HC Deb 23 December 1976 vol 923 cc333-4W

In an intervention during David Ennals' speech in the debate last week (Vol. 921, c. 1186), you said that, if an occupational pensioner got an increase in pension, and as a result had his unemployment benefit reduced by a similar amount, he would in fact be worse off, since the additional pension would be taxable whereas the unemployment benefit which he was losing was not. In her winding-up speech Lynda Chalker made a somewhat similar point (c. 1284) about the case of an invalidity pensioner who would be likely to suffer a net reduction in income if his wife had increased her earnings above £39 a week.

These are perfectly fair points, but they are merely one aspect of the wider problem that short-term unemployment and sickness benefits have not been taxable since 1949 and that invalidity pension has not been taxable since its introduction by the Conservative Government in 1971. The recipients of these benefits who have a total income above the tax threshold—and £39 is of course in itself a substantial figure—have an advantage over other persons with incomes at similar levels, but the corollary to this is that, when the composition of their income changes, they lose some of their tax advantage.

While there is little doubt that in principle all such benefits ought to be taxed, the administrative implications of taxing them are enormous and successive Governments have failed to solve the problems involved. Certainly such problems could not be solved without a very large increase in Civil Service manpower.

I am sending a copy of this letter to Lynda Chalker.

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