Daniel Zeichner
Main Page: Daniel Zeichner (Labour - Cambridge)Department Debates - View all Daniel Zeichner's debates with the HM Treasury
(11 months, 2 weeks ago)
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George Eustice (Camborne and Redruth) (Con)
I beg to move,
That this House has considered public bodies and VAT.
It is a pleasure to serve under your chairmanship, Mr Betts. Hon. Members will be well aware that His Majesty’s Treasury tends jealously to guard its primacy on tax matters. Indeed, I remember as a Minister frequently being given a briefing inviting me to respond to questions about tax with the simple words, “This is a Treasury matter.” If I ever sent officials to the Treasury to raise an idea or discuss a particular matter, they would go away with a look of trepidation in their eyes and come back looking rather chastened. However, I never accepted that tax is a matter for the Treasury alone. I have always believed that it is a matter for the Government as a whole because tax affects every industry, every public body and every Department. Its effect on all those things means there is also a vital role for Parliament in scrutinising tax policy.
I want to focus on the Value Added Tax Act 1994 and the way we treat public bodies—especially the unfair treatment of further education colleges. The United Kingdom was forced to introduce VAT when we joined the European Economic Community in 1973, and over the years VAT became one of the big three tools used by Government to raise revenue. It has also been the main go-to tool for Governments when they are trying to deal with a crisis. VAT was slashed after the financial crisis of 2008, and again during the covid pandemic.
Under the VAT rules, tax can be levied on goods at either the standard rate—the full 20% tax is levied on sales—or at a reduced rate of 5% for certain items, such as children’s car seats. There are also zero-rated goods—principally food and children’s clothing. Finally, there is another category—exempt goods. That applies to many services, including insurance, finance and, notably, education.
The 1994 Act established a basis for public bodies to reclaim the VAT on their purchases, even though their services were exempt. That applies in particular to councils, the police, schools or academies and, notably, museums. However, there is an anomaly in the way the tax system works, in that FE colleges are not on the section 33 list that would make them exempt.
Daniel Zeichner (Cambridge) (Lab)
The right hon. Gentleman is making an important and useful speech. Does he agree that the VAT trap has sometimes been used as a way to lure institutions out of the maintained sector and into academisation and that that is another lever that the Government have used the VAT system to create? That has affected institutions such as Hills Road Sixth Form College, Long Road Sixth Form College and Cambridge Regional College.