§ Mr. Peter Bottomley
To ask the Chancellor of the Exchequer, pursuant to his answer of 4 March,Official Report, column 245, what level of sales was assumed to estimate the revenue forgone at £750 million, when car tax was abolished; what proportion of the retail prices reduction has been replaced by price increases; and if he will estimate the effects on (a) the retail prices index and (b) the tax and prices index if the £750 million is fully replaced by other taxation and also by manufacturers' price increases.
§ Sir John Cope
The estimated revenue loss in 1993–94 of £750 million—car tax and consequential VAT—was based on car sales of around 1.5 million. There are considerable difficulties associated with monitoring the retail price of new cars and no estimates are available on how prices have changed since the abolition of car tax was announced in November 1992. Were the revenue to be recouped wholly from an increase in the excise duty on road fuels, this would have an estimated impact effect of 0.1 per cent. on both the retail prices index and the tax and price index.