Value Added Tax

HC Deb 25 October 1973 vol 861 cc1451-6

5. Mr. Sydney Chapman

asked the Chancellor of the Exchequer if any calculation has yet been made of the revenue derived from value added tax in the first half-year of its operation; and whether the amount exceeds the estimated yield.

The Chief Secretary to the Treasury (Mr. Patrick Jenkin)

While it is not the practice to publish forward estimates for periods of less than a complete year, I can tell my hon. Friend that provisional net receipts of value added tax in the half-year ended 30th September are £18 million. He will recognise that receipts in the first six months give no indication of the normal yield of the tax.

Mr. Chapman

In any review of value added tax or of its rate, will my right hon. Friend ask the Chancellor to give first priority to dealing with the anomalies and unfairnesses that have come to light in the new tax, bearing in mind that these anomalies and unfairnesses are far fewer than in the old selective employment tax and purchase tax?

Mr. Jenkin

My right hon. Friend and I will certainly be prepared to consider any proposals that my hon. Friend may wish to make.

Mr. Joel Barnett

As the Chancellor would not give the right sort of answer to the hon. Member for Oswestry (Mr. Biffen) about food, and after what has recently been mentioned about the need for there to be unanimity in the EEC, will the Chief Secretary give a clear and cate- goric assurance to the House today that the Government will veto any proposals to increase the coverage of VAT in Britain?

Mr. Jenkin

It has never been the practice of any Government to enter into any binding commitments about the future movements of taxation. The hon. Gentleman knows that perfectly well, and he knows equally well that the right hon. Member for Leeds, East (Mr. Healey) would not say anything different. I remind the hon. Gentleman that there would have been £225 million of tax charged on food now if we had retained the cover age and rates of purchase tax which we inherited in 1970.

Mr. Barnett

Does that mean that the Minister is not prepared to give an assurance that he will refuse to tax food with value added tax?

Mr. Jenkin

I did not say anything of the sort. I stand by what I said.

9. Mr. Eadie

asked the Chancellor of the Exchequer what requests he has had for the re-examination of VAT in relation to catering establishments.

Mr. Nott

My right hon. Friend has received various suggestions. The operation of the tax will be kept under review.

Mr. Eadie

Has the Minister any evidence that the service charge is being used by management in the catering industry to offset the administrative costs of value added tax? Does he not agree that in view of the suspect legality of this practice, and as it is robbing waiters and waitresses, there is a case for some investigation?

Mr. Nott

I cannot agree with that. Value added tax is a tax on services as well as on goods.

Mr. Brian Walden

The Conservative Party in its manifesto pledged itself to value added tax. On their own admission the Conservatives did not foresee the rise that has taken place in world food prices and even when we were legislating for the tax we did not expect the rise to continue for so long. Is it not foolish further to increase food prices for those who eat in canteens? If there is to be a review of the tax would it not make sense to remove this charge?

Mr. Nott

Food generally is zero rated. It was decided at the time the tax was compiled that catering establishments should be included in the charge to VAT. Any changes that might be contemplated are a budgetary matter and there is nothing I can add to that.

10. Mr. Ewing

asked the Chancellor of the Exchequer what advice his Department has received from the clothing trade regarding VAT on certain sizes of children's clothing and the percentage of children's clothing likely to be worn by adults.

Mr. Nott

Representations have been received from the clothing trade about the maximum sizes of certain items of young children's clothing and the revised Customs and Excise Notice No. 714 issued in July took account of those representations. The percentage of young children's clothing likely to be worn by adults has not been mentioned by the clothing trades.

Mr. Ewing

That is a surprising reply especially in view of the letter of Mrs. MacDonald of the Scottish TUC. The Minister is on record as saying that 25 per cent. of children's clothing is likely to be worn by adults. Where did he get that figure? The mothers of these young children, who are by no stretch of the imagination fanatics, are frustrated by the value added tax on children's clothing. In the measures that he is to introduce will the Minister consider reducing the maximum size chargeable to tax for clothing worn by these young children, as was the position under purchase tax?

Mr. Nott

As far as I can see the first part of the question was in complete contradiction to the latter part. The whole purpose of the relief, which was sought by hon. Members on both sides, was to exempt young children's clothing from VAT. We have taken what we believed to be the average size of a child of 12. In fact, the limits are largely above the average size of a 12-year-old child and there must be a dividing line somewhere.

Mr. Adam Butler

In view of the anomalies and complexities that arise because of this situation, will my hon. Friend consider removing children's wear from the exemption from VAT and com- pensate for it through an increase in family allowances?

Mr. Nott

My hon. Friend will recall that when we originally introduced value added tax there was no exemption for young children's wear. Clearly, before we introduced the tax we considered other alternatives, but we believed that this proposal was the best in the circumstances.

Mr. Concannon

Is the Minister aware that some of us believe that the people in the Department must think that some schoolchildren these days were born of pygmies? I have an 11-year-old son who last weekend was politely told that he was now in the VAT range. I wondered whether he was in line for a rocket from somewhere, but he is now in line for VAT. This is all right for me, but for many of my constituents it is an added burden of tax in a very low income area. We should reconsider this matter and take into consideration the fact that our children are growing bigger and more masculine at an earlier age than in previous generations.

Mr. Nott

I am delighted that the hon. Gentleman's son is a big boy, like his father. It is necessary to draw a dividing line. Unfortunately, some children and-grown-ups will fall on the wrong side of that line. My right hon. Friend, in his Budget Statement, said that Miss World, whose statistics are 34, 22, 34, is in fact a young child for the purpose of this dividing line. This is something that we cannot avoid. We must draw the line somewhere.

11. Mr. Thomas Cox

asked the Chancellor of the Exchequer if he will now remove VAT from telephone bills in respect of telephones supplied to disabled people by local councils.

Mr. Nott

Under the Chronically Sick and Disabled Persons Act 1970 local authorities have power to meet telephone rental charges or give assistance towards the cost. My right hon. Friend believes that this is the best means of helping disabled people.

Mr. Cox

Is the hon. Gentleman aware that that is a most deplorable reply? His lack of action in this matter is severely restricting the efforts of local authorities whi0063h have to work within the budget of supplying telephones to disabled people. Will he tell the House why pin-table machines are exempt but many items essential need to disabled people are taxed?

Mr. Nott

We have debated VAT and the disabled on many occasions. I have told the hon. Gentleman before that there is no reason why any disabled person should have to pay VAT on items that he needs to help him in his disability. In this matter local authorities have discretion in assisting disabled people. If local authorities are not doing so, then I think that this question should be put to my right hon. Friend the Secretary of State for Social Services.

Dame Irene Ward

This is a very important matter. There can be a differentiation in a local authority's action which is not particularly helpful to the disabled. Instead of waiting for a Question to be put down to my right hon. Friend the Secretary of State for Social Services, could not my hon. Friend institute an investigation, as local authorities might be more interested if the Treasury found out rather than other Departments? Will he prepare an analysis for us so that we may know where to exercise our pressure?

Mr. Nott

With respect to my hon. Friend, I think that that question, which is basically about the working of the Act, should be put to my right hon. Friend the Secretary of State for Social Services.

Mr. Loughlin

Is the hon. Gentleman aware that in health and welfare, with the powers being invested in local authorities, there have been and always will be wide discrepancies between good and bad authorities? Will he take this fact into account and recognise that a slightly different emphasis should be placed on this matter, because we are dealing with the question of VAT? Would it not be better for his Department to deal with this as a specific issue, as distinct from a health and welfare service?

Mr. Nott

I do not doubt that there is a discrepancy of treatment between one local authority and another. As I have already said, this is a matter that should be taken up with my right hon. Friend. If relief were to be given in this area a whole host of other equally deserving groups would feel that they were not being singled out for special treatment. This is of not the type of situation which should be dealt with by a tax concession.