HC Deb 26 November 1987 vol 123 cc369-71
9. Mr. Galbraith

To ask the Chancellor of the Exchequer if he will make a statement on Her Majesty's Government's policy towards the European Economic Commission's proposals to extend value added tax.

11. Mr. John Garrett

To ask the Chancellor of the Exchequer if he will make a statement on recent developments on the proposals for the harmonisation of value added tax in European Economic Community member countries.

Mr. Lawson

As I made clear at the ECOFIN Council last week, we shall not permit to come into force any proposals that in any way conflict with the pledges that Her Majesty's Government have given concerning the United Kingdom's zero rates of VAT.

Mr. Galbraith

The largest manufacturer in my constituency is the publishing firm Collins. Will the Chancellor give a categorical assurance that he will not impose VAT on books? If he is intent on taxing knowledge, will he tax the Bible?

Mr. Lawson

I am grateful for the hon. Gentleman's Budget representation. I have noted it, as I note all Budget representations.

Mr. Garrett

Is the Chancellor aware of the great concern among manufacturing companies in my constituency about the threatened imposition of VAT on printed matter and children's shoes? Leaving aside the wider policy issue about the correctness of imposing VAT on books and children's clothing, is he aware that hundreds of jobs could be at stake if those two industries were penalised in that way?

Mr. Lawson

I will answer in two ways. First, one of the pledges that was given during the general election campaign was that we would maintain the zero rate on children's clothing and shoes. All pledges that we made during the election campaign will be honoured. Secondly, under the stewardship of the Government, we have since 1983 created more jobs than the rest of the Common Market put together. There is no need for the hon. Gentleman to fear for jobs so long as this Government's policies continue.

Mr. Gow

Will my right hon. Friend temper his admiration for his noble Friend, Lord Cockfield, by asserting to the House that it is the view of many Conservative Members that decisions about the scope and the rates of VAT should be taken by him and by Parliament, and not by people, however eminent, in the Commission at Brussels?

Mr. Lawson

I fully understand the strength of support for the view just expressed by my hon. Friend, although he will know that there are a number of ways in which we are already committed by Community law in this matter, as were the previous Labour Government. As for my admiration or not for Lord Cockfield, I must say that if he had heard this exchange he would have been rather surprised.

Sir Anthony Grant

Does my right hon. Friend agree that the threshold level for VAT, starting at £21,300, is absurdly low? Will he use his best endeavours in Europe to get it raised and thereby save a tremendous amount of time of small firms and of civil servants?

Mr. Lawson

My hon. Friend has made an important point that is particularly pertinent in the context of my previous answer, because that is one of the ways in which we are bound by Community law. We have our VAT threshold at the highest level permitted under Community law. We are pushing very hard for that to be increased, but of course that requires unanimous agreement by all countries. The fact that unanimity is required in tax matters benefits us in other ways. It enables us to prevent changes in Community law of which we disapprove.

Mr. Yeo

In the admittedly hypothetical event that my right hon. Friend is required to impose VAT on new building, will he assure the House that he will consider sympathetically representations from voluntary organisatons that VAT should not be imposed on new construction projects for which funds have been raised voluntarily from the British public?

Mr. Lawson

My hon. Friend is referring to the infraction case about which we expect to hear the verdict of the European court in the early part of next year. That case was fought extremely vigorously by the Government and of course we hope to win it. If by any mischance I am wrong and we do not win the case, of course we would consider very carefully and sympathetically the points made by my hon. Friend.

Mr. Henderson

Will the Chancellor confirm that the Government intend to continue to zero-rate VAT on food? If that is so, when will he announce the removal of VAT on nuts, crisps and chocolate-coated biscuits, which are an important part of the diet of my constituents and no doubt others?

Mr. Lawson

I am interested to learn about the diet of the hon. Gentleman's constituents, as I was not previously aware of that. VAT on nuts, crisps and chocolate-coated biscuits was imposed by the right hon. Member for Leeds, East (Mr. Healey) when he was Chancellor of the Exchequer. Perhaps the hon. Gentleman might like to have a few words with his right hon. Friend.

Dr. Marek

Will the Chancellor accept that these are not Budget representations, but matters of vital interest to the British nation? Will he tell the nation that he will not place a tax on the Bible or books? We have not had such taxes in this country for the past 100 years. In view of the crass and incompetent decision to charge for eyesight tests and dental examinations, will he now have mercy on the British public and the NHS and announce that there will not be VAT on drugs and medicines? I give the Chancellor one more chance to come clean with the country.

Mr. Lawson

I am most grateful to the hon. Gentleman for giving me that chance. If I may say so—and this is not saying a great deal — the country has rather more confidence in me than in him. As I said earlier, we made a number of pledges during the general election campaign on VAT. All of those pledges will be honoured. As for any other matters, we shall stick to the convention, which I think is right, that statements are made at the time of the Budget and at no other time.