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House of Commons

Thursday 13 February 1992

The House met at half-past Two o'clock


[Mr. Speaker-- in the Chair ]


London Docklands Railway (Lewisham, etc.) Bill

(By Order) Order for Third Reading read.

To be read a Third time on Thursday 20 February.

Alliance and Leicester (Girobank) Bill

(By Order)

British Railways (No.

4) Bill-- (By Order)

Crossrail Bill

(By Order)

East Coast Main Line Safety Bill

(By Order)

King's Cross Railways (No.

2) Bill-- (By Order)

London Docklands Railway (Lewisham, etc.) (No.

2) Bill-- (By Order)

London Underground (Green Park) Bill

(By Order)

London Underground (Jubilee) Bill

(By Order) Orders for Second Reading read.

To be read a Second time on Thursday 20 February.

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Oral Answers to Questions


Child Care

1. Mr. Maclennan : To ask the Chancellor of the Exchequer what representations he has received on the subject of taxation of child care ; and if he will make a statement.

The Financial Secretary to the Treasury (Mr. Francis Maude) : We have received a number of representations on that subject.

Mr. Maclennan : Does the Minister recall that we on these Benches have advocated provision for tax vouchers for child care in the past three Finance Bills? Does he recognise that provision is required for local authorities, voluntary groups and the private sector to provide places in creches and nursery schools? Will he take steps to ensure that that is possible following the Budget?

Mr. Maude : I am aware that the hon. Gentleman and his colleagues have promoted all sorts of proposals in recent years, and many of them have been contradictory. At this stage in the period preceding the Budget, he will not expect me or any of my right hon. Friends to say anything about specific tax matters.

Mr. Thurnham : Is my hon. Friend aware that private nursery provision has increased by 50 per cent. in recent years and that efficient councils such as Wandsworth have been able to provide nursery education fully to all the children in their areas?

Mr. Maude : My hon. Friend makes an important point.

Employment Prospects

2. Mr. Hinchliffe : To ask the Chancellor of the Exchequer if he will list those measures which he has taken since November 1990 to improve employment prospects.

The Chief Secretary to the Treasury (Mr. David Mellor) : Since November 1990, the Government have reduced interest rates by 3.5 per cent. and retail price inflation has fallen by more than half. Underlying earnings growth has fallen to its lowest level for almost 25 years and economy-wide productivity has increased, helping push non-oil exports to record levels. The foundations have been laid for sustainable growth in both output and employment.

Mr. Hinchliffe : Has the Minister any understanding of the individual human tragedy of unemployment? Is he aware that today's increase is the 22nd consecutive monthly increase in unemployment? Does he know that since the Chancellor and the Prime Minister came to office, some 30,000 jobs, on average, have been lost every working day? Is not the Government's complacency on the matter scandalous and disgraceful?

Mr. Mellor : No, there is no complacency. Unemployment is a tragedy for the unemployed in Britain, just as it is for the greater number of unemployed in France and the United States. We have created a climate for recovery. The key question is not the one that the hon.

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Gentleman asked, but, rather, whose policies will be best able to put people back to work? The Labour party will have to deal with that issue.

Sir William Clark : Does my right hon. and learned Friend agree that far more people are in employment today than in 1979? Does he also agree that a minimum wage and higher taxation would lead to even greater unemployment?

Mr. Mellor : That is undoubtedly so. There are nearly 600,000 more jobs in the United Kingdom today than there were in 1979. My right hon. Friend will be aware that the Organisation for Economic Co-operation and Development said that between 1984 and 1990 the United Kingdom had by far the best job creation record of the larger European Community countries.

Mr. Beith : Why does not the Chief Secretary recognise that a period of high unemployment and recession is the best time to spend additional resources on investment in the fabric of our schools, homes and transport? That would put people back to work and give long-term benefits to the economy.

Mr. Mellor : The hon. Gentleman knows only too well that in his autumn statement my right hon. Friend the Chancellor was able to announce a £1.4 billion boost to the railways and London Transport and an increase of more than 10 per cent. in real terms for capital works on schools. In addition, for good measure, a substantial increase in the Government's commitment to hospital building was announced. Therefore, I am not sure that the hon. Gentleman has as good a point as he thought.

Sir Ian Stewart : Does my right hon. and learned Friend agree that the best way to provide improved employment prospects is to get inflation and interest rates down, as the Government have done so commendably in the past 18 months? The worst thing to do would be to impose swingeing increases in personal taxation of the sort advocated by the Labour party, because that would undermine the incentive and enterprise on which jobs depend.

Mr. Mellor : My right hon. Friend is quite right. As the Bank of England's recent quarterly bulletin made clear, the right environment for recovery is one of stable prices. For the Labour party, inflation is the word that dare not speak its name.

Mr. John Smith : Are not the truly appalling unemployment figures announced today--an increase of more than 53,000, taking the unemployment total to more than 2,600,000, even leaving out the thousands of job losses announced during the present month--ample proof that the Government's incompetent economic policies are certainly not working, but are causing severe hurt? Do the Chancellor and the Chief Secretary consider that the mounting job losses, with all the human tragedy that they bring, are a "price well worth paying"?

Mr. Mellor : It is quite clear that we have a climate for recovery in this country, with falling unit labour costs, inflation below the European Community average and interest rates fully competitive with those of our competitors. Once we get beyond the cheap debating point, has the right hon. and learned Gentleman thought about what the minimum wage will do to unemployment?

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Does he appreciate the nonsense of the proposal to increase taxation at this time of economic difficulty? The key question is : what impact would Labour policies have on unemployment and the economic well-being of the country? That is the question which the right hon. and learned Gentleman fails to address.

Value Added Tax

3. Mr. Enright : To ask the Chancellor of the Exchequer if he will give the rates of VAT since the beginning of 1979 ; and the dates of each change.

The Economic Secretary to the Treasury (Mr. John Maples) : Until 18 June 1979, 8 per cent. and 12 per cent ; from 18 June 1979 to 1 April 1991, 15 per cent ; and since 1 April 1991, 17 per cent.

Mr. Enright : I am grateful to the Economic Secretary for his diligent research in producing those figures. Will the hon. Gentleman tell the constituent of mine who is over 21 and earns £50 for a 40-hour week why he has taken a greater percentage of the young man's earnings than he has from his right hon. and hon. Friends who go to the City and, for part-time work, earn hundreds of thousands of pounds? Is not it a fact that the Government are robbing the poor to pay the rich?

Mr. Maples : The only way to reverse what the hon. Gentleman alleges would be to go back to the sort of tax rates that we had under the last Labour Government--83 and 98 per cent. I am sure that it will be interesting to the right hon. and learned Member for Monklands, East (Mr. Smith) to know that Labour Members advocate such tax increases.

What the hon. Member for Hemsworth (Mr. Enright) said is not true for the vast majority of the population. A married man on average earnings, with two children, has found that his tax burden from central Government has risen from 32.2 to 32.7 per cent. The great increase has come from domestic rates and the community charge, and we know who is responsible for that-- high-spending Labour councils.

Mrs. Peacock : Will my hon. Friend confirm that it was the last Labour Government who introduced a value added tax of 25 per cent. on certain luxury items?

Mr. Maples : My hon. Friend does well to remind the House of what happens under a Labour Government. They had a value added tax rate of 25 per cent. My hon. Friend may have noticed that the Opposition have been floating a similar idea among themselves and discussing again in an internal memorandum the possibility of a luxuries rate of VAT. We have no problem in this regard ; we do not need to raise taxes--[ Hon. Members : -- "You have."] We have set out our tax and spending plans for the next three years. The Labour party has set out only its spending plans, including plans to spend £35 billion. Apparently, it does not need to finance that from raising more tax.

Mrs. Beckett : Is the Minister aware that he has just admitted that under this Government there has been a trade-off between income tax cuts and increases in VAT? If we take the Prime Minister's words at face value-- that the Conserservative party will not raise the rate of VAT

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--does the hon. Gentleman recall an interview given recently by the Chief Secretary, when he was asked about extending coverage of VAT to transport fares? He said :

"nobody knows what is waiting round the corner."

The Chief Secretary then sought to imply that the Government might in some way be forced by the EC to extend the coverage of VAT. Is the Minister aware that last week in Brussels Madame Scrivener, the relevant Commissioner, assured me that there was no question of our being forced by the European Community to extend the coverage of VAT, and that we cannot be forced so to do? Does he think that his right hon. and learned Friend the Chief Secretary was hinting that the Government might choose to extend VAT?

Mr. Maples : This is quite extraordinary. No one could have fought harder than this Government to maintain the zero rates that we have. We have secured the right to do that. My right hon. Friend the Prime Minister has made it clear that we have no intention of raising the rate of VAT either before or after the election. As I told my hon. Friend the Member for Batley and Spen (Mrs. Peacock), we do not need to raise taxes ; the Labour party does. How do the Opposition think they are going to finance £35 billion of extra spending without raising taxes on ordinary people? They cannot do it.

Mr. Squire : My hon. Friend reminds the House of the 25 per cent. rate under the last Labour Government and mentions that it was a tax on luxuries. Will he confirm that those luxuries included televisions ; and does he agree that if there is not to be an income tax rate of 35p to support those massive spending plans, they can be supported only by a large increase in VAT?

Mr. Maples : My hon. Friend is, of course, right. There has to be a substantial increase either in income tax or in VAT to pay for the Labour party's spending plans. My hon. Friend does well to remind us that when the Labour party was last in office its idea of luxuries included petrol as well as televisions and caravans.

Environmental Policies

4. Mr. Simon Hughes : To ask the Chancellor of the Exchequer what representations he has received in favour of taxation policies to benefit the environment ; and if he will make a statement.

Mr. Maude : We have received a number of representations on this subject also.

Mr. Hughes : Given that investment in cavity wall insulation, in energy-efficient boilers and in heating controls has dropped by 50 per cent. since 1987, given that even double-glazing salesmen appear to have gone quiet in this recession and given that energy-efficiency investment not only helps the environment but protects the vulnerable and the old and creates hundreds of thousands of jobs, will the Government consider extending the exemption from stamp duty for all energy-efficient homes beyond August and perhaps indefinitely?

Mr. Maude : I shall certainly listen carefully to what is said on that matter and give it full consideration. The hon. Gentleman seems to leave out of account the fact that investment in energy efficiency is desirable for its own sake.

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Saving energy saves on cost, so there is already a built-in incentive for people to make prudent investments in energy-efficiency measures.

Mr. Nicholls : Will my hon. Friend confirm that one of the representations that he must have received was that from the Liberal Democrats advocating their policy of imposing an extra 50p a gallon on petrol? Does my hon. Friend agree that those who live in rural areas ought to know that that is what the Liberal Democrats have in mind? Does he agree that that policy would have a devastating impact on people who live in the country areas of Teignbridge?

Mr. Maude : My hon. Friend does a sterling service in drawing attention to that Liberal Democrat policy. I wonder, with him, whether the Liberal Democrats will be quite as keen on promoting that policy in rural areas in the coming general election.

Value Added Tax

5. Mr. Wareing : To ask the Chancellor of the Exchequer if he will state the amounts of Exchequer revenue raised from value added tax in each of the years 1978-79, 1986-87 and 1990-91 ; and indicate what percentage of total Exchequer revenue raised in each of these years these figures constituted.

Mr. Maples : In 1978-79, £5.2 billion and 9 per cent. ; in 1986 -87, £22.2 billion and 15.1 per cent. ; and in 1990-91, £32.5 billion and 15.8 per cent.

Mr. Wareing : I thank the Minister for that answer and the confirmation that during the Government's tenure the burden has been placed firmly on the shoulders of those who are least able to bear it. Will the hon. Gentleman give a categorical assurance that if, unfortunately, the Conservatives are returned to power in a general election, value added tax will not be extended to any of the goods or services upon which it is not already levied? May I have a simple answer, yes or no, and no shenanigans?

Mr. Maples : It simply is not true that the burden of taxation has been increased on the poorer members of society. [ Hon. Members :-- "Answer."] That was the subject of the first part of the hon. Gentleman's question. Living standards at all income levels improved over that period. [Hon. Members :-- "Answer."] The hon. Gentleman asked about three questions and I shall choose which one to answer. I think that most people are interested in the fact that living standards under this Government have risen dramatically.

My right hon. Friend the Prime Minister has made it perfectly clear that we have no intention of increasing VAT. We have made our plans on spending and tax perfectly clear. We do not need to raise VAT and in the European Community we have fought harder than anyone could have done to maintain our zero rate. We do not need any clarification about that. We need clarification from the Opposition about what their tax burden will be.

Mr. Charles Wardle : Has my hon. Friend heard the call from the many people who run village halls about the burden that VAT imposes on their activities?

Mr. Maples : I hear my hon. Friend's Budget representation and will take it into account.

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Mr. John D. Taylor : How can the Government give an assurance that there will be no change in VAT rates when, under the Single European Act, the Government have already committed themselves to a policy of convergence of VAT rates throughout the European Community?

Mr. Maples : Any change in fiscal measures has to be agreed by unanimous vote in the Council of Ministers.

Mr. Ian Taylor : Will my hon. Friend make it clear that, according to the Treasury and Civil Service Select Committee, VAT is progressive in its impact, given that the more people spend, the more tax they pay? May we therefore put the Government's tax policy into context : although we do not wish to raise VAT above its present level, what we have done reflects further taxation on those who can afford to spend more?

Mr. Maples : Of course, my hon. Friend is quite right. The more one spends, the more one pays in VAT. It must amaze my hon. Friend, as it amazes me, that we have to explain that to the Opposition.

Dr. Marek : Does the Minister agree that his initial answer, taken with the huge increases that his Administration have brought about in national insurance contributions, the poll tax and the burden of rates that business men and business women have to pay, makes it clear that his party is the tax, tax and tax again party? Will he confirm that the proportion of national income taken in tax rose from 34.75 per cent. in 1978-79 to 37 per cent. in 1991-92? Has the Minister any plans to lower the total burden of taxation on the people of this country, which reached its highest levels in the 1980s after the very much lower levels that we experienced under Labour in the 1970s?

Mr. Maples : It is extraordinary that the hon. Gentleman wants to discuss this part of his party's history. The tax burden under this Government rose during our first two and a half years because we inherited at the top of the business cycle a borrowing requirement of 5.5 per cent. of gross domestic product. For every year since 1981, the tax burden has fallen. It will continue to fall this year and next year and I think that it is well known to everybody that this Government's policy is to lower taxes, in contrast with the plans of the hon. Gentleman's party. We know that it plans to spend £35 billion. We should like to know how Labour plans to raise that.

Mr. Wareing : On a point of order, Mr. Speaker. In view of the unsatisfactory nature of the Minister's answer to the question on the extension of VAT, I intend to raise the matter on the Adjournment.

Income Tax

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

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

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The Chancellor of the Exchequer (Mr. Norman Lamont) : The top 5 per cent. of taxpayers pay 32 per cent. of the total yield of income tax, compared with 24 per cent. in 1978-79.

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

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

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

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

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

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

Mr. Rooney : Does the Chancellor of the Exchequer recognise that 2, 700,000 people out there would welcome the opportunity to pay any income tax?

Mr. Lamont : What the hon. Gentleman does not answer is this question : by putting up--

Mr. Rooney : Answer the question.

Mr. Lamont : The point that the hon. Gentleman will not face up to is this--

Mr. Rooney : Answer the question.

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

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

Mr. Norman Lamont : Income tax has been reduced from 14.5 per cent. of such a family's gross income in 1978-79 to 13 per cent. in 1991-92.

Mr. Davies : Does my right hon. Friend agree-- [Interruption.]

Mr. Speaker : Order. This is no longer funny.

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

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

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

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

Taxes (Abolition)

8. Mr. Cran : To ask the Chancellor of the Exchequer how many taxes have been abolished since 1979 ; and if he will list them.

Mr. Mellor : We have abolished six taxes--investment income surcharge, national insurance surcharge, development land tax, the tax on lifetime gifts, capital duty and composite rate tax. We plan to abolish a seventh--stamp duty on shares.

Mr. Cran : Has not my right hon. and learned Friend conclusively convinced the House that only a Conservative Government have the courage to reduce taxation on the one hand and to get rid of taxes on the other, in contradistinction to nearly all other Governments before them, and especially the one between 1974 and 1979 who

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found endless ways of leaching money out of other people's pockets? How many new taxes would the Opposition introduce if they were in government?

Mr. Mellor : We know that the right hon. and learned Member for Monklands, East (Mr. Smith) proposes a number of additions to existing taxation and a number of new taxes, including the reappearance of investment income surcharge. I return to the question that we shall level continually at the Labour party : what is the basis for thinking that there is any answer to the country's problems through increasing the burden of taxation?

Mr. Ashton : How many welfare benefits have been cut and how many freezes have been imposed to pay for taxation cuts?

Mr. Mellor : On the contrary, the level of benefits paid has never been higher. It has risen sharply in real terms, as the hon. Gentleman knows only too well.

Mr. Allason : I congratulate my right hon. and learned Friend on the abolition of composite rate tax. Is he aware that the 0800 free number is of enormous benefit, especially to pensioners who have had tax deducted from their gross income from their investments in banks and building societies? Has he any plans to extend the free 0800 number to other taxes which could be reclaimed by pensioners and others?

Mr. Mellor : I have no announcement to make on that matter at this stage, but I shall bear in mind the representation that my hon. Friend has made.

Mr. Skinner : If all those taxes have been abolished since 1979, why is it that the average family, starting out in 1979 with a debt of 45 per cent. of income after tax and insurance, reached the end of 1991 with a debt of 102 per cent? The abolition of those taxes has not done the average family any good, has it, or those at Lloyd's?

Mr. Mellor : During the lifetime of this Government the average family the hon. Gentleman talks about has had increases in disposable income of unprecedented levels, in excess of £50 per week, while the hon. Gentleman well knows that from 1974 to 1979 their standard of living bumped along without showing any significant increase.

Family Income

11. Mr. Tredinnick : To ask the Chancellor of the Exchequer what was the average family income in (a) 1979 and (b) 1991 in real terms.

Mr. Norman Lamont : The real net income of a married couple on average male earnings with two children has increased from £194 in 1978-79 to £262 in 1991-92--a rise of 35 per cent.

Mr. Tredinnick : Does my right hon. Friend agree that that huge increase in real income clearly demonstrates the overall success of Conservative policies and would not have come about without the tax cuts that all families have experienced? Would it not be a disaster if families in my constituency in Leicestershire and throughout the country faced the huge tax increases proposed by Labour and the Liberals?

Mr. Lamont : It remains the situation that if we had not altered the income tax regime that we inherited when we

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came to office, and if we had merely indexed the rates and allowances, the average family would be paying £1,200 more in income tax. That is what it would be paying under the previous regime of the last Labour Government.

Mr. John Smith : What about value added tax?

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