Value Added Tax

HC Deb 28 March 1991 vol 188 cc516-8W

Mr. Alex Carlile

To ask the Chancellor of the Exchequer if he will make it his policy to remove VAT from sanitary towels and tampons; and if he will make a statement.

Mrs. Gillian Shephard

The Government have no plans to remove VAT from sanitary products or other essential items of personal hygiene. In any case, this would be contrary to EC law.

Mr. Waller

To ask the Chancellor of the Exchequer whether he intends to compensate health authorities for the Budget increase in the standard rate of value added tax.

Mrs. Gillian Shephard

I have agreed that in the special case of the health programmes, the additional costs to health authorities should be added to existing provision as a claim against the reserve. This will also apply to comparable expenditure in Scotland and Wales. The increased provision will be granted to the national health service in supplementary estimates for 1991–92 to be presented in due course later in the year.

Mr. Bernie Grant

To ask the Chancellor of the Exchequer how many firms were registered for value added tax, were new registrations for value added tax, and ceased to be registered for value added tax, in each year from 1987 to date, in the parliamentary constituencies of(a) Tottenham and (b) Hornsey and Wood Green.

Mrs. Gillian Shephard

[ holding answer 25 March 1991]: The local VAT Office at Enfield covers areas in addition to the constituencies of Tottenham and Hornsey and Wood Green. No distinction is made between businesses registering for the first time and other registrations, for example, a sole proprietor taking on a partner or forming a limited company.

Years End December	New Registrations	Deregistrations
1987	2,740	2,297
1988	2,816	2,229
1989	3,583	2,367
1990	3,087	2,575

Mr. Fisher

To ask the Chancellor of the Exchequer what resources and how many civil servants for how many days were devoted to Her Majesty's Government's plans to raise value added tax to 17.5 per cent.

Mrs. Gillian Shephard

[holding answer 26 March 1991]: Civil servants provided advice to Ministers on a wide range of subjects during the Budget period. It is not possible to provide a reliable estimate of the time spent advising on any one particular issue.

Mr. Fisher

To ask the Chancellor of the Exchequer what he estimates will be the effect on the headline and core rates of inflation on value added tax at 17½ per cent.

Mr. Maples

[holding answer 26 March 1991]: The increase in the standard rate of value added tax from 15 to 17½ per cent. will add 1.1 percentage points to RPI inflation in 1991–92, on the assumption that it is fully passed on to the consumer. But this effect will be more than offset by the Budget measures on the community charge, which will reduce RPI inflation by 1.9 percentage points.

There is no unique measure of underlying inflation. Moreover, as explained in the Government's observations on the Treasury and Civil Service Committee's report on the 1990 Budget, it is helpful when analysing underlying inflation to abstract from once-off changes, such as changes to indirect taxes.

The increase in VAT will have no effect on producer output price inflation. It will have the following effects on measured inflation between April 1991 and March 1992: add 1.2 percentage points to RPI inflation excluding mortgage interest payments, offset by the Budget reduction in the community charge; add 1.3 percentage points to RPI inflation excluding mortgage interest payments and community charge; add 1 percentage point to the increase in the market price GDP deflator.

But these effects are best seen as once-off changes to the price level, associated with switching from community charge to indirect taxes, rather than increases in underlying inflation.

Mr. Barry Field

To ask the Chancellor of the Exchequer what arrangements he is making to allow guest house and hotel proprietors to recoup the increases in value added tax on holidays prebooked and prepaid before the rise from tour operators and by tour operators from their customers.

Mrs. Gillian Shephard

[ holding answer 26 March 1991]: No special arrangements are necessary. Guest houses and hotel proprietors and tour operators will either be able to use the normal arrangements governing a change of VAT rate or, where appropriate, arrangements under the tour operators' margin scheme. Details are explained in the relevant Customs and Excise public notice and leaflet. To the extent that guest house and hotel proprietors have received payment before 1 April 1991, they will have no additional VAT liability in respect of that payment.