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Value Added Tax

Volume 523: debated on Wednesday 9 February 2011

1. What assessment he has made of the effect on economic growth in Northern Ireland of the increase in the basic rate of value added tax. (38253)

Before answering, may I pay tribute to Ranger David Dalzell of the 1st Battalion the Royal Irish Regiment? He came from Bangor, but he was also stationed with his regiment in my constituency at Tern Hill. I am sure the whole House will join me in offering our condolences to his family and friends, and thanking this brave young man for his service to his country after he was killed in Helmand this week.

The reckless years of debt and spending made the VAT rise a necessary step for national economic recovery. Forecasts from the Office for Budget Responsibility show that the Government’s plans will deliver sustainable growth for each of the next five years, with employment rising by 1.1 million by 2015, and the deficit falling.

When will the Secretary of State set out his paper on rebalancing the Northern Ireland economy? That is particularly crucial at a time when the VAT rise is damaging local retailers.

The hon. Lady is correct. We need to bring the paper forward as a team effort, working with local Ministers. I will come to that in response to later questions. We had a very satisfactory meeting with the Exchequer Secretary earlier this week, and we hope to publish the paper as soon as possible.

I am grateful to the Chairman of the Select Committee on Northern Ireland Affairs for his question. That has to be finally decided, but I would estimate that we should have a public consultation period of two to three months.

I associate myself with the comments of the Secretary of State on Ranger Dalzell. Across the House we are all well aware of the bravery and courage that all those young men show. We sympathise with his family at this time.

On VAT, shoppers from the Republic of Ireland coming across to Northern Ireland contribute greatly to the economy of Northern Ireland. The VAT increase has impacted directly on Northern Ireland, leading to a 10% reduction in sales and a 28% reduction in exports. What will the Secretary of State do to address that?

I am grateful to the hon. Gentleman for his comments on Ranger Dalzell.

Cross-border taxation is an issue that we will consider as part of the paper. We are acutely aware of the ability of consumers to move their spending rapidly either way, depending on taxation.

Can the Secretary of State put into context the changes in taxation? Basic rate taxpayers in Northern Ireland have had their personal allowance increase, which has taken many of them out of the tax net.

We regard Northern Ireland as an integral part of the United Kingdom. Northern Ireland taxpayers pay their tax and receive public spending in return.

I join the Secretary of State in his tribute to Ranger Dalzell and his family.

The Secretary of State has made it clear that he wants to be Northern Ireland’s man in the Cabinet. As he knows, following the rise in VAT instituted by his Government, a litre of fuel in Northern Ireland is the most expensive in any part of the UK. Can he tell the House why it is more expensive in Belfast than in North Shropshire, and what a litre of fuel costs in Belfast this morning?

Prices vary from 120p to 133p for petrol or diesel, but the right hon. Gentleman should remember that it was his Government who increased the rate of duty on fuel. He was in the bunker with the great incompetent for Kirkcaldy and Cowdenbeath (Mr Brown), who got the country into this mess in the first place.

I am glad that the Secretary of State managed to find an answer in his folder. The First Minister and Deputy First Minister are asking him urgently for help in Northern Ireland now. He has been in the job for nearly a year, but so far there has been no real help on the economy, just a promised paper on the economy that is still stuck in the printing press. Meanwhile, VAT is up, fuel prices are up and private sector business activity is reporting the biggest fall in 26 months. Hundreds are losing their jobs at Belfast Metropolitan college, 4,000 more are due to lose their jobs in health and social services and tens of thousands more jobs will go in the public sector. In Dublin, demand evaporates. Now we learn that he is losing his battle with the Chancellor for a future grab on end-of-year funding from the Executive. We can all see that it is hurting. When are people in Northern Ireland going to see it is working?

I do not know how the right hon. Gentleman has the nerve. When he was sitting in the bunker in Downing street shoring up his former boss, who overruled the right hon. Member for Edinburgh South West (Mr Darling) when he wanted to raise VAT, the Belfast News Letter found out that I was in Northern Ireland more than he was. We were in the danger zone in May, but thanks to the measures that we have taken, everyone in the UK, including in Northern Ireland and Lancashire, are in a better place as we establish stability in the public finances. We cannot go on spending £120 million a day on debt interest.