Pre-Budget Report

I will give way to hon. Members on both sides of the House, but, first, I should like to address the important matter of VAT. The shadow Chancellor asked me to address a particular question about the impact assessment that referred to a higher rate of VAT, which was lodged on the website of Her Majesty's Revenue and Customs, and which has been the subject of a lot of newspaper reports. I want to deal with that, head on. First, as the Prime Minister said earlier at Prime Minister's questions, in the run-up to the pre-Budget report, I considered—as any Chancellor would—a large number of options about just about every aspect of tax and spending, as the House would expect. As I had to raise money in order to ensure that our borrowing is reduced in the medium term, I concluded that the best and fairest way to do it would be to increase national insurance contributions by 0.5 per cent., as I announced on Monday. I also said that while VAT would come down to 15 per cent., it would return to its 17.5 per cent. rate at the end of 2009. That is the Government's position, and that remains the Government's position. When I saw press reports this morning that an impact assessment containing a reference to 18.5 per cent. of VAT had been put on a website and been signed by my right hon. Friend the Financial Secretary, I asked the permanent secretary at the Treasury to find out what had happened, as the House would expect. What I found was this: the Financial Secretary had not, in fact, signed that document. It transpires that someone within either the Treasury or Her Majesty's Revenue and Customs had typed the Financial Secretary's name alongside an impact assessment that he did not know about, he had not seen and he had never authorised. [Interruption.] The shadow Chancellor asked me for an explanation, and the House is entitled to it. That is it. In other words, the Government's policy is and remains that VAT will fall to 15 per cent. at the beginning of next week. It will then rise to 17.5 per cent. In other words, our policy is exactly as I set out in the pre-Budget report on Monday.