§ Mr. Chris SmithTo ask the Chancellor of the Exchequer what is his estimate of the savings in a full year at 1989–90 rates of restricting all allowances and reliefs to the standard rate of tax; and if he will provide a breakdown of the category of allowances and reliefs.
§ Mr. Lilley[holding answer 12 February 1990]: Estimates of the direct revenue yield in a full year at 1989–90 levels of income from restricting the main income tax reliefs and allowances to the basic rate are as follows:
864W
£ million a. Personal allowances 1,350 b. Mortgage interest relief 430 c. Employee's superannuation and personal pension contributions 200 d. Retirement annuity relief1 110 1 Including relief for retirement annuity payments made by employees. It is not 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 £2¾ 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 income and are provisional. No account is taken of possible behavioural changes or the effect on receipts of capital gains tax.