HC Deb 22 March 1979 vol 964 cc1684-5
15. Mr. David Atkinson

asked the Chancellor of the Exchequer why a family brick ice cream is subject to value added tax.

Mr. Robert Sheldon

All ice cream, together with confectionery, soft drinks, crisps and similar snack foods, is subject to value added tax which, like other taxes, is imposed to raise the necessary revenue.

Mr. Atkinson

Is it not ridiculous that housewives can buy sweet courses such as ice cream, custard and yoghurt that are tax-free but that she has to pay an extra 8 per cent. on her family ice cream brick? Is not this unnecessary discrimination against the ice cream manufacturers, and will the Chancellor use the opportunity in his forthcoming Budget to remedy this anomaly?

Mr. Sheldon

I am afraid that this is an inevitable consequence of VAT which has to make these distinctions. The hon. Gentleman may not recall, though other hon. Members certainly will, that when VAT was introduced it was supposed to be a broad-based tax free from anomalies. This is one of the anomalies inherent in the tax, and it is my task to implement it as best I can.

Mrs. Wise

Will my right hon. Friend remind the Opposition that it was the Conservatives who introduced value added tax in the first place? Will he confirm that the really important taxes on food are the import levies which are exacted on foods imported from outside the EEC, many of which are staple foods, the prices of which have increased considerably because of these import levies?

Mr. Sheldon

There is no question about import levies, but I will add to the point made by my hon. Friend that at present 50 per cent. of the articles in the value added tax system are zero-rated. To go any further in this direction would be to make it a much more narrowly-based tax even than the one introduced by the Conservatives in 1972.

Sir Geoffrey Howe

Does the Financial Secretary acknowledge that when VAT was first introduced it was visualised that it would be refundable or rebateable to firms in the construction industry, the pharmaceutical industry and in relation to the export trade? Is he aware that as a result of the current industrial dispute many firms in those industries are now suffering growing embarrassment due to the Government's failure to pay the refunds due to them? Can the right hon. Gentleman give an assurance that more effective action will be taken to see that those firms do not run into serious cash flow difficulties, with mounting unemployment?

Mr. Sheldon

There are obvious problems for a number of firms as a result of the computer being out of action due to the industrial dispute. I hope that it will not be long before these refunds are made. Meanwhile, I hope that the other alternatives available to firms to find sources of finance to make good any deficiencies will be employed by them.