Personal Allowances (Hansard, 26 February 1981)

§ 10. Mr. Wigley
asked the Chancellor of the Exchequer what would be the cost to the Exchequer of every 1 per cent, increase in the personal allowances against income tax.

§ Mr. Peter Rees
About £140 million in a full year at 1980–81 income levels.

§ Mr. Wigley
Is the Minister aware of the widespread concern that exists about the reports that the Government may be considering increasing personal allowances by less than the inflation rate, and that that hits those who are on low incomes and who should be kept outside the tax net? To pull them inside the net is counterproductive and something that the Government should avoid.

§ Mr. Peter Rees
I note what the hon. Gentleman says. He will appreciate that I cannot anticipate the Budget Statement. He will recall that the first Budget of this Administration put up personal allowances by double the rate of inflation that we inherited.

§ Mr. Peter Bottomley
Will my hon. and learned Friend accept that in that first Budget it was not possible to increase child benefit; because child benefit had overtaken child tax allowances? What the hon. Gentleman says about tax allowances and the lower paid does not apply to the lower paid with children. It is far more effective to raise child benefit in real terms, even if it means shaving a bit off personal tax allowances.

§ Mr. Peter Rees
I take note of what my hon. Friend says, but he will realise that child benefits are primarily a matter for my right hon. Friend the Secretary of State for Social Services.

§ Mr. Cook
Does the Minister recall the cry of despair of his right hon. and learned Friend last November that he was boxed in by election commitments? Has he forgotten that one of those commitments was that raising tax thresholds would take the low-paid out of the tax net? Will he, therefore, now have the decency to admit that if he now lowers the threshold by failing to index the levels, he will increase the tax on the low-paid most in order to pay for the handouts that have already been received by the extravagantly paid?

§ Mr. Peter Rees
I am not aware of any handouts to the extravagantly paid that were not more than matched by decreases in the basic rate and increases in personal allowances in 1979.