§ Mr. Tierneyasked the Chancellor of the Exchequer what tax changes for 1979–80 he proposes following the increase in child benefit which has been announced.
§ Mr. Joel BarnettMy right hon. Friend in his Budget Statement announced the Government's decision to increase child benefit to £4 a week for all children in April 1979, and, as a first instalment of this to increase the benefit by 70p to £3 this November. These increases allow the phasing in of the child benefit scheme to be completed by withdrawing child tax allowances in respect of all children—other than certain students and children living overseas to whom special provisions apply—with effect from 1979–80. The combined November and April benefit increases will exceed the losses from the proposed withdrawal of the tax allowances so that for the great majority of families there will be a net increase in family income.
In order to ensure that widows and others in receipt of taxable social security benefits who receive child dependency additions are not worse off as a result of the withdrawal of the tax allowances, it is proposed to exempt the child dependency additions from tax with effect from 1979–80. This exemption extends the arrangements for part-exemption of those dependency additions in 1977–78 and 1978–79. For those beneficiaries who are liable to tax this exemption will more than set off the loss of the tax allowances. No tax adjustment is to be made for war widows whose dependency allowances are not taxable, but appropriate adjustments will be made to the amount of their dependency allowances.
Consequential changes will also be needed to the additional personal allowance which can at present be claimed by single parents only if they have a child living with them for whom they are entitled to child tax allowance. It is pro- 424W posed with effect from 1979–80 to replace the link with the child tax allowance by a requirement that the child should meet the present conditions for the child tax allowance, except that the claimant will not have to prove custody of a child who is not his or her own child.
Single persons who maintain relatives to look after younger brothers or sisters are now ordinarily able to claim the additional personal allowance, and the removal of the custody requirement should ensure that practically all can do so. The alternative "child minder" allowance available to this group—currently worth only £100, compared with £550 additional personal allowance—will generally cease to have effect.
It is proposed to introduce legislation in next year's Finance Bill to give effect to these changes. The Inland Revenue will take them into account in the preparation this winter of the PAYE codes which will take effect from 6th April 1979.
The Inland Revenue is today issuing a press release with further details.