HC Deb 13 February 1997 vol 290 cc457-8
9. Mr. Winnick

To ask the Chancellor of the Exchequer if he will reduce VAT on domestic fuel. [14180]

Mr. Waldegrave

No. VAT was applied to domestic fuel for sound environmental and necessary revenue reasons, which continue to apply.

Mr. Winnick

Why not? Does not the Chief Secretary know that VAT on domestic fuel causes particular hardship to many pensioners and others on low income and should be reduced? But then a Chancellor who does not even know the price of a tin of baked beans would not worry about such matters, would he?

Mr. Waldegrave

It takes a certain nerve for a party—the Labour party—s that is making its centrepiece today a new tax on gas and electricity to complain about VAT on fuel. It is perfectly clear that the new tax on gas and electricity proposed by the Labour party will not only hit pension funds and shares, but is bound to affect prices. The hon. Gentleman has a brass neck to complain about VAT.

Mr. Yeo

Will my right hon. Friend confirm that old people were given full protection against the extra costs arising from the introduction of VAT on fuel? If the VAT rate were reduced, the benefits would go to the largest consumers of fuel, who tend to be the richest people. The proposal so enthusiastically espoused by the Labour party is a way to rob poor people and help rich people, while wrecking the environment in the process.

Mr. Waldegrave

My hon. Friend is quite right: pensioners, those on income support and others were fully compensated. My hon. Friend is also right that the bigger one's house, the more fuel tax one pays.

Mr. Milburn

Does the Chief Secretary agree with the statement made by the Chancellor in September 1993 that VAT on fuel is a perfectly fair tax?

Mr. Waldegrave

As the hon. Gentleman is a member of a Front-Bench team that proposes a new tax on gas and electricity, he should ask whether his so-called windfall tax is fair.

Mr. Ian Bruce

Has my right hon. Friend had time to read the literature put out by the Labour party and the Liberal Democrats at the last general election, proposing carbon taxes to put up the price of fuel because it was too cheap? Has he seen what consumers are paying today for gas and electricity? Even with VAT, the cost of fuel has been reduced, owing to the Government's policies.

Mr. Waldegrave

The privatisations of the great fuel utilities, against which the Labour party voted on every occasion, have brought about a 2 per cent. real-terms decrease, after VAT, in the price of electricity and a 20 per cent. real-terms decrease, after VAT and everything else, in the price of gas. The Labour party opposed that, root and branch.