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VAT (Works of Art)
6. Mr. John Wilkinson (Ruislip-Northwood): What is his estimate of the additional revenue to be derived from the proposed increase in VAT on works of art imported into the UK from outside the EU in each of the first three years of operation. [83193]
The Paymaster General (Dawn Primarolo): In the first two full years, the amount of money collected from imposition of VAT at 5 per cent. on works of art will be £10 million. As the hon. Gentleman will know, the Government are not convinced of the case for raising VAT on art to 5 per cent.
Mr. Wilkinson: I am grateful to the hon. Lady for that answer. However, is it not the case that, in the first year after imposition of VAT at 2.5 per cent.--under the seventh directive of the European Union on imported antiques, works of art and collectables from outside the European Union--imports decreased by 40 per cent., from £1 billion to £600 million? Is she aware that the United Kingdom has 12,000 art dealers and 50,000 jobs in the trade, most of which are in London? She says that she is not convinced of the case for increasing the tax. How was it that she was unable--being such a good European--to persuade the European Commission not to waive the previously agreed derogation to 1 July? The tax, like so many European taxes, will destroy jobs. Is it not time that the Government cut the Gordian knot and did not harmonise tax with Europe?
Dawn Primarolo: I should first correct the hon. Gentleman. The unanimously agreed deal to which the previous Government signed up--the right hon. Member for Wells (Mr. Heathcoat-Amory), when a Minister, signed the explanatory memorandum--stated that we should apply VAT at 2.5 per cent., rising to 5 per cent. There was no vote on whether to increase the 2.5 per cent. to 5 per cent. The previous Government made the commitment to increase VAT to 5 per cent., and the increase was agreed unanimously.
Since the election of the current Government, we have been trying, working very closely with the art market, to persuade our European partners that VAT should remain at 2.5 per cent. We shall continue to negotiate on the matter, which is a darn sight more than the previous Government did for the art market--they sold the market down the river by agreeing to 5 per cent.
Mr. Tam Dalyell (Linlithgow):
Why are our European partners being so sticky about the issue, which affects a lot of jobs?
Dawn Primarolo:
The issue is whether there is an unfair distribution between European art markets. The Government have put the case that the direct competition to the London market comes from New York, so anything that undermined the London market would be bad for all European markets. We are still trying to convince our partners to reopen the issue. Unfortunately, we cannot use the veto because the deal is signed and delivered. It cannot be reopened without unanimity.
Mr. David Heathcoat-Amory (Wells):
Is the Paymaster General aware that the British art market, which employs more than 50,000 people, faces a threat not only from the doubling of VAT, but from the European directive which will impose a compulsory resale levy, which will drive the market out of London--indeed, out of the European Union--to centres such as New York? If she really wants to stand up for British industry, why is she not standing up to the European Union, whether on the road haulage industry, which faces uncompetitive fuel duties, on the City of London, which faces a withholding tax that should have been vetoed months ago, or on the British art market, which is facing new threats to its existence? Why do the Government not stand up for British industry instead of pursuing their mission to be popular in Europe?
Dawn Primarolo:
The right hon. Gentleman has a cheek: he defended the fuel duty escalator in the Chamber when he was a Minister in the previous Government. His Government failed to stand up to Europe when agreeing to allow 5 per cent. VAT on the art market immediately. I read his pamphlet on the art market with some interest. I acknowledge that he knows a considerable amount about the subject, but, if he knows so much, why did his Government do such a bad deal?
8. Ms Joan Ryan (Enfield, North):
What representations he has received regarding the increase in child benefit announced in the Budget. [83195]
The Chancellor of the Exchequer (Mr. Gordon Brown):
I have received a number of representations, including those made at a meeting with the Child Poverty Action Group before the Budget. Most have welcomed the fact that child benefit has risen by 30 per cent. since we came into government and from next April will be £15 for the first child and £10 for subsequent children.
Ms Ryan:
I thank my right hon. Friend for that answer and for the increase in child benefit, which will help 13,800 families in my constituency. My real reason for tabling the question is to tell him that I have met a number of pensioner groups recently. As ever with pensioners, they were interested in more than just the policies that benefit them directly. They also expressed interest in and support for measures that are beneficial to children, particularly the increase in child benefit. Will my right hon. Friend confirm to me, so that I can confirm to parents
Mr. Brown:
All our changes, including the working families tax credit and the child tax allowance which will be introduced from 2001, are designed to give families help when they need it most--when children are growing up. Some 7 million mothers and 12 million children will gain from the increase in child benefit. It is the biggest rise that this country has ever seen and is backed up by our working families tax credit, which will start in October. There will be a minimum income of £200 for families in work with children, which will benefit 1.5 million families. I hope that the Opposition will support the measure instead of opposing it.
Miss Anne McIntosh (Vale of York):
Does the Chancellor not recognise that, although the increase in child benefit will at least go to the child, the changes that he is proposing through the working families tax credit will result in the benefit being lost to the child, because in most cases it will go to the married father? Will he admit that the Labour party has failed to deliver on its election pledge of reducing welfare spending?
Mr. Brown:
I hope that the hon. Lady will understand these facts. First, child benefit goes to the mother. She seems to have misunderstood that. Secondly, the working families tax credit means an overall increase in family income amounting in some cases to £40 or £50 a week. Thirdly, our proposals for the working families tax credit, backed up by child benefit, are far superior to those now floated by the shadow Chancellor and the leader of the Conservative party for a transferable tax allowance that would give a millionaire £1,734 as a result of tax relief and, in some cases, would give nothing to the lowest-paid in the country.
Mr. Christopher Leslie (Shipley):
Is the child benefit increase a way of showing how the Government are standing up for the many, and not the few? Is that not in stark contrast to the priorities of the Conservative party, which would spend hundreds of millions of pounds on cutting stamp duty on properties valued at over £500,000?
Mr. Brown:
I have looked at the voting of the Conservative party on the Finance Bill and the Budget, and it has committed more than £7 billion to measures that include cutting the tax rate for smokers. That money would not be available for the health service or for education, and that makes absolutely hollow the attempt by the Conservative party to put itself on the side of the health service and parents educating their children. As the Minister for Public Health has reminded them, the Tories have to go back and think these things out because none of their figures add up.
9. Mr. Crispin Blunt (Reigate):
What assessment he has made of the effect of the road fuel duty escalator on (a) economic growth and (b) Government revenue in each of the next five years. [83196]
The Economic Secretary to the Treasury (Ms Patricia Hewitt):
The Government are committed to ensuring that economic growth takes place in a sustainable way that respects the environment and is fair to future generations. The fuel duty escalator--which we inherited from the previous Government--is an important element of a package of tax measures that will contribute towards the aim of achieving economic growth while protecting and, where possible, enhancing the environment.
The revenue gained from the escalator in the next three financial years is shown in the March 1999 "Financial Statement and Budget Report".
Mr. Blunt:
I am afraid that that answer treated my question with the same contempt received by my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) and my hon. Friend the Member for Guildford (Mr. St. Aubyn), who made specific requests for information and found that none was forthcoming. Has the Treasury team not worked out that the purpose of an escalator is to accelerate one's movement from one floor to another? Why are they behaving like a group of demented four-year-olds, out of control in a department store--
Madam Speaker:
Order. The hon. Gentleman must use better language in this House.
Mr. Blunt:
Why are the Treasury team taking the rest of the economy--the grown-up economy--way past any sensible destination and inflicting enormous damage on our rail freight industry? The only things that will be getting a lift from the ridiculous decision to stay on the escalator way past any sensible point will be our goods on foreign-owned trucks.
Ms Hewitt:
I am a little puzzled by the hon. Gentleman's question. The previous Government introduced the fuel duty escalator, the effect of which, by 2010, will be to save between 2 million and 5 million tonnes of carbon annually--a measure that was in the green manifesto on which the hon. Gentleman stood for election. As the Budget report clearly set out, the revenue raised in the current year from the fuel duty escalator--which we inherited from the Conservative Government--is £1.7 billion. The Conservative party, which voted against the measure, needs to tell us how it would replace that hole in the public finances and how it would meet the Kyoto targets to which it was committed in government.
Mr. Peter Snape (West Bromwich, East):
Does my hon. Friend not think it remarkable that, in 1993--when the fuel tax escalator was introduced--the hon. Member for Reigate (Mr. Blunt) was not only a failed Tory candidate in West Bromwich, but a political adviser to a former Tory Transport Minister?
Is it not the case that three inquiries conducted under the previous Conservative Administration all concluded that heavy goods vehicles did not meet their true track costs? Is it not also a fact that rail freight, which the hon. Gentleman mentioned for some bizarre reason, has increased by 15 per cent. in the past year? He has rather made a fool of himself there.
Is it not a pity that Conservative Members not only have failed to condemn the illegal activities of certain truckers, but apparently support those truckers in their demands,
which would appear to be for British social costs and French diesel prices? Will my hon. Friend make it plain that those demands are impossible and that, as long as those activities continue, there can be no question of the escalator being reconsidered?
Ms Hewitt:
I am grateful to my hon. Friend, who has made his point extremely well. He reminds me of the remarks of the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), who rightly said that hon. Members who support the Kyoto targets, as the previous Government did, but refuse to support the road fuel duty escalator, are sailing dangerously close to hypocrisy.
I must not apply that comment specifically to the hon. Member for Reigate (Mr. Blunt), and of course I will not do so, but I emphasise the fact that the road fuel duty escalator plays a vital part, under this Government as under the previous Government, in ensuring that we meet our environmental targets and have a balanced and integrated transport policy.
Mr. John Whittingdale (Maldon and East Chelmsford):
Is the Minister aware that many small haulage firms are becoming desperate, as they are now only weeks away from bankruptcy? Her answer, that the Government intend to continue with the escalator until 2010, will simply increase that despair. Does she understand that more and more people feel that the Government's road haulage forum is a waste of time, given their refusal to abandon the fuel escalator or the increase in excise duty? Will the Government commission a full independent report specifically on the competitiveness of the industry, and give an undertaking to act on it?
Ms Hewitt:
I hope very much that the hon. Gentleman will support our policy of discussion with the industry, rather than the policy of disruption pursued by some of the hauliers. The road haulage forum is proving an extremely useful venue for serious and constructive discussions with the industry--something that the previous Government did not undertake--and of course we are considering the industry's competitiveness.
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