asked Her Majesty's Government:

Whether they accept the findings of the Institute for Fiscal Studies in its report on poverty published in October that 160,000 people in work face an effective marginal tax rate of at least90 pence in the pound through loss of benefits and higher tax payments; and, if they do not accept the findings of this report, what is their estimate of the number of people so affected.[HL7930]

Budget 2006 Table 4.2 provides estimates of the numbers of workers, who work more that 16 hours and therefore may qualify for the working tax credits, facing high marginal deduction rates (MDRs, or effective marginal tax rates). It shows that the numbers facing MDRs above 90 per cent have fallen from 130,000 in 1996-97 to 35,000 in 2006-07.

The Institute for Fiscal Studies report provides similar estimates although, as set out in the respective publications, there are some specific differences; for example they include individuals working a very few hours, and therefore are still eligible for out-of-work benefits such as income support. Previous analysis by the IFS suggests that the 1997 tax and benefit system had over 300,000 working parents with an MDR over 90 per cent. Their more recent analysis suggeststhat the number of working adults with MDRs over 90 per cent is now 160,000.

Both publications provide reasonable analyses of the distribution of effective marginal tax rates for working adults under stated assumptions.