Below is the text of Mr Major’s speech made to the Scottish Conservative Party Conference which was held in Perth on Friday 13 May 1988. It was made in reply to the debate on economic policy and taxation and published by Conservative Central Office as document 204/88.
JOHN MAJOR:
Last year Nigel Lawson came to you with a promise, a pledge, and a prediction. He predicted that the British economy would move further ahead. It has.
He pledged that we would keep up the fight against inflation – and we have, with inflation over the past five years averaging less than 5%.
He promised that he would cut the basic rate of tax to 25p. He has.
That cut reduces the marginal tax rate for 23 million taxpayers. Combined with the increase in personal allowances it means an extra £5 a week to the married man on average earnings. It means that the average nurse is paying £12 a week less in income tax than she would be paying if we’d simply stuck to Labour’s tax regime – £12 a week.
Labour once had a tax rate of 25p in the £. But the problem was it didn’t apply to many pounds. Under Labour, it was the marginal tax rate for 4.5 million taxpayers. Now, it is the marginal rate for 23 million taxpayers. Five times as many. Under them, 25p covered just £750 of taxable income. Now it runs to £19,300 of income – 25 times as much. Labour’s 25p was a token, ours is the tax rate for all the income of the overwhelming majority of people.
You will remember that in last year’s Budget debates, Labour voted against the reduction in the basic rate of tax to 27p. Last week they voted against the further reduction to 25p – against a reduction for the low paid person on £5,000 a year, and for those on average earnings. 6 weeks after Budget Day, they’ve broken their vow of silence and finally revealed their own policy. They are in favour of high taxes and against low taxes even for the lower paid whom they claim they want to help. Well, I have news for them. We are in favour of lower taxes and our priority now is to reduce the basic rate of tax to 20p in the £ as soon as we prudently and sensibly can. We believe that people can spend their own money in the interests of their own family better than the Government can – and we shall give them the opportunity to do so.
But last week’s debates in the House of Commons were notable not just because Labour finally admitted that they didn’t want the mass of the British to pay lower taxes. They also entrenched themselves yet deeper in opposition to the cuts in the higher rates of tax.
They claimed that there was no “evidence” that higher rate cuts worked. The fact is that even after the Budget higher rate taxpayers will be paying a larger proportion of income tax revenues than they did in 1979. And these people are not the ‘super rich’ with whom Labour are obsessed. They include those who make a particular contribution to our society, such as many headmasters, surgeons and small businessmen. 60% of the gainers from the higher rate changes are not the ‘super rich’ for whom I hold no special brief – but those who earn less than £40,000.
But remarkable though this Budget was, we do not believe in tax cuts at the expense of keeping the public finances sound or at the expense of essential public services. Last autumn we concluded a public expenditure round which increased planned spending by an extra £4.5 billion for key public services in 1988/89. £850 million for education in the UK, of which £230 million in Scotland; £500 million for law and order in the UK, with £55 million in Scotland. It also provided £229 million more for defence, and over £1,000 million for Social Security.
Our public expenditure plans, published in January, show that we plan to spend £1,100 million more on health in 1988-89 than in 1987-88. In Scotland alone the increase is £177 million. Since those plans were published we have provided another £750 million from the Reserve to fund in full the pay awards for nurses and doctors and dentists. The nurses will get an increase averaging 15% – their highest ever real increase. Yet again the Government has honoured the recommendations of the Review Body for nurses that we set up.
And we can do all this – cut taxes across the board, make major tax reforms and provide for better public services, at the same time as we plan to repay our National Debt, not add to it.
Last year we achieved a balance on the Budget of £3.5 billion – a cash surplus unprecedented in post-war years. This year we are planning a further debt repayment of £3 billion. And that means that you and I, and our children, will have to pay less to service that debt in the future. Less of our taxes will have to go in paying off interest on past borrowing. If Government borrowing had remained at its 1978/79 share of GDP, cumulative borrowing would now be about £80 billion higher, with increased debt servicing costs of around £8 billion a year. £8 billion a year available for better services, or lower taxes. If we had not reduced this borrowing we would have had to put up the basic rate of tax by 7 pence this year; not to spend more on education or health or Social Security but simply to pay the interest to our creditors on the debts we would have incurred. That is the scale of the change we have brought about in recent years. Indeed, so profligate was the Labour administration by comparison that in this year’s Budget the Chancellor could have abolished Income Tax altogether and still be borrowing less as a share of national income, than Labour in the mid-Seventies. But as you know, he did not judge it prudent to do so.
Mr. Chairman, I am well aware that some of the changes in Scotland in recent years have been painful. But they have been spectacular too. And above all they have worked. Our job for the future must be to build on the growing strength and vitality of the economy; to promote new investment; more enterprise; and, in so doing, to build a greater choice of employment and opportunity for the present generation than their predecessors even enjoyed.
Scotland not only can do this; it is already doing it. The prosperity gauge is rising – in Scotland and throughout the United Kingdom. Our policy to see it rise still further is clear; a balanced budget, steady sustainable growth, reduction of debt and the elimination of inflation.