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Income Tax Rates
4. Mr. Simon Hughes: To ask the Chancellor of the Exchequer what recent representations he has received in respect of (a) the basic and (b) the higher income tax rates; and if he will make a statement. [18522]
The Financial Secretary to the Treasury (Mr. Michael Jack): I receive a steady flow of representations regarding all aspects of the tax system.
Mr. Hughes: I want the Minister to be really honest to the House. I want him to tell us whether he receives mailbags full of letters stating, "Please put income tax down and please do not put higher rates of tax up for high earners," or whether the strong balance of view is that people want better services--better education, better health, better housing and better transport--and are willing to pay a bit more income tax, and with higher earnings a bit more higher-rate tax, to fund better public services. Is not the second approach the truth?
Mr. Jack: That question comes from the member of a party whose 1996 alternative Budget pledged it to raise public spending, by its calculations, by £4 billion. I receive representations that tell me, "Isn't it good that we can see that the basic rate of tax falls to the lowest level for 60 years while at the same time, year on year, there is a real increase in spending on the health service along with more money spent on education and public services in general, but within a Budget where controls are tight, and we have the fastest growing economy in western Europe?" That is the package that people like to write to me about.
Mr. John Townend: Does my right hon. Friend agree that any Government could increase the overall burden of direct taxation without putting up tax rates, merely by abolishing mortgage tax relief, reducing tax relief on pensions, reducing allowances or lifting the ceiling on national insurance contributions? Does he further agree
that any Government who propose to spend £12 billion extra would have to put up taxes, otherwise borrowing would go through the roof?
Mr. Jack: My hon. Friend has clearly been looking at various posters around the country. He is entirely right to give that health warning, because the official Opposition seem to be committing themselves to two of our rates of tax. Therefore, as my hon. Friend inferred, it is clear that everything else is up for grabs. His warning should be heeded by every elector.
Mr. Darling: The House will recall that the Conservatives put up national insurance after the last election, even though they promised not to do so.
Will the Financial Secretary clarify what the Chancellor said and, in particular, give an undertaking that the Conservatives would not seek to increase the rate of VAT on fuel during the next Parliament?
Mr. Jack:
The hon. Gentleman was not listening to my right hon. and learned Friend, who made his views entirely clear on every aspect of tax policy, and, indeed, on his policy on VAT. I have nothing to add.
Mr. Duncan Smith:
Is my right hon. Friend aware that Labour-controlled Waltham Forest council raised its council tax two days ago and that, over a three-year period, that tax has been increased by 41 per cent.? I have a mailbag full of letters from people telling me that they are sick and tired of paying increased charges. The Liberal Democrats on the council voted with the Labour party to increase that tax and now have an outraged public chasing them.
Mr. Jack:
My hon. Friend has illustrated the underlying desire of anybody in the Labour party who is in power to spend more of other people's money and to tax more. He is entirely right.
5. Mr. Hall:
To ask the Chancellor of the Exchequer what representations have been made to him on the rate of economic growth. [18524]
Mr. Kenneth Clarke:
I receive many representations on economic growth. Since 1992, the United Kingdom has had the strongest and longest recovery of any major European Union nation, and can expect continued, healthy growth. The Organisation for Economic Co-operation and Development expects the United Kingdom to grow faster this year than the United States, Japan and all the major European economies.
Mr. Hall:
Under the Tories, Britain has suffered two of the worst economic recessions since the war, and slower growth than any other major industrialised country in the world. Can the Chancellor tell us why we have fallen from 13th to 18th place in the world prosperity league and why we have been relegated to the European second division?
Mr. Clarke:
With respect, I think that the hon. Gentleman was not paying close attention to the reply that I gave to his main question. I could go back to the rather
Mr. Yeo:
Does my right hon. and learned Friend agree that one of the reasons for our outstanding economic performance in the past few years is the enormous competitive advantage that we have enjoyed because we have escaped the onerous obligations of the social chapter? Does he further agree that if a Government ever came to power who accepted those obligations, the consequences would be the destruction of a huge number of jobs in this country and the erosion of our competitive advantage?
Mr. Clarke:
I agree with my hon. Friend. I think that the vast majority of Finance Ministers of the other European countries realise that they have now to go through the difficult structural changes in their economies and the changes in their labour markets that this country has undergone during the period of Conservative rule. We will continue to outperform them until they do--unless, of course, we have a Labour Government who plunge us back into the old-fashioned type of social democratic economy from which the rest of Europe has desperately to try to escape over the next few years.
6. Mr. Salmond:
To ask the Chancellor of the Exchequer what recent discussions he has had with industry representatives about clause 37 of the Finance Bill; and if he will make a statement. [18525]
The Economic Secretary to the Treasury (Mrs. Angela Knight):
My hon. Friend the Exchequer Secretary met industry representatives on 22 January. The amendments to clause 37 passed on Report now address the concerns expressed by the property industry.
Mr. Salmond:
Why did the Government back down on clause 37? Were they concerned about the legal position if they pursued the matter as they originally intended? If so, is the Minister worried about payment and prepayment traders in other related aspects of the Finance Bill? Is there not a ticking time bomb of legal action in the Finance Bill because of discriminatory treatment as between similar traders in different industries? Is the Minister worried about that, or does she think she and her colleagues will not be at the Dispatch Box, so it will be someone else's problem?
Mrs. Knight:
The hon. Gentleman is incorrect. The amendments to the clause targeted avoidance more tightly, and we are convinced that that will work. We shall keep a close eye on the matter. The important point is
Mr. Brooke:
Will my hon. Friend pass on to the Exchequer Secretary and to Customs and Excise the thanks of my constituents for the hard and constructive work that went into resolving the original problems posed by clause 37? Will she, at the same time, congratulate our hon. Friend on having become this very day the owner of Westminster's top dog?
Mrs. Knight:
I assure my right hon. Friend that my hon. Friend the Exchequer Secretary has heard his thanks. It is clear that, when my right hon. Friend and my hon. Friend get together, they can resolve matters in an honourable and friendly way. I understand that my right hon. Friend came second in the top dog awards. In fact, the first three top dogs were Tory top dogs. That is a good omen.
7. Mr. Hoyle:
To ask the Chancellor of the Exchequer when he next plans to meet the Governor of the Bank of England to discuss interest rates. [18526]
Mr. Kenneth Clarke:
Thursday 10 April, and frequently thereafter.
Mr. Hoyle:
Will the Chancellor explain why he is keeping interest rates at an artificial level, if not for political and electoral reasons?
Mr. Clarke:
That is the first opinion that I have heard expressed on interest rates from any Opposition Member, so it is a start. With the greatest respect to the hon. Gentleman, I will not take his advice on monetary policy. We have achieved an inflation rate of below 4 per cent. for more than four years, which is the best performance this country has seen for almost 50 years. The OECD survey said:
Mr. Legg:
Will my right hon. and learned Friend explain what the impact on the public sector borrowing requirement would be if local authorities were allowed to spend all their capital receipts? What implications would that policy have for the overall level of interest rates?
Mr. Clarke:
The best estimate that I can give is about £2½ billion per year. It is clear that the Opposition are committed to such a policy, but they will not say how they would finance it. If they return to borrowing, which must be one of the methods that they are contemplating to fill the obvious gaps in their public spending plans, that will put upward pressure on interest rates, as my hon. Friend said. That is an irresponsible approach to an area of policy in which the Government are achieving remarkable success.
Mr. Sheerman:
The Chancellor cannot get away with this snapshot of the past two years. People want to know
Mr. Clarke:
With the greatest respect, the latest authoritative figures for European Union inflation show that we are below the average. Our record has been sustained throughout the recovery. I was the first Chancellor to publish this year the International Monetary Fund's article 4 annual report, which says:
"Inflation performance over the past 4 years has been remarkably good."
I am determined that it will remain as good for the next four years, once we get this Government back in office.
"The inflation targeting framework for monetary policy has delivered impressive results."
High inflation used to be an endemic weakness of the British economy, and tended to destroy our recoveries. The Government have tackled that problem successfully, which is why this recovery is so healthy.
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