VAT: Bloodstock Industry (Hansard, 1 December 1992)

§ The Parliamentary Under-Secretary of State, Department of the Environment (Lord Strathclyde)
My Lords, we prefer to maintain a single positive rate of VAT in the United Kingdom, but extensive discussions with UK bloodstock interests to find other ways of minimising any distortion of competition are continuing.

§ Lord Peyton of Yeovil
My Lords, I wonder what my noble friend means by the verb "continuing". The discussions have been going on for a very long time. Do Ministers need to be reminded that we have two serious problems in this country: unemployment and the balance of payments? Does it not seem exceedingly foolish to allow either of those to suffer damage when an easy remedy is available—either a dual rate of purchase tax or the registration of owners? Either would do. It is no good my noble friend saying that discussions are continuing—1993 will alter the rules.

§ Lord Strathclyde
My Lords, discussions are continuing, but also a great deal has been achieved. We are working hard with the industry to find ways of helping it. We have introduced an agricultural flat rate scheme at the bloodstock industry's request. We introduced a reduction in betting duty in the last Budget worth £10 million to the industry, and we have encouraged the use of distance selling methods to get round the VAT regulations. I understand what my noble friend says about the state of the industry, but we are very keen to help it.

Lord Bruce of Donington
My Lords, in view of the imminence of the Edinburgh summit at which all kinds of backstairs deals may conceivably be done, will the noble Lord give the House an assurance that the Government will adhere strictly to their often-repeated pledges of continuing zero rating in respect of food, fuel, transport, children's clothing and other items which are at present zero rated?

§ Lord Strathclyde
My Lords, the noble Lord hits on a very important point. It is the same European Community law that allows the Irish to set their low VAT rate on horses which protects our own very important British Government policy on zero rating.

§ Lord Renton
My Lords, is my noble friend aware that some 30 years ago when the bloodstock industry was having a very difficult time, a Conservative Government persuaded Parliament to introduce the horserace betting levy? That is still being paid, but VAT differential rates are having a very bad effect on the industry in spite of the levy. Although my noble 1250 friend has said that the Government are further considering the matter, can he say when a favourable decision will at last be reached?

§ Lord Strathclyde
My Lords, I thought I had indicated to the House that we have already achieved many things to help the industry. But VAT is not the only problem it faces. Overall, there are too many horses for too few owners; and the price of horses has dropped over the course of the past few years. That has reduced profits to the bloodstock industry. There are many other problems inherent within the industry than just VAT.

§ Lord Mellish
My Lords, is it not a fact that the bloodstock industry is in a very parlous condition? A lot of its work is being transferred to Ireland because VAT there is very much lower. That is not right. Surely, this country ought to take into account VAT as it applies to an industry which is suffering from the threat of the loss of many jobs. This is an all-party matter.

§ Lord Strathclyde
My Lords, of course we take VAT into account; but even if it were possible under Community rules to allow a second low rate of VAT, it would be difficult to avoid making the argument for so many other industries. For example, the tourist industry, the car manufacturing industry and many other industries which believe that they have an important role in our national life.

§ Baroness Sharples
My Lords, is my noble friend aware that with so many studs closing, veterinary surgeons are having a very difficult time?

§ Lord Strathclyde
My Lords, I am grateful for that information. That indicates the problem which exists in the horseracing industry.

§ Lord Barnett
My Lords, I agree with the noble Lord, Lord Peyton, and others about the problems of the bloodstock industry; but the first part of the Question relates to VAT as a whole. In that respect, the Minister insisted that government policy is to stick with a single positive rate. Will the introduction of the single market on 1st January have no consequences for government policy in that regard?

§ Lord Strathclyde
My Lords, the Commission has decided on a Community framework of a standard rate of VAT of not less than 15 per cent. It is that which guides us. The Irish are protected on their low rate on the same basis as I answered the noble Lord, Lord Bruce of Donington. We are not sure that the French low rate is a legal rate. That is something that the Commission will have to take up through the European Court of Justice.

The Viscount of Falkland
My Lords, what does the noble Lord estimate the loss to be in terms of revenue to this country should Messrs. Tattersall move their operations to Ireland? I believe it is their plan to do so.

§ Lord Strathclyde
My Lords, we have no estimates of that figure. We regret the decision; but it is a commercial decision for them to make.

§ Lord Harmar-Nicholls
My Lords, is my noble friend aware that whatever figure is produced now, we are losing a important and valuable industry in this country? The battle that is going on is a battle that the general public seems to think we are losing. What can we do about it?

§ Lord Strathclyde
My Lords, the point is that there are many factors affecting the British horseracing industry. The British VAT rate is only one factor which buyers and breeders take into account when making their decisions as to where to purchase or sell horses. I have said that we have a great deal of anxiety for the industry and are continuing our discussions with it. We shall do what we can within existing VAT regulations to help the industry.

§ Lord Donoughue
My Lords, will the Minister accept that the answer that "discussions are continuing" is totally unsatisfactory in the light of identical answers given to me by different Ministers on 15th January 1991 and 11th March 1992 of this year? The canary has changed but the song remains the same. It is not good enough. As the noble Lord, Lord Peyton, suggested, there are two clear potential solutions to that problem. The first is to adjust our bloodstock VAT levels to those prevailing among our European competitors in Ireland and France in order to create a level playing field. The second is to enable horse owners to register for VAT as a business. Given the existence of those solutions, why are the Government dithering while tens of thousands of jobs are at risk?

§ Lord Strathclyde
My Lords, as regards adjusting VAT rates, I believe that I have made the position clear, given our Community obligations. We must exist under the current framework. Racehorse owners can register for VAT if they can prove that they are a business. Until now racehorse owning has not been regarded as a business. However, I am advised by Customs and Excise that if those owners were to eat their horses and produce food from them, they could demonstrate that they are a food production business.

§ Lord Donoughue
My Lords, before the Minister sits down—and I hope that he enjoyed his lunch—will he not agree that in eight of the 12 countries of the European Community racehorse owners are allowed to register for VAT as a business?

§ Lord Strathclyde
My Lords, I have no information as to whether or not eight out of 12 is the accurate figure. I understand that the French get round the problem, but we all know about their particular culinary tastes. The European Commission has still to take up with the French Government as to whether or not their rules apply.

§ Lord Elton
My Lords, in the Minister's reply to my noble friend Lord Harmar-Nicholls, he spoke as though it were only the buying and selling of horses which is in question. Will my noble friend register that it is concerned also with the training, racing and breeding of horses? That is a very much larger 1252 industry? A great deal is at risk and the House has demonstrated that all parties favour some emergency action.

§ Lord Strathclyde
My Lords, my noble friend is right. We are talking about the whole industry. However, this particular aspect of VAT affects only those people who are not registered for VAT as a business; that is, the owners who must pay VAT but cannot claim it back. Rather than allowing this discussion to continue further, I should say that I understand those anxieties which have been expressed to me today. I shall draw them to the attention of the Treasury in order to see whether or not something can be done.

§ Lord Peyton of Yeovil
My Lords, that at least gives me the opportunity to say "thank you". When my noble friend visits the Treasury, will he tell those Ministers who are not always receptive of communications that there is some surprise that they do not seem to have realised that 1st January 1993 will see a change in the rules of a very serious kind? Will he say also that there is some surprise that no assessment appears to have been made of the damage in terms of exports lost, revenue lost and jobs lost?

§ Lord Strathclyde
My Lords, my experience of discussing this question with Treasury Ministers and Customs and Excise officials leads me to believe that they are aware of what has been said.