Clause 66 — VAT: refunds to certain charities

Part of Bill Presented – in the House of Commons at 3:45 pm on 25th March 2015.

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Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian 3:45 pm, 25th March 2015

My hon. Friend has been doing this job much longer than me, so I suppose he has earned the right to be more cynical. I am still flush with the newness of this change of role in my life, and I would like to think that that was not the Government’s intention, but I shall bow to his longer service in this place and more expert analysis.

It was interesting to hear the Financial Secretary speak about the role that VAT had played in the Government’s short-term failed economic plan over the last five years. He talked about the mess the previous Labour Government left, but the economy was growing when we left office, and, as other hon. Members have said, part of the reason it reversed was the increase in VAT, which stifled confidence and the spending power of many in our communities. I would also like to hear from a Government Member whether a great deal of the deficit resulted from the decision by the then Chancellor, my right hon. Friend Mr Darling, to bail out the banks. Would Government Members have bailed out the banks, or do they think we should have left them to fail? Is anyone going to jump up? Anyone? No, they are all hypnotised, it would appear, and unable to respond. Bailing out the banks was the responsible thing to do. It might have seemed unfair, but it was important to people in my constituency that when they went to the ATMs the next day they could still draw out their wages.

The Financial Secretary talked about the Government’s sustained economic growth agenda. I do not remember sustained economic growth following the increase in VAT. I seem to remember the worst recession that this country has ever had, following that intervention by the Government. That has hurt people in my communities and, I am sure, in communities right across the country.

I urge the Government to think about the proposal put forward by my Front-Bench team because it is really important to understand how VAT interacts and impacts in various situations. Is increasing VAT the best way of increasing income to the Treasury or does it have a negative impact because what happens is that people lose jobs and have less money to spend in the high streets? Many of the small communities in my East Lothian constituency have seen falls in profits, and many people with their own businesses needed tax credits, thus taking more money out of the Treasury. If their businesses had been doing better, they would have paid more into the Treasury. That is why it is so important to gain an understanding of the impact of VAT so that future Governments will be better informed.