VAT (Hansard, 4 November 1993)

§ 4. Mr. Bennett
To ask the Chancellor of the Exchequer what discussions he has recently held with representatives of the publishing industry concerning the widening of VAT.

§ The Paymaster General (Sir John Cope)
Treasury Ministers have recently met representatives from all sectors of the publishing industry and their views are being carefully considered in the preparations for the Budget.

§ Mr. Bennett
What income would the Government obtain if they imposed VAT on newspapers, books and magazines? Does the right hon. Gentleman have any estimate of the number of local newspapers that might close as a result of its imposition? What would happen to minority authors? How many books might not be published as a result and how many magazines would close? If the Minister addes up the figures perhaps he will agree that such a move would do far more damage to the spread of information and knowledge than benefit to the Treasury's revenues.

§ Sir John Cope
We have had suggestions of a large number of figures in answer to the points that the hon. Gentleman has made, but I will not anticipate anything that my right hon. and learned Friend may want to say later.

§ Mr. James Hill
I am sure that my right hon. Friend has taken into consideration the fact that there is only one local paper in some areas and that, if they have to pay VAT, such papers are likely to go out of business. But they serve a community purpose. I am sure that my right hon. Friend will sympathetically consider single-paper areas such as Southampton.

§ Sir John Cope
That point has indeed been made in the representations to us.

§ Mr. Nicholas Brown
Was not it an election pledge by the Conservative party that no VAT would be imposed on magazines, newspapers or books? Will the Minister confirm that the imposition of VAT on these items would be regressive, would fuel inflation and would lead to the direct loss of well over 20,000 jobs? Will he also confirm that the same sum of money could be raised without any of these consequences if the Government blocked the inheritance tax loopholes that are abused by the very wealthy?

§ Sir John Cope
Once again the hon. Gentleman is trying to say that everything can be done by stopping-up tax avoidance in some way. He knows perfectly well, as I do, that every Finance Bill that has ever been introduced has involved closing loopholes. He is chasing a mirage. Of course the figures that he mentioned have been brought to our attention in the various representations to which I referred.

§ Mr. Congdon
Does my right hon. Friend agree that the publishing community's campaign against VAT on books would be a jolly sight more convincing if it were prepared to scrap the net book agreement that has pushed up and keeps up book prices?

§ Sir John Cope
I realise the point made by my hon. Friend, but I do not think that it arises in this context.

§ 6. Mr. Mullin
To ask the Chancellor of the Exchequer how much an average family paid per week in VAT in (a) 1979 and (b) 1993.

§ The Financial Secretary to the Treasury (Mr. Stephen Dorrell)
A couple with two children on average earnings paid VAT of £12.95 per week at today's prices in 1979–80 and an estimated £19.30 per week in 1993–94.

§ Mr. Mullin
Is not it clear that the public have been conned and that for four general elections the Conservative party has posed as the party of low taxation that cuts taxation, but has been quietly transferring the burden of tax from income tax to VAT? Is not it the truth that taxation has gone up under the Conservatives and is not that because it is expensive to maintain 3 million people who are permanently out of work? Is not the best way to cut tax to cut unemployment?

§ Mr. Dorrell
To take up the hon. Gentleman's phrase, the truth is that since 1979, we have been improving living standards for British people, which is what matters. Since 1979, take-home pay measured in today's terms for the same family to which the hon. Gentleman referred has risen by £81.50 a week. The hon. Gentleman is right that £6.35 of that increase has gone to pay VAT, but the other £75 a week has gone to improve living standards.

§ Mr. Bill Walker
Does my hon. Friend agree that VAT is an essential aspect of spending-side economics and that 506 if we did not have the income from VAT we would not be able to meet the spending programmes, especially those in which the Opposition are constantly demanding increases?

§ Mr. Dorrell
My hon. Friend is right that VAT is, under this Government, and was under our predecessors, an important part of the total revenue-raising package. I ask the House to reflect on the significance of the fact that in Labour's Britain the standard rate of tax on a wage-earner involved in wealth creation was 33 per cent., while the standard rate of VAT on spending was 8 per cent. I should have thought that in a society where wealth creation was regarded as important, we would want—as the Government have—to cut the rate of tax on wealth creation even if that means an increase in the rate of tax on spending.

§ Mr. Marlow
Would my hon. Friend be kind enough to give an assurance that there is no way in which the Government will consider imposing more VAT on families in Britain if, later in the next Session, the Government intend to bring forward a Bill to re-route more taxpayers' money through Brussels to corrupt regimes in southern Europe so that hands may be greased and money can find its way into the pockets of some people's cronies?

§ Mr. Dorrell
My hon. Friend has introduced a general all-purpose question on taxation. I do not propose to get involved in speculation about our future tax policy. As for our obligations to our European partners, I am sure that my hon. Friend would want us to honour obligations entered into by the Government of the United Kingdom.

§ Ms Harman
Does the hon. Gentleman still refuse to recognise that VAT on gas and electricity is even more unpopular than the poll tax? Does he realise that it is dreaded by the public and that now 1,000 Tory councillors are backing Labour's demand that the Government should drop it? The Chancellor has a choice: either he can ditch it in his 30 November Budget or see it go down in the Finance Bill. Which is it to be?

§ Mr. Dorrell
The hon. Lady is scraping the bottom of the barrel in suggesting that our tax policy should be determined by the views of individual councillors. The one thing that all sides should agree about is that tax policy should be decided by the House. The Government's proposals for VAT on fuel and power have been repeatedly endorsed by the House. It is the House which makes that decision, not councils.

§ Mr. Sheldon
Is not the important aspect of value added tax the fact that until the recent decision to impose it on fuel and power, it was broadly neutral? That was because of zero rating. All other taxes except income tax are regressive, which means that VAT hurts most those who are least well off. As I have said, income tax is our only progressive tax, and the Government are determined to reduce that to help the most well off.

§ Mr. Dorrell
I remind the right hon. Gentleman and the House that it was the Liberal Deomcrats and not the Government who described the exemption of fuel and power from VAT as an anomaly. The hon. Member for Islington, South and Finsbury (Mr. Smith) proposed the introduction of an energy tax and asked the public to write to him with their reactions. Perhaps some of the letters that The Sun suggests should be written to my right hon. and learned Friend the Chancellor should be addressed to that 507 hon. Gentleman. The right hon. Gentleman will acknowledge, I think, that it was not the Government but the Institute for Fiscal Studies which analysed the income distribution effect of the last Budget, and concluded that it was broadly neutral across all income groups.

§ Mr. Duncan Smith
Does my hon. Friend agree that the Opposition are missing the key point, which is that as we changed the structure of direct and indirect tax we lowered the indirect taxation level, leaving most people with money to spend? That is one of the key reasons why we shall move faster as we come out of recession than our European counterparts who have failed to learn that lesson.

§ Mr. Dorrell
My hon. Friend is precisely right: not for the first time, the Opposition are missing the point. He is also right to draw attention to the fact that the prime objective of tax policy must surely be to encourage wealth creation. We cut the marginal rate of tax on wealth creation because we want to make people better off. That is why the man on average earnings with two children now enjoys take-home pay that is £81.50 a week higher than it was in 1979.