§ First, the good news. One of the worst consequences of inflation has been to force more and more of the worse off into paying higher tax, because their money incomes have increased although their real earnings have risen very much less. To relieve those at the bottom of the scale, I therefore propose to increase the main tax allowances and so to put up the threshold for income tax. The personal allowance for single people will go up by £30 and that for married couples by £90. I am proposing a substantially higher increase in the married allowance because this has in recent years been falling behind in comparison with the single allowance.
§ I also propose to increase the income tax child allowance. This is the only way open to me of giving early help to the great majority of families, since it is not administratively possible to introduce family allowances, or some form of child credit, for the first child in the immediate future. The increase for child allowances will be £40 at each of the three rates.
§ The total cost of these changes in allowances will be £513 million in 1974–75—£654 million in a full year. The number of taxpayers relieved from income tax in the coming year as a result of these changes in tax allowances will be 1½ million, including earning wives.
§ I propose to give further help to the worse off in relation to age exemption. Successive Governments have increased the age exemption limit to take account of increases in national insurance retirement pensions, to avoid a pensioner being brought into tax liability simply by reason of the pension increase. I propose to follow this practice, and the increases in age exemption income limits required as a result of my right hon. Friend's proposals on the pension front will be fairly substantial: the age exemption income limit for a single person will be increased by £85, from £700 to £785, and for married couples by £130, from £1,000 to £1,130. The marginal fraction, by which the relief is withdrawn when a pensioner's 323 income slightly exceeds these limits, will have to be increased slightly in order to avoid an unreasonably wide marginal band. It will go up from 50 per cent. to 55 per cent. The cost of these changes will be £18 million in 1974–75—£30 million in a full year.
§ Now the news which some may find less agreeable, the raising of the tax threshold, the cost of the improved pensions and other benefits falling on the Exchequer and the actions we are taking on food subsidies and housing, make it inevitable that I should increase the revenue from tax on incomes.