New Clause 1 — Value Added Tax: limitation on new orders
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‘No new Order shall be made under section 30(4) or 31(2) of the Value Added Tax Act 1994 which:
(a) Amends the current definition of “hot food” in the Act, or
(b) Amends the Act to limit the zero rate to the supply of caravans used for residential purposes.’.—(Cathy Jamieson.)
Brought up, and read the First time.
Cathy Jamieson (Kilmarnock and Loudoun, Labour)
I beg to move, That the clause be read a Second time.
Roger Gale (North Thanet, Conservative)
With this it will be convenient to discuss the following: new clause 2—Review of VAT Exemption for small vehicles—
‘The Treasury shall, within two months of Royal Assent to this Act, lay before Parliament a report on the effect on the availability of transport services on the VAT exemptions for small vehicles.’.
New clause 3—VAT impact of changes—
‘No new Order shall be made under section 30(4) or 31(2) of the Value Added Tax Act 1994 unless the Chancellor of the Exchequer has fully reviewed the impact of those changes on jobs, living standards and businesses and placed the review in the Library of the House of Commons.’.
New clause 4—Definition of ‘hot food’—
‘No new Order shall be made under section 30(4) of the Value Added Tax Act 1994 which amends the current definition of “hot food” in the Act.’.
New clause 5—Value Added Tax: baked products—
‘No new Order shall be made under section 30(4) or 31(2) of the Value Added Tax Act 1994 which shall affect baked products when no attempt is made to keep the product hot for consumption.’.
New clause 6—VAT on caravans—
‘No new Order shall be made under section 30(4) or 31(2) of the Value Added Tax Act 1994 which amends the Act to apply to holiday caravans that are currently zero rated.’.
New clause 7—VAT: protected buildings—
‘No new Order shall be made under section 30(4) of the Value Added Tax Act 1994 which amends the current definition of “protected building” in the Act.’.
New clause 8 has not been selected because it is outside the scope of the Bill. I indicate to the Committee that it will be for my successor in the Chair, the Second Deputy Chairman of Ways and Means, to determine, once she has heard more of the debate, whether to call any of the new clauses other than new clause 1.
Cathy Jamieson (Kilmarnock and Loudoun, Labour)
It is a pleasure to follow some excellent speeches. As we heard earlier, the harsh reality of the Budget is that it has done nothing to give Britain the jobs and growth we desperately need. We have heard how it has failed—[Interruption.]
Roger Gale (North Thanet, Conservative)
Order. I am sorry to interrupt the hon. Lady. Will Members leaving the Chamber please do so quietly? I wish to hear the debate.
Cathy Jamieson (Kilmarnock and Loudoun, Labour)
Thank you, Sir Roger. That gives me the opportunity to repeat, for those unable to hear because of the conversations, my point about the harsh reality of the Budget, which has done nothing to give Britain the jobs and growth we desperately need, and about how it fails the fairness test. It has done nothing to help support families and pensioners on modest and middle incomes. We will discuss that further tomorrow so I shall not dwell on it now. It would, of course, be outwith the scope of the new clauses. I shall only say that families are already finding out just what the Government’s decisions will mean for their household budgets. As we will hear, businesses are also now finding out that the botched Budget makes no economic sense for them either.
There was a time when people might have given the Chancellor some credit for his strategic brain. Some on middle incomes and small businesses might even have given him the benefit of the doubt on economic policy, notwithstanding our many warnings about cuts that go too far and too fast. They might have given him the benefit of the doubt even if they did not completely agree with everything he was doing. But how times change. The Chancellor has had several weeks of torrid headlines—The Mirror: “Half-baked Tory tax a mistake-and-bake from Osborne and co”; The Sun: “PM David Cameron is urged to show leadership over pasty-gate”; The Guardian: “‘Pasty tax’ is the last thing people need”; the Evening Standard: “Heston says pasty tax will stop artisan bakers earning a crust”; and even “Tax on beloved Cornish pasties sparks furore in Britain” in USA Today and “‘Pasty tax’ row heats up for British PM” on the al-Jazeera website.
John Redwood (Wokingham, Conservative)
Is the hon. Lady at all worried that the fine reputation of the pasty will be damaged by so many MPs trying to associate themselves with it and get their ratings up as a consequence?
Cathy Jamieson (Kilmarnock and Loudoun, Labour)
I am sure that the pasty industry is looking on as we speak and will want to know exactly which MPs have gone and sampled the local delicacies in whichever part of the UK they happen to live.
Those weeks of torrid headlines have led us to the current situation. There is now a pasty petition, and there has apparently been a pasty summit, while Greggs is planning a pasty protest march on Downing street to plead with the Prime Minister to step in personally and kill off the hated pasty tax.
Brandon Lewis (Great Yarmouth, Conservative)
The shadow Chancellor is quite right. Does the hon. Lady not agree that in removing this VAT anomaly, it is only fair to protect the interests of the fish and chip mongers in places such as Great Yarmouth?
Cathy Jamieson (Kilmarnock and Loudoun, Labour)
The interests of fish and chip shops have been raised on a number of occasions in this debate, and I am sure that plenty of people will want to patronise those local establishments. However, that does not get us away from the fact that the introduction of this measure has been an absolute shambles.
Matthew Hancock (West Suffolk, Conservative)
I am grateful to the hon. Lady and to the shadow Chancellor for encouraging her to give way. I have a simple question: is Labour going to reintroduce this anomaly, should it ever win an election?
Cathy Jamieson (Kilmarnock and Loudoun, Labour)
I am almost disappointed that I took that intervention, if that is the best that the hon. Gentleman can come up with.
We on the Opposition Benches like to be helpful, so we are going to give the Government the opportunity to step back from the current mess, which is entirely of their own making, and drop these ill-thought-out plans, which have led to more questions being asked about hot and cold snacks than anyone could have dreamed were possible.
Before I move on, and before anyone asks me when I last ate a pasty—or a bridie, as it would be in Scotland—I have a confession to make. I am one of Parliament’s three vegan MPs, so the delights—[ Interruption. ] I hear calls of “Resign!” The delights of the Greggs steak bake have passed me by, although it is a firm favourite with my son, and the cheese and onion bridie is a staple component of my husband’s diet. However, I am very grateful to Brownings the Bakers, in Kilmarnock in my constituency, which, in advance of Kilmarnock football club’s recent cup final triumph, created a vegan Killie pie, to mimic the award-winning Killie pie, so that I would not go hungry—some Ayrshire colleagues on the Government Benches can see where this is going—while other Kilmarnock supporters were enjoying that award-winning local delicacy.
When I went along to the bakery to receive the pies, it never occurred to me that such delicacies would become the hot—or cold—political topic only weeks later. We have seen quotation after quotation from bakeries and other producers of hot snacks, warning the Government of the problems that the tax will create for them. Indeed, who would have thought that the Treasury Committee would be taking evidence from the Chancellor on what constitutes an ambient temperature? Efforts on Second Reading to clarify exactly what “the ambient temperature” means did not elicit much more information, although we did learn that Jacob Rees-Mogg, who I see is in his place, prefers sausage rolls to pasties. I am sure that that was very useful information, and it was interesting to find it out, but it threw very little light on the rest of the subject.
Notwithstanding the Chancellor’s attempt to explain his rationale on hot takeaways to the Treasury Committee—which makes for fascinating reading—we are still struggling to find out whether the hot roast chicken selected in the supermarket by my right hon. Friend Mrs McGuire, to which she referred on Second Reading, would be liable for VAT if it had cooled down by the time she reached the checkout.
Anne Main (St Albans, Conservative)
In successful pasty shops such as Pengenna’s in Bude, the pasties come out of the oven and people eat them hot straight away. They are not being kept hot; they are being delivered hot and fresh from the oven. Does the hon. Lady share my concern that that represents an anomaly?
Cathy Jamieson (Kilmarnock and Loudoun, Labour)
The hon. Lady makes a good point, and it will be interesting to see how she votes at the end of the debate.
If I were to go back to Brownings, my local baker, and purchase two vegan Killie pies, one to eat there and then and one to take home for another day, would one or both be VATable, to use the term the Chancellor used before the Select Committee?
Cathy Jamieson (Kilmarnock and Loudoun, Labour)
I will give way—I was going to say “to my hon. Friend”, but he is actually my former colleague from another place.
Ben Wallace (Wyre and Preston North, Conservative)
The hon. Lady will know that Kilmarnock has some of the best fish and chip shops in Scotland. If she were not a vegan, she would certainly know that. Is she really saying that her party wants to maintain the competitive disadvantage that her local fish and chip shops have? Is she really supporting the big supermarkets and chains that will put those small chip shops out of business by ensuring that that loophole is exploited?
Cathy Jamieson (Kilmarnock and Loudoun, Labour)
I am sure that the hon. Gentleman patronises many of those chip shops on his regular visits to my part of the world—and sometimes to my constituency. I hope that he will go to Brownings the bakers and have a Killie pie, if he has not already had one. The point that he makes does not negate the fact that it is primarily the smaller bakers—the so-called artisan bakeries and those that produce traditional products—that are going to have a problem as a result of this tax.
I want to return to my point about whether one or both of my two vegan Killie pies would be VATable. I am unsure whether “to VAT” is actually a verb that would provide us with the word “VATable”. I am, however, aware that the word “ambient” has its roots in the Latin word for “going round”. The Chancellor’s reputation, if not his ambitions for the future, seems to be going round in ever-decreasing circles as a result of this furore.
The Treasury Committee employed its usual straightforward way with words when it stated:
“We recommend that, where changes to complex areas of taxation are proposed, the greatest possible supporting material be published to allow for greater scrutiny of the possibility of unintended consequences.”
Those are extremely wise words—[ Interruption. ] I am happy to take an intervention from those on the Government Front Bench who are mocking the wise words of the Treasury Committee.
Alan Beith (Berwick-upon-Tweed, Liberal Democrat)
Am I to understand from what the hon. Lady is saying that the Labour party is making a costed commitment to remove the tax from pasties, and to ensure that there is no anomaly by also removing it from fish and chips and from every other foodstuff as well?
Cathy Jamieson (Kilmarnock and Loudoun, Labour)
I have to confess that, the last time I looked at the Labour party manifesto, it did not mention fish and chips, or pasties, or bridies. We are absolutely clear that this tax will do nothing to support those local industries and that it will place yet another burden on hard-pressed customers.
Julie Hilling (Bolton West, Labour)
Does my hon. Friend agree with John Carr, the managing director of Carr’s pasties in Bolton, that when VAT was introduced on food in 1980, it was a total mess? It meant, for example, that biscuits were deemed a luxury although cream cakes were not. Will not this change in VAT create an even bigger mess? Is it not a ridiculous measure to have introduced?
Cathy Jamieson (Kilmarnock and Loudoun, Labour)
I thank my hon. Friend for that intervention. I want to give plenty of opportunity for Back Benchers to contribute to the debate. It is not just a debate about pasties; it is also about caravans. I know that many Members will wish to speak on that issue because of its importance for their local industries. [Interruption.] I would be happy to take an intervention from Ministers or from one of those senior Tory MPs quoted as having met the Chancellor today to lobby on the issue of caravans. Does anyone want to give us an update on that? No, I see no takers at the moment. Perhaps we will hear about it later. [Interruption.]
Roger Gale (North Thanet, Conservative)
Order. I am sorry to interrupt the hon. Lady again. The hon. Lady must be heard, and she really should not have to shout from the Dispatch Box to put her message across. Many Members on both sides of the Committee want to participate in the debate. Whether or not they are called will depend to some extent on their behaviour in the Chamber, and it will also depend on the amount of time available to us.
Cathy Jamieson (Kilmarnock and Loudoun, Labour)
Thank you, Sir Roger. I will do my best to bring my remarks to a speedy conclusion so that others can contribute.
Let me briefly mention other issues. I have already mentioned caravans, but building work on churches is also important, and I know that some colleagues will speak about it later. One other area, if I can be pardoned a very bad pun, not yet highlighted in the headlines is the whole issue of hairdressers’ chairs. I mention it simply because the Government’s proposal shows once again a lack of understanding of the operation of many small businesses.
People and women—and it is often young women—starting out on their hairdressing careers, perhaps on their first business opportunity, often rent a chair in a larger salon. I see some nods of agreement from Government Members. It is welcome if some of them understand the issue, but it does nothing at all to help those people setting out on their first business venture if they suddenly find that they are going to have to pay more costs. The National Hairdressers Federation has highlighted further anomalies. Conservative Members might not be aware of it, but it is common practice in hairdressers’ businesses to rent out space not only to other hairdressers, but to others in the beauty and therapy professions. The anomalies highlighted by the NHF are made worse by the Government’s proposals.
David Morris (Morecambe and Lunesdale, Conservative)
I can tell the hon. Lady of a loophole that has needed closing for many years. Although it is possible to rent a chair in the hairdressing industry, the problem has been that VAT is levied on the premises. I think it is right to place it on the individual because these people operate individually.
Cathy Jamieson (Kilmarnock and Loudoun, Labour)
I am slightly surprised to hear that from the hon. Gentleman. All I wanted to do in raising this particular issue was to make the Government recognise that the consultation, which has been brought forward, amounted to too little, too late, and that it would have been far better if it had been done earlier.
Back Benchers want to contribute, so I shall close in order to give them the opportunity to speak. It would be useful, however, if some Conservative Members were able to give us an update on the meeting apparently taking place today. Will there be a change of position? Will the Government withdraw, particularly from the caravan tax, but also from the other ill-thought-out taxes? Once again, I see no one seeking to intervene on this particular point, so I shall finish and allow others to raise further issues.
Peter Aldous (Waveney, Conservative)
I am grateful to be called to speak. I shall restrict my comments to new clause 6 and the proposed application of VAT to the sale of static holiday caravans from
I have received representations and expressions of interest from a variety of parties. These include Hoseasons, one of the largest holiday providers in the UK, which is based in Lowestoft in my constituency; and five park operators, including the chairman of my own constituency Conservative association, who has herself written to the Treasury and a number of other Members. Small and medium-sized enterprises, including painters and decorators, and a bank are also concerned about the impact of the proposal on business viability.
Let me make three observations. First, I fear that HMRC’s assessment of the impact of the change takes full account of neither the whole supply chain serving the industry, nor the fact that the industry is concentrated in specific geographical areas that will be hit very hard. Some of those areas are pockets of deprivation and unemployment, and many are coastal communities such as my constituency, where tourism is a vital component of the local economy.
The supply chain includes manufacturers who are located almost exclusively in the UK—mainly in the Humberside area—wholesalers, and park operators. In recent years, the sale of static caravans has become a vital part of park operators’ businesses. Without such sales the future of some businesses will be at best uncertain, while others will cut both staff and the reinvestment in facilities that is so important if they are to continue to attract customers and ensure their own financial viability. Trading conditions have been very difficult for those operators in recent years, and the introduction of the new tax on
I am especially concerned about the fact that HMRC’s assessment takes no account of the numerous SMEs that work in the parks. There are builders, decorators, plumbers, electricians, people who fit carpets and curtains, and people who service plant and equipment. We should also bear in mind that many of those who work in the parks—admittedly on a seasonal basis—are young people gaining their first experience of work. An unintended
consequence of the measure could, in some cases, be the removal of that vital first rung on the employment ladder.
David Hanson (Delyn, Labour)
In my part of north Wales, the projected 30% drop in sales shown by the Government’s own figures will have an impact on new purchases. Those who come to north Wales do not just buy static holiday homes; they buy cars and go to restaurants, pubs and shops, and their income and expenditure help to boost our economy. That will hit the hon. Gentleman’s constituency as well.
Peter Aldous (Waveney, Conservative)
I shall come to that issue in a moment.
My second point is that HMRC’s analysis fails to take account of the vital role played by static caravan owners in a local economy such as that in Waveney. They are, in many respects, the “anchor tenant” for the whole tourism industry. They come to stay in the area for most weekends, and they do not limit their visits to the summer season. They spend money in local shops, restaurants and pubs, visit the many day attractions in my area such as Pleasurewood Hills and Africa Alive, or spend a day on the beach or boating on the Broads. A reduction in their numbers would have a significant knock-on effect on the many businesses in the area.
Finally, I believe that the rationale for the introduction of the tax is flawed. It is claimed that it addresses an anomaly, as touring caravans are subject to VAT while static caravans are not. However, the industry has come a long way since 1973, when the VAT exemption was first made, and I believe that today’s static caravan has more in common with a holiday home than with a mobile caravan. Static caravans are more like second homes in terms of their facilities and the nature of the accommodation, the investment that their owners have made in them, and the way in which they are used—not just for once-a year holidays, but for regular visits throughout the year.
Albert Owen (Ynys Môn, Labour)
Another consequence of the tax is that those who currently buy caravans to use as second homes would actually buy second homes. That would raise the price of affordable homes, especially in rural areas such as the hon. Gentleman’s constituency.
Peter Aldous (Waveney, Conservative)
I am not sure that I entirely agree with the hon. Gentleman. The problem with many second homes is that they are very expensive. What worries me that, certainly in my area, people would go abroad for holidays. They might even buy a villa in Spain, which really would be cheap, and the whole tourism industry would be affected.
In many respects, the current tax treatment of second homes and statics is, by chance, similar. The former pay stamp duty, while the later pay VAT on movable items only. To change that balance would unfairly penalise this group of people. Many of them cannot afford a second home, yet they are similar to second-home owners in so many ways. Such a move would be regressive in taxation terms.
In summary, I believe that the impact of this proposal will be far greater than HMRC’s assessment implies. It will have a significant negative effect on the economy and on jobs in specific locations around the country, including my constituency. Further, I question whether
the anomaly it is intended to address actually exists. I therefore urge the Government to think again, and to allow a vital industry to continue to play a key role in securing the economic recovery.
Alan Johnson (Kingston upon Hull West and Hessle, Labour)
I join Peter Aldous in supporting new clause 6, and I wish to make a few brief points.
First, on the anomaly issue, in the early ’70s a Conservative Chancellor looked at towable caravans, which are VATable, and residential caravans, which are not, and decided that so-called static caravans should be classified as residential property and therefore not be subject to VAT. In the ensuing 40 years, every Chancellor, both Labour and Conservative, has made the same decision.
In the global recession of 2008, the caravan industry was hit hard. In my neck of the woods, east Yorkshire, we know how difficult that was. I took a delegation to meet the well-known caravan user Lord Mandelson, to make the argument that the industry needed a bit of help from his Department—which was not at that time known as the Department for Business, Innovation and Skills. [Interruption.] Yes, yachts were his main form of holiday. In the entire history of the caravan industry, so great has been its feeling that it could survive independently without Government help that not a single official in the whole vast empire of that Department knew anything about it. Frankly, apart from a bit of tinkering around the edges of the car scrappage scheme, there was not much that we could do for the caravan industry. As a result, companies went bust, people went bankrupt and the supply chain was hit very hard.
Through its own efforts, however, the industry is now getting its head back above water. Atlas Leisure Homes in my constituency went into receivership in 2008 and lost 250 jobs. It has fought its way back and now employs 120 people in an area that has been badly hit by unemployment. Companies in the supply chain have had similar experiences. Meadley International Transport is involved in distribution. It is run by a father, his son and his daughter. He put in the whole of his pension and all his assets to get Meadley through the global downturn, and it, too, is now getting its head back above water.
This measure will destroy Atlas and Meadley. It will destroy small businesses across the country. It will destroy an industry that is almost the last purely British success story in the manufacturing sector. Some 95% of UK caravans are made in this region. In 2008 and 2009, people did not decide not to buy a caravan; they deferred that purchase. If those companies had gone out of business, German and Dutch firms would now be prospering from the fact that a market is developing again.
Karl Turner (Kingston upon Hull East, Labour)
As my right hon. Friend will know, I have three such manufacturers in my constituency. One of the biggest is Willerby Holiday Homes. It is based in east Hull and employs 700 people. I spoke to its chief executive today. He tells me the firm has been operating a three-day week since the banking crash in 2007, but he hopes it may return to
full-time work in the next few months. He says it is ridiculous to expect that to be able to happen if this VAT measure is introduced.
Alan Johnson (Kingston upon Hull West and Hessle, Labour)
My hon. Friend raises a crucial point. I say the following to those on the Treasury Bench: this was meant to be a Budget for manufacturing; it was meant to be a Budget for growth in the British economy; it was meant to be a Budget that ended some of the anomalies in the north-south divide.
How can we go ahead with this measure, given that hon. Members in all parts of the House know the effect it will have on jobs and British manufacturing, and know that the savings of about £40 million to £45 million set out in the Treasury’s own document will be far exceeded by the costs in unemployment, waste and redundancies throughout the country? How can the Treasury possibly decide, after 40 years of looking at this, that this is the year in which it needs to put the price of caravans up? Again, its own figures show that that will lead to a 30% reduction in demand, although the National Caravan Council says that the real figure will be more like 75% or 80%. I believe Treasury officials now understand that their own analysis was deeply flawed.
Diana Johnson (Kingston upon Hull North, Labour)
As a Hull MP, I wish to stress that we are facing job losses in so many private sector businesses, from BAE Systems, Comet and P&O to many others across the city. It sounds as if we may end up with thousands more job losses as a result of this measure, and we really cannot afford to see that happen in our city.
Alan Johnson (Kingston upon Hull West and Hessle, Labour)
My hon. Friend is right because, on the Treasury’s assessment, more than 1,000 jobs are going to be lost. Some 90% of this manufacturing industry is based in east Yorkshire. I say to those on the Treasury Bench that this is not an industry that has asked for help from the Government—indeed, in 2008-09, it had to pull itself up by its bootstraps. Having done that, this is not a question of its asking the Government for any help; it is about asking the Treasury and the Government not to inflict on that industry a possible death blow to a great British manufacturing success story.
Graham Stuart (Beverley and Holderness, Conservative)
It is my pleasure to follow the other speakers. Like all those who have spoken so far, apart from those on the Front Bench, I shall speak to new clause 6 and the proposal that the Finance Bill should set out that this House will not approve, in a future statutory instrument, the imposition of VAT on static caravans. So much has already been said, but I must point out that my constituency contains ABI, a major manufacturer in the heart of Beverley; companies in the immediate area that are part of the supply chain; and a series of parks along the Holderness coast that depend for their profits on the sales of static homes, as we discover when we speak to the owners.
The Treasury’s assessment of the impact of introducing the VAT is that there would be a 30% reduction in sales. When we think about the employers in the various constituencies in Hull, in my constituency and in those of my right hon. Friends the Members for Haltemprice and Howden (Mr Davis) and for East Yorkshire (Mr Knight), we find that so many companies are
involved. More than 90% of the production of static caravans in the UK is concentrated in east Yorkshire and, as has just been said, so successful is this industry in the UK that nearly all the caravans that are bought and installed in the UK are built there. So my constituency has a great concentration of all those who may suffer from a 30% reduction in demand—manufacturers and all the people who work in that area, suppliers, and the parks themselves.
Glyn Davies (Montgomeryshire, Conservative)
I associate myself with the concern that my hon. Friend is showing and that many of my constituents also show. Does he share my concern about the disruption around the introduction date that will be caused to the manufacturing side of the industry? Does he share my hope that in the intervening period Ministers will examine ways in which they can limit that disruption?
Graham Stuart (Beverley and Holderness, Conservative)
I am grateful to my hon. Friend for his intervention, but I am not looking for Ministers to limit that disruption; I am looking for them to remove that disruption altogether. However, he is right to mention the date. We are talking about a major manufacturing business. We are talking about businesses with 700 staff involved in tooling up, buying in the resources and planning their production, yet we are facing the introduction of this VAT on
Anne McIntosh (Thirsk and Malton, Conservative)
I have been listening very carefully to my hon. Friend. Is he concerned that, as in my constituency, the business plans for this year of businesses that have static caravans and want to increase their numbers will be completely in ruin?
Graham Stuart (Beverley and Holderness, Conservative)
My hon. Friend is right. We have heard examples of managing directors of companies being called in by their banks to talk about lending provision because of the threat and uncertainty that this measure brings. It will be extremely disruptive to a fantastic British manufacturing success story. Let me go through the process. The supply chain is in the UK. It is very much concentrated in east Yorkshire but hundreds of people are employed by suppliers elsewhere in Yorkshire and across the country.
Andrew Gwynne (Denton and Reddish, Labour)
The hon. Gentleman is making an eloquent case regarding the supply chain, which is indeed spread right across the United Kingdom. Let me draw to his attention the correspondence I have had from a company called Phantom Ltd, based in Reddish in my constituency, which supplies security and safety systems to the leisure market, including the caravan market. It says that the VAT increase could be “devastating” for its business and that its
“plans for expansion will be severely curtailed and new employment opportunities will be lost.”
Is that not the reality of these measures for the wider supply chain?
Graham Stuart (Beverley and Holderness, Conservative)
I fear that the hon. Gentleman may be right.
As I was saying, there is the supply chain and manufacturers, all of which are UK-based, then there is the sales channel and the deployment of the end product. Where? That is in rural and often coastal areas and areas with low incomes all over the country. What is the effect? It is to bring people, once they have made the capital investment in a caravan, to visit those areas week in, week out, bringing all sorts of economic benefits to areas that otherwise do not have a lot of industry to fall back on. When one looks at the industry in the round like that, one sees that it is special. Perhaps everybody says that, but we must consider how successful it is and who it serves. I have not even got to the point about who will be affected. We are talking about people who want to make a purchase of a home for about £30,000, not people who can switch easily to making a bricks-and-mortar purchase. When the tax-dodging, socialist, multi-millionaire candidate for the London mayoralty goes off to console himself by buying a cottage, he will not have to pay VAT, but when hard-working, decent people who like to pay their taxes go to get a slice of the decent life and have a stake in the countryside they will find that the caravan they want to buy at £30,000 now costs £36,000.
Alan Reid (Argyll and Bute, Liberal Democrat)
The hon. Gentleman is making his case eloquently. In my area, which is a large, rural, coastal area, there is a large number of caravan sites, which bring a lot of money into the local economy. He is right that this measure will affect large parts of the country. I fully support him in his new clause and I hope that the Government will have second thoughts.
Andrew George (St Ives, Liberal Democrat)
I, too, have put my name to the new clause. Is the hon. Gentleman aware of the anomaly in areas such as mine where there is a planning restriction on occupancy where static caravans exist, making them ideal for people who want to use them for holiday homes? Under the measure, static bricks-and-mortar constructions will not be subject to the same level of taxation, so the measure will benefit those who can afford to have a second home and will therefore have an impact on the availability of housing for local people, whereas the presence of static caravans does not impact on the local community in the same way.
Graham Stuart (Beverley and Holderness, Conservative)
My hon. Friend is quite right. That is why Albert Owen has a fair point. Some people will be able to afford permanent housing, thereby further pressurising the housing market in areas where such housing is limited. Static caravan parks have been a perfect arrangement, because they allow both the local community and people from outside to benefit. They have meant that the local worker who is looking for a house—often someone who works at a caravan park—has been better able to find a house.
Chris Bryant (Rhondda, Labour)
I hope the hon. Gentleman will accept that in some cases people will not be making choices but will have absolutely no choice. In my mother’s case when everything had gone wrong in her life and the only
money she had was the money she was going to spend on a static home, the difference between £30,000 and £36,000 would have been the difference between homelessness and having a home.
Graham Stuart (Beverley and Holderness, Conservative)
I am grateful to the hon. Gentleman, although properly designated permanent homes will continue to be VAT-free. We are talking about static holiday homes that are not supposed to be a main residence, although there are people in my constituency and elsewhere who are occupying under false pretences, whether misled by the owner of the park, as sometimes happens, or having allowed themselves to be misled.
Nadhim Zahawi (Stratford-on-Avon, Conservative)
I am listening carefully to my hon. Friend. What would he say to a dealer and park operator in my constituency who said that we cannot defend the anomaly for what is deemed a luxury purchase? They want a bit more time for consultation and forward planning. The idea that a towable caravan is VATable, but a static one is not is indefensible.
Graham Stuart (Beverley and Holderness, Conservative)
In truth, if we were starting with a blank sheet the tax system would look nothing like it does today, but we are not starting with a blank sheet. We have an industry with the characteristics I have described, yet at this of all times we are about to introduce VAT. Will it raise £500 million or £1 billion towards the massive deficit left to us by Labour? No. At best, it will raise £45 million a year while damaging the economy in east Yorkshire and in rural areas across the UK. As a practical politician, keen though I am on tax simplification, it is not obvious to me that this particular simplification is justified now. It is not, and the Government should think again.
The Government are consulting; they accept that they do not have all the answers and the proposal is out for consultation. The shadow Chancellor may not take it at face value that the Government are serious and that they are consulting properly, but I do. I have met the Chancellor and he has told me that is the case, so I call on the Government to listen to the representations from the Chamber today and to those that will come from the industry over coming days and weeks, and to think again. Given the appalling inheritance from the shadow Chancellor, there is no embarrassment in looking hard at every area. There is a good intellectual case for the proposal in theory, but in practice it is a bad idea. It will not bring in enough money. It threatens many jobs and it should be rejected, as I am sure it will be.
Greg Knight (East Yorkshire, Conservative)
There is a lot to be said on the issue, so does my hon. Friend agree that the Government would be wise to extend the consultation period?
Graham Stuart (Beverley and Holderness, Conservative)
My right hon. Friend is right. Having secured from the Chancellor an absolute commitment that there will genuinely be consultation, I ask the Government to extend the period and allow us to make the strongest possible case. It will also allow us further to expand the coalition in the House. Ministers will be aware that there is strong feeling in the Committee today that the proposal should be reconsidered. I look for a sign that they recognise the strength of feeling in the Chamber. The proposal does not make economic
sense; we have not one but two enterprise zones in east Yorkshire. Why? It is because of the difficulties of unemployment in our area.
We have had great news. In all the years under the Labour Government when they spent so much money, did they reduce the tolls on the Humber bridge? No, they did not, but this Government have made the right decision. They are putting in commitment. This is a Budget for growth. It is a Budget that takes people out of tax. It is a Budget that reduces corporation tax. It is a Budget that will create employment in east Yorkshire, which is why we must make sure we get all the detail right. I am grateful that the Government are consulting. I recognise that it is a sign that they see room for manoeuvre. I want them to extend the consultation period and I look forward in due course to their finding other ways of dealing with the vast deficit left behind by the incompetents who sit on the Opposition Front Bench.
Dawn Primarolo (Deputy Speaker; Bristol South, Labour)
Order. A large number of Members wish to participate in this debate, which ends in one hour. I ask Members to make shorter speeches in order to accommodate their colleagues, so that the Minister can hear all the views. Interventions from now on must be short, or I will stop the Member from speaking at length on an intervention. I hope that helps the debate.
Karl Turner (Kingston upon Hull East, Labour)
I shall speak to new clause 6. I am delighted to follow Mr Stuart, although I disagree with some of the points that he makes.
This was certainly not a Budget for jobs and growth. For hon. Members on the Government Benches to make that point time and again, as they do, shows me and my constituents how out of touch they are. On the subject of VAT on static caravans, I have three manufacturers based in Hull East. One of them, Willerby’s, the biggest manufacturer, has 700 staff. I said in an earlier intervention that the firm had gone from a full working week to a three-and-a-half day week. The firm tells me that it is probably ridiculous to suggest that there is a possibility of returning to a full working week if the proposed VAT is implemented on
I want to address the question of whether there really is an anomaly. I do not think there is. I do not think people buy static caravans for the same reasons that they buy trailer caravans. A static caravan is often a second home, but if I accept that there is an anomaly, surely there should be time for a proper consultation and an opportunity for people to think about the impact on their businesses and jobs. It is the wrong time, while the economy is flatlining, to try to deal with an anomaly, if that is what it is. We need jobs and growth in this country. We do not need a savage attack on manufacturing industry.
Helen Goodman (Bishop Auckland, Labour)
Does my hon. Friend agree that a Budget which increases taxes on static caravans and pasties, but cuts taxes on ski lifts tells us far more about the consumption patterns of those on the Government Front Bench than anything else? The Chancellor said he has never eaten a pasty. Has my hon. Friend found out whether the Chancellor has ever stayed in a caravan?
Karl Turner (Kingston upon Hull East, Labour)
My hon. Friend makes an excellent point.
The Government’s impact assessment suggests that sales will drop by 30% as a result of VAT on static caravans. That would be disastrous for the static caravan manufacturing industry in Hull. I appeal to the Government to listen to the representations that have been made from both the Opposition and the Government Benches and to think again. The measure will be disastrous for that industry.
Stephen Gilbert (St Austell and Newquay, Liberal Democrat)
I shall speak to new clause 5, in my name and the names of all Cornish MPs. We have a Cornish coalition moving forward to try to protect the Cornish pasty. The proposals from the Government are, I fear, unfair and unworkable and will be bad for the economy of Cornwall.
Let us consider the economic impact first. Cornwall is already an extremely disadvantaged part of the United Kingdom, being the only part that qualifies for convergence funding, yet the 86 million pasties that are produced contribute £37 million directly to the Cornish economy, and the 40 Cornish Pasty Association members turn over £150 million a year.
Sheryll Murray (South East Cornwall, Conservative)
Does my hon. Friend agree that the small bakeries in our town centres and villages are keeping or helping to keep those town centres and villages alive? This measure could push them beyond economic viability.
Stephen Gilbert (St Austell and Newquay, Liberal Democrat)
My hon. Friend makes an entirely relevant point. Some 2,000 people in Cornwall are employed directly in the production of the 84 million pasties a year and that 2,000 does not count the many scores of others who work in bakeries on the high streets of many towns across Cornwall.
We know from YouGov research that 32% of people said that they would stop buying pasties altogether if the VAT extension went forward. Let us assume that one in three is too high a number and that there is a 20% fall in sales. What will that mean? The Cornish pasty producers will lose £30 million a year, £7.5 million will be lost in secondary spend in the Cornish economy and 400 jobs will be lost directly in the industry.
Alison Seabeck (Plymouth, Moor View, Labour)
The hon. Gentleman will appreciate that we also have a pasty industry in Devon. He is talking about job losses and I have already come across workers for pasty companies in Cornwall who live in Plymouth and who are already on a three-day week. It is already having an impact and it will get much worse.
Stephen Gilbert (St Austell and Newquay, Liberal Democrat)
The hon. Lady makes an accurate point. Pasty producers tell me that they are already feeling the squeeze. They are feeling the same pressures as us all through fuel costs and so on. They simply do not feel that they can reduce the net price and therefore absorb that extra 20% so there are serious concerns that it will add problems to an already damaged industry.
The Government’s change is supposed to be about simplification and replacing the subjective test of the purpose of selling the pasty under the current VAT rules with a much simpler test, but in fact we are only replacing one set of anomalies with another. VAT will
be charged if the pasty is bought hot but not if it is bought cold. Will we have an army of HMRC inspectors going around with their standard issue thermometers and testing pasties?
Nadhim Zahawi (Stratford-on-Avon, Conservative)
In my constituency, the Subway franchisee sells cold sandwiches without VAT and must charge VAT when the sandwiches are heated. Spudulike has to charge VAT. The idea that when one serves hot food one has to charge VAT—even in the chip shop in Stratford—is only about levelling the playing field—
Dawn Primarolo (Deputy Speaker; Bristol South, Labour)
Order. That is not brief enough and interventions should ask a question.
Stephen Gilbert (St Austell and Newquay, Liberal Democrat)
I understand the point that my hon. Friend is trying to make, but there is a big difference between eating cold fish and chips, which would not be very pleasant, and eating a cold pasty, which, when it is a good pasty, can be enjoyable. My hon. Friend will also see in the amendment paper that I have not tried to oppose any simplification in this area. I have tried to be helpful to the Government by suggesting that no VAT should be charged on products when no effort is made to keep the product warm. By phrasing it in that way, my intention was to encourage the Government to think again about whether we can achieve the aim of hitting the sale of rotisserie chickens while keeping an exemption for baked products. Perhaps when he sums up, the Minister will be able to tell me that he has considered my suggestion and that there are some good reasons why he would agree with me, but I doubt it.
This unfair tax unfortunately plays to the perception that some Government Members do not understand what day-to-day life is like for millions of people in our country. It plays to the perception that an attack is being made on quite an iconic Cornish dish. This is not just about the Cornish pasty, but about the meat and potato pie of my hon. Friends in the north and, as we heard from the Opposition spokesperson, the Scottish bridie. I simply think that the Government do not understand that millions of people eat those every day as part of their routine. We need to reconsider whether we have the balance right.
When my right hon. Friend the Chancellor visited Cornwall in 2008, he said:
“Cornwall is having a tough time with the economy and businesses are finding it hard. There are things that the Conservatives can do.”
I am desperately proud to be part of a coalition Government who have introduced a local enterprise partnership in Cornwall, produced an enterprise zone in Newquay, taken 19,000 Cornish people out of income tax, delivered a council tax freeze and made sure that Cornwall is the first part of the country to have access along its entire length to superfast broadband, but, when my right hon. Friend the Chancellor says that there are things that the Conservatives can do, I ask, please, that this is one thing that the coalition Government do not do. I shall request a separate Division on new clause 5.
Ben Bradshaw (Exeter, Labour)
I rise to support new clause 7 in my name and those of several other right hon. and hon. Members.
The upkeep of our beautiful and historic buildings is vital to the preservation of Britain’s unique cultural heritage, and it is often done, particularly in the case of churches, thanks to tireless fundraising by volunteers. Raising VAT from 0% to 20% on alterations to our churches and other historic buildings, at the same time as the Government are making fundraising harder with their cap on philanthropy, represents a double whammy to our heritage sector and a dreadful blow to our historic churches—and cathedrals, in particular.
Our great churches and cathedrals are not just historic piles of bricks and mortar or even just places of worship for the few. They are among our most important tourist attractions, bringing thousands of overseas visitors to Britain every year, and well-run major churches and cathedrals, such as the stunning cathedral in Exeter, open their doors constantly to the local community and provide a vital public service. They are our greatest physical symbol of the big society.
I can think of countless occasions in Exeter—for example, a service of thanks for the work of the Royal Marines in Afghanistan, or a funeral for a local teenager tragically murdered—when the cathedral has been packed to the rafters with local people in celebration or in grief. It is a unique service not provided by any other institution.
Nicholas Soames (Mid Sussex, Conservative)
I wholly support the point that the right hon. Gentleman is making, and does he agree with me that the issue is about not just cathedrals, but small village churches with, in many cases, small congregations, who go to great efforts to raise large sums of money to make their facilities more usable for the rest of the community? Does he agree also that the proposed change is a pretty poor advertisement for the big society?
Ben Bradshaw (Exeter, Labour)
I absolutely agree.
The Government, in their consultation document, claim that the impact of the change on churches will be small, but that is not the case. Some 45% of grade I listed buildings in England are maintained by the Church of England, including 42 cathedrals. Their upkeep is incredibly expensive, and there are no central funds available for building maintenance.
A very large proportion of the alterations made to churches are about making them easier for the community to use, including, for example, installing disabled toilets, kitchens and so on, but the charge will also hit traditional skills and crafts, such as bell hanging and organ building. About £100 million is spent on those works annually, and imposing 20% VAT on them will add £20 million a year to those bills. In reality, much of the work will simply stop, and that will hit local churches, local communities and the building trade—and it will not raise a single extra penny for the Treasury.
The Prime Minister said earlier today at Prime Minister’s questions that the Government would be giving churches the money that they need to make up the loss, but that is also not the case. The compensation being offered in the Budget by extending the listed places of worship grant scheme, which currently refunds the VAT liable on repairs, is a wholly inadequate way to meet the extra cost that the VAT rise will create.
The Government have already cut the listed places of worship grant scheme by a massive two thirds, from £23 million to £7 million a year, and it already covers less than half the cost of current repairs.
Jonathan Ashworth (Leicester South, Labour)
I am grateful to my right hon. Friend for giving way, and I suppose I should declare an interest as a patron of the St Peter’s project in my constituency, where we are trying to raise funds to make much-needed alterations and renovations to St Peter’s church in Highfields. There are already considerable pressures on the listed places of worship grant scheme, which is a very good scheme, but one problem with it is that when a church applies to it there is no certainty about the amount of grant that it will receive. Now that this change is being made, those pressures are only going to increase.
Ben Bradshaw (Exeter, Labour)
My hon. Friend is exactly right. As I said, the grant already covers only less than half of the cost of repairs, and the £5 million that is being offered to extend it to alterations covers only a quarter of the likely annual cost of those alterations.
A number of churches and cathedrals have already put on hold schemes that were planned or under way. My own cathedral in Exeter faces having to raise several hundred thousand pounds more for its exciting cloister project. The wife of the dean of Wakefield cathedral, which faces an extra £200,000 of costs for alterations, has famously composed a protest song about the VAT hike. The lovely little church in the small Herefordshire village of Llangarron, at which I attended Easter Eucharist, will have to find an extra £60,000 for a project that has been in the pipeline for seven years.
As 26 deans of cathedrals wrote in an unprecedented letter to The Sunday Times on Sunday, this change will seriously jeopardise the sustainability of many of our great buildings, not only for present-day use but for that of future generations. I urge the Government to think again on this very important matter, and I hope, Ms Primarolo, that you will help to facilitate the expression of the will of the House on it shortly.
David Davis (Haltemprice and Howden, Conservative)
I want to associate myself with the comments made by my right hon. Friend Mr Knight, by my hon. Friend Mr Stuart, and by my right hon. Friend Alan Johnson; I embarrass him again by calling him that. The proposal for VAT on static caravans will have a seriously deleterious effect on all of east Yorkshire, including Hull, dramatically cutting employment in the area at a time when we are trying to encourage growth and to balance the books. This proposal will do neither; in fact, it will reverse both.
This is a Finance Bill; the aim is to raise money. The latest estimates of the employment impact of this measure are that it will result in 4,000 to 7,500 job losses, of which 1,500 to 2,000 will be in the vicinity of our constituencies. The effect of that in financial terms is pretty straightforward to calculate. The Government estimate that they will raise £30 million to £40 million in VAT from this change. They will lose between £32 million and £65 million in lost national insurance, lost inland revenue, and extra welfare costs. It will therefore do the opposite of what the Budget is attempting to do. When I put that point to the Treasury, people said to me: “We don’t calculate things in that way.” That might sound silly, but there is a substantive point behind it—as I am sure that the shadow Chancellor, who is smiling, will
know. Usually when one introduces a tax change that leads to job losses, people will, in due course, find another job. In east Yorkshire, two of the three Hull seats have dramatically high unemployment levels already, and the ratio of jobs available to unemployed people seeking them is one of the highest in the country. As a result, the resulting unemployment will not be short term but is likely to last for more than five years. We should calculate the effects of the proposal in this way because, for the foreseeable future, it will cost more than it will raise.
Diana Johnson (Kingston upon Hull North, Labour)
The right hon. Gentleman is making an excellent speech. Has he seen today’s report that 43 people in my constituency are chasing every vacancy? I set that figure alongside the comments that he is making.
David Davis (Haltemprice and Howden, Conservative)
The hon. Lady makes a powerful point that I am not unfamiliar with. We have all been in similar battles over job losses at BAE in Brough and, in my constituency, job losses to the tune of 1,700 have been announced in the past six months.
This proposal does not stand up, on the Government’s own criteria. Accordingly, I support new clause 6 and will vote for it when it is put to the test.
Albert Owen (Ynys Môn, Labour)
It is a pleasure to follow Mr Davis. Although I agree with the contributions of Members on both sides of the House on the pasty tax and the church buildings tax, I will concentrate on the caravan issue.
As has been said eloquently by the previous speaker and my right hon. Friend Alan Johnson, the exemption was put in place for good reason. It has been left as it is because previous Chancellors have understood its importance, not only to manufacturing but to tourism. Those two important industries will be damaged if this proposal goes forward. I do not have the confidence of some Members who have spoken that the Chancellor will extend the consultation and that all things will be rosy. The effect of the proposal will be catastrophic for tourism across the United Kingdom.
Alex Cunningham (Stockton North, Labour)
Chris and Helen Brown set up the Drovers Way holiday caravan park in my constituency just two years ago to diversify their farming business. They have an exciting business model, but they tell me that the VAT proposal will kill their business and put them out of work. What message does the Chancellor have for people like them?
Albert Owen (Ynys Môn, Labour)
My hon. Friend is absolutely right. The people who have contacted me on this issue are not natural Labour supporters, but business entrepreneurs. The Government have said on numerous occasions that they want to encourage aspiration and to help entrepreneurs and those who want to take risks in business. Those are the very people who will be damaged by this proposal.
Chris Ruane (Vale of Clwyd, Labour)
Does my hon. Friend agree that the problem relates not only to static caravans, but to mobile caravans? A company called Fifth Wheel in my constituency has just invested £1 million in the manufacture of mobile caravans. It has won
10 awards from the Caravan Club of Great Britain in the past 10 years and two awards from the
. Its legs have been knocked from underneath it by a tax that has been foisted on it without any consultation.
Albert Owen (Ynys Môn, Labour)
I am grateful to my hon. Friend for making that point. I am referring specifically to static caravans, but he is right to say that this important industry includes mobile caravans.
A business that employs many hundreds of people across the United Kingdom, including in my constituency, wrote to me to say that 60% of its turnover comes from the sale of caravans. The proposal will be a huge knock to such companies.
Because of the time, I shall keep my remarks brief, but I want to raise one issue that has also been referred to by Andrew George. It will predominantly be the young people who work in this industry who will lose their jobs as a consequence of the proposal. Young people face many pressures in rural areas, especially in finding work and finding a home. Many people get a mobile home in such areas because they aspire to have a second home. They then rent it out to other people when they are not using it, which contributes to the local economy. However, in deprived areas where property prices are low, those people may transfer—because they want to come to beautiful places such as the Isle of Anglesey—
Albert Owen (Ynys Môn, Labour)
I will not give way again; I have already given way twice and I want to finish my point.
People who visit places such as the Isle of Anglesey, which I represent, want to go to them regularly. They will therefore buy terraced houses or properties at the lower end of the market and force up the prices of those properties. That will put pressure on affordable housing. I do not think that that is an issue that the Treasury has taken on board.
This exemption is not an anomaly, but is meant to help the industry. If that industry suffers, many people in the tourism and manufacturing industries across the United Kingdom will suffer. We have seen headlines about the granny tax, the pasty tax and the charity tax, but this proposal is an Osborne tax. It was made in No. 11 and will have consequences across the United Kingdom. Tonight, Members on both sides of the House have the opportunity to vote it down. That is the strongest and clearest message that we can send the Chancellor of the Exchequer and his lieutenant. That is true not only of the caravan tax but of the pasty tax, which I will also vote against if there is an opportunity to do so tonight. Let us be consistent. The caravan tax will not raise extra revenue for the Treasury, but it will damage jobs, entrepreneurs, coastal areas of beauty that rely on tourism and areas that rely on the manufacturing of caravans.
Gordon Henderson (Sittingbourne and Sheppey, Conservative)
I should like to draw to the Government’s attention a couple of anomalies in the VAT rules that they have created with their Budget proposals. That is quite ironic considering that the reason that Ministers have given for their proposals to change the current VAT rates for pies, pasties and caravans is to iron out such anomalies.
I start with hot food. The Government propose to amend note 3 in the existing legislation so that
“the current test for ‘hot takeaway food’ which is based on the purposes for which food is heated becomes a simpler and more objective test based on whether the food is above ambient air temperature at the time it is provided to the customer.”
That suggestion is nonsense, and I will explain why.
I have in my constituency a baker who has a very small shop in which he bakes bread, pies and pasties. He takes his baked products out of his ovens and lets them cool in his glass-covered but unheated serving counter. My constituent, being a good citizen, starts baking his products at 5.30 in the morning, so by the time he opens at 9 o’clock his products are cold before he sells them to his customers. Sometimes his customers want a hot pie, so my baker friend has a microwave oven that he uses to heat up their pie. He then religiously—I have seen him do it—records that the sale of that pie is subject to VAT.
However, when he is busy, my baker friend has to bake a second batch of pies to replenish his stock. If he is really busy, his customers snap up those pies before they have time to cool down. Under the existing regulations, my baker friend does not have to charge VAT on that batch of pies, but it is unclear whether he will have to do so under the new regulations. To be honest, my advice to him was to carry on operating exactly as he does now, but it would be good if the Exchequer Secretary could clarify exactly what his new proposal actually means.
The Exchequer Secretary might also like to explain what is meant by “ambient temperature”, because that is where the new regulations threaten to cause anomalies. For instance, the ambient temperature in my baker friend’s shop is very hot, because his shop is so small that the ovens heat it up. Because he has no air conditioning, the temperature in his shop is even hotter in the summer. Further along the high street, there is a branch of a national chain of bakers, which is larger and air-conditioned, so the ambient temperature there is much lower. That means that under the new rules, one shop in my high street will be able to serve pies at a higher temperature than another without charging VAT. The new rules also mean that both shops can serve hotter pies without charging VAT in the summer than in the winter, when the ambient temperature is much lower. If that is not an anomaly, I do not know what is.
How will the proposed regulation be monitored? Are we going to see hordes of VAT inspectors armed with thermometers swooping down on bakers’ customers as they leave the shop and sticking their thermometers in their pies to see whether they are hotter than the ambient temperature?
Mark Garnier (Wyre Forest, Conservative)
My hon. Friend may be interested to hear that the written evidence given to the Treasury Committee by the Institute of Chartered Accountants in England and Wales states that these VAT changes are broadly sensible reforms
“but will still leave plenty of anomalies”.
Gordon Henderson (Sittingbourne and Sheppey, Conservative)
I can only agree with it.
I accept that there is an argument for trying to address the current situation whereby some shops sell hot pies without charging VAT but others, such as my
local chippy, have to charge VAT on the hot pies that they sell. However, the Government’s proposal is not an answer. Nor, sadly, is the Opposition’s new clause 1, which is why I cannot support it. I very much hope that Owen Smith will withdraw it, and that he and his colleagues will support new clause 5, which I believe would achieve the Government’s objectives while protecting businesses such as that run by my friend.
Andrew George (St Ives, Liberal Democrat)
I am pleased that the hon. Gentleman will be supporting new clause 5. As he knows, no one eats fish and chips cold, but a lot of people eat a good pasty cold. In fact, they are delicious cold. A lot of people go to the many pasty bakers in my constituency, buy pasties hot, take them home, put them in the freezer and use them later. The Government’s proposal clearly does not address that type of consumption.
Gordon Henderson (Sittingbourne and Sheppey, Conservative)
I am pleased that the hon. Gentleman agrees with me that that proposal is nonsense, but I want to move on to caravans, which are important to my constituency.
The Government’s proposal is allegedly to iron out an anomaly by ensuring that the sales of holiday and leisure caravans are taxed consistently at the standard rate, but once again, it simply creates another anomaly, which I will describe in a moment.
The proposal must be one of the most ill-conceived and badly thought out of all the proposals in this year’s Budget. We have been told consistently that the Government want to help coastal communities, which have become increasingly deprived over the past couple of decades, and which often have a higher level of unemployment than other areas. The Isle of Sheppey in my constituency is one such coastal community. As I have mentioned in the House on a number of occasions, unemployment on the Isle of Sheppey is among the highest in the south-east of England. The island took another knock earlier this year when Thamesteel went into administration. To give them their due, both the Department for Business, Innovation and Skills and the Department for Communities and Local Government have been working hard with my local authorities to find ways of mitigating the closure of Thamesteel by encouraging the growth of other industries, but one of those industries is the tourism and holiday industry, which has declined over the past 40 years, since its ’60s heyday.
In recent months, we have seen the green shoots of recovery in our local tourism scene, boosted in part by the decision of Swale borough council to allow many caravan parks to extend their operating periods from eight to 10 months of the year. That decision gave caravan park owners a real incentive to invest in and upgrade their parks, but success in the caravan holiday business is reliant on a good mix of park-owned caravans for hire and pitches for owner-occupiers. The sale of holiday caravans will be very badly hit if they incur VAT at 20%, and, in turn, the park-owned business will be hit because operators will have to increase their hire charges to balance their books, driving away even more much-needed visitors.
Let us not forget that those visitors are not wealthy people; in the main, they are working class people who strive for a better life by having their own holiday home here in Britain. In my view, the policy has been dreamt
up by somebody who has never holidayed in a caravan park, has no idea of how the holiday park business operates and has no conception of the disastrous effect the policy will have on many coastal and rural communities.
It is deeply ironic that the Government are striving to give coastal communities help up the ladder of prosperity while using their feet to kick away the very same ladder with this ill-thought-out proposal. I urge hon. Members to support new clause 6.
Dawn Primarolo (Deputy Speaker; Bristol South, Labour)
Order. May I just let Members who wish to speak know that I need to give the Minister time to reply to the debate and intend to call him at 7.40 pm? Hon. Members might therefore want to make their remarks slightly shorter.
Gordon Marsden (Blackpool South, Labour)
I wish to speak principally to new clause 7, but, in passing, I associate myself with the remarks of Gordon Henderson, particularly on seaside and coastal towns. I have received a letter on precisely those issues from my holiday village, Martin Mere, in Blackpool, which has caravan sites as well as wonderful beaches.
My right hon. Friend Mr Bradshaw eloquently described the broader issue. I do not want to dwell on the architectural glories of churches, but in my constituency, churches and places of worship have done immensely valuable work in adapting their buildings for community and voluntary sector use. That is why I was mystified when I raised the issue in Prime Minister’s questions today. He had a bizarre brief on swimming pools in Tudor houses. We do not have many swimming pools in Tudor houses in Blackpool, but we have many of the churches and places of worship to which I referred. Incidentally, although it will suffer massively from this proposal, this is not just an issue for the Church of England. Many of the reformed and independent Churches, the Roman Catholic Church and other denominations and religions also do immensely valuable work.
Alan Beith (Berwick-upon-Tweed, Liberal Democrat)
I declare an interest as chairman of the Historic Chapels Trust, which is restoring a Catholic church in Blackpool. Does the hon. Gentleman recognise that when alterations were taxed differently from repairs there was a perverse incentive to alter rather than merely repair, but that the Government could help a lot if they were prepared to put more money into the fund that churches can use to bypass VAT?
Gordon Marsden (Blackpool South, Labour)
I thank the right hon. Gentleman for that intervention and I pay tribute to his work as chairman of the Historic Chapels Trust. I can only say, however, that I know of no examples in Blackpool where such a process has been the driver. The driver in Blackpool has been to make churches, such as the town centre church, St John’s church, and Holy Trinity church in South Shore, accessible for community meetings and so on. As has rightly been said, this is the big society in action.
Blackpool also has a Salvation Army citadel. It does an immense amount of good work, not least with the homeless community. If it wants to make alterations to its buildings to expand the outreach services and community use it currently offers, it will, as a result of this proposal, face a whopping 20% extra in VAT on any building or alteration work. That is a recipe for stopping all that good work nationwide. As I indicated to the Prime Minister earlier, that is shooting the big society in the foot. It is an absolute nonsense.
My right hon. Friend the Member for Exeter referred to the listed places of worship grant scheme. I deplore Ministers’ attempt to cloud the issue by saying that they have thrown £5 million into the pot for the grant scheme. Treasury Ministers and the Secretary of State for Culture, Olympics, Media and Sport are perfectly aware that that will not address the issue, in any shape or form, of the losses that will be made under this process.
Peter Bottomley (Worthing West, Conservative)
Would it be appropriate for the Minister to say whether the Government consulted the Churches’ Legislation Advisory Service and whether they were aware that the Churches were responsible for nearly half the grade I listed buildings that this proposal will affect?
Gordon Marsden (Blackpool South, Labour)
It would be absolutely appropriate, not least because there seems to have been scant consultation with any of the Churches or other religious groups or places of worship on this issue. Perhaps the Government would like to start taking notice of the e-petition on this issue, which already has more than 16,000 signatures. Anne Sloman, chair of the Church Buildings Council, wrote to the Chancellor last week stating:
“a very large proportion of the alterations to these buildings…are concerned with making these buildings viable for use by the wider community by installing meeting rooms, lavatories and kitchens. This is the Big Society in action. The imposition of 20 percent VAT…means…most of it will simply stop.”
In conclusion, this is a nonsensical policy. At the end of holy week, the Prime Minister piously talked about the Church in action, but at the same time he let this howler through in a Budget that he claimed to have read line by line. I appeal to the Treasury Front-Bench team, if it is worth appealing to them on this matter, to take notice of what is being said across the Committee. They ought to do a little more line-by-line consideration of this proposal’s perverse effects if they want to dissuade people from the general judgment often passed—possibly very cynically—that some officials and others in the Treasury do indeed know the price of everything and the value of nothing.
Nicholas Soames (Mid Sussex, Conservative)
I believe that there is a great deal in the Budget to applaud and support, but on this issue I wholly agree with Mr Marsden, who has just sat down, and Mr Bradshaw, who put it very well. I also know that my hon. Friend Tony Baldry has written a powerful letter about this matter.
I understand entirely the Chancellor’s desire to make it a reality of public policy that methods and amounts of taxation should be synchronised and brought together. However, there must sometimes be occasions in our
public life in this country when that is simply not possible, and that is the case when it comes to damaging the fabric of this country, which is what this VAT proposal will do. It will make things impossible for the churches and congregations the length and breadth of the land, and not just in the great cathedrals in the great cities, but in the small churches with small congregations, who, by the sweat of their brow, secure those buildings for the future. They make them the centre of their communities, the very places around which we on this side of the House—and, of course, those on the other side—want to bring to reality the whole concept of the big society.
Richard Graham (Gloucester, Conservative)
Does my right hon. Friend agree that the churches and the cathedrals across the land play a vital role in regeneration, growing the economy and tourism, and contribute to our community in a number of different ways, which makes it essential that the Treasury looks on VAT for alterations with great compassion?
Nicholas Soames (Mid Sussex, Conservative)
They do all those things, but they are also places that represent the spirit of England down the centuries. To trifle with them in this way is really not a sensible thing to do, either for the nation at the moment or for the future.
I beg the Treasury Minister to consider whether it would not be worth while laying this measure aside and considering how better it might be to come up with a different scheme. As the right hon. Member for Exeter said, the listed places of worship grant scheme could not possibly compensate for the kind of money involved in imposing a 20% VAT rate on alterations. I urge my hon. Friend the Minister to view this issue with great care, to pay attention and to understand the feelings in this House and elsewhere in the country among people who give of themselves to keep such places going. They mind very much indeed, and their views should be heard and considered.
Ian Lucas (Wrexham, Labour)
I wish to speak in support of new clause 2, which stands in my name. It deals with a long-standing campaign that I have undertaken alongside a charity in my constituency, Chariotts, which offers dial-a-ride-type services to disabled people and has been established for a number of years. It has become more and more successful, transporting people in wheelchairs and those with severe disabilities across the constituency.
The problem in recent years is that as the charity has grown, so has the likelihood of its becoming registrable for VAT in the near future. A VAT anomaly exists that is relevant to Chariotts, as well as other organisations across the country, which is that there is an exemption from VAT for public transport vehicles with 10 seats or more, but not for those with fewer than 10 seats. That means that a disabled passenger undertaking a journey in a small vehicle will have to pay VAT on the journey. When the charity becomes registrable, there will be a 20% increase for disabled passengers, which is extremely serious for individuals on fixed incomes.
I have raised this issue on many occasions in the Chamber, as well as with the Exchequer Secretary elsewhere. He told me in a written answer:
“No estimates have been made of the cost of extending this zero rate as long-standing formal agreements with our European partners prevent us from unilaterally extending the scope of our existing zero rates or introducing new zero rates.”—[Hansard, 28 November 2011; Vol. 536, c. 718W.]
That was quite a categorical no to extending the exemption, to go alongside the statement that European policy was preventing it from occurring. Imagine my astonishment, therefore, when I learned on Monday that the Budget introduces an exemption—a further VAT concession—for small cable-based transportation systems. Ski lifts and the like will benefit from a tax cut from 20% to 5%. There is to be a reduced rate of VAT for skiers on the piste. We have already heard about pasties and caravans. Now, for reasons that are unclear, the Government are giving a tax cut to people having a luxury holiday.
Alan Reid (Argyll and Bute, Liberal Democrat)
Skiing is an important industry in the highlands of Scotland, and I am delighted at this tax cut.
Ian Lucas (Wrexham, Labour)
I beg to differ. It will affect one particular sector. It is rather convenient that the Chief Secretary to the Treasury, who has Aviemore in his constituency, has been much more amenable to this tax cut than to a tax cut for disabled people not only in my constituency but in Skye, in the highlands of Scotland and right across the country. It is a disgrace that the Government said no to me when I asked for assistance for disabled people but then said yes to a request from the Chief Secretary to the Treasury, who has a major constituency interest. I want the Exchequer Secretary to tell the Committee how much this tax cut is going to cost the Treasury, and to undertake to look into the matter, for the benefit of disabled people and not of skiers.
Dawn Primarolo (Deputy Speaker; Bristol South, Labour)
Order. I remind Members that I will turn to the Minister at 7.40, which means that I will stop the Member who is making a contribution at that time.
Andrew Percy (Brigg and Goole, Conservative)
I rise to support the comments that have been made by my right hon. and hon. Friends from across East Yorkshire, who have outlined the terrible impact that the so-called caravan tax will have on the county. For the sake of brevity, I shall not repeat their arguments. Instead, I shall concentrate on a particular document that has caused me considerable alarm. It has also alarmed one of the park owners in my constituency. My constituency also covers part of Lincolnshire, which contains a large number of holiday parks that will be affected by the measure. The HMRC document that outlines a summary of the impacts says of the economic impact:
“This measure might lead to a small increase in the price of static caravans”.
Even I can do the maths on that one, even though my bank balance might suggest otherwise. Applying 20% VAT to the price of a static caravan is not a small increase; it is a considerable increase. One of my park owners told me that the manufacturers sell their units for an average price of £25,000. Doing the math, as the Americans would say, we discover that that will mean an increase of £5,000, which is not a small increase at all.
That same park owner also wanted me to pass on to Ministers a point that I thought we all understood—namely, that businesses make decisions based on the tax regime that is in place, and that they look forward and make those decisions for the many years ahead. Another of my constituents has invested £500,000 this winter to extend the number of pitches on a holiday park that currently has 450 pitches. He said that the tax change would make it almost impossible for him to continue to employ the same number of people that he does at present, or for that expansion, in a relatively depressed area, to go ahead. I urge colleagues across the House to vote tonight to save that industry.
Frank Dobson (Holborn and St Pancras, Labour)
As the chair of the all-party parliamentary group on historic places of worship, I have been approached by people from all over the country and asked to come out against the proposal to take away the zero VAT rating on alterations to listed places of worship. Such alterations include improved access for the disabled, the installation of toilets and small kitchens, the provision of better heating and lighting and the introduction of more energy-efficient measures. They are not just for the congregation; they are for the whole community. They encourage the community use of religious buildings and make an increasing contribution to attracting tourists all over the country. These church buildings are vital, whether they be vast edifices like York Minster, of which as a York lad I am immensely proud, or small parish churches all over the country. The Government need to look again at this silly, stupid, unprecedented and unconsulted-on proposal.
David Gauke (Exchequer Secretary, HM Treasury; South West Hertfordshire, Conservative)
We have had a thoughtful and impassioned debate this evening, and I am pleased to have the opportunity to set out the Government’s case for addressing some of the anomalies within the VAT system. In the time available, I will try to address as many points as possible, but I hope the House will forgive me if I do not take many interventions, so that I can cover as much ground as possible.
Let me begin with hot takeaway food. The current rules on the VATability of such food have been made complex and unfair by a patchwork of different legal decisions taken over the decades. The definition of hot takeaway food has been in place since 1984, and it applies to food that
“has been heated for the purposes of enabling it to be consumed at a temperature above ambient air temperature”
and that is
“above that temperature at the time it is provided to the customer”.
There have been repeated efforts since the 1980s, however, to chip away at this boundary. A number of businesses have argued in litigation that although the food they may provide to their customers is hot and is taken away, it should not be taxed as hot takeaway food, but should instead be zero-rated. Some have argued successfully that their intention was not to provide their customers with food to be eaten hot, but that they heated their food for other reasons instead—for hygiene reasons, or to finish the cooking process, or to provide evidence of freshness, or to create an aroma or to improve appearance, crispiness or texture.
David Gauke (Exchequer Secretary, HM Treasury; South West Hertfordshire, Conservative)
No. As I said, I am not going to give way very often.
Those arguments have not always been successful, but they have resulted in some businesses being able to secure VAT-free treatment for a range of hot products, such as hot rotisserie chickens, meat pies, pasties and panini. Other businesses, however, have continued to apply VAT to the similar hot-food products that they sell. They have accepted or the courts have ruled that their intention is to heat their food products so that their customers can eat them hot. Under the current rules, a small independent fish and chip shop will have to charge VAT on its hot chicken, but a major supermarket will argue that its rotisserie chickens are zero-rated. One baker who keeps his sausage rolls in a hot cabinet to provide his customers with a hot snack will charge tax, but the baker next door who keeps them hot and argues that the purpose is to maintain an appealing aroma will claim that they are zero-rated. The current rules mean that many customers simply do not know whether they are being charged VAT on their hot food because the treatment depends on the particular supplier’s purpose in heating the food. The new rules will ensure a level playing field, and we are removing the subjective element.
David Gauke (Exchequer Secretary, HM Treasury; South West Hertfordshire, Conservative)
Let me make a point about the arguments surrounding ambient temperature. This test has been in place since 1984. We do not expect staff to take detailed temperature readings every time they sell a pasty. HMRC will take a pragmatic approach, and provide businesses with guidance, taking into account the responses of businesses on how to implement the change. I have to point out that existing simplification schemes are already available to allow businesses to calculate their VAT liability by reference to a fixed percentage of their turnover without requiring staff to consider the temperature of every product sold. This is a pragmatic approach, already in existence.
David Gauke (Exchequer Secretary, HM Treasury; South West Hertfordshire, Conservative)
Let me deal now with listed buildings. There are some areas of confusion. The fact is that repairs and maintenance to all buildings, including listed buildings, have always been liable to VAT, while alterations to non-listed buildings have been since 1984.
David Gauke (Exchequer Secretary, HM Treasury; South West Hertfordshire, Conservative)
No, I really want to make some progress.
None of that has been changed by the Budget announcement. There is a borderline that causes confusion between repairs and alterations. The Budget decision also reflects the view that grants provide a more flexible mechanism than VAT for providing specific financial support for heritage—
David Gauke (Exchequer Secretary, HM Treasury; South West Hertfordshire, Conservative)
Well, I am about to make a point about it. We have increased the funding for the listed places of worship grant scheme and broadened its scope so that churches and other listed places of worship can claim grants to offset the impact of VAT on their alterations.
David Gauke (Exchequer Secretary, HM Treasury; South West Hertfordshire, Conservative)
Our original announcement of £5 million was based on a church report, but it is not set in stone. We are talking to churches, and if there is good evidence that more is needed, we will be happy to provide it.
David Gauke (Exchequer Secretary, HM Treasury; South West Hertfordshire, Conservative)
I will, very briefly.
Edward Leigh (Gainsborough, Conservative)
This is a key point. The Government have announced that they will increase the listed places of worship grant scheme by £5 million, but they have cut it from £23 million to £7 million, so that is totally inadequate. What we want tonight is a commitment from them that they will resolve the problem. Half the ancient buildings in this land are run by the Church of England, by ordinary people who want to support their local communities. The Government must compromise on this issue.
David Gauke (Exchequer Secretary, HM Treasury; South West Hertfordshire, Conservative)
I refer my hon. Friend to the comments that I made before his intervention.
Let me respond briefly to what was said by Ian Lucas. We are restricted in regard to what we can do for public transport. If we provided a reduced rate for passenger transport, we would not be able to focus it entirely on charities; it would apply more widely to taxis.
Taxing static holiday caravans and larger touring caravans will bring their treatment into line with that of other holiday accommodation. VAT is already paid on mobile caravans, camper vans, canal narrow boats and camping equipment. We therefore propose to replace the current definition of a zero-rated caravan, which is based on size, with a new definition based on whether the caravan is designed for residential use. We are considering applying British Standard 3632, and are also considering an additional test. However, I have received representations from, among others, my hon. Friend Mark Simmonds arguing against that, and we will examine those arguments closely.
David Gauke (Exchequer Secretary, HM Treasury; South West Hertfordshire, Conservative)
I cannot, because I have only about two minutes left, but my hon. Friend has expressed his views to me very strongly.
We have heard a number of forceful and impassioned arguments this evening. The Government think it right to address anomalies in the tax system, but some of the arguments that we have heard outside the House and some of the media commentaries have not been terribly well informed, and we want a proper, informed debate and consultation. I have heard the arguments in favour of extending the consultation period and I think that that is reasonable in the circumstances, so rather than closing the period on
it is right for us to address the anomalies. For example, those with static caravans and those who run park homes or caravan sites are registered for VAT, but can recover—
Graham Stuart (Beverley and Holderness, Conservative)
A two-week extension is not a large extension, but it is an extension none the less. However, the Government and the Chancellor must ensure that this is a genuine consultation. Ministers have heard what has been said tonight. They must think again, and reverse their proposal. If they say that they will do so, I shall be happy to take that at face value, but we do not want to see thousands of jobs in east Yorkshire axed as a result of this measure.
David Gauke (Exchequer Secretary, HM Treasury; South West Hertfordshire, Conservative)
My hon. Friend continues to make his case very strongly. We are, of course, listening to the arguments, but we think it right to have a VAT system that deals with some of the anomalies, and that is why we have finally addressed some of the problems that have remained in our VAT system for too long.
Cathy Jamieson (Kilmarnock and Loudoun, Labour)
At the outset of this debate there was a bit of laughing and joking, but the tone quickly changed as people realised the seriousness of the issue under discussion. The Minister’s contribution reminded me of the well-known phrase, “When you’re in a hole, you’d better stop digging”—particularly when Members on the Government Benches are looking so miserable.
I hope the Minister has listened to what has been said. In order to be helpful—and recognising that it was, perhaps, lack of attention to detail and unintended consequences, rather than malevolence, that prompted the Government to introduce these proposals, which would affect jobs and the economy—I beg to ask leave to withdraw the clause, but I shall press other new clauses in this group to a Division.
Clause, by leave, withdrawn.
Seven hours having elapsed since the commencement of p roceedings , the proceedings were int errupted (Programme Order,
The Chair put forthwith the Questions necessary for the disposal of the business to be concluded at that time (