§ Mr. Meacherasked the Chancellor of the Exchequer by how many pence per week a 1 per cent. increase in VAT would put up the cost of living of the average family, and of the family on half average income and double average income, respectively; what percentage increase in the retail price index this represents; and what are the similar figures for a 5p increase in petrol tax and a 5 per cent. devaluation of the green pound.
§ Mr. Peter Rees, pursuant to his reply [Official Report, 25 May 1979; Vol. 967, c. 302], gave the following answer:
Analyses of the incidence of indirect taxation are made annually and published in "Economic Trends" of which copies are available in the Library of the House. The analysis for 1977 was published in January 1979 and is the latest available.
It is estimated that a 1 per cent. increase in the rates of VAT would increase the expenditure of a family with an average original income of £90 per week by about 40p per week. An additional 5p excise duty on petrol, would, with VAT at its present rate, increase the expenditure of the same family by about 18p. Corresponding figures for a family with half and double average income (before income tax and cash benefits) would be about 25p and 6p and 60p and 29p respectively. The 1 per cent. increase in VAT and the additional duty and VAT on petrol would increase the Retail Price Index by about ½ per cent. and ¼ per cent. respectively.
It is estimated that a 5 per cent. devaluation of the green pound would, once all the effects had worked through to the retail stage, raise the cost of living of the average income household by a little more than 20p per week, the household with half the average gross income by a little more than 15p per week and the household with double the average 185W gross income by about 30p per week, and that this devaluation would increase the general index of retail prices by about ¼ per cent. Since, on average, household income rises with household size, the differences between the figures would be less if the same calculation were done on a per head basis.