Oral Answers to Questions

Helen Jones Excerpts

Tuesday 6th September 2011 Commons Chamber

[Helen Jones (Warrington North) (Lab)]

3. What recent assessment he has made of the effect on inflation of the increase in the basic rate of VAT.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

The Office for Budget Responsibility is responsible for producing independent economic and fiscal forecasts. The OBR published a full analysis of developments and the prospects for inflation in its forecast at Budget, and that can be found at its website. The Office for National Statistics estimates that the impact of the VAT rise on consumer prices index inflation was 0.76 percentage points.

[Helen Jones]

The Minister has failed signally to answer the question. Will he tell the House why only three European Union countries—Estonia, Lithuania and Romania—have inflation higher than the rate in this country? Is it not true that the failed economic polices pursued by the Treasury and the decision to raise VAT have more than doubled the rate of inflation compared with the Government’s target? When is he going to accept responsibility for that and do something about it?

[Mr Gauke]

I am afraid that the hon. Lady might not have listened to my earlier answer. The fact is that the primary cause of the increase in inflation has been global commodity and energy prices. It is also worth pointing out that our currency depreciated in value quite significantly a couple of years or so ago. The VAT increase was necessary in order to reduce the deficit—a policy that was recognised by the previous Chancellor of the Exchequer.