HC Deb 23 March 1989 vol 149 cc703-4W
Mr. Heddle

To ask the Chancellor of the Exchequer what considerations caused him to revise the proposals on value added tax on non-residential construction from those originally published on 21 June 1988.

Mr. Lilley

I refer my hon. Friend to my reply to my hon. Friend the Member for Suffolk, South (Mr. Yeo) on 6 February at columns548–50.

Mr. Heddle

To ask the Chancellor of the Exchequer if he will specify the assumptions and forecasts he has made about non-residential construction in the private sector in each of the years 1989–90, 1990–91, 1991–92, and 1992–93, in calculating value added tax yield in future years on such construction.

Mr. Lilley

The assumptions and forecasts used to calculate the VAT yield from non-residential construction in 1989–90 and 1990–91 are consistent with the economic forecasts contained in the FSBR.

Mr. Heddle

To ask the Chancellor of the Exchequer (1) whether he has undertaken any study into the effect of the output and activity of the construction industry of his proposals for applying value added tax to non-residential construction;

(2) whether he has undertaken any study into the likely effect on employment in the construction industry of his proposals for applying value added tax to non-residential construction;

(3) whether he has undertaken any study into the likely effect on urban development corporations of applying value added tax to non-residential construction;

(4) whether he has undertaken any study into the likely effect on inner city regeneration of his proposals for applying value added tax to non-residential construction.

Mr. Lilley

As I made clear in my statements on 21 June 1988 and 6 February 1989, the Government had no choice but to remove the zero-rating found unlawful by the European Court of Justice. After consulting the construction and property industries, the Government are satisfied that the best solution is to combine the taxations of certain new construction with the landlord's option to tax rents, so that the tax could "wash through" the system to the maximum possible extent.