§ Mr. CousinsTo ask the Chancellor of the Exchequer if he will estimate the revenue effect in 1988–89 of(a) abolishing the high rate of income tax, (b) abolishing all personal tax reliefs other than the personal allowances, and (c) the net revenue effect of combining both measures.
§ Mr. Norman LamontThe direct cost in income tax revenue for a full year at 1988–89 levels of income of abolishing the higher rate of income tax is estimated at £2.7 billion. The direct cost in capital gains tax revenue on disposals in 1988–89 is estimated at £0.2 billion.
Information on income tax reliefs is available only in respect of mortgage interest, retirement annuity premiums, employees' superannuation contributions and the business expansion scheme. The total direct revenue yield from abolishing these reliefs is estimated at £6.7 billion. The capital gains tax cost would be small.
The net effect of abolishing these reliefs and the higher rate of tax would be a yield of some £3 billion. This estimate includes the consequential effects on revenue from capital gains tax on disposals in 1988–89. The income tax component makes no allowance for possible behavioural effects arising from the changes.