Asked by: Lord Rose of Monewden (Conservative - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government when they expect real GDP per capita to return to its pre-pandemic peak; and what steps they are taking to support this growth.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
Achieving sustained economic growth is the priority mission of this government. The government is focused on fixing the foundations of the UK’s economy.
Having launched the Growth Mission in July 2024, the government has already taken several steps including planning reforms to get Britain building, establishing the National Wealth Fund, announcing a Pensions Review, and launching Skills England. The government is under no illusion of the scale of the challenge, however, given the difficult economic inheritance.
HM Treasury does not prepare formal forecasts for the UK economy, which are the responsibility of the independent Office for Budget Responsibility (OBR). In its March forecast, the OBR expects that GDP per capita will surpass its pre-pandemic peak in 2025. Further details can be found in Table 1.5 of the OBR’s latest Economic and Fiscal Outlook published in March 2024: https://obr.uk/efo/economic-and-fiscal-outlook-march-2024/.
Asked by: Lord Rose of Monewden (Conservative - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what plans they have to assist families further in relation to the rise in the cost of living; and whether any such plans include (1) introducing a lower rate of VAT for fuel, and (2) reducing the general rate of VAT.
Answered by Baroness Penn
To support households with the rising cost of living, the Government is providing over £15 billion of additional support, targeted particularly on those with the greatest need. This package builds on the over £22 billion announced previously, with Government support for the cost of living now totaling over £37 billion this year.
The Government intends VAT to remain a broad-based tax on consumption where the standard rate of 20 per cent applies to most goods and services, including road fuel. While there are exceptions to the standard rate, these have always been strictly limited by both legal and fiscal considerations.
Reducing VAT would impose additional pressure on the public finances, to which VAT makes a significant contribution. VAT raised around £130 billion in 2019-20 and, according to OBR forecasts, will have raised approximately £135 billion in 2021-22, helping to fund key spending priorities. Any reduction in tax paid is a reduction in the money available to support important public services, including the NHS and policing.
Asked by: Lord Rose of Monewden (Conservative - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what plans they have to extend the business rates holiday beyond April 2021 for (1) retail, and (2) hospitality and leisure, businesses.
Answered by Lord Agnew of Oulton
The Government will consider all reliefs in due course through the Business Rates Review.Asked by: Lord Rose of Monewden (Conservative - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what assessment they have made of the impact of the withdrawal of the VAT retail export scheme from 1 January 2021 on levels of employment in (1) the retail sector, (2) the hospitality and leisure sector, (3) the creative sector, and (4) across all sectors.
Answered by Lord Agnew of Oulton
Ahead of the end of the transition period, the Government has announced the VAT and excise duty treatment of goods purchased by individuals for personal use and carried in their luggage arriving from or going overseas (passengers). The following rules will apply from 1 January 2021:
- Passengers travelling from Great Britain to any destination outside the United Kingdom (UK) will be able to purchase duty-free excise goods once they have passed security controls at ports, airports, and international rail stations.
- Personal allowances will apply to passengers entering Great Britain from a destination outside of the UK, with alcohol allowances significantly increased.
- The VAT Retail Export Scheme (RES) in Great Britain will not be extended to EU residents and will be withdrawn for all passengers.
- The concessionary treatment on tax-free sales for non-excise goods will be removed across the UK.
The Government published a consultation which ran from 11 March to 20 May. During this time the Government held a number of virtual meetings with stakeholders to hear their views and received 73 responses to the consultation. The Government is also continuing to meet and discuss with stakeholders following the announcement of these policies.
The detailed rationale for these changes are included in the written ministerial statement and summary of responses to the recent consultation. A technical note has also been issued to stakeholders to expand on this document and to respond to issues raised by stakeholders.
HMRC estimate that VAT RES refunds cost around £0.5 billion in VAT in 2019 for around 1.2 million non-EU visitors. In 2019 the ONS estimate there were substantially more EU visitors (24.8 million) than non-EU passengers (16.0 million) to the UK. This implies an extension to EU residents would significantly increase the cost by up to an estimated £0.9 billion. This would result in a large amount of deadweight loss by subsidising spending from EU visitors which already happens without a refund mechanism in place, potentially taking the total cost up to around £1.4 billion per annum.
The final costings will be subject to scrutiny by the independent Office for Budget Responsibility and will be set out at the next forecast.