Election 2010: what the parties say about finance

29 April 2010
Election 2010: what the parties say about finance

Do you have plans to change the current rate of VAT?

Jeremy Hunt, Shadow Secretary of State for Culture, Media and Sport, Conservative We have set out our plans and they do not involve raising VAT. The only people who have drawn up plans to raise VAT are the Labour Party. Of course, as Alistair Darling has said repeatedly, no responsible chancellor or shadow chancellor can ever rule out tax rises, but our plans do not involve raising VAT.

Labour In the recent Budget, the chancellor outlined Labour's plans to reduce the deficit and consolidate the public finances with a small increase in national insurance contributions rather than VAT. At the Pre-Budget Report last year, and in 2008, the chancellor weighed up the choice between a VAT increase or a national insurance rise. We were guided by our values, taking the view that a small rise in national insurance would be fairer.

John Thurso, Shadow Secretary of State for Business, Innovation & Skills, Liberal Democrats No, our plans do not require an increase in VAT. Our tax plans and the first steps we'd take to deal with the deficit are fully costed. We see absolutely no reason to raise VAT because we have done our homework: we have identified where money can be generated and where money can be saved. The Liberal Democrats are the only party that is producing a clear plan to tackle the deficit, making the Liberal Democrats the best guarantee of future financial stability in Britain.

Would you consider a lower rate of VAT for restaurants, as in France?

JH (Conservative) We have no plans to change the current system.

Labour Last year, it was agreed that all EU member states should have the choice to apply a reduced VAT rate of not less than 5% to certain labour-intensive services - including restaurant and catering services. We apply reduced VAT rates where we believe they provide well-targeted and cost-effective support for our policy objectives. We have no current plans for a lower rate of VAT for restaurants.

JT (Liberal Democrats) We have no plans to change the rate of VAT applied to restaurants. We want to support businesses such as restaurants by rebuilding consumer confidence rather than through tax cuts that the country simply cannot afford. Our plans to rebalance the tax system, putting an extra £700 in the pocket of the average working-age person, will do far more to support restaurants.

Will cold, take-away food continue to be VAT-exempt?

JH (Conservative) We have no plans to change the current system.

Labour Cold take-away food has been charged, and continues to be charged, at a zero rate of VAT. It is only if these food items are supplied as part of a catering package that the standard rate of VAT is applicable. We have no current plans to scale back applicability of the zero rate of VAT.

JT (Liberal Democrats) We have no plans to change the scope of VAT. As with restaurants, the best way to help high-street businesses like take-aways is to rebuild consumer confidence so that people feel able to spend on discretionary items.


Do you have any plans to tackle the inequality of VAT applied to cleaning and catering? At present, no VAT is charged on catering staff so firms employ kitchen assistants to do the cleaning.

JH (Conservative) We want to make it easier for small and medium-sized businesses to win government contracts. By scrapping requirements for companies to provide three years of audited accounts when bidding, we will enable start-up and smaller companies to compete for and win government business. And we will also introduce an aspiration that 25% of government contracts should be awarded to small and medium businesses, as the USA already does, to encourage contractors to work with smaller businesses, not just the usual behemoths.

Labour The relief for catering staff is widely welcomed and we have no current plans to remove it. However, as you would expect this is an area which is kept under review. If there was evidence of the relief being used other than as intended, for example to cover what in reality are cleaning staff, that would be a matter of concern.

JT (Liberal Democrats) This treatment was introduced as a specific concession prior to the introduction of VAT in 1973. The concession was introduced with good intention but introduces complexity and causes businesses to act differently as a result of tax rules. Therefore, while we don't have specific plans to change this VAT treatment, we would be open to debate on changes to this rule. We are committed to making the tax system both fairer and simpler.

Do you plan to make it easier for outsourced providers to access local authority contracts such as hospitals and school meals?

JH (Conservative) We have no plans to change the current system.

Labour It is right that authorities are free to establish their own procurement strategies. The decision on how to source food, particularly outside central government, is a matter for individual contracting authorities. That said, we encourage them to use collaborative deals established under the OGC's food category strategy.

Public bodies are required to seek value for money - or "right sourcing" - through fair, open competition, with all potential providers treated equally. Labour is taking steps, through implementation of the Access for All programme to level the playing field, enabling SMEs to compete for contracting and supply-chain opportunities where they would represent value for money.

JT (Liberal Democrats) We are supportive of any moves that improve the service provided and maximise the value for the taxpayer.

Do you support the introduction of minimum alcohol pricing?

JH (Conservative) No. We have said we will scrap loss-leader selling of alcohol by retailers but our plan is to raise taxes on those drinks linked to antisocial drinking, while abolishing Labour's new "cider tax" on ordinary drinkers, and leaving duty on ordinary drinks unchanged.

Labour Labour recognises that price can influence alcohol consumption levels, and we are committed to developing the evidence base on cheap alcohol. Our approach will be based on fairness, tackling problem drinking but not unfairly punishing the responsible majority.

JT (Liberal Democrats) We support a ban on below-cost selling, and are in favour of the principle of minimum pricing, subject to detailed work to establish how it could be used in tackling problems of irresponsible drinking.

Would you support a lower rate of duty on alcohol below 2.8% abv, as recommended by the Health Committee?

JH (Conservative) We have been clear that we will raise duty on problem drinks, while leaving ordinary drinks unaffected.

Labour While it is permitted to introduce a reduced rate of duty for beers below 2.8% abv, there is little evidence about demand for beers at this strength - they represent less than 0.5% of the market. The Republic of Ireland has introduced a reduced rate for beers below 2.8% abv and we will look at the results of this to see if any lessons can be learnt.

JT (Liberal Democrats) We will review the complex, ill-thought-through system of taxation for alcohol to ensure it tackles binge-drinking without unfairly penalising responsible drinkers, pubs and important local industries. Our focus is on tackling alcohol-related harm, rather than penalising the majority who drink responsibly.

Everyone recognises that pubs are central to communities. What will you do to support pubs struggling with the recession and a heavy tax burden?

JH (Conservative) We will save British pubs and support British breweries by banning "loss-leader" sales of alcohol in supermarkets; introducing new rules to strip licences from irresponsible off-licences; and raising taxes on problem drinks predominantly bought in off-licences, such as super-strength cider. Like any business, British pubs and breweries also need action on taxes and regulation to compete and survive. That is why Conservatives would reduce small company corporation tax from 21p to 20p, simplify the planning system and cut the burden of government regulation.

Labour Pubs are central to communities. As recognition of this, Labour recently announced a package of measures designed to provide practical support to community pubs - including funding for business support to make pubs more successful and help for communities to buy their local pub to keep it running. Some pubs will also benefit from the increase in Small Business Rate relief announced in Budget 2010.

JT (Liberal Democrats) As well as reviewing the issues around beer ties, we will make it easier for pubs to put on live music. We will reintroduce the rule allowing two performers of unamplified music in any licensed premises without the need for an entertainment licence. We will also allow licensed venues for up to 200 people to host live music without the need for an entertainment licence. Pubs will also benefit from our plans to improve access to credit, reform business rates and cut red tape.

What are your plans for the minimum wage?

JH (Conservative) We will keep the minimum wage and in uprating it we will be guided by the independent Low Pay Commission's recommendation.

Labour It took a Labour government to introduce the National Minimum Wage (NMW), and all workers now have a statutory right to paid holidays. In line with the recommendations from the Low Pay Commission on the NMW, we announced in the 2010 Budget that the headline rate would rise by 2.2% to £5.93 in October. This increase strikes a balance between helping low-paid workers and families, and ensuring that the rise does not damage their employment chances.

JT (Liberal Democrats) We believe that wages should reflect the role of the job and the skills required by the individual, not their age. We will therefore equalise the National Minimum Wage across all ages so that young people aren't discriminated against.

What will you do to make the issue of tipping and service charges in restaurants more transparent?

JH (Conservative) From 2009 it has been illegal for tips to be included in making up the national minimum wage, which is something Conservatives campaigned for. We proposed amending the Employment Bill to make such practices illegal, but Employment Minister Pat McFadden said our proposals were "meaningless". Thankfully, he has now changed his mind.

Labour Building on the achievement of the National Minimum Wage, Labour has significantly strengthened its enforcement. So using tips to make up workers' NMW has been outlawed. This will ensure that tipping practices are made fairer and that all workers, whether they are paid tips or not, receive a fair wage in the form of at least the NMW in basic pay. The regulations also provide greater transparency to consumers so they can make a more informed choice when tipping.

JT (Liberal Democrats) We support the intention of the code of practice launched last year - money from tips shouldn't be used to top up wages to the minimum. We will introduce a universal service code, which sets out general good service principles including transparency. The code would be mandatory in the public sector and all organisations seeking major government contracts with others encouraged to comply.

Election 2010: What will the parties do for hospitality>>

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