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Local Government Expenditure

Volume 173: debated on Thursday 24 May 1990

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To ask the Chancellor of the Exchequer (1) what rate of income tax would be necessary to finance all current local government expenditure in the United Kingdom;(2) what rate of value added tax would be necessary to finance all current local government expenditure in the United Kingdom;(3) what rate of corporation tax would be necessary to finance all current local government expenditure in the United Kingdom.

[holding answer 22 May 1990]: If local authorities spent in line with total standard spending in England and Wales, and total current expenditure in Scotland, total current expenditure would be around £39·8 billion. Assuming that central Government grant to local authorities ceased and that expenditure currently funded in part by local authorities all fell to central Government, this would imply additional central Government expenditure of around £11 billion.This is equivalent to an increase of around 7½p in the basic rate of income tax, or an increase of 5½ percentage points in the VAT rate, or an increase of around 28 percentage points in the full rate of corporation tax. These calculations take no account of any consequential behavioural effects, which are likely to be significant.