Finance Bill

I would have been absolutely delighted to be in government and to have a progressive tax system that helped ordinary people and stimulated business growth, as we in my party have done in the Scottish Government. We have reduced business rates to grow local businesses, and frozen the council tax for three full years to help local people. However, we are now faced with the consequences of a coalition agreement that will see the VAT rise hit the poorest the hardest. On balance, the record of my party in government in Scotland will be viewed far more favourably than the VAT increase introduced by the Liberals and the Tories in this Westminster coalition. However, I am being distracted from my amendment; that is the Liberals' fault, as well. I was making the serious point that this an additional £150 million bombshell tax on charities, but there is also the additional cost to the public sector generally. The health service alone in Scotland will now have to find £26 million from its budget in order to pay the VAT bill. At a time when all of us, presumably, want to protect the front line—the prison service and the police in England, Wales and Northern Ireland; the teachers; the nurses; the social workers: indeed, every public body and all the people who do the work—this Government, backed by the Liberals, are forcing those public bodies to pay that hard-earned cash to the Treasury instead of ensuring continued investment in and payment to the front line. That is a ridiculous position to find ourselves in. In economic terms, this makes no sense. The British Retail Consortium described the rise as "disappointing". I said on Second Reading that that was something of an understatement. It went on to say:""We didn't want a VAT increase. It'll hit jobs."" Simon Newark of UHY Hacker Young warned that the rise could push up prices on the high street by about 2%, which could have a significant impact on inflation. He went on to warn:""Higher inflation could trigger interest rises, risking the spectre of the double dip recession."" Others were warning that the rise in VAT will exacerbate cash-flow problems. I said at the beginning of my remarks that the poorest will be hit three times harder than the richest. Some estimates have suggested that those earning under £14,200 will be hit six times harder than those at the top of the pay scale, earning more than £49,700. I concede that that estimate may be at the far end of the scale, but the point is that this VAT rise is going to hit those on low and modest earnings, and without earnings, extremely hard. Is it not the case that this VAT rise also increases the incentive for people to operate in the shadow or cash economy, where income tax and national insurance contributions are not paid, and exacerbates the yield issue for the Government?