The Bloodstock Industry: VAT (Hansard, 17 December 1992)

The Earl of Caithness
My Lords, we have always accepted that the introduction of the single market could present difficulties for the bloodstock industry and that potential damage could be caused if solutions were not found to these problems. That is why we have been working and continue to work hard with industry representatives to help them find further ways to mitigate the effects they fear; we have set no time limits on these discussions.

§ Lord Peyton of Yeovil
My Lords, does my noble friend understand that to an outsider the sluggishness and lack of progress that characterise these talks suggest a competition in stubbornness, with the Customs and Excise enjoying a comfortable lead? Would my noble friend take this opportunity to endorse the report of the Select Committee of the House of Commons which calls on the Customs and Excise to show more understanding of and sympathy with the needs of the industry? Does he agree that the Customs and Excise create the impression of regarding the jobs that will be lost and the business which will go elsewhere as of little account? It would be nice, I think, if now we had another chairman in 648 charge of Customs and Excise with the wit and understanding of Geoffrey Chaucer, who was chairman 500 years ago.

The Earl of Caithness
My Lords, I am sure that my noble friend would agree that Customs have made a great deal of progress. Let me explain what has been done in the past. The Customs have introduced export undertakings and negotiated the extension of time limits in relation to temporary importation arrangements; they have encouraged the Commission to take action against French use of carcass value for VAT purposes; and they have introduced other minor administrative easements for the industry's benefit. My right honourable friend the Chancellor of the Exchequer cut betting duty by 0.25 per cent. in 1992 at the request of the industry. We have also introduced an agriculture flat rate scheme at the industry's request to help small breeders. We have explained new VAT arrangements so that no one is unnecessarily disadvantaged by them; and we are willing to consider any proposals on appearance money or sponsorship in relation to VAT registration and racehorse owners. I am sure that my noble friend would agree that Customs and Excise are well in the lead of being the ones to move.

§ Baroness Mallalieu
My Lords, does the noble Earl appreciate that many of us who have no connection whatsoever with the bloodstock industry, save for a love of racing, will not willingly forgive this Government if they continue to refuse to make some relatively minor changes in value added tax to allow this industry, which is a source of enormous national pride, to continue, unlike most other British industries, to remain at the forefront of world industries in this field? Will the noble Earl be good enough to indicate what his information is as to the cost to the Revenue of either adopting the Irish or the French VAT rates or indeed of allowing breeders here to register so that irreparable damage is not done before too long to this industry?

The Earl of Caithness
My Lords, I gave a long list in my first supplementary answer—longer than I normally do—of things that have been done specifically to help the bloodstock industry and those who are associated with it. A comparison of the present VAT arrangements and the arrangements available after 1992 shows that they are broadly similar. That has meant quite a substantial move by Customs and Excise. I can also tell your Lordships that discussions are continuing. My noble friend Lord Peyton has been talking to my right honourable friend the Paymaster General recently. There are further discussions planned for tomorrow.

§ Lord Renton
My Lords, what is the significance of the meeting reported in The Times yesterday which is said to have taken place this week between representatives of the bloodstock industry and the Chancellor of the Exchequer? When will the outcome of that meeting be made public?

The Earl of Caithness
My Lords, there is a further meeting tomorrow. There was a meeting last Friday 649 with the Horseracing Advisory Council where some progress was made. We look forward to hearing the propositions that we have asked the horse-race industry to put forward to us. But as my noble friend will be only too well aware, there are a lot of diverse parts with conflicting interests in that industry. We are awaiting submissions from them.

§ Lord Palmer
My Lords, does this situation not make a complete mockery of the single market when other Community members are able to charge different rates of VAT?

The Earl of Caithness
My Lords, an exemption has been made which has been to the enormous benefit of Britain. As the noble Lord will be aware, Britain was at the forefront of being able to keep zero rates for a lot of products. It is the very same agreement that has enabled the differentials in VAT which have existed to the present to be maintained in the future. But that is exactly why Customs and Excise have been talking to the industry and await further representations from the industry to try to mitigate the problem.

§ Viscount Allenby of Megiddo
My Lords, does the Minister agree that the Treasury loses a great deal of revenue by the practice of shipping horses abroad because of the payment of VAT and then bringing them back to this country to be used for whatever purpose? Is it not high time that this practice, which is detrimental to the welfare of the horse, was stopped and that we really did see sense and had a level playing field?

The Earl of Caithness
My Lords, that is exactly one of the areas that we have addressed. As the noble Viscount will be aware, the arrangements post 1st January 1993 are rather better than the arrangements at the moment.

§ Lord Rees
My Lords, can my noble friend tell the House what representations have been made in Brussels about the ingenious French solution of charging VAT on the carcass value of bloodstock?

The Earl of Caithness
My Lords, as I said earlier, we have made very strong representations to the Commission. We have encouraged it to take action on this front. But as my noble friend will be only too well aware, the French treat their horses in a slightly different manner from the way we treat horses. They also eat them.

§ Lord Mackay of Ardbrecknish
My Lords, is my noble friend aware that any shift from a 17.5 per cent. VAT rate for one industry would be followed by a campaign by a number of other industries—for example, the tourist industry—which felt that they were disadvantaged? That would be very damaging to the Government's sensible policy of maintaining a zero rate and a 17.5 per cent. rate. Furthermore, if the Government are going to look at important industries with regard to even playing fields for taxation within Europe, it would be best to start with the Scotch whisky industry.

The Earl of Caithness
My Lords, my noble friend is absolutely right. There is a natural follow-on; and not just for leisure industries such as horse-racing. I know that people are waiting in the wings to bring forward submissions. I refer not just to those involved with pure bred race-horses but show jumpers, three-day eventers and ordinary people who have horses purely for enjoyment.

§ Lord Monkswell
My Lords, in an earlier answer the noble Earl appeared to suggest that Customs and Excise had some discretion in whether to levy the tax. Can he clarify that point because it is my understanding that Parliament determines what the level of tax should be? If it is possible for Customs and Excise to vary the rate of VAT, will the Government advise them that they should reduce VAT on goods bought by pensioners in this country?

The Earl of Caithness
My Lords, as I said earlier, there are a number of ways in which Customs and Excise have been able to help the industry —specifically this industry—within the law. Customs and Excise abide by the law absolutely strictly. But they have helped in various ways. They will continue to have discussions and look forward to the further submissions which I am told are promised.

§ Lord Donoughue
My Lords, I am sure the Minister will acknowledge the deep concern that has been expressed on this issue from all sides of the House over a long period. Does he not agree that the measures that have been introduced by Customs and Excise, though welcome, are not central to this problem and will not save the industry?
Is the Minister aware of the view of the Select Committee of the other place which was referred to earlier? Perhaps I may be allowed to refer to the report because some Members of the House may not have time to see it. The Select Committee states that it hopes that Customs and Excise will be directed by the Paymaster General to sanction a simple, broadly-based method of allowing owners to register for VAT. It goes on to say that unless action is taken to remedy the VAT disadvantages, the horse-racing industry, in which the UK is a world leader, could go into rapid decline, with the loss of thousands of jobs. That is the heart of the question.
In five minutes I am leaving to go to Towcester races. Does the Minister have any message of Christmas comfort for the loyal and, at Towcester resilient supporters of the horse-racing industry that the Paymaster General will boot the Customs and Excise and tell them to find a sensible solution to save the industry and all the jobs?

The Earl of Caithness
My Lords, I am sure that the whole House will wish to congratulate the noble Lord on having a good Recess, starting with an excellent day's racing at Towcester. I hope that while he is there he will spare a thought for the rest of us who will still be in our offices.
The problem the noble Lord raised was the one mentioned by the Horseracing Advisory Council at the meeting last Friday. There are a number of different problems relating to owners, because owners 651 come in various different shapes—companies, large owners, medium-sized owners and small owners. This is again an area where we are awaiting representations and submissions from the Horseracing Advisory Council. As soon as they are in, Customs and Excise will be able to consider them. It is difficult for them to consider submissions when they have not yet received them.

§ Lord Peyton of Yeovil
My Lords, my noble friend enjoys widespread respect in the House. Does he realise how greatly he will enjoy its sympathy today on having to shelter behind that catalogue of rather piffling measures he retailed in his answer to my first supplementary question? Will he take the opportunity to tell those people that if they want to save jobs and this country's export business they had better get on and take the easy remedy of registering horse owners for VAT? It is easy. It is done elsewhere. It is sheer pigheadedness that it is not done here.

The Earl of Caithness
My Lords, my noble friend may think that the list I gave him in a very full answer was piffling, but I fear that his questions would have been considerably more abrasive if we had not undertaken the measures that we have. Of course the Government understand fully the anxieties relating to the industry. That is why the discussions are continuing at an intensive level. Indeed, my noble friend has been in direct contact with my right honourable friend the Paymaster General to raise the points that have been raised in your Lordships' House. As I said, we are waiting for the horse-racing industry to come back to us.