HC Deb 16 March 1993 vol 221 cc190-1

I have already announced my intention to extend value added tax to domestic fuel and power from 1 April next year. I have one further announcement to make on VAT.

As the House knows, it has long been this Government's intention to switch the burden of taxation from direct taxes on income to indirect taxes on consumer spending. It is perhaps less well known that Britain has one of the lowest effective rates of VAT in the European Community.

Against this background, and in a Budget designed to place the public finances on a sound footing, I have inevitably had to look very carefully at the whole structure of our current VAT regime, and particularly at whether all of our existing zero rates should be maintained. Some of these zero-rated goods—for example, food and water—are clearly amongst the most basic necessities of life. Others—for example, sewerage and newspapers—perhaps fall into a different category.

Having reflected carefully, I have decided nonetheless not to extend the VAT base beyond fuel and power. I do, however, have one further announcement on VAT, which will I hope offer some consolation to those hon. Members who would rather be at Cheltenham today, watching the Champion Hurdle.

For some time, the bloodstock industry has been concerned about competition from other EC countries which levy a lower rate of VAT on horses. The single market has exacerbated this problem and created a major incentive to move bloodstock business abroad, threatening 30,000 jobs.

There have been intensive discussions between the Jockey Club and Customs, and I am pleased to announce that a way forward has been found. As a result of proposed changes in the Jockey club's rules, owners who wish to do so will now be able to organise their racing activities in a more commercial way. This in turn will enable them to meet the normal business test for VAT registration and to claim credit for VAT on purchases, subject to the usual rules.

I know that there have been representations on this from both sides of the House, and I know that registration on this basis meets the industry's concerns over this problem. No Government have done more for racing than this one—and quite rightly so, for it is an important industry, and a vital part of our national life. This measure will be welcomed by the industry and by its many supporters in this House.

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