HC Deb 23 November 1978 vol 958 cc1450-1
1. Mr. Sainsbury

asked the Chancellor of the Exchequer what is the marginal rate of income tax for a pensioner couple with an income equivalent to average male earnings and composed of the flat-rate State pension and income from their savings for retirement.

The Financial Secretary to the Treasury (Mr. Robert Sheldon)

The marginal rate on a total income of £4,900, which consists of £1,520 basic State pension for 1978–79 and investment income of £3,380, would be 48 per cent.

Mr. Sainsbury

Does the Minister realise that 48 per cent. is an absurdly high rate of tax to apply at that level of income, the level of average male earnings? Does he recognise that applying it to investment income in the form of a surcharge unfairly penalises those retired people, especially small business men and those who have been self-employed, who derive Hart of their retirement income from their savings instead of from occupational pension schemes?

Mr. Sheldon

Yes, but such a person by definition would have no occupational pension scheme as premised in the illustration given by the hon. Gentleman, nor would he have any retirement annuity contracts. Accordingly, he would be very ill-advised to proceed in that particular way. I note the interest of many Opposition Members to cancel the investment income surcharge, but I still maintain that there is a great difference between income which is earned and income which is unearned.

Mr. Madden

Many pensioners are rightly concerned about marginal rates of income tax, but does my right hon. Friend agree that the vast majority are more concerned about a very sharp increase in the television licence fee? Does he not agree that the time has now come to scrap the television licence and to shift the cost on to the Exchequer?

Mr. Sheldon

I know that there are a number of charges about which pensioners feel particularly badly. But one advantage they have had under this Government has been regular and continuous increases in their retirement pensions. I think that is the right way to give them the rightful treatment which they deserve.

Mr. Cope

Is it the Chancellor's ambition, as a result of the sort of rates of tax which the Minister is describing, to be the first Chancellor of the Exchequer to treble the yield of income tax during his period of office, because he has very nearly achieved that?

Mr. Sheldon

The hon. Gentleman fails to note what has happened in the last two Budgets, when we have seen income tax rates decline and an improvement in the income tax system generally. Opposition Members should note that this continuous improvement which we have been able to sustain has by no means come to an end.