Value Added Tax (Cars) (Hansard, 15 July 1992)

§ The Paymaster General (Sir John Cope)
I beg to move, That the Value Added Tax (Cars) (Amendment) (No. 2) Order 1992 (S.I., 1992, No. 1654), dated 9th July 1992, a copy of which was laid before this House on 9th July, be approved. As the first motion on value added tax is of smaller account than the second, it will be helpful to the House to take them separately.
The House will know that, in general, cars are not allowable as VAT inputs by businesses. However, my right hon. Friend the Chancellor of the Exchequer announced in his Budget that, from 1 August, private taxi operators, car hire firms and driving schools will be able to recover VAT on their purchases of new cars. That was provided for in the Value Added Tax (Cars) (Amendment) Order, SI 627.
That order provided the new relief for those taxi firms and driving schools operated by self-employed drivers and instructors, because otherwise they would have been unfairly penalised. It granted relief on cars to be let on hire on condition that they were used as taxis, or for self-drive hire or driving school cars. It did not extend relief to purchases by leasing companies. Since the order was made, we have learnt that some leasing businesses intend to execute leasing arrangements, including a clause restricting the use of leased cars to one of the uses that qualify for relief, thereby, in their view, entitling them to recover input tax. Such terms would not have commercial validity or rationale, and the lessors would have no interest in enforcing the restrictions or any way in which to do so.
We therefore thought it right to introduce the order to clarify the previous one, thus avoiding uncertainty. The order makes it clear that such a scheme would not succeed in avoiding tax. I support the order and commend it to the House.

§ Dr. John Marek (Wrexham)
I welcome the Paymaster General's explanation of why SI 627 has been superseded by SI 1654, and in general I agree with what he said.

§ Sir John Cope
Not superseded, but supplemented.

§ Dr. Marek
Yes, supplemented. I was looking at SI 1654, which states: Article 2(a) of the Value Added Tax (Cars) (Amendment) Order 1992 is hereby revoked"— but it is then re-enacted in the provisions. How much will the original order and the new omnibus order cost the Revenue? It would be useful if the Paymaster General could give us an estimate.
There is a lesson to be learned on how to legislate. The Government should not table statutory instruments and then find that they have faults. I am not saying that the Government are not acting properly but, as a result of consultation, they often realise that the original order is insufficient or flawed, and so have to table another one. The more openness in government—especially on non-controversial issues such as the order—the better.
I would welcome it if, when the Government were tabling such orders, they could be made available for consultation in the House or published by the Government, as the Government did with the new value added tax regulations in anticipation of our entry into the single market in 1993. Much of the relevant draft legislation was published in advance of the Finance Bill.
1192 The Opposition support the order, but it would be useful if the Paymaster General could tell us the cost. I see that a paper is being brandished, so I shall stay on my feet for another 10 seconds to allow it to reach the Paymaster General.

§ Mr. Bob Cryer (Bradford, South)
When it examined the statutory instrument, the Select Committee on Statutory Instruments thought that the explanatory memorandum provided by the Department was useful, and better than that on the original one. It was a much longer memorandum and we printed it in our third report, House of Commons Paper No. 52 for the 1992–93 Session. Apendix 1 contains the full explanatory memorandum, which I hope will be of use to the House and users of the instrument.
We should remember that such legislation has to be applied by the user and has the force of law. The number of orders and instruments produced by the Government is now approaching 3,000 a year. We hope that the memorandum will assist in clarifying the instrument.
SI 1654 blocks a loophole that the Revenue did not realise existed, and it is only a short order. The tatty draft order that we have does not give a price. Is the order replacing the previous one to be issued free of charge? The Government are partly responsible for ensuring that an order is as comprehensive as they want it to be. I do not blame the draftsman for the loophole as there are always smart alicks looking for such defects. That is why provisions sometimes have to be drafted in a complex way.
However, the Government do bear some responsibility and, as it is such a short order, it would be helpful if the Government issued it free rather than charging an additional sum. It should certainly he free to purchasers of the original 1992 order, which was an amending order, as was SI 959 which, in 1989, amended the original statutory instrument of 1980. As there are now three amending statutory instruments, will the Department consider producing a consolidated order? It may be of help to the user to have all the amendments in one document instead of having to purchase several at a time.
It should be the primary concern of both the Government and the House to make legislation as clear and succinct as possible. I know that it is difficult, for the reasons that I mentioned. The Government should consider a consolidation provision at some stage. I hope that they will do so sooner rather than later.

§ Sir John Cope
The hon. Member for Wrexham (Dr. Marek) asked me about the cost of the order. The legislation stops a loophole and, as far as we know, there will be no extra cost. Indeed, it may save us money that we might otherwise have had to pay had the order not meant what we thought the original order meant. SI 1654 is for clarification.
The original order, SI 627, cost £50 million to produce. The hon. Member for Bradford, South (Mr. Cryer) explained that the Select Committee on Statutory Instruments had issued an explanatory memorandum. He was right to say that it would be useful to users of the order. He asked if we were to give away the order. That is most unlikely. It is a matter for the Stationery Office to decide, and it has to recover its costs. The original order cost only 65p, so it is not expensive, and we should recover the cost of producing such documents.

§ Mr. Cryer
When the fault clearly lies with the Government, it is usual for them to issue a replacement order to purchasers of the original order. While it may not be fair to ascribe all blame to the Government, they should bear at least some of it. As the Paymaster General seems reluctant to show concern for the user from the Dispatch Box, perhaps he will consider the matter further after the debate. When the Joint Committee on Statutory Instruments finds that an instrument has to be amended as something is seriously wrong, it is common for the Government to issue a free replacement. Will the Paymaster General give consideration to the matter?

§ Sir John Cope
I shall consider the issue outlined by the hon. Member for Bradford, South. We do not consider that the original order, SI 627, did not fulfil our intentions. However, it seemed that there might be a challenge in the form of an avoidance scheme and, by issuing the clarifying order before either of them took effect, we avoid time and trouble for the Government and for others. The hon. Gentleman asked whether we had thought of producing a consolidating order. We are paying attention to that and will probably produce some VAT consolidating orders. However, we have not yet decided to do so. The hon. Gentleman's recommendation is sensible and we shall certainly consider it.