HC Deb 12 May 1988 vol 133 cc457-9
8. Mr. Waller

To ask the Chancellor of the Exchequer what is his estimate of the weekly value to the average pensioner couple of the changes in income tax for 1988–89.

Mr. Major

The Budget changes in income tax will be worth over £4.10 a week to I he average pensioner couple paying income tax.

Mr. Waller

While recognising that about half of all pensioner couples do not pay income tax at all, and that this year's Budget will have taken about 195,000 pensioners out of income tax altogether, may I ask whether my right hon. Friend agrees that it is very good news for all those pensioners who pay tax that they will have gained, on average, about £4.19 a week from this Budget?

Mr. Major

I entirely agree with my hon. Friend, except in one tiny respect. It is not one half of pensioners who do not pay tax. As a result of the increase in age allowance and other changes, two thirds of pensioners do not now pay income tax.

Mr. Winnick

How can the Minister justify that claim? Although pensioners will receive a tax reduction, in many cases they will be paying £15 to £20 a week more in rent and rates, compensation for which will be only on a transitional basis? How do the Chancellor and the Chief Secretary justify a position in which the richest 1 per cent. of taxpayers are receiving 70 per cent. of all the Budget tax concessions?

Mr. Major

Between 1979 and now pensioners' real incomes have risen, in real terms, five times more than they increased in real terms between 1974 and 1979. Most pensioners' incomes under the social security changes have been either increased or are unchanged. The transitional protection arrangements that were announced by my right hon. Friend the Secretary of State for Social Services deal with the problems that are faced by a minority of pensioners who, until then, were losers.

Mr. Jack

Does my right hon. Friend agree that, in addition to the benefits from the tax changes as they affect pensioners, the control of inflation is also important, as it affects their disposable income? Pensioners remember how they were affected during the period when those who sit on the Labour Benches were in government. Does my right hon. Friend also agree that the increase in their disposable income will give pensioners a great opportunity to take the products of national savings, many of which are tax-free?

Mr. Major

I agree entirely with my hon. Friend. The change that has taken place in recent years in the living standards of pensioners was most effectively shown in the family expenditure survey that was published some time ago. Many people were considerably surprised by the improvement that has taken place.

Mr. Chris Smith

Is the Chief Secretary able to tell us what the weekly impact is on a pensioner couple, especially those with a small occupational pension, of the changes in the housing benefit tapers and the 20 per cent. rates payment provisions that were introduced by the Government in April? Do they not wipe out in hundreds of thousands of cases any small benefit that was available under the Budget?

Mr. John Smith

Yes.

Mr. Major

No, the answer is not necessarily yes. The net effect on a pensioner couple as a result of the changes will depend on a variety of intangibles, but in the vast majority of cases considerable protection is provided against them, and the average living standards of pensioners have materially increased.