Alteration of Personal Reliefs

Part of Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 17 July 1974.

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Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton 12:00, 17 July 1974

Amendment No. 10 proposes that the additional personal allowance should be increased by £50, from £130 to £180. The cost of the increase is estimated to be £4 million in a full year.

When we debated the allowance in Committee on the Floor of the House, together with a number of other secondary allowances, I promised to examine them all. For reasons that I shall give shortly, it was not possible to deal with the smal- ler ones, but I felt that in any case this would be by far and away the most useful.

The additional personal allowance is mainly for single-parent families. It is given to a man or woman who is entitled to the single person's allowance—such people include widows, widowers and divorced or separated people—and who has sole charge of a child living with him or her, for whom he or she receives the child tax allowance. It is also given, subject to similar conditions, to a married man whose wife is completely incapacitated for the whole of the tax year, on the grounds that the wife cannot then perform her normal duties of looking after the children.

I am sure that every hon. Member will recognise that this is an important relief, much more important than the smaller ones in the other amendments, though they are important. Those smaller ones include widower's or widow's housekeeper and child-minder allowances. To a considerable extent they have been displaced by the additional personal allowance. The Radcliffe Commission recommended the abolition of all those allowances and the daughter's service allowance.

There are other reasons. The cost of the amendments would not be great, but there are administrative problems. I know that when hon. Members hear of administrative problems they generally say "Well—", so I want to explain the serious consequences that would result if the amendments were carried. I am referring in particular to the staff consequences.

If those small amendments were carried, the main task would be to identify those who would become entitled to any increased allowance, which would involve examining the tax records of about 25 million PAYE taxpayers and picking out those affected. Once they had been identified, notices of the revised PAYE coding would have to be prepared and sent to the employee and his employer.

There is an additional difficulty in the case of an increase in the allowance for elderly people. The dependent relative allowance relates to the dependants of an elderly person as well. In some cases records will show that a taxpayer is over 65, but that is by no means invariably the case, and some means would have to be found to identify the remainder. It is estimated that the recoding necessary to give an increase to the over-65s would require about 650,000 man hours of work, the equivalent of nearly 400 extra staff. If the other secondary personal allowances were raised at the same time, the staff cost would rise to about the equivalent of over 600 extra staff. The cash cost would be £650,000 for an increase in the allowance of the elderly only, and £1 million for a general increase in secondary allowances.

It is important to tell the House what would be the consequences of the proposals. There is the question whether in existing circumstances the work could be done. The Revenue staff have already had to work about 2·3 million hours of overtime to give effect to the taxation changes already made or announced and to revise the PAYE coding to take account of the increased State pension. One pays tribute to them for that.

Quite apart from the work burden and strain that this has entailed, it has been a particularly frustrating operation since the recoding for the increase in child allowances has had to be done virtually all over again in consequence of the proposal to increase the allowances for single-parent families.

There may be many further heavy tasks ahead for staff if we wish to make further allowances to the sort of people we have in mind. There is no spare space in the programme of work into which the extra work which would arise from the proposals could be fitted. In consequence there is grave danger of staff being strained to the utmost, or possibly beyond. It would be asking a lot of the staff if they were required to undertake a third PAYE recoding for 1974–75. I hope that the House will understand these reasons. The work for the men who have to do the recoding and the cost of paying them overtime would be substantial, in relation to the cost of the Opposition amendments.