CONSTRUCTION SECTOR VAT CUT CALL

Plaid Cymru have outlined a proposed VAT cut on home renovations, which could result in nearly 2,000 extra jobs in Wales by 2020 and over £47 million for the economy. Plaid Cymru Westminster candidates Hywel Williams and Ieuan Wyn Jones have made the case for a VAT cut in the construction sector to generate jobs and boost the Welsh economy.

Ahead of visiting a local building firm in Felinheli, Hywel Williams cited an independent report by Experian published in 2015 showing that such a VAT cut on home renovations would have resulted in nearly 2,000 extra jobs in Wales by 2020 and would have had a stimulus effect of £47m in 2015.

Ieuan Wyn Jones added that small businesses were the backbone of the Welsh economy and that this VAT cut would give the sector a welcome boost when the UK leaves the EU.

Hywel Williams said:

“A targeted reduction in VAT could bring with it many tangible economic, social and environmental benefits.

“As an independent report by Experian showed in 2015, had the VAT cut been introduced then, it would have resulted in 1,987 extra jobs in Wales by 2020 and would have had a stimulus effect of £47m in 2015.

"There is no VAT on new build, which is often the more expensive option. We have an old housing stock in Wales and renovation is a better option in so many ways – greener, more socially cohesive and less wasteful of resources.

"An expensive new build, say for well off people in the southeast of England is VAT free. A renovation of say a terraced house in Wales for a young couple on a low income is clobbered with 20 % VAT. This anomaly is clearly unfair and hits Wales hard because of the nature of our housing stock."

Ieuan Wyn Jones added:

“The construction industry employs more than 100,000 workers in Wales.

“SMEs are the backbone of our economy so increasing growth in this area would be felt the length and breadth of Wales.

“At present, we don't have the power to vary VAT rates but this will change when the UK leaves the EU.

“We must look at practical, creative ways of defending Wales and its economy as we prepare to leave the European Union. This policy is just one aspect of how we can do that.”

NICE BUT...

Personally I have no problem with the Severn bridges being nationalised, it just makes more sense for them to be run by the National Assembly rather than Westminster and the Department for Transport. With that in mind the preparations to transfer of control of the Severn Bridges to the National Assembly in 2018 need to start now, as if they return to Westminster (and the Department for Transport) the tolls will never be reduced.

VAT or no VAT it is still a tax on jobs and businesses

The truth is whatever Westminster based party forms the next Westminster Governments, they and the Department for Transport they simply cannot be trusted to put the interests of commuters and businesses first, they will never put Wales first. For most Westminster ministers and most Welsh MPs the Severn Bridges and tolls may be out or sight and out of mind, but they loom large in the imagination and the wallets of long suffering commuters, businesses and visitors.

Now while there appears to be a general political consensus that something must be done about the Severn bridge tolls, which is nice, but not particularly helpful. The mixed messages from the Department for Transport on the eventual ownership of the bridge and the potential fate of the tolls are not helpful. Local Labour MP’s may now be jumping up and down in relation to the Severn bridge tolls, but, this begs the question just exactly where were they between 1997 and 2010 when their party was in government.

There is talk of when the bridges come back in public ownership (in 2018) that the tolls may be maintained for an additional two years to recoup the Westminster government’s expenditure on maintenance. What may make this sting some more is that VAT will probably be dropped, so those organisations which have been recovering their VAT from bridge tolls will have to pay in full?

Now Plaid Cymru has called for the transfer of powers to Wales so that the tolls on the bridges can be reduced, something that could have a considerable impact on businesses and the economy. With control over the bridges devolved, Plaid Cymru would cut the tolls to £2 to cover maintenance costs. The costs for upkeep are £15 million per year, but motorists and vehicles using the crossings currently generate £72 million pounds per year.

While the tolls would form a useful revenue stream for Welsh Governments, the priority of Plaid Cymru is to cut the tolls. By the time the two Severn Bridges come back into public ownership in 2018, Severn River Crossings plc will have milked its cash cow to the tune of about £ 1.029 billion pounds. To add insult to injury the old (M48) Severn Bridge is periodically closed at weekends for routine maintenance, which is funded by the Department for Transport, from public coffers.

Back in 2012, Plaid Cymru submitted a Freedom of Information request to the Department of Transport seeking details of any correspondence between it and the Welsh Government on the level of tolls since May 2011, the last Assembly elections. In its response the Department of Transport merely listed emails between the Highways Agency and the Welsh Government advising of planned increases in tolls for 2012 and 2013.

The FOI request revealed that there was no other correspondence between the Welsh Government and the Westminster Government.  In 2012 a report for the Welsh government suggested that abolishing the tolls would increase traffic by an estimated 12% - equivalent to about 11,000 vehicles a day – and that businesses and commuters forked out around £ 80 million pounds a year crossing the Severn bridges.

In October 2010, Professor Peter Midmore's independent economic study of the Severn Bridge tolls which has recommended that the revenues should stay in Wales, once the crossings revert to public hands. This study of 122 businesses was commissioned by the Federation of Small Businesses revealed that the tolls had a negative impact on 30% of firms in South Wales, this compared with 18% in the Greater Bristol area.

While noting that the economic impact was not substantial for most, the 2010 study found that transport; construction and tourism-related companies reliant on regular crossings suffered increased costs and reduced competitiveness. The 2010 study found that Welsh businesses were unfairly penalised by the tolls and concluded that the money should be shared with the Assembly Government and used to improve Wales’ roads and public transport. 

FUEL PRICES DEBATE

Plaid and the SNP have a debate at Westminster (this afternoon) which will help to pressurise the UK government into taking action on rising fuel prices (which is hitting all of us either directly or indirectly). Plaid and the SNP are calling for the Con Dem Government to consider a regulator to cut fuel duty when oil prices rise. Both parties will make their case during an opposition debate in the Commons.

Speaking ahead of the debate, Plaid Cymru spokesperson for Transport, Jonathan Edwards MP, said:

“Plaid Cymru and the SNP recognised this problem long ago – we pushed for it in Budgets in 2005 and 2008 with widespread support from real people outside parliament. Unfortunately, Labour stubbornly ignored the problems of rising fuel prices while the Conservatives scared of supporting our idea decided to steal it, water it down and re-brand it as their own. There has been a massive hike in the cost of fuel recently, not all of it down to the rising cost of oil. The Tory-led Government's VAT increase and fuel duty hike have pushed the price of a litre up by at least 3.5p in the last month alone.Businesses and especially families in rural areas, especially in many parts of Wales, where a car is a necessity not a luxury are those who are facing the pain because of these choices. For the short-term we need to have a fuel duty stabiliser and a special price for fuel in rural areas, but we also need to diversify and invest in renewable energy alternatives to reduce our reliance upon oil and other fossil fuels.”

SNP Treasury spokesperson Stewart Hosie MP said:

"This may be the only opportunity MPs will have to debate fuel prices ahead of the Budget in March and the fuel duty increase in April, and so it is crucial that we persuade the Tory-led government to honour its pre-election pledge and establish a fuel duty regulator.The country is crying out for action to bring down fuel prices, and this SNP / Plaid debate will be a focus for that. Westminster's inaction has made this an enormous issue for the Scottish Parliament elections in May. Its a huge issue on the doorstep and the forecourts because and a key illustration of why we need to build up Scotland’s Parliament, and equip it with the full powers of financial responsibility. A Fuel Duty Regulator – which the Tories supported before the election – would bring duty down when oil prices go up. Cutting fuel by 10p per litre in Scotland would only cost about half of the estimated £1 billion in extra revenue the Treasury is set to rake in as a result of rising oil prices. It's a national scandal that in Europe's oil-richest country, Scots are paying among the highest fuel prices.”

Plaid Cymru / SNP motion:


This House notes the oil price has reached $100 a barrel; that diesel in the UK is the most expensive in Europe; further notes that the combination of the 1 January 2011 duty rise and the VAT increase is estimated to have added 3.5p to the cost of a litre of fuel; acknowledges the sharp rises in fuel prices over the past year and the resulting impact on headline inflation figures; recognises the financial pressure this places on hard pressed families and businesses already struggling with high inflation and the impact of the recent VAT rise; condemns the government's continued dithering over the implementation of a fuel duty regulator (or stabiliser) as neither a sustainable or stable way to make tax policy; further recognises the specific additional fuel costs for those living in remote and rural parts of the UK; is concerned that diesel in such places is approaching £7 per gallon; condemns the Government for its failure to prioritise the implementation of a fuel duty derogation; and calls for the introduction of a fuel duty derogation to the most remote areas at the earliest opportunity.

The Conservative Party had promised to look into a "fair fuel stabiliser" in their election manifesto, back in January, David Cameron was considering ways to help cash-strapped motorists. More recently, however,  Cameron has played down the possibility of a "fair fuel stabiliser" to limit fuel duty rises. The fact that UK Government benefits to the tune of 600 million a week in fuel duty may be a contributory factor in relation to the PM’s indecision, just as it was with former New Labour PM, Gordon Brown, perhaps Mr Cameron should declare an interest?

TIME TO DECLARE AN INTEREST?

Everybody is getting hit hard by the high fuel prices, if the Prime Minister breaks his promises on introducing a fuel duty stabiliser then the poorest in society suffering more than the rest of us. The Conservative Party promised to look into a "fair fuel stabiliser" in their election manifesto, in early January, David Cameron said he was considering ways to help cash-strapped motorists. More recently Cameron has played down the possibility of a "fair fuel stabiliser" to limit fuel duty rises. The fact that UK Government benefits to the tune of 600 million a week in fuel duty may be a contributory factor in relation to the PM’s indecision, just as it was with former New Labour PM, Gordon Brown, perhaps Mr Cameron should declare an interest?

There is an urgent need to see measures put in place to stabilise prices before they rocket even higher. Implementing a Fuel Duty Regulator would at least bring duty down when oil prices go up – and cap prices at the petrol pump. I think that there is little chance that Cameron will keep to his word or his election pledge on introducing a fuel duty stabiliser, as this UK Coalition Government seems to have shed any real principles as regularly as the snow melts in warmer weather.

The Federation of Small Businesses (FSB) says the UK now has the second highest diesel price in Europe - something which it says is causing great difficulties for hauliers and other businesses dependent on road transport. They point out that in Europe, the total price is split about 50/50 between the cost of the fuel itself and tax, yet, in the UK, the average product price is 38% of the total, with the remaining 62% coming from tax. Fuel duty already costs 58.95p for every litre. Average prices at the pump are now around 127p per litre and the Retail Motor Industry Federation has written to the Chancellor asking him to scrap the planned fuel duty increase, due in April.

Prices reached $147 a barrel before the recession in 2008 but are currently about $100 a barrel. The average price of petrol is rising at the highest rate for 10 years. The average cost of a litre of unleaded petrol has gone up by 6.13p since mid-December to a record 128.27p (£5.83 a gallon). The price of diesel is even higher and in some rural areas the cost of fuel is more than 20p a litre above the average figure. There are further increases in duty planned for April as well as expected rises in the price of oil. The 4th January VAT hike to 20% and a simultaneous rise in fuel duty, did little to help matters, as motorists saw 3.5p added to the cost of a litre.

Plaid Cymru has long favoured a new system of regulating tax on fuel in order to mitigate the effects of high prices at the pumps, and for a fuel duty regulator to cap the price of petrol at the pump when it rises too quickly. Wholesale oil prices will inevitably rise over the next few years as the world economy re-builds itself in the face of an increasing demand for oil and all of us will pay for higher fuel prices directly or indirectly. What's needed is an increase in sustained investment in renewable energy sources which would boost our economy without damaging the planet. It is scandalous that Wales was left out of recent pilot programmes for electric cars, but recent experience tells that for many Westminster Governments (Conservative or New Labour) Wales is so often out of sight and out of mind.

CONDEMS’ HAMMER BLOW TO NHS

The impact of the ConDem government's planned increase in VAT will be a crushing blow to the Welsh NHS. That was the message today form Plaid Cymru’s health spokesperson Helen Mary Jones AM. Ms Jones has obtained figures from health boards across Wales which estimate that the impact of the VAT increase on revenue allocations will be at least £13.2m, while the impact on the current NHS capital programme would be £7.7m in a full year.

It is worth remembering that back in June the Conservative-Lib Dem Westminster government announced that VAT would rise from 17.5% to 20% on 1st January 2011. Plaid’s Helen Mary Jones, who is the AM for Llanelli, warned that increasing VAT will put a strain on public services, like those provided by the NHS, at a time when they need to make best use of every penny that they can get.

This comes on the back of savage cuts that have already been imposed by the ConDem government on the communities of Wales. The VAT increase is yet another hammer blow to our public services. The Plaid driven government is working hard to protect the people of Wales from the ConDem axe and has secured a level of budget protection for community and secondary health care. Sadly the Welsh government has no powers to stop this VAT attack on our health service.

That £20m is a significant chunk of health board and trust budgets and is really only part of the story. The actual cost of the VAT increase to the NHS in Wales will be even higher. The ConDem government has taken an axe to our public services already, it's absolutely ridiculous for even more money to be clawed away from our public services only to end up in the treasury's coffers. This increase in VAT will put a huge strain on health, and other public services, at a time when they need to make best use of their resources.

Any Tory claims about protecting health are a sick joke, the reality is that the conservative/Lib Dem government's policies are going to have a damaging direct impact on our National Health Service in Wales. Plaid Cymru is committed to a Welsh NHS that is free at the point of delivery.

Plaid's actions in government are proof of this, what with putting a stop to the previous government's disastrous hospital closure programme and ruling out the use of PFI in the NHS. The Conservatives and their Liberal Democrat little helpers in Westminster need to think about what they are doing and put a stop to this blatant attack on our public services in Wales.

This table details the estimated full year impact on revenue budgets for each Health Board and Public Health Wales NHS Trust arising from the VAT increase from 17.5% to 20% announced in the UK Budget on 22nd June. Estimates were not provided by Velindre NHS Trust. It is estimated that the impact of the increase on the current NHS capital programme would be £7.5 million in a full year. This information is not available by Health Board.

MAKING THE CASE FOR A FUEL DUTY REGULATOR

There is a more than reasonable case for a fuel duty regulator who would cap the price of petrol at the pump when it rises too quickly. A rise in oil prices means an increase in petrol prices, which in turn leads, as petrol prices increase, to an increase in the amount the Government receive from VAT.

Under the fuel duty regulator plan, the Government will announce an expected yield from fuel duty and VAT in every Budget and PBR which will show the relationship between fuel duty and VAT. If there was a fuel regulator, then this would mean that if there was an unexpected spike in oil prices, fuel duty would be frozen while the increase in VAT caused by the price spike means that the Government would receive the predicted yield.

When there was a massive spike in prices in 2008, the Government found itself with an unexpected windfall while ordinary families were left struggling to survive.The purpose is not necessarily to prevent an increase in fuel duty but to smooth the shocks that come about from a volatile market. This protects poorer families and those living in rural areas who are more reliant upon cars, as well as any industry which requires petrol, e.g. haulage, taxis etc. It also impacts upon the public sector, such as police and ambulances.

The regulator as suggested only works in one direction. There is not an alternative if the market slows down. Over the longer term there is no future of fossil fuel based transport systems, Plaid favours the development of sustainable public transport which would enable people to reduce fossil fuel usage where possible, we believe in developing a sustainable green economy and more research and development to normalise more environmentally sustainable methods of transport than those which are oil-based (e.g. electric cars).

Now the idea of fuel regulator is not a new idea, Plaid and the SNP put down a motion (in 2008) on this very subject, which when it went to a vote on 2nd July 2008 resulted in a result of 308 to 14. Labour voted against, Conservatives and Liberal Democrats sat on their hand and abstained, while Plaid and the SNP voted for. Some two weeks later, on the 16th July 2008, the Tories put down a similar motion. That time Labour and the Liberal Democrats voted together against the motion, while Plaid voted in favour.

An Early Day Motion, was tabled this week by Plaid’s Adam Price MP and the SNP’s Stewart Hosie MP, reads:

That this House notes the recent unexpected spike in the price of petrol at the pump, recognises that unexpected increases in the price of fuel impacts significantly upon hard-working families, businesses of all sizes, seriously affects those living in rural areas who have no transport alternative except private cars, and impacts upon the costs of public services; recognises the need for greater research, development and support for reducing our dependency upon oil for everyday use, but in the short-term calls for a freeze on fuel duty in this Budget to protect those affected by the current price spike and further calls for a fuel duty regulator to prevent unexpected spikes in prices from affecting hard working families in future.