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Value Added Tax

I begin by declaring an interest as a director of my family retail business, which has been in existence since my great-grandfather started it in 1888. The present times are more difficult than ever before, and I have to take the day-to-day decisions in the business, because, when life gets a bit difficult, those decisions end up being taken at the top. My heart sank when I saw the leaks during the weekend before the pre-Budget report was announced. I could not understand why on earth the Government were going to reduce VAT by 2.5 per cent. I actually thought that there must be more to it; I could not believe that they would be so crass as to reduce VAT by that amount. If they wanted to make an impact and give an impetus to consumer sales, they would have had to reduce it by considerably more, which would have involved huge expense and been completely unaffordable. I will tell the Minister what the effect of this measure has been on countless retailers—every retailer—throughout the country. When it was announced on the Monday, I immediately phoned the shop in Uxbridge and told my staff that we would implement the VAT reduction from the next day. That was effectively a week early, because no one would come into the shop otherwise—no one would buy anything that they believed was going to be cheaper the following week. We also had lots of orders that had been placed, and we had to make the decision to take a hit on those as well. Of course, the reduction is not 2.5 per cent. In real terms, it is 2.13 per cent. Consumers trying to do the mental arithmetic have soon realised that this makes hardly any difference to the price of most items. So, retailers have immediately had to take a hit. We have already heard about how they have had to put in the required software and change labelling. We decided not to do that, however, and we are still taking the appropriate amount off at the till. That is cheaper and more efficient, and I must admit that I am also making the political point to our customers, because they can then see how little they are actually getting. I have tried to be as neutral about this as possible, however. I might care about this place, but I care very much about the 30 people whom I employ—probably more than about anything else with regard to that business. I have asked them whether anyone has come in and bought anything because it has been reduced by 2.13 per cent., and, of course, that is obviously not the case. Perhaps the Minister will tell me what personal purchases he has made, that he would not otherwise have made, because of the VAT reduction. If he is an honest man—I know that he is—he will say that it has not made a blind bit of difference to him. So, this measure has been a disaster from the retailer's point of view. Consumers are already getting huge discounts, which are biting into margins. That is very likely to cause the demise of many retailers. A very sensible accountant of mine has told me, many a time, that turnover is vanity, and profit is sanity. It is all very well trying to reduce prices to get people to come in, but we have not had many people coming in. In relation to the compliance costs, why does the Minister think that it will be £5 million cheaper to re-price next year than this year? Is it because there are going to be fewer shops about? And why is familiarisation going to be so much cheaper? The hon. Member for Twickenham (Dr. Cable) made a point about the timing of all this. What is the worst time of year to put prices up? My hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) said that the provision would last until 1 December next year, and that there might be some change then. But who on earth is going to put their prices up at the busiest time of the year, or afterwards when the sales are on? Retailers are going to take a hit again at that time. What is the point of all this? I agree with my party and those on my Front Bench that this is not the time to be borrowing like mad, although I understand that others take a different view. I cannot go and borrow lots of money to help my business, first because I think it would be wrong and, secondly, because the banks would not let me. So why are the Government doing this? If I am being kind, I will say that it was something that they could do quickly, but actually I think that it was a gimmick and it sounded good. When he was Chancellor, the Prime Minister loved to finish his speeches with a gimmick, and he has obviously passed that on. Had the measure not been leaked, I think that the Opposition might have thought that it was a wonderful idea, for about five seconds until we worked out what it was really all about. It is a gimmick. I would not mind at all if the Minister were to say that he had changed his mind, and that he was going to put the VAT rate back to 17.5 per cent. and leave it there. I would even make a pledge to the consumers of Uxbridge that I would keep my prices at the 15 per cent. level because the current VAT change will not help them at all. I urge the Minister to look at this. When those at the Treasury make changes, do they ever ask real retailers and real people what they want, or do they sit down and come up with these incredibly ridiculous schemes? I was delighted to see that the Treasury did not bother working out the impacts on all the groups listed—and I am not going to go through them, as I would be attacked for being politically incorrect. To be honest, the whole VAT change is a gimmick that will not help, but will actually have a worse effect on retailers and poor employers. As the right hon. Member for Birkenhead (Mr. Field) said, after Christmas lots of people will be in big trouble. People will ask, ““What did the Government do?”” and the answer will be that they took prices down by 2.13 per cent. when they were already reduced. I have to say that that is a disaster.