HC Deb 26 October 1971 vol 823 cc1463-4
17. Mr. Ralph Howell

asked the Chancellor of the Exchequer how many civil servants are engaged in making tax refunds arising from the exemption of unemployment, sickness, and social security benefits from taxation.

Mr. Maurice Macmillan

It is estimated that last year about 320 Inland Revenue staff were needed to make tax refunds to the unemployed. Refunds to the sick are made by employers and involve little or no staff costs for the Revenue.

Mr. Howell

Is my hon. Friend aware of the growing resentment amongst old-age pensioners and other low wage earners who, in some cases, are taxed on incomes as low as £8.50 a week, when they know that other people are receiving up to £30.35 in State benefits and tax rebates, tax-free? May I have an assurance that something will be done rapidly to correct that injustice?

Mr. Macmillan

Long-term social security payments have always been taxed. My hon. Friend will be aware that originally short-term benefits were due to be taxed also, but in the event that was not done, owing to administrative complications. There is no case in principle against taxing short-term National Insurance benefits. My hon. Friend will be aware that my right hon. Friend is examining the whole of the tax structure as part of his continuing review and reform of it, and these matters are being considered in the course of that examination.

Mr. Fernyhough

Would not the hon. Gentleman agree that his Government have already taxed the sick and unemployed by the withdrawal of payment for the waiting days?

Mr. Macmillan

That is an entirely separate question.

Mr. Bruce-Gardyne

Does my hon. Friend recall that when, for administrative reasons, the decision was taken to ex- clude short-term benefits from the tax system, the yield from the taxation of such short-term benefits was to be measured in single millions of pounds, whereas to-day it is between £150 million and £200 million a year, which puts an entirely different complexion on the whole situation?

Mr. Macmillan

I agree with my hon. Friend. There would be a considerable yield from the taxation of these benefits, but that is a factor of other aspects of the tax situation which have to be studied at the same time.