HC Deb 18 January 1982 vol 16 cc73-5W
Dr. Owen

asked the Secretary of State for Social Services what composition of families and family income levels fall within the poverty trap; and how the numbers of families have increased over the last five years in numerical terms and as a percentage of all families.

Mrs. Chalker

[pursuant to her reply, 8 December 1981, c. 365–6]: Such information as is readily available is shown in the following tables.

Table 1 gives, for various hypothetical families, the estimated ranges of gross weekly incomes which, at November 1981 levels, were theoretically subject to "marginal tax rates" of 75 per cent. or more. The figures are purely illustrative. They are based on a number of assumptions which are described in the November 1981 edition of the "Tax Benefit Model Tables". Copies of the November edition are being deposited in the Library.

Table 2 shows the estimated numbers of families theoretically subject to marginal tax rates of 75 per cent. or more in the years 1975, 1976 and 1977. These estimates have been derived from analyses of family expenditure survey data; 1977 is the last year for which estimates ate available. Estimates for 1979 will be available shortly.

The right hon. Gentleman will appreciate that statistics on the so-called poverty trap, such as those given in tables 1 and 2 below, are of limited value. The poverty trap arises from the existence of a number of carefully targeted means-tested benefits that have been specifically designed to alleviate "poverty", overlapping the impact of income tax and social security contributions on incomes above certain levels. In practice, however, these high marginal tax rates are more theoretical than real because some benefits run on for a while even if income rises—for instance, family income supplement, with the free school meals to which it acts as a "passport", runs on for a year.

Table 1
Estimated ranges of gross weekly incomes which were theoretically subject to marginal tax rates of 75 per cent. or more. November 1981
Type of family Range of income
£
Single person with 1 child 37–73
Single person with 2 children 42–81
Married couple with 1 child 41–73
Married couple with 2 children 42–82
Married couple with 3 children 47–89
Married couple with 4 children 52–97

Table 2
Estimated numbers of working families, with children, theoretically subject to marginal tax rates of 75 per cent. or more
Year Estimated numbers of families As percentage of all families with children
1975 90, 000 1.3
1976 70, 000 1.0
1977 110, 000 1.5

The estimated numbers of families in table 2 have been rounded to the nearest 10, 000 and are subject to statistical error. They relate only to people living in private households. Higher rate taxpayers have been excluded.