§ Mr. Andrew SmithTo ask the Chancellor of the Exchequer if he will estimate the additional contributions that the United Kingdom will have to make to the EC as a result of the imposition of VAT on domestic fuel and power; and how much the United Kingdom contributions will increase due to the imposition of VAT on domestic fuel and power under(a) the third resource and (b) the fourth resource.
§ Mr. Heathcoat-AmoryThe introduction of VAT on fuel and power has no effect on the VAT base which is used to calculate our third resource contributions since this is harmonised across member states. There may be a small effect on gross national product at market prices, but that depends on what alternative policies would have been followed instead.
In any case, there would be no overall effect on the size of our contribution to the EC budget since, after abatement, our gross contribution is the same as it would have been under the pre-1988 Community financing system—before the introduction of the GNP resource. Changes in our GNP base, which are not mirrored in our harmonised VAT base, do not affect the size of our contribution after abatement.