Finance Bill

I am now tempted to keep the hon. Gentleman in suspense for a little longer. I hope he will bear with me. I was making the point that if the Committee does not agree to support the amendments and does not agree that we should make reports and study the impact, it will be tantamount to our saying that we do not care how VAT will hit different groups, but I know that there are people in the Government, and Members in the House, who do care. They worry about the impact of VAT because they, like Labour Members, came into politics to try to make this country a fairer and more prosperous place to live in. The reports we are asking for are all the more urgent because evidence has emerged over the last couple of weeks from the Government and elsewhere that VAT increases are both unfair and regressive. There was the now infamous graph on page 66 of the Red Book, to which the Economic Secretary referred in questions earlier this afternoon. The graph purported to show that the Budget was fine—the very model of progressive politics. Only after interrogation did it emerge that the picture looked half decent only because it incorporated Labour measures and did not include the full extent of the welfare cuts that await the country in years to come; indeed, just a third of those welfare cuts were put into the picture, so unsurprisingly, it was flattering. The best arguments for the reports we are asking for were not made by the Economic Secretary or by me, but by the Prime Minister and the Deputy Prime Minister. During the election the Prime Minister said that he could "absolutely promise" that VAT is regressive. He said that""you could try, as you say, put it on VAT, sales tax, but again if you look at the effect of sales tax, it's very regressive, it hits the poorest the hardest. It does, I absolutely promise you."" That is what the Prime Minister said at one of his popular Cameron-direct events in Exeter in May. The Deputy Prime Minister echoed that view, and also said that raising VAT would be regressive and penalise the poor. On "Today" on 7 April he said,""you clearly cannot write Budgets in the future"—" echoing the point made by the hon. Member for East Dunbartonshire (Jo Swinson)—""but what you can say is that the only way you can avoid a huge hike in VAT, which let's remember is a regressive tax, is by making sure that you take some of the decisions that we've done"." I am not quite sure what those decisions were. And, of course, there are the comments by the hon. Member for Bermondsey and Old Southwark (Simon Hughes), who is not with us this afternoon but has been very eloquent on this subject in public and in private. He told "The Daily Politics" on 15 June:""I hope we don't have a VAT increase because it is the most regressive form of tax, it penalises the poor at the same rate as the rich"." The views expressed by the Prime Minister, the Deputy Prime Minister and the deputy leader of the Liberal Democrats have all echoed the opinion that has been offered to us in the House by a range of experts. The National Institute of Economic and Social Research said in its report of 21 June that VAT rises do more harm than other tax rises would. The Institute for Fiscal Studies said that a VAT rise will have a bigger impact on those with least money. I think it said that the poorest 10% of households would lose twice as much as a percentage of their income as the richest 10%. Even the Treasury's own figures, released in answer to a parliamentary question earlier in the year, show that the poorest households are affected three times as much as the richest by changes in VAT. So the leadership of the new Government was very clear about the impact of VAT rises, and given this silence during the election and the risks of the proposed clause 3, I think the House needs to know what the truth really is, and we need to know what measures we should be demanding on behalf of our constituents in future Finance Bills to soften the blow. Amendment 46 seeks to focus this debate on one group of people in particular, but before I address that I give way.