Child Tax Allowance

Part of Orders of the Day — Finance Bill – in the House of Commons at 11:45 pm on 11 July 1989.

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Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames 11:45, 11 July 1989

The new clause seeks to reintroduce child tax allowance alongside child benefit. The hon. Member for Birkenhead (Mr. Field) and my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) have a long-standing interest in the subject.

I was a little surprised by what the hon. Member for Birkenhead said. During the late 1970s he strongly supported the conversion of child tax allowances into child benefit. Recently, as he acknowledged, he has published a number of articles and made a number of speeches in which he has advocated the abolition of all tax allowances. I am not entirely sure how he reconciles that proposal with his desire to help those on low incomes. However, I realise that what he is doing tonight, as he revealed the other day in The Guardian, is essentially a political, or tactical or teasing exercise. I am grateful to my hon. Friend the Member for Ealing, Acton (Sir G. Young) for saying that the new clause is only a gentle reminder.

Under the new clause, the hon. Member for Birkenhead proposes to reintroduce a tax allowance which was abolished in April 1979. As I think that he acknowledged, the new clause does not make a great deal of sense. Far from simplifying and rationalising the tax and social security system, it would introduce new complications. It would be difficult to justify the cost of setting up and maintaining two separate administrative systems to give general support by different means. It has also been acknowledged during the debate that the new clause would fail to meet the aim of helping those who need it most. A child tax allowance would be of no help to the 25 per cent. of families who do not pay tax. The hon. Member for Birkenhead has suggested elsewhere that families should be able to choose whether they wish to receive a cash payment instead of a tax allowance. That, too, would make the system even more complicated.

At the practical level, the new clause does not suggest how the proposed tax allowance would be divided when both parents can claim relief. As I am sure he realises, under independent taxation both the husband and the wife could each claim the new allowance. The new clause, however, does not make it clear whether the mother or the father ought to have the relief. That is perhaps a point of detail.

Most of the hon. Gentleman's remarks, and those of my right hon. Friend the Member for Chesham and Amersham, were directed not at the new clause but at the fact that the Government have not uprated child benefit. That decision has been explained on many occasions by my right hon. Friend the Secretary of State for Social Security. Child benefit has not been increased this year, but the Government are targeting additional help on those families who need it most. Families in receipt of income support or family credit do not gain from an increase in child benefit; it is offset in their income-related benefit.