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Budget Resolutions and Economic Situation

It is impossible for me, sitting where I do, to give an absolute figure on what should be the starting point for paying top tax rates. Nobody can expect us Opposition Members to do that. I am saying that we should at least have an open mind on this issue, look at what is happening in other countries and realise that it is possible to make considerable progress on these fronts. If Members do not want to consider the example of Australia, which is a long way away, they should consider Ireland. In 1987, Ireland’s economic position was precarious. It had stagnant growth, high unemployment, spiralling deficits and the International Monetary Fund threatening to intervene in the Irish economy. That sounds familiar: it happened a long time ago in our country before the reforms under Lady Thatcher and John Major. Ireland’s 1987 budget began a process of major economic reform, cutting spending drastically to bring the deficit under control. The next budget reduced current spending by 3 per cent. and capital spending by 16 per cent. Those spending reductions were accompanied and followed by major and continuing tax cuts. Among others, the standard rate of corporation tax was steadily reduced from 50 per cent. in 1987 to 12.5 per cent. in 2003—the lowest rate in the EU. Personal tax rates were steadily reduced from 35 per cent., 48 per cent. and 58 per cent. in 1987 to 20 per cent. and 42 per cent. in 2001. One might think that that was dramatic, and if anyone suggested such cuts here they would be dismissed as out of touch with reality or as coming from a right-wing think-tank, or criticised by Matthew D’Ancona in The Sunday Telegraph. However, between 1987 and 2003, overall tax receipts in Ireland increased fourfold and corporation tax receipts increased 16-fold. That has allowed public expenditure to grow by 220 per cent., compared with a rise in the UK of 120 per cent. in the same period. I know that other factors were involved and we cannot entirely replicate what the Irish managed to achieve. Ireland, for example, has benefited unduly from receipts from the EU, but the fact is that the simple case is very interesting, and we should be aware of it.