Value Added Tax Bill

Maggie Throup Excerpts

Friday 8th February 2019 Commons Chamber

[Maggie Throup (Erewash) (Con)]

It is a pleasure to speak in the debate, and I congratulate my hon. Friend the Member for Christchurch (Sir Christopher Chope) on getting one of his many private Members’ Bills to Second Reading. I thank him for giving such a comprehensive history of VAT in the early part of his speech and for his forensic analysis of each part of the Bill.

At first, I thought that the subject of the Bill seemed rather dry, but the more I looked into it, the more interesting it became. Prior to my entering this place, I ran my own marketing business, which was registered for VAT. I did not see being registered for VAT as a hindrance; I saw it as a sign of success, as it meant that my turnover was growing and quite substantial. Some business owners I spoke to were concerned that splitting VAT on a quarterly basis was quite onerous. I always found that the quarterly returns helped me to focus on the financial side of my business and provided an opportunity for a regular review. They helped me to review my business costs and the charging structure for my marketing services. In effect, I was carrying out a quarterly audit that helped me to keep my business on the straight and narrow over the 19 years for which I ran it. Some businesses may have criticised me for carrying out such a check only every three months, but it worked for me.

We are debating whether the £85,000 VAT threshold is the right one and if we should make provisions to exempt certain goods and services from VAT liability. In November 2017, the Office of Tax Simplification produced an excellent report. I must declare that I could be slightly biased, because the chair of the office is Angela Knight CBE. For those Members who are not fully aware of the political history of the Erewash constituency, Angela Knight was its Member of Parliament from 1992 to 1997. One of her claims to fame—among many, of course—was that she was the Treasury Minister responsible for the introduction of the £2 coin. She has had a varied and at times much-publicised career since leaving this place, and she was the perfect person to be appointed chair of the Office of Tax Simplification.

The views of my hon. Friend the Member for Christchurch on the EU are well known, and he has expressed them today. His Bill is timely, because Conservative Members want to take back control on 29 March. We need to make sure that the VAT threshold will encourage businesses to grow while at the same time maintaining the tax take for Government, because that pays for our vital public services. Members from all parties want to make sure that we have the right investment for our wonderful public services. The current £85,000 threshold is the highest general threshold in the OECD, so some may argue that we should consider lowering the threshold rather than looking to increase it.



Some anomalies have already been mentioned. The Bill proposes exemptions, including for domestic fuel and power and for repairs to historic buildings. We have also already discussed fitness equipment and the difference between cakes and biscuits. The prime example of the latter is Jaffa Cakes: if it is a cake, it is zero rateable, but if it is a biscuit, it is taxable. It has been deemed to be a cake, so it is zero rated. Closer to my heart are the gingerbread men made by Stacey’s bakery in my Erewash constituency. In my opinion, they are the best gingerbread men a person could buy in the whole country. If the gingerbread men have chocolate trousers, they are subject to VAT. If they just have chocolate eyes but no chocolate trousers, there is no VAT. In the interests of equality, why do we not have gingerbread ladies? If we did and they had chocolate dresses, would they be subject to VAT? I am sure that we could all highlight many more anomalies, but the ones I have mentioned help to illustrate just how important it is to ensure that any changes to VAT legislation are well thought through and appropriate.

I could spend a lot more time talking about whether higher or lower threshold levels encourage more or less entrepreneurship, or about the optimal threshold to maximise the tax take without stifling business, but I am sure all that will be thrashed out in Committee. VAT is the third largest source of tax revenue collected by HMRC, after income tax and national insurance contributions, so I am sure it is above my pay grade to recommend a new threshold to the Treasury. It is clear to me that we should not jeopardise the £120 billion collected in 2016-17—I am not sure of the figures for the following year—which represented 22.5% of all taxes. I fear that the removal of one tax would only result in the increase of another tax to balance the nation’s books.

[Sir Christopher Chope]

Will my hon. Friend give way?

[Maggie Throup]

I was just about to finish, but I will give way.

[Sir Christopher Chope]

In her zeal to leave the European Union, surely my hon. Friend has not forgotten that we will be able to keep a big dividend in the form of the £10 billion to £20 billion a year that we currently pay to the European Union. Why can we not spend that on our own priorities?

--- Later in debate ---

[Maggie Throup]

My hon. Friend makes an important point; this is about priorities, and our priority may not actually be changing the level of VAT.

I look forward to hearing the Minister’s response and analysis of the proposed changes in this Bill.

--- Later in debate ---

[James Cartlidge]

The hon. Gentleman is correct: I do not spend a lot of time at Labour party conferences. I am sure that, because he is there, it is huge fun. I know that he has a great sense of humour and so on. I never met Barbara Castle, but I am sure that it would have been a great honour to meet her. I do agree with that basic set of housekeeping accounts, which, by the way, the great Margaret Thatcher also used to believe in.

[Maggie Throup]

As my hon. Friend mentioned Barbara Castle, I want to put it on the record that she had the same education as I did. We went to the same school—Bradford Girls’ Grammar School. On both sides of the House, we can make sure that we chalk up our balances on the chalkboard—or the whiteboard as it would be now.

[James Cartlidge]

That is an excellent point. What worries me is that if we make unfunded commitments that do not result in the so-called dynamic behaviour that has been predicted and the Treasury loses revenue, the people who pay will not be us in this Chamber or anyone outside, but people who have not yet been born. We will stick the balance on the national credit card and, ultimately, the national debt. That is what happens if we do not take control of public finances.

I also want to talk about the transition period and leaving without a deal. My hon. Friend the Member for Christchurch seemed to suggest that we would benefit from not having a transition, because we would be able to vary VAT. He will remember that in his speech in the recent no-confidence debate—he spoke eloquently, although it took me some time to work out whether he had confidence in the Government or not—he advocated a WTO-terms exit. I intervened on him to ask what he would do about the 40% tariff on sheep meat, and he said to me that that was “Project Fear”.

In fact, if we leave without a deal, we will have to have the default WTO schedule, because there is nothing else. That schedule includes some very onerous tariffs indeed, not least for our farmers and exporters. In a debate about the cost to consumers of VAT, it is quite something to advocate allowing certain household items that we take for granted—such as dry pasta and tinned tomatoes—to be tariffed at 15% or 20% in a few weeks’ time. This is most significant for our exporters. In my constituency, I have household name companies—by that, I mean that they are very well known in the constituency—that have written to me about no deal. The matter is critical for them; in one case, the default tariff exceeds the margin that the company makes. That is serious stuff, which we need to be prepared for.