The Rt. Hon. Sir John Major KG CH

Category: Chancellor (1989-1990)

  • Mr Major’s Parliamentary Answer on Taxation – 18 January 1990

    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.

  • Mr Major’s Written Parliamentary Answer on Separate Taxation – 17 January 1990

    Below is the text of Mr Major’s written Parliamentary Answer on Separate Taxation on 17th January 1990.

    Sir John Stanley To ask the Chancellor of the Exchequer what steps he will take to ensure that charities do not suffer a loss of income from covenants from married couples where one of the spouses is not paying income tax as a result of the introduction of separate taxation as from 1 April 1990.

    Mr. Major [holding answer 21 December 1989]: A charity’s claim to refunds of tax on payments received under covenants does not depend on whether the covenantor is, or is not, liable to pay tax on his or her own income.

    A covenantor making a covenant payment to a charity deducts basic rate tax and pays over to the charity only the net amount. The charity is entitled to claim back that tax from the Inland Revenue.

    If the covenantor is liable to tax on an equivalent amount of his income, he gets basic rate relief for the covenant payment by retaining the tax he has deducted from it. If he is not liable to tax on an equivalent amount of his income, he has to pay over to the Inland Revenue the tax he has deducted.

    The introduction of independent taxation for married couples with effect from 6 April 1990 will mean that a husband and wife will become separate taxpayers. If one of them will not be liable to tax, the effect on his or her covenants will be no different from what happens now when a covenantor is a non-taxpayer- the payments will continue to be made net of tax to the charity, but the tax withheld will have to be paid over to the Revenue.

    For the past year, Inland Revenue publicity material has drawn attention to the fact that couples who find themselves in this situation may want to review their covenant arrangements. That is a matter between covenantors and the charities that they support.

  • Mr Major’s Written Parliamentary Answer on Construction Company Earnings – 15 January 1990

    Below is the text of Mr Major’s written Parliamentary Answer on Construction Company Earnings on 15th January 1990.

    Sir John Stanley To ask the Chancellor of the Exchequer what was the average annual increase in the net earnings of construction companies between 1974 and 1979; and what has been the average annual increase since 1979.

    Mr. Major Based on figures extracted from published accounts, the average annual increase in net income of large construction companies was 12.5 per cent. between accounting years 1974 and 1979 and 11.6 per cent. between accounting years 1979 and 1988. Net income is defined as gross trading profit plus other revenue income less depreciation. The underlying figures are published in the MA3 series of business monitors “Company Finance”.

  • Mr Major’s Written Parliamentary Answer on Charities – 21 December 1989

    Below is the text of Mr Major’s written Parliamentary Answer on Charities on 21st December 1989.

    Mr. Alfred Morris To ask the Chancellor of the Exchequer if he has any plans to legislate for the removal of taxation on charitable fund raising by appeals like that for Children In Need or to make compensatory ex-gratia payments to such appeals of equivalent amounts to any taxation deducted.

    Mr. Major [holding answer 20 December 1989]: Donations to charitable appeals are not liable to income tax, corporation tax or VAT, provided the donors receive no benefit in return. One-off fund-raising events held by charities are exempt from VAT, and non-charitable bodies can also obtain VAT exemption when organising one-off events as agents of an appeal fund which has charitable status. Income tax or corporation tax may be payable where the fund-raising activities amount to trading but, by concession, the Inland Revenue does not charge tax on the profits where certain conditions are satisfied. Full details of the concession (C4) are contained in the Inland Revenue leaflet IR1 1988.

  • Mr Major’s Written Parliamentary Answer on Harbours – 21 December 1989

    Below is the text of Mr Major’s written Parliamentary Answer on Harbours on 21st December 1989.

    Mr. John D. Taylor To ask the Secretary of State for Northern Ireland if he will list by category the number of(a) yachts, (b) fishing boats, (c) pleasure boats and (d) other sea-going vessels registered at Portrush, Ballycastle, Bangor, Ardglass, Donaghadee and Portstewart harbours.

    Mr. Major [holding answer 18 December 1989]: I have been asked to reply.

    I regret that this information is not available centrally and could be obtained only at disproportionate cost.

  • Mr Major’s Written Parliamentary Answer on the Married Couple’s Allowance – 20 December 1989

    Below is the text of Mr Major’s written Parliamentary Answer on the Married Couple’s Allowance on 20th December 1989.

    Mr. Raison To ask the Chancellor of the Exchequer (1) what is his best estimate of the saving from abolishing the married couple’s allowance for non-pensioners in 1990;
    (2) what is the expected cost of the married couple’s allowance in 1990–91.

    Mr. Major The direct revenue cost of the married couple’s allowance in a full year at 1990–91 levels of income is estimated to be £5 billion. If the allowance were to be given only to married couples where either the husband or wife was aged 65 or over, there would be a saving of about £4.5 billion.

    Estimates are based on a projection of the 1987-88 survey of personal incomes, and, in line with Autumn Statement forecasts, assume 7.5 per cent. indexation of allowances and the basic rate limit; all estimates are provisional.

  • Mr Major’s Speech to the Stock Exchange Christmas Lunch – 20 December 1989

    The text of Mr Major’s speech to the Stock Exchange’s Christmas Lunch on 20th December 1989.

    CHANCELLOR OF THE EXCHEQUER:

    I’m pleased to have been invited to join you for two reasons. First, because it is an agreeable occasion in itself, and second, because it has been a pretty boring year to far, and coming to the Stock Exchange Christmas Lunch will give me something to remember it by.

    This is the third successive years I will have both begun and ended in the treasury. In saying this, I am of course assuming that I will end the year in the Treasury – you may regard this as rash, since there are, after all, eleven days to go yet! Nonetheless, I will take the risk.

    The Treasury has lost none of its subtle ways in my absence. Treasury officials really are in a class of their own. And to prove it – they have a language of their own.

    For example, the Delphic phrase, “We are still crawling over these numbers”, really means “this thing is riddled with mistakes”.

    “There is one slight wrinkle” translates as “the whole idea is fundamentally flawed”.

    “I think the point you made may well be right, Chancellor” translates as “it’s absolute rubbish, but in this daft world anything can happen”.

    And heaven help you if you are told some question is “essentially a matter for your political judgement”, that means “you got yourself into this mess – now get yourself out of it”.

    But jargon is not just the preserve of civil servants. The City has its own jargon too. It starts with the radio in the morning, and the compelling news of how the American long bond has fared in Far East trading. And it continues all day. The pound does not go up or down’ nothing so mundane, it is “firm” or “soggy”. Trading is “choppy” or “directionless” – and I’m not sure which is worse. And huge fluctuations are put down to a mysterious phenomenon described as a “nervous European afternoon”.

    And how about the following, which I find published at the foot of one eminent city firm’s circular:

    “This material is for your private information and we are not soliciting any action based upon it. Opinions expressed are our present opinions only. The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such”.

    This really means:

    “For heaven’s sake, take no action on the basis of this circular. We don’t want to be sued. In any event, we may change our mind by this afternoon. Our conclusions are based on ropey information, and you would be loopy to take any notice of it”.

    I am not being critical. I know how they feel. I just wonder if I could have that long caveat stamped on Treasury forecasts before I presented them to Parliament! Fortunately, I don’t need to – they are the best forecasts in the business, by and large!

    And these forecasts are clear for next year. They leave me in no doubt about the priorities for economic policy either. I have made no secret of my determination to get inflation down, and keep it down. For inflation, if it were allowed to take hold again, would be intensely damaging. It is not just that it undermines business planning and investment, and provokes industrial strife – though that in itself is damaging enough. It is that inflation is socially divisive on a grand scale. It favours the debtor at the expense of the saver, and the strong at the expense of the weak. It is quite simply unacceptable.

    So inflation has to be squeezed out using all the practical methods to hand. Which means monetary conditions have to be adequately tight. Of course there are always those who fear that the cure will be worse than the disease. But no one should underestimate the underlying strength of the real economy today, which is far healthier, more resilient, and more independent than the condition in which is entered the ‘80s. In the long term, the economy will be stronger, not weaker, for the action we have taken now. So to the doubters I say simple this: the soft option is not an option. And I believe that message is now well understood, and I see no need to labour it on this festive occasion.

    And I am also confident that I shall not need to borrow the technique one South American President, who has recently stated that he will go into exile if the 1990 inflation rate exceeds his target. He made the same promise last year if he missed his 1989 target of 80%. In the 12 months to November the rate was 77.9%. So far so good: we will watch events with interest.

    Another matter I have been watching with interest and which I should mention while I am at the Stock Exchange is the progress your exchange is making in preparing for the future. I was very glad to learn that a design for TAURUS is now ready to go out to consultation. With 1992 approaching fast, it is clearly of the greatest importance that we have an effective and modern system, and I hope that all concerned can now move quickly to achieve that.

    TAURUS is, of course, not only the name of your settlement system. To far more people it is a sign of the Zodiac. I am not myself a great believer in horoscopes, although I have made clear that we take a wide range of indicators into account when deciding whether monetary conditions are right. In this respect, there is one particular indicator whose status I have decided merits upgrading. Many people present may not realise the close relationship that existed for so long between the sterling dollar exchange rate and the performance of the English cricket team. Regrettably, this has broken down somewhat over recent years, but I believe it may still be useful, and so officials have been examining this matter carefully, to see what lessons we may usefully draw.

    There are clearly still a few wrinkles in the system. For example, I gather that on the basis of the Test team’s dismal performance over the past few years, the pound should now be worth less than 40 cents. There are a number of possible explanations for this:

    (i) It could be that there has been a chance in exchange rate policy, towards maintaining a firm pound, and that this has been spectacularly successful
    (ii) Or it could be that there has been a change in policy by England’s cricket selectors, which has been spectacularly unsuccessful
    (iii) It could mean that the pound is about to plummet
    (iv) Or it could simply be that you can prove anything with statistics

    I leave you to judge which of these is most likely. The conclusion I prefer to draw is that England are about to beat the West Indies 5-0, and win all their future matches for the next few years as well. And on that agreeable note, I wish you all a very Merry Christmas, and a Good New Year.

  • Mr Major’s Written Parliamentary Answer on Department of Transport (Expenditure) – 18 December 1989

    Below is the text of Mr Major’s written Parliamentary Answer on Department of Transport (Expenditure) on 18th December 1989.

    Mr. David Howell To ask the Chancellor of the Exchequer whether he will now review the policies of taxation in relation to benefits to employees from the provision of workplace nurseries and other child care facilities by employers.

    Mr. Major I refer my right hon. Friend to the reply that my hon. Friend the Financial Secretary gave to the hon. Member for Norwood (Mr. Fraser) on 3 November at column 361.

  • Mr Major’s Written Parliamentary Answer on Department of Transport (Expenditure) – 18 December 1989

    Below is the text of Mr Major’s written Parliamentary Answer on Department of Transport (Expenditure) on 18th December 1989.

    Mr. David Howell To ask the Chancellor of the Exchequer whether he will now review the policies of taxation in relation to benefits to employees from the provision of workplace nurseries and other child care facilities by employers.

    Mr. Major I refer my right hon. Friend to the reply that my hon. Friend the Financial Secretary gave to the hon. Member for Norwood (Mr. Fraser) on 3 November at column 361.

  • Mr Major’s Written Parliamentary Answer on Workplace Nurseries – 18 December 1989

    Below is the text of Mr Major’s written Parliamentary Answer on Workplace Nurseries on 18th December 1989.

    Mr. David Howell To ask the Chancellor of the Exchequer what is his policy on the taxation of benefits to employees accruing from the provision of workplace nurseries and creches.

    Mr. Major Employees pay income tax on their earnings whether received in cash or in kind. A subsidised place in a workplace nursery or creche is a benefit in kind and any subsidy is a proper subject for tax. The costs to the employer of subsidising workplace nurseries – or otherwise financing childcare for employees – is allowable against corporation tax.