Clause 3 — Rate of value added tax

Part of Bill Presented — Shared Parenting Orders Bill – in the House of Commons at 7:30 pm on 13th July 2010.

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Photo of Mark Durkan Mark Durkan Shadow SDLP Spokesperson (Foreign and Commonwealth Affairs), Shadow SDLP Spokesperson (Home Affairs), Shadow SDLP Spokesperson (Justice), Shadow SDLP Spokesperson (Treasury) 7:30 pm, 13th July 2010

I wish to speak to a number of the amendments, and the ground has been fairly well covered on many of them.

In an intervention I referred to the Treasury document "Tax Policy Making" that was published on the same day as the Budget. The Exchequer Secretary to the Treasury, who was with us and is back with us now, wrote the foreword, in which he said:

"I want a new approach to tax policy making; a more considered approach. Consultation on policy design and scrutiny of draft legislative proposals should be the cornerstones of this" system. Therefore, I am quite sure that he would be comfortable with all the hon. Members, including Andrew George, using the device of a Finance Bill to tease out many of these proposals and their implications.

I quoted from three key paragraphs of that paper on tax policy, which suggested that there should be more effective scrutiny of tax legislation, that a tailored tax impact assessment would replace the current regulatory impact assessment and that the Government would consider greater use of sunset clauses, or a trigger for an evaluation in legislation. Quite a number of the amendments propose sunset clauses, triggers for evaluation or impact assessments. On that basis, I would have thought that Ministers could accept amendments 55 and 22, tabled by the hon. Members for St Ives and for Nottingham East (Chris Leslie), which propose different sunset clauses.

The hon. Member for St Ives chose a two-year period for his sunset clause. I pointed out in an intervention that it just happened that two years was the period that the Government had used for their assessment of the impact of the tax changes on families and households. Two years is also, of course, the period of the public sector pay freeze, so if the public sector pay freeze is part of the emergency period and defines the emergency period of the Budget, surely there is a case to argue that if this is an emergency increase in VAT that has to be undertaken to get revenue in now, to help reduce the deficit, it should similarly be time-limited.

The colleague of Stephen Williams, spoke in a strange way-I do not quite know what this twilight zone rule is whereby the hon. Gentleman speaks not only as a Government MP but in some other role, not as a spokesperson for the party, but as someone who has been told to speak here for the party as Chair of some Back-Bench committee. No doubt when this twilight zone rule is worked out, we shall find out more. He was confident enough that because there would be Finance Bills every year, this measure would be subject to change and review, but that is not what the Chancellor told us in the Budget statement. In referring to the increase in VAT to 20%, he said:

"This single tax measure will by the end of this Parliament generate over £13 billion a year of extra revenues."-[ Hansard, 22 June 2010; Vol. 512, c. 177.]

There is nothing temporary about that, and nothing about being just for the next two years. Clearly, if the Government get this increase, it will be there to infinity and beyond.

Alec Shelbrooke argued that VAT is more progressive than income tax because only 50% of goods are subject to VAT. That is a completely new argument, even for the Tories. Of course, as other hon. Members have said, if people believe that the increase to 20% will reduce the deficit and be benign in its progressive impact, why stop at 20%? Why not continue much higher? That is the nonsense that we are being treated to.

Other amendments seek to make exemptions for children's necessities and other things. In an earlier intervention, my colleague, Sammy Wilson, said that all Governments should make much more selective use of the menu of VAT rates, which they could apply to certain services to help to stimulate construction and other sectors. All of us hoped that the Government would continue that in future, rather than just locking on to the relentless pursuit of keeping VAT high for now and for good.

The hon. Member for St Ives also questioned the difficulty caused by the fact that the Treasury and Whips tell Members that we cannot change part of the Budget because the whole thing is a package. After we heard the Budget statement, we debated a number of resolutions. Some Members voted for some of them and against others, and other Members abstained. Those resolutions are all different, and they must all be taken differently. This proposal comes to us in the form of a Finance Bill. Members have the right to seek amendments on specific measures because of their impact. Labour Front Benchers have tabled amendments that would require clear impact assessments before changes can come into effect. That is logically consistent with what the Government said in their paper, "Tax Policy Making: a new approach", so why should it not happen?

We have all spent the past year reeling from the impact on the credibility of politics and Parliament of the expenses scandal. During the debate, Members on both sides have traded points about the fact that there is a basic dishonesty and self-delusion and self-deception in some of the positions that are being adopted. It does nothing for the credibility of the political process when we can all point out the inconsistencies in one another's position. That just adds to the credibility deficit in the political process, whatever we say about trying to cope with the national deficit.

The Liberal Democrats have been asked about their position several times today. In fairness to the hon. Member for St Ives, who is publicly carrying his doubts, I should say that he has at least participated in the debate-everyone else has absconded-but we need to know, as Dr McCrea asked, when exactly was the moment of conversion. The Liberal Democrats have not undergone the only conversion; we now hear Tory Members seeing many merits in the measures in the Budget that they had previously denounced, rejected and campaigned against. We now have more Government Members on more roads to Damascus than does the Syrian bus fleet. At some point, they will have to tell us what caused that, other than just a conversation with the Governor of the Bank of England.

Jon Trickett referred to the Secretary of State for Business, Innovation and Skills, who, of course, told the House in the Budget debate that what changed him was a conservation he had with the Governor, who used the scary words, "sovereign debt crisis", which changed the right hon. Gentleman's mind. Of course, that is the same Governor of the Bank of England whom the right hon. Gentleman lampooned for a long time for telling us that there was no recession coming, when other people could see it coming and said so. After that magic conversation, policy changed completely.

However parties have got into this position, Parliament, particularly this House, which has a duty in relation to budgetary matters and Finance Bills, has a corporate duty to ensure that we scrutinise policies and assess their impact. The classic example, which was mentioned by Conservative and Liberal Democrat Members, existed in the last Parliament when the then Chancellor abolished the 10p tax rate. Many people said that that would have an adverse impact on the poor, but the then Chancellor said, "No, bunkum. That's not what the Treasury figures show." Many Labour Members were bamboozled into accepting that, simply because they were told that it was part of a package and that, if they voted against it, the whole thing would fall apart. However, those who said that it was wrong and challenged it were right, and they were vindicated and proved to be right. That was Parliament working properly.