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Petroleum Revenue Tax

Volume 975: debated on Wednesday 5 December 1979

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asked the Chancellor of the Exchequer whether he will circulate in the Official Reportthe effect, in terms of the real and the money economies, of bringing forward the payment of £700 million of petroleum revenue tax.

The bringing forward of PRT payments will have no immediate effect on output. It will directly reduce the PSBR in 1979–80. The resulting effects on the money supply depend on how the oil companies finance the payments. It is likely that they will reduce to some extent their holdings of liquid assets, including their bank deposits, and that the money supply will therefore be reduced. In the longer term, the reduction in the PSBR and rate of monetary growth will contribute to reducing the rate of inflation, which will be beneficial to private sector output.