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Finance Bill

Yes; the hon. Gentleman is very helpful. Although it is tempting—and, I hope legitimate, Mrs. Heal—to have a wide-ranging debate on VAT, it is also useful to dwell on the amendment. That is precisely the sort of consideration that the review should examine. What strikes me as extraordinary is that a civil servant asked to come up with a £12 billion or £13 billion tax cut could not have come up with one that had less impact on the public consciousness. If the Government were seeking, albeit with borrowed money, to give away that amount of extra money to the taxpayer, they could have taken roughly 3p off the basic rate of tax for a year. They might not have thought that that was the right way to go, or they might have felt that it did not stimulate the economy in the way that they had intended, but every time people got their payslip at the end of the week or month, they would have noticed the sizeable reduction. The most problematic aspect of the VAT cut, which it would be interesting to examine in a review, is that it did not have the effect of giving people additional confidence: the mental sense that they had additional money in their pockets. Part of the reason for the Government's changes was to try to give people a sense that things were not so bad, that there was a bit more money to spend, that they could go out there and spend it, and that that would be a self-fulfilling prophecy in its impact on the economy. I do not think that that has proved to be the case, although others may disagree. If there were a cut in the basic rate of income tax, people might choose to save the money. The Government would say that cutting VAT means that people get the benefits only if they spend money—they were keen to encourage people to spend, and continue to be so. However, psychologically, it did not have the impact that it could have had as regards people feeling that they had more money to spend, even if they did in practice because the 4p's were accruing here, there and everywhere as they made different purchases.