asked the Minister for Finance the basis of calculation of the following items mentioned in his financial statement of the 26th January, 1977: (a) £60 millions revenue buoyancy (b) £35 millions tax on farm incomes (c) inflation from April, 1976 to April, 1977, and (d) rate of inflation for the year 1977.
Written Answers. - Financial Statement Items.
88.
(a) £60 million revenue buoyancy: Estimates of revenue are calculated by reference to the level of economic activity associated with a particular profile of public expenditure and taxation and having regard to appropriate assumptions about trends in the economy generally. The revenue estimate for 1977 contained in the White Paper on Receipts and Expenditure was related to the pre-budget profile of public expenditure and taxation and their implications for trends in the main macro-economic aggregates during 1977. On the basis of past experience and using standard econometric techniques, estimates were then made of the impact in 1977 of the measures announced in the budget on economic activity in general and on public revenue in particular. From these calculations, it was estimated that the additional revenue buoyancy generated by the budgetary measures in 1977 would be about £60 million.
(b) £35 million tax on farm incomes: The estimate of £35 million yield from taxation of farming incomes was computed by reference to the proposed amended provisions for assessment and payment of tax on farming incomes in 1977 as outlined in my financial statement, and to the assumption that the following numbers of persons will be assessible accordingly:
|
Estimated Number |
Estimated Yield |
|
|
£m |
||
|
Persons holding land with a rateable valuation of £75 or more (1) |
15,500 |
31 |
|
Persons with a trade or profession |
||
|
who also hold land with a rateable |
||
|
valuation below £75 (2) |
6,000 |
3 |
|
Persons holding land with a rateable valuation in excess of £20 who also have income from a nonfarming source (3) |
4,500 |
1 |
(1) Under Section 15, Finance Act, 1974, a rateable valuation of £100 or more.
(2) Under Section 16, Finance Act, 1974, a rateable valuation in excess of £50.
(3) Section 28, Finance Act, 1974.
(c) and (d) Inflation from April, 1976 to April, 1977, and rate of inflation for year 1977: The rate of inflation is normally regarded as being represented by the rate of increase in consumer prices or, in other words, the rate of increase in the deflator of personal consumer expenditure. Changes in this deflator are determined by changes in the prices of primary inputs into consumption, chiefly wages and salaries, farmers' incomes, profits and import prices. The weighting of each of these primary inputs is given by the Input-Output Tables for 1969, which are the latest available. These weightings, taken in conjunction with assumptions about the likely developments in the prices of primary inputs can be used to forecast the rate of increase in consumer prices in 1977.
As the data from which the consumer price index is compiled are not collected during the month of April, it is not possible accurately to estimate the increase in consumer prices over any 12-month period ending in April. A fairly reliable estimate can, however, be calculated by reference to the increases which occur in the 12-month periods ending in mid-February and mid-May.
For the purposes of forecasting the rise in consumer prices in the period April, 1976—April, 1977, estimates of the likely increase in prices between mid-November, 1976 and mid-May, 1977, were prepared on the basis of trends to mid-November, 1976, and in the context of the expected rise in prices in 1977 as a whole.