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 Martin Smyth Martin Smyth , Belfast South 12:00 am, 18th April 1991

To ask the Chancellor of the Exchequer if he will publish any available information on the impact of the 2·5 per cent. value added tax increase on a low wage economy; and if he will make a statement.

Photo of John Maples John Maples The Economic Secretary to the Treasury

Any increase in the rate of VAT will bear less heavily on poorer households than on the better-off because of the extensive zero-rating of necessities.

Photo of Martin Smyth Martin Smyth , Belfast South

Does the Minister agree that, apart from growing unemployment, increased costs—I am thinking especially of clothing and telephone bills—will have an effect on people earning low wages and those on low fixed pensions?

Photo of John Maples John Maples The Economic Secretary to the Treasury

As the hon. Gentleman knows, the Budget increase in VAT was accompanied by a substantial reduction in the community charge. A married couple benefiting from that reduction would have to spend more than £13,000 a year on goods subject to VAT before being worse off. However far down the income scale one goes, one will find that people are better off because necessities are not subject to VAT.