Finance Bill

Alison Thewliss Excerpts

Monday 5th September 2016 Commons Chamber

[Mr Christopher Chope (Christchurch) (Con)]

I thank the hon. Member for Dewsbury (Paula Sherriff) for tabling her amendments, for speaking to this issue today and for having campaigned on it so effectively for so many months, if not years.

My amendment 140 would require the removal of VAT on women’s sanitary products to take effect by 1 January 2017. The background is that the former Prime Minister assured the House in March that he had succeeded in persuading the other 27 Heads of Government at the EU Council meeting on 17 and 18 March to allow the United Kingdom Government to respond to popular demand and extend the zero rate for VAT to women’s sanitary products. The former Prime Minister told the House:

“This is an important breakthrough. Britain will be able to have a zero rate for sanitary products”.—[Official Report, 21 March 2016; Vol. 607, c. 1246.]

On 24 March this Bill, then the Finance (No. 2) Bill, was published, and clause 125, as it now is—it was originally clause 115—was designed to implement the pledge on the abolition of VAT on women’s sanitary products and the introduction of a zero rate, but when the EU VAT action plan was published on 7 April it did not deliver on what the Prime Minister must have thought he had been promised at EU Council meeting in the previous month.

I tabled a couple of parliamentary questions on the subject. The first was:

“To ask Mr Chancellor of the Exchequer, what information his Department holds on the reasons why the EU Action Plan on VAT consultation document issued…on 7 April 2016 omits any reference to the decision of EU Heads of Government that the UK can remove VAT from women’s sanitary products”.

The answer I received was typically helpful from my right hon. Friend the Chief Secretary, then the Financial Secretary, and said:

“The content of the EU VAT Action Plan is a matter for the European Commission. European Council Conclusions welcomed ‘the intention of the Commission to include proposals for increased flexibility for Member States with respect to reduced rates of VAT, which would provide the option to Member States of VAT zero rating for sanitary products’.”

I then asked my right hon. Friend the Chief Secretary on what date he expected the removal of VAT from women’s sanitary products to take effect, and he replied on 18 April:

“The zero rate of VAT for sanitary products will take effect as soon as possible after Royal Assent.”

There was no mention of any constraint in EU law that would prevent the early implementation of the pledge that the Prime Minister was able to deliver following that European Council meeting.

[Alison Thewliss (Glasgow Central) (SNP)]

I thank the hon. Gentleman for the support he has given to the campaign and for his research, in addition to the work done by my honourable colleagues on the SNP Benches. Does he agree that it does not feel like progress or much like a victory if I still have to pay tax on the tampons I am using today?

[Mr Chope]

I fully accept what the hon. Lady says. This whole saga illustrates the frustration that many of us have felt in this House for a long time that the European Union works extremely slowly and very deviously. That was what the referendum was all about: it was about taking back control of these decisions to this House and being able to implement decisions quickly, effectively and in accordance with the wishes of the British people. Unfortunately, we have not got an instant departure from the European Union. We have to negotiate our departure and serve article 50 and so on, but in the meantime there is a lot of frustration, I accept. That has been exacerbated by the way the previous Government played down—let us be generous to them—the EU impact in this regard before the referendum. They did not want people to think that there was another reason to vote to leave, so that we could remove VAT from women’s sanitary products.

On Second Reading of the Finance (No. 2) Bill, my right hon. Friend the then Financial Secretary, who is now the Chief Secretary, said:

“The Government are committed to making that change…I am proud that in the Finance Bill we are legislating to enable zero VAT rates for women’s sanitary products.”

I then intervened and said:

“I congratulate my hon. Friend on the progress he has made. Why does clause 115 say that the measure will not come into effect when the Bill receives Royal Assent, but is subject to the Treasury introducing a provision at some later stage? Why can we not legislate on this in the Bill without any qualification?”

My right hon. Friend replied:

“It is customary, with changes in VAT rates, to give retailers notice. It is not usual for VAT changes to be put in place on the date of Royal Assent, as notice is usually provided. I reassure my hon. Friend that the intention is to provide a short period of time, following Royal Assent, in which retailers will have an opportunity to adjust prices. This is no desire by the Treasury to kick this into the long grass—we want to make progress on the matter.”—[Official Report, 11 April 2016; Vol. 608, c. 102.]

I think that that was a very disingenuous remark, because there was no reference to any EU constraint. The impression given was that it was all being sorted out with the European Union and that it would be delivered through clause 115, as it then was, very quickly. Somebody in the Treasury must have known or suspected that it would not be delivered in the time envisaged or, perhaps, at all, but nobody wanted to disclose that to the British people in the run-up to the referendum. I have heard that an agreement was made between remainers in the then Government and in the Opposition to try to prevent the issue from being raised on the Floor of the House, in the Finance Bill, close to the time of the vote.

Is it not fantastic that we now have the freedom to do these things ourselves, in our own sovereign Parliament, in accordance with the wishes of the people? I hope that the new Treasury team will be much more open and transparent in the way they deal with such issues. If there is an EU constraint, let us say so.

I welcome Government amendment 161, because it says that the measure will take effect after the later of 1 April 2017 or

“the earliest date that may be appointed consistently with the United Kingdom’s EU obligations”,

whatever that might mean. Why, however, was that not included in the Bill to start with? It was never going to be possible for the measure to be implemented at an earlier date than was consistent with our EU obligations. People were led up the garden path: they were led to believe that there was going to be an instant delivery, but we now know that that is not going to happen. I hope that when we come to look at the wider issues of VAT, we will get on with, for example, removing the 5% VAT on domestic fuel, which we in the leave campaign made an issue during the referendum.

It was a long time ago, but it was on 1 April 1973 that VAT was introduced in our country as a requirement of our decision to join the European Union. At that time, the rate was 10% and the yield was £1.5 billion a year. The standard rate was increased in January 2011 and it has been 20% since then, and that raises £100 billion a year. After leaving the European Union, we will be free to set our rates of VAT at whatever level we wish.

--- Later in debate ---

[Kirsty Blackman]

I promise that I will speak only briefly, because I know that everybody is keen to get away.

I thank the Government for their movement on this issue already. In my short time as an MP, there has been a major change in VAT on sanitary products, and I appreciate the Government taking that on. We owe huge thanks to the women who have campaigned about this, not only those in the House—such as my hon. Friend the Member for Glasgow Central (Alison Thewliss), the hon. Member for Dewsbury (Paula Sherriff) and other Members from across the House—but all the other women who have put their time and effort into campaigning.

I would like to highlight briefly some of the anomalies that continue in relation to sanitary products and VAT. VAT is still levied on incontinence products. Unless someone fits a very narrow definition of “disabled” under the law, they pay VAT on incontinence products. In the UK, between 3 million and 6 million people suffer from incontinence, and the UK Government receive the VAT from the sale of those products. I do not think that that is right; I think that those individuals should be able to get incontinence products VAT-free, because they are a necessity for those 3 million to 6 million people.

The other anomaly in the system concerns breast pads. If someone who is breastfeeding has an excess supply of milk and is therefore leaking milk, they require breast pads. There are no two ways about it. They absolutely require those pads, or they will be covered in milk. Having done that a number of times myself, I am well aware of the pitfalls.

[Alison Thewliss]

Having breastfed my children, I well know that circumstance and how it can arise. This points to the need for a wider review of VAT—perhaps at the point of Brexit, or even starting now—on items that have emerged into the market. Breast pumps, for example, are still liable for VAT, whereas formula is not. That has a disproportionate effect on people who choose breastfeeding over formula feeding.

[Kirsty Blackman]

I absolutely agree with my colleague. If we are to encourage breastfeeding and to make it as accessible as possible for people, we need to ensure that the products they require to breastfeed well, and without making too much mess, are appropriately VAT-rated. The interesting thing is that the zero-rating guidance was written a long time ago, and it is not appropriate for today’s society. If the Government were, as my hon. Friend suggests, to commit to undertake a proper review and making sure that people are not unfairly penalised for buying essential, necessary products, I would very much appreciate it.