Personal allowance for 2017-18

Finance Bill – in a Public Bill Committee am 11:45 am ar 30 Mehefin 2016.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

Clause 3 sets the income tax personal allowances for 2017-18. The change will help working people to keep more of what they earn, and it is a big step towards keeping our manifesto commitment to a £12,500 tax-free personal allowance by the end of the Parliament. The Government’s record on personal allowances is already strong. Over the previous Parliament, the personal allowance increased by more than 60%, from £6,475 in 2010-11 to £10,600 in 2015-16. Our reforms have already taken 4 million people out of paying income tax altogether.

The Government want to go further by increasing the personal allowance to £12,500 by the end of the Parliament and by ensuring that no one working 30 hours a week on the national minimum wage pays any income tax at all. Clause 3 marks another significant step towards our meeting those commitments by raising the personal allowance from £11,000 in 2016-17 to £11,500 in 2017-18 —an increase of £500. The change made by the clause will ensure that 30 million people pay less tax in 2017-18 than at the start of this Parliament, with 1.3 million taken out of paying income tax altogether. Therefore, by April 2017, a typical basic rate taxpayer will pay over £1,000 less income tax than when we took office six years ago.

Clause 3 builds on the Government’s determination to support those in work by ensuring that people can keep even more of the money they earn. It takes a significant step towards meeting our commitment to raise the personal allowance to £12,500 and means that more of the lowest-paid are taken out of paying income tax altogether. I commend the clause to the Committee.

Photo of Rob Marris Rob Marris Shadow Minister (Treasury)

We support the clause, but I caution the Government that, in terms of the benefits it will produce for lower-income families, there is a law of diminishing returns, particularly for those who are in part-time paid employment. They will already be below the income tax threshold of £11,200, which the clause will raise to £11,500. That rise will not benefit such families at all.

I urge the Minister to look at reviewing national insurance contribution thresholds, so that there is greater alignment. I am not suggesting complete alignment, because it is a national insurance scheme and people receive certain benefits or prospective benefits in the comfort of knowing that, having paid national insurance contributions, they have a health service, unemployment benefits and disability benefits, were they to be injured at work and so on. They benefit from that insurance, even if they do not need to draw upon it, as they would hope not to—who wants to be unemployed or in hospital, or whatever?

The Government need to review the thresholds, because there is a growing discrepancy for low-income families between the relatively benign nature of the income tax regime and how national insurance contributions bite at much lower levels of income.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Clause 4