To ask the Chancellor of the Exchequer what would be the cost in the 1991–92 financial year of introducing a reduced rate tax band of (a) 20 per cent. and (b) 15 per cent. on the first £2,000 of taxable income; and what would be the effect on the net income of (i) a single person, (ii) a couple where the wife is not working and (iii) a couple where the wife is working and paying tax.
The direct revenue cost of a reduced rate of 20 per cent. on the first £2,000 of taxable income in 1991–92 would be about £2·4 billion in a full year. A reduced rate of 15 per cent. of the same band of taxable income would cost about £4·8 billion in a full year. These estimates are based on a projection of the 1988–89 survey of personal incomes and are provisional. The increases in income after tax of the different types of family would be as follows:
| Increase in income after tax1 | ||
| £ per week | ||
| (a) Reduced rate of 20 per cent. On first £ 2,000 of taxable income | (b) Reduced rate of 15 per cent. on first £2,000 of taxable income | |
| Family type | ||
| (i) Single person | 1·92 | 3·85 |
| (ii) Married couple with wife not working | 1·92 | 3·85 |
| (iii) Married couple with wife working and paying tax | 3·85 | 7·69 |
| 1 Illustrative calculations assume taxpayers have enough income to use the whole of the reduced rate band; in line (ii) the wife's income is assumed to be less than the personal allowance. | ||