Supplementary Sickness and Unemployment Benefits (Taxation)

Oral Answers to Questions — National Finance – in the House of Commons at 12:00 am on 3 November 1970.

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Photo of Mr Jock Bruce-Gardyne Mr Jock Bruce-Gardyne , South Angus 12:00, 3 November 1970

asked the Chancellor of the Exchequer what estimate he has made of the administrative cost of rendering supplementary sickness and unemployment benefit payments liable to tax.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

For sickness and unemployment benefit, the administrative cost would be about £15 million; I cannot make an estimate for supplementary benefits, but compared with the yield the cost of collection would be disproportionately high.

Photo of Mr Jock Bruce-Gardyne Mr Jock Bruce-Gardyne , South Angus

Would my hon. Friend look at this matter again? Surely when the potential yield exceeds £150 million a year, the time has come to look again at the unique exemption enjoyed by these forms of payment. Is it not unhealthy that some families should enjoy tax-free benefits which are in excess of taxable income from employment of other families?

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

This occurred when the Labour Party introduced the National Insurance Scheme in the 1940s. These benefits were then taxable, but it was found that the administrative difficulties were such that in the end they had to be exempted from tax, as indeed were supplementary benefits under the 1966 Act. I assure my hon. Friend that we shall not lose sight of this proposal.

Mr. W. T. Williams:

If the administrative costs of collecting these untaxed benefits is so great, will not the Government consider the position in regard to old-age pensioners and extend this principle to them also? Would it not be more just to the old people so that they might enjoy a higher standard of living since among old people there is very real poverty?

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

I do not want to be drawn into all the complexities of the hon. Gentleman's question, but I take note of what he has said.