Family Income

HC Deb 21 December 1981 vol 15 cc300-1W

Mr. Squire

asked the Chancellor of the Exchequer what would be the effect on the net income of a two-child family with one earner on half average earnings, three-quarters average earnings, average earnings, one-and-a-half times average earnings and twice average earnings of a 1p cut in the standard rate of tax next April; what this would cost; and what would be the effect on the net incomes of the above families if the same amount of money were used (a) to increase personal tax allowances and (b) to increase child benefits.

Mr. Ridley

A reduction of 1p in the basic rate of income tax would cost £865 million in a full year at 1981–82 income levels.

The effect of this change and that of increasing the main personal allowances or child benefit at the same overall cost is shown in the table below for a family with two children. It is assumed that the husband is the only earner and has no income tax allowances other than the married man's personal allowance and no other source of taxable income.

	Increase in net income (£ per week)
Level of earnings	1p cut in basic rate	Increased personal allowances	Increased child benefit
½ x average	0.33	0.75	3.10
¾ x average	0.70	0.75	3.10
Average	1.07	0.75	3.10
1½ x average	1.82	0.75	3.10
2 x average	2.16	1.07	3.10

Average earnings in 1981–82 for full time adult males (all occupations) have been taken as £148.75 per week.

Miss Richardson

asked the Chancellor of the Exchequer if he will update for 1980–81 and 1981–82 the figures on family income provided in his reply of 12 January to the hon. Member for Barking, Official Report, c. 503–4.

Mr. Ridley

The information, including revisions to some earlier years, is shown in the following tables.

Percentage of Income paid in Income Tax and National Insurance Contributions
	Half	Three quarters			One and a half times	Twice
	Average Earnings	Average Earnings	Average Earnings	Average Earnings	Average Earnings
Year	Tax	NIC	Tax	NIC	Tax	NIC	Tax	NIC	Tax	NIC
SINGLE PERSON
1976–77	20.6	5.8	25.4	5.7	27.8	5.8	30.2	5.3	33.0	4.0
1977–78	17.4	5.7	22.9	5.7	25.7	5.7	28.5	5.4	30.5	4.1
1978–79	15.8	6.5	21.5	6.5	24.4	6.5	27.3	6.0	28.7	4.5
1979–80	15.3	6.5	20.2	6.5	22.6	6.5	25.1	5.8	26.3	4.3
1980–81	16.5	6.7	21.0	6.7	23.3	6.8	25.5	6.3	26.6	4.7
1981–82 (provisional)	17.9	7.7	21.9	7.8	23.9	7.7	26.0	7.8	27.7	5.9
MARRIED COUPLE—WITHOUT CHILDREN
1976–77	13.7	5.8	20.8	5.7	24.3	5.8	27.9	5.3	30.8	4.0
1977–78	8.5	5.7	17.0	5.7	21.2	5.7	25.5	5.4	27.8	4.1
1978–79	7.8	6.5	16.1	6.5	20.3	6.5	24.5	6.0	26.7	4.5
1979–80	7.9	6.5	15.2	6.5	18.9	6.5	22.6	5.8	24.5	4.3
1980–81	8.9	6.7	16.0	6.7	19.5	6.8	23.0	6.3	24.7	4.7
1981–82 (provisional)	11.1	7.7	17.4	7.8	20.5	7.7	23.7	7.8	25.4	5.9
MARRIED COUPLE WITH ONE CHILD UNDER 11
1976–77	7.8	5.8	16.8	5.7	21.4	5.8	25.9	5.3	28.9	4.0
1977–78	4.9	5.6	14.4	5.6	19.2	5.7	24.1	5.4	26.7	4.0
1978–79	6.3	6.1	14.6	6.2	19.0	6.3	23.6	5.9	25.9	4.5
1979–80	7.3	6.0	14.5	6.2	18.2	6.3	22.0	5.6	24.2	4.3
1980–81	8.3	6.3	15.2	6.4	18.8	6.5	22.4	6.2	24.3	4.7
1981–82 (provisional)	10.4	7.3	16.7	7.4	19.9	7.5	23.2	7.6	25.0	5.8
MARRIED COUPLE WITH TWO CHILDREN UNDER 11
1976–77	4.3	5.5	14.2	5.6	19.3	5.6	24.5	5.2	27.5	3.9
1977–78	1.9	5.4	12.4	5.5	17.4	5.6	22.8	5.3	25.6	4.0
1978–79	5.0	5.8	13.1	6.0	17.8	6.1	22.7	5.8	25.2	4.4
1979–80	6.8	5.6	13.8	5.9	17.5	6.0	21.5	5.5	23.5	4.2
1980–81	7.8	5.9	14.6	6.1	18.2	6.3	21.9	6.0	23.9	4.6
1981–82 (provisional)	9.8	6.9	16.0	7.1	19.3	7.3	22.7	7.4	24.6	5.7
MARRIED COUPLE WITH ONE CHILD UNDER 11 AND ONE CHILD 11–16 YEARS
1976–77	3.6	5.5	13.8	5.6	19.0	5.6	24.2	5.2	27.3	3.9
1977–78	1.3	5.4	11.8	5.5	17.1	5.6	22.6	5.3	25.4	4.0
1978–79	4.7	5.8	12.8	6.0	17.5	6.1	22.5	5.8	25.0	4.4
1979–80	6.8	5.6	13.8	5.9	17.5	6.0	21.5	5.5	23.5	4.2
1980–81	7.8	5.9	14.6	6.1	18.2	6.3	21.9	6.0	23.9	4.6
1981–82 (provisional)	9.8	6.9	16.0	7.1	19.3	7.3	22.7	7.4	24.6	5.7
MARRIED COUPLE WITH TWO CHILDREN UNDER 11 AND TWO CHILDREN 11–16 YEARS
1976–77	—	5.1	8.5	5.3	14.7	5.4	21.2	5.1	24.6	3.9
1977–78	—	5.0	7.2	5.2	13.4	5.3	20.0	5.2	23.3	3.9
1978–79	2.1	5.2	9.9	5.6	15.1	5.8	20.6	5.6	23.5	4.3
1979–80	6.0	4.9	12.6	5.4	16.3	5.6	20.5	5.2	22.7	4.0
1980–81	6.9	5.2	13.4	5.7	17.0	5.9	21.0	5.8	23.1	4.4
1981–82 (provisional)	8.8	8.1	14.8	6.6	18.2	6.9	21.8	1.	23.9	5.6

Average earnings are for full-time adult male manual workers. Figures for the financial year are based on averages of monthly estimates derived from new earnings survey data for each April and a centred three-month moving average of the average earnings index (whole economy). The income figures include family allowance or child benefit, where appropriate. It has been assumed that employees are not contracted out of the earnings related state pension scheme.