asked the Chancellor of the Exchequer (1) what would be the loss of income in a full year if the standard rate of value added tax were reduced to 12½ per cent.;(2) what would be the loss of revenue in the fiscal year 1980–81 if the standard rate of value added tax were reduced as from 1 August 1980 to 12½ per cent.; and what would be the corresponding effect on the public sector borrowing requirement;(3) what will be the effect on the retail price index of a reduction in the standard rate of value added tax to 12½ per cent.
Excluding the change in tax paid by central Government, a reduction in the rate of VAT to 12½ per cent. would cost about £1,600 million in a full year and about £600 million if implemented from 1 August. The impact effect on the index of retail prices would be a reduction of about 1·2 per cent. I am unwilling to commit my Department's resources to giving the right hon. Member an estimate of the effect upon the public sector borrowing requirement for the reasons I gave in my answer to the hon. Member for Newham, North-East (Mr. Leighton) on 14 November. [Vol. 973, c. 622–623.] The right hon. Member may wish, however, to pursue his inquiry via his access to the treasury's economic model through the Library at the House.