Energy Bill [HL]

I was a member of the Treasury team when VAT was first introduced in 1972. It was one of the principles of the then Government that it should be as simple a tax as possible. There were of course some major exclusions from VAT, for instance all food and children’s clothes, but I well remember my noble friend Lord Higgins, who was dealing with the Finance Bill, saying that it was a simple uniform tax to be extended across the range of products and services, apart from those that were specifically excluded. Since then Governments, no doubt of all persuasions, have found themselves led down a path of adding more complications to VAT. I have sympathy with what my noble friend has suggested, because these are clearly energy-saving and carbon-saving measures, which one would wish to encourage. However, to use VAT and the tax system to do that seems to me to go against the principle of keeping VAT as simple a tax as possible. VAT is now substantially higher than it was when it was first introduced, for reasons that we can all understand, although that is not within the competence of the Committee. Wisely, my noble friend’s amendment places this firmly in the hands of the Chancellor of the Exchequer, although it could not be with anybody else, as my right honourable friend the Chancellor is the Minister in charge of the tax system. However, I sound a note of caution on beginning to extend lower rates of VAT to other services and products, notwithstanding that one might have some sympathy with what is being sought. Having said that, I should be interested to hear what the Minister has to say in reply.