Family and Child Tax Allowances

Oral Answers to Questions — National Finance – in the House of Commons at 12:00 am on 1st April 1976.

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Photo of Peter Bottomley Peter Bottomley , Greenwich Woolwich West 12:00 am, 1st April 1976

asked the Chancellor of the Exchequer if he will list for a two-child family the combined value of family allowance and child tax allowance for a standard rate taxpayer as a percentage of the average industrial take-home earnings for the years 1968 to 1976.

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli

With permission, I will circulate the full information in the Official Report. Although there has been some fluctuation, the combined value of the family allowance and child tax allowance as a percentage of average industrial take-home earnings has declined slightly from 10·6 per cent. in 1968–69 to 8·7 per cent. in 1975–76.

Photo of Peter Bottomley Peter Bottomley , Greenwich Woolwich West

Will the Government recognise that this is at the heart of the whole problem of incentive to work, and that a person on average earnings with two children is only £12 a week better off than if he were not working?

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli

We have recognised that. As I said, there has been some reduction in the real value of these allowances. In framing taxation policy that is one factor of which we have to take account.

Photo of Mrs Helene Hayman Mrs Helene Hayman , Welwyn and Hatfield

In view of that reply, will the Minister undertake to raise family allowances in the Budget?

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli

I am sure that my right hon. Friend will note my hon. Friend's suggestion.

Photo of George Young George Young , Ealing Acton

Does the Minister accept that over the past 10 years there has been a shift of the burden of taxation away from families without children to those with children? Does he intend to reverse that shift in the forthcoming Budget?

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli

The figures that I mentioned show that there has been some shift and that the real value of the child allowance has fallen. I accept that there has been some shift of the burden from people without children to people with children.

Following is the information:

Assuming that the children are not over 11, the figures are as follows:

YearCombined value of FAM and CT As as % of average industrial take-home earnings
1968–6910·6
1969–709·9
1970–719·1
1971–7210·2
1972–738·8
1973–747·9
1974–757·8
1975–768·7

1. Take-home earnings are the annual equivalent of the average earnings—less tax and National Insurance contributions—of full-time male manual workers aged 21 and over in manufacturing and certain other industries at October of each year. The National Insurance contributions relate to an adult male worker not "contracted out" of the Graduated Pension Scheme, and include graduated contributions.

2. The calculations take account of the family allowance deduction for income tax