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Value Added Tax

Volume 115: debated on Thursday 30 April 1987

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asked the Chancellor of the Exchequer if he has any plans to extend the scope of value added tax.

Is it not becoming increasingly clear to the House and to the country that the Conservative party intends to fight the next general election on two manifestos — [Interruption.] — one that will be published openly, and a secret document in which there are to be proposals to increase the rate of VAT and to extend its scope to food and other products? Despite the fact that the Minister has answered no to my main question, the Prime Minister is not prepared to deny the assertion categorically? When will the Government be honest with the House and the people?

We shall certainly fight the next election on two manifestos, ours and yours.

Order. I shall be standing at the next general election, but I shall not have a manifesto.

Our manifesto, Mr. Speaker, will be of great assistance to us, but I think that the Opposition parties' manifestos will be of even greater advantage to us.

Does my hon. Friend agree that if any of the Opposition's pledges are put into effect VAT will have to be increased to about 49p in the pound? Will my hon. Friend accept also that the collection costs of VAT, given the thresholds that apply on the turnover of a small business, which is roughtly twice the national average wage, are extremely high? Does he agree that the administrative burden on small businesses is onerous and, despite the EEC, would it not be a good idea to have a threshold of about £50,000 a year to assist small businesses?

I note what my hon. Friend said about the threshold. I hope that he and my other hon. Friends will recognise that the measures we are introducing this year for cash accounting and annual accounting should greatly reduce the burden of income tax for small businesses.

Why have papers concerning the extension of VAT in Britain been withdrawn from the May meeting of Common Market Finance Ministers?

The hon. Gentleman can ask whatever questions of the Commission he likes. The Government's policy is to reduce taxation; the Labour party's is to increase it. I am sorry that Labour Members have to resort to repeated smears to cover up the fact that they are the party of high taxation and we are the party which has reduced taxation.

May I draw attention to the report of the Treasury Select Committee entitled "The Defence of VAT Zero-Rating" which contains clear evidence that the Government are determined to fight the case in the European Court, where the European Commission is seeking to extend the base of VAT? Is that not a very clear indication of the Government's views on the subject?

I thank my right hon. Friend for making that clear to the House. The actions of the Government are well known and have the support of the House.

Does the Minister's answer mean that he is saying to the House what up to now the Prime Minister has not been prepared to say, that when the EEC recommends that Britain imposes VAT on food, fuel, children's clothing and new building, the Government will veto it?