Finance Bill

Debate between Catherine McKinnell and Stephen Gilbert

Tuesday 3rd July 2012 Commons Chamber

[Catherine McKinnell]

I repeat what I said before: the Government’s current policy of increasing VAT to 20% is taking money out of people’s pockets and is causing a slump in demand. It is very strange that these questions are coming from a Government who are borrowing more than they intended over the spending period, not less.

[Stephen Gilbert]

The hon. Lady mentioned a figure of about £400 a year. What I missed, and what I am hoping she will be able to clarify, is whether that is per person or per family. If we knew that, we might all be able to do the maths as to how much this measure would cost the Exchequer.

[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.

--- Later in debate ---

[Catherine McKinnell]

I could probably answer the hon. Gentleman’s question with just four words: “out of double-dip recession.”

The Government’s economic credibility, not to mention any reputation for competence they might have had, has taken a massive hit over the VAT changes. They put VAT on pasties and took it away. They put VAT on caravans, then they reduced it to 5%. They put VAT on churches and kept it. Then they invited payment of the charge up front. Churches could claim it back by submitting forms to the Treasury for access to a special fund, which essentially is a big pot of all the money that they paid up front in the first place. What a shambles. Do the Government even know what they are doing any more? They say that their U-turns show that they are listening. When they got it so horrendously wrong, it is good that campaigners were able to get through to them.

I know that hon. Members on both sides of the House have worked hard to get the Government to listen on the subject of the VAT changes, but is it not all too serious to be left to second chances? Do not the people of this country deserve a Government who can get it right first time? People saw in the Budget a true reflection of a Chancellor who tried to sneak through thoughtless changes and got found out.

Let us look at some of the Government’s tax changes. The selection speaks volumes about this Government. They gave a tax cut to banks and to millionaires, but showed no mercy to people who eat pasties. The pasty tax will go down in history as one of the most incompetent Government debacles ever. The attempt to raise the price of pasties and sausage rolls by 20% was claimed to be necessary to close an anomaly, but was universally seen as evidence of an out-of-touch Government trying their luck and grabbing tax on a food that Ministers never eat. The Save Our Savouries campaign run by The Sun pointed out that caviar is still VAT-exempt. Perhaps we can learn something from that. Perhaps the Minister will comment on that in his concluding remarks.

The Prime Minister told us:

“I’m a pasty eater myself. . . I love a hot pasty”,

but he gave himself away when he said that his last pasty was from a shop that turned out not to exist. It was just one gaffe after another. The Chancellor ended up giving evidence to the Treasury Committee on how to tell whether a pasty was hot or cold. Members pointed out that because products would be subject to VAT if they were above ambient temperature when bought, pasties could cost different amounts on summer and winter days.

[Stephen Gilbert]

Notwithstanding some of the flaky accusations the hon. Lady is making against the Government, can she explain why Labour Members will not join in supporting the Government on new schedule 1, which addresses the concerns that were expressed during the consultation process?

[Catherine McKinnell]

Our position is that we would like none of the VAT changes to be introduced so by voting against new schedule 1 today, as I have already explained, we vote against all the VAT changes.

As was pointed out, if the pasty counter was near the oven, the ambient temperature would be higher. If it was near the chiller, the ambient temperature may be lower. Greggs’ official consultation document asked whether servers would ultimately have to take the temperature of both the pasty and the surrounding air to determine whether a 20% surcharge should be applied. The proposal was universally and rightly rounded on as ridiculous. Ken McMeikan, the chief executive of Greggs the bakers, which I am proud to say is based in my part of the world, Tyne and Wear, deserves a mention for his excellent campaign against the pasty tax. A massive £30 million was wiped off the value of the company in the week after the Budget as orders were threatened and jobs put at risk. Along with several hundred other bakers, Mr McMeikan delivered a petition to 10 Downing street. He told Ministers:

“we are the voice of half a million people. We embody their resentment at what this Government is trying to impose against the people’s will. . . ordinary hard working people simply do not want this pasty tax.”

I visited a local school breakfast club with Mr McMeikan and I know just how committed Greggs is to local schools and community projects. It did not deserve to have its business torpedoed by Ministers who are too out of touch ever to have eaten one of its products. Eventually the Government backed down on the pasty tax—they had to because that was the only move they could make—but they left behind them a legacy of arrogant disregard for ordinary people that will not quickly be forgotten. My only hope now is that the U-turn that has been made will be made properly. Representatives of Greggs are still raising concerns that the new wording of the regulations on hot food now state that VAT should be charged if it

“is provided…in packaging that retains heat (whether or not the packaging was primarily designed for that purpose)”.

The hon. Member for St Austell and Newquay (Stephen Gilbert) raised the matter with the Minister, but his answer did not provide certainty, so I would be grateful if he would clarify in his reply exactly how the Government will ensure certainty for this slightly battered production market.

Any sort of paper bag or wrapping could inadvertently help to retain heat, so there is a danger that pasties could still be caught in the regulations and that this whole incompetent mess of U-turns and retractions will all have been for nothing. I hope that the Government will take the opportunity to clarify that point and reassure Greggs and other bakers up and down the country that supplying customers with paper napkins, for example, which could inadvertently slow down the cooling process, will not result in an extra 20% charge for their customers.

Greggs would like confirmation, as I am sure would other bakers across the country, on whether taking trays of baked products from the oven and stacking them in counters that have no other means of heating or heat retention would be considered to be slowing down the cooling process. The practice is used by bakers to minimise food handling and the number of trays in use, but there are genuine concerns in the industry that it could constitute slowing down the cooling process and so incur a VAT charge.

The Government’s second U-turn was on their attempt to charge 20% VAT on static caravans—[Interruption.] I am asked from a sedentary position “Are you only on the second U-turn?” Yes, I am. I venture to guess that caravan holidays, like pasties, are not familiar to most members of the Cabinet. They saw an opportunity to take some extra tax and went ahead without considering the impact on individuals, jobs, growth or tourism. Because of the huge campaign mounted against the policy—I pay tribute to Members on both sides of the House for that, particularly hon. Members who represent the Hull constituencies, who are particularly concerned about the impact on jobs in their area—the Government backed down, but they are still trying to impose the 5% charge, as the Minister set out in more detail earlier.

The Treasury’s own figures show that 20% VAT on static caravans would result in a 30% fall in demand. The industry estimates that it would result in 1,000 job losses in manufacturing, excluding the supply chain. We know that at least one factory in the supply chain, Willerby Holiday Homes, put all 700 of its staff on a 90-day consultation as a direct result of the Government’s announcement that it would levy 20% VAT on its product. The National Caravan Council states that 4,300 jobs might be lost in holiday parks, plus another 1,500 jobs from associated suppliers.

I appreciate that the Minister has sought to give some reassurances on the change and indicated that the Government are listening, to the extent of reducing the VAT rate to 5%. However, he has made it clear today that no actual calculation has been made on the potential impact of the 5% charge, which is of great concern. Even the reduced charge of 5% will mean either that caravan holidays will become more expensive for holidaymakers or that holiday parks will be forced to absorb losses and job cuts. At a time when consumers are already severely squeezed, many people will simply have to go elsewhere. In turn, the whole economy of holiday towns would be hit, with shops, pubs and attractions losing their main business. Is that really what the Government intended?

--- Later in debate ---

[Catherine McKinnell]

I not only welcome it but point out that we proposed it, and the Chancellor shortly followed us on the same day. Our proposal to bring about an immediate reduction in VAT to 17.5% would deliver that 3p fuel duty reduction for drivers and put money in their pockets not only in respect of fuel but right across the board. It is a measure that is absolutely required to turn our economy round from the double-dip recession we are in.

[Stephen Gilbert]

Is not the real VAT bombshell the fact that the hon. Lady does not know how much this policy would cost Her Majesty’s Treasury? In the hour or so for which she has been talking, has she had any inspiration from colleagues?

BBC Local Radio

Debate between Catherine McKinnell and Stephen Gilbert

Wednesday 26th October 2011 Westminster Hall

[Stephen Gilbert]

My hon. Friend makes a fantastic point. I like to think of BBC local radio as cheap and cheerful, often serving the community and holding it together on a shoestring.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

For many BBC listeners and users who pay the licence fee, local radio is their only contact with the BBC. Some 2 million BBC radio listeners have no other contact. Reducing the service, therefore, is a disservice to those people.

[Stephen Gilbert]

The hon. Lady makes an excellent point. The floods in my constituency in November last year showed and brought home to me how much of a lifesaver the news and advice provided by local radio is to a community at times of crisis. The absolute importance of that should not be underestimated by the House.