§ Mr. Austin Mitchell
asked the Chancellor of the Exchequer whether he will publish in the Official Report an estimate of the cost to the Exchequer in a full year of an increase in the threshold for income tax and each of the taxation bands by an amount required to compensate for inflation since the enactment of section 22(2) of the Finance Act 1977.
§ Mr. Ridley
There would be a revenue yield—not a cost—of about £800 million if the current levels of allowances, basic and higher rate band widths and investment income surcharge threshold were replaced by those specified in sections 22(1) and 17 of the Finance Act 1977, revalued from 1977–78 to 1981–82 levels by reference to movements in prices over the relevant period, leading to an increase of 64 per cent.
Allowance levels for 1977–78 were later increased—by the Finance (Income Tax Reliefs) Act 1977. However, for the purposes of the indexation provision in section 22(2) of the Finance Act 1977, the original levels specified in Section 22(1) of that Act continue to apply.