HC Deb 13 December 1996 vol 287 c376W
Mr. David Nicholson

To ask the Chancellor of the Exchequer if he will estimate the change in general taxation necessary to fund current levels of public spending, with current borrowing, if the United Kingdom economy had grown since 1979 at the rate established between the end of 1973 and the second quarter of 1979. [7388]

Mr. Waldegrave

The United Kingdom's real gross domestic product grew at an average annual rate of 1.64 per cent. between the third quarter of 1973 and the second quarter of 1979. Since the third quarter of 1979 the annual rate of real GDP growth has averaged 1.9 per cent.

If real GDP had grown since the third quarter of 1979 at an annual rate of 1.64 per cent., other things being equal, the combined impact on tax receipts and spending would raise borrowing by approximately 3½ per cent. of GDP. Therefore, to keep borrowing unchanged, taxation would have to rise by up to 3½ per cent. of GDP. However, there is great uncertainty over estimates of this kind.

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