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Personal Taxation

Volume 115: debated on Friday 1 May 1987

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asked the Chancellor of the Exchequer what would be the effect on revenue in a full year at 1987–88 rates of taxing men and women separately, with personal allowances and the married women's earnings allowance replaced by a non-transferable personal allowance of £2,425; and if he will publish in the Official Report a table showing by range of income and for one and two-earner families the gains and losses for (i) earned income and (ii) unearned income.

The direct revenue yield from giving a non-transferable personal allowance of £2,425 to each partner in a married couple would be £4·3 billion in a full year at 1987–88 income levels. The table shows the gains and losses by range of total income. It is not possible to provide reliable estimates for earned and investment income separately.

asked the Chancellor of the Exchequer what is his estimate of the saving to the Exchequer in a full year at 1987–88 rates of restricting all allowances and reliefs to the standard rate of tax; and if he will provide a breakdown of the figure in the Official Report by category of allowance and relief.

asked the Chancellor of the Exchequer if he will update for 1987–88 the information on the extra revenue resulting from allowing all tax allowances and reliefs at the standard rate only, provided in his reply of 1 May 1986 to the hon. Member for Birkenhead (Mr. Field) Official Report, columns 479–80.

[pursuant to his reply, 6 April 1987, c. 76]: The direct revenue cost at 1987–88 levels of income of allowing personal tax allowances at rates in excess of the basic rate of income tax is estimated to be about £850 million. Information on the similar cost of other income tax reliefs is available only in respect of mortgage interest, retirement annuity premiums, employees' superannuation contributions, the business expansion scheme, and donations to charities; in total it is about £750 million. Within this total is a cost of about £340 million for mortgage interest relief and about £130 million for retirement annuity premiums. It is not possible to provide reliable estimates for the other individual reliefs. Nor is it possible to estimate precisely the combined yield from restricting these reliefs and personal allowances

Multiple of average earnings
HalfTwo-thirdsOneFiveTen
(a)(b)(a)(b)(a)(b)(a)(b)(a)(b)
Single
1978–7923·5100·027·5100·031·5100·052·2100·067·5100·0
1979–8022·9102·629·7103·429·7104·442·8121·651·4151·8
1980–8124·7103·527·7104·930·7106·344·3122·552·1154·6
1981–8226·9100·129·6101·732·3103·546·4117·353·2150·5
1982–8327·3100·330·1101·733·0103·245·9119·353·152·5
1983–8427·0104·630·0105·833·0107·145·1125·752·5159·6
1984–8526·5108·429·6109·532·7110·745·3129·052·6164·0
1985–8626·2110·329·4111·332·6112·445·5130·352·7166·8
1986–8725·8115·428·8116·831·9118·345·6135·252·8172·3
1987–8824·9119·627·7121·530·5123·745·8138·252·9176·3
Married
1978–7916·0100·021·9100·027·8100·050·5100·066·5100·0
1979–8016·0101·721·1102·726·3103·841·5120·250·7149·6
1980–8117·9102·722·6104·127·3105·742·9121·151·5152·3
1981–8220·898·725·0100·529·3102·545·2115·852·6148·1
1982–8320·899·425·3100·929·8102·544·6118·052·3150·2
1983–8420·1104·124·9105·329·6106·743·7124·451·9157·3
1984–8519·3108·324·2109·329·2110·543·9127·851·9161·8
1985–8618·9110·323·9111·229·0112·344·0129·252·0163·7
1986–8718·9114·923·7116·228·4117·844·2134·052·1170·1
1987–8818·7118·023·0120·127·3122·544·4136·852·2173·9
Married with 2 children (both under 11)
1978–792·4100·011·5100·020·9100·048·8100·065·6100·0
1979–801·4102·810·2103·318·9104·140·0119·150·0147·9
1980–814·9102·412·9103·520·8105·141·6119·750·8150·3
1981–827·399·514·9100·722·5102·543·9114·651·9146·3
1982–836·9100·614·9101·522·8102·843·2116·851·6148·4
1983–845·9105·614·2106·222·4107·242·3123·251·2155·5
1984–855·0109·813·5110·222·0111·142·4126·651·2159·9
1985–865·0111·213·5111·622·0112·542·6127·951·3161·7
1986–875·7115·013·7116·021·8117·542·9132·551·4167·9
1987–885·9117·513·4119·221·0121·743·1135·351·5171·6

to the basic rate, but it is thought to be about £1,800 million. These estimates make no allowance for any possible behavioural effects if allowances and reliefs were to be restricted to the basic rate.

asked the Chancellor of the Exchequer if he will construct an index, with 1978–79 equalling 100, of the changes in the level of income tax and national insurance contributions for each subsequent year for a taxpayer on (a) half, (b) two thirds, (c) average, (d) five times and (e) 10 times average earnings for households where the taxpayer is (i) single, (ii) married, no children, (iii) married with two children and (iv) married with four children, in all cases assuming the wife does not work, using a similar form to his answer of 27 March 1986, Official Report, columns 606–8.

[pursuant to his reply, 22 April 1987, c. 579]: The following table shows (a) income tax plus national insurance contributions less child benefit, where appropriate, as a percentage of gross earnings; and (b) real net income after tax, NIC and child benefit in index number form with 1978–79 equalling 100. The calculations assume that the taxpayer has no reliefs other than the appropriate personal allowance and that national insurance contributions are at the contracted-in rate. Average earnings are those for full-time males paid at adult rates whose pay was not affected by absence. Figures for 1986–87 and 1987–88 are provisional.

Half

Two-thirds

One

Five

Ten

(a)

(b)

(a)

(b)

(a)

(b)

(a)

(b)

(a)

(b)

Married with 4 children (two under 11, one 11–15 and one over 16)

1978–79-11·7100·00·2100·013·3100·046·7100·064·5100·0
1979–80-13·3103·1-0·8102·711·6103·638·5117·349·3145·5
1980–81-8·1101·73·1102·014·3103·840·3117·750·2147·7
1981–82-6·299·54·899·815·8101·742·5112·951·3143·9
1982–83-7·0101·04·5100·915·9102·341·8115·150·9146·0
1983–84-8·4106·13·5105·815·3106·940·9121·450·4153·0
1984–85-9·3110·32·8109·814·8110·741·0124·850·5157·4
1985–86-8·9111·33·1110·815·1111·841·2126·050·6159·1
1986–87-7·6114·53·8r114·615·2116·341·6130·450·8165·1
1987–88-6·9116·53·9117·314·6120·041·8133·050·9168·6

asked the Chancellor of the Exchequer if he will estimate the size of the cut in the standard rate of income tax required in 1987–88 to reduce the total tax payments, including income tax, national insurance contributions, indirect taxes, less child benefit where appropriate, for those on (a) three quarters and (b) 100 per cent. of average earnings in the categories (i) single people, (ii) married couples and (iii) married couples with two and four children in each case to (x) the same sum of money and (y) the same proportion of gross earnings as in 1978–79.

[pursuant to his reply, 22 April 1987, c. 579]; Figures for couples with four children are not available. The remaining figures are in the table.

Reductions in basic rate required in 1987–88 to restore tax payments to their 1978–79 levels
(pence)
Percentage of average earningsSingleMarriedMarried plus 2 children
(a) Same amount in real terms
7514·017·215·3
10012·414·213·5
(b) Same proportion of gross earnings
752·13·45·1
1000·91·63·4