our fair and just taxation policies at the next election and there will be a Labour Government to implement them.

Mr. Dalyell : On a point of order, Mr. Deputy Speaker. It is nearly 11 o'clock and, not wishing to interrupt a parliamentary colleague's speech, may I ask whether there has been any request from the Government for a statement on the serious situation relating to intact Iraqi nuclear weapons which may be stored near the Turkish border and the issue of monitoring the nuclear centre at Tuweitha? In the light of Christopher Gunness's report, which was the second item on the news at 6 and 7 o'clock this morning

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on BBC radio, perhaps the Government would like to make a statement and to clarify what action they will take through the United Nations on reports which, if true, represent an appalling situation.

Mr. Deputy Speaker : I have not received any requests for permission to make a statement. Doubtless what the hon. Gentleman has said will be conveyed to the appropriate Minister.

Mr. Arbuthnot : On a point of order, Mr. Deputy Speaker. As it is nearly 11 o'clock, may I say that I understand that today, at about 11.30, the retail prices index figures are due to be published. I wonder whether I could ask the Minister to refer in his speech to the retail prices index figures, because we never hear enough about them.

Mr. Deputy Speaker : Again, that is not a matter for me. I am sure that the Minister's speech will be in order when he makes it, if he catches my eye.

11 am

Miss Emma Nicholson (Torridge and Devon, West) : The debate reveals the deep and unbridgeable divisions between Conservative and socialist philosophy. Conservatives stand for freedom of the individual, the family, the community and the country. Labour stands for statism, centralism and patronage, representing a corrupt and discredited political modus vivendi, more appropriate to the South American mafia than to the proud and distinguished country which is the United Kingdom.

It is unusual to have the chance to discuss the distributive nature of modern Governments. The distributive nature of modern Government expenditure is seldom questioned. Therefore it is to the credit of my hon. Friend the Member for Kensington (Mr. Fishburn), who initiated this private Member's debate, that we have this chance to debate that subject. I warmly congratulate him on his thoughtful and interesting speech, which outlined points that many of us do not have much chance to consider politically during the rough and tumble of our normal debates. This is a very unusual opportunity which I warmly welcome. The fundamental difference between the Conservative and Labour parties is that while socialist dogma dictates that everyone's earnings belong to the state, Conservatives know that they belong to the individual who then freely, and with no guilt, gives back to the state--to the Treasury--a proportion of his or her income to carry out programmes that that individual supports or which, in a democracy, the majority of voters have said that they support.

Furthermore, it is clear that the individual voter wishes the Government to achieve on his or her behalf the least taxation for the maximum effect on those packages of expenditure in public life that have been deemed to be more effectively and more economically carried out by the public purse. It is seldom questioned in our society, but I believe it to be true that it is not the amount that we raise that we should question so much as the way in which we spend it. In many senses, it is not a question whether the Government raise 39, 40 or 41 per cent. in taxes. I wish it to be very much less than that. It is a question of how economically and effectively the Government use the funds that they have raised. The key question should always be : will that package of work be more effectively carried out

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if it is not undertaken by the Government ? When we look at the redistributive nature of our modern taxation system and Government expenditure today, again it is true to say that, in contrast to the Opposition, Conservatives want everyone to earn a handsome living. That phrase was used a moment ago in a wholly derogatory sense. Child benefit is a universal benefit, and--

Mr. Dalyell : Will the hon. Lady give way?

Miss Nicholson : Perhaps the hon. Gentleman will allow me to complete my sentence. Child benefit is a universal benefit, and it is our desire that state taxation systems should help the poorest of the poor. Universal benefits do just the reverse. That is the great weakness of universal benefits, if we want to help the poorest members of society. Universal benefits spread exactly the same sum of money throughout the whole of society.

Mr. Dalyell : Before we leave the question of what is or is not handsome, was the hon. Lady pleased and flattered by the statement that she was the only Conservative lady Member of Parliament who dresses as well as the Labour lady Members of Parliament? Would she not be better, given her opinions this morning, to stick to dress rather than politics?

Miss Nicholson : As I am not sexist, I would not wish to criticise Opposition Members for their looks or demeanour, or for their discourteous behaviour. However, Conservative Members know that Labour men as well as Labour women Members of Parliament have been Folletted. They were taken out because they were deemed to be so unattractive by members of their own party. It is not Conservatives who make sexist and rather dreary judgments of Labour men and women Members of Parliament. It was a leading member of the Labour party who said that, alas, they were so unpalatable that they had to be dressed up--that they had to be cosmetically altered from top to bottom.

I prefer the reality of a Labour Back-Bench Member. A colleague who sits in front of him saw that the television cameras were shining too brightly upon his bald pate, so the balding Member went out and bought a wig. A colleague who sits behind him was heard to refer to the dead rat that he now has to look at, sitting on the Bench in front of him. Conservatives believe in the diversity of human nature and, therefore, of human appearance, so we do not fuss in any way about what we look like.

The hon. Member for Linlithgow (Mr. Dalyell) is an Old Etonian. They are well known for their great desire to look lovely all the time. I did not read the newspaper comment to which he referred. In any case, I have no interest in such things. I am a genuine politician. I am here for the good of my constituents. I am not here for this intolerable frivolity. I shall not give way to someone who, since he happens to be a Labour Member of Parliament, is sexist, dull, drab and badly dressed.

Socialist dogma--the belief that everyone's earnings belong to the state-- fails to recall the lessons learnt in eastern Europe, which is that me and mine is more productive than us and ours. It is the Folletting effect-- pulling all the dress money for those who sit on the Opposition Benches into the centre--that has given us this uniformity of padded shoulders and carefully contrived colour schemes. This is a job-lot purchase from the

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old-style state stores in Russia--soon to be privatised, I am delighted to say. Conservatives, however, believe in people being able to purchase exactly what they want.

More seriously, Mr. Deputy Speaker, me and mine is more productive than us and ours. That is why, when we look at the Labour legacy of taxation that we inherited in 1979, we see that, due to Labour's desire to take more control at the centre and to depress the individual's unique contribution to his or her life and to that of the community, the basic rate of income tax was increased from 30p to 35p in the pound, giving the United Kingdom the highest rate of income tax of any Organisation for Economic Co- operation and Development country, except Denmark. Personal allowances ceased to be index linked, with the result that more people paid tax and more people paid income tax at the higher rate than ever before. By 1978- 79, 1.8 million more people were paying income tax than in 1973-74. The starting points for higher tax rates and investment income surcharges were reduced and halved respectively. The top rate of tax on earned income was raised from 75 to 83 per cent., and the top rate on investment income increased from 90 to 98 per cent. It was a third-world taxation approach, surprisingly reminiscent of India's.

Despite Labour's fine talk about equal opportunities for women, the previous Labour Government did not reform taxation policies for married women. Despite their hurling charges against the Conservative Government, they did not care about women. Successive Conservative Chancellors made the major reforms to which my hon. Friend the Member for Kensington referred.

The Conservative women's national committee made the first move while the Labour Government were in power in the late 1970s. Joan Seccombe, who subsequently became a Dame and member of the House of Lords and who is now Conservative party vice-chairman with special responsibility for women, worked hard with national committee members such as Dame Margaret Fry and others to produce a keynote report proposing that when the Conservative party took office, which they so rightly foresaw, it should alter taxation policies for married women.

That tax reform had been overdue since Julius Caesar arrived in the United Kingdom. It is curious that when he wrote about the United Kingdom he said that Britain was not only a grey and rainy island but that we were the oddest nation because we were unique in treating men and women equally in law. It took a Roman invasion to destroy that fine principle and a Conservative Government to put it right. Mr. Battle rose --

Miss Nicholson : The hon. Gentleman has had his chance ; I shall not give way to him.

Before the Married Women's Property Act 1851, taxation was relatively light and married women were not people in law. The same applied under the Labour Government, who did not alter taxation for married women. That Act allowed married women to own property and to inherit.

Previously, the only married women who had that right were rich city widows. No doubt Old Etonians from the Labour party would have been trawling the city in the last century to find rich city widows. They were rich because they were the only married women who were allowed to

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inherit property. That is why they are identified so finely in Chaucer's "Canterbury Tales". Even then, those widows had toy boys because they were able to inherit money. The 1851 Act corrected that, but it did not allow for independent taxation of women ; it took a Conservative Government to do that.

Why did Labour make no changes? Presumably, because it costs money and the Labour party sacrifices any principle if it demands real financial commitment. That is a political prostitute's attitude--it cost money, so married women were not allowed independent taxation. Labour did not really care. I say that with some feeling, because when my right hon. Friend the Member for Blaby (Mr. Lawson), the then Chancellor, announced his momentous reform, the shadow Chancellor did not even refer to it. What a shoddy crowd the Opposition are ; they really did not care.

I contrast that with the tax reforms of the Conservative Government, which were made because they are central to the Conservative philosophy and because we practise what we preach. Our goals were to reduce the basic rate of income tax, which we have done and will continue to do, from 33 to 25 per cent., with an achievable goal of 20 per cent. Another goal was to raise the thresholds at which tax become payable, which we have done, taking 2 million people out of the income tax system. We planned to switch from tax on earnings to tax on spending, which we have done with value added tax. Before the Opposition bestir themselves from their political slumbers and complain about value added tax, I remind them that we have the second lowest VAT average in the European Community. VAT here ranges from zero to 33 per cent. That is an incredibly wide tax range and no harmonisation is planned or possible because of that broad band. We have an average outturn of just over 11 per cent. That fine track record was achieved because 25 per cent. of all goods are zero rated.

We have encouraged savings through devices such as the tax-exempt special savings account, which was introduced by the present Prime Minister. We have simplified the tax system by abolishing seven major taxes--national insurance surcharge, investment income surcharge, capital duty, capital transfer tax, development plan tax, composite rate tax on savings and stamp duty charges on shares and on property outside London. In addition, as my hon. Friend the Member for Kensington said, we have carried out a massive computerisation programme of the Inland Revenue. It is one of the finest large computer systems in Europe and it will prove powerful and effective. The Labour party has not admitted that it wants to bastardise the tax system by a mismatch that is alien to our political philosophies in the United Kingdom of putting together tax and benefits and by compiling a huge detailed record on each citizen in the United Kingdom to achieve what could only be a grotesquely unfair rates system.

We have helped business considerably by restructuring business taxation so that the new main corporation tax of 33 per cent. is one of the lowest in the industrialised world. We have reduced the small companies rate from 42 to 25 per cent. and brought it into line with the basic rate of income tax.

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I have some points to make on which I should be glad of clarification from my hon. Friend the Minister. The first is the question of advance corporation tax, which is paid by companies on their dividends and shareholders. It appears that companies investing abroad are penalised because when they distribute in the United Kingdom the overseas income generated, little or no relief is available for the advance corporation tax payer. Secondly, over the years, that causes severe cash flow penalties, compared with companies that are wholly or mainly investing in the United Kingdom. Thirdly, that depresses the market capitalisation, because lower earnings are reported where advance corporation tax is

charged--against profit rather than against tax payable or profits earned in the United Kingdom. Thus, the market capitalisation is depressed.

Secondly, perhaps the Minister will comment on the issue of benefits in kind, with particular reference to company cars. After all, scale benefits are being increased dramatically to discourage the provision of company cars. Following that, it seems that there may be an inconsistency of approach by the Inland Revenue and Customs and Excise in taxing the benefits where cash alternatives to the provision of cars are not proposed by companies.

Thirdly, on foreign exchange gains and losses, current taxing legislation is unclear and uncertain, leading to potential muddle. Little progress seems to be happening on that front, despite the recently issued consultative document. I should welcome the Minister's comments on those three points.

I warmly welcome the greatly enlarged tax incentives for charitable giving. I have had the good fortune to be closely involved for many years with non- governmental organisations in the United Kingdom and overseas. Indeed, for 11 years I was a staff member of the Save the Children Fund. Following that, I have been concerned with the World Association of Girl Guides and Girl Scouts, the Duke of Edinburgh's award scheme and others. Now that I am in Parliament, I have the opportunity as a volunteer to be heavily, and I hope constructively, involved in the workings of about 58 voluntary organisations carrying out crucial work in the United Kingdom and overseas.

All the institutions and groups with which I am concerned warmly welcome the splendid inititives that the present and previous Conservative Governments have taken in the last decade in easing giving to charity from tax perspectives. That has made an enormous difference to their income and we hope that further incentives will be forthcoming from the Government.

Overall, the Government's aim is to reduce the tax burden when it is prudent to do so, and in particular to reduce the basic rate of income tax. Much progress has been made, which I warmly welcome, and I am grateful to the Government for the fact that the tax burden as a percentage of gross domestic product has fallen throughout our period in office.

11.22 am

Mr. Alex Carlile (Montgomery) : I congratulate the hon. Member for Kensington (Mr. Fishburn) on choosing this interesting and tricky subject for debate. It has been an illuminating debate so far. The hon. Member for Torridge and Devon, West (Miss Nicholson) raised the important issue of the taxation of married women. I agreed with the thrust of her remarks,

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possibly apart from her implication that the hon. Member for Linlithgow (Mr. Dalyell) might be regarded as a toy boy. She may agree that there is also cause for concern about the position of unmarried women, many of whom, rightly or wrongly, live as part of a couple. It is important to pay close attention--not only in relation to taxation but in other respects--to their legal position vis-a-vis their partners and the state.

The hon. Lady referred to charities, and I join her in welcoming the changes that the Government have made which are of benefit to charities. I hope that, with her great and respected experience of working in the charitable sector, she agrees that charities continue to labour under an archaic legal framework and that it is to be hoped that in the next Session of Parliament the Government will grasp the nettle, for which, unfortunately, they were not able to find time in this Session, for a wholesale review of charity law.

I raised that issue earlier in the week in Committee upstairs on the Finance Bill. Charities will not be able to operate in a sufficiently clear and predictable environment unless charity law is reformed and we are able to look at charities throughout the statutory framework in a modern context.

Miss Emma Nicholson : I am not sure whether toy boys must have slightly slenderer waists than the hon. Member for Linlithgow (Mr. Dalyell). I am not being discourteous to him when I say that I prefer him as a non-toy boy.

I welcome the remarks of the hon. and learned Member for Montgomery (Mr. Carlile) about charities. The purpose of revising charity law should primarily be to stop the public being ripped off by so-called charities which are not charities. I see that as the key initiative. Proper charities which wish not to fall into that trap can simply register as companies, when they come under the provisions of company law. The best charities do that now.

Mr. Carlile : I have some professional experience of dealing with frauds in the charitable sector. They cause great unhappiness and anger to many members of the public.

Paying tax hurts because it involves the compulsory removal of money which we feel we have worked hard to earn. Taxes should never leave more than that most basic and inevitable sense of injustice which we feel when we are compelled to give our money to the Government, like it or not.

Unjust taxes are ultimately uncollectable, as the Government recognised when they decided to abolish the poll tax. At best, we cannot expect even just taxes to gain more than a grudging acceptance from the public. Yet they are essential if we are to sustain a society in which there are as few illiterate, poor, sick and homeless people as possible. The duty of government is to raise the taxes that are necessary to avoid those social evils which are self-evidently unacceptable and divisive.

That has not happened under the present Government, whose achievement falls short of their often-expressed ambition. Marginal rates of tax have been reduced, but many of our citizens--especially those with small businesses living on tight financial margins--say that under Conservative rule they have found themselves paying more tax than ever before.

The uniform business rate is a tax. It is not in proportion to the earnings of businesses. It is related to the

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