To ask the Chancellor of the Exchequer what would be the cost in 1987–88 and 1988–89 of restricting (a) personal allowances and (b) mortgage interest tax relief to the standard rate of tax only.
[holding answer 17 December 1987]: The direct revenue yield at 1987–88 levels of income of restricting personal allowances to the basic rate is estimated to be £810 million; the yield at 1988–89 levels of income, assuming indexation of the current income tax bands and allowances to 1988–89 levels as in table 4.1 of the 1987 Autumn Statement, is estimated to be £950 million. The estimates make no allowance for possible changes in taxpayers' behaviour.
The direct revenue yield in a full year at 1987–88 levels from restricting mortgage interest relief to the basic rate is estimated to be £330 million. This estimate makes no allowance for the effect of any consequential changes to the distribution of outstanding mortgages. It would be premature to provide estimates of the direct revenue yield at 1988–89 levels since this will depend on the mortgage interest rate and the level of mortgages outstanding in that year.
To ask the Chancellor of the Exchequer if he will publish in the Official Report figures relating to tax reliefs and allowances on the same basis as in his reply
|Reductions in income tax liabilities in 1987–88 compared with the indexed 1978–79 tax regime|
|Upper 50 per cent.1||Lower 50 per cent.1|
|Amount||Average per tax unit2||Amount||Average per tax unit2|
|£ million||£ per year||£ million||£ per year|
|Increase in personal allowances||2,500||240||1,470||140|
|Abolition of reduced rate band||-1,720||-170||-1,130||-110|
|Decrease in basic rate||6,190||600||1,790||170|
|Increase in higher rate threshold||400||40||—||—|
|Changes in higher rate thresholds||800||80||—||—|
|Abolition of higher rates above 60 per cent.||590||60||—||—|
|Abolition of Investment Income Surcharge||810||80||20||2|
|Notes: Source of income tax reduction(+)/increase(-).|
|In the table, the effect of each change has been calculated on the assumption that each of the previous changes has already been made.|
|1 Based on 20·9 million single people and married couples expected to pay tax in 1987–88 and excluding a further 900,000 who would pay tax under the revalorised 1978–79 regime. All information is in terms of tax units i.e. married couples are counted as one and their incomes combined.|
|2 By reference to the numbers paying tax in 1987–88.|