HC Deb 01 April 1993 vol 222 cc479-81
1. Ms Quin

To ask the Chancellor of the Exchequer what representations he has received about the levying of VAT on domestic heating announced in the Budget.

The Chancellor of the Exchequer (Mr. Norman Lamont)

I have received a number of representations.

Ms Quin

Does the Chancellor agree that his time before the Budget would have been better spent had he not remained in purdah but talked to a number of the people who will be hardest hit by these proposals? Does he further agree that, as well as the people on benefit who are worried about how they are going to pay those higher bills, people just above benefit level are frightened that this measure will push them further into the poverty trap? Will he think again about this measure before it is too late?

Mr. Lamont

On the first point, the hon. Lady suggested that I should have been out listening rather than reflecting in quiet, but, by doing so I was able to read the manifesto of the Leader of the Opposition in which he said: We should consider increased use of the fiscal system to promote environmental protection. I also had the opportunity to read Labour's policy document "Looking to the Future", which said: We will be looking of ways of increasing taxes on environmentally damaging products. The fact is that when we look at a problem we decide to do something about it, rather than write a lot of words which we then retreat from. That is the difference between being in government and being in opposition and mouthing platitudes.

Sir Terence Higgins

Will the Chancellor give an assurance that in calculating the extra amount to compensate pensioners and those on low incomes for the effect of the tax—which will be paid in advance of the tax coming into operation—he will not take account of any change in the underlying level of fuel prices which may have occurred in the interim? If that is so, will he announce the amount now rather than wait until autumn?

Mr. Lamont

I note my right hon. Friend's point. He knows that we have announced that we will bring forward the extra help so that it will be available from April 1994, at the precise moment that the bills will arrive. We have done that because we wish to help. We have made it very clear that while we regard this measure as necessary on both fiscal and environmental grounds, it is not our intention that poorer people should suffer. I have made that abundantly clear.

Mr. William Ross

Since the Chancellor has now broken through the zero-rated barrier, does he realise that no one will believe him when he says that he will maintain the zero rate principle on many other items? Does not he see the danger that this very unpopular tax will, for the Tories, eventually prove to be the equivalent of the poll tax in the previous Parliament?

Mr. Lamont

What the British public expect from the Government is that we should pursue sound finance. That is the overwhelming and first commitment of the Government.

Mr. Wilkinson

When Lord Barber introduced VAT on April fool's day 20 years ago, he boasted that the British rates of VAT were the simplest to implement within Europe. Would it be reasonable to say that from 1995–96 and beyond that to 1996–97, if the Government get their budget deficit back under control, there could still be a hope of getting VAT on domestic fuel down again?

Mr. Lamont

We have only just put our proposals forward and intend to legislate for them. It would be quite wrong for me to speculate about future years. I make this observation to my hon. Friend: Britain's average rate of VAT, measured across all products, is one of the lowest in the Community.

Mr. Gordon Brown

Should not the Chancellor have been reading his own election commitments, when he said that there were no circumstances in which value added tax on fuel, gas or electricity would be raised? Is not that the reason why the country will never trust the Chancellor again? Will he confirm that, as a result of the changes in VAT, the typical British family will soon be paying £15 a week in VAT, compared with £1.86 when the Labour party left office, and that the biggest element in that is the VAT on gas and electricity, which will cost £2 a week. Is not it a disgrace that the Government, who believe that unemployment is a "price well worth paying" for their economic failure, also appear to believe now that poverty among pensioners is a price well worth paying for their economic failure? Will he now answer—[Interruption.] Conservative Members do not like it because we are telling the truth about what is happening. Will the Chancellor answer one simple question? Is he now proposing that, on top of VAT on the use of fuel, he will also impose VAT on standing charges for gas and electricity—yes or no?

Mr. Lamont

I assure the hon. Gentleman that, far from not liking what he says, we always love everything that he says in the House.

I know that the hon. Gentleman yesterday had a briefing and a lunch with British Gas, as a result of which he was informed that VAT applied to standing charges. If it did not apply to standing charges, that would be an obvious case of avoidance. [HON. MEMBERS: "Answer!"] I have answered the hon. Gentleman's question and will not take any lectures on the subject from the Labour party which, when it was in office, increased electricity prices by 168 per cent.—an average of almost 20.7 per cent. a year. As I observed in my wind-up speech in the Budget debate, we know who the Minister of State at the Department of Energy was at that time—the Leader of the Opposition. We also know why the Government of the day did it—because they were so in hock to the International Monetary Fund that they had to shove up electricity prices. We will not take any lectures from the hon. Member for Dunfermline, East (Mr. Brown).