Clause 66 — VAT: refunds to certain charities

Part of Bill Presented – in the House of Commons at 3:15 pm on 25th March 2015.

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Photo of Shabana Mahmood Shabana Mahmood Shadow Minister (Treasury) 3:15 pm, 25th March 2015

I will come on to what we announced yesterday, but we are not going to raise VAT. That is as clear as it gets, and the hon. Gentleman knows that.

I remind the Committee that VAT is the tax that hits everyone, with the same rate paid by the pensioner as by the millionaire. For many pensioners and those on the lowest incomes, it is the biggest tax that they pay. It is also the tax that hits people every single day, whether they are buying a cup of coffee or filling up the family car. Everybody does that every single day. The Government’s decision to raise the standard rate of VAT has, without doubt, hit the living standards of millions of people. According to the Treasury’s own figures, it has cost families an average of £1,800 over the past four years. That is no small trifling sum of money, even if it is averaged over four years.

As I heard from constituents across Birmingham when I was there with the shadow Chancellor yesterday, £1,800 has had a huge impact on their ability to make ends meet and to do the basic things in life—putting food on the table and keeping a roof over their families’ heads, desperately hoping they will not have to go to a food bank, even though they have a job, just to put food in the bellies of their children. That £1,800 is a significant sum of money and, coupled with the other facts of this Government’s record, such as wages being down by an average of £1,600 a year and the combined impact of tax and benefit changes, families are on average more than £1,000 a year worse off.

Those are significant sums of money and that is why I was proud to join the shadow Chancellor in Birmingham yesterday, when he made a crystal clear pledge to the British people that a Labour Government will not raise VAT or extend VAT to food, children’s clothes, books, newspapers and public transport fares. In their Budget, the Conservatives confirmed their intentions for extreme spending cuts in the next Parliament and we have heard about that in the debate this afternoon. We also know from the point made by my hon. Friend the shadow Chief Secretary to the Treasury that the Conservatives have made £10 billion-worth of unfunded tax promises. With five weeks left until the election, we are still waiting to hear how those promises on tax cuts will be paid for. I will happily give way to the Minister if he wants to shed some light on the matter, but he appears to be unwilling to intervene. That is a shame, because in his opening speech on this clause he talked with great flourish about credibility, credibility gaps and ensuring that people know what they are voting for. If people make an unfunded tax promise, their credibility will take a huge hit—and rightly so.

When the Chancellor of the Exchequer and the Prime Minister were in opposition, they were happy to talk up the fact that nobody believes an unfunded tax cut and they were absolutely right. Nobody believes them now. If they are going to deliver that we should at least hear how they will start paying for it. If they want to see off the charge that VAT will go up under the Tories if they win the next general election, regardless of what the Prime Minister said in questions today, they need to start answering some of the questions about the unfunded tax cuts that they have already promised.