§ Q30. Mr. Peter Bottomley
asked the Prime Minister if increases in tax allowances and child benefit have the same effect on the public sector borrowing requirement.
§ The Prime Minister
Increases in tax allowances under the PAYE system have a delayed impact on the public sector borrowing requirement (PSBR) because they are met in the first instance by employers. The change in employers' net tax payments to the Exchequer is delayed by about a month. Child benefit is paid directly to mothers and thus has484W an immediate PSBR impact. In the first year, therefore, the PSBR effect of a child benefit increase can generally be expected to be larger than the effect of increases in tax allowances coming into force on the same date.