§ It has been widely suggested that the rates of purchase tax should be reduced to the maximum extent permitted by the regulator, which is 10 per cent.
§ I have concluded that there should be reductions in purchase tax, but that these reductions should be greater than could be made by the use of the regulator. The changes will therefore be made by Order under the Purchase Tax Act, 1963.
§ As from midnight tonight, all four rates will be reduced by almost twice the amount permitted by the regulator—by two-elevenths to be precise. The 55 per cent. rate will thus be cut to 45 per cent. ; the 36⅔ per cent. rate to 30 per cent. ; the 22 per cent. rate to 18 per cent. ; and the 13¾ per cent. rate to 11¼ per cent.
§ Purchase tax is collected in arrears, so the cost will be about £110 million in the current financial year and about £235 million in a full year.
§ This is the first time that the rates of purchase tax have been reduced since 1963, and it is the biggest reduction of purchase tax since 1953. It will mean price cuts over a wide range of goods.