Below is the text of Mr Major’s response on Taxation held on 18th January 1990 in the House of Commons.
Mr. Barry Porter To ask the Chancellor of the Exchequer if it remains his policy to achieve lower rates of direct taxation.
The Chancellor of the Exchequer (Mr. John Major) We have set an objective of 20 per cent, basic rate of income tax, without a time limit.
Mr. Porter I am sure that all my hon. Friends are delighted with that response. In drawing up his Budget statement will my right hon. Friend also consider that it would be helpful to give some fiscal encouragement to savings and investment rather than to consumer spending?
Mr. Major My hon. Friend makes an important point about savings. I shall make a careful note of it. The real difficulty with the savings ratio is not so much a fall in the stock of savings, but an increase in the amount of borrowing. Our interest rate policy is intended to deal with that.
Mr. Beith Will the Chancellor take a more positive and enthusiastic attitude to incentives for saving, particularly in a year when the necessary and welcome move towards independent taxation and the national insurance changes will make for a looser fiscal stance?
Mr. Major The hon. Gentleman is an old parliamentary hand. When was any Chancellor enthusiastic before a Budget?
Mr. Yeo Bearing in mind the obvious advantages for everyone of lower taxation, can my right hon. Friend advise my constituents in Suffolk whether he knows of any politician who is currently recommending higher taxation?
Mr. Major Whether the person concerned is a politician is a matter for judgment, but I believe that it is the official policy of Her Majesty’s Opposition to raise taxation substantially both in terms of direct taxes and national insurance contributions.
Mr. Nicholas Brown Just among ourselves, would not the Chancellor like to take this opportunity to admit that 2 per cent, off” the mortgage rate is worth substantially more to most home owners than 2p off the basic rate of income tax? Would not the Chancellor also like to take this opportunity to repudiate the top rate tax-cutting, interest rate-rising policies of the previous Chancellor, or would he prefer to wait until the Budget? In the meantime, will he confirm that, as the former Minister for Housing and Planning told us not so long ago, the Conservative party’s official response to those who are struggling to pay their mortgages is that they should take in lodgers?
Mr. Major Even among ourselves, in the privacy of this exchange, I am reluctant to concede too much to the hon. Gentleman. I note his implicit acknowledgement that the Labour party would reverse the Government’s policy of cutting top taxes and would increase taxation quite substantially. Mortgage interest rates will fall when interest rates fall, which will be when we begin to see some progress in reducing the rate of inflation, and not before.