§ Mr. Foulkesasked the Chancellor of the Exchequer if he will give as accurate an estimate as possible of the loss of revenue when a married man with two children, earning £5,000 per annum, who has been in employment for 20 years and has a £10,000 mortgage repayable over 25 years and no other material allowances or income, is made unemployed and is therefore no longer paying tax; and if he will give as accurate an estimate as possible of the social security benefits likely to accrue to the above man during his first year of unemployment, and each subsequent year, making any reasonable assumptions necessary.
§ Mr. Peter ReesOn the assumptions stated by the hon. Member, and assuming that the mortgages is a new one and that the married man in question receives no redundancy payment, the figures are as follows:
At current rates while in employment the man would pay £866.32 a year in tax and national insurance contributions, and his employer £675 of employers' national insurance contributions. The total loss of revenue would, therefore, be £1,541.32.
Money Supply* Velocity of† Circulation Prices‡ Output§ £M3 M3 £M3 M3 1959 (1949x100) … … NA NA NA NA 141.9 126.5 1969 (1959x100) … … NA 163.9 NA 118.2 140.0 135.3 1979 (1969x100) … … 337.3 358.2 110.0 103.6 309.8 119.1 * Amount outstanding, mid-period, not seasonally adjusted. Comprehensive money supply statistics on the current definitions are compiled only for 1963 and later but figures for M3 going back to 1959 can be estimated on the basis of data given in the Bank of England, Statistical Abstract, number1 1970. Comparable figures for £M3 cannot be estimated as there is no split available between residents' sterling and foreign currency deposits. †GNP at current market prices during the period divided by the money supply at mid-period. ‡ Calculated using an index formed by linking the customers' expenditure deflator for years prior to 1962 with the general index of retail prices for 1962 and later tyears. § GDP at factor cost at 1975 prices, output based. ║ For 1979, figures for the first half of year have been converted to an annual rate. The figures in the table show that changes in the velocity of circulation have been very small compared with changes in the money supply, nominal incomes or inflation; over the last 20 years, the velocity of M3 has increased by one quarter, whereas prices have increased nearly four and a half times. In interpreting these figures a number of points should be noted. First, broad stability of velocity in the long run does not mean that the velocity of circulation does not
894WIn view of the size of his mortgage repayment he would be eligible to claim supplementary benefit from the beginning of unemployment and the total of social security benefits in the first year would be £3,342.34. The same amount would be paid in subsequent years.
Notes: Further assumptions are: ages of children 4 and 6; household rates £2.80 per week; "Minor allowances" include free school meals for 38 weeks and free welfare milk for 52 weeks.