§ Mr. Chris SmithTo ask the Chancellor of the Exchequer what would be the cost in the 1991–92 financial year of introducing a reduced rate tax band of(a) 20 per cent. and (b) 15 per cent. on the first £2,000 of taxable income; and what would be the effect on the net income of (i) a single person, (ii) a couple where the wife is not working and (iii) a couple where the wife is working and paying tax.
§ Mr. MaudeThe direct revenue cost of a reduced rate of 20 per cent. on the first £2,000 of taxable income in 1991–92 would be about £2.4 billion in a full year. A reduced rate of 15 per cent. of the same band of taxable income would cost about £4.8 billion in a full year. These estimates are based on a projection of the 1988–89 survey of personal incomes and are provisional. The increases in income after tax of the different types of family would be as follows:
Increase in income after tax1 £ per week (a) Reduced rate of 20 per cent. On first £ 2,000 of taxable income (b) Reduced rate of 15 per cent. on first £2,000 of taxable income Family type (i) Single person 1.92 3.85 (ii) Married couple with wife not working 1.92 3.85 (iii) Married couple with wife working and paying tax 3.85 7.69 1 Illustrative calculations assume taxpayers have enough income to use the whole of the reduced rate band; in line (ii) the wife's income is assumed to be less than the personal allowance.