HC Deb 26 April 1993 vol 223 cc718-20
9. Mr. Welsh

To ask the Secretary of State for Social Security what representations he has received on the impact on benefit claimants arising from the imposition of VAT on domestic fuel and power; and if he will make a statement.

11. Mr. O'Hara

To ask the Secretary of State for Social Security how much he estimates it will cost his Department in the relevant upratings of benefits to take account of the incremental imposition of VAT on domestic fuel.

The Minister for Social Security and Disabled People (Mr. Nicholas Scott)

We have received a number of representations from a range of organisations and individuals, including hon. Members. My right hon. Friend the Chancellor of the Exchequer announced in his speech that extra help will be given to poorer pensioners and others on low incomes. We will be announcing the precise details and costs of this help in the autumn.

Mr. Welsh

Does the Minister understand the anger felt at the imposition of VAT on domestic fuel bills and on the standing charges for gas and electricity, especially by people in Scotland, where, by definition, the colder climate means higher fuel bills? It has been estimated that the VAT will place an extra financial burden of £133 on families in Scotland. Does the right hon. Gentleman accept that such taxation on domestic fuel will hit the poorest in our society, especially pensioners and those receiving social security benefits? Has he demanded that the Chancellor should abolish this measure? If not, why not?

Mr. Scott

My right hon. Friend the Chancellor has explained why he felt it necessary to introduce this measure. It is now common internationally for indirect taxes to be levied on the cost of fuel. The most important thing for the House to bear in mind is that both my right hon. Friend the Prime Minister and my right hon. Friend the Chancellor have undertaken that the poorer people in our society will be protected from the impact of the increases.

Mr. O'Hara

Is the Minister aware that many pensioners, including those who frequently come to my advice surgeries in despair, receive electricity bills in which the standing charge is the most significant item on the bill? A bill of £24 may be made up, half and half, of the standing charge and the units consumed and it is very common to receive a bill of £36, of which £24 is for the fuel consumed. Does the right hon. Gentleman agree that the imposition of 17.5 per cent. VAT on such bills represents an increase of between 25 and 35 per cent. in the cost of actual fuel consumed? Those pensioners are frightened to consume that fuel. Can the right hon. Gentleman assure those pensioners that they will be adequately protected by the uprating of benefits that he will announce shortly?

Mr. Scott

The price of fuel has been falling in recent years. The Government have already given substantial amounts of extra help to poorer pensioners and others on low income. As I have already said, the Government have a clear commitment to ensure that those on lower incomes will be protected from the introduction of VAT on fuel.

Mr. Sims

But is my right hon. Friend aware that there is concern about this tax among some of my constituents, who find that income from the modest savings that they have made during their working lives, when added to their pension, brings them just above the income support level? They still find it difficult to make ends meet and their sense of grievance is added to when others in similar circumstances, but who made no such special provision, are entitled to income support and a number of other benefits which flow from that. Is my right hon. Friend really satisfied with the present level at which one becomes eligible for income support and the structure of benefits associated with it?

Mr. Scott

This is not the first time that we have heard about the problem faced by the group that my hon. Friend has identified. One reason why we will consider carefully between now and the autumn the precise form of protection to be introduced is to determine which groups, either on income support or any income-related benefit, should be protected as a result of the introduction of VAT on fuel.

Mr. Bradley

May I press the Minister a little further on the extra compensation that the Government are considering? Will he guarantee today that the extra compensation will not be limited to those on means-tested benefits? He will be aware that many of those on means-tested benefits will not claim such compensation and so will get no extra help with the VAT imposition. Many people on non-means-tested benefits, such as elderly people on retirement pensions, disabled people, people with carers, the unemployed and those on low incomes, will get no extra help with the imposition of VAT unless the compensation scheme extends to non-means-tested benefits. Will the Minister give that guarantee today or, better still, will he urge the Chancellor of the Exchequer to scrap the plans altogether?

Mr. Scott

I say no to both points made by the hon. Gentleman at the end of his remarks. Full details of the extra help to be made available will be given in the autumn, based on the latest information then available to the Government and to the House. We shall announce then a coherent and integrated set of measures rather than a one-off, isolated measure. I reiterate the commitment made by my right hon. Friend the Chancellor and by my right hon. Friend the Secretary of State that the extra help will be given to those who need it most.

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