Mortgage Interest Relief

HC Deb 17 February 1994 vol 237 cc899-901W

Ms Harman

To ask the Chancellor of the Exchequer, pursuant to his answer of 19 January,Official Report, columns 635–41, if he will provide estimates for the years 1978–9 to 1992–93 of the burden of direct and indirect taxes on a married couple, two children, and one earner on 100 per cent. of average earnings, including the impact of mortgage interest relief, if the family is assumed to have a mortgage at the average outstanding level in each year, and is paying the average mortgage interest rate.

Mr. Dorrell

[holding answer 1 February 1994]: The available information is given in the table.

Tax and mortgage payments
	1978–79	1992–93	1993–94
(i) Whole economy
Income tax	11.2	9.3	9.1
NICs	7.2	6.2	6.2
(ii) Family
Income tax	14.4	12.3	12.4
NICs	6.5	7.9	7.9
Net mortgage payments	11.8	14.0	10.8

Notes:

1. Whole economy income tax and NICs show total tax receipts on an accruals basis as a proportion of GDP. The figures for NICs include both employers' and employee contributions.

2. Family 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 are assumed to pay Class 1 NI contributions at the contracted-in rate.

3. In order to provide comparability with 1978–79, when support for children was given partly through child tax allowance, child benefit is treated as a deduction from income tax. Both children are assumed to be under 11 years old.

4. The calculations assume a mortgage of £33,000 in 1992–93 and 1993–94, and one of £8,400 in 1978–79. The figures for 1978–79 and 1992–93 represent broadly the same proportion of the average house price as a £33,000 mortgage today.

5. Average earnings are taken to be the average gross weekly earnings of all full-time males on adult rates with pay unaffected by absence. Average earnings stood at £92.80 per week in 1978–79 and £347.70 in 1992–93. They are assumed to grow by 3½ per cent. in 1993–94 to £359.90.

Ms Harman

To ask the Chancellor of the Exchequer, pursuant to his answer of 19 January,Official Report, column 635, if he will (a) provide estimates for the years 1993–94 and 1994–95 of the burden of direct and indirect taxes on a married couple, one earner, two children, on 100 per cent. of the average earnings, including the impact of mortgage interest tax relief, assuming that the family has a £35,000 mortgage and that mortgage interest rates are 7.9 per cent. in 1993–94 and 7.8 per cent. in 1994–95 and (b) provide similar estimates for 1995–96 to take account of the tax changes announced for 1995–96, assuming that other aspects of the tax regime are subject to statutory indexation, that prices rise by the amount specified in the working assumption on page 121 of the Financial Statement and Budget report 1994–95, that earnings growth in 1995–96 is the same as in 1994–95 and that the family has a £35,000 mortgage and that mortgage interest rates are 7.8 per cent. in 1995–96.

Mr. Dorrell

[holding answer 1 February 1994]:The available information is given in the table.

Tax and mortgage payments
	1993–94	1994–95	1995–96
(i) Whole economy
Income tax	9.1	9.6	9.9
NICs	6.2	6.4	6.3
(ii) Family
Income tax	12.4	13.1	13.7
NICs	7.9	8.8	8.8
Net mortgage payments	11.6	11.6	11.8

Notes to Table:

1. Whole economy income tax and NICs show total tax receipts on an accruals basis as a proportion of GDP. The figures for NICs include both employers' and employee contributions.

2. Family tax and mortgage payments show income tax, employee NICs and net mortgage payments for a one-earner married couple on average earnings with two children as a percentage of earnings.

3. Family 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 are assumed to pay Class 1 NI contributions at the contracted-in rate.

4. Child benefit is treated as a deduction from income tax.

5. Estimates of family income tax and National Insurance Contributions in 1995–96 are based on the illustrative assumption of uprating personal allowances, tax thresholds, NIC Lower and Upper earnings limits and Child Benefit in line with the assumption of 3.25 per cent. given in the 1994–95 Financial Statement and Budget Report for the increase in the Retail Price Index in 1995–96.

6. Mortgage payments are shown net of mortgage interest relief.

7. Average earnings are taken to be the average gross weekly earnings of all full-time males on adult rates with pay unaffected by absence. These are assumed to be £359.90 per week in 1993–94, £374.30 in 1994–95 and £389.30 in 1995–96, based on illustrative earnings growth assumptions of 4 per cent. per year in 1994–95 and 1995–96.