Finance Bill

My right hon. Friend the shadow Chief Secretary to the Treasury said at the start of the debate that clause 3 goes right to the heart of the Budget, and I entirely agree. It is also, effectively, a signature measure from this Tory Government, inasmuch as it exemplifies their ability to break the promises they made before the election and is pretty heartless in its targeting, through its regressive measures, of the poorest and the most vulnerable in our society—and all without any sort of mandate, given that they did not put the measure before the people of the country during the election. Amendment 25, which is in my name, calls for an impact assessment in respect of several key commercial and other sectors of society that will be disproportionately hit by the VAT increase. I do not intend to talk about all six areas, partly because my hon. Friend the Member for Leeds West (Rachel Reeves) spoke so eloquently about the most important of those sectors—the poorest, the most vulnerable and the people on low incomes in our society. They are the people who will be hardest hit by the increase in VAT, and they are the people who matter most. I want to address the specific issue in respect of the NHS. Quite often it is thought that the NHS is immune from VAT rises because it can recover VAT on many items, but I think I can show that the NHS—one of those areas that are hugely important to the most vulnerable people in our society and that has a fragile budget—will be hit by the VAT rise. One of the Prime Minister's promises before the election, in addition to promising not to put up VAT—a broken promise—was that he would cut the deficit, not the NHS. In reality, the VAT rise, which will impact on the NHS, is a real-terms, de facto cut in the budgets of the NHS. Crucially, although the NHS can reclaim VAT in some areas of spending such as direct medical services and what are called contracted-out services, which are dealt with under the contracted-out services provision, not all areas are subject to the contracted-out services provision. The King's Fund calculates that the VAT rise will cost the NHS £250 million to £300 million per annum, and, more specifically, in answer to a parliamentary question tabled at the Scottish Parliament, we heard from Nicola Sturgeon, the Minister responsible for the NHS, that she anticipated the VAT rise costing £25 million per annum, which is clearly in line with the £250 million to £300 million that we can anticipate for the UK as a whole. That estimate of extra cost is predicated on the fact that the NHS has to pay VAT on purchasing, for example, a new MRI scanner, if it is for clinical purposes—that is, unless it is designed specifically for research purposes. A fully equipped ambulance now costs an NHS trust about £225,000, to which the VAT increase will add £6,000. A CT body scanner, which costs £700,000, will cost £17,500 more. Locum doctors, who are widely used in the NHS, are another service on which the NHS cannot reclaim the VAT. So each NHS trust in the UK will have to pay an additional £75,000—about £3 million across the NHS—for the use of locum services. Why does that matter? It matters, as I said, because it is a genuine increase in costs for the NHS and it is not accounted for in the current payment to the NHS. Government also often respond to this line of inquiry—