HC Deb 21 March 1985 vol 75 cc977-9
15. Mr. Kenneth Carlisle

asked the Chancellor of the Exchequer how many taxpayers are no longer liable for income tax as a result of his recent Budget.

Mr. Lawson

Some 800,000 people on low incomes, 100,000 of them widows, who would have paid tax if I had not raised personal allowances will pay no tax at all in 1985–86.

Mr. Carlisle

That is an encouraging figure. The raising of tax thresholds by twice the rate of inflation, combined with the reductions in national insurance contributions, will be of real help to those on low pay. Will my right hon. Friend now address himself with urgency to the further measures that are required to eliminate the poverty and unemployment traps?

Mr. Lawson

Yes, indeed. It has been a constant objective of the Government, both under my predecessor as Chancellor and myself, to reduce the effect of these traps, and particularly the employment trap. Thresholds have now risen by more than 20 per cent. in real terms over what they were under Labour. My hon. Friend is right to direct attention to the restructuring of the national insurance contributions system, the first time that such restructuring has ever been done, and I believe that it will have a very helpful effect indeed where unemployment is at its most severe.

Mr. Fisher

Is the Chancellor aware that tax thresholds have risen by 10 times more than child benefit has risen over the period? Is he aware that a rise in child benefit is the only way to help the 500,000 working families with children, whom tax thresholds do not help at all?

Mr. Lawson

Tax thresholds help families with children, just as they help the single and those without children, whereas an increase in child benefit helps only those with children. It is a matter of judgment as to where the Government put their limited resources. I am confident that a reduction in taxation is the best way to help the economy grow and prosper.

Mrs. Currie

Has my right hon. Friend noticed that 260,000 of those who will no longer be paying tax as a result of the Budget are over working age? Does he agree that, apart from a few well-paid pensioners, such as certain Opposition Members, the Chancellor and the Treasury should, on the whole, keep their sticky fingers off the pensions that people have worked so hard to provide for themselves?

Mr. Lawson

I am not sure whether my hon. Friend is praising the extent to which tax reliefs have gone to the elderly or whether she regards what has been done as excessive. The elderly benefit from the changes in the Budget. It is extraordinary for the Opposition to maintain that the proposals in the Budget concerning national insurance were derived from the Labour party manifesto. Following what the Leader of the Opposition said about that, I looked into the matter and found that all that they said in their manifesto was that the upper earnings limit for employees should be abolished. That was the one thing that I conspicuously refrained from doing.

Mr. Hattersley

Will the Chancellor now answer the question which he refused to answer half an hour ago? Will he confirm that if the mortgage rate is increased in the coming 24 hours, for most house owners the increase in mortgage repayments this year will more than exceed any reduction in their income tax?

Mr. Lawson

That is a typically confused calculation—[HON. MEMBERS: "Answer."]—because the benefits in income tax terms will last for the entire year whereas the extra burden in mortgage interest will last for only so long as the mortgage interest rate is higher—which will be considerably less than a year.

Mr. Yeo

Does my right hon. Friend agree that while it is advantageous for many thousands of people no longer to be liable for tax, even more welcome is the fact that many people who were earning too small a sum to be liable for tax will benefit from the reduction in employees' national insurance contributions?

Mr. Lawson

My hon. Friend is absolutely right. It also makes an important difference to the relationship between earnings in work and income out of work. That was an important aspect that we had to change for the better, and that is what the Budget has done.