§ We cannot give adequate priority to investment and exports and at the same time maintain a limited but real growth in public expenditure unless private con 274 sumption is held at existing levels for the great mass of the population. There must be room for those at the bottom to see their living standards rise.
§ This means sacrifices for those at the upper end of the scale. The main instrument for achieving this necessary redistribution of wealth and income is our system of personal taxation. I do not intend to introduce legislation this autumn to deal with those issues; the time for dealing with them will be in my spring Budget. However, I intend to restore the proposal I made in my first Budget to bring down the starting point of the investment income surcharge from £2,000 to £1,000, or £1,500 for the over-65s. The House rejected that proposal in the summer, but I believe that it will now recognise that the burden of personal tax should fall that much more heavily on investment income than on income which is earned by current effort.
§ I am well aware—and the TUC and others would not allow me to forget it if I were not—that inflation reduces the real value of tax allowances and tax thresholds expressed in money terms. In general, however, I shall be reviewing these allowances in my spring budget.
§ But there are two exceptions. The first concerns tax relief for the elderly. People over 65 have for many years started paying tax at a higher level of income than those under 65, and it has become the practice to move this starting point up in step with increases in the national insurance retirement pension. The present age exemption limits, as they are called, now stand at £810 and £1,170 respectively for single and married people.
§ Having regard to the pension increases which I have announced, I propose to raise the starting points for the over 65s to £950 and £1,425, for 1975–76. I shall do this by converting the age exemption into a new tax allowance, to be called age allowance, for elderly people with modest incomes. This will mean an end to the present rule under which, where an elderly person's income exceeds the age exemption limit, the benefit of the higher starting point begins to be withdrawn immediately.
§ Under my proposals, the higher starting points I have mentioned will be turned into higher tax allowances for all elderly people over 65, except where their 275 total income exceeds £3,000: above £3,000, the extra allowance will be withdrawn as it is now, by £2 for every £3 of the excess.
§ I believe all Members of the House on both sides will know how much this concession will be welcomed by elderly people, who find the present system complicated and confusing. The additional cost of the new age allowance compared with present arrangements will be £220 million in 1975–76 and £285 million in a full year.
§ We have also carried out the commitment made by my hon. Friend the Chief Secretary to review the amount of the blind allowance for 1975–76. I propose to increase this allowance from its present figure of £130 to £180.
§ I am making these announcements now, although they will be effective for the coming tax year 1975–76, for administrative reasons. It will mean that the Inland Revenue will be able to carry out the necessary coding preparations for next year, and I am authorising it to go ahead with these on the basis of the figures which I have just given to the House. But the legislation will, as I have indicated, be included in next year's Finance Bill.