Value Added Tax (Hansard, 6 April 1989)

§ 10. Mr. McFall
To ask the Chancellor of the Exchequer how much value added tax was paid per annum by an average family in 1978–79; and what was the comparable figure in 1988–89.

§ 11. Mr. Allen McKay
To ask the Chancellor of the Exchequer how much value added tax was paid per annum by an average family in 1978–79; and what was the comparable figure in 1988–89.

§ 15. Mr. McKelvey
To ask the Chancellor of the Exchequer how much value added tax was paid per annum by an average family in 1978–79; and what was the comparable figure in 1988–89.

§ Mr. Lilley
A married man on average male earnings with two children would have paid approximately 2.6 per cent. of his earnings in value added tax in 1979–79 and 4.8 per cent. in 1988–89.

§ Mr. McFall
Does the Minister realise that over the past 10 years the VAT paid by average families with two children and average male earnings had risen from £2 million to over £22 million in real terms, which represents a doubling of the VAT that people paid under Labour? Does the Minister not agree that this regressive tax hits the poorest people in society? When will he stop fooling the British people and his Back Benchers by chattering on about income tax cuts, when he is using the VAT sledgehammer to clobber the British people?

§ Mr. Lilley
The hon. Gentleman does not appear to realise that since 1978–79, the take-home pay of a man on average earnings with one child has risen in real terms by 29 per cent., which takes account of all taxes. Under Labour that family saw an increase of less than 1 per cent. in its real take-home pay. The tax is not regressive, as the hon. Gentleman suggests.

§ Mr. McKay
Does the Minister not agree that the £6.60 by which the average family would be better off if VAT represented a proportion of gross income, as it did under Labour, would be helpful to the average family? It would help to pay the mortgage interest that Government policies have increased.

§ Mr. Lilley
As I have just pointed out, if the average family had to go back to the level of income that it possessed under the last Labour Government, it would be in dire straits. One of the benefits of VAT is that families at least have some choice about whether they pay it. A high proportion of spending goes on zero-rated items, such as food and housing.

§ Mr. McKelvey
Does the Minister not realise that only an economic illiterate would argue that VAT is anything other than a regressive tax? Does he not understand the effect that it has on poor people, especially those in Scotland who have also been hit by that most obnoxious and regressive tax of all—the poll tax?

§ Mr. Lilley
The hon. Gentleman is simply wrong. People on three quarters of average income pay less than 4½ per cent. of their income in VAT; someone on average income pays about 4.7 per cent. and someone on one and a half times average income pays 5.1 per cent. Therefore VAT is clearly a progressive and not a regressive tax. That is manifestly obvious and were the hon. Gentleman in contact with his constituents he would realise that the less well off spend a much higher proportion of their incomes on zero-rated items.

§ Mr. Oppenheim
Given that VAT is not levied on most basic essential items, surely the figures merely prove that, under a Tory Government, people can afford more luxuries.

§ Mr. Lilley
My hon. Friend is absolutely right. Under a Labour Government they would of course, be able to afford far less. It is sheer hypocrisy for the Labour party to show any concern about any tax because it is, after all, the party of high spending and high taxation.

§ Mr. Holt
My hon. Friend will be aware that in the calculations of VAT in 1978–79 one major difference for many people was that the whip-round for the drinks and refreshments of one's opponents at sporting events were not VAT rated. That was brought in by the Government in 1982 and will be thrown out as a result of harmonisation. Why not do it in advance of that date?

§ Mr. Lilley
I know my hon. Friend's strong feelings about the impact that VAT has had upon Beaconsfield rugby club. I have dealt with the matter as best I can. I think that my hon. Friend has a strong case about the treatment that he has received and I apologise to him and his son.