§ Mr. Ralph Howellasked the Chancellor of the Exchequer, further to his reply 240W to the hon. Member for Norfolk, North, Official Report, 3rd May, column 188, and his earlier reply to the hon. Member for Blaby (Mr. Lawson) Official Report, 13th March, column 42, if he will explain the apparent discrepancies between the two replies; and if he will now show how much extra revenue from value added tax and other indirect taxes would be necessary in order to restore the 1959–60 ratio between direct and indirect taxation.
§ Mr. Robert SheldonThe two measures differ in coverage and are expressed as shares of different totals. The answer given to the hon. Member for Blaby (Mr. Lawson) [Official Report, 12th March 1978, column 42] gave taxes on personal incomes and capital as a, proportion of central Government receipts from taxation, excluding throughout national insurance contributions. These figures are on a national income accounts basis. The answer given to the hon. Member for Norfolk, North [Official Report, 3rd May 1978; column 188] was based on the share of income tax and capital taxes in general Government revenue including local authority receipts from the rates as well as national insurance contributions. The figure was taken from the table provided in my reply to the hon. Member for Cornwall, North (Mr. Pardoe) [Official Report, 28th April 1978; columns 732–4.] In those figures, in the years 1959–60 to 1965–66 income tax included taxes on the undistributed and distributed profits of companies: the figures are based on revenue departments' administrative data.
As for the second part of the hon. Member's Question, in the answer given to the hon. Member for Cornwall, North on 28th April referred to above, the share of direct taxation and national insurance contributions, using the definitions given by my right hon. Friend in the answer to the hon. Member for Cornwall, North on 28th February, columns 187–8, in total general Government revenue from taxation in 1959–60 was given as 48.2 per cent. The Financial Statement and Budget Report 1978–79 estimated that the share of these taxes in general Government revenue from taxation in the current year would be 49.8 per cent. To restore the 1959–60 proportion for the same total tax yield would imply a switch from direct to indirect taxation in the current year of about £900 million, but the precise changes in rates of direct and indirect 241W taxation needed would depend on the choice of tax instruments used, and this figure does not, of course, take account of the amendments recently carried to Clause 11 of the Finance Bill. The choice of any particular earlier year for comparison is bound to be arbitrary and an idea of the year to year fluctuations in the pattern of taxation is given by the comparable figures for the three subsequent years, 1960–61, 1961–62 and 1962–63, which would be about £700 million, £100 million and £300 million, respectively.