§ Mr. Heathcoat-AmoryTo ask the Chancellor of the Exchequer if he will estimate the effects of the tax changes announced in the Budget on each decile of household income. [8142]
168W
§ Dawn Primarolo[holding answer 11 July 1997]: Estimates of the impact on households of the tax changes announced in the Budget which we can directly model are contained in the table below. The figures show the direct impact of the measures on households. They do not reflect the long term benefits of the Budget, including New Deal spending which will help to move the long-term unemployed from welfare into work; and the long term benefits of reducing Government borrowing.
Average impact of main Budget tax measures, relative to indexation Household income decile Change (£ per week) As a percentage of net income Bottom -0.30 -0.25 2 -0.35 -0.25 3 -0.45 -0.25 4 -0.80 -0.35 5 -1.15 -0.40 6 -1.30 -0.40 7 -1.55 -0.40 8 -1.80 -0.40 9 -2.05 -0.40 Top -2.35 -0.30 Average -1.20 -0.35 The figures include the main tax measures directly affecting households which can be modelled: reduction of VAT on fuel and power to 5 per cent., reducing the Gas Levy to zero, reducing in MIRAS to 10 per cent., real increase in tobacco duty of 5 per cent., real increase in road fuel duty of 6 per cent., and abolition of tax relief on Private Medical Insurance. Figures are rounded to the nearest 5p, or 0.05 per cent.
Household incomes are adjusted for differences in composition before allocating households to deciles.
The figures do not reflect that the tax changes affect households very differently depending upon their expenditure. For example estimates for the effect of the Budget on non-smokers are contained in the following table:
Average impact of main Budget tax measures (excluding tobacco), relative to indexation Household income decile Change (£ per week) As a percentage of Net Income Bottom 0.05 0.05 2 0.00 0.00 3 -0.10 -0.05 4 -0.40 -0.15 5 -0.70 -0.25 6 -0.90 -0.25 7 -1.15 -0.30 8 -1.40 -0.30 9 -1.65 -0.30 Top -1.95 -0.25 Average -0.80 -0.25