Finance Bill

Thank you, Mr Hancock. I could go on setting out the lengthy list of information about VAT that we have provided. The Opposition's case that there has not been any analysis is all the more ironic given that Labour was the party that produced the doubling of the 10p rate of income tax and provided no distributional analysis whatever. We, however, have examined that particular tax change, and it is worth noting that the five bottom deciles lost out and the five top deciles gained. That is what our predecessors did, and it is not the case under the distributional analysis of VAT. As I have said, there is a strong case for looking at the expenditure basis, which shows that VAT is indeed progressive. The impact on pensioners is a legitimate concern, but if the focus is on those with the lowest income, that needs to be considered in the context of the overall distributional analysis. Amendment 23 would provide for children's prams, cots, nappies and other items to remain at 17.5%. I am afraid that that amendment is illegal under EU law, so we cannot pursue it. Amendment 40 would provide for the Treasury to produce a report on the standard rate of VAT by 4 January 2011. The Chancellor has made it clear that we have no plans in that regard. Clause 3 makes provision for the standard rate of VAT to increase from 17.5% to 20% on 4 January 2011. That is an unavoidable measure, and I urge the Committee to reject the amendment, which risks the Government's plan to reduce the deficit.