Taxes and Benefits

HC Deb 23 May 2000 vol 350 cc486-8W

Mr. Willetts

To ask the Secretary of State for Social Security if he will provide illustrative examples of cases where taxes and benefits interact to produce a marginal income deduction rate of(a) 50 per cent. and above, (b) 60 per cent. and above, (c) 70 per cent. and above, (d) 80 per cent. and above, (e) 90 per cent. and above and (f) 100 per cent. and above on the same basis as Figure 37 in the departmental report, Cm 4614, p.81. [120382]

Mr. Rooker

Marginal net income deduction rates in Figure 37 of the latest departmental report were calculated by micro simulation modelling, using a sample of households from the 1996–97 Family Resources Survey. The following examples are drawn from the survey results underpinning the latest estimates, for 1999–2000. They are shown by 10 per cent. bands. As in Figure 37, the examples are restricted to households where at least one person is working for 16 hours or more per week.

50 to 59 per cent. rate: None of the cases in the 1996–97 survey are modelled to have a marginal net income deduction rate of between 50 and 59 per cent.

60 to 69 per cent. rate: a single person with no children, on the Housing Benefit taper and with earnings below the income tax and National Insurance thresholds.

70 to 79 per cent. rate: an earner in a couple with two children and on the Family Credit (which has now been replaced by the Working Families Tax Credit (WFTC)) taper, with earnings below the income tax and National Insurance thresholds.

80 to 89 per cent. rate: a lone parent with two children, with earnings below the income tax and National Insurance thresholds, receiving the maximum level of Family Credit (which has now been replaced by the WFTC) and on the Council Tax Benefit and Housing Benefit taper.

90 to 99 per cent. rate: a main earner in a couple with two children and on the Family Credit and Housing Benefit tapers, with both partners working but only the main earner earning enough to pay tax, at 23 per cent. (which has now been reduced to 22 per cent.), and National Insurance contributions, at 10 per cent.

100 per cent. + rate: a sole earner in a couple with one child, on both the Housing Benefit and Council Tax benefit tapers, working more than 30 hours per week and paying income tax at 23 per cent. (now reduced to 22 per cent.) and National Insurance at 10 per cent., receiving Family Credit (now replaced by WFTC) less than the value of the 30 hour credit at £11.05, which is not taken into account in assessments of Housing Benefit and Council Tax Benefit entitlement.