HC Deb 14 November 1974 vol 881 cc576-8
13. Mr. MeCrindle

asked the Chancellor of the Exchequer what studies are being undertaken at the Treasury with a view to indexing the tax system.

Mr. Dell

The effects of inflation on the tax system are kept under continuing review by the Treasury and Revenue Departments.

Mr. McCrindle

Would not the indexing of the tax system, by preventing all Governments benefiting from fiscal drag, make inflation less attractive to Governments than it has been for a number of years past? Will the right hon. Gentleman start some sort of investigation in the Treasury to see whether this is not a line that the Government might take in the near future?

Mr. Dell

I do not think that fiscal drag is sufficient to make inflation attractive to the Government. This matter is kept under review. We have at least annual Budgets, and now more frequently, in which it can be reviewed. The question is whether it should be done automatically by indexing or, as it is at the moment, by regular review. So far, we have decided to stay with the latter method.

Sir John Hall

What studies are taking place into the possibility of introducing indexing right across the board, for incomes, social security benefits, tax scales and so on, as I suggested yesterday?

Mr. Dell

If it is done across the board, indexing has many implications—for example, for our foreign indebtedness. But one action that this Government have taken on the Page Report which the previous Government did not take is to define an area of small savers who could be assisted to protect their savings by indexation, and this scheme will be introduced next year.

17. Mr. Beith

asked the Chancellor of the Exchequer whether he will bring forward proposals for indexation or other regular review of tax thresholds so as to remove the disincentive effect on working widows and others which arises when their tax liability is increased by cost-of-living pension increases.

Mr. Dell

The level of tax thresholds and allowances is already kept under regular review.

Mr. Beith

Will the right hon. Gentleman accept that the steps taken by the Chancellor to ease the position of elderly people above the tax threshold will be warmly welcomed, but will he accept, too, that there is deep resentment among widows who feel that what is given with one hand by way of pensions is taken away by the other in the form of tax? Will the right hon. Gentleman ensure that this review leads to some benefit for their allowances?

Mr. Dell

My hon. Friend the Financial Secretary said a moment ago that this matter is kept under review. The hon. Gentleman will know that the national insurance widows' pension is paid in full without deduction of tax, and that any tax due is normally collected under PAYE. It therefore appears that a heavier burden of tax is cancelling the benefit, but that is not the case, as the hon. Gentleman will realise.

Mr. Cormack

Does the right hon. Gentleman realise that many hon. Members on both sides of the House are fed up with being given that sort of answer? We represent many millions of widows. They do not want to be kept under review. They want action. Will the right hon. Gentleman ensure that action is taken very soon?

Mr. Dell

As my hon. Friend said, the best action is on the widows' pension and in reviewing tax allowances. That action is taken.