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House of Lords
Tuesday, 1 May 2007.
The House met at half-past two: the LORD SPEAKER on the Woolsack.
Prayers—Read by the Lord Bishop of Newcastle.
Disability: VAT
Lord Ashley of Stoke asked Her Majesty’s Government:
Whether they will review the VAT paid by disabled people in view of the Low Incomes Tax Reform Group’s report VAT and Disabled People—The Case for Removing the Barriers.
Lord Davies of Oldham: My Lords, the Government will consider the evidence presented in the report carefully and will assess whether any of the recommended VAT changes would be consistent with European VAT agreements and whether they would be well targeted and cost-effective when compared with the range of support already provided for people with disabilities.
Lord Ashley of Stoke: My Lords, I thank my noble friend for that response, but does he agree that the law relating to disabled people and VAT contains some ridiculous anomalies? One among many examples is that if a disabled person decides to widen his doorway to make it accessible, he qualifies for zero-rated VAT, but if that same man decides to have a new doorway made to aid accessibility, he has to pay VAT at 17.5 per cent. I do not see the sense in that. This kind of absurd anomaly damages disabled people because it is so unfair to them. What we require now is urgent government action. Can my noble friend say whether we will get some government action with not too many ifs and buts? This has been going on for far too long and I would like a clear, straight answer on the urgent action needed to resolve this problem.
Lord Davies of Oldham: My Lords, the whole House will recognise the authority with which my noble friend speaks on these issues. As I may have mentioned in my original Answer, a meeting is due to take place in the next 10 days between the Low Incomes Tax Reform Group and officials from the Treasury and Revenue and Customs in order to discuss these issues, including some anomalies. Whether the anomalies are quite as dramatic as my noble friend has indicated, I might dispute. There is a difference between widening a doorway to assist the disabled by enabling wheelchair access and designing a doorway that might just be to improve the quality and value of the house and might not be strictly necessary for the disabled person. That is why the one attracts VAT and the other is exempt. However, of course I respect what my noble friend is saying. The meeting is due to take place shortly and certainly those attending will be able to present these issues to officials.
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Lord Addington: My Lords, does not the Minister agree that there is some degree of confusion in the tax system? As the noble Lord has pointed out, although you get some tax relief for certain repairs in your home, if you are carrying out workplace initiatives to enhance the Government’s policy of getting disabled people into work, you do not get VAT relief. Does not the Minister agree that that is an absurdity?
Lord Davies of Oldham: My Lords, with all these issues there is a borderline and, depending on which side of the border a particular decision is taken, it can create disquiet. The noble Lord is right that we are concerned to help the disabled to enjoy full-time work when they are able, but he will recognise that we have to protect our system from exploitation in which VAT is avoided when works are for the benefit not of the disabled but of others in the household. Those circumstances do not justify VAT relief.
Lord Skelmersdale: My Lords, in his original Answer, the Minister said that the Government’s actions in this area could be proscribed by the VAT directives. Will he explain just how they might be proscribed? More important, what happens in other EU countries so far as these anomalies are concerned?
Lord Davies of Oldham: First of all, my Lords, the noble Lord will recognise that we have lived with the directives since 1973, ever since VAT was introduced. The range of reliefs and zero rates have been targeted at disabled people against a background where it is clear that we are bound by European positions on VAT; for instance, we are prohibited from changing VAT rates from those that we have inherited from previous Administrations. VAT is a significant conditional factor occasioned by Europe, but the benefits of membership of the EEC and the single market in other respects counterbalance this particular limitation on the Treasury’s ability to act.
Baroness Darcy de Knayth: My Lords, VAT legislation refers throughout to “handicapped”, while the Taxes Management Act 1970 refers to “idiot”, “lunatic” and “insane person”. Both need bringing up to date in line with the definition in the Disability Discrimination Act. Will the Minister undertake to look at this and perhaps do something about it as soon as possible?
Lord Davies of Oldham: My Lords, the Government are fully aware of the embarrassing fact that certain parts of our taxation legislation refer to disabled people in terms from the 1970s and 1980s that are now utterly redundant and unacceptable. The noble Baroness will recognise, however, that as the principles contained in those Acts are not changing significantly at this stage, whether we ought to introduce primary legislation merely to update a particular term is an issue that concerns the Government in terms of the availability of time.
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Baroness Uddin: My Lords, while it would be remiss of me not to mention the great changes that have occurred because of the disability rights movement, does the Minister agree that there is still a huge way to go, as those who most need help are often still not aware of some of the benefits of this or other pieces of legislation that benefit disabled people?
Lord Davies of Oldham: My Lords, I agree with my noble friend that the question of public awareness with regard to take-up of these opportunities is important. The Government are particularly concerned that frail and elderly people who should benefit from support often, because they do not actually have a disability, do not think that they should benefit, and nor do their relatives. That is important information that should be better communicated.
Olympic Games 2012: Stadium Design
2.44 pm
Lord Naseby asked Her Majesty’s Government:
Lord Davies of Oldham: My Lords, no final decisions have yet been taken on the design of the Olympic stadium. The designs are currently being developed by the Team McAlpine consortium, which includes the architects HOK Sport Ltd on behalf of the Olympic Delivery Authority. The Olympic Board will consider these design proposals as soon as they are ready.
Lord Naseby: My Lords, are the Minister and Her Majesty's Government aware that there is enormous support in the country for a very successful Olympic Games but that those who manage to go to see the Games do not want to be soaked to the skin? Given, too, that the initial design had no roof cover and that a Memorandum of Understanding has already been signed with Costain for £400 million, can we be reassured that the majority of seats will be covered so that people can view this great event without getting soaked to the skin?
Lord Davies of Oldham: My Lords, the noble Lord makes a timely representation; decisions on the design are to be taken by the Olympic Board over the next two to three months. A design has been submitted with a roof for a part of the stadium; there is also considerable pressure, represented by the noble Lord, from those who hope that the stadium will be totally enclosed. However, there are costs involved as well as concern about the use to which the stadium will be put after the Olympic Games.
Lord Faulkner of Worcester: My Lords, does my noble friend recall that when the decision was taken 10 years ago to build the Cardiff Millennium Stadium with a retractable roof—I declare an interest as
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Lord Davies of Oldham: My Lords, I am second to none in my admiration for the stadium in Cardiff, but it is designed to hold crowds of 60,000 and is a permanent sporting stadium with a very high level of paying public. The numbers seated by the Olympic stadium will come down from 50,000 to 25,000 after the Games. It is not intended to be a sports stadium modelled on the Millennium Stadium in Cardiff but to be much more for local use and a feature of the neighbourhood. That is bound to mean that the concept of costs and the long-term legacy is somewhat different from the outstanding sports stadia we have in this country.
Lord Glentoran: My Lords, I have two points. The Cardiff stadium holds 76,000 people, not 60,000, as the Minister said. Secondly, can he assure the House that the decision on the legacy of the Olympic stadium—whether we will have an athletics stadium or a full permanent one—has been made?
Lord Davies of Oldham: Not in full detail, my Lords, which is why a decision on the nature of the stadium is significant. However, it has been decided that the stadium will not be suitable for a premier league football club, which would expect gates of 60,000 or more—I apologise for getting the figure wrong. The stadium will hold only 25,000 as a legacy for the area—that is an important conditional factor on its nature and structure. It is to be converted from an Olympic stadium and will hold 25,000 in the longer term instead of more than twice that number. That is why we need to think about the stadium in different terms from stadia at which football matches are played or our great national sporting stadia. The complex will be the legacy of the whole of the Olympic Park in that area.
Lord Addington: My Lords, will the Minister assure us that if we are to get a stadium whose long-term usage includes athletics, we will concentrate primarily on that sport as it needs a permanent home in central London? Will he make sure that in future we do not confuse roofs with covered seating?
Lord Davies of Oldham: My Lords, I agree on the latter point, certainly. The noble Lord is right: London lacks a significant athletics stadium. Wembley is a magnificent sports stadium, but for football. This will be an athletics stadium for the Olympic Games; it will be used for field and track events plus the opening and closing ceremonies. Thereafter it will be used for athletics.
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Baroness Carnegy of Lour: My Lords, is the Minister aware that high in Maslow’s hierarchy of human needs is to have a roof over your head?
Lord Davies of Oldham: My Lords, no one would disagree with the noble Baroness on that front, but I emphasise that those who attend sporting events do so for a rather more limited period. Sports fans through the ages have suffered considerable privations for the joy of their sport, even without a roof over their head.
Inflation
2.50 pm
Lord Goodlad asked Her Majesty’s Government:
Lord Davies of Oldham: My Lords, the Monetary Policy Committee of the Bank of England has operational responsibility for the conduct of monetary policy. Under the Chancellor's remit for the MPC, the operational target for monetary policy is an underlying inflation rate of 2 per cent. The remit was last confirmed on 21 March 2007. For their part, the Government will continue to be vigilant and disciplined in the fight against inflation. To that end, the Chancellor announced to Parliament on 1 March that overall headline settlements for public sector workforces covered by pay review bodies are to be less than the 2 per cent inflation target in 2007-08.
Lord Goodlad: My Lords, I thank the Minister for that reply. Will he confirm that the Government’s attitude towards this is confident but not complacent? Does he agree that the Monetary Policy Committee is composed of the most distinguished people and that it is grossly unfair and unfortunate that commentators should say that the Chancellor of the Exchequer has packed it with Keynesian doves? Does he think that it would be good for the Bank of England’s reputation for independence if future MPC members were appointed not by the Chancellor of the Exchequer but by the Civil Service Commission?
Lord Davies of Oldham: My Lords, first, I echo the noble Lord’s opening remarks: the Government are confident that they will get inflation within target and below 2 per cent. Measures have been taken to guarantee it and public sector pay settlements are an important contributory factor in that. As the noble Lord will recognise, the Governor's letter is the first from the Monetary Policy Committee in a decade. The board as constituted, with the Bank of England representatives and the Chancellor’s nominees, has generally ensured that this country has enjoyed the best inflation record of any advanced economy in recent years. There is therefore no obvious reason why we need to change the committee’s structure.
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Lord Barnett: My Lords, it is nice to agree with my noble friend on the third of the four Questions he is replying to—which I think is a record. However, in his regular chats with the Governor of the Bank of England, will my noble friend remind him that going 0.1 per cent over the target once in 10 years is no cause for panic? He should remind him that, in practice, he also has another remit, as excessive interest rate increases would have a serious impact not only on the exchange rate but on the potential for economic growth.
Lord Davies of Oldham: My Lords, I am grateful to my noble friend for that reminder. However, it is scarcely panic on the part of the Governor of the Bank of England: he is fulfilling his legal commitment under the Bank of England Act 1998 to write to the Chancellor when the inflation target has been exceeded by 1 per cent. So it was not an indication of panic. The whole House will recognise this year’s very exceptional circumstances, particularly the increasing energy prices and oil price rise which have occasioned this blip in performance. But a blip is what it is. I can say that without the risk of falling into the complacency against which the noble Lord, Lord Goodlad, warned me.
Lord Higgins: My Lords, what are the Government doing about the growth of the money supply, which cannot be controlled purely by interest rates?
Lord Davies of Oldham: My Lords, that is indeed so. However, the noble Lord will also recognise that we have been able over the past decade to manage the economy to produce not only significant growth but control over inflation. It compares well with all previous Administrations. The noble Lord would not want me to comment on inflation rates between 1979 and 1997—which is one possible choice of dates. He can rest assured that the Chancellor and the Governor of the Bank of England are all too aware of these requirements.
The Minister of State, Department for Environment, Food and Rural Affairs (Lord Rooker): My Lords, it is the turn of the Cross Benches.
Lord Bilimoria: My Lords, there is no doubt that just about everyone would agree that one of the current Government’s best moves has been the creation of the independent Monetary Policy Committee, which has performed very well overall, with low inflation over a prolonged period. But are the Government confident that the measure of inflation is a true representative of today’s consumer?
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Lord Davies of Oldham: My Lords, it is a true representative in terms of international comparisons. We can establish that over the past decade Britain has had the lowest inflation rate of any of the G8 countries with the exception of Japan. We have a need for international comparison which is accurate and that is what the present measure provides. However, I recognise the probable point underlying the noble Lord’s question—that mortgages are outside the present computation, and they are important to households. The noble Lord will also recognise that tackling inflation and lower interest rates also help in the question of mortgages.
Lord Rooker: My Lords, it is time to hear from the Lib Dems.
Lord Newby: My Lords, while I am sure that all Members of the House will believe that the members of the Monetary Policy Committee have performed their job extremely well, does the Minister accept that concerns have been expressed to which the noble Lord, Lord Goodlad, gave voice—of cronyism in recent appointments and reappointments? Does he accept that the way in which to deal with this is to have a more open and transparent appointments system for members of the Monetary Policy Committee?
Lord Davies of Oldham: My Lords, that is a very fine principle, and who could disagree with it—except for the obvious fact that such appointments are market-sensitive. People are watching the development of the Monetary Policy Committee and who is appointed to it very carefully. An open process would create circumstances in which there would be a great deal of uncertainty as to the eventual appointments—and what does the noble Lord think would happen to market speculation in that period?
Baroness Noakes: My Lords, I am confused. The Minister quoted earlier the letter that the Chancellor wrote to the Governor of the Bank of England saying that the Chancellor was going to keep wages in the public sector below 2 per cent. RPI is 4.8 per cent. What magic wand has the Chancellor got to make employees in the public sector accept a real pay cut of 3 per cent?
Lord Davies of Oldham: My Lords, the Chancellor does not have a magic wand, but he probably has the confidence of the nation that he has run an economy at an inflation rate below half the inflation rate that the previous Administration managed for 18 years. It is an economy with significant growth and one of full employment. Members who value their jobs and earning power recognise that at times short-term sacrifices bring longer-term rewards.
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