Value Added Tax

Oral Answers to Questions — National Finance – in the House of Commons at 12:00 am on 4th March 1993.

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Photo of Mr Anthony Coombs Mr Anthony Coombs , Wyre Forest 12:00 am, 4th March 1993

To ask the Chancellor of t he Exchequer how many companies were registered for VAT in 1979 and at the most recent available date.

Photo of Stephen Dorrell Stephen Dorrell The Financial Secretary to the Treasury

At the end of 1979, 1.3 million businesses were registered for VAT. The latest figure available on a comparable basis is for the end of 1991, when the figure was 1·7 million businesses.

Photo of Mr Anthony Coombs Mr Anthony Coombs , Wyre Forest

Does my hon. Friend agree that those figures show the resilience and remarkable entrepreneurial vitality of British industry? Rover has not only experienced a significant increase in sales recently, but has shown a remarkably flexible attitude to its work force. In the past six weeks, shop-floor workers have sold no fewer than 3,000 cars. Is not such dynamism in stark contrast to the purveyors of doom and gloom on the Opposition Benches, who glory in talking down British industry?

Photo of Stephen Dorrell Stephen Dorrell The Financial Secretary to the Treasury

My hon. Friend is absolutely right, first, to draw attention to figures published today by the Society of Motor Manufacturers and Traders, which record that in the past three months motor sales were up by 7 per cent. on the previous three months and up by 16 per cent. on the same period last year and, secondly, to the fact that the mix of policies that the Government have pursued means that 31 per cent. more businesses are now registered and active than when we took office in 1979.

Photo of Alan Milburn Alan Milburn , Darlington

What is the Minister's message to the 4,737 firms in the north-east that were driven out of business last year as a result of his policies? Does he recognise that the initiative and hard work of people who run small businesses have been betrayed by his Government's broken promise of an economic recovery? When will he act to unlock the skills, potential and enterprise of British people instead of laying them to waste?

Photo of Stephen Dorrell Stephen Dorrell The Financial Secretary to the Treasury

Every insolvency is a tragedy for those involved. We clearly want to avoid that and to create circumstances in which the number of insolvencies is reduced. I should have hoped that, in presenting a balanced picture, the hon. Gentleman might at least pause to reflect that even in 1991, which was a year of business difficulty, substantially more businesses were created in Britain than in any year when the Labour party was in power in the 1970s.

Photo of Mr John Butcher Mr John Butcher , Coventry South West

May I persuade my hon. Friend to seek a special derogation from Brussels to raise the VAT threshold to £100,000, as the collection of VAT from a large number of small companies raises a small sum and incurs huge costs, whereas collecting from the bigger companies raises the bulk of the money at a small cost? This would do much for job creation at a time when we are looking for optimistic signs and recovery.

Photo of Stephen Dorrell Stephen Dorrell The Financial Secretary to the Treasury

My hon. Friend makes another interesting Budget representation. He has less than a fortnight to wait and see whether it will be acted on.

Photo of Paddy Tipping Paddy Tipping , Sherwood

To ask the Chancellor of the Exchequer what representations he has received about the VAT burden that charities face.

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

My right hon. Friend the Chancellor of the Exchequer has received a great number of representations on behalf of charities, as is normal before every Budget.

Photo of Paddy Tipping Paddy Tipping , Sherwood

In view of the strength of public concern reflected in the letters in Ministers' and hon. Members' postbags about the burden of value added tax on the Royal National Lifeboat Institution and other charities that perform services that would otherwise fall on public authorities, will the Minister give urgent consideration to ways of lifting that tax on voluntary effort?

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

Representing a coastal constituency myself, I am very conscious of the vital role and valour of the RNLI, but it already receives special tax treatment through zero rates on a number of purchases, including lifeboats and carriage equipment, and on the construction, repair and maintenance of slipways. That special treatment is worth about £3 million a year to the RNLI. As the hon. Gentleman will understand, I cannot, of course, comment further on any representations made before the Budget.

Photo of Mr John Hannam Mr John Hannam , Exeter

In receiving representations from the various charitable organisations about their VAT, has my hon. Friend taken on board the fact that, in providing valuable services across a range of activities, local authorities and commercial companies are able to recover VAT, whereas charities are not? Will he therefore consider the proposal for a VAT refund system for the services that they provide?

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

All representations are carefully considered before the Budget. Charities pay VAT on approximately one third of their expenditure, whereas the public pay it on about half. I do not think that my hon. Friend would want me to comment further today.

Photo of Mr Dafydd Wigley Mr Dafydd Wigley Leader and Party President, Plaid Cymru

May I support the pleas made on behalf of the lifeboat and disablement charities? The fact that charities pay VAT on a third of their expenditure is no excuse for not considering alleviating the entirety of the burden on such organisations. Will the Minister bear in mind the fact that this time of financial difficulty, when it is hard to raise money, is absolutely the wrong time for the burden of taxation to be carried by organisations that will probably bear more than their share of public responsibilities, especially when community care develops from April? Please will the Minister reconsider?

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

I hear clearly what the hon. Gentleman says, but perhaps he will allow me to make the point that since the Government took office, a series of measures have been introduced to encourage charitable giving and charities now enjoy tax relief in excess of £1 billion a year. We have a creditable record, but we shall consider representations.