§ Mr. Ralph Howellasked the Chancellor of the Exchequer, what would be the total net cost to the Exchequer, after taking into account savings to employers in the public sector, if all national insurance contributions were abolished; and what rate of VAT would be necessary in order to offset this loss without other tax increases.
§ Mr. Joel BarnettThe income from national insurance contributions other than those paid by public sector employers is estimated at about £5,800 million in 1975–76, to which must be added the additional expenditure on benefits, in the region of £1,000 million, which would result from abandoning the principle whereby entitlement to benefits depends upon contributions paid. To raise nearly £7,000 million in additional revenue from VAT would mean more than trebling its yield, and considerable uncertainty must obviously attach to any estimate of the standard rate of VAT required to achieve so large a change. It would certainly be appreciably greater than the present 25 per cent. higher rate.