§ I now come to income tax. Income tax is never welcome, but paying tax unexpectedly is even less so. That is the position facing employees who were working in Kuwait and Iraq at the time the Gulf crisis began. They may now become liable to pay United Kingdom tax on their foreign earnings which they had expected to be exempt. I propose that employees who had intended to work in Kuwait or Iraq for a year or more but were forced to return home earlier by the crisis should not be taxed on their foreign earnings.
§ I have no changes to make to either the basic rate or the higher rate of income tax. Our objective remains to move towards a basic rate of 20p, but I cannot make further progress towards it this year. Our priority must be to reduce taxes on business.
§ I propose this year to uprate the personal allowance in line with inflation. It will rise by £290 to £3,295. The personal allowance for the over-65s will increase by £350 to £4,020, and for those aged 75 and over by £360 to £4,180. The married couple's allowances for the elderly will also be increased in line with inflation, from £2,145 and £2,185 to £2,355 and £2,395. The income limit for the allowances for the elderly will increase by £1,200 to £13,500.
§ However, I am not proposing to increase the married couple's allowance for couples under 65 or the allowances that are linked to it. They will stay at £1,720.
§ I know that there is a widespread view in the House and in the country that more should be done to help families with children. I propose to use the resources released by not increasing the married couple's allowance for that purpose.
§ There are some, I know, who advocate the reintroduction of child tax allowances. I have looked at that option carefully, but I am clear—especially following the introduction of independent taxation—that it would not be an effective way of channelling resources to those who need them. A better way of directing help straight into the pockets of mothers, whether they choose to work or not, is child benefit. It goes to all families—to the children of non-taxpayers as well as the children of taxpayers.
§ I therefore propose to increase child benefit from 7 October by £1 a week for the first eligible child in each family, and by 25p a week for other children. These rises come on top of the increase announced by my right hon. Friend the Secretary of State for Social Security last autumn, which will be paid from 8 April. This means that, in October this year, a benefit of £9.25 a week will be payable for the first child, and £7.50 for each subsequent child.
§ We will ensure that the increases benefit not only taxpayers but the very poorest families—those on income support and family credit. These increases will help 6.8 million families, and 12.3 million children. I should add 180 that the Government have decided that the new levels of child benefit will be uprated in line with inflation next April and in subsequent years.