Finance Bill

Amendment 47 is a probing amendment. It touches on a complicated area of VAT law which was in the process of undergoing a degree of reform. I know that there will be no instant answers, but I think it would be useful for the Committee to know more about the direction that the Government are seeking to take in reforming this area over the next year or two. Let me record my thanks to the Low Incomes Tax Reform Group, which published an important report entitled "VAT and disabled people—the case for removing the barriers". It identified a number of cases in which existing zero-rating provisions for people with disabilities are inadequate. The fact is that the increase in VAT to 20%, with no kind of balancing relief, on many supplies that are still needed by people with disabilities will cause some hurt and some cost. I should like to know what the Government think about four issues related to reform. The first is the contrast between European Union and United Kingdom law. The Exchequer Secretary will have already memorised annex III of Council Directive 2006/112/EC. As he knows, it allows reduced rates for""medical equipment, aids and other appliances normally intended to alleviate or treat disability"." He will also know that the application of UK VAT law does not mirror that flexibility precisely. A restriction now applies to many items because they must be designated solely for use by a person with disabilities. That appears to be a more stringent test than the one set out in EU legislation, and it would be useful to understand the Minister's attitude to that. The second issue touches on a point made by my hon. Friend the Member for Pontypridd (Owen Smith). It concerns people with mental health needs. Annex III does not make any distinction between equipment needed for people with mental health needs and that needed for those with physical health needs, yet at present there are discrepancies in UK law that still need to be ironed out. Thirdly, there are issues to do with the accessibility of work places. I think there is agreement across the House that it is important that there is extra support to get people with disabilities back into work. Obviously, that is going to be more important after the Government's reform of disability living allowance with, as they say, a more stringent—or, rather, a different—test for work capability assessment; we do not quite know what that test will look like. At present some businesses are able to get VAT relief on putting in place adaptations in order to help people with disabilities come to work in their work places, but other businesses do not enjoy those reliefs. It would be useful to understand the Minister's thinking on that, too. My final point concerns transport. UK VAT law provides limited reliefs for the purchase and lease of certain cars by disabled people. A good example is the Motability scheme, but it excludes people not in receipt of the higher rate Motability component of DLA. The Government have told us they want to reform DLA. We have not yet heard precisely how, but many people will be concerned that eligibility for such schemes will be curtailed and that some individuals may face a tax problem as a result of the Government introducing VAT increases at the pace they propose. This is thus a complicated matter. I do not think the full consequences of the VAT hike are properly understood across the House, so the amendment asks the Treasury to produce a report showing what remedies will be provided for people who need to purchase disability equipment and who will be adversely affected by this rapid increase in VAT proposed by the Government in clause 3.