§ Mr. Rookerasked the Chancellor of the Exchequer by how much total revenue is increased for each percentage point rise in the rate of inflation above the forecast in the last public expenditure White Paper (Cmnd. 8175).
§ Mr. Brittan[pursuant to his reply, 26 November 1981, c. 430]: The effect of an increase in the rate of inflation on total revenue depends on how the change arises and how the rest of the economy responds to the change in both the inflation rate and revenue. However, neglecting any second-round effects and assuming that nothing changes apart from an increase in all prices by 1 per cent., it is possible to estimate the direct effects on North Sea taxes, VAT, and car tax, which together account for the majority of revenue derived from price sensitive taxes. On this basis and given the forecasts for 1981–82 provided in the 1981 FSBR, there was no inflation forecast as such in the public expenditure White 71W Paper, revenue from these sources would be estimated to rise by about £200 million in 1981–82, for each percentage point.