§ '. Schedule 8 to the Value Added Tax Act 1994 (zero-rating) shall have effect, and be deemed always to have had effect, as if in Group 1 (food), in Note (6) (which provides that certain items which override the exceptions listed in that Group relate only to item 4 of the excepted items (non-alcoholic beverages)) for "Items 4 to 6" there were substituted "Items 4 to 7".'.—[Dawn Primarolo.]
§ Brought up, and read the First time.
§ Dawn Primarolo
I beg to move, That the clause be read a Second time.
746 The new clause corrects an error made in the transcribing of a cross-reference from the Value Added Tax Act 1983 to the Value Added Tax Act 1994, unintentionally extending zero-rating to VAT on food to include pet food, although it has been this Government's, the previous Government's and the industry's interpretation that VAT was to be applied at 17.5 per cent. It restores the position to what everyone understood it to be until Customs and Excise recently discovered the error. I commend it to the House.
§ Mr. Letwin
The new clause gives us a marvellous illustration of what is wrong with VAT legislation. The drafting mistake that the new clause remedies arose because of a quadruple negative. In the first place, everything is subject to VAT, but schedule 8 zero-rates—makes not VATable—certain items, including those in group 1, item 2 of which is animal feeding stuffs and pet foods; but certain items in group 1 are excepted and are not not VATable; but there is an override for preparations and extracts of yeast, meat or egg, which are not not zero-rated, or not not not VATable, making them not VATable, or zero-rated; but the override is overridden by note (6), which restricts some of the overrides to beverages such as Bovril, the favourite drink of my hon. Friend the Member for Lichfield (Mr. Fabricant). That makes the other meaty preparations on that list not not not zero-rated, in which case, they are not not not not VATable—in which case, they are, of course, VATable. All of that was meant to apply to pet foods—poor old pet foods.
Unfortunately, that string of quadruple negatives quite defeated Her Majesty's Government's magnificent legal advisers—and, we are to assume because no challenge was levelled, the entirety of the private sector, until very recently. Now, Her Majesty's Government have splendidly caught up with the fact after the fact; but they hardly needed to because, as my hon. Friend the Member for Rochford and Southend, East (Sir T. Taylor) pointed out earlier this afternoon, the sixth VAT directive probably had direct effect throughout, so there was probably no need for the change.
That brings me to my questions. Does the Paymaster General know what the yield of the measure will be if it has been correctly drafted? I asked her this some hours ago, when we debated the Ways and Means motion, but she failed to answer—no doubt it was an oversight. Perhaps she will answer now.
§ Mr. John Bercow (Buckingham)
The challenge my hon. Friend poses the Paymaster General is entirely unexceptionable, so I assume that she will be able to answer it. However, does my hon. Friend agree that the hon. Lady does not have to look into the crystal ball when she can read the book? Given that, in answer to my hon. Friend the Member for Rochford and Southend, East (Sir T. Taylor), the Paymaster General said that this tax had not only been incurred legally, but had been paid by the relevant sector in previous years, should she not be able to tell us how much was paid in the financial year 1998-99, and do so immediately?
§ Mr. Letwin
My hon. Friend is absolutely right. We are discussing an opportunity loss for the Exchequer and, since we can know what revenue came to the Exchequer 747 through pet food VAT last year, the Paymaster General should be able to estimate what the opportunity loss would be were the new clause not added to the Bill—always assuming it had any value in the first place.
My next question is whether the drafting is now right. I should not bother to ask were it not for the fact that the whole thing is so incomprehensible that it defeated all the draftsmen to begin with, and it might be that there is a mistake this time.
I should also like to know what is a packaged food for birds. Packaged foods for birds will be caught, but packaged foods that happen to be eaten by birds but are not for birds will not be caught. This is just like the Medicines Control Agency: a great deal of fuss and bother has been caused by the difficulty of determining what something is for before one has eaten it. Whether the thing in question is caught depends to a great extent on whether one is a bird or a human being.
I hope that the Paymaster General can tell us that she is confident that, this time around, she and her officials have got the drafting right, because what we have here is legislation that is a dreadful mess. That is nobody's fault—the blame must be spread across the past 50 years—but the situation has been greatly worsened by the sixth VAT directive. What we should have been dealing with this evening is a proper clearing up of some ghastly architecture; unfortunately, what we have is just another piece of patchwork.
I hope that the Paymaster General will tell us, first, that the provision yields some serious revenue and, secondly and crucially, that it has been correctly drafted this time.
§ Dawn Primarolo
The answer to the hon. Gentleman's second question is that I sincerely hope that the provision is correctly drafted this time and that the transcription error has now been corrected. The yield is £185 million a year, which is not an insignificant sum, so it seemed to be a good idea that the Government should maintain the revenue.
I know that it is late, but I think that the Opposition should consider calming down, and agreeing that the new clause makes sense and represents sensible management.I apologise to the House for the previous Government having made the error, and I hope that the Opposition will now agree to its being corrected.
§ Question put and agreed to.
§ Clause read a Second time, and added to the Bill.