Clause 16.—(INCREASE OF RELIEF FOR DEPENDENT RELATIVE OF FE MALE CLAIMANT AND FOR WIDOWS AND OTHERS IN RESPECT OF CHILDREN.) (Hansard, 27 June 1967)

§ Mr. MacDermot
I beg to move Amendment No. 8, in page 18, line 28, at beginning insert: (1A) In section 13 of the Finance Act 1957 (relief for persons over sixty-five with small incomes), as amended by section 10(6) of the Finance Act 1965, for the references to £390 and £625 (the income limits for exemption) there shall be substituted references to £401 and 339 £643; and (as regards the marginal relief) for the reference to £160 (the addition to the income limit) there shall be substituted a reference to £180. (1B) In section 216(1) of the Income Tax Act 1952 (relief for dependent relative), as amended by section 10(3) of the Finance Act 1965, for the reference to £210 (lower income limit of dependent relative) there shall be substituted a reference—

(a) for the year 1967–68, to £221,

(b) for subsequent years of assessment, to £235,
and, subject to the next following subsection, for the reference to £285 (the higher income limit) there shall be substituted a reference, for the year 1967–68, to £296, and for subsequent years of assessment, to £310.

§ Mr. Speaker
It would be for the convenience of the House if we also discussed Amendments Nos. 9 and 10, which, I am told, are consequential.

§ Mr. MacDermot
These three Amendments increase the income limits for age exemption and the income limit for the dependent relative allowance to take account of the proposed increases in the basic National Insurance retirement pension announced the other day by my right hon. Friend the Minister of Social Security. The House will remember that the proposed increases in the retirement pension are 10s. a week for a single person and 16s. a week for a married couple, to take effect from 30th October next, if the House approves. The extra pension received this year will be £11 10s. for a single person and £18 8s. for a married couple. For a full year the increase will be £26 and £41 12s.
The present income limits for the special exemption for elderly people over 65 are £390 for a single person and £625 for a married couple. Pensioners who only have their retirement pension are well below those limits. If a pensioner has other income bringing his total up to or near the present limit appropriate to his circumstances the increase in the pension would carry him above the limit.
Similarly, if he has other income bringing his total to a bit above the present marginal relief limit, again he would be taken outside the range by the increases. What the new subsection (IA) in the first Amendment does is to increase the present age exemption limits by £11 to £401 for a single person and by £18 to £643 for a married couple. The broad effect will be 340 that the increases in the pension will not affect the title to age exemption or marginal relief this year.
At present, some marginal relief might be due in the extreme case of a married couple with no allowances other than the basic married allowance, and an income of £781, an "excess" of £156. The present law rounds this up and provides a marginal band of £160. With the new income limit marginal relief could operate for incomes up to £176 above the married couple's limit, so that the figure of £160 is to be amended to £180.
To turn to the dependent relative allowance. At present, the full allowance is due only if the dependant's income does not exceed £210, that is to say, £75 in the normal case, £110 for a dependent relative maintained by a single woman. This figure represents the present retirement pension of £4 a week rounded up, the exact figure being £208 a year. If the dependant's income exceeds this figure the allowance due is reduced by £1 for every £1 of the excess. The increase in retirement pension will increase the income of most dependent relatives by £11 10s. this year and £26 in a full year.
The new subsection (1B) which the first Amendment proposes to add to the Bill raises the relative's income limit by £11 from £210 to £221 for 1967–68 and by £25 from £210 to £235 for subsequent years. A dependent relative whose only income is the basic retirement pension will still qualify for the full amount of the allowance, but a dependant who has a little other income will rank for the same dependent relative allowance for 1967–68 as was due before the pension increased. For 1968–69 the relief may be reduced by £1 because of the differences in the rounding up.
At present, the full relief of £75 which is due if the relative's income does not exceed £210 drops by £1 for every £1 by which the relative's income exceeds £210, becoming nil if the income is £285 or more. Clause 16 of the Bill as it stands, increases the full allowance of £75 to £110 for claimants who are single women and, therefore, increases the £285 to £320 in those cases. The present Amendments increase these figures by a further £11 for 1967–68 and £25 for later years, so that the relief will drop to nil for 1967–68 on a dependant's income of £296, if the claimant is a man or £331 if the 341 claimant is a single woman. For 1968–69 and later years the corresponding figures for a dependant's income at which no allowance will be due are £310 and £345 respectively.
The reasons why we have made provision in the Bill this year to cover the dependent relative allowance limits for the following year, 1968–69 are administrative. It would be very helpful to the Revenue when doing the preparatory P.A.Y.E. coding work for 1968–69 this autumn to know what will be the dependent relative's income limits for the year. On previous occasions when National Insurance pensions were being increased the dependent relative's income went up. It has been the practice to make an advance announcement that this would happen, so that the coming year's P.A.Y.E. coding would reflect the dependent relative allowance right from the start.
As this announcement is being made simultaneously with provisions in the Finance Bill, we thought it right to give statutory form to this intention from the outset.

§ Mrs. Thatcher
I am grateful to the Financial Secretary for his explanation. We had wondered why the subsequent year's assessments were dealt with for the income limits for dependent relative relief, and not for the other reliefs dealt with in this Amendment. I have one comment to make about the reliefs. We have noted that they were extremely small and we have noted the Financial Secretary's reason for it.
We therefore expect them to go up in the next Finance Bill. I would make the point that the limit of £390 for the single person, which is now being increased by only £11, is still very small because the limit was changed to £390 in April 1965.
Since then there has been an increase in the cost of living of 7.5 points which, if my arithmetic is correct, works out at about 6 per cent. This year a purchasing power of £390 in April, 1965, would require to be very nearly £415. The person who has a very small income does not enjoy the same tax exemption with the same purchasing power as he or she did in 1965. I mention this because I hope that the Financial Secretary will take this into account in the Finance Bill next 342 year and at any rate retain the purchasing power and the exemption limits which he and the Chancellor gave the House in 1965.