Vol. 430 No. 5
7 Mr. Cox asked the Minister for Finance his views on whether the continued existence of a 1 per cent levy on income constitutes a real obstacle to the continuation of the consensus approach with the social partners in general, and the trade union movement in particular, in the context of the Programme for Economic and Social Progress.
The Programme for Economic and Social Progress, like its predecessor, the Programme for National Recovery, has proved the merits of the consensus approach to managing our national affairs in terms of both jobs and living standards.
The introduction of an income levy on a temporary basis was necessary given the adverse consequences for the public finances of the recent prolonged slowdown in the international economy and the Government's concern to fulfil as far as possible the economic and social provisions and objectives of the Programme for Economic and Social Progress. In these circumstances, I hope that the levy will not prove an obstacle to the continuation of the consensus approach. I also hope that those in employment will see the levy as making a contribution towards catering for the exceptional unemployment and other social costs resulting from the slowdown in both the international and domestic economies. Furthermore, we should not lose sight of the fact that taxpayers have been asked to accept this limited sacrifice against the background of substantial gains in real take-home income and living standards under both the Programme for National Recovery and the Programme for Economic and Social Progress. It is also the case that any realistic alternative to the introduction of the temporary levy would similarly have been subjected to such criticism which fails to take account of the overall budgetary context.
The consensus achieved first under the Programme for National Recovery and continued in the Programme for Economic and Social Progress has resulted in considerable benefits, not only for the economy but also for every man, woman and child in the country. I believe that the whole country would lose a great deal if the consensus approach were discarded. We are all challenged, those in Opposition as well as the Government, and the social partners, to overcome obstacles to consensus and the progress which it brings — especially those thrown up by force of economic developments such as that to which the question refers. I am confident that we can all deal with this challenge as successfully as we have done with others over the past seven years.
Does the Minister agree that the 1 per cent income levy is a very crude tax, as it is an imposition on incomes as low as £173 per week? Senior trade unionists have said explicitly to the Government that if it is not withdrawn immediately it constitutes an obstacle not only to the renewal of the Programme for Economic and Social Progress but to sitting down to contemplate it.
I am aware of the remarks made by senior trade union leaders. Naturally I hope that when the facts and circumstances are examined, following a review of the Programme for Economic and Social Progress and the various statistics and schedules produced by the Central Review Committee, the trade unions will see the benefits involved. I will give one example which I used previously to highlight this matter; a worker who is single and earning an average industrial wage will have experienced a real increase in net take home pay of more than 11 per cent between 1987 and 1993 in contrast with a decrease of 7 per cent in the period from 1980 to 1987. Considering the extremely tight budgetary position this year, which was acknowledged by all commentators, and the increase in the numbers on the live register during the period late 1991 to early 1993 of more than 30,000, with additional expenditure of £130 million — the Deputy is correct in that levies are blunt instruments — it was not unreasonable to claw back, hopefully on a temporary basis, a small proportion of that money.
Will the Minister accept that it is as a result of tax reform that the figures on disposable income are so impressive? The reason trade unions are signalling concern at this stage is that not only is the 1 per cent levy a crude instrument, as the Minister acknowledged, but it fundamentally reverses the thrust of policy to date.
The 1 per cent levy makes up just a small portion of the money used in the last few years to reduce taxes——
The Minister should ask the taxpayers about that.
——and pay public service and private sector workers. Public service pay has been increased by about 19 per cent in line with the commitment in the Programme for Economic and Social Progress and in those circumstances a reduction of 1 per cent must be seen as very small.
