HC Deb 27 October 1994 vol 248 cc994-5
5. Mr. William O'Brien

To ask the Chancellor of the Exchequer what income has accrued from value added tax on domestic fuel bills from April to October 1994.

The Paymaster General (Mr. David Heathcoat-Amory)

The Central Statistical Office's estimates of consumer expenditure show that the projected total of VAT accruing on domestic fuel bills in the six months to 1 October 1994 will be £410 million, and for the year to 31 March 1995 the projected total accruing will be £1,120 million.

Mr. O'Brien

Does the Minister agree that 10 million pensioners and 6.5 million people, including unemployed people, have contributed substantially to those figures? Only fools would accept that the 50p allowance introduced by the Department of Social Security to help to pay bills meets the cost. As pensioners, unemployed people and those on income support face difficult winters and difficulty in meeting their energy bills, will the Minister prevail on his colleague, the Chancellor, to withdraw the next issue of the implementation of 17.5 per cent. VAT on fuel bills?

Mr. Heathcoat-Amory

The House decided to implement VAT on fuel bills in two stages. It did so in the knowledge that a generous compensation package gives extra help to all pensioners and widows, disabled people and those on income-related benefits, adding up to some £2.5 billion over three years. The background is that fuel prices generally are falling. Indeed, even allowing for the introduction of VAT earlier this year, electricity prices have remained stable over the past two years and gas prices are now lower by 2.5 per cent. in real terms than two years ago.

Mr. Biffen

Will my hon. Friend use this occasion to assert the sovereign role of this House in determining fiscal matters and, in that context, acknowledge that there is an economic and social argument for keeping our rates of value added tax below those of our European Union partners, even though that may have consequences for direct taxation?

Mr. Heathcoat-Amory

I can confirm that the decision on fuel taxation was taken by the House and was not forced on us by the European Community. Our existing zero ratings are protected fully by EC legislation, and we have an effective veto on any changes that are against the wishes of this House.

Mr. MacShane

The Minister will be aware of today's important article in The Times pointing out that personnel directors have awarded themselves wage increases significantly above those given to their employees. He will also be aware that suppliers are now increasing prices across industry because of the recovery, that large wage claims are in the pipeline and that the latest Union bank of Switzerland prediction on inflation in the United Kingdom next year is 5 per cent. Will the Minister make a bet with me on what the inflation rate will be in 12 months' time? [Interruption.]

Madam Speaker

Order. The hon. Gentleman is on the wrong question: we are talking about VAT on domestic fuel bills. I will allow the Minister to answer, however; I am sure that he can.

Mr. Heathcoat-Amory

I can answer in relation to privatised industries in the fuel and power sector. I can confirm that privatisation has led to lower prices. That has been good for customers, as well as for all who work for the industries concerned. There has been an unalloyed benefit from the privatisation programme introduced by the Government in the teeth of opposition from hon. Members on the Opposition Benches.