asked the Secretary of State for Employment if he will review the working of the retail price index, with a view to seeking ways to minimise the wide variation in the effect of raising the same amount of revenue through taxes on different categories of item, many of which are price inelastic.
[pursuant to his reply, 14 April 1980, c. 424]: Reasons for the variations mentioned were discussed in the reply given to my hon. Friend by my hon. and learned Friend the Minister of State, Treasury on 3 March. The figures that have been quoted for the effects on the RPI relate only to the direct effects of taxes on goods and services purchased by consumers. Purchases of goods such as petrol and derv are also made by businesses and tax changes on these will work through to the consumer to a varying degree and with varying time lags. If these indirect effects were also taken into account the variation in the effect on the RPI would be materially reduced. I am satisfied that the retail price index reliably reflects changes in prices paid by households and that it may be read in conjunction with the tax and price index if the effects of direct taxes are also to be taken into account.