Income Tax (Hansard, 5 March 1993)

§ Ms Harman
To ask the Chancellor of the Exchequer (1) if he will estimate the effect on Treasury revenues in 1993–94 of introducing an allowance against income tax of(a) £1,000 and (b) £2,000 for all working mothers., giving both full and first-year costs;
(2) if he will estimate the effect on Treasury revenues in 1993–94 of introducing an allowance against income tax of (a) £1,000 and (b) £2,000 for all working mothers with at least one child under five years, giving both full and first-year costs.

§ Mr. Dorrell
[holding answer 25 February 1993]: Estimate of the cost of introducing allowances against taxable incomes for working mothers and lone parents at 1993–94 levels are set out in the table. The first year cost would depend on how the measure was implemented.

Cost (£ billion)

Allowance of (a) £1,000 per year Allowance of (b) £2,000 per year

All working mothers¹ 0.6 1.1

All working mothers with a child under five¹ 0.2 0.4

¹ Including lone parents who are working.

§ Ms Harman
To ask the Chancellor of the Exchequer if he will update, to take account of the 1992 Budget, the information on tax changes contained in his answer of 3 March 1992 to the hon. Member for Oldham, West (Mr. Meacher),Official Report, column 122.

§ Mr. Dorrell
[holding answer 25 February 1993]: Latest estimates of the reduction in tax liability resulting from the changes in tax rates, allowances and thresholds are in the table. The 1978–79 income tax regime has been indexed to 1992–93 levels by reference to the statutory formula, and allowing for independent taxation. A reliable analysis of taxpayers with incomes over £80,000 is not available.
For the purposes of these calculations the indexed regime of 1978–79 is applied directly to the income base of 1992–93. In practice, retention of the regime, indexed as appropriate, for the intervening years would have led to changes in the income base.
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Reduction in income tax compared with 1978–79 indexed regime

Range of individual's income in 1992–93 (£) Number of individual¹ 1992–93 (million) Total reduction in tax (£ million) Average gain per individual (£)

Under 5,000 3.5 520 150

5,000–10,000 8.1 3,100 390

10,000–15,000 6.2 4,500 730

15,000–20,000 3.8 4,100 1,080

20,000—30,000 3.2 5,300 1,700

30,000—50,000 1.2 4,000 3,403

50,000—80,000 0.3 2,700 9,700

over 80,000 0.1 6,800 48,200

Total 26.4 31,100 1,200

¹ Individuals who would be liable to tax under the indexed 1978–79 regime.

Cost (£ billion)
	Allowance of (a) £1,000 per year	Allowance of (b) £2,000 per year
All working mothers¹	0.6	1.1
All working mothers with a child under five¹	0.2	0.4
¹ Including lone parents who are working.

Reduction in income tax compared with 1978–79 indexed regime
Range of individual's income in 1992–93 (£)	Number of individual¹ 1992–93 (million)	Total reduction in tax (£ million)	Average gain per individual (£)
Under 5,000	3.5	520	150
5,000–10,000	8.1	3,100	390
10,000–15,000	6.2	4,500	730
15,000–20,000	3.8	4,100	1,080
20,000—30,000	3.2	5,300	1,700
30,000—50,000	1.2	4,000	3,403
50,000—80,000	0.3	2,700	9,700
over 80,000	0.1	6,800	48,200
Total	26.4	31,100	1,200
¹ Individuals who would be liable to tax under the indexed 1978–79 regime.