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Value Added Tax

Volume 523: debated on Tuesday 8 February 2011

16. What assessment he has made of the effects on consumer confidence of the recent increase in the basic rate of value added tax. (38633)

Sustainable public finances will increase consumer confidence in the medium term. The decisive action taken by the Government in the spending review and June Budget, including the increase in VAT, will put the public finances and spending on a sustainable footing.

Given the increase in VAT and the biggest monthly fall in consumer confidence since 1992, will the Minister update the House with his assessment of job losses in the retail sector?

Unless we get the public finances right, there will be no long-term consumer confidence. Can we imagine what the impact would be if the Government abandoned their approach and just started spending money, like the previous Government did, and failed to tackle the deficit? I am afraid that consumer confidence would go through the floor.

Is it not right to say that to compensate for the increase in VAT, the Government have increased the personal allowance for taxpayers, so that consumers have more money to spend?

My hon. Friend is right to say that we have increased the personal allowance, taking 880,000 people out of income tax, resulting in an income tax cut for millions of people. It is none the less the fact that we must tackle the deficit. To the extent that the Labour party wants to do anything about the deficit, it advocates reducing the deficit by increasing taxes by more. Think what that would do.