§ 21. Miss Fookesasked the Chancellor of the Exchequer if he will take steps to return to the principle of value added tax levied at a single effective rate, in addition to zero rating.
§ Mr. Denzil DaviesI shall continue to keep the structure of all taxes under review.
§ Miss FookesIs the hon. Gentleman aware that that is no answer at all? Will he please bear in mind the anomalies caused by having differential rates?
§ Mr. DaviesObviously some anomalies are caused by differential rates, but I remind the hon. Lady that most European countries, where this tax originated, have a far greater number of differential rates than we have. They seem to be able to cope well with the anomalies and their economies also are coping well.
§ Mr. SedgemoreWill my hon. Friend confirm that if the Government are to carry out the Chancellor's pledge and make VAT progressive, there will be a need to have multi-rate VAT? How will that fit in with our Common Market obligations?
§ Mr. DaviesMy hon. Friend is right that a multi-rate VAT is more progressive in terms of the tax system. That is one reason why a number of European countries have such a system.
§ Mr. JesselWhy did not the Chancellor increase the VAT rate, which was what was expected and would have been accepted by the nation?
§ Mr. DaviesThe answer is, as we made clear in the debates last week on the National Insurance Surcharge, that any increase in the rate of VAT would work quickly into the cost of living and would almost immediately increase the retail price index.