HC Deb 16 April 1973 vol 855 cc18-20
15. Mr. Sydney Chapman

asked the Secretary of State for Trade and Industry if he will make a statement on the introduction and operation of value added tax, with particular reference to the actual movement of prices and service charges compared with what was anticipated.

Sir G. Howe

Reports received so far in my Department indicate that the changeover to VAT is in general going reasonably well. I am confident that over the country as a whole the great majority of price adjustments, up and down, are being made fairly. There have been fewer problems than we might have expected in view of the scope of the operation. In general, the movements of prices and charges are very close to the estimates made when our publicity campaign was launched in March.

Mr. Chapman

I agree with my right hon. and learned Friend generally, but will he comment on two specific complaints which have been made following the introduction of VAT? The first relates to alleged excessive additions made to bills, particularly in cafeterias and restaurants. Secondly, following the point made by my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke), is it not true that a flat 10 per cent. has been added to other service charges without regard to the abolition of selective employment tax?

Sir G. Howe

I agree that there has been a substantial number of complaints relating to cafes and restaurants, about which my right hon. Friend the Minister of Agriculture would answer detailed questions. However, any complaints of that kind are being followed up by the Weights and Measures Inspectorate. Alongside the introduction of VAT there are inevitably seasonal fluctuations in the price of foodstuffs which must be put into the account. Complaints about flat 10 per cent. additions made in the service industries are being investigated, and it is generally found possible to arrive at agreed changes which, although sometimes representing a 10 per cent. increase on one product, do not represent any net addition to the income of the trader when account is taken of the fact that prices for other products are held at a lower level.

Mr. Robert C. Brown

Does the Minister agree that the consumer is being severely milked on small items costing l0p and less? Will he inform retailers that in spite of the tremendously heavy price increases made in the last couple of years the new halfpenny piece is still a legitimate coin of the realm, and should be used?

Sir G. Howe

If consumers generally were, as the hon. Member says, being severely milked on small purchases, that would be a matter to be considered very seriously. But, so far from small traders and shopkeepers being dishonest and out to gull the consumer, as the Opposition seem to think, the overwhelming majority are complying effectively with the obligations of the changeover.

On the question of small items, I underline what the hon. Gentleman has said. The halfpenny coin remains an active and effective coin of the realm and should be used in making price adjustments, up and down, in relation to the introduction of VAT.

Dame Irene Ward

As my right hon. and learned Friend agrees that anxiety and difficulties have arisen in relation to cafés and restaurants, would it not be a good idea to have a conference on the matter with whoever represents cafes and restaurants in total so that we would have a proper statement on the problem and see whether we could deal with the situation?

Sir G. Howe

There has already been consultation of the kind to which my hon. Friend refers between both my right hon. Friend the Minister of Agriculture and myself and the leading trade association, covering almost all the aspects affected by the tax change. Problems arising in small hotels and restaurants concern detailed variations in detailed cases which can be followed up only by investigation on the spot, and they are being followed up in that way. I shall consider my hon. Friend's point that there should be further consultation with the representatives of that trade to see whether further guidance is necessary.

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