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Indexation

Volume 885: debated on Thursday 30 January 1975

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8.

asked the Chancellor of the Exchequer what plans he has to index the tax system, with special reference to the rates of income tax; and whether he will make a statement.

The effects of inflation on the tax system are kept under continuing review by the Treasury and Revenue Departments.

I am glad to hear that, but is it not the case that the present rate of inflation, coupled with a non-indexed taxation system, has a profound and capricious effect both on the pattern of taxation and on the real incidence of taxation, including in particular an increase in the real burden of income tax without the sanction of Parliament? Now that the Treasury has at last yielded the principle of indexation by indexing savings bonds—which I welcome—is it not high time to extend indexation to taxation? Will the Minister appoint a full committee of inquiry into this important and urgent subject?

What the hon. Gentleman said at the beginning of his supplementary question is true. Inflation affects the real burden of taxation under our present system. On the other hand we have frequent opportunities in at least annual Budgets to review the level of allowances, and my right hon. Friend has indicated that he will be reviewing the level of personal allowances in his next Budget. I see no point at the moment in a committee of inquiry. As the hon. Gentleman knows, the Sandilands Committee is looking at one aspect of the problem, and we shall study what the committee says.