§ Mr. MacGregorasked the Chancellor of the Exchequer to what level the higher rate of income tax bands would need to be raised to reflect the inflation that has taken place since April 1973; and what would be the cost of raising them accordingly.
§ Mr. Robert SheldonOn the basis of the change in the retail prices index between April 1973 and December 1977—the latest date available—the comparable thresholds of taxable income would be as follows:
1973–74 Revalorised Equivalent £ £ 5,000 10,227 6,000 12,272 7,000 14,317 8,000 16,362 10,000 20,452 12,000 24,542 15,000 30,677 20,000 40,904 The number of bands of taxable income in 1973–74 was one less than in 1977–78 and the highest rate was 75 per cent. If this system were substituted for the present system with the thresholds revalorised as above, the estimated cost for 1977–78 would be about £600 million.
§ Mr. Arthur Lewisasked the Chancellor of the Exchequer to what extent the revenue would be reduced if all persons were allowed to have an earned income of £5,000 per annum before income tax commenced; and by what amount the tax rates above the £5,000 per annum on earned income would have to be increased to recoup this reduction in the revenue.
§ Mr. Robert SheldonAs income tax rates are applied to total taxable income regardless of source, there are difficulties in distinguishing tax on income from one specific source. However, assuming that earned income is regarded as the bottom slice and there is no change in 121W the tax charged on investment income, it is estimated that the loss of revenue would be somewhere about £14,600 million, if the principal personal allowances were increased to £5,000. It would be possible to recoup only about 20 per cent. of this sum even if a rate of 100 per cent. were charged on the earned income remaining after personal allowance deductions of £5,000.
§ Mr. MacGregorasked the Chancellor of the Exchequer whether he will estimate what the revenue cost would be by April 1978, assuming a current inflation rate of 10 per cent. of (a) cutting the basic rate of tax from 34 per cent. to 30 per cent., (b) restoring the main personal allowances to their real equivalent value of April 1973, and (c) restoring the higher rate tax bands to their real equivalent values of April 1973; and if he will give these costs in terms of the fiscal years 1977–78 and 1978–79, respectively.
§ Mr. Robert SheldonI shall let the hon. Member have a reply as soon as possible.
Mr. Rockerasked the Chancellor of the Exchequer what would be the cost of introducing lower-rate income tax bands of (a) 20 per cent. on first £500; (b) 20 per cent. on first £1,000; (c) 5 per cent. on first £500; (d) 25 per cent. on first £1,000, showing in each case the cost if all taxpayers were included and the cost if the operation of the lower rate tax band was confined to basic rate taxpayers only.
§ Mr. Robert Sheldon,pursuant to his reply [Official Report, 20th January 1978; Vol. 942, c. 390], gave the following information:
The estimated costs would be as follows, on the basis of 1977–78 incomes:
Cost Band if allowed to all taxpayers if allowed to taxpayers liable at basic rate only £ million £ million £500 at 20 per cent. 1,600 1,550 £1,000 at 20 per cent. 3,000 2,850 £500 at 5 per cent. 3,350 3,200 £1,000 at 25 per cent. 1,900 1,850