§ Mr. CallaghanI next propose legislation which will provide for a rise of 6d. in the standard rate of Income Tax to take effect from 6th April next year. But I do not propose to make a corresponding increase for the reduced rates of tax which are charged on the first £300 of the taxable income of individuals after they have received their personal allowances. The effect of this modification will be that 14½ million of the 21 million persons with incomes in the taxable field will be unaffected by the increase in the standard rate.
I give some examples. A married man with one child under 11 years of age and earning not more than £18 a week will pay no more in Income Tax than he does at present. With earnings of £20 a week, such a married man with a small child will pay an extra 6d. a week. A married man without children will pay no more in tax if the earnings do not exceed £15 a week. At £17 a week earnings, such a married man without a family will pay another £1 2s. 10d. per year, or less than 6d. per week. A married man with two children under 11 will pay no extra tax up to an earned income of £1,100 per year. At £1,200, the extra tax will amount to an additional £1 10s. 8d. per year, or 7d. per week.
1038 I can put it this way. The levels below which no additional tax will be paid will be like this: for a single person, nearly £13 a week; for a married couple, nearly £15 a week; for a married man with one child under the age of 11, nearly £19 a week; for a married couple with two children under the age of 11, nearly £1,200 a year before any additional tax will become payable.
As is the nature of the Income Tax, equity plays a large part. This is one of the reasons why I have selected it. The higher the income, the bigger the tax. I am, however, aware that it hits hardly on a great many people. I have no particular desire, in my first Budget, to raise taxation, but I am trying to face the situation that I have inherited and to deal with it honestly.
If I may give two more examples, a married couple earning £2,000 a year and with two children under the age of 11 will pay an extra £17 a year and a married man with no children and an earned income of £3,000 a year will pay an extra £42 a year. I estimate that this increase in the standard rate of tax will yield an additional £122 million of revenue in 1965–66. Of this amount, about £78 million will be borne by companies and more than half of this will be borne by their shareholders.
Given the need to increase tax rates, I believe that I have adjusted these additional imposts in such a way that they fall on the shoulders of those who can best bear them. I recognise fully that burdens and commitments grow with an increasing income and that to the young family with a small child and an earned income of £1,500 per year, even another 4s. a week can be meaningful. This is especially true when they are burdened with the cost of buying a home at high interest rates or renting accommodation and paying fares to and from work. We all should recognise these facts. I shall watch the revenue prospects carefully in order to ease their position as and when I can. Meantime, I hope that it will be recognised by all that they are making a contribution that will assist in the difficult task of climbing out of our balance of payments deficit and will help to ease the lot of the most needy in the community.