§ Mr. Simon Hughes
To ask the Chancellor of the Exchequer if he will give estimates for the direct and indirect revenue yield from increases in income tax of 1 per cent., 2 per cent., 3 per cent., 4 per cent., 5 per cent. and 6 per cent., taking into account current economic growth and unemployment figures.
§ Mr. Lamont
[holding answer 16 December 1987]: The direct revenue effect of increasing the basic rate of income tax by 1p in the pound is forecast at £1.25 billion in 1988–89 and 1.60 billion in 1989–90, as published in table 4.5 of the Autumn Statement 1987. Direct effects of further increases in the basic rate of tax are proportionately greater. These estimates make no allowance for possible changes in taxpayers' behaviour.
Estimates of further, second round effects would require simulations on an economic model and would depend on the precise assumptions chosen.