Finance Bill

Debate between Clive Efford and John Hemming

Tuesday 28th June 2011 Commons Chamber

[John Hemming]

We should remember that VAT does not apply. I declare an interest, as a VAT-registered person. People who understand how VAT works will know that people who charge VAT can reclaim it on their inputs. We have to look at the details. On the hon. Gentleman’s further point, yes, there is an economic multiplier that has an effect. As demand is increased, there is a multiplier effect. At the same time, we have to look at the long-term effect on the deficit, the debt and the interest paid. As interest rates go up, wider damage is done to the whole of society.

It is true that in an ideal world we would not have higher rates of VAT. In an ideal world everything would be nice, and there would no problems and no difficult decisions to take. We have to get a balance. It is very pleasing to see that the official Opposition now accept that VAT should be 20% in the long term.

[Clive Efford]

There used to be a time when the hon. Gentleman was fond of quoting the Institute for Fiscal Studies, which called the VAT cut “an effective stimulus”. As for the construction industry, does he not recognise the figures showing a 19% increase in the number of business failures in the construction industry in the first three months of this year—since the increase was imposed?

[John Hemming]

There is no VAT on new build. The hon. Gentleman’s party believes that the VAT rate should be 20% in the long term; I thank him for agreeing with us about that.

The Government, essentially, have to bring the deficit under control to keep interest rates under control—and that is what we are doing.