I have also decided that I must take action under Section 9 of this year's Finance Act. The Treasury has, therefore, made an Order, the Surcharge on Revenue Duties Order, the effect of which is to put a surcharge of the full permitted amount of 10 per cent. on the range of Customs and Excise duties referred to in the Finance Act, and an Purchase Tax. The surcharge will take effect from midnight tonight.
I wish to make it clear that, taking Purchase Tax, for example, the increase is the equivalent of 10 per cent. of the existing rates, not an addition of a further 10 per cent. to the existing rates. There is some misunderstanding about this. Thus, for goods now chargeable at 5 per cent. the increase would, in effect, raise the rate to 5½ per cent., not to 15 per cent.
The Order will be laid forthwith, and hon. Members will see in the explanatory note the full list of duties to which it relates. I must stress that the effect on prices of individual articles will be a matter for the traders concerned to determine.
The effect of the surcharge will be to withdraw purchasing power from the economy at the rate of £210 million per year. It can, of course, be reduced or removed at any time, but if it were maintained till the end of the current financial year, it would fortify the surplus above the line to the extent of £130 million.