Skip to main content

Value Added Tax

Volume 129: debated on Thursday 10 March 1988

The text on this page has been created from Hansard archive content, it may contain typographical errors.

3.

To ask the Chancellor of the Exchequer whether he has any plans to discuss with his European Economic Community counterparts the question of zero rates on value added tax.

The Economic and Financial Affairs Council will discuss the Commission's proposal for tax approximation in the light of the report by its economic policy committee, which is expected in the spring.

Does the Minister think that the Prime Minister's assurances during the last election campaign that there was no question of imposing VAT on food or children's clothes should be treated with more, or less, confidence than her assurance on 23 April 1979, before the 1979 election, that there was no question of massive increases in value added tax?

My right hon. Friend made it clear to the Ecofin Council in November that we would not allow to come into force any proposals that would in any way impinge on our election promises to retain zerorating of VAT on those products, and that stands.

Does my right hon. Friend agree that many Eurofanatics are more concerned with harmonisation than with common sense? They should be told to mind their own business in matters that do not affect Europe but concern this country alone, and be told that we still run our own affairs, thank God.

My hon. Friend has put an opinion that clearly has widespread support in this country. The Government have made it clear that they have difficulties with many of the proposals that have been put forward by Lord Cockfield. Those difficulties are shared in different ways by several other countries. Indeed, we find some of the proposals quite unacceptable.

Will the Minister heed the report of the Treasury Select Committee, published this morning, which suggests that VAT harmonisation is in no way essential to the achievement of the internal market, which, contrary to the views of some hon. Members who have been calling out, is in the interests of this country?

The hon. Gentleman is correct. The Treasury Select Committee echoed a point that I and the Government have made. We welcome the moves towards an internal market, but do not believe that it is essential to harmonise all excise duties or necessarily to approximate all VAT rates.

As Lord Cockfield seems unable to understand the messages that have gone from the House previously, and for the avoidance of doubt, will my hon. Friend write to him and explain in explicit terms that his proposals for the approximisation of VAT, and especially for the abolition of zerorating, are totally unacceptable to Her Majesty's Government and to the House of Commons?

The noble Lord is perfectly well aware of our views. Over the years he has shown an ability to learn from experience and argument. After all, he was once the chairman of the Price Commission, and subsequently realised that there were less bureaucratic and more effective ways of reducing inflation. A similar relevation may occur in this matter.

Inquiring with interest whether the Chancellor of the Exchequer will be consulting the Almighty as well as other Finance Ministers in Europe before he imposes VAT on the Bible, may I ask whether, in pressing for allowing different rates of indirect tax, the Minister will draw to the attention of those other Finance Ministers the fact that the United States has a large internal market without integrating or harmonising state or local taxes? Will he further press on them that if they want industrial competitiveness they need to move beyond harmonisation of taxation to a joint or common industrial strategy in the European Community?

The hon. Gentleman is correct. The United States has achieved what is by any standards a free and open internal market and has done so without requiring its states to give up some freedom to operate different rates of taxation. Clearly, the United Kingdom Parliament should retain greater freedom than an individual state of the United States of America.