Value Added Tax

Oral Answers to Questions — National Finance – in the House of Commons at 12:00 am on 18th April 1991.

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Photo of Mr Max Madden Mr Max Madden , Bradford West 12:00 am, 18th April 1991

To ask the Chancellor of the Exchequer if he will make it his policy not to extend the range of goods and services subject to value added tax.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

I have no plans to extend the range of goods and services subject to VAT.

Photo of Mr Max Madden Mr Max Madden , Bradford West

Bearing in mind the burden of VAT, which means that the average family now pays £19 a week in VAT, and the fact that many people on low incomes, including pensioners, are having to pay the full VAT increase to finance the £140 reduction in the poll tax yet will not receive the full reduction, will the Chancellor of the Exchequer give a firm assurance to all families with children that items that are currently zero-rated, especially children's shoes, will continue to be so after 1992?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

The hon. Member for Bolsover (Mr. Skinner) knows more about them than I do.

The hon. Member for Bradford, West (Mr. Madden) asked me to give an assurance and I have stated our policy. He will know that the extent of VAT is the subject of discussions within the European Community and the Council of Finance Ministers. We have made it clear that we regard the protection of zero rating as essential. Because basic necessities are exempt or zero-rated, we consider that it is right to make that switch in the Budget, which has been well received. It means that the poorest families will not suffer in any way.

Photo of Mr Keith Mans Mr Keith Mans , Wyre

Bearing in mind the comments of the Financial Secretary a moment ago, will my right hon. Friend confirm that he would be prepared to make concessions on the VAT paid by charities, were it not for the restrictions imposed by the EEC?

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

As my hon. Friend the Financial Secretary said, we already have many reliefs—worth up to £800 million—for charities. That must be contrasted with the £35 million additional burden that the Budget placed on charities. Every year, the Budget contains additional measures to help charities, just as it did this year.

Photo of Margaret Beckett Margaret Beckett Shadow Chief Secretary to the Treasury

Does the Chancellor recall saying last summer that the underlying rate of inflation was important because it left out the distortion of housing costs? Will not his VAT poll tax surcharge further increase an already worrying underlying rate? Does not that show two things? First, as last year, the Government are running risks with inflation and secondly, when the Prime Minister spoke of taking inflation by the throat, he meant that he was force feeding it.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

I should be interested to know whether the hon. Lady would reverse the VAT switch that we made in the Budget, because Labour has been extremely equivocal on that point. Inflationary pressures in the economy are measured by the underlying rate of inflation, producer prices, and the gross domestic product deflator. When one strips out one-off additions such as the VAT addition, it is clear that underlying as well as headline inflation continues to fall.

Photo of Mr John Watts Mr John Watts , Slough

Is my right hon. Friend aware of the considerable support for the maintenance of zero rating and for his policy of shifting part of the burden of local services from the local taxpayer to central taxation? Is he aware that there would be considerable support for taking that principle further, to avoid the need to reintroduce an unpopular property tax? If my right hon. Friend did that, he would share the credit for having taken part in the abolition of two unpopular taxes.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

The hon. Member for Bolsover (Mr. Skinner) seems to be obsessed with a certain subject— [Laughter.]

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. Let us return to the question.

Photo of Mr Norman Lamont Mr Norman Lamont , Kingston upon Thames

I am grateful for the support that my hon. Friend the Member for Slough (Mr. Watts) gives to the change that we made in the Budget, but he must wait for the local government finance proposals, which we shall announce shortly.