Income Tax

HC Deb 08 April 1952 vol 498 cc2483-5

47. Mr. I. Mikardo

asked the Chancellor of the Exchequer how much of the extra £1 per week is retained by a single man earning £7 per week who increases his earnings to £8 per week; and how much of the extra £1 will be retained by him when the new tax tables come into force.

Mr. R. A. Butler

In this particular case the hon. Member will be aware that the reduction in tax on overtime work is limited to the reduction produced by the increase in earned income relief, and the gain is 2d. The same man will have the tax on his pay reduced by 4s. 4d. a week.

Mr. Mikardo

Does not this make absolute nonsense of the suggestion that the effect of the Chancellor's changed tax structure will be to give the workers the incentive to work overtime?

Mr. Butler

Well, the hon. Member probably knows as much about Income Tax tables as I do, yet he has deliberately given in this Question and the next two instances of where the reduction in the Tax on overtime work is limited to the reduction produced by the increase in the earned income relief. It was impossible to give a steeper improvement in the amount of the earned income relief. Clearly, there are one or two places in the tables where this occurs, but very few. In the majority of cases there is a distinct advantage on overtime. As the hon. Gentleman will observe, there is a distinct gain here which will be a relief to the man concerned.

48. Mr. Mikardo

asked the Chancellor of the Exchequer how much of the extra £2 per week is retained by a married man with two children earning £12 per week who increases his earnings to £14 per week; and how much of the extra £2 will be retained by him when the new tax tables come into force.

Mr. R. A. Butler

The difference between the two figures is 5d. This man will have the tax on his pay reduced by 9s. 1d. a week.

Mr. Mikardo

Is the right hon. Gentleman aware that this sort of thing operates in a large number of cases throughout the tax tables, and is it not now clear that the major purpose of the change was not to give advantage to the middle range of wage earners but to high income earners, and particularly those with high unearned incomes?

Mr. Butler

I have two answers to that. If the hon. Member would interest himself in the man with a wage of £8 a week, a married man with two children who earns an extra £2 would have the tax on that £2 reduced from 5s. 1d. to 1s. I should have thought that that was a certain incentive. Further, in the scheme for which I was responsible, the advantages to those earning over £2,000 a year and higher were very much less than in the tables produced and passed by the House when two of my Socialist predecessors were in office.

Mr. Mikardo

How many workers earning £8 a week does the right hon. Gentleman think will have the least possibility of getting another £2 a week in overtime?

Mr. Butler

It depends entirely on their circumstances. As this scheme was intended to be fair and to give an opportunity, I say without hesitation that some of the most difficult cases are precisely those of railway workers, whom the hon. Member represents in Parliament.

Mr. Nabarro

Would my right hon. Friend quote the case of a miner working on a Saturday morning and thereby earning overtime rates of pay which would yield precisely the incentive results that his Budget was intended to provide?

49. Mr. Mikardo

asked the Chancellor of the Exchequer what is the estimated total amount paid in Income Tax for the current year by the 2 million persons who are about to be exempted from liability.

Mr. R. A. Butler

I would refer the hon. Member to the answer I gave to the hon. Member for Stockton-on-Tees (Mr. Chetwynd) on 18th March.

Mr. Mikardo

Is it not clear from that answer that, on average, each of these two million persons will gain by the tax changes a good deal less than they will incur in additional costs as a result of the higher prices resulting from the Chancellor's programme?

Mr. Butler

In the debate last night and on every occasion, hon. Members opposite refuse, for good political reasons of their own, not to calculate the total reliefs and benefits in the Budget but to take those which suit them best. If the hon. Member refers to the answer to which I referred, he will see that between £5 and £6 million in a full year will be saved precisely to these two million people who are relieved from Income Tax.

Mr. Mikardo

Does the right hon. Gentleman realise that, taking his higher figure of £6 million, it means £3 per annum each, which is only just over 1s. a week? How are these taxpayers to pay for the additional cost of the food for their families out of a shilling a week?

Mr. Butler

That is precisely covered by the terms of the answer I have just given. If the hon. Member takes account of the various other reliefs in the Budget, including family allowances, there is a very considerable help towards those who have to suffer from the extra costs. I have never maintained, and nor have my hon. Friends, that every case can possibly be covered.