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Employment (VAT Rise)

Volume 525: debated on Tuesday 22 March 2011

4. What assessment he has made of the effect on levels of employment of the increase in the standard rate of value added tax. (47921)

8. What assessment he has made of the effect on levels of employment of the increase in the standard rate of value added tax. (47925)

The Government have taken urgent and unavoidable action to tackle the deficit and to put the public finances on a sustainable footing. That is essential for jobs and growth. Raising the standard rate of VAT is an important element of the plan and, in November, the Office for Budget Responsibility’s forecast, which took full account of the VAT increase, was for total employment to rise by 1.1 million in 2015.

I thank the Minister for that answer. Will he tell us what impact the VAT rise has had so far on himself and his family?

The VAT rise of course leads to increased prices in the shops, and that affects everyone in the House.

The Chief Secretary to the Treasury had a meeting—a crisis meeting, according to The Daily Telegraph—with senior retailers a few weeks ago. Was there any discussion of the impact of the VAT rise at that meeting?

I did indeed meet senior retailers from the British Retail Consortium and we discussed a whole range of issues in a private meeting. If the hon. Gentleman is interested in the consortium’s views, he should listen to what its director general said on 20 October, the day of the spending review. He said that delays in public expenditure cuts

“would just store up more pain for later, risking increased borrowing costs, higher taxes and more job losses.”

Which does my right hon. Friend think is the lesser evil: a rise in VAT that does not apply to food or children’s clothes, or taking almost 1 million of the lowest paid workers out of income tax altogether?

I certainly think that our Government have got their priorities right when it comes to lifting the burden of income tax on low-income workers. The increase in the personal allowance by £1,000, which will come into effect in April this year, will ensure that 880,000 low-income workers will no longer pay income tax. Furthermore, 23 million basic rate taxpayers will see a tax cut of £200 next year.

Has my right hon. Friend considered the letter sent to him by the chair of the tourism group of the Sutherland Partnership, which outlined the importance of tourism for employment in the area and the barriers that VAT is creating, particularly in relation to road fuel? Is there anything that the Government can do to mitigate that effect?

I have seen that letter and, as a fellow highland MP, I am fully aware of the impact that high fuel prices have on families and individuals. We have already taken steps to deliver a 5p duty discount to island communities, and I hope that we will be able to do what we can tomorrow, but that will be a matter for the Chancellor to announce in the Budget statement.