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Mrs. Ewing: The hon. Gentleman knows the SNP's opposition to the 17.5 per cent. rate. The amendment, which was tabled in my name, was not canvassed because 250 redundancies were announced in my constituency on Friday, courtesy of the Ministry of Defence, and that matter had to be dealt with. The Labour party is extremely miffed that it did not work out the possibility of tabling such an amendment to the new clause. If that is what is worrying Labour Members, it is a shame, but there was nothing to prevent the Labour party, with all its resources, from doing exactly what my party did.
Mr. Darling: I do not wish to labour the point, but of course we considered the possibility. Given that we had to obtain a majority which, of necessity, would include some Tory rebels, we were anxious to prevent VAT from being imposed at 17.5 per cent., and we believed that the one position that we could win was to keep VAT at the present year's level. Without exception, Labour Members have always opposed VAT on domestic fuel.
Although I have great sympathy with the hon. Lady in respect of the redundancies that were announced in her constituency on Friday night, it has been my experience that the leader of the Scottish National party has never been reticent about using the press. The reason why we did not hear a cheep between Friday evening and today was simply that the hon. Lady was otherwise engaged, no matter how understandable the situation in which she found herself.
Mrs. Ewing rose --
Mrs. Ewing: It must be recorded that the amendment was on the blues at the back of the Order Paper on Friday, if Labour Members had cared to check. I take it from the remarks of the hon. Member for Edinburgh, Central that the official Opposition plan to call a Division on new clause 1, although I had understood that new clause 1 was not opposed. There is still an opportunity to vote on the recommendation that we have placed before the Committee. All that we are asking for is hon. Members'
Column 55support. Hon. Members must make up their own minds. They must take decisions and answer to their constituents. Many people will find it very interesting if the official Opposition do not support our amendment in the Lobby tonight just because they happen to be miffed that they missed an opportunity.
Mr. Graham: I am confused because the amendment refers only to 5 per cent.--it should be 1 per cent. My opposition to VAT on fuel is well known, Mr. Deputy Speaker, as is my opposition to the fuel poverty which is affecting constituents all over Great Britain. Ministers' replies to the questions that I asked before they put VAT on fuel should have had some credibility. I asked: Did they know what the price of coal was? Did they know how much it cost for a bag of coal to be delivered to a house? Did they know how much a bottle of Calor gas cost? Did they know what a gallon of paraffin cost? I never received any answers. One would think that, with all the resources which Ministers have, they could have found that out. The Minister may wish to intervene now to tell me.
We are again speaking about fuel poverty, and the Opposition are trying to protect pensioners, the disabled and the low paid. We are constantly arguing about the issue because elderly people and others cannot heat their houses and live in comfort. The Government deny them that. The amendment aims to reduce the costs of heating the homes of the elderly and of the disabled.
The Government should tell us how much it costs to heat a home, and then they should look at by how much they are increasing that cost. There is confusion among some Members, but I am keeping strictly to the amendment. I should like to see the abolition of VAT on fuel, and the Government should go further and make some other dramatic reductions to the cost of heating homes. We do not want the Government's penny-pinching schemes to help people who are suffering fuel poverty. We need something that is more committed and would allow folk to live in comfort.
The House often gets caught up in minutiae which, at the end of the day, does not help anybody. I should like the Government to take some cognisance of fuel poverty. People are living in real hardship in cold and damp houses. Many of my constituents live in damp homes, and the local council does not have enough money to heat those houses. Hon. Members may ask what is the relevance of that. Clearly, if people are paying for heating, they will also be paying the additional VAT on fuel. If VAT on fuel were reduced, that would help people to live in comfort.
My hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) rightly let the Committee know that we have too many homes in Scotland which are damp and need heating. Too many homes have condensation and have been badly built. Do the Government come up with enough money to remedy those problems? No. They come up with an increase in VAT on domestic fuel, which brings us back to square one. Ordinary men and women who are low paid or pensioners cannot heat their homes because of this Government's actions.
Column 56Members in different parts of the Committee will be voting on this issue. I look at it as a simple issue. The Opposition are against VAT on domestic heating. Like my hon. Friend the Member for Aberdeen, North (Mr. Hughes), I would support a rate of zero per cent. Unfortunately, VAT on domestic fuel has been imposed for a year, and we cannot remove it without co-operation from other member states of the European Union. I suspect that such co-operation would be unlikely, given the Government's relations with the other member states.
It is surely better to have a rate of 5 per cent., which is at the bottom of the reduced rate of VAT, than one of 8 per cent. An argument has been advanced that we should leave well alone, and that we should not move the rate to 5 per cent. Another argument is that new clause 1 might not go through, but I do not believe that. The Chancellor said that he would introduce clauses as a result of a decision of the House before Christmas regarding VAT, when the Government were roundly defeated on increasing VAT on domestic fuel to 17.5 per cent. The Chancellor then said that he would take note of that decision.
The Chancellor had his revenge in his mini-Budget just before Christmas, although he need not have done so, by putting up the duties on lots of other commodities. He said that he would have regard to what the House decided, and that he would propose a new clause in time for it to be discussed in Committee. This he has done. The Treasury produced draft clauses, and we have the clauses before us.
There would be no honour on the Government side--there is some--if they incited their own Back Benchers to vote against new clause 1. I do not think that they will do that. I am prepared to accept the word of the Government that they will do their best to ensure that new clause 1 is read a second time and becomes part of the Bill. If that is the case, what is left? After the new clause is dealt with, we can--as an attempt to find the opinion in the Committee--ask whether we want the reduced rate of VAT to be 8 or 5 per cent. I am simple-minded on the matter. I do not believe that we should have VAT on fuel, but, if we have to have it, I would rather it was at 5 per cent. than at 8 per cent.
It is clear that, for many people, the cost of energy is great. Members have talked about fuel poverty. It exists not just in Scotland but in England and, as a Welsh Member, I can tell the Committee that fuel poverty is present in Wales as well. Consumers of electricity have to pay high standing charges, and that again is a measure that bears hardest on those who can least afford to pay. Meanwhile, the regional electricity companies have so much money that it is flowing out of their ears. There is no justice. Despite the adverse effects upon the poorer people in society, we are debating whether we should leave VAT at 8 per cent or reduce it to 5 per cent. I certainly have sympathy for the amendment, and I do not care whether it has been tabled by the SNP or by the Labour party. We should look at what the amendment says and ask whether, in our judgment, it is good for the country and for the people whom we represent.
I have no doubt that my electors would, to a man and woman, say that if I have a chance to vote for VAT on domestic fuel to be at 5 per cent. rather than at 8 per cent., that is what I ought to do. I intend to do that.
Column 57There is a problem within the Labour party. While the Scottish National party will never form a Government, the Labour party will form the next Government. I do not know what my hon. Friends on the Front Bench will suggest, but they might be worried that the Government will say that the Labour party is forgoing a certain amount of revenue. The Government may then ask where the Labour party is going to get that revenue.
I do not how much revenue a 3 per cent. reduction in VAT would amount to-- it might total £0.5 billion. The Chancellor of the Exchequer in his Budget--I am speaking from memory--said that he was expecting a public sector borrowing requirement of about £30 billion in 1995-1996. As a result of changes in the economy, he is now expecting a PSBR of £21.5 billion. Those matters are dealt with by guess and by God, and estimates of the PSBR can vary by huge amounts. If the Labour party--through its support of the amendment--were able to bring the rate of VAT down from 8 to 5 per cent., what would happen to the PSBR? It would go up from £21.5 billion to perhaps £22 billion. I do not think that that is serious. I cannot say that about many things, but on its own it is not a serious problem. On the other hand, what other tax could be put up instead?
I recommend that the Government accept the amendment and resolve, as a quid pro quo, not to abolish tax on share transactions. That would more than compensate for any loss of revenue resulting from acceptance of the amendment. The tax that the Government will forgo voluntarily when they abolish duty on share transactions is about £1 billion. That is more than they would forgo if they accepted the amendment. I will not vote for the amendment irresponsibly and say, "Well, as it is something that my constituents would want, I'm not going to worry what happens to the economy as a result." I shall vote for the amendment and urge the Government, if it is passed, to recoup the money by retaining duty on share transactions. In itself, that abolition of duty would lead to more short-termism and difficulties for the economy.
I hope that that is a reasonably logical argument. We should not try to squabble about who thought of something first. It does not matter. People do not care tuppence about who tabled the amendment. They care only about the effect that it will have. I am sure that, if it were passed, 99 people out of 100--not only in my constituency but throughout the land--would give three cheers.
Mr. Heathcoat-Amory: The hon. Member for Oxford, East (Mr. Smith) asked about the status of the 8 per cent. VAT rate on domestic fuel and power. In my introductory remarks, I said quite clearly that we accepted the decision of the House in December of last year and have no intention of increasing the rate further. In fact, the new clause fixes the 8 per cent. rate in statute and removes its transitional status. Let us contrast what I just said with the evasive attitude of the hon. Member for Dunfermline, East (Mr. Brown), who, in the debate on the Budget, despite being asked several times by one of my hon. Friends, refused to give any assurances about the intentions of a future Labour Government on the rate and scope of VAT.
We do not intend to bring in any more reduced rates of VAT. To do so would undermine the comparative administrative simplicity of the VAT system in this
Column 58country. It would create new boundary lines between rates and types of products and services, which would provide endless scope for disputes and difficult decisions.
Mr. Andrew Smith: Can we be clear about precisely what the Paymaster General said? When he said that the Government have no intention of bringing in any more reduced rates, is that what he means--no rates other than 8 per cent? Or is he saying that no other goods and services will be brought to the 8 per cent. rate? Which is it?
Mr. Heathcoat-Amory: I am saying that the VAT rate on domestic fuel and power will be a unique reduced rate in this country and we will not be adding any more products or services to the reduced rate band.
In answer to a question about energy saving materials, I can confirm--it was apparently not understood by the hon. Member for Nottingham, South (Mr. Simpson), who introduced his Bill last Friday--that such products are not on the annexe to the sixth VAT directive and therefore we could not introduce a reduced rate for such products, even if we wished to. The Commission said that it has no intention of proposing any additions to the reduced rate to cover energy-efficient materials, and therefore I must say that that, too, falls at the first fence.
The hon. Member for Banff and Buchan (Mr. Salmond) described the regional variations in the weather pattern in the United Kingdom and pointed out--as if we did not know--that it is generally colder in Scotland than it is in the rest of the United Kingdom. It is not quite that simple, because parts of Scotland, such as the west coast, are not as cold as certain parts of England. Therefore, any attempt to introduce regional variations in the taxation of fuel, or in the compensation package, would rapidly turn into an administrative nightmare. I am sure that the hon. Gentleman is aware that various other costs in Scotland are somewhat lower than in England, certainly in the south of England. If we were to compensate for those costs as well, in the opposite direction, the whole system of taxation and the benefit system would rapidly become bureaucratically unworkable. Certain payments go to Scotland more frequently than to England. Cold weather payments, which the Government introduced, go differentially to those living in Scotland. Last year, for example, Scotland received 40 per cent. of the cold weather payments that were paid, and they are due to rise. They were increased from 1 November last year from £6 to £7 per week and will increase further to £8.50 per week from 1 November this year.
Mr. Salmond: I am well aware of the inadequacy of the emergency payments scheme. The Minister talks about an administrative nightmare for the Government. Will he just contemplate the fuel nightmare, which the imposition of VAT on domestic fuel has made worse for so many of his fellow citizens? Has he actually read the Cold Climate Allowance Bill, which has been introduced several times by my hon. Friend the Member for Moray (Mrs. Ewing), which suggested that regional variations in compensation be built- in to the social security system to bring about some alleviation of fuel poverty? Does he understand that all those questions were dealt with in that
Column 59Bill and that all that is required from the Government is some political will not to put people into a situation of desperate fuel poverty?
Mr. Heathcoat-Amory: I well understood the points that were made by the hon. Gentleman and his colleagues, both in this and previous debates, but I am firmly of the view that any attempt to go down that road for one specific item of domestic expenditure would become administratively unworkable.
On VAT and the climate, it is worth pointing out in passing that not only do all other EC countries have a positive rate of VAT on domestic fuel and power, but in countries that are colder than the United Kingdom the VAT rate in higher. For instance, in Sweden and Denmark, the rate of VAT on fuel and power is 25 per cent. and therefore it is not the only matter to be considered under this general heading.
Mrs. Ewing: Does the Minister understand that, in those Nordic countries, the housing standards and the standards of insulation are much higher and that they have much lower winter death rates than we do in the United Kingdom, particularly when we compare them with northern parts of Scotland? I realise that VAT is one aspect of the argument, but at the moment we do not have a sufficient scheme to bring our housing stock up to the necessary quality. Until that is achieved, we must do everything possible in our power to avoid fuel poverty.
Mr. Heathcoat-Amory: That is why I said that there were a number of other factors in play. I am sure that the hon. Lady would give us credit not only for introducing but for generously funding the home energy efficiency scheme, which will receive £100 million a year over the next three years and which is far and away the most comprehensive scheme for improving the insulation and draught-proofing of domestic dwellings.
I return to the main substance of the amendment, which is the determination of the hon. Member for Banff and Buchan to force through an amendment to reduce the 8 per cent. rate of VAT on fuel to 5 per cent. That is unacceptable to the Government because of the revenue loss concerned. It would cost some £500 million a year, which would have to be made up by other taxes elsewhere or be funded by cuts in public expenditure. Under neither heading did the hon. Gentleman make any suggestions.
The Committee was entertained by the exchanges between the Labour party and the SNP on this matter. Although I resist the amendment and disagree with it for the reason given, I concede that the hon. Member for Banff and Buchan and his party are at least consistent on the matter. He opposed VAT on fuel and now wishes to reduce it to the minimum rate permitted under EC legislation. Both he and my hon. Friends were somewhat bemused and baffled by the wriggling explanation--or non-explanation--given by the hon. Member for Edinburgh, Central (Mr. Darling) in trying to describe why he will not support the amendment. If the Labour party is against this tax--its opposition to the Budget was founded on opposition to VAT on fuel--it is strange that it would rather have VAT at 8 per cent. than at 5 per cent.
Column 606 pm
There is a clear amendment, which I understand is in order, to amend the new clause and insert 5 per cent. rather than 8 per cent., so it intrigued us that, although the Labour party and the Liberal Democrats want zero per cent. VAT on fuel, they would nevertheless prefer 8 to 5 per cent. That Mickey Mouse arithmetic and contorted logic gives us a glimpse of what a future Labour Government would be like. It clearly did not impress the hon. Member for Greenock and Port Glasgow (Dr. Godman), who said with genuine and heartfelt sincerity that he opposed the whole concept of VAT on fuel and would vote accordingly. He will certainly join the hon. Member for Banff and Buchan in the Division Lobby.
Mr. Malcolm Bruce: The Minister is correct to say that the Liberal Democrats will not support the amendment. The reason, however, is clear. We said that we favoured the 5 per cent. rate but must show how it would be funded. We proposed that it be funded by a carbon energy tax, which the Government resisted and prevented the European Union from adopting. Are the Government in favour of a carbon energy tax, which would help to finance the 5 per cent. rate? If so, not only could we support the amendment but so could the Government.
Mr. Heathcoat-Amory: That reasoning is highly specious. I confirm that we are not in favour of a carbon energy tax, which is unnecessary and would damage the competitiveness of British industry. If we imposed such a tax on British business, it would simply encourage industry, particularly heavy industry, to migrate away from the United Kingdom and the European Union to parts of the world like north America and the Pacific basin, which have no intention of imposing a carbon tax. So we could see carbon emissions rising globally, rather than diminishing.
Dr. Godman: I am grateful to the Minister for showing his characteristic courtesy. He has confused me with another hon. Member because at no time did I use the phrase, "vote accordingly". I said that I had some sympathy for a 5 per cent. level of VAT on fuel. I would prefer a zero rate. Incidentally, for what it is worth, the pronunciation of my constituency is Greenock and Port Glasgow.
Mr. Heathcoat-Amory: I apologise to the hon. Gentleman for getting the pronunciation of his constituency wrong, but I was crediting him with more logic than he has displayed. If he opposes VAT on fuel and power and wants a zero rate, it defies logic that he will not support an amendment that would reduce it to 5 per cent. and that he would rather have 8 per cent. That logic obviously impresses the hon. Member for Wrexham (Dr. Marek), who clearly said that he will support the SNP amendment. The Labour party has a mini, or perhaps a major, rebellion on its hands. I see that the hon. Member for Wrexham is now being spoken to, no doubt in stern tones, by a colleague. I doubt whether that will be sufficient to get him out of the wrong Lobby, in eyes of the Labour party, or the right Lobby in the eyes of the SNP. So what started as a simple amendment by the SNP has driven a dagger right the way through the Labour party. Although I have no sympathy and will invite my hon.
Column 61Friends to reject the amendment, I must at least congratulate the hon. Member for Banff and Buchan on his parliamentary tactics.
The First Deputy Chairman: Order. It may assist the Committee if I advise on the order in which I intend to put the Questions. First, I shall ask whether the clause should be read a Second time; secondly, I shall put the SNP amendment; and, thirdly, I shall ask whether the clause should be added to the Bill.
Question put and agreed to .
Clause read a Second time.
Amendment proposed to the proposed new clause: (a), in new subsection (1A)(b), leave out `8' and insert `5'.-- [Mr. Salmond.] Question put, That the amendment be made:--
The Committee divided: Ayes 7, Noes 283.
Division No. 43] [6.06 pm
Column 61Barnes, Harry
Marek, Dr John
Column 61Marshall, Jim (Leicester, S)
Tellers for the Ayes: Mr. Alex Salmond and Mrs. Margaret Ewing
Column 61Ainsworth, Peter (East Surrey)
Aitken, Rt Hon Jonathan
Alison, Rt Hon Michael (Selby)
Allason, Rupert (Torbay)
Arnold, Jacques (Gravesham)
Arnold, Sir Thomas (Hazel Grv)
Baker, Nicholas (North Dorset)
Banks, Matthew (Southport)
Banks, Robert (Harrogate)
Beresford, Sir Paul
Biffen, Rt Hon John
Bonsor, Sir Nicholas
Bottomley, Peter (Eltham)
Boyson, Rt Hon Sir Rhodes
Bright, Sir Graham
Brooke, Rt Hon Peter
Brown, M (Brigg & Cl'thorpes)
Browning, Mrs Angela
Bruce, Ian (Dorset)
Carlisle, John (Luton North)
Carlisle, Sir Kenneth (Lincoln)