§ Mr. Simon HughesTo ask the Chancellor of the Exchequer what is his estimate of the savings, in a full year at 1990–91 rates, of restricting all allowances and reliefs to the standard rate of tax; and if he will provide a breakdown by category of allowance and relief.
§ Mr. HanleyTo ask the Chancellor of the Exchequer how much revenue would be gained by the Treasury if the higher rate of MIRAS were abolished.
§ Mr. Lilley[holding answer 4 April 1990] : Estimates of the direct revenue yield in a full year at 1990–91 levels of income from restricting the main income tax allowances and reliefs to the basic rate of income tax are as follows:
£million Personal allowances 1,390 Mortgage interest relief 510 Retirement annuity relief1 110 1 Including relief for retirement annuity payments made by employees. It would be premature to provide an estimate for employees superannuation and personal pension contributions, since this would depend on take-up. Nor is it possible to provide reliable estimates for the effects of restricting other smaller reliefs to the basic rate.
The direct revenue yield from restricting all reliefs and allowances simultaneously to the basic rate is likely to be in the order of nearly £3 billion, somewhat more than the sum of the yields from restricting the reliefs and allowances separately; this is due to the cumulative effect of bringing more people into higher rate tax. About two thirds of those who would pay more tax as a result of this change are currently liable only at the basic rate.
Estimates are based on a projection of the 1987–88 survey of personal incomes and are provisional. No account is taken of possible behavioural changes or the effect on receipts of capital gains tax.