§ 36. Mr. Biffenasked the Secretary of State for Social Services if his attention has been drawn to the Institute of Economic Affairs' publication, "Social Benefits and Tax Rates", by Professor A. R. Prest, a copy of which has been sent to him; and what conclusions he has drawn on the possible effects of taxation on social benefits.
§ Mr. CrossmanI have read with interest this pamphlet, which is mainly concerned with the effect of increases in income on entitlement to social benefits. We are aware of the problem to which the pamphlet draws attention, although we doubt whether the effects are in practice as extensive as the pamphlet suggests. We are, however, studying the situation closely.
§ Mr. BiffenWould the right hon. Gentleman agree that this has been a very valuable study, which has shown that the effective rates of marginal tax on essential benefits can in some circumstances exceed 100 per cent.? As further study is being given to the problem, will he report when this study has been completed?
§ Mr. CrossmanYes, Sir. I will not say that it was easy to understand but once I got a glimmer of what an implicit marginal tax rate was I began to realise the great significance of it, even to people with low incomes receiving social services. Very few of them, possibly, understand this. If they did the Chancellor might have much greater problems. This disturbs me greatly as the Social Services Minister, and I am studying it very closely.
§ Lord BalnielWhile agreeing about the great value of the report, may I ask, on the subject of financing the social services, whether the right hon. Gentleman will confirm that the additional £50 million which will be raised by increasing the employers' contribution to the Health Service will be used to finance abolition of the prescription charge, which will also cost exactly £50 million?
§ Mr. CrossmanI am grateful to the hon. Gentleman for giving me a foretaste of his speech on Wednesday.