HC Deb 10 May 1984 vol 59 cc1067-9
3. Mr. Michael Brown

asked the Chancellor of the Exchequer what estimate he has made of the consequences

of his decision to bring the construction of house extensions within the scope of value added tax on the level of the black economy.

The Minister of State, Treasury (Mr. Barney Hayhoe)

Detailed estimates cannot be made.

Mr. Brown

Does my hon. Friend accept that it is likely that the Government could lose a considerable amount of revenue because a number of cowboy builders may take advantage of the new circumstances? Ought he not to consider detailed estimates, because the measure may mean that the Government will lose, rather than raise, revenue?

Mr. Hayhoe

The fears that have been expressed, as I understand them, are very exaggerated. For example, home extension work is unlikely to go to the black economy, and the Budget changes made by my right hon. Friend will end the evasion of tax by the misdescription of repairs—which were, and still are, standard-rated—as alterations, which are zero-rated. Those misdescriptions must have cost the Revenue considerable amounts in the past, and that sort of evasion will, I hope, not now take place at all.

Mr. Maxton

How many extra Customs and Excise staff will be employed to collect this duty? How does this compare with the reduction in the number of Customs and Excise staff over the past five years, and in particular, of the staff who have been employed to ensure that hard drugs are not imported?

Mr. Hayhoe

The number of Customs and Excise staff involved in this change will be very small. What it will mean is that the staff already concerned with these matters will be able to spend more of their time on VAT control, rather than in sorting out some of the very difficult marginal cases between repairs and alterations.

Mr. Stanbrook

Would it not be fair to exempt from this tax at least those householders who signed contracts for the work to be done before 1 June and who have, unfortunately, not been able to get the work done before that date?

Mr. Hayhoe

As my hon. Friend may know, this matter was debated in the House during the Committee stage of the Finance Bill on 30 April, and I gave an indication then that my right hon. Friend, myself and others will be considering the points made in the debate. I made it clear that I said that without any commitment to any change in taxation arrangements.

Mr. Hattersley

Does not the initial answer that no detailed estimate can be made mean that the Government have no idea of the real consequences of the tax? Can the Government tell us, for instance, how many small business men they anticipate will be made bankrupt? Can they tell us whether they share the view of the industry that it will result in at least 35,000 unemployed men and women who were previously working in the industry?

Mr. Hayhoe

The fact that one cannot make a detailed estimate of tax evasion should not come as something strange to the right hon. Gentleman, who has had some experience of government. If one knew precisely where all the tax evasion was going on, of course the resources of the Customs, and of the Revenue department, would be deployed against that evasion. What I do know, from the careful judgments that we have made, is that overall one

would expect this not to increase evasion because we are removing the difficult dividing line between repairs and alterations.