HC Deb 29 November 1994 vol 250 c1102

Finally, I turn from taxation to income tax.

The lower, basic and higher rates of income tax will remain unchanged in 1995–96. However, we can at last begin to benefit from our steady return to healthy public finances. This means that I can fully index the personal allowance, the threshold for higher rate tax, and the income limit for the age-related allowance.

I have been able to provide some additional help in two important areas. First, I want to do a little bit more for pensioners. I propose to increase the age-related personal allowance by more than indexation. The allowances for everyone aged 65 and over will be increased by £430. Nearly 3 million pensioners will gain from this, at a cost of £200 million in a full year.

Secondly, I also propose to widen the 20p lower band to £3,200. That increase is twice the amount necessary for indexation for inflation. One in five of all taxpayers will now only pay tax at the lowest rate of 20p.

The tax measures that I am announcing in this Budget—all the tax measures that I have described—reduce revenue by £1 billion in 1995–96, but that is because I have had to provide £605 million, as I have said, for the transitional relief for business rate payers. I have said many times that I would like to go further and that I will in due course go further. Conservative Members are tax cutters by instinct. But I have also made it clear over and over again that tax cuts can come only when we can afford them and when it is in the interests of our industrial economy that we should make them.

That means two things. We have to continue to improve further our long-term economic performance. That is why in my Budget today I have introduced numerous measures—boring the hon. Member for Bolsover—to strengthen the economy and make sure that recovery is sustained and that we become a powerful manufacturing and industrial economy.

The second requirement is firm control of public spending.

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