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Value Added Tax (Wales)

Volume 513: debated on Tuesday 13 July 2010

2. What assessment he has made of the likely effect of the proposed increase in the standard rate of value added tax on the retail sector in Wales. (7693)

A full impact assessment was published on Budget day. Although it focused on the compliance costs for all businesses, it had an emphasis on retailers, as it acknowledged that they were expected to incur higher compliance costs. However, having experienced two VAT changes in the previous two years, retailers should now be familiar with the necessary system and process changes.

I am sorry but that was a really complacent answer. Much of the retail sector in my constituency is very dependent on the business that comes in through the door from pensioners. There are 13,000 of them in the Rhondda, a growing number, and they are the people who will be very heavily hit by the VAT increase, because they will have less discretionary income to spend on gifts and the things that make life worth living. Will the hon. Gentleman look specifically at how the retail sector in more distant areas—outside the main city centres—can be supported?

The fact is that we had to raise VAT because there was no money left. I do not know whether the hon. Gentleman is proposing that we should have cut spending by even more, but I do not think that that would have a lot of support on his Benches or on ours. After all, our predecessors looked very closely at raising VAT and would have done so had the previous Prime Minister not vetoed it.

What would the people of Wales make of the fact that the previous Government were going to raise VAT to 19%? Would they not surely conclude that this was going to happen under any Government elected in May 2010 because of the mess made by the last one?

The fact is that the deficit has to be reduced, and VAT is one of the few levers available to the Government to do that. Any sensible Government would consider it; and indeed, given the circumstances we are in, any Government would do it.

When the Chancellor rose to give us his Budget a few weeks ago, he promised that he would give it to us straight. He somehow forgot to tell us that Britain’s pensioners may face an £8 billion VAT bill over the course of this Parliament. Given that neither Government party has a mandate for introducing VAT increases, does the Minister agree that, at the very least, this House deserves a report on the impact of VAT on pensioners before the increase comes into effect?

We have provided more detail of the distributional impact of this VAT rise than the previous Government ever did or would have done had they increased VAT last December. The fact is that this Chancellor—like this Treasury team—has the courage of his convictions to do the right thing, unlike his predecessors, who neither pursued the policies they believed in nor had a leader they believed in.