| Previous Section | Index | Home Page |
Mr. Deputy Speaker: I call Mr. Fabricant.
Mr. Deputy Speaker: Order. I apologise to the House; I was distracted for a moment. Has the right hon. Member for Wells (Mr. Heathcoat-Amory) given way or has he concluded his remarks?
Mr. Heathcoat-Amory: I have concluded.
Mr. Deputy Speaker: In that case, I should call the Paymaster General to reply to the debate in the remaining time.
5.31 pm
Dawn Primarolo: I shall try to deal with all the points that have been raised within the short time that remains. If I cannot, I shall certainly deal with them in the later debate.
I remind the House of the context of this matter. The previous Government--I understand that the righthon. Member for Wells (Mr. Heathcoat-Amory) was Paymaster General from 1994 to 1996--committed us to an absolute legal obligation to raise VAT on works of art from 2.5 to 5 per cent. The then Government asked the Commission to undertake an independent study, but they unfortunately did not have that written into a directive. The agreement was political and therefore not enforceable in law.
The right hon. Member for Cities of London and Westminster (Mr. Brooke), who is very well informed and follows these issues closely, referred to the delayed report. He is quite right: the independent report should have been available at the end of December, but it was not available until March. The Commission made its response as late as 28 April and the Government's view is that it ignored the recommendations. In our opinion, the Commission's recommendations did not properly recognise elements of the independent report, which we then pursued vigorously with the Commission and other member states.
The hon. Member for Chichester (Mr. Tyrie) asked about the Commission's report. I can tell him that it and an explanatory memorandum were put before the House along with the Government's view. Although the report was lodged with us, the Commission unfortunately did not make it generally available and, under the agreement undertaken by the previous Government, we could not require it to do so. However, we at least obtained a copy for ourselves and were able to scrutinise the details.
The Government were faced with the Commission's insistence on the implementation of the absolute legal requirement. As hon. Members know, the consequence for the Government of not complying with our legal obligations would have been infraction proceedings and things could have been considerably worse. None the less, we continued to pursue the Commission to seek either an extension of our derogation or the setting of 2.5 per cent. as the rate for the rest of Europe. Only one other EU country--Denmark--applies the 5 per cent. levy, and the others apply higher rates.
The Government faced an absolute legal agreement and had no room for manoeuvre because the independent report had not been written into the directive. The Commission refused to move, and other member states did not agree to reopen the matter. At present, income to the Government is around £10 million, and the increase in VAT to 5 per cent. on goods currently taxed at 2.5 per cent. will yield around a further £10 million in a full year. The offset resulting from widening the scope of the new 5 per cent. rate to include imported works of art previously taxed at 17.5 per cent. will, however, leave the overall package effectively revenue neutral.
Mr. Tyrie:
Will the Minister give way?
Dawn Primarolo:
Forgive me, but I have been left little time to reply to the debate. I shall be happy to return to the point in later debates.
The Government have continued to work closely with the art market, recognising its valuable contribution to a global art market centred on New York and London. The European Union should see London as a European centre of excellence, but we have not been able to win that argument at this stage. In a press release, the British Art Market Federation welcomed the Government's decision to provide for the reduction on imports of contemporary art, saying that that decision and
Mr. Leigh:
I am sorry that the Minister was unable to give way during the debate. Clearly, she had time to do so. What can she say about new subsection 6(a), which sets out items accepted for definition--
Mr. Deputy Speaker:
Order. I am afraid that the Minister will not have an opportunity to answer that question.
It being three quarters of an hour after the commencement of proceedings on the motion,MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 52(1)(b) (Money resolutions and Ways and Means resolutions in connection with Bills).
Question agreed to.
Resolved,
Mr. Letwin:
I am not clear about the meaning of the motion. Nor am I entirely clear about the guidance on Member's interests, so, for the avoidance of any impropriety, I declare a possible interest in that a pet shop may have been a client of the bank of which I am a director.
The motion is the most vexed of those before us this afternoon. I have a few straightforward questions that Ministers may wish to answer now so that we do not have to deal with them when we reach the considerable number
of substantive questions to be debated later. I am not clear--the notes on clauses do not make it clear--whether the situation is as I envisage it, which is that up till the time when the lacuna that gave rise to the substantive change was spotted, pet shops were paying VAT.
Dawn Primarolo
indicated assent.
Mr. Letwin:
I am glad to see that I am right in that. In that case, this Ways and Means motion cannot possibly have the effect of changing the revenue that was extracted or would now fall to be extracted from those who were previously operating under the mistaken assumption that the law was correctly constructed and that Customs and Excise had the right to levy the VAT that it was levying.
The motion must therefore relate to the future and to the question of how much can be raised in the future. Will the Paymaster General give us an estimate of the effects on the Revenue of that change in the future? What will be the immediate effect--the first-round effect? What additional VAT revenue will be raised assuming no demand elasticity? What will be the second-round effect--the long-term effect--assuming that things change and people use less pet food as the price rises?
I take it that the Treasury has done an analysis of both those effects. For reasons which I do not want to dwell on now--it would intrude into the substantive debate--I do not want to go into detail about why I think that this is an important question to answer. However, I hope that the Paymaster General can clear up the factual point and give us an idea of those two projections, which I presume the Treasury has made.
Mr. Fabricant:
I am a little surprised that the hon. Member for Burton (Mrs. Dean) is not present. The headquarters of Bovril and Marmite are located in Burton, which is close to Lichfield. The House will know that Bovril and Marmite make use of beef extract and yeast, which are the substances referred to in this Ways and Means motion. My hon. Friend the Member for West Dorset (Mr. Letwin), who leads from the Front Bench so expertly and fluently, asked about pet foods. Will VAT be applied only to products used in alcoholic beverages, such as yeast and egg--which I suppose is used in egg nog or advocaat--or will it be applied to Marmite and Bovril?
We need an assurance that VAT will not be applied to Bovril. [Interruption.] As my hon. Friend the Member for West Dorset says, we must make a plea for Bovril and Marmite to ensure that they remain exempt. If VAT were applied to those products, employment in Burton would be affected, and it is conceivable that people in Lichfield work in that factory, which is only a few miles down the A38. More importantly and more directly related to this Ways and Means motion, we need an assurance that this small measure does not mean that VAT will be put on human food. Will the Paymaster General give a clear and
unequivocal assurance that VAT will not be applied to Bovril or Marmite as a precursor to VAT on foods generally?
It would be utterly hypocritical if the hon. Lady could not give that assurance. Many of us remember the scares that the Government caused before the last general election when they were in opposition. They asked for such guarantees, even without the Ways and Means motion which spurs me to ask this practical question.
"the Government's equally robust opposition to the Artists' Resale Rights Directive,"
--not relevant to this debate, and not part of my responsibilities--
"will we believe, enable us to maintain the UK's competitive position in the international art market."
The federation recognises what we have done, and recognises that we were bound by legal obligations because of the previous Government's commitments. It has congratulated the Government on vigorously pursuing the best interests of the art market. Despite what some Opposition Members say, the Government are committed to ensuring that the British art market gets a fair deal.
5.39 pm
That provision may be made in the Finance Bill amending section 21 of the Value Added Tax Act 1994.
Motion made, and Question proposed, pursuant to Standing Order No. 52(1)(b),
That provision (including provision having retrospective effect) may be made in the Finance Bill amending the provisions of Schedule 8 to the Value Added Tax Act 1994 by virtue of which supplies of preparations and extracts of meat, yeast or egg are zero-rated.--[Mr. Jamieson.]
5.39 pm
| Next Section
| Index | Home Page |