VAT (Hansard, 13 November 1989)

§ Mr. Burns
To ask the Chancellor of the Exchequer what would be the estimated cost to industry and commerce by increasing value added tax to 18 per cent.; and if he will make a statement.

§ Mr. Ryder
[holding answer 9 November 1989]: The operation of the VAT system means that businesses making only taxable supplies would he able to deduct the VAT on their costs except in respect of purchases of motor cars and business entertainment. Businesses making exempt supplies would generally bear increased VAT on their purchases. Overall, the additional VAT that would be borne by businesses is estimated to be around £¾billion.

§ Mr. Burns
To ask the Chancellor of the Exchequer what would be the estimated effect on the retail price index of increasing value added tax from 15 to 18 per cent.; and if he will make a statement.

§ Mr. Ryder
[holding answer 9 November 1989]: It is estimated that the effect on the retail prices index of increasing value added tax from 15 to 18 per cent. would be an increase in the index of around 1½ per cent.

§ Mr. Burns
To ask the Chancellor of the Exchequer what would be the estimated effect, in money terms, on the annual family expenditure budget of(a) a single pensioner whose only income was the state pension, (b) a married pensioner couple whose only income was the state pension,(c) a single parent family earning £6,000 per annum, (d) a married couple with two children earning £10,000 per annum, (e) a married couple with two children earning £12,500 per annum and (f) a married couple earning £18,000 per annum with two children and (g) a married couple on unemployment benefit with two children; if value added tax were increased to 18 per cent.

§ Mr. Ryder
[holding answer 9 November 1989]: Assuming that their level and pattern of expenditure were unchanged, a married couple with two children with earned income of £12,500 a year would pay about £120 a year more in VAT, if the rate of VAT were raised to 18 per cent. The comparable figure for a similar family with earned income of £18,000 a year would be around £190 a year.
No estimates are available for the other family types specified in the question, since data on their expenditure patterns are less reliable.