§ Mr. Meacherasked the Secretary of State for Social Services what estimate he has made of the number of families who, out of an increase in their earnings of £1, face the loss of, respectively, 50p, 75p, 100p and 125p or more as a combined result of reduction of benefits, taxation or other compulsory payments; and by what means these estimates are arrived at.
§ Sir K. JosephIt is only possible as yet to make theoretical estimates of these numbers, making assumptions as to take-up, recent movements of earnings and housing costs and so on. The assumption has also had to be made that benefits will be adjusted immediately income changes, whereas in practice this will seldom if ever happen where the family are receiving several benefits. It is such families who may gain least from an additional £1 of earnings. The estimates therefore certainly exaggerate the total number affected, indicating an upper limit beneath which the true figure lies.
It is estimated that, had all 6.2 million two-parent families with father in full-time work earned an extra £1 at the end of 1972, 245,000 or about 4 per cent. of them would, on the somewhat unrealistic 459W assumption which has had to be made that their benefits were adjusted immediately, have gained between 25p and 50p, and 55,000 or about 1 per cent. of families would, on the same unrealistic assumptions, have gained something less than 25p. Some 15,000 families would on the same unrealistic assumptions have lost up to 25p, and another 15,000 would have lost more. About 95 per cent. of all two-parent families with children would have gained more than 50p. These estimates do not take account of the introduction in April of 12-month awards for free school meals, free welfare milk and family income supplements.
These estimates are based on data collected in the Family Expenditure Survey for 1970 and 1971 updated to the end of 1972. This provides an estimate of the incomes of two-parent families before tax, from which the net income of these families after tax and payment of any combination of means-tested benefits can be calculated by means of a computer programme. Unlike the estimates quoted in the House on 6th November 1972—which related to the position at 31st July—these estimates take account of the
£million Cost of National Insurance Benefits: Savings on Supplementary Benefit from: Approximate tax yield on increased retirement pension*
Amount of Increase increased retirement pension increased other benefits increased retirement pension increased other benefits £3.25 (single) … 1,200 540 185 45 120 £5.10 (married) … £2 (single) … 700 300 150 30 70 £2.75 (married) … * The short-term benefits are not taxable; it is not possible to estimate the tax yield on increased widows benefits.