HC Deb 01 April 1993 vol 222 cc490-2
12. Mr. Loyden

To ask the Chancellor of the Exchequer if he will estimate the cost in a full year to the average householder's energy bills of the introduction of value added tax at (a) 8 per cent. and (b) 17½ per cent.

Mr. Dorrell

It is not possible to make an accurate assessment. It depends on future pricing decisions by the fuel companies as well as on the effect of those pricing decisions on consumption levels.

Mr. Loyden

How will the Minister ensure that the operation of benefits takes into account the 17.5 per cent. increase in VAT? He cannot simply rely on the retail prices index rate, which will be 8 per cent. Is not this a clear indication that the Government have no intention of meeting in full the needs of pensioners and people on low pay, who will have to pay the extra 17.5 per cent. on their bills?

Mr. Dorrell

We have said absolutely clearly that we intend to provide extra help in advance of the implementation of the price increases, and that this will be targeted at the 8 million households in receipt of income-related benefits. Assistance will go to those who need it, while the rest of us make a contribution to controlling the deficit—a matter which is of no interest at all to the Labour party.

Mrs. Browning

If the extent of uprating is to be announced in November, will my hon. Friend please take into account the fact that it should reflect the increase for a full year, including the critical winter months? I am conscious of the fact that the period between the Budget in March and the announcement in November is only eight months.

Mr. Dorrell

My hon. Friend may rest assured that in calculating the increases to be made as part of the planning of next year's uprating we shall take account of all the costs that recipients have to face in the year during which those benefits are received. Furthermore, we have made it clear that the cold weather payments system will be adjusted to take account of the VAT changes that my right hon. Friend the Chancellor announced.

Mr. Gordon Brown

Given the hon. Gentleman's admission with regard to standing charges, will he now tell us how much more, in pounds and pence, a typical pensioner will have to pay because of the imposition of VAT on standing charges for gas and electricity? Will he also explain the environmental justification for that imposition?

Mr. Dorrell

The hon. Gentleman might explain to the House why Labour thought that it was entirely consistent to impose VAT on telephone standing charges. [HON. MEMBERS: "Answer."] The simplest layman—apart, apparently, from the hon. Gentleman—can see that the standing charge for the supply of energy to a household is part of the integrated cost that has to be charged by the supplier. The hon. Gentleman is pressing upon us the creation of a blatant tax loophole—something which he does not normally like to do. I can assure him that we shall resist his pressure.

Mr. John Greenway

Will my hon. Friend confirm that the majority of member states of the European Community levy VAT on energy costs for domestic consumers? Does he agree that in terms of energy costs the most important thing for people on low incomes is the need to keep energy prices down? Is not the statement made on Monday by my right hon. Friend the President of the Board of Trade indicative of the fact that the Government are prepared to allow the market to bring down energy costs? Will my hon. Friend also confirm that the extra money given to the coal industry will not be reflected in energy charges?

Mr. Dorrell

My hon. Friend is almost right about the European Community. He said that the majority of EC member states charge VAT on domestic fuel and power. The truth is that they all charge VAT on domestic fuel and power. He is right to stress that the key issue is the price that the consumer has to pay. We are certainly accepting no lectures from the Opposition about electricity prices. Electricity prices went up by 20 per cent. every year Labour was in power and by more than a quarter in real terms.

It would be nice to hear a welcome from the Opposition for the fact that in the past 10 years, since we reformed the industries, electricity prices have fallen by 8 per cent. in real terms and gas prices have fallen by 15 per cent. in real terms. That shows our commitment to the proper pricing of energy.