HC Deb 12 February 1985 vol 73 cc145-6W
Sir Brandon Rhys Williams

asked the Chancellor of the Exchequer if he will publish figures comparing the estimated net costs, after savings on means-tested benefit expenditure of (a) raising tax thresholds for married couples to equal the supplementary benefit scale rate for a family with four children aged four years, six years, 12 years and 15 years, plus £25 per week to allow for housing costs and (b) raising tax thresholds for married couples to equal the supplementary scale rate for a married couple, plus £25 to cover housing costs, and simultaneously increasing child benefit to equal the supplementary benefit scale rates for children, assuming in each case that the other personal income tax allowances are moved up in line.

Mr. Moore

If income tax allowances for 1985–86 were set, as specified, in relation to the supplementary benefit scale rates now current, the net costs in a full year at forecast 1985–86 levels of income are estimated at(a) £15 billion and (b) £4¾ billion. These costs are relative to indexation of allowances and thresholds by 4.6 per cent. and assume that relief for mortgage interest would continue on the present basis. The level of the married man's allowance in each case would be (a) £6,165 and (b) £3,675.

Dr. McDonald

asked the Chancellor of the Exchequer (1) if he will estimate, for each financial year since 1979–80, the costs of raising (a) the tax threshold and (b) the tax bands above the rate of inflation;

(2) if he will estimate the loss to the Exchequer in each year since 1979–80 resulting from the abolition of the higher-rate bands for income tax;

(3) if he will estimate the costs to the Exchequer each year since 1979–80 of the reduction in the basic rate from 33 per cent. to 30 per cent.

Mr. Moore

[pursuant to his reply, 31 January 1985, c. 310]: If the 1978–79 income tax allowances and thresholds were indexed to 1984–85 levels by reference to the statutory formula and applied to the 1984–85 income tax base, the direct revenue effect would be an additional yield of about £4.3 billion in a full year.

The levels of the main allowances and thresholds, compared with the actual 1984–85 values, would be:

Indexed 1978–79 regime 1984–85
Personal allowances £ £
Single and wife's earned income allowance 1,795 2,005
Married man's allowance 2,795 3,155
Additional personal allowance 1,000 1,150
Aged single allowance 2,370 2,490
Aged married allowance 3,785 3,955
Aged income limit 7,300 8,100

Bands of taxable income (£)
Rate of tax (percentage) Indexed 1978–79 regime 1984–85
25 0— 1,370
30 0–15,400
33 1,371–14,600
40 14,601–16,500 15,401–18,200
45 16,501–18,400 18,201–23,100
50 18,401–20,300 23,101–30,600
55 20,301–23,100 30,601–38,100
60 23,101–25,900 over 38,100
65 25,901–29,600
70 29,601–34,200
75 34,201–44,300
83 over 44,300

Investment Income Surcharge: Indexed 1978–79 regime
Bands of net investment income (£)
Non-aged Aged Rate of Surcharge (percentage)
0–3,100 0–4,600 Exempt
3,101–4,200 4,601–5,600 10
over 4,200 over 5,600 15

Investment income surcharge was abolished in 1984–85.

Taking the 1984–85 income tax base as given, the direct revenue effects of reinstating the indexed 1978–79 tax regime can be broken down, as follows:

Yield(+)/Cost(-) £ million
Reductions in personal allowances +1,590
Reintroduction of reduced rate band at 25p -1,550
Increase in basic rate of 3p +2,410
Reduction in basic rate limit of £800 +60
Changes in higher rate thresholds up to 60 per cent. +400
Reintroduction of higher rates above 60 per cent. +660
Reintroduction of investment income surcharge +730
Total 4,300

In the table above, the effect of each change has been calculated on the assumption that each of the changes which precede it has already been made.

It is not possible to determine what incomes in 1984–85 would have been if the 1978–79 tax allowances and thresholds had been in force (after indexation) over all the intervening years.

The provision of similar information for earlier years would involve disproportionate cost.