§ Sir Gerald Nabarro (Worcestershire, South)
I beg to move Amendment No. 72, in page 43, line 36, leave out '£634 and£929' and insert '£675 and£1,000'.
The most impressive passages of the Chancellor's Budget speech this year undoubtedly related to allowances for personal taxation, and I was most impressed by what my right hon. Friend said about retirement pensioners:Last autumn the retirement pension was increased by 20 per cent. This autumn—the first time for 20 years that there have been increases only a year apart—the pension will he increased by a further 12½ per cent. the standard pension for a married couple will, therefore, be increased by £1.20 from the present rate of£9.70 to£10.90. The 622 standard rate for a single person will be increased by 75p, from£6 to£6.75.Later, when dealing with personal allowances, my right hon. Friend said:The income limits for age exemption will also be raised, to£634 for a single person and to£929 for a married couple. The limit for small income relief will be raised to£550."—[OFFICIAL REPORT, 21st March, 1972; Vol. 833, c. 1355–89.]There are about 7½ million retirement pensioners in Britain, and the figures which relate particularly to the Amendment were given in answer to a Question of mine on 15th May, when the Minister of State said:The estimated numbers of retirement pensioners in the United Kingdom liable to tax for 1972–73 are 750,000 married couples and I million single persons. The estimated cost of raising the limits for age exemption as indicated is£8 million for the full year assuming that the marginal fraction was unaltered."—[OFFICIAL REPORT, 15th May, 1972; Vol. 837, c. 25.]About three-quarters of all pensioners have other sources of income—that is sources of income other than their State 623 retirement pension. It may be an occupational pension, it may be an income from working full time or part time, but my case this evening is that the financial margin between the amount of the State pension and the point at which the pensioner commences paying income tax—that is the threshold—is too narrow, for reasons with which I hope the Committee will agree.
The fact is that a single old-age pension, when increased to£6.75, is equal to£351 a year. The margin between that point and£634—being the threshold—is only£283, or about£5.50 per week. Not very much work is entailed at today's hourly rates to earn£5.50 a week, and my case is that even the earnings rule for retirement pensioners—women between the ages of 60 and 65, and males between the ages of 65 and 70—is vastly more than£5.50 per week.
I find in my constituency and on moving among elderly people, and even among geriatrics, that there is great resentment today at the relatively low levels at which income tax becomes payable, having regard to extremely high prices, notably for food. Here I pause to say that I attribute no blame in this matter. I do not want to enter into a lot of party political argy-bargy about the price of food, or the increased price of food, but it is the fact that food has increased in price by more than 17 per cent. in the 22 months since June, 1970, and as a retirement pensioner spends on average more than 50 per cent. of his pension on food that is a significant factor.
A single person is taxed on everything that he earns above about£5.50 a week. For a married couple the increased pension at£10.90 a week is equal to£567 a year approximately. The margin between that figure and the threshold for income tax purposes at£929 is a mere£362 a year, which is almost exactly£7 a week. To allow only£7 a week to be earned by a married couple in addition to their State pension before they cross the threshold into the payment of income tax is, I submit, much too small a figure.
My right hon. Friend has generously increased the age relief, and I congratulate him on doing so. I am using this opportunity as a trailer for next year.
624 I hope that there will be a revision of thinking among men of all parties in the House who join me in the sympathy which they extend to retirement pensioners in times of rising prices, extremely high food costs and increased rent costs, often with inadequate housing, to say nothing of fuel costs which have risen precipitously. I should like to see a totally revised approach to the taxation of the elderly next year. I am talking of personal taxation.
§ Mr. Charles Loughlin (Gloucestershire, West)
I am very disappointed by the hon. Gentleman's reference to using this as a trailer. I accept in toto the case he is presenting, but many of the people for whom he is rightly pleading may well be dead by next year. Using this as a trailer is only half the fight. Could he not argue, even at this late stage of the Bill, that his hon. Friend the Minister ought to deal with this question tonight?
§ Sir G. Nabarro
My use of the word "trailer" was in the context of a total revision of taxation arrangements for the elderly. I should dearly love the Chancellor to reply to the debate and to say. "Yes, we shall raise the threshold of income tax from£634 to£675—£41 per annum—and rom£929 for a married couple to£1,000, an increase of£71 per annum." I should dearly love him to accept those figures as presented in the Amendment.
But that is only rather less than half of my argument. What I should like to see done with retirement pensions is a recognition in the tax system and figures of the fact that the more elderly a pensioner becomes, the greater is the cost of living for that man or woman, the more protection they require, and the more better food they require—though the volume may net be greater, the quality should he better—to sustain them. The comforts they require should be improved.
If one digresses a little on the cost of living for the elderly, one could mention the extraordinary arrangements that we have for radio and television licences. I said to the Minister of Posts and Telecommunications recently that I should prefer to see retirement pensioners relieved entirely of the cost of radio and television licences. It is all part of the provision for the elderly which I believe ought to increase with every year of age 625 after the age of 65, rather than tend to decline through the additional costs of the items they require for life.
§ Mr. J. T. Price (Westhoughton)
I, too, share the views being expressed by the hon. Member for Worcestershire, South (Sir G. Nabarro). He has made what is, for him, a very moderate speech, and we all agree with him. But he could make his case even stronger by referring to the fact that of the 7½ million people on retirement pensions, at least 1 million, probably 1½million, are either widows or widowers maintaining their houses and being treated for tax purposes as single people. Therefore, to put the threshold at£12 a week for a person maintaining the house that has been the family home until either the wife or the husband, as the case may be, has died and left the other as a single person, is quite wrong because no one can hope to maintain even the most modest house on that sort of money when called upon to pay tax on what is left.
§ Sir G. Nabarro
I am grateful to the hon. Gentleman. He has added a point to my argument.
I now proceed to the revision I seek in the threshold and in the application of income tax benefits and reliefs to the elderly. As a total revision of the present system, I should like to see an arrangement whereby the income tax liability of a single person or a couple on retirement pension is reduced by 10 per cent. per annum for every year over the age of 65, up to a limit of an income of£2,000 per annum. Thus, at the age of 66 the income tax liability would be less 10 per cent., at 67 income tax liability would be less 20 per cent., at 68 it would be less 30 per cent., and so on to the age of 75, with an income tax liability less 100 per cent. That is up to a maximum of£2,000 income per annum, from all sources aggregated—State retirement pension, occupational pension, if any, or any form of earnings and income. That would be a realistic appreciation of the fact that elderly men and women find that the cost of living increases by approximately 10 per cent. per annum, in arithmetical progression. The income tax system ought to give a realisation to that simple fact.
What I have said about the general revision of these arrangements is a trailer Vol. 837 626 for next year. Next year I shall seek to move an Amendment to the Finance Bill, which is always in order because there has to be a Clause in such Bills dealing with income tax rates, and one can always amend it in the sense I have indicated. All I seek to do this year is to cause the single person's income tax threshold to increase from£634 to£675 and the married couple's threshold from£929 to£1,000.
But I say to the Chief Secretary that it is preposterous to write into financial statutes these irregular figures such as£929. Who on earth in the Treasury thought up that one? It is nearly as potty as the Conservative Chancellor of the Exchequer who thought up a standard rate of tax at 7s. 9d. in the£. I blasted him then, in 1959, for thinking up that rate. I asked why we could not have a rate of 8s. so that everyone could calculate it freely and mentally, or a rate of 7s. 6d., three half-crowns in the£. In the same way, in principle, why cannot we have round figures, such as a threshold of—1,000 a year, for age relief?
§ Mr. Kenneth Lewis (Rutland and Stamford)
I am worried about that point in case any Chancellor decided to round the figures upwards, in which case that would be a disadvantage. There is a great deal of talk at present about prices having risen because shopkeepers have rounded upwards on the introduction of decimal currency. If the Chancellor of the Exchequer rounded up the income tax, that would be a great disadvantage.
§ Sir G. Nabarro
No Conservative Chancellor would do anything so silly. I do not think for a moment that that would occur. It is only a temporary mental aberration on the part of the Chief Secretary, if not the Chancellor, that they have alighted on figures such as£929. Perhaps the Chief Secretary can say what particular merit the figure of£929 has. It ought to be a round figure. The figure of£929 ought to be a round£1,000, and the£634 ought to he a tidy£675.
That is my case. I am not passionate about it this year. I seek the debate as a curtain raiser for next year. I have called this a "trailer" because I want to see allowances for income tax for the elderly drastically and realistically revised.
§ Mr. Loughlin
The hon. Member for Worcestershire, South (Sir G. Nabarro) has presented his case in a very temperate and comprehensive fashion.
I have spoken to many old people in my constituency who have, by one means or another, augmented their retirement pension, and one of the things which causes them great resentment is the amount of tax which they have to pay. I shall be very interested in what the Financial Secretary has to say on the Amendment. I have been a Member for a number of years, and I know that the hon. Member for Worcestershire, South will not take offence if I say to him that he and I have not normally been in accord with each other politically, but it will be fascinating to hear the case which the Chief Secretary presents against the hon. Gentleman.
§ [MR. E. L. MALLALIEU in the Chair]
§ 8.30 p.m.
§ I am sorry that the hon. Member for Worcestershire, South spoke about the Amendment being a trailer for next year. When we speak of old people, we are dealing not only with people of 65 years of age but also with people of 85 years of age. While I am always eager to assist those who are in what I call the immediate retirement category, I also have in mind people in the later stage of retirement. I see no reason why a plea should not be made for those who have been thrifty during their lives and who have managed to put money by and to accumulate capital or investments.
§ I have difficulty as a Member of Parliament in explaining the situation in which a man and woman, having striven to purchase their house, have then retired on the retirement pension but, because they have purchased their house instead of being tenants, their retirement pension is restricted to the flat-rate pension, whereas a tenant is able to obtain not only the retirement pension but also a supplementary pension to pay for the rent.
§ The Chief Secretary may not be interested in this matter, but it is very important. Many complaints have been made to me that thrift and an attempt by people to better themselves have been, marginally at least, a handicap during 628 retirement. If the Chief Secretary were prepared to accept the Amendment—even though I agree with the hon. Member for Worcestershire, South that it is a little too modest in its approach—we should be paying a tribute to those people who have been inclined to look after themselves in the past.
§ I hope that the Chief Secretary will give sympathetic consideration to the Amendment. It will not cost the Treasury a lot of money.
§ Mr. Loughlin
If that is correct, I can tell the Chief Secretary that figures have been bandied about in this House substantially in excess of£8 million on much less worthy issues. If it costs us£8 million—in the context of the total revenue£8 million is an infinitesimal amount£and it produces for old people who have done whatever they could for themselves during their working lives one additional iota of happiness in addition to that which they normally could expect, it will be—8 million well spent.
I hope that the Chief Secretary, if he cannot accept this modest Amendment—it is not a trailer for next year as the hon. Gentleman has declared it to be—will present to the Committee a substantial case why he cannot accept it.
§ Mr. J. T. Price
Only in the last couple of weeks have I drawn to the attention of the Financial Secretary to the Treasury two cases that bear almost exactly on the point that has been argued by the hon. Member for Worcestershire, South (Sir G. Nabarro). Like my hon. Friend the Member for Gloucestershire, West (Mr. Loughlin) I have been privileged to spend many years here and have had very many problems sent to me from elderly people in my constituency who have been completely baffled by the tax liabilities they are asked to undertake on small retirement incomes.
One knows, without spelling out all the technical details, which may be a subject for another occasion, that there has recently been a good deal of criticism of all the tax allowances that are given to encourage the working population and others to pay contributions to industrial pension funds. Many hon. Members still appear to think that people who receive 629 a tax allowance when they are paying their contributions to an industrial scheme, to provide an extra income when they retire, are getting some kind of bonanza from the Treasury which gives them an advantage over other people who have no special provision of that kind. Nothing could be further from the truth.
The Chief Secretary will not thank me for telling him what is obvious to him as a technical servant of the Treasury, but what most people do not understand is that those who have had the tax allowance whilst paying the contributions, when they come to draw the pension from the industrial fund are obliged to pay tax at the standard rate on quite small pensions. These small extra incomes bring them above the tax threshold. I have long believed that the tax thresh-hold in these cases is far too low. I ask the Chief Secretary to consider giving greater relief to the people with small incomes who find themselves mulcted in taxation when they retire. If he considers some of the very sophisticated contracts that are being sold by some insurance companies on single premium annuities, with all the tax reliefs that accrue by doing it by way of a capital sum instead of an annuity, he will find that certain people who are properly and well-advised by technical experts in that sphere are getting far better tax advantages out of our system of pensions than are millions of orthodox people who are drawing little pensions out of industrial funds.
I do not want to exaggerate, but there can be no real justification for requiring a man or woman living as a single person to keep the home going after the partner has died on£634 a year and being liable to pay quite a few pounds in taxation.
From that point of view I welcome the enterprise of the hon. Member for Worcestershire, South (Sir G. Nabarro) in bringing this matter to the notice of the Committee. He sometimes brings issues to the notice of the House which arouse my strong opposition. However, one has to give praise when the sinner repenteth and comes forward with some rational and acceptable proposal. I should be the first to commend him in whatever part of the Committee he happened to be sitting, if he will not take that unkindly.
§ Mr. Price
My hon. Friend the Member for Gloucestershire, West (Mr. Loughlin) says that I even commend him at times. However, I am being taken away from my subject.
I do not want to detain the Committee on the Amendment. I suggest to right hon. and hon. Gentlemen who are responsible for the levying of taxation that a strong and valid case has been made out for those who are drawing modest incomes from two sources, but are chiefly relying on the State retirement pension for which they have qualified under the national insurance scheme. Such people, although they may receive benefit from some small friendly society into which their parents may have put them when they were at school, find that the small amount they draw is aggregated with their other income and they have to pay tax on it. I appeal to the Minister to give serious thought to the Amendment and to demonstrate that the Government realise that a case has been made out which should be answered in practical terms.
§ Mr. Patrick Jenkin
It is always a demanding occasion on a Treasury Minister when answering a debate of this nature, which clearly engages the sympathies of hon. Members on both sides of the Committee, and he has, however regretfully, to advise the Committee not to accept the Amendment. That is the advice which I fear I must give the Committee this evening.
My hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) made it clear that he had two purposes in moving the Amendment. The first was that expressed in the Amendment, namely, to raise the limits for age exemption above the levels fixed in the Bill.
The second was to serve notice on us that he is looking for a totally revised basis of taxation for the elderly and hopes we may be able to make some moves in that direction next year.
§ 8.45 p.m.
§ Mr. Loughlin
The Amendment is before the Committee. The Chief Secretary must not claim in support of his argument any intention for next year. 631 The Amendment is now out of the responsibility of the hon. Member for Worcestershire, South (Sir G. Nabarro); it is the Committee's Amendment, and the Chief Secretary must not take up the trailer argument.
§ Mr. Jenkin
The hon. Member is, I think, anticipating what I may have to say about my lion. Friend's trailer. He would be a rash Treasury Minister who in year 1 gave firm prognostications on personal allowances of any kind which might apply in the year 2. All I say is that I have taken careful note of what my hon. Friend the Member for Worcestershire, South said on the point, and we shall bear it closely in mind.
The purpose of the Amendment, which, as the hon. Gentleman rightly says, is now before the Committee, is to raise the age exemption limits. It may be helpful if I remind the Committee of what happened in the last two years regarding the age exemption limits. In last year's Finance Act, for 1971–72 we raised the age exemption limit for a single person to£504 and for a married couple to£786. The same Act made provision also for 1972–73, to raise them further, to£530 single and£825 married, to take account of the fact, that 1972–73 would cover a full year of the pension as increased at the October, 1971, up-rating.
Since then, we have made the historic decision to make annual increases in the national insurance pension. But it is not directly related to that that, although we fixed the level of the age exemption at the figures I have given for the current year, 1972–73, in last year's Finance Act, we are by this Clause raising the limits again, by£104, to a total of£634 for a single person and£929 for a married couple. It is worth noting that those figures are now, respectively,£130 and£143 above the level which applied in 1971–72.
§ Sir G. Nabarro
What mystified me was the reason for the£929. The increase for a single person was from£530 to£634, and for a couple from£825 to£929. In both cases, the rise is£104. Why is it uniform for both a single person and a married couple?
§ Mr. Jenkin
If I may say so, that is the key point of my hon. Friend's Amendment and of the Clause. In contrast to the position in earlier years, when the primary purpose of raising the age limits has been to make room, as it were, for the increase in the national insurance pension so that the increase in pension should not bring into tax those who were otherwise below the threshold and should not increase the tax burden on those who were just above it and were entitled to marginal relief, the purpose this year is different, namely, to ensure that those entitled to the marginal age exemption relief, that is, those just above the new limit, should receive a tax benefit equal to that going to the 2½million other taxpayers, namely, a sum of just over£52 a year, or just over£1 a week.
The reason why the amount is the same for a married couple as for a single person is exactly the same as the reason why the increase in the married allowance and in the single allowance has had to be the same this year. It is the administrative reason that this is a year in which the Chief Inspector's branch of the Inland Revenue is undertaking the recoding of every taxpayer for the purposes of the unified tax system. In such a year it would be quite impossible to take on board the additional recoding that would be necessary if the married and the single allowances were increased by different amounts and if the married age exemption limit and the single age exemption limit were increased by different amounts.
§ Mr. J. T. Price
This is very interesting and I am glad that I stayed to listen to this short debate. The Chief Secretary is saying that administrative convenience stands in the way of doing something that should be done for quite valid reasons on its merits. The House has never accepted administrative convenience as sufficient reason for not doing what ought to be done. I am not too strong on protocol, but I need make no apology for reminding the Chief Secretary that we do not accept administrative convenience as a reason. Arguments should be accepted on their merits. Administrative convenience would not be accepted as an excuse by many hon. Members on both sides of the Committee.
§ Mr. Jenkin
I should have chosen my words with even greater care than I did.
633 was most careful not to use the words "administrative convenience", because on a number of occasions I have said from the Opposition Dispatch Box exactly what the hon. Member for Westhoughton (Mr. J. T. Price) has just said, namely, that this is not a reason which the House of Commons takes to kindly. But in this case I would beg hon. Members on both sides to recognise that this is not a matter of convenience this year. This year there are the very special circumstances occasioned by what I think is not unfairly described as the historic reform for which we legislated last year—unification in income tax and surtax.
I know that hon. and right hon. Members opposite do not necessarily accept all the features of reform—we indicated our differences last night—but no one on either side of the Committee has done other than welcome this major simplification of our personal tax system. It will be very much easier for ordinary people to understand. The complicated earned incomes reliefs will disappear and will be replaced by a differentiation expressed as an investment income surcharge, the complexities around the border of surtax will come to an end, as will the two different tax systems of surtax and income tax.
The reform has been widely welcomed, but it requires a complete recoding of every taxpayer in the country. Personal allowances have to be uprated by two-sevenths to take account of the disappearance of earned income relief, and this requires a complete recoding. It is a massive operation. As I said in the small hours of this morning, the Inland Revenue has performed a notable task in clearing the decks and getting up to date, ready to undertake the recoding operation which will require some millions of man-hours during the latter part of this year. We were not prepared to let that stand in the way of our adjusting the allowances this year. On the debate on the Question, "That the Clause stand part of the Bill," we may come to the whole sphere of personal allowances. It was absolutely imperative, not just convenient, that we should give effect to the change by revision of the tax tables rather than by the recoding of the individual taxpayer. We cannot take on board this year any amendment which would require a significant volume of recoding. If the 634 Inland Revenue had an additional task imposed upon it, that would put in peril the unification exercise, which is one of the biggest operations—
§ Mr. Jenkin
I do not think it is. It is essentially a realistic argument. I do not wish to make a political point in what has been a wholly non-political debate. The right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) said in his Budget speech in, I think, 1969 that a reform on these lines was something he would very much have liked to carry out.
One of the prices we must pay is the acceptance of the inevitable administrative constraints which the reform imposes. We must take sometimes politically difficult decisions in order to be able to get over the hump of work and carry the reform through.
§ Mr. John Hall
I fully understand, and sympathise with, the reasons my hon. Friend has given for not being able this year to do as much as perhaps many Members of the Committee may have thought he should do. But does this not mean that we can expect that the logical increases in the allowance will follow next year? Can we look forward to that?
§ Mr. Jenkin
I must not allow myself to be tempted to gaze into the crystal ball of my right hon. Friend the Chancellor and arouse any hopes or anxieties about what might happen next year.
My hon. Friend the Member for Worcestershire, South particularly asked why there was the odd figure of£929. This was the result of applying an increase in the age exemption of£104, to make sure that those entitled to the marginal age exemption relief received exactly the same tax relief as the general body of taxpayers, and to do it in such a way that for both single people and married couples entitled to the age exemption marginal relief we did not require a recoding exercise, doing it instead through the tax tables.
I am sure that from what I have said the Committee will realise that the Amendment would require a recoding which we just cannot take on hoard. 635 Therefore, while we all naturally feel sympathy towards the elderly—we all meet in our constituencies elderly people who bring us their problems—we cannot take this on this year.
My hon. Friend expressed his dislike for these odd figures, as I think he called them.
§ Mr. Jenkin
It was my small daughter who said that she could not roll her tongue like that.
I share my hon. Friend's dislike of such figures. He will have noted that the figures in the personal allowances which we have provisionally fixed for next year for the unified tax system are all in multiples of five; we have rounded up to the nearest five. The rounded-up allowance for next year is provisionally£595 for a single person,£775 for a married couple,£235 and£265 for the three child tax allowances, and£130 for the additional personal allowance. These figures are somewhat about what would he reached by the application of the strict two-sevenths fraction. This is a direct reflection of exactly the same ambition as my hon. Friend expressed, to have round figures. It might be argued that they should all be multiples of 10. That was considered, but the additional cost of rounding up an extra£10 where necessary was very substantial.
§ Sir G. Nabarro
I do not wish to be fiscally pious, but may I commend to my hon. Friend that he should take a little more than short and faltering steps in my direction of absolute regularity by endeavouring to round up with figures of£100, not£10, which would make the matter vastly simpler, especially as we are embarking on a huge exercise of metrication?
§ 9.0 p.m.
§ Mr. Jenkin
I ask my hon. Friend to accept that that would be the case, though I cannot give him the figures.
My hon. Friend also referred to the margin between the pension and the tax threshold. That is indeed a factor that Treasury Ministers regularly bear in mind 636 when considering the size of the age exemption.
The hon. Member for Westhoughton raised the question of taxation of the occupational pension. Governments of all parties have accepted that the right principle to apply to occupational pension schemes is to exempt the build-up and tax the benefit, and that is broadly what we do. The taxpayer receives a tax relief on his contribution, but the pension is taxed. For the great majority of taxpayers over a lifetime that represents a much lighter tax burden than they would bear if they had to pay contributions out of net income but received the pension tax free. It is always open to anyone to make arrangements to pay regular contributions out of net income through a life assurance company or something like that and then to receive a capital sum which can be used tax free.
§ Mr. J. T. Price
I have been deeply involved over the years in the problem of the relationship of pension funds to tax liabilities. I have been to the appropriate department of the Revenue on many occasions to seek concessions on behalf of the contributors to pension funds. I drew the hon. Gentleman's attention to the fact that quite recently there has been an invention of a subtle kind in insurance. Insurance companies are now offering to the public contracts bearing annuity benefits plus capital sums, which are far more favourably treated under our present tax laws than are the orthodox pension funds, which have enjoyed these advantages at various rates since the Finance Act, 1921, which established the basis for all the tax reliefs. These recent developments are leaving the established and orthodox funds in a less favourable position than that enjoyed by people who are being advised today in other ways. This is something that I deplore and I hope that the hon. Gentleman will take my remarks seriously.
§ Mr. Jenkin
I always take seriously anything on this subject which falls from the hon. Gentleman's lips, because he knows a great deal about it. In 1970, the Labour Government made a major revision of the income tax rules affecting pension schemes and we modified this to some extent last year. But I note what the hon. Gentleman says and will bear it in mind.
637 I hope I have explained the situation satisfactorily to my hon. Friend the Member for Worcestershire, South. I hope also that, however reluctant he may feel, I have persuaded him that this year, for the compelling administrative reasons 1 have given, we are unable to accept the Amendment. I have explained what we have done in the Bill and I hope that my hon. Friend will feel able to withdraw the Amendment.
§ Mr. Dalyell
Having almost taken root on these benches for 18 out of the last 30 hours, I have an unsuppressable urge to be fiscally pious for a moment. The Chief Secretary has given me a lead in to say something which does not appear on this Amendment but which I have had an urge to say sometimes during these debates. That is to pay tribute to the way in which the Inland Revenue overcomes many problems and helps hon. Members who write to it.
Whatever other difficulties I may have presented to the Treasury, I have not had cause this year to write to it on behalf of a constituent. This is partly because of the excellent service from Centre One at East Kilbride. I say this because the Inland Revenue gets a great deal of abuse from all sorts of quarters and a lot of poor Press comment. Whenever the tax centre makes a mistake, it is blamed, but when, as it does in 99 per cent. of its cases, it does something right, it never gets praised. Whatever the Treasury may feel about the difficulties of setting up a computerised tax system like Centre One at East Kilbride, those of us who have had anything to do with it on a day-to-day basis know well where we stand and that anything we can do to help should be done.
§ Mr. Jenkin
I should like to express warm appreciation for those words of the hon. Member for West Lothian (Mr. Dalyell) and to thank him very much.
§ Sir G. Nabarro
I rise to express my limited satisfaction with the reply I have had from my hon. Friend the Chief Secretary. I had, of course, a strictly regulated and limited objective in moving my Amendment, which was to draw attention to the inadequacy of the proposed threshold for elderly people for income tax purposes, and to the need for a reappraisal of the whole system. I shall 638 consider that my limited and regulated objective has been quite fulfilled tonight and I am grateful to my hon. Friend for the generous and characteristically logical fashion in which he received my words. I therefore beg to ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Question proposed, That the Clause stand part of the Bill.
§ Mr. Patrick Jenkin
Before we let this Clause go through, perhaps I may make one or two points about it because it is an important Clause and I know that my hon. Friends would not wish it to go past without my saying something about the real benefits it confers upon the taxpayers.
One of the features of the tax reductions that the Government have made since they came into office, and of which by far the biggest is included in this Clause—the massive increase in personal allowances;£135 this year£is the way in which the great bulk of the direct tax cuts have benefited the ordinary people. Last year, the total reduction of Inland Revenue yield for 1971–72 was£256¾million, and£163 million of that represented the increase in the child allowances of£40 for each child. This year the figures are even more startling. Of the total reduction in the Inland Revenue yield for 1972–73—£1,070 million—no less than£960 million is attributable to the increases in the married and single allowances and a further£6 million to the increase in income limits by£104.
One can express this in a variety of different ways, but perhaps the clearest way, and one on which a number of speeches have been made, is that of the thresholds for income tax of ordinary people. In last year's Budget, and in this one, we have raised the tax threshold for a single man by£174 a year, or£3.34 a week; for a couple entitled to age exemption by£189 a year, or£3.63 a week; for a married couple with two children under the age of 11 by£277 a year, or£5.32 a week; for a married couple with four children under the age of 11 by no less than£379 a year, or 7.29 a week.
By any standard, these are massive tax reductions—massive increases in the threshold. We inherited in June, 1970, 639 an exceedingly difficult situation, with a very low tax threshold. It was this that inevitably ruled out dealing with the family poverty problem by means of the family allowance. It was this that created severe difficulties at the crossover particularly of the family income supplement, when it was introduced, and other welfare benefits with the tax system, and we have gone a long way to widening the area of the crossover by raising the thresholds for tax.
§ Mr. J. T. Price
Am I right in supposing that in quoting those striking figures we may be giving a false impression to the country? It is wrong to convey the impression either wilfully or carelessly that the figures mean that there is an additional tax relief of £2 at the lower end or £7 at the upper end. It means only that relief has been given of 38.75 per cent., or whatever is the standard rate of tax, on the increase in the threshhold. These figures are not the amount of the relief but the allowance on which tax relief has been given.
§ Mr. Jenkin
That is absolutely right. I have no wish to be unfair. During our debates over the last two years on this subject, and in the debate we have just completed, hon. Members on both sides have concentrated on the low threshhold. I thought it helpful, in considering the Clause, to concentrate on indicating by how much we have succeeded in less than two years in raising the tax thresh-hold. I do not conceal that this has been possible in a somewhat different economic situation from that with which our predecessors were faced but, nevertheless we promised that it would be done and it has been done. The Labour Party Manifesto of 1970 said:The irresponsible tax bribes that the Tories now promise and threaten would wreck the economy.Yet we have made the most massive tax reductions—often urged on by hon. Gentlemen opposite—and we have fulfilled our election pledges.
In two years we have reduced taxation by£3,000 million. Tax this year is£3,000 million lower than it would have been if the Labour rates had remained in force as we inherited them. This compares with £3,000 million by which taxation was higher by June, 640 1970, than it would have been if the 1964 Tory rates of tax had remained in force. The Government can be justly proud of their record in reducing the burden of taxation. The Clause contains the biggest single reduction in the burden of income tax in our history and I hope that the committee will accept it with acclaim.
§ 9.15 p.m.
§ Mr. Loughlin
Our debate on the previous Amendment was a rational and sensible one. The hon. Member for Worcestershire, South (Sir G. Nabarro) presented his case in a restrained manner and, when I invited him to divide the Committee, I was pleased when he said that he would rather not. I did not want to place him in the embarrassing position of moving an Amendment against his own Government. In that debate we moved away from the yah-yah politics which have been a cardinal feature of the last two years of Tory Government. Whatever issue has been debated—whether it is inflation, unemployment, prices, wages—hon. and right hon. Gentlemen on the Government side have always said everything was the fault of the Labour Government. I thought that we had got away from that atmosphere, but the Chief Secretary to the Treasury returned to it without any need, because the Committee would willingly have passed the Clause. No one on the Opposition Front Bench sought to rise.
Then the Chief Secretary, seeking to make political capital out of the Clause, used figures which my hon. Friend the Member for Westhoughton (Mr. J. T. Price) pointed out were, if not fictitious, at least misleading. The hon. Gentleman spoke about the enormous reliefs from income tax people would have under the Clause. I wondered whether I had been in the Chamber either for the Second Reading of the Bill or for the Budget statement. The use of such figures is erroneous.
The Chief Secretary told us that the tax threshold has been reduced and he spoke about a £3,000 million reduction in taxation under the Tory Government. This is fair enough. Where has the money gone? It has not gone to the average man or woman. The Chief Secretary should substantiate his argument, because£1,400 million has gone somewhere, but not to 641 industrial or professional workers. It has gone to people with enormous incomes.
The £3,000 million and the 6d. reduction in income tax should be related to individual incomes. We should talk in terms of how much is received by a man on £1,000 as contrasted with the amount received by a man on £20,000. That is what a meaningful examination of the exemptions or tax remissions granted by the Tory Government would be.
I am remaining in order, Mr. Mallalieu, because I am dealing with the point made by the Chief Secretary; and apparently he was in order or you would not have allowed him to make it.
The Second Deputy Chairman
The hon. Gentleman has tempted me to my feet. Both sides have had a fair crack of the whip. Perhaps I should not have allowed matters to go so far. In the circumstances, both sides having had a fair crack of the whip, I hope that the hon. Gentleman will try to bring his speech to a conclusion on the question, "That the Clause stand part of the Bill".
§ Mr. Loughlin
Mr. Mallalieu, I am wholly in sympathy with the Chair in its present dilemma. The Chair allowed the Chief Secretary to finish. The Chair is in an embarrassing position if it does not allow me to finish. The Chief Secretary, in talking about the degree of tax reliefs which have been given, either under the Clause or in past legislation, should get the facts straight. The great mass of people have not received the benefits of the tax reliefs. They have suffered the imposition of the increase in the cost of living that this Government have imposed upon them.
§ Mr. Brian Walden (Birmingham, All Saints)
I was sitting quietly on the Opposition Front Bench, minding my own business and thinking of the extreme brevity of the remarks that I intend to make on a later Clause, and therefore thinking that it was very likely that I should be having a small port or brandy with my wife at about 10 o'clock, when suddenly the Chief Secretary rose with a rather fictitious set of figures and about as one-sided a version of what the Government have been up to as could be imagined. Regrettably, therefore—I trust that this will be a terrible 642 lesson to the hon. Gentleman and that he will not again make speeches on Clauses which are not opposed—I shall necessarily have to say a few words on the Clause. I promise to be brief, Mr. Mallalieu.
The Chief Secretary could claim even greater reliefs. No doubt if the inflation rate rises still further, with even more roaring inflation next year, the thresholds will be able to leap still further and the Treasury will be getting a massive return.
However, basically that is not really what I want to say. What I want to say to the Chief Secretary is this. It is an argument which never seems to get across in the way we discuss Finance Bills. I have pointed it out several times and I make one last attempt in the certain knowledge that no Treasury Minster will want to answer me. Very often Tories discuss taxation as if it were the only kind of impost which mattered: provided that one can say that such and such has happened in respect of tax, that settles the issue. It does not. One might say that being at the Treasury involves demand management, and what that involves at a time of 1 million unemployed. An increased rate is to the ordinary family in a council house a tax. I know that technically it is not a tax. I know it is not. It is a change. But to the ordinary person it is the same thing. If Ministers are to come to the Dispatch Box with all their calculations about how much they by their tax concessions have benefited the British public they ought to give a fair picture and tell us how much they have disadvantaged the British public by being unable to control prices, especially food prices, and how much they by their increased imposts have disadvantaged the public.
§ Question put and agreed to.
§ Clause 63 ordered to stand part of the Bill.