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Taxation
5. Mr. Robert N. Wareing (Liverpool, West Derby): If he will make a statement on Her Majesty's Government's policy towards the balance between direct and indirect taxation. [72417]
The Chief Secretary to the Treasury (Mr. Alan Milburn): The Government are building a tax system that is fair and that supports work, enterprise and families. That is why we pledged not to increase the basic or top rates of income tax, and not to extend VAT to food, children's clothes, books and newspapers and public transport fares. We stand by those pledges.
Mr. Wareing: I thank my right hon. Friend for that answer. In 1978-79, at the end of the last Labour Government, taxes on products and production were 3.9 per cent. of total taxation. By 1997-98, that figure had risen to 39.1 per cent. Could the Chancellor consider, as an alternative to a 10p rate of income tax, reducing
regressive indirect taxation and shifting the balance further towards direct taxation, which is more progressive and more equitable?
Mr. Milburn: We judge tax proposals according to a number of criteria, one of which is fairness. We have made it clear repeatedly that, when we are able to do so and when we judge that the time is right--
Madam Speaker: Order. I cannot hear the Minister. He will please address the House.
Mr. Milburn: We want to introduce a 10p tax rate when the time is right. Some of the other measures that we have introduced, such as cuts in VAT on fuel and changes to the national insurance contributions rates, are major steps towards a fairer tax system. That is the Government's approach, and we shall continue to advocate and implement it.
Mr. Stephen Dorrell (Charnwood): On Tuesday, we were told that the Prime Minister was lecturing his socialist colleagues in Europe on the lessons that Europe could learn from what he described as the extraordinary capacity of the United States to create wealth and work. Yesterday, the Prime Minister was forced to admit that, far from emulating the American example, it was the Government's plan to increase both the direct and indirect tax burden on the British economy. When will the Chancellor of the Exchequer stop undermining the Prime Minister?
Mr. Milburn: I am not sure whether the right hon. Gentleman is making a late bid for a Front-Bench job, but he knows fine well that last year's pre-Budget report set out the position very clearly indeed. The tax burden under this Government is projected to be less than that for which the Tories had planned.
The Tories increased taxes before the general election; they had planned to continue to do so if, heaven forbid, they had won that election; and, if they had their way now, they would continue to increase the tax burden, most notably by getting rid of the working families tax credit. I should be interested to know the right hon. Gentleman and his Front-Bench colleagues' views on VAT on fuel, because the last Tory Chancellor of the Exchequer pledged to increase it to 17.5 per cent.
Mr. Peter L. Pike (Burnley):
When considering direct taxes and duties, should we not take into account the amount of beer and cigarettes that are daily brought across the channel for sale in this country to avoid tax and duties? That puts our people out of work. It is appropriate to discuss that issue in a week when the Stena line is organising trips for people to go across the channel to buy cars, which will have implications for our motor industry.
Mr. Milburn:
As my hon. Friend knows, those matters are rightly for my right hon. Friend's Budget, which will be announced next Tuesday.
Mr. Nick Gibb (Bognor Regis and Littlehampton):
Which of the following does the Chief Secretary regret the most: promising before the election not to raise taxes, the fact that the Government have broken that promise by
Mr. Milburn:
What I regret is that the hon. Gentleman has not learned the lessons of history. It was the Tories who broke their promises on tax. In 1979, they promised not to increase VAT, but at their first Budget they increased it--indeed, they doubled it. [Interruption.] The hon. Gentleman does not want to listen, but I remind him of what the then Prime Minister, the right hon. Member for Huntingdon (Mr. Major), said on 27 March 1992:
"We have no need and no plans to extend the scope of VAT."
Within a year, the Tory Government had increased VAT and had extended it to fuel. If it had not been for the Labour party and this Parliament, they would have continued to increase it.
Small Businesses
6. Mr. Barry Sheerman (Huddersfield): What new steps he is taking to promote small businesses. [72418]
The Chancellor of the Exchequer (Mr. Gordon Brown): In the last Budget, we announced a range of measures to help small businesses to invest for the future, including the cut in the small companies' rate of corporation tax to 20p from April, enhanced first-year capital allowances at 40 per cent. extended to July this year and a new capital gains tax taper for individuals, reducing the effective rate for those investing in business assets to 10 per cent. after 10 years. Small businesses benefit most of all from a move from the boom-bust economy to an economy based on stability.
Mr. Sheerman: Has my right hon. Friend seen the findings of recent research, which suggest that a high percentage of small businesses not only have no information technology systems, but do not possess a computer? Is it not about time that we gave small businesses real incentives to move into the computer age, even if that means introducing a tax scale of some kind--or, indeed, giving universities a role in the improvement of the systems available to small businesses, and in the education of those businesses?
Mr. Brown: I thank my hon. Friend for his question, and for chairing, this morning, the first meeting of the parliamentary committee on the euro.
My hon. Friend's point about small businesses is well taken. A third of a million small businesses have access to the internet and to electronic commerce. We intend to raise that figure substantially, and, working with business, we shall do what we can to achieve our aim.
Mr. John Townend (East Yorkshire):
When I listen to Ministers, I sometimes wonder whether they have any idea of the problems involved in running a small business. I know of those problems from personal experience.
Does the Chancellor appreciate that the small tax reductions that he has mentioned will not help businesses on the borderline, some of which have been driven into losses by the burdens imposed on small business? Those burdens have increased dramatically since the Government came to power. Paternity rights, the social
chapter, the working time directive, the hygiene regulations and the minimum wage will all cause more and more small businesses to go before industrial tribunals, where they will face a maximum penalty of not £12,000 but £50,000, which could put many of them out of business.
Mr. Brown:
We will take no lectures from a Conservative party that unilaterally imposed statutory sick pay on every employer in the country. As for the climate for business, the hon. Gentleman, who was an MP at the time, will remember that, in the early 1990s, inflation rose above 10 per cent. and interest rates rose to 15 per cent. for a year and remained above 10 per cent. for four years, and 1 million small businesses went under as a result.
What businesses want most of all is the stability that is being provided by a Labour Government. Contrary to what the hon. Gentleman has said, small businesses welcome the cut in tax from 23p to 20p. We have yet to hear whether the Conservative party would rescind that cut, along with working families tax credit.
7. Mr. Paul Truswell (Pudsey):
What plans he has to improve the accuracy of tax demands sent to self-employed people. [72419]
The Financial Secretary to the Treasury (Mrs. Barbara Roche):
To help self-employed people to manage their tax affairs within the new self-assessment system, the Inland Revenue sends taxpayers statements of account which detail the current tax position. The Inland Revenue is constantly looking at ways of improving its service to taxpayers, and has recently improved the format of self-assessment statements.
Mr. Truswell:
I thank my hon. Friend for that answer. Is she aware that, as well as overtaxing the incomes of 800,000 self-employed people, the Inland Revenue has added insult to injury by enclosing with its letter of apology a guide that would have overtaxed the intellect of the average genius, let alone Members of Parliament? Has she any plans to introduce a numeracy and literacy strategy, so that, next year, we can have plain English, plain dealing and plain sailing?
Mrs. Roche:
I am well aware of the problems identified by my hon. Friend, and I take to heart his comment about plain English. I shall certainly undertake to ensure that his remarks are passed on.
Of course the Inland Revenue regrets the problems caused by the statement error. It decided to send all the statements, despite the fault in some, because taxpayers needed to know what to pay by 31 January. The fault was put right before statements were issued in February. Work is in hand to ensure that such faults do not slip through in future. I hope that my hon. Friend will accept those reassurances.
Miss Anne McIntosh (Vale of York):
Will the Minister join me in calling on the Inland Revenue to impose the same penalties on itself for overcharging self-employed people in their tax assessment, and to repay
Mrs. Roche:
It is very unlikely that the situation that the hon. Lady describes will arise because of the late notification, which this was all about, but I am interested that the hon. Lady, for whom I have some regard--[Hon. Members: "Some regard?"] There are limits beyond which even I will not go. I am grateful to her for raising the question of interest on late payment. Perhaps she might consider her party paying interest on broken promises.
Mr. Bill O'Brien (Normanton):
May I join my hon. Friend the Member for Pudsey (Mr. Truswell) in asking the Minister to prevail on the Inland Revenue to be more efficient and to show greater efficiency in its dealings with the self-taxation system? Because of the Inland Revenue's lack of efficiency, returns are being sent to constituents and demands are being made for interest payments on unpaid tax when the tax has been paid. However, because of lack of efficiency, the Inland Revenue is not prepared to accept its mistakes. I understand that many constituents are paying interest by default. I ask the Minister to take the matter up and to demand greater efficiency in the Inland Revenue.
Mrs. Roche:
I say openly that, if my hon. Friend has some examples and cases to put to me, I will look into them as quickly as possible. If mistakes are made, we will always be happy to take responsibility and to look into them, but the Inland Revenue is constantly looking at its service, through consultation, and improvements are made all the time.
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