Finance Bill

Andrew Percy Excerpts

Tuesday 3rd July 2012 Commons Chamber

[Mr Gauke]

We assessed what the impact would be if VAT was at 20%, and obviously 5% is a quarter of that, so one can draw correlations. Most industries supply VAT-inclusive durable goods at a profit, so it is reasonable to apply VAT in this case. The impact that we originally set out in the tax information and impact note at the time of the Budget will be significantly lessened by the change to the 5% rate, particularly bearing in mind that there is already a full 20% rate on a fair proportion of static caravans because of the durable goods contained within them.

[Andrew Percy (Brigg and Goole) (Con)]

We can partly assess what the impact will be from what manufacturers themselves have said, which is that they do not expect the 5% rate to have an impact of any great severity on them. However, it is important to recognise that there needs to be stability, so an assurance that the Government will not raise the rate in future would be welcome, as would an undertaking that there will be an assessment of the rate after a year or two to see whether it has had any impact. Generally, the industry has welcomed it.

[Mr Gauke]

My hon. Friend is right to say that the industry has welcomed the change to our policy. As we would expect, it does not anticipate the 5% rate to have a significant impact on it. As far as the stability of the rate is concerned, the standard wording is to say that all decisions are for the Chancellor and all taxes are kept under review, but I do not anticipate that the Government will return to this issue in any great hurry. I am sure my hon. Friend will be pleased about that. Were we to do so, I have no doubt that he would make strong representations once again. I hope he will take some comfort from that.

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[Catherine McKinnell]

The figure that the hon. Gentleman is looking for is £450 for a couple with children. It would put money back into their pockets, boost the economy and drive growth. Let us not forget that the Institute for Fiscal Studies has predicted that the Government’s tax credit changes will mean that families will be £511 worse off this year and £1,250 a year worse off by 2015.

[Andrew Percy]

Who would benefit more from a VAT cut, a family earning just above the minimum wage or a millionaire?

[Catherine McKinnell]

Clearly, a family would gain more from a VAT cut because they spend much more on VAT as a proportion of their household income. The hon. Gentleman’s indignation at that response demonstrates just how much the Government are out of touch with the reality of the effect of their spending plans on households and household incomes. That would explain why this economy is going backwards rather than forwards under the Government’s plans.

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[Catherine McKinnell]

It all depends on how long the Government take to get the economy back into growth. The reaction of Government Members seems strange, when they are driving the economy into recession rather than into growth.

[Andrew Percy]

The hon. Lady will be aware that the temporary reduction under the last Government had a significant cost impact on a number of businesses. If the economy suddenly went into growth in the quarter following the reduction, would she expect businesses to take the burden of the costs of implementing the reduction and then unimplementing it in two successive quarters?

[Catherine McKinnell]

The hon. Gentleman is getting ahead of himself, given that we are in a double-dip recession, that growth has stalled, that all the predictions of the Office for Budget Responsibility are being revised down day on day, and that borrowing is going up. Everybody agrees that we need demand in the economy. The way of generating demand in the economy is to put money back into people’s pockets. I remind hon. Members that before the increase in VAT, the economy was on a trajectory of growth. That was before this Government took over and brought in their disastrous austerity policies.

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[Mr Field]

I am grateful for the intervention. Unfortunately I cannot give an answer, but I will redirect the question to the Minister. This time, I hope that he will give us an answer and—I hope even more—say that the Government intend to take action.

[Andrew Percy]

It is a pleasure to follow the right hon. Member for Birkenhead (Mr Field), who made an interesting contribution, on an issue that I was not planning to speak about, but which I hope will be pursued if his new clause is not accepted this evening.

This has been an interesting debate. I am only sorry that the Minister’s attempt to take us through every VAT change since 1973 was cut somewhat short. We got to about 1983, which was probably as far as most of us needed to get, but it was interesting none the less. The debate has also been interesting because of the number of food products that have been mentioned. At one point, when we were talking about rotisserie chickens, pasties and sausage rolls, I thought it was lunchtime at the Percy house, but apparently not. I am proud to say that I eat pasties: I ate my last one from Fuller’s bakery on the precinct in Goole just the other day. I cannot say that I partake of sports drinks, so I will not take much of an interest in that part of the debate, but I am certainly pleased that the Government have seen sense on pasties. I am not sure that I necessarily share the full analysis offered by my hon. Friend the Member for Truro and Falmouth (Sarah Newton) about the seamless transition of policy. I do not think it has necessarily been the Government’s finest hour, but at least at the end of the process we have a system with which we can all live.

I want to make a few brief comments about the caravan tax. It is a pleasure to see my hon. Friend the Member for Beverley and Holderness (Mr Stuart), who assisted with—[Interruption]—sorry, who led the campaign. I chide him with an in-joke. He led the campaign very ably and got us all together. He deserves credit for that, and I am pleased to see him here for this debate. The impact that the measure would have had is well documented in the various debates we have had. The Minister knows from the meetings we had with him that we were very concerned, particularly in our part of the world, where the vast majority of the relevant manufacturing is and where a lot of the supply chain is based, including, in my constituency in Brigg, a number of companies that were affected. I also have some of the parks that would have been affected in my constituency. I am pleased to see my hon. Friend the Member for Cleethorpes (Martin Vickers), who would have similarly been greatly affected, from the point of view of the park owners, had the measure gone forward. It is therefore incredibly important that we have reached the position we have.

Some genuine points have been made about the consultation. One needs only to do a Google search to find headline after headline, in both local and national papers, about the state in which the industry has found itself in recent years. Indeed, it had to go to the previous Government looking for support, although I am not sure that a great deal was forthcoming. We are talking about an industry that has struggled considerably over the past few years, so quite who came up with the idea of slapping on 20% VAT, thereby affecting sales by up to 30%, I do not know, and I hope that some lessons will be learned. I prefer to see what the Government have done not as a U-turn, however. There was a US politician who used to describe a U-turn as a recalibration of policy, so I welcome this recalibration of policy. It is a shame that the previous Government did not do that on more occasions, as my hon. Friend the Member for Beverley and Holderness mentioned.

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[Mr Graham Stuart]

rose—

[Andrew Percy]

I give way to my hon. Friend, who led the campaign.

[Mr Stuart]

I am grateful to my hon. Friend. Now that a 5% VAT rate has been introduced, does he agree that any Government, whether the coalition or a future Labour Government, would be ill-advised to return to this issue with any form of increase? The level of 5% can be accepted. People do not pay council tax on these caravans. We are talking about a compromise, but one that can last, that the industry can live with and that the political establishment should live with. Indeed, no Government should ever think of returning to the issue at any time while even someone as young as my hon. Friend is in this House.

[Andrew Percy]

I am being abolished at the next election anyway, so there are only three years in which the Government might have to worry about me. However, they would frankly be stupid—if that is not unparliamentary language—to look at the issue again. I think any Government will take note of the campaign.

The final assurance I seek from the Minister is that we will continue to be conscious that there will still be a potential impact, as was mentioned in interventions by the hon. Member for Kingston upon Hull North (Diana Johnson), who also fought valiantly. I hope that the Treasury will continue to monitor that.

In the final minute, I want quickly to say something about the Opposition’s VAT cut for millionaires, which I think is what they are proposing. Whereas we on this side of the House have decided to target tax changes at those struggling the most—for example, by raising the personal allowance and taking some of the poorest out of tax altogether—the Opposition policy is to issue a massive VAT cut for high earners and millionaires, and just to pepper money around. The Opposition are not quite sure how much—they have not told us, although we think the figure might be £12 billion—and they do not know for how long the measure would be in place. What a policy! The interesting thing we have learnt is that we now know that the Opposition’s official policy is to support, ultimately, VAT at 20%, because they have said that the measure would be temporary, meaning that they have therefore definitely agreed the 20% rate.

[Julie Hilling]

Will the hon. Gentleman give way?

[Andrew Percy]

No, I am not going to give way, because other people want to speak.

The shadow Minister talked a lot about VAT consultation and the Government’s failure, she said, to consult on the changes. I just wonder whether she has consulted very widely on her proposal to reduce the rate temporarily to 17.5%, because I suspect not.

[Diana Johnson]

It is a real pleasure to follow the hon. Member for Brigg and Goole (Andrew Percy), who, with characteristic humility, accepted that bringing forward these VAT proposals was not the Government’s finest hour, unlike the hon. Member for Truro and Falmouth (Sarah Newton), who unfortunately is no longer in her place. She has a rose-tinted view of the shambles of this Budget and the proposals that have been put forward, which caused consternation, upset and distress to many individuals and businesses around the country. However, she now seems to think that we should be celebrating the fact that the Government have had to cobble together this compromise.

I shall be supporting new clause 10, which was tabled by those on our Front Bench, and I want to speak against the Government’s new schedule 1. Our opposition to new schedule 1 underlines Labour’s commitment to having low taxes, because it would implement a tax increase, including the 5% VAT on caravans, which I want to address.