To ask the Chancellor of the Exchequer what his estimate is of the effect of the changes in value added tax announced in the Pre-Budget Report 2008 on the financial services sector. (240444)

The reduction in the standard rate of VAT from 17.5 per cent. to 15 per cent. between 1 December 2008 and 31 December 2009 will benefit the financial services sector because it will incur less irrecoverable VAT (in respect of its exempt supplies).

There may be compliance costs for those parts of the financial services sector making taxable supplies. The Impact Assessment can be found on the HM Treasury website at the following address:

http://www.hm-treasury.gov.uk/d/pbr08_vat_1845.pdf