Tax Reliefs and Allowances (Hansard, 18 December 1987)

§ Mr. Kirkwood
To ask the Chancellor of the Exchequer what would be the cost in 1987–88 and 1988–89 of restricting(a) personal allowances and (b) mortgage interest tax relief to the standard rate of tax only.

§ Mr. Norman Lamont
[holding answer 17 December 1987]: The direct revenue yield at 1987–88 levels of income of restricting personal allowances to the basic rate is estimated to be £810 million; the yield at 1988–89 levels of income, assuming indexation of the current income tax bands and allowances to 1988–89 levels as in table 4.1 of the 1987 Autumn Statement, is estimated to be £950 million. The estimates make no allowance for possible changes in taxpayers' behaviour.
871W
The direct revenue yield in a full year at 1987–88 levels from restricting mortgage interest relief to the basic rate is estimated to be £330 million. This estimate makes no allowance for the effect of any consequential changes to the distribution of outstanding mortgages. It would be premature to provide estimates of the direct revenue yield at 1988–89 levels since this will depend on the mortgage interest rate and the level of mortgages outstanding in that year.

§ Mr. Dobson
To ask the Chancellor of the Exchequer if he will publish in theOfficial Report figures relating to tax reliefs and allowances on the same basis as in his reply

Reductions in income tax liabilities in 1987–88 compared with the indexed 1978–79 tax regime

Upper 50 per cent.¹ Lower 50 per cent.¹

Amount Average per tax unit² Amount Average per tax unit²

£ million £ per year £ million £ per year

Increase in personal allowances 2,500 240 1,470 140

Abolition of reduced rate band -1,720 -170 -1,130 -110

Decrease in basic rate 6,190 600 1,790 170

Increase in higher rate threshold 400 40 — —

Changes in higher rate thresholds 800 80 — —

Abolition of higher rates above 60 per cent. 590 60 — —

Abolition of Investment Income Surcharge 810 80 20 2

Total 9,570 920 2,150 200

Notes: Source of income tax reduction(+)/increase(-).

In the table, the effect of each change has been calculated on the assumption that each of the previous changes has already been made.

¹ Based on 20.9 million single people and married couples expected to pay tax in 1987–88 and excluding a further 900,000 who would pay tax under the revalorised 1978–79 regime. All information is in terms of tax units i.e. married couples are counted as one and their incomes combined.

² By reference to the numbers paying tax in 1987–88.

Reductions in income tax liabilities in 1987–88 compared with the indexed 1978–79 tax regime
	Upper 50 per cent.¹	Lower 50 per cent.¹
	Amount	Average per tax unit²	Amount	Average per tax unit²
	£ million	£ per year	£ million	£ per year
Increase in personal allowances	2,500	240	1,470	140
Abolition of reduced rate band	-1,720	-170	-1,130	-110
Decrease in basic rate	6,190	600	1,790	170
Increase in higher rate threshold	400	40	—	—
Changes in higher rate thresholds	800	80	—	—
Abolition of higher rates above 60 per cent.	590	60	—	—
Abolition of Investment Income Surcharge	810	80	20	2
Total	9,570	920	2,150	200
Notes: Source of income tax reduction(+)/increase(-).
In the table, the effect of each change has been calculated on the assumption that each of the previous changes has already been made.
¹ Based on 20.9 million single people and married couples expected to pay tax in 1987–88 and excluding a further 900,000 who would pay tax under the revalorised 1978–79 regime. All information is in terms of tax units i.e. married couples are counted as one and their incomes combined.
² By reference to the numbers paying tax in 1987–88.