§ Mr. Austin Mitchellasked the Chancellor of the Exchequer (1) further to the answer of 22 February concerning the taxation of child benefit, Official Report, c. 425–26, whether he will publish in the Official Report a table showing the implied average rate of tax, the incremental rate and the cash increase in benefit which could be afforded on a revenue-neutral basis if child benefit were to be taxed;
(2) further to the answer of 22 February, concerning the taxation of child benefit, Official Report, c. 407, whether the treatment of child benefit as earned income would have a significant effect on the figures; and whether he will publish a table in the Official Report showing the total number of benefits, the number which he assumed would be taxable in whole or in part, and the distribution by income range as set out in the reply dated 31 January, Official Report, c. 20–22, concerning the average rate of tax paid in each income range.
§ Mr. RidleyI regret the delay in answering these two questions. I am now able to provide information for 1983–84 in the light of my right hon. and learned Friend's Budget Statement of 15 March.
At the income tax rates and allowances for 1983–84 and with the child benefit rate from November 1983 proposed in the Budget, the yield from taxing child benefit, in a full year at 1983–84 levels of income, would be about £1 billion. The average rate of income tax of those liable to tax with children would be about 21 per cent.
Some six million families would pay tax at the basic rate and a further quarter million at higher rates. The number of children involved would be about 10¾ million and half a million respectively.
If the £1 billion yield in a full year were applied to increasing taxable child benefit the revenue-neutral increase would be about £2.;15 per week on average in 1983–84.
49WIf child benefit were to be taxed as earned income and if married women receiving child benefit could set wife's earned income relief against it, the yield of income tax would be reduced from £1 billion to about £350 million.
It is not possible to give reliable estimates of the numbers of families with children by income range in the degree of detail shown in the tables (which applied to taxpayers generally) in my answer of 31 January, to which the hon. Member refers.
The following table gives provisional estimates for 1983–84 by broad income ranges of the numbers of tax units receiving child benefit and of the average tax rate, on the assumption that child benefit had become liable to tax (and would therefore be treated as part of total income). However, total income includes only child benefit and those forms of income liable to tax before the deduction of personal allowances and reliefs; it therefore excludes family income supplement and other non-taxable benefits.
Range income (lower limit) Numbers of taz units receiving child benefit (millions) Average tax rate paid by those in column (b) £ Not liable to tax Liable to tax Per cent. (a) (b) (c) 1,500 ¼ ¼ 10.8 4,000 — 2¼ 16.2 8,000 — 2 19.2 12,000 — 1¼ 23.2