Finance Bill

It is actually worse than that. Goods of all sorts tend to be dearer in rural areas to begin with, the VAT is added to that price and so more VAT, in cash terms, is paid on the purchase, or the sale, of the same item in a rural part of the country than in a competitive city centre. Then we must consider the fuel situation, which is extraordinary because VAT is paid on top of duty. This Government are keeping the three duty rises of the previous Government, and each duty rise will also have additional VAT at 20% on top flowing its way to the Exchequer. My hon. Friend the Member for Na h-Eileanan an Iar (Mr MacNeil), like all my hon. Friends, is right to say that in remote and rural areas, in particular, this is an umpteen-level whammy, as the VAT goes on top of every single duty rise for every single good delivered to those areas. Of course, the effects do not just stop and start at rural areas, because bits of the local economy are also affected, particularly small service companies. Retailers and restaurants may find themselves between a rock and a hard place. As Stephen Law, president of the insolvency trade group R3, said, those businesses will""struggle to work out what will damage their bottom line more: taking on the extra tax burden or suffering an inevitable fall in consumer demand if they pass the tax on."" When we think about the consequences and how that can damage what may already be fragile companies on local high streets, we can begin to see the very real damage that may be caused. We can see that damage before we consider the law of unintended consequences. I thought that The Scotsman on 4 July was right in its article headed "Cowboys builders set to return as VAT rises". It stated:""Stuart Brodie, head of tax at Grant Thornton in Scotland, said not only would the VAT increase fuel the black market but past trends showed it would also reduce the government's tax take."" The article quoted him as saying:""You generally see that if you cut the tax rate, you up the tax intake as it's less attractive for businesses to avoid it and vice versa"." According to the article, he added that""the VAT rise would act as a disincentive for many legitimate builders at the lower end of the market to grow their businesses as it would be more cost effective for them to do less work and keep turnover below the £68,000 VAT registration threshold."" He also said:""You are putting an automatic collar on their ability to grow their business"." This is happening at a time when we need those small businesses. In Scotland 90% of people are employed by the smallest businesses. We need everyone in the small and medium-sized enterprises sector to be growing, taking on, employing and paying all the tax they possibly can.