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Income Tax

The hon. Gentleman raises four perfectly pertinent questions, which I shall answer. May I acknowledge his welcome for the measure that I am proposing? First, I said in my statement that 4.2 million households will receive as much as, or more than, they originally lost. The remaining 1.1 million householders will have their loss at least halved. In addition, those people might be benefiting from tax credits and other measures. I set out to try to offset the average loss; I think that that is what the majority of people in the House wanted us to do. The hon. Gentleman also asked how the measure is being paid for. This year, it is being paid for by borrowing. As for what I have done in relation to higher rate tax payers, under the tax system, every single taxpayer gets the same personal allowance, but because I wanted to ensure that the help went to basic rate taxpayers only, I made a change there. People who currently pay the 40 per cent. rate will not pay any more, so the cost is covered by borrowing. The hon. Gentleman also asked why I did not use a rebate. I looked into that very carefully. I had always thought that the Liberals' policy was to use allowances. He is nodding; it is not clear why he is wishing on me something that he does not want himself, but there we are. I considered the issue of rebates, and I saw that that would be horrendously complicated. We would have to set up a new system. In addition to that, the Inland Revenue tells me that every year about half a million people move, and the Revenue does not know their addresses, so their cheques would go missing. When I looked at the proposal, and at the comparative costs, which are not actually that different, I decided that it would be far better to do something simpler and easy to understand. It is easy to understand that personal tax allowances will be raised by £600 a year. Basic rate taxpayers will therefore get £60 in their pay packet from September, and £10 a month thereafter. The hon. Gentleman's final question was what would happen in future years. I have said that I will set that out in the pre-Budget report, but I repeat what I said in my statement: in addition to helping those people who have an income of up to £20,000—those whom people were principally concerned about—we are helping those whose incomes go up to £40,000. Given the current circumstances, in which people face increasing bills because of what is going on in the world commodity markets and the financial markets, this year it is right to do more to help people on low and middle incomes—in other words, all those on the basic rate tax—as other countries have done. That is why I think that my proposal is far better and far more effective, and goes far further, than the measures that many people were asking for just three weeks ago.