§ Next month purchase tax and SET will be abolished and be replaced by VAT. In last year's Finance Act, the standard rate of VAT was provisionally fixed at 10 per cent. The House will recall that in our debates last year it was suggested by hon. Gentlemen opposite that I had it in mind to use the powers which I then took to fix the initial standard rate of VAT at 12½ per cent. Fortunately that is neither necessary nor appropriate. There will be no change in the provisional figure, and the standard rate of VAT will therefore be 10 per cent. The rate of car tax was also fixed at 10 per cent. in last year's Act, and it will remain at that figure.
§ I should add that, if we had decided to collect the same amount of revenue as at the higher rates of purchase tax and SET, which existed when we took office, we should have had to fix the rate of VAT at 15 per cent. Instead, as a result of the massive cuts in indirect taxation which we have already made since June 1970, the 10 per cent. rate will be the lowest standard rate in Europe.