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Income Tax

Volume 115: debated on Tuesday 5 May 1987

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asked the Chancellor of the Exchequer what has been the total cost in 1986–87 prices of all reductions in rates of income tax since May 1979.

[pursuant to his reply, 28 April, 1987, c. 64]: The total cost, in a full year, of all changes since 1978–79 in income tax rates, including those proposed in the 1987 Budget, is £7,840 million at 1987–88 levels of income (equivalent to £7,540 million at 1986–87 prices). This amount includes the cost of changes in basic and higher rates and higher rate thresholds, and abolition of the investment income surcharge and the reduced rate band. It excludes the cost of changes in the levels of personal allowances which totals £4,030 million at 1987–88 levels of income (£3,875 million at 1986–87 prices). The calculation is made by comparing the total income tax liabilities in 1987–88 under the proposed 1987–88 income tax regime with those under the 1978–79 tax regime indexed to 1987–88 levels by reference to the statutory formula. Thus, the comparisons allow for budgetary changes in income tax rates and thresholds but not for any change in the definition of the tax base between 1978–79 and 1987–88. The forecast movement in the RPI has been used to calculate equivalent amounts at 1986–87 prices.