§ Mr. Hendersonasked the Chancellor of the Exchequer whether he has any plans to revise his estimates for revenue from the specific duties on tobacco and alcohol, in view of criticism of them from independent analysts.
§ Mr. HayhoeNo. The criticism has not allowed for any fall in demand for cigarettes or beer as a result of the increase in tax-duty plus VAT. The Exchequer loses all the tax on this "lost" volume, not just the incremental tax. Our methodology also allows for a switch by comsumers, within a fixed money expenditure, into or out of the item whose price has risen. This alters tax revenue from all other goods which forms part of the overall effect of a tax change. The methodology was set out in considerable detail inEconomic Trends, March 1980.