§ 25. Mr. Arthur Davidsonasked the Chancellor of the Exchequer if he will take steps to tax the retirement pension 1125 at a lower rate, when it is assessed for tax purposes, than other earnings.
§ Mr. Patrick JenkinI am afraid that I could not entertain the hon. Member's suggestion.
§ Mr. Davidsonrose—
§ Mr. SpeakerOrder. The hon. Member, in a supplementary question to Question No. 12, announced that he was anticipating his supplementary question on this Question. However, I will allow him to ask it.
§ Mr. DavidsonI am grateful, Mr. Speaker: I did not think that you would allow me to do so. I cannot recall in detail the Financial Secretary's earlier reply, but will he bear in mind that pensioners very much resent their retirement pension being taxed at all; and that if he would at least go halfway by taxing the pension at a lower rate he would give some recognition to these natural and well-founded resentments?
§ Mr. JenkinMy right hon. Friend has already referred to the age exemption relief, but perhaps I can tell the hon. Gentleman that for a married couple under 65 the threshold for tax is £598; for a couple over 65 it is £786, with marginal relief that goes right up to £1,112. These are the figures for 1971–72. They will be higher still next year.
§ Mr. Maxwell-HyslopIs it not the case that if the retirement pension were made tax free it would be entirely regressive and would benefit most those with the largest gross incomes?
§ Mr. JenkinIt would certainly help those below the tax threshold not at all.
§ 26. Mr. Rostasked the Chancellor of the Exchequer what consideration he is giving to the reduction of income tax liability for retirement pensions.
§ Mr. Patrick JenkinThe aim of this Government is to reduce taxation on incomes generally.
§ Mr. RostI welcome that reply. Has my hon. Friend had time to study some of the letters he has received from me and some of my pensioner constituents giving examples of relatively high taxation on reasonably small incomes? Does he not agree that the present Government promote an incentive to self-provision, 1126 and should we not now do more to provide incentives to self-provision following six years of the reverse?
§ Mr. JenkinIt is certainly true, as I say in reply to many letters received from my hon. Friend and from other hon. and right hon. Members, that the rates of taxation in this country are high, and we aim to reduce them. We made a start—many people would say a very satisfactory start—in the Budget earlier this year.
§ Mr. MarksIs the Financial Secretary aware that those who contribute to National Insurance pensions and who will contribute under the Government's new reserve scheme will pay tax on their pensions but will get no tax relief on their contributions? Is that not grossly unfair?
§ Mr. JenkinI would not necessarily accept that it is grossly unfair, but it does not lie in the mouths of hon. Members opposite to make those accusations because theirs was the Government who removed tax relief on National Insurance contributions. As for the reserve scheme, the weighting on the contributions as between employer and employee is towards the employer in order, at any rate in part, to make up for the fact that the employee's contribution will not qualify for tax relief.
§ Mr. HefferDoes not the Financial Secretary agree that, apart from the general principle of taxation on retirement pensions, one of the problems is that every time there is a slight increase in their income, pensioners are not re-coded quickly enough and on many occasions find themselves on Code 1, which means that they have to pay higher taxation for a longer period than they ought to pay it? Will not the hon. Gentleman promise that this aspect will be looked into at the earliest possible moment?
§ Mr. JenkinI am certainly prepared to look into any case, and hon. Members are swift, and rightly swift, in sending such cases to me when they come to their attention. In the overwhelming majority of cases if the changed circumstance is notified to the tax office, any necessary steps are taken within a matter of weeks and any repayment due is made forthwith. But I will certainly look into this matter to see whether we can improve and speed up the process.