§ Mr. Ian Stewartasked the Chancellor of the Exchequer if he will estimate the cost of cutting the basic rate of tax to 30 per cent., restoring the main personal allowances to their real equivalent value of April 1973 and restoring the higher rate tax bands to their real equivalent values of April 1973, showing the 1973 figures and the present equivalents; and if he will indicate the cost of introducing all three changes simultaneously.
§ Mr. Robert Sheldon, pursuant to his reply [Official Report, 29 January 1979; Vol. 961, c. 355], gave the following reply:
The information is as follows:
Cost £ million Reduce basic rate to 30 per cent. 1,200 Restore main personal allowances to real equivalent of 1973–74 levels 1,950 Restore higher rate tax bands to real equivalent of 1973–74 widths 350 The cost of introducing all three changes simultaneously would be about £3,350 million.
The figures used in the calculations are as follows:
212W
Personal allowances 1973–74 Real equivalent value £ £ Single person's and wife's earned income allowance 595 1,319 Married person's allowance 775 1,718 Additional personal allowance 130 288 Age exemption income limit: Single 700 1,552 Married 1,000 2,217 Marginal age exemption income limit: Single 1,040 2,305 Married 1,340 2,970
Personal allowances 1973–74 Real equivalent value £ £ Higher rate tax hands: Width of 40 per cent. band 1,000 2,217 Width of 45 per cent. band 1,000 2,217 Width of 50 per cent. band 1,000 2,217 Width of 55 per cent. band 2,000 4,433 Width of 60 per cent. band 2,000 4,433 Width of 65 per cent. band 3,000 6,650 Width of 70 per cent. band 5,000 11,084 Width of 75 per cent. band Balance In 1973–74 there was no 83 per cent. band. In the calculations the revalued age exemption limits have been treated as age allowances under the current system with appropriate adjustments of the income limit.
The real equivalent value is determined by comparison of the Retail Prices Index (all items) between April 1973 and December 1978 (the latest month available).
The calculations assume that the lower rate band remains and that the higher rates apply above the present £8,000 threshold.