To ask the Chancellor of the Exchequer what is his estimate of the revenue costs of a cut in all higher rates of income tax to (i) 40 per cent. and (ii) 35 per cent. in (a)1988–89 and (b) 1989–90.
The cost of abolishing all higher rates of income tax above 40 per cent. is estimated to be £965 million in 1988–89 and £2,070 million in 1989–90. The abolition of rates of income tax above 40 per cent. was announced in the Budget on 15 March; the costs given above are those published in table 4.1 of the Financial Statement and Budget Report 1988–89. The cost of further reducing the higher rate of tax to 35 per cent. is estimated to be an additional £405 million in 1988–89 and an additional £880 million in 1989–90.