§ 2. Mr. Chapman
asked the Chancellor of the Exchequer if he will make a statement about the total tax liability and national insurance contributions payments of those people earning less than half the average wage.
§ Mr. Peter Rees
As a result of the changes announced in the Budget, employees earning less than half of average earnings will pay about £270 million less in employees' national insurance contributions in a full year and about £400 million less in income tax.
§ Mr. Chapman
I appreciate and welcome the significant reduction in tax liability for those on modest means, which works at about 15 per cent. less tax liability for somebody earning only £80 per week. However, will my right hon. and learned Friend use his good offices to ensure that in future Budgets priority is given to the unification of income tax and national insurance contributions, particularly since national insurance contributions are no longer really based upon the contributory principle, so that those of modest means are given the most help?
§ Mr. Rees
I am sure that the House is indebted to my hon. Friend for his calculations, which demonstrate the lengths to which my right hon. Friend went in his Budget to assist those on modest incomes. The amalgamation of national insurance contributions with income tax is a wider question and raises a whole range of issues. I am bound to reassert that we attach importance to the insurance principle. However, there may well be administrative advantages to be gained from the idea which my hon. Friend has trailed, and the Government will no doubt look at it. There will be ample opportunity to consider the matter after the computerisation of schedule E and cases I and 2 of schedule D and the Green Paper on transferable personal allowances.
§ Mr. Pike
If the Government have sincere intentions to help those on modest and low incomes, how do they justify the reduction of 23 per cent. in income tax for those on the top rate band in 1979? Would it not be better for the Government to take more positive action? What they have done is still insignificant for those on modest and low incomes.
§ Mrs. Virginia Bottomley
Does my right hon. and learned Friend agree that raising tax thresholds, reducing national insurance contributions for the lower paid and maintaining child benefit are the best ways to protect the lower paid and reduce the poverty trap?
§ Dr. McDonald
Is the right hon. and learned Gentleman aware that whatever relief the changes in the national insurance contributions offer to some of the low-paid, because they are ill-thought out they encourage employers to hold wages down and create three new poverty traps at £60, £90 and £130?
§ Mr. Rees
As I have said, the major contribution to the alleviation of the poverty trap will be taking a range of people out of tax altogether. Indeed, 10,000 people who were on means-tested benefits will be taken out of tax, and that is a positive contribution. None the less, as the hon. Lady points out, to the extent that one moves up, one shifts the problem, but I hope that over a period, as we have carried through a sustained policy of raising tax thresholds, we shall make a considerable contribution to the problem, the solution of which she and I have atheart.
§ 3. Mr. Ashdown
asked the Chancellor of the Exchequer if he is satisfied with the efficiency of personal income tax work in Inland Revenue tax offices; and if he will make a statement.
§ The Minister of State, Treasury (Mr. Barney Hayhoe)
I refer the hon. Gentleman to the answer that I gave to my hon. Friend the Member for Dorset, North (Mr. Baker) on 24 January 1985.
§ Mr. Ashdown
Is the Minister aware that many are now concerned that the work in the district tax offices will largely fall apart before computerisation is brought into effect? Does he accept that delays in replying to letters are now measured in months and that hundreds of thousands of people are paying the wrong tax because of delays in end-of-year PAYE reviews? Is the national state of work in the tax offices better or worse than this time last year, and how might things stand in six months time?
§ Mr. Hayhoe
The number of letters that are outstanding nationally is some 4.8 million. I should quickly emphasise that only about one in four of those are communications from the general public. I know that the hon. Gentleman has been particularly worried about the position in Yeovil, but he will know that there have been substantial improvements there in the past six months. The number of letters that had been outstanding for more than 14 days was then 11,000, and that has now been reduced to 7,500, despite a rather virulent infectious virus in the Yeovil tax office.
§ Mr. Alexander
Is there not an alarming trend for income tax personnel to leave their jobs, often to work in the private sector for accountants, where they show people how to pay less tax? Has my hon. Friend any plans for increasing their job satisfaction, apart from introducing commission incentives, which I assure my hon. Friend would be repugnant to almost everyone in Britain?
§ Mr. Hayhoe
I well understand my hon. Friend's final point. I have seen the rather alarmist headlines in the newspapers about the alleged brain drain of Inland Revenue tax inspectors, but the challenge, opportunities and rewards of the private sector have always been an attraction to tax inspectors, and the number of those who have been leaving the Civil Service in recent months is not all that much greater in percentage terms than in the past. Nevertheless, that trend is of concern and separate discussions are taking place between my officials and the Association of Inspectors of Taxes and I hope that some helpful movements will appear from those discussions.