§ Mr. Andrew SmithTo ask the Chancellor of the Exchequer if he will update his answer to the hon. Member for Peckham (Ms Harman) of 19 January 1994,Official Report, column 635–42, take account of changes he is making in the Budget, and to provide latest estimates of the burden of direct and indirect taxes for 1993–94, 1994–95, 1995–96 and 1996–97, including figures for the effect of the council tax.
§ Sir George YoungReal household disposable income per head has risen by nearly a half since 1979. Tax increases taking effect over the next year will cost all households on average about £2.30 a week. The impact on pensioners should be, on average, neutral. After taking account of these tax changes, real personal disposable income is still expected to rise by 1.5 per cent. next year. This should mean that households will on average be about £5 a week better off after tax and inflation.
The tables show revised estimates of tax payments in 1993–94, 1994–95 and 1995–96. These figures relate to hypothetical households assumed to have particular characteristics and do not represent the effect of the tax system on the population as a whole. For example, less than 1 per cent. of households are one-earner couples with two children and income close to male average earnings.
Changes in the figures shown in the tables for different years mainly reflect assumed growth in average earnings and should not be taken as the impact of Budget measures. Real take-home pay at average earnings for all the family types in the table is now 40 per cent. higher—over £80 a week—than in 1978–79.
Tax payments in 1994–95 and 1995–96 are based on illustrative assumptions for growth in earnings and take account of revised Budget measures. Tax payments in 1996–97 will depend on decisions in the November 1995 Budget and on what happens to earnings and prices. Estimates of council tax payments in 1993–94 will not be available until analysis of the 1993 family expenditure survey is complete.
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Income tax, National Insurance and indirect taxes at multiples of average earnings 1993–94 Percentage of average male earnings 50 75 100 150 200 300 400 500 700 1,000 2,000 Married, two children Amounts, £ per week Gross income 179.55 269.33 359.10 538.65 718.20 1,077.30 1,436.40 1,795.50 2,513.70 3,591.00 7,182.00 Income tax and NICs 11.79 42.31 72.84 123.21 192.56 336.20 479.84 623.48 910.76 1,341.68 2,778.08 Indirect taxes1 — 35.15 44.94 66.28 — — — — — — — Total 77.46 117.78 189.49 Percentage of earnings Income tax and NICs 6.6 15.7 20.3 22.9 26.8 31.2 33.4 34.7 36.2 37.4 38.7 Indirect taxes1 — 13.1 12.5 12.3 — — — — — — — Total 28.8 32.8 35.2 Married, two earners, no children: Earnings split 60:40 Amounts, £ per week Gross income 179.55 269.33 359.10 538.65 718.20 1,077.30 1,436.40 1,795.50 2,513.70 3,591.00 7,182.00 Income tax and NICs 11.11 37.86 68.05 129.10 189.16 304.58 434.55 578.19 865.47 1,296.39 2,732.79 Indirect taxes1 — 41.10 51.00 70.68 — — — — — — — Total 78.96 119.05 199.78 Percentage of earnings Income tax and NICs 6.2 14.1 19.0 24.0 26.3 28.3 30.3 32.2 34.4 36.1 38.1 Indirect taxes1 — 15.3 14.2 13.1 — — — — — — — Total 29.3 33.2 37.1 1 Figures for indirect taxes are only shown for a narrow earnings range because the margin of error outside this range is too high to produce even illustrative estimates using the methods outlined in notes 4–6 below. Spending patterns vary widely between households with the same income and composition and all figures shown for indirect taxes are very approximate. 946W947W
Income tax, National Insurance and indirect taxes at multiples of average earnings—1994–95 Percentage of average male earnings 50 75 100 150 200 300 400 500 700 1,000 2,000 Single Amounts, £ per week Gross income 185.85 278.78 371.70 557.55 743.40 1,115.10 1,486.80 1,858.50 2,601.90 3,717.00 7,434.00 Income tax and NICs 41.04 73.56 106.09 163.71 238.05 386.73 535.41 684.09 981.45 1,427.49 2,914.29 Indirect taxes1 — 36.89 46.96 68.35 — — — — — — — Total 110.45 153.05 232.06 Percentage of earnings Income tax and NICs 22.1 26.4 28.5 29.4 32.0 34.7 36.0 36.8 37.7 38.4 39.2 Indirect taxes1 — 13.2 12.6 12.3 — — — — — — — Total 39.6 41.2 41.6 Married no children Amounts, £ per week Gross income 185.85 278.78 371.70 557.55 743.40 1,115.10 1,486.80 1,858.50 2,601.90 3,717.00 7,434.00 Income tax and NICs 34.43 66.95 99.47 157.09 231.43 380.11 528.79 677.47 974.83 1,420.87 2,907.67 Indirect taxes1 — 37.81 48.41 70.91 — — — — — — — Total 104.76 147.88 228.01 Percentage of earnings Income tax and NICs 18.5 24.0 26.8 28.2 31.1 34.1 35.6 36.5 37.5 38.2 39.1 Indirect taxes1 — 13.6 13.0 12.7 — — — — — — — Total 37.6 39.8 40.9 Married, two children Amounts, £ per week Gross income 185.85 278.78 371.70 557.55 743.40 1,115.10 1,486.80 1,858.50 2,601.90 3,717.00 7,434.00 Income tax and NICs 15.98 48.50 81.02 138.64 212.98 361.66 510.34 659.02 956.38 1,402.42 2,889.22 Indirect taxes1 — 37.52 47.94 70.06 Total 86.02 128.97 208.70 Percentage of earnings Income tax and NICs 8.6 17.4 21.8 24.9 28.7 32.4 34.3 35.5 36.8 37.7 38.9 Indirect taxes1 — 13.5 12.9 12.6 — — — — — — — Total 30.9 34.7 37.4 Married, two earners, no children: Earnings split 60:40 Amounts, £ per week Gross income 185.85 278.78 371.70 557.55 743.40 1,115.10 1,486.80 1,858.50 2,601.90 3,717.00 7,434.00
Income tax, National Insurance and indirect taxes at multiples of average earnings—1994–95 Percentage of average male earnings 50 75 100 150 200 300 400 500 700 1,000 2,000 Income tax and NICs 13.52 43.56 75.47 140.51 203.96 332.20 469.48 618.16 915.52 1,361.56 2,848.36 Indirect taxes1 — 43.86 54.37 75.16 — — — — — — — Total 87.42 129.83 215.67 Percentage of earnings Income tax and NICs 7.3 15.6 20.3 25.2 27.4 29.8 31.6 33.3 35.2 36.6 38.3 Indirect taxes1 — 15.7 14.6 13.5 — — — — — — — Total 31.4 34.9 38.7 1 Figures for indirect taxes are only shown for a narrow earnings range because the margin of error outside this range is too high to produce even illustrative estimates using the methods outlined in notes 4–6 below. Spending patterns vary widely between households with the same income and composition and all figures shown for indirect taxes are very approximate. 948W949W
Income tax, National Insurance and indirect taxes at multiples of average earnings 1995–96 Percentage of average male earnings 50 75 100 150 200 300 400 500 700 1,000 2,000 Single 1995–96 tax system applied in 1995–96 Amounts, £ per week Gross income 194.20 291.30 388.40 582.60 776.80 1,165.20 1,553.60 1,942.00 2,718.80 3,884.00 7,768.00 Income tax and NICs 43.31 77.29 111.28 172.11 249.79 405.15 560.51 715.87 1,026.59 1,492.67 3,046.27 Indirect taxes1 — 39.29 50.12 72.98 — — — — — — — Total 116.58 161.39 245.09 Percentage of earnings Income tax and NICs 22.3 26.5 28.6 29.5 32.2 34.8 36.1 36.9 37.8 38.4 39.2 Indirect taxes1 — 13.5 12.9 12.5 — — — — — — — Total 40.0 41.6 42.1 Indexed 1978–79 system applied in 1995–96
Amounts, £ per week Gross income 194.20 291.30 388.40 582.60 776.80 1,165.20 1,553.60 1,942.00 2,718.80 3,884.00 7,768.00 Income tax and NICs 54.19 92.55 129.71 197.83 295.41 551.32 849.69 1,172.06 1,816.80 2,783.92 6,007.64 Percentage of earnings Income tax and NICs 27.9 31.8 33.4 34.0 38.0 47.3 54.7 60.4 66.8 71.7 77.3 Married, no children 1995–96 tax system applied in 1995–96 Amounts, £ per week Gross income 194.20 291.30 388.40 582.60 776.80 1,165.20 1,553.60 1,942.00 2,718.80 3,884.00 7,768.00 Income tax and NICs 38.34 72.33 106.31 167.15 244.83 400.19 555.55 710.91 1,021.63 1,487.71 3,041.31 Indirect taxes1 — 39.80 51.18 75.23 Total 112.13 157.49 242.38 Percentage of earnings Income tax and NICs 19.7 24.8 27.4 28.7 31.5 34.3 35.8 36.6 37.6 38.3 39.2 Indirect taxes1 — 13.7 13.2 12.9 — — — — — — — Total 38.5 40.5 41.6 Indexed 1978–79 system applied in 1995–96 Amounts, £ per week Gross income 194.20 291.30 388.40 582.60 776.80 1,165.20 1,553.60 1,942.00 2,718.80 3,884.00 7,768.00 Income tax and NICs 43.60 81.95 119.11 184.99 277.75 527.79 823.03 1,145.40 1,790.15 2,757.26 5,980.98 Percentage of earnings Income tax and NICs 22.4 28.1 30.7 31.8 35.8 45.3 53.0 59.0 65.8 71.0 77.0 Married, two children 1995–96 tax system applied in 1995–96 Amounts, £ per week Gross income 194.20 291.30 388.40 582.60 776.80 1,165.20 1,553.60 1,942.00 2,718.80 3,884.00 7,768.00 Income tax and NICs 19.49 53.48 87.46 148.30 225.98 381.34 536.70 692.06 1,002.78 1,468.86 3,022.46 Indirect taxes1 — 39.43 50.66 74.38 — — — — — — — Total 92.91 138.12 222.68 Percentage of earnings Income tax and NICs 10.0 18.4 22.5 25.5 29.1 32.7 34.5 35.6 36.9 37.8 38.9 Indirect taxes1 — 13.5 13.0 12.8 — — — — — — — Total 31.9 35.6 38.2
Income tax, National Insurance and indirect taxes at multiples of average earnings 1995–96 Percentage of average male earnings 50 75 100 150 200 300 400 500 700 1,000 2,000 Indexed 1978–79 system applied in 1995–96 Amounts, £ per week Gross income 194.20 291.30 388.40 582.60 776.80 1,165.20 1,553.60 1,942.00 2,718.80 3,884.00 7,768.00 Income tax and NICs 23.93 62.28 99.44 164.49 255.50 503.78 797.49 1,119.87 1,764.61 2,731.73 5,955.45 Percentage of earnings Income tax and NICs 12.3 21.4 25.6 28.2 32.9 43.2 51.3 57.7 64.9 70.3 76.7 Married, two earners, no children: Earnings split 60:40 1995–96 tax system applied in 1995–96 Amounts, £ per week Gross income 194.20 291.30 388.40 582.60 776.80 1,165.20 1,553.60 1,942.00 2,718.80 3,884.00 7,768.00 Income tax and NICs 16.90 48.31 81.65 149.62 214.98 349.61 494.62 649.98 960.70 1,426.78 2,980.38 Indirect taxes1 — 46.29 57.56 79.88 — — — — — — — Total 94.59 139.21 229.50 Percentage of earnings Income tax and NICs 8.7 16.6 21.0 25.7 27.7 30.0 31.8 33.5 35.3 36.7 38.4 Indirect taxes1 — 15.9 14.8 13.7 — — — — — — — Total 32.5 35.8 39.4 Indexed 1978—79 system applied in 1995—96 Amounts, £ per week Gross income 194.20 291.30 388.40 582.60 776.80 1,165.20 1,553.60 1,942.00 2,718.80 3,884.00 7.768.00 Income tax and NICs 24.35 59.44 97.79 174.50 255.56 408.26 605.65 846.73 1,410.06 2,344.12 5,567.84 Percentage of earnings Income tax and NICs 12.5 20.4 25.2 30.0 32.9 35.0 39.0 43.6 51.9 60.4 71.7 1 Figures for indirect taxes are only shown for a narrow earnings range because the margin of error outside this is too high to produce even illustrative estimates using the methods outlined in notes 4–6 below. Spending patterns vary widely between households with the same income and composition and all figures shown for indirect taxes are very approximate. Notes:
(1) Income tax payments are calculated on the assumption that the households receive no tax reliefs other than the standard allowances and only have income from employment. All earners, including wives, are assumed to pay Class 1 NI contribution at the contracted-in rate. Child benefit is treated as a negative income tax in order to provide comparability with support given through child tax allowances.
(2) Earnings are taken to be the average gross weekly earnings of all full-time males on adult rates with pay unaffected by absence. Estimates of earnings in 1994–95 and 1995–96 are based on earnings growth assumptions of 3½per cent. in 1994–95 and 4½ per cent. in 1995–96.
(3) Figures for indirect taxes include estimates of the intermediate taxes on households as well as the impact of taxes on final goods and services. Estimates of the impact of taxes on final goods and services assume that these taxes are fully incident on households. Estimates of the impact of intermediate taxes are based on the relation between intermediate production costs and final consumption derived using input-output techniques.
(4) Estimates for most indirect taxes are based on equations derived from the 1985 Family Expenditure Survey uprated to later years using forecasts of aggregate tax receipts. Estimates of VAT on domestic fuel and power, Airline Passenger Duty and Insurance Premium Tax are based on equations using results from the 1991 and 1992 Family Expenditure Survey uprated using a similar methodology. All estimates are based on the illustrative assumption that 10 per cent. of disposable income is saved.
(5) These figures do not include estimates of council tax payments. Estimates of council tax burdens in 1993–94 will not be available until analysis of the 1993 Family Expenditure Survey is complete.
(6) Estimates of indirect taxes are very approximate, even within the range for which figures are shown, because spending patterns vary widely between households with the same composition and income. The margin of error is even higher outside the range shown, and even illustrative estimates cannot be made. Because of sampling variation, there can be substantial differences between estimates obtained from Family Expenditure Surveys for different years.