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Tax Reductions

Volume 984: debated on Thursday 15 May 1980

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asked the Chancellor of the Exchequer what proportion, in both money and percentage terms, of tax reductions in each, respectively, of the last two Budgets, was received by the 1 per cent. with the highest incomes;

1979 Budget1980 Budget
GroupCost £ millionPercentage Per cent.Cost £ millionPercentage Per cent.
Top 1 percent.74016·11207·8
Next 9 per cent.98021·230019·5
Next 10 per cent.57512·517011·0
Next 80 per cent.2,31550·294961·7
4,610100·01,539100·0
Those persons with the highest incomes suffer the greatest increases in income tax up to each Budget. This is illustrated in the following table where the calculations are for a single person, eligible only for the single person's allowance.
Income LevelIncome in 1978–79Tax in 1978–79Increase in tax to 1979–80 pre-BudgetBudget reduction in tax 1979–80Increase in tax to 1980–81 pre-BudgetBudget reduction in tax 1980–81
££££££
1 percent.16,0006,3151,8321,7731,708385
10 per cent.8,0002,25546930750026
20 per cent.6,5001,76036023040626
50 per cent.4,2001,00123314926226
In 1978–79 the stated percentage of taxpayers (counting married couples as one) had incomes exceeding the income figures shown. The tax changes for 1979–80 and 1980–81 have been calculated assuming an increase in income of 16.8 per cent. to 1979–80, the increase in average earnings between 1978–79 and 1979–80, and, for illustration only, an increase of 17.8 per cent. between 1979–80 and 1980–81, the percentage by which prices (measured by the retail prices index) increased between the beginning and end of 1979. Of course, as incomes increase in money terms tax is expected to increase in money terms. The percentage changes in tax for the groups above are:
1979–79 1979–80 post-Budget1979–80 (post-Budget) to 1980–81 post-Budget
1 per cent.0·920·7
10 per cent.7·219·6
20 per cent.7·420·1
50 per cent.8·421·8
The following table shows how the estimated tax bill is divided between the various groups.
197980198081
Pre-Budget Per cent.Post-Budget Per cent.Pre-Budget Per cent.Post-Budget Per cent.
Top 1 per cent.12·211·210·510·6
Next 9 per cent.22·923·222·522·8
Next 10 per cent.14·815·315·215·4
Bottom 80 per cent.50·150·351·851·2
Total100·0100·0100·0100·0
(The figures are for those in each year who would have paid tax in the year on the allowances of the previous year.)

and, similarly, what proportion, in amount and percentage terms, went, respectively, to the next 9 per cent., the following 10 per cent., and the remaining 80 per cent.

[pursuant to his reply, 12 May 1980, c. 380]: The estimated information is as follows: