Finance Bill

I would be very supportive of a sunset clause if this measure were a serious attempt to tackle the structural deficit and get the accounts on to a balanced basis thereafter. There may well be later amendments that posit that view, and we will see whether they are pressed to a Division. This change was a political decision and we have the opportunity this evening to reverse it and to demand again a credible medium-term deficit consolidation strategy, not one that simply puts up VAT, with all the social and economic consequences. We should think about the impact that the increase will have on families—not just hard-pressed families who are working, but those who will see unemployment benefits reduced in real terms, whose tax credits may be cut or squeezed, and whose housing benefit, particularly in areas where rented housing is expensive, will come under real pressure. That is the part of society that will suffer most from this VAT rise. According to Shelter, almost half of local housing allowance claimants are already making up a shortfall of almost £100 a month to pay their rent. It is those people at the bottom, who are working hard on modest means and are already struggling to make ends meet, who will be hit hardest by this additional VAT rise. There are, of course, many other reasons to oppose the rise. Mike Bailey, the head of indirect tax at PricewaterhouseCoopers, and Marc Welby, the VAT partner at BDO, both point out that some businesses are exempt from VAT, such as banks, charities and certain public sector businesses, and they will be hit by not being able to recoup extra VAT costs on expenditures, for example on accountancy and legal fees. So this is an additional charge on certain key businesses and on charities. David Smith, chairman of the Shadow Monetary Policy Committee, a group of independent economists, said that the move would increase unemployment by 235,000 over the next decade and reduce GDP by 1.4% over the same period. GDP forecasts have already been downgraded in the last Office for Budget Responsibility report. I am desperately hoping that that is wrong and the Government are right, but I fear the worst, and we may see a detrimental impact on GDP growth as a consequence of the rise. It is also warned that the job losses will put a permanent dent in the living standards of many in this country. Peter Jenkins of the Charity Tax Group, representing more than 400 leading charities, said that the VAT increase was disastrous for charities, resulting in a bill of £150 million for irrecoverable VAT at a time when the Government—I understand why they are doing this—are asking the charitable sector to take on some or many of the roles currently undertaken by public bodies, local authorities and the state generally. When the Government are trying to encourage the transfer of responsibility and work from the public sector to the charitable sector, it seems extraordinary that with the VAT rise they will at a stroke place the charitable sector with an additional £150 million bill.