Finance Bill

Debate between David Gauke and Andrew Percy

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.