Finance (No. 2) Bill

Debate between Ian C. Lucas and Sheila Gilmore

Wednesday 25th March 2015 Commons Chamber

[Ian Lucas]

Indeed. My hon. Friend has made a very valid point. I think that we should all be interested to know what was the impact of the last Tory-Liberal Democrat increase in VAT, which was introduced in January 2011, because it should inform future policy. It seems extraordinary to me that that should be resisted.

According to the Office for National Statistics, the median salary in my constituency, Wrexham, has fallen by 7.4% in the last year. The town centre is, unfortunately, populated—like many other town centres throughout the country—by too many empty shops, and part of the reason for the emptying of those shops over the past few years has been a decrease in consumer activity. What VAT does—and this is why I am passionate about VAT—is take money out of the pockets of consumers on the high street and send it straight to the Treasury. It has a massive impact on local businesses. Those of us who run local businesses and employ people want to ensure that we have the best and fairest type of tax system to develop local economies.

That is why I want to know the impact of the 2011 VAT increase. I think that the Minister is a reasonable man. I cannot for the life of me understand why he does not want to have that information, or, if he has that information, why he does not want to share it with the House.

We have made a lot of progress today. The Prime Minister has been dragged, kicking and screaming, to a point at which he has ruled out a VAT increase by the Conservatives in the next Parliament—if he is ever in a position to make such a decision. That is major progress. It is certainly a change, not just from the Prime Minister’s position earlier in the current Parliament, but from the position that the Chancellor outlined in his Budget statement last Wednesday, when he set out the spending and taxation plans that he expected to be implemented. Why did he not tell us that the Tories were going to rule out a VAT increase in the next Parliament? That is what amazes me. What has happened between last week and this week? What happened yesterday?

What has happened, in my view, is that because the Labour party, in opposition, made a commitment not to increase VAT in the next Parliament, Lynton has been on the blower. He has said. “We are under pressure, Dave. We are under pressure, Prime Minister. We have to match the commitment that the Labour party has made. You have to rule out a VAT increase in the next Parliament.” So that is why the Prime Minister made his statement at the Dispatch Box today—a statement that I welcomed.

History will judge whether that promise will be kept. We heard from my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) about the history of Conservative commitments on VAT: about what happens before elections, and about what happens after them. When I speak to my constituents over the next six weeks, I shall remind them of that record. I shall remind them of what the Conservative party and the Liberal Democrats said before 2010 and what they did afterwards, and I shall remind them of what this Chancellor tried to do in 2012 with the pasty tax and the caravan tax.

The tax of choice for the Conservative party is VAT. History tells us that. If the Conservatives want to increase taxes, they increase VAT. The country will have to judge whether the commitment that the Prime Minister has given today is one that will stand the test of time.

[Sheila Gilmore]

It is a pleasure to serve under your chairmanship, Mr Hood. I was also going to say that it was a pleasure to be in the company of so many Members who had participated in Finance Bill Committees during this Parliament, but one by one they have disappeared from the Chamber—even the hon. Member for Dover (Charlie Elphicke), who has been one of the most assiduous Committee members—which is a shame as I was looking forward to hearing the usually very robust views they express, when we are upstairs in Committee at least. Presumably they have something else on their mind today.

The period we are in, which spans one VAT increase to possibly another, is a very interesting one. One of the things that the Government are trying to say—interestingly, some of the other parties are trying to say the same—is that there is no difference between the policies of the Government and the Opposition and that we would all have to make the same decisions. However, the Institute for Fiscal Studies has clearly stated that there is a huge difference between the forward plans of the Government and those of the Opposition. Our policies involve a different attitude towards spending cuts and tax increases in order to reduce the deficit over a period. That is what we said back in 2010; we were clear that we would be following a different pathway. We were not deficit deniers, as was sometimes suggested, but we were clear that we had a different view on how this could best be handled and that there would therefore be fairness in our measures. That remains the case because, prior to the Budget, the IFS said that, given our forward plans and taxation proposals, in contrast to the £55 billion of spending cuts the Conservatives would have to find, the Labour Opposition would be looking to make only £4 billion of spending cuts. More recently the IFS has said that in order to carry out our plans we would not need to make any further spending cuts in the forthcoming Government. So that is a very big difference in our policies. From that point of view, we are in a position to say not just that we would not increase VAT, but that we have a different and much fairer road to go down.

It is right for us to ask what the Government—whether the coalition or the Conservative party; it is not always clear—would be doing. Not only have they said that they need to find those spending cuts to carry out their deficit reduction proposals, but they have also suggested further tax reductions through the continued raising of the tax threshold. At no time since that announcement was made by the Prime Minister at the Conservative party conference has there been any clarity as to where that money would be coming from. So not only are they clearly tied to making substantial departmental spending cuts, but they have not shown us how they are going to close this financial gap. That is why people are saying, “We think it’s going to be VAT.” It is hard to tell where else it might come from. Of course, if it is coming from somewhere else, we would expect that to be said. So the Prime Minister stands up and says, “Oh no, we won’t be increasing VAT,” but the other half of that statement has not been made. We do not know how he is going to square this circle.