Increase of Value Added Tax

Part of Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 3 July 1979.

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Photo of Mr John Biffen Mr John Biffen , Oswestry 12:00, 3 July 1979

When I am trying to establish a degree of bipartisanship, under the benign eye of the hon. Member for Colne Valley (Mr. Wainwright), who always regretted that we did not have a more stable tax structure, I am in danger of inviting the wrath of two Yorkshire-men rather than one. I shall stick closely to my brief.

My hon. Friend the Member for Croydon, South (Mr. Clark) suggested that VAT could be used as a regulator tax to assist small businesses. I am sure that the Government will wish to consider the whole question of small businesses in the light of the Wilson report findings and to fashion a tax policy accordingly. Nothing that I can say this evening can anticipate what that tax policy will be.

VAT is the least suitable instrument for a regulatory device designed to produce certain desirable patterns of economic behaviour. I am glad to have the assent of the hon. Member for Batley and Morley (Mr. Woolmer), because I am sure that I shall need friends when adopting this line of argument.

The hon. Member for Colne Valley said that a 15 per cent. rate for VAT was not necessarily objectionable in itself. I was pleased to accept that. His only anxiety was that the Treasury had not adopted a holus-bolus, Liberal Party policy to sustain it. Perhaps that is where we shall end, but I have doubts.

The hon. Member made many interesting suggestions, but I am sure that he will agree that they should not make our task much easier. He will recognise that there is a genuine disagreement, but we believe that there is an overwhelming advantage in having a single positive rate of VAT and that the indirect rate of taxation must provide an increasing share of our total revenue.

I come to a more difficult hurdle to surmount, although I do not wish to underrate the hazards of the Liberal Party. I turn to the stony glare of the hon. Member for West Lothian (Mr. Dalyell), who asked me three questions. Two of them do not fall within the ambit of the Treasury. If any directives have to be issued to the oil companies about their methods of distribution, they will be issued under the Energy Act and be the responsibility of the Department of Energy. I shall ensure that the hon. Member's speech is drawn to the attention of my right hon. Friend the Secretary of State for Energy.

Provided that the retail trade is operating within the law there is no responsibility on the part of the Treasury for prices charged by a retail confectioner. The hon. Gentleman may wish to refer his comments to the Department of Trade as the matter is not within the bailiwick of the Treasury. The hon. Gentleman is right in believing that the use of the VAT system is a legitimate Treasury consideration when it has as its objective the promotion of either energy saving or recycling.

There are problems of definition of what constitutes recycling. I return to the point I adopted earlier in respect of my hon. Friend the Member for Croydon, South, when I said that I did not believe that VAT was the appropriate tax to deal with the sort of problems that the hon. Gentleman had in mind.

No doubt over the next few months there will be growing anxiety that all sectors of Government should address themselves to the central problem of energy conservation. Energy conservation is the most tangible short cut when trying to bring about a better balance in energy supply and demand. The Treasury, along with other Government Departments, will be deciding what action it thinks is appropriate. Value added tax is not likely to be used as a means of promoting that end.