§ Dr. McDonald
asked the Chancellor of the Exchequer what would be the cost of each 1 per cent. increase in 1981–82 in each of the higher rate tax bands.
§ Mr. Peter Rees
[pursuant to his reply, 23 January 1981, c. 258]: About £5 million in a full year at 1980–81 income levels in addition to the cost (about £10 million in a full year) of increasing the first higher rate threshold. The cost in 1981–82 would be greater, depending on incomes and other factors. It is not the practice to give estimates before the Budget Statement.
The cost of increasing the first higher rate threshold mentioned above assumes, consistently with the presentation in the Financial Statement and Budget Report, that the increase in the basis rate band, represented by the increase in the first higher rate threshold, is not accompanied by an increase in any subsequent threshold. Therefore, the figure of £10 million quoted above assumes that the width of the 40 per cent. band is reduced. The cost of increasing the width from its reduced value to 1 per cent. more than its present value is included in the figure of £5 million.
None of the costs allow for any rounding that would be required for administrative purposes or to meet the indexation provisions of Section 24 of the Finance Act 1980.