Finance Bill

We have announced the policy and the increase. All taxes are reviewed on an ongoing basis, and that will obviously be the position with VAT. However, for the reasons that I have set out, it would not be sensible to have a sunset clause. It would have a damaging effect on the pattern of expenditure. Underpinning the Government's approach is a commitment to fairness. Consequently, the VAT increase will apply only to the standard rate, ensuring that the zero rate is maintained on everyday essentials such as food and children's clothing, and that the 5% rate on domestic fuel and power stays in place. It is also part of a wider Budget package in keeping with the Government's commitment to tackle the deficit while protecting the most vulnerable. The VAT charge is part of a fair and progressive Budget, and the wider package contains a number of measures specifically intended to help the most vulnerable, in particular the increase in personal allowances by £1,000, the triple lock for increases in the basic state pension and the above-indexation increase in the child care element of the child tax credit. All sections of society will contribute to tackling the deficit, but the richest will pay more than the poorest. That has been supported by the chief executive of Barnardo's, who has said that""we recognise the Government has done what it can to protect the most vulnerable."" Amendments 1 to 4 would provide that the rate increase would come into effect only after an impact assessment had been laid before the House. Similarly, amendment 25 would provide that before the rate increase took effect the Chancellor must produce a report on its impact on a number of specific groups. Amendments 41 to 43 are further variants on that theme, as is amendment 46. Together, they would provide that the increase be deferred until the earlier of 4 January 2012 or the date of the production of a report on the impact of the increase on disabled persons, pensioners, children and child poverty, inequality, the bottom quintile, charities and the informal economy. Those amendments are unnecessary. At a time when the Government need to show a willingness to tackle the deficit and a sense of direction to ensure that there is confidence in the running of the British economy, it is vital that we have the credibility of bringing the VAT increase into effect as soon as possible. It is worth noting that the OECD has stated that the Government have demonstrated that they are taking courageous and appropriate action in the Budget. That is what we are doing, which is why it is right that we reject attempts to delay the implementation of the VAT increase. Although we have not necessarily labelled all the material that we have produced on the matter as impact assessments, we have produced a great deal of material about the impact of the VAT increase and the Budget more generally. It would be damaging to businesses if we did not proceed, as they need the certainty that we will do so. I shall set out some of the impacts of the rise that we have already described. In annex C of the Red Book we set out the OBR's assessment of the economic impact of the Budget measures. The impact of the VAT increase is built into the inflation forecast in paragraph C.19. Paragraph C.23 sets out the impact on household demand and paragraph C.24 the impact on company profits. Paragraph C.5 sets out the OBR's view of the VAT tax gap, and paragraphs C.39 and C.64 explain that VAT is expected to fall as a percentage of GDP, because the OBR assumes rebalanced economic growth with consumption —[Interruption.]