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Value Added Tax

6. Mr. McAvoy: To ask the Chancellor of the Exchequer if he will make a statement on the amount of VAT collected in the last year for which figures are available. [9521]

The Exchequer Secretary to the Treasury (Mr. Phillip Oppenheim): The net amount of VAT collected in the financial year 1995-96 was £43,069 million.

Mr. McAvoy: On the radio this morning the Chancellor, when asked about the Tory record on VAT

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on fuel, said that the Labour party was using a quotation about VAT on fuel from somebody at the time of the 1992 general election. Clearly, the Chancellor has nothing but contempt for that somebody and regards that somebody as being of no importance or influence and easy to disregard. Can the Minister confirm that the Prime Minister is that somebody?

Mr. Oppenheim: With regard to that and to the campaign launch this morning--[Interruption.] If hon. Members give me a chance, I shall be delighted to answer the question. I remember that when the Leader of the Opposition got his job, he cast his eyes to heaven and said that he would not indulge in infantile yah-boo politics, yet this morning he signed off his VAT on food campaign, which is so catty and silly that it makes demon eyes look cerebral and spiritual by comparison.

Sir Sydney Chapman: Does my hon. Friend agree that we have one of the least burdensome VAT regimes of all European Union countries? Will he confirm that 40 per cent. of consumer expenditure in this country is free of VAT, that we want to keep it that way and that the worst prospect for that would come about if we ever agreed to the harmonisation of VAT rates in Europe?

Mr. Oppenheim: Yes.

Mr. Beggs: Is the Minister aware that jobs in my constituency and throughout the United Kingdom could be put at risk by the proposed two-tier insurance rate of 17.5 per cent. and 4 per cent., granting special concession and privilege to the retail sector as against the rental sector, which services about 3 million in the less well-off sections of our community? Will he undertake to meet representatives of rental companies and hear from them how he can continue to achieve the same VAT revenue to the Exchequer while maintaining level competition between the two sectors?

Mr. Oppenheim: The hon. Gentleman makes some valid points. I am meeting representatives of the travel industry and the insurance industry next week. There has been widespread VAT avoidance by those sectors. In the interests of taxpayers in general and of services such as health, education and law and order, which are significantly funded by VAT and on which almost all hon. Members understandably want more to be spent, we must not allow industries to create large VAT loopholes that will put at risk the revenue for those important services. Nevertheless, the hon. Gentleman makes an important point. I will meet the various interests and industries involved to see whether anything can be done to ensure that the system works fairly and to avoid the tax loopholes that have undoubtedly been created.

Mr. Bill Walker: Will my hon. Friend confirm that the vibrant UK economy that we are enjoying results in people having more money to spend, and that the advantage of VAT, rather than direct taxation, as a principal means of raising revenue is that people pay tax

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as they spend? They make the choice, whereas with direct taxes they do not have a choice. That is a great advantage and it makes our economy what it is today.

Mr. Oppenheim: My hon. Friend is right. It is important to remember that VAT is not levied on items that form a significant part of the budget of the less well-off.

Ms Primarolo: Will the Minister tell the House why we should trust his undertaking that VAT will not be imposed on food? The Chancellor said this morning that that had never crossed his mind--those were his words. Will he explain, therefore, why on 30 November 1993 in the Budget statement, at column 940 in Hansard, the right hon. and learned Gentleman described the serious options and the "powerful case" for extending VAT to "food, children's clothes, transport, sewerage and newspapers."--[Official Report, 30 November 1993; Vol. 233 c. 940.]

Mr. Oppenheim: The hon. Lady should probably have continued the quotation to put it in context. I think that her question is marvellous. I never thought that I would stand at the Dispatch Box--[Hon. Members: "Go, then."]--and listen to a Labour Front Bencher make such a heartfelt plea against tax rises. It shows that 17 years of Tory rule have not been in vain. The deputy leader of new Labour's throwing a temper tantrum at the suggestion that he should give a fiver to a tramp proves that, while new Labour may demonstrate admirable enthusiasm for Tory policies, it might be extrapolating a little too far.

National Debt

7. Mr. Spring: To ask the Chancellor of the Exchequer if he will make a statement on the ratio of national debt to gross domestic product, relative to those of other EU member states. [9522]

The Chief Secretary to the Treasury (Mr. William Waldegrave): The United Kingdom's ratio of gross debt to gross domestic product at 53.75 per cent at the end of March 1996 is one of the lowest ratios of general Government gross debt to GDP in the European Union.

Mr. Spring: Does my right hon. Friend agree that his answer simply serves to underline the British economy's stunningly good performance relative to that of the rest of Europe? Will he confirm that our ratio also compares well with those of Japan and the United States?

Mr. Waldegrave: The country's debt figures represent a main source of pride for the Government. We must consider what has happened during the past 20 years. In 1970, we had the worst debt to GDP ratio of the big countries in Europe. In 1975, we were still the worst performer. We began to catch up in the 1980s and in 1996 we were the best performer. I confirm the accuracy of my hon. Friend's comments about Japan and the United States: we have a lower debt to GDP ratio than both of those countries.

Mr. Geoffrey Robinson: Will the Chief Secretary confirm that national debt has doubled under the present

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Prime Minister and now costs every taxpayer about £1,000 a year? Does he agree that that represents a disgraceful mismanagement of the country's finances?

Mr. Waldegrave: The hon. Gentleman makes a silly point. The base year of 1990 saw the lowest level of national debt since 1915, when the Liberals joined the national coalition and began to finance the war by borrowing. It was not until 1990 that we had debt under control again. Another way of putting it is that, in 1990, we had by far the lowest debt level of any western country. That enabled us to look after public services during the recession and, at the end of it, still have the lowest debt of any big European country.

Mr. Yeo: Will my right hon. Friend confirm that if the European countries that are hoping to form the first wave of a single currency were able to meet the debt to income ratio required by the convergence criteria only through a gross fudging of their financial accounts, that would be an unsustainable basis for a single currency and it would be highly desirable for this country to have no part of it?

Mr. Waldegrave: My hon. Friend is entirely right. If countries were to think it wise to try to join a single currency by using accounting devices that counted for one year only, they would join an ultimately unstable single currency. I am sure that that will form part of the judgment that Ministers take in the Council of Ministers at the appropriate time.

Mr. Malcolm Bruce: Will the Chief Secretary acknowledge that, under the present Prime Minister, British national debt has risen faster than that of any other member state in the European Union except Germany, which is coping with reunification? Against that background, and as the Conservative and Labour parties have pledged to reduce or abolish taxation, there is a natural question in the minds of the electorate about how they will keep debt down without introducing other measures of taxation. We want an exchange, not of insults, but of information regarding exactly which taxes Labour and the Conservatives will put up.

Mr. Waldegrave: The hon. Gentleman is right to contrast the approaches of the Government and the Opposition. The Government will maintain low tax and debt burdens by controlling expenditure. There is not the slightest chance of the Labour party's doing that.

Mr. Wilkinson: Is not it remarkable that this country probably nearly meets the convergence criteria for joining the single currency but, according to polling data in The Daily Telegraph, is the country most vehemently opposed in principle ever to joining the single currency? Is not it a fact that good management of the economy, as evidenced by the statistics on national debt, is a good in its own right to be pursued in the interests of the British people, not the interests of creating a single currency in which they have no confidence?

Mr. Waldegrave: My hon. Friend is exactly right. The policies that my right hon. and learned Friend the Chancellor has been following are right for the economy and are pursued because they are right for the economy. One of the things of which the Government can be proud

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is the fact that we will have an entirely free choice, thanks to the Prime Minister's opt-out, about whether to go into a single currency. The economic strength of the country will mean that we shall be able to choose on the basis of wider considerations.

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