Finance Bill

Stephen Williams Excerpts

Tuesday 28th June 2011 Commons Chamber

[Mr Hanson]

It is very interesting that my hon. Friend makes that point about the VAT increase, because following that reckless gamble, inflation, which was 3.1% in September, was 4.5% in April and May, hitting savings, pensions, incomes, jobs and people’s livelihoods. He will know that confidence is important and that consumer confidence is now at minus 31%. Overall confidence was three points lower in April than in March, and lower than at any time since spring 2009.

[Stephen Williams (Bristol West) (LD)]

Confidence is a measure of sentiment and opinion, but spending power is a fact, so will the right hon. Gentleman explain how in January, February, March and April consumer expenditure went up?

[Mr Hanson]

The hon. Gentleman will know that the Office for Budget Responsibility and every independent forecaster have already shown that growth in the economy has flatlined over the past 12 months, following the impact of the Labour Government’s measures at the end of their time in office at the beginning of 2010. Since then, growth has flatlined and unemployment is projected to increase by 200,000 over the next year.

[Stephen Williams]

I thank the right hon. Gentleman for giving me a second chance to pose my question to him. The Library’s statistics show that, in the four months since VAT was increased, consumer expenditure in shops increased month after month, so how can he say that consumer confidence has declined? That is not about economic growth, which is how he answered my first question; it is about consumer confidence and spending. Will he deal with that point, please?

[Mr Hanson]

I suppose that is why the Federation of Master Builders only today—[Interruption.] Just for the record, on my uttering “Federation of Master Builders”, Conservative Members fell about with laughter, but the FMB’s members build houses and employ people in the construction industry. Only today—in a brief dated today—it stated:

“The situation for small construction firms has been made more perilous by the VAT increase at the start of the year,”

and that we risk

“11,400 construction job losses and 34,000 total potential job losses”

because of the VAT increase. The hon. Member for Bristol West (Stephen Williams) and his colleagues may recall that the OBR expects some 200,000 additional people to become unemployed this year. The lack of consumer confidence, the impact of VAT and the lack of consumer spending will be critical to those potential job losses in the community.

--- Later in debate ---

[Mr Hanson]

There have also been job losses at Borders. There have been job losses across the board in the retail sector as a result of the impact of the VAT increase.

[Stephen Williams]

I thought I heard the right hon. Gentleman say Borders, but Borders went bust under the previous Labour Government. Would he like to retract that?

[Chris Ruane]

I said Thorntons.

--- Later in debate ---

[Nia Griffith]

I fully understand that businesses reclaim the VAT, but the consumer purchases the end product for a composite price that reflects everything that has been done to produce the thing in the first place, as well as the transport costs—that was explained by my hon. Friend the Member for Chesterfield (Toby Perkins)—and, of course, the VAT. The customer pays the VAT in the end, but the business has already been affected by the rise in costs that it is incurring, which do not include VAT. The price of raw materials, particularly fuel, has risen, and every business is being squeezed to the limit. Every penny counts, and businesses are asking themselves, “At what point can I put the price up? At what point does the purchaser not buy?”

Many of my hon. Friends have mentioned the impact on hard-pressed families, and they have indeed been hit very hard. The hon. Member for Redcar (Ian Swales) recited a long list of goods that do not attract VAT. Was he suggesting that every middle-income and lower-income family should exist solely on food and children’s clothing? Has he not thought of the numerous household items—

[Stephen Williams]

Will the hon. Lady give way?

[Nia Griffith]

I will, on that point.

[Stephen Williams]

The hon. Lady’s Front-Bench colleague, the right hon. Member for Delyn (Mr Hanson), said that there would be a £450 increase per “hard-pressed family”, if I may use her phrase. That means that families would have to spend £18,000 a year on VATable items—not VAT-exempt or zero-rateable items. Can the hon. Lady give us an example of the sort of items on which those hard-pressed families would spend £18,000 a year?

[Nia Griffith]

When we arrived at the £450 figure, we were taking account of the total impact of all the tax changes introduced in the emergency Budget last June. However, if Members look around their bathrooms and kitchens, they will see numerous items that do not last for ever and need to be repaired. For example, adults will need to replace some items of clothing.