VAT: women’s sanitary products

Finance Bill – in a Public Bill Committee am 11:45 am ar 7 Gorffennaf 2016.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (House of Lords) 11:45, 7 Gorffennaf 2016

I beg to move amendment 1, in clause 115, page 162, line 8, leave out from “liners” to end of line 9.

With this it will be convenient to discuss the following:

Amendment 2, in clause 115, page 162, line 10, at end insert—

“(d) products that are designed, and marketed, as being solely for use for absorbing breastmilk”.

Amendment 5, in clause 115, page 162, line 14, after “after” insert

1 April 2017, or on any prior”.

Clause stand part.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (House of Lords)

I want to start by thanking the Government. I am pleased that it is hoped that clause 115 will stand part of the Bill; it is a good move by the Government. I welcome the huge amount of hard work done last year by my hon. Friend Alison Thewliss and by Members across the House on raising this matter. I appreciate the work that was done, and the fact that the Government have included this clause in the Bill.

I want to talk about our intention. In amendment 1 we are looking at the removal of the exemption from the zero rate for incontinence products. I understand that the Government’s proposal does not include incontinence products. There is some technical language in VAT legislation relating to people with disabilities and their ability to claim zero-rate VAT on incontinence products. However, that does not apply across the board to everybody who has incontinence problems; it applies only to those who meet the specific criteria that were drafted.

We have real concerns about that. Just because somebody is not registered disabled does not mean that they do not need to use incontinence products. That is a serious issue and the Government should not charge VAT in that case. If somebody has problems with incontinence, these products are necessary for their wellbeing and in their everyday life. The Government need to look again at the earlier legislation.

If we could have broadened the clause to include men’s incontinence products as well as women’s, we would have done that. However, because the clause was titled “VAT: women’s sanitary products”, we could not. That is why we are broadening it to include only women’s incontinence products. For clarity, we are talking about incontinence products that women are required to use but that do not fall into the exemption categories in the original VAT legislation.

Amendment 2 concerns products for the absorption of breast milk. I assume neither of the Ministers here has breastfed, so they may not know all the ins and outs of how this works. I breastfed both my children for about three years in total, so I have some experience. The amendment proposes that

“products that are designed, and marketed, as being solely for use for absorbing breastmilk” be zero-rated for VAT.

Breastfeeding is incredibly important and has huge health benefits for mother and child. It is completely and totally natural and is what a woman’s body expects to happen after she has had a child. When breastfeeding a child, it takes a while for the milk supply and the child’s feeding to balance. There is a period where the mother has too much or too little milk—usually too much, so there is an awful lot of leaking of milk. People do not usually talk about this in public, but there are stories about it all over the internet. In one case, a woman was at a job interview, at which somebody mentioned children, and suddenly there was a let-down, which means milk coming out at speed. Absorption products are absolutely necessary. It is vital for women to have breast pads that go inside the bra and absorb breast milk when that let-down happens. That happens not to all women, but to a huge number.

These products are required; they are not in any way a luxury. They are not something that women could do without, unless they were willing to bring several changes of clothes with them, which is not particularly practical when they are already doing absolute heaps of washing because they have a new baby.

We tabled the amendment to highlight the fact that this is another anomaly where something that women need is not zero-rated for VAT. I am unsure whether we will press the amendment to a vote, but I would appreciate it if the Minister indicated whether he is willing to consider moving on this matter. If he is, we will consider withdrawing the amendment; if not, we will seriously consider pressing it to a Division. I stress the importance of breastfeeding, because women might be put off by the cost of these products. Anything we can do to make breastfeeding cheaper, easier and more convenient for women is a very good thing, so I would appreciate it if the Government considered the amendment.

Photo of Rebecca Long-Bailey Rebecca Long-Bailey Shadow Chief Secretary to the Treasury, Member, Labour Party National Executive Committee 12:00, 7 Gorffennaf 2016

Clause 115 is designed to implement the Government’s pledge to abolish the so-called tampon tax, following a long-standing campaign by women’s groups, as well as by my hon. Friend Paula Sherriff and other Members from all parties. As we have heard, among those other Members was the hon. Member for Glasgow Central, who represented the Scottish National party on last year’s Finance Bill Committee, and whom I will describe as “the hon. sister” for today’s purposes.

It has taken us some time to get where we are. The EU rules have allowed countries to keep VAT exemptions and reduced rates—including zero rates—where those rates and exemptions were negotiated at the point of their joining the EU. However, there were significant restrictions on removing goods and services from VAT, which meant that under existing rules the UK had been able to reduce VAT to 5% but not remove it altogether. That is what the previous Labour Government chose to do for women’s sanitary products; following a campaign by women Labour MPs, the then Paymaster General, Dawn Primarolo, reduced the rate to the 5% minimum—but that 5% rate was left in force.

More recently, there was a grassroots campaign to remove the VAT. Prominent in that campaign was a petition, started by feminist campaigner Laura Coryton, that attracted hundreds of thousands of signatures. Similar campaigns have been run in other countries. The issue was raised in this place by the hon. Member for Glasgow Central in the Finance Bill Committee last year, and by my hon. Friend the Member for Dewsbury, who then tabled an amendment to the Bill on Report. That amendment attracted considerable cross-party support, including from several Conservative Members.

The Government announced some concessions, which included finally starting negotiations on the issue at European level. Nevertheless, the matter was largely ignored during the Prime Minister’s EU renegotiation, as the Government focused on issues such as defending the interests of the City of London. The issue was finally addressed only when Ministers were staring into the face of defeat over the ultra-shambles Budget. I know that the Minister will appreciate my saying that the Chancellor became the first in history to accept not one but two amendments to his own Budget resolution: one was in my name, on green energy VAT, and the other was, of course, in the name of my hon. Friend the Member for Dewsbury. Do not worry, I have more to say on green energy VAT later in Committee.

The amendment to the Budget resolution led to the Minister raising the issue at the European Council and it being addressed in the Council communiqué. In April, the European Commission published an action plan on VAT. That was a move further towards a single European VAT system based on the destination principle—the principle that goods and services are taxed in the country where they are consumed. The European Commission also announced a consultation with member states on proposals to allow countries to vary their reduced VAT rates on items including women’s sanitary products. One option would see the establishment of a list of goods and services on which reduced—including zero—rates could be introduced by any country. Another option would simply give member states complete freedom to select any goods they favour for reduced rates.

Of course, those steps at European level have been somewhat overtaken by the vote to leave the EU, although, as we know, European law may remain in force for some years to come. None the less, the EU VAT action plan anticipated concluding the reforms by 2018, even if we had not completed the process of leaving by that stage, so it would be helpful if the Minister could say whether the UK will now have a say on the options put forward in the EU VAT action plan and, if so, what option is favoured. I hope that he can confirm that in either case, the tampon tax would be abolished, full stop.

A pledge to abolish the tampon tax was made by the Vote Leave campaign during the referendum campaigning season. It was even suggested that that would be included in a mini-Queen’s Speech following a Brexit vote. However, as we have the Bill before us today, we can take steps without that being strictly necessary; I am sure that the Minister understands the clear, basic point.

The explanatory notes, which were of course written before the referendum vote, state :

“This clause reduces the VAT rate on the supply of women's sanitary products from 5% to zero %.”

However, I hope that the Minister will acknowledge that that is not really the case. The clause does not zero-rate women’s sanitary products; it merely provides the Treasury with enabling powers to do so, if it chooses to, at a time of its choosing. The clause leaves open the question of not only when it will do so, but whether it will so so.

That is the issue dealt with in amendment 5, which my hon. Friend the Member for Dewsbury tabled and which I have signed. There is no reason to leave the matter open-ended, given the possibility that Ministers will simply never get round to abolishing the tampon tax once the heat is off. The amendment would impose a hard deadline. If for any reason it could not be met—if we were still negotiating Brexit and the EU VAT action plan had not been concluded with the necessary reform—the Government would have to return the matter to the House by way of an amendment to a future Finance Bill, and explain why they had failed to follow through at that stage. A firm date will hold the Government’s feet to the fire and set a clear objective and a legislative backdrop, to prevent sliding.

Sadly, my hon. Friend the Member for Dewsbury was of course not chosen for this Committee. I will not press the amendment to a vote if the Minister does not accept it, but I think my hon. Friend will want to raise the issue later, depending on the Minister’s response. It is only fair to add that I suspect that the whole House will not provide the Government with a majority as solid as the one that the Minister has in Committee. I hope that he will give some sort of positive answer today, because the change was a key pledge of the Vote Leave campaign. Other pledges seem to be unravelling fast. I hope that Conservative Members who supported Brexit will at the very least feel an obligation to follow through on the pledge. Otherwise they will be judged very badly by constituents who voted in the referendum.

It would be helpful if the Minister would address another issue, although we have not at this stage tabled an amendment on it. It is about the women’s charities that received funding from the tampon tax fund. It is understandable that many people criticised the use of a tax on women to pay for support that they often needed as a result of male violence. None the less, that money was still better than nothing while the tax continued. Now that it will be abolished, what consideration has the Treasury given to ensuring that there will in the future be stable funding for the vital work of the organisations in question?

My hon. Friend the Member for Dewsbury previously raised another issue with the Minister, and I want to press him on that again today. That is the fact that the benefit of zero rates is not always passed on to consumers in full. It depends largely on the market. There is evidence, for example, that in France a similar tax cut was not passed on to women, but simply bolstered the profits of retailers and manufacturers. When the rate of VAT on sanitary products was reduced to 5%, the Government said they would monitor whether the benefits were passed on to consumers here. It would be interesting, if possible, to compare the margins at that time with the margins now, to see whether that happened. Can the Minister give any information about that today, or by way of a written response later, and provide the full data from any assessment?

My hon. Friend the Member for Dewsbury, in her usual hands-on manner, has grasped the issue directly, and has herself negotiated a deal with leading retailers: they will pass on the cut in full. I understand, however, that some smaller retailers have yet to make that commitment, and there are others in the supply chain who could also benefit, theoretically. Will the Minister join me in urging these businesses to pass on the tax cut in full and to sign up to the arrangement that my hon. Friend has reached? Will the Minister also outline what he intends to do where companies do not pass on the benefits to women? Will he speak out against them and make it clear that the Government anticipate that this tax cut will benefit female customers, not big business shareholders, and will he consider tougher sanctions if they do not pass on the benefits? For example, is there an argument for including an enabling provision for a windfall tax in this Bill? Even if there is no current intention to use such a power, it might have a useful effect if companies know that the option to use it is in the Bill. It is sometimes easier for politicians to talk quietly if they carry a big stick. The Minister is a very effective talker, even though he does not have his stick with him this week. His thoughts on this issue would be very welcome.

We note that the Scottish National party has tabled two amendments, and the arguments for them were put forward articulately today. The amendments seek to expand the definition of “women’s sanitary products” for VAT purposes. We start from a position of sympathy, and we will support any amendments on these matters that the SNP Members choose to push to a vote.

In conclusion, we will support the clause, which has come about largely as a consequence of the campaigning of Labour Members and other Members in this House. The Government are not right to say, “job done.” On the contrary, this is a case of, “We now have the tools, and we may do the job later if we feel like it”, and that really is not good enough to meet the promises made by European leaders, the Prime Minister, his Government and the winning side in the recent referendum. It is not good enough for women. I hope that the Minister will accept the amendment tabled by my hon. Friend the Member for Dewsbury. I look forward to hearing what he has to say on the other issues that I have raised.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

Clause 115 makes provision to ensure that women’s sanitary products will be zero-rated for VAT as soon as possible after the Finance Bill receives Royal Assent. Introducing a zero rate of VAT on sanitary products has been an issue raised and supported by hon. Members from all parties in the House. The Government have listened to their views, and we accept the argument put forward by many hon. Members that we should not apply VAT, even at the current 5% reduced rate, to these products.

We have been active in pursuing this change in the European Union. In the autumn statement in 2015, the Chancellor announced that while the UK sought to change the rules for the application of VAT zero rates with the EU, £15 million a year—an amount equivalent to the revenue accrued from VAT on these products—would be spent on supporting women’s charities. So far, this fund has supported 25 charities that are making a significant impact on the lives of women and girls in the United Kingdom.

The Chancellor announced in the autumn statement that initial donations from the tampon tax fund, totalling £5 million, would support the Eve Appeal, Safelives, Women’s Aid, and the Haven. Further grants totalling £12 million were announced at the Budget this year to support a range of charities. This included £5.2 million allocated to Comic Relief and Rosa to disburse over the coming year to a range of grassroots women’s organisations across the UK.

The Prime Minister took this issue to the European Council in March and secured the agreement of all EU Heads of State, who welcomed Commission action in this area, including giving member states the option of zero-rating sanitary products. In May, ECOFIN unanimously agreed that the Commission should bring forward proposals as soon as possible to allow member states to apply a zero rate to women’s sanitary products. The next step in the process is for a proposal to be published by the Commission, which it has committed to do before the end of this year. We are working with the Commission to expedite that process, so that the proposal is brought forward as soon as possible. To ensure that there is no delay in zero-rating women’s sanitary products for VAT at the earliest opportunity, we have included this clause in this year’s Bill.

Let me turn to amendments 1 and 2, the case for which was argued today by the hon. Member for Aberdeen North. She proposes that the provisions in the clause be extended to pads used to absorb breast milk and other products. The Government have taken decisive action to gain agreement across the EU on bringing forward a proposal on VAT on sanitary products, but it needs to be remembered that VAT applies to the vast majority of purchases of goods and supplies, including everyday items such as toilet paper, and it makes a significant contribution to the public finances. Extending the relief in the way that the amendment proposes is not possible under any feasible proposal from the Commission. Seeking to extend the scope of any new zero rate would introduce further complications to what are already delicate and complex discussions with the European Commission.

Our fundamental aim must be to ensure that we can apply a zero rate of VAT to sanitary products. Seeking to widen the scope at this point could compromise our capacity to deliver on what we have promised. I think all sides of the House would agree that while we remain a member of the European Union—of course, that will change in future—we have to comply with European Union law. We are making good progress when it comes to women’s sanitary products, but trying to extend the scope at this point would, I fear, jeopardise that progress.

That brings me to amendment 5. As I have stated, we are supportive of the introduction of a zero rate for sanitary products and would like to see that as soon as possible, which is why we have legislated for it in clause 115. We have been working hard to ensure that the Commission agrees that member states should be able to apply a zero rate to sanitary products if they wish, and we want that proposal published as soon as possible. The Prime Minister secured agreement in the March European Council conclusions with leaders of all member states that the VAT action plan would signal an intention to allow member states to apply a zero rate to women’s sanitary products. The action plan published on 7 April did not include any proposals but set out options for future discussion.

The Commission has yet to publish its legislative proposal on sanitary products. I wrote to European Commissioner Pierre Moscovici in May, seeking the early publication of a proposal that would set a date for introduction. He confirmed that a proposal would definitely be provided before the end of the year. Discussions continue between ourselves and our EU partners to ensure that a proposal is published as soon as possible, and we are confident about those assurances. Although the clause provides the power, I understand the concern to ensure that we have an end date. I am optimistic that we will have the measure in place by 1 April 2017; I am happy to put that on the record.

There is no disagreement between the Government and the Opposition on this issue. We all recognise that the UK remains bound by European obligations. We will pursue introducing a zero rating as soon as possible. Had the UK voted to remain in, I think our influence in these discussions might well have meant that we could have brought in the measure much earlier than 1 April, but we are where we are.

I note that the hon. Member for Salford and Eccles does not propose to press her amendment but may well come back to the issue on Report. By then, there may be further developments. Let me be clear that the Government have an open mind as to whether we would accept the amendment on Report, when we hope to have greater clarity. We are confident that by 1 April there should be no reason why the measure is not in place. It is possible that the Government will come forward with our own amendment, but we may well simply accept amendment 5.

I hope that I have provided some reassurance that we do not wish to kick this issue into the long grass. We think that the negotiations are leading to a satisfactory conclusion, and we do not wish to complicate the process. That is why I urge the hon. Member for Aberdeen North not to press amendments 1 and 2, but if she does, I urge hon. Members to reject them. We are, of course, sympathetic to the arguments she made. In the light of the new situation, a future Government may wish to return to this issue.

On the point raised by the hon. Member for Salford and Eccles about support for charities, I have explained the circumstances in which we introduced the £15 million fund when we were not in a position, legally, to introduce a zero rate. The Chancellor committed to that fund continuing for the duration of this Parliament, or until we could introduce a zero rate for women’s sanitary products. We are in sight of introducing a zero rate for women’s sanitary products. Once the measure is introduced, the Chancellor will decide whether to continue funding women’s charities in that way.

I cannot provide any more clarity than that, as the decision will have to be made in the future. I hope that is helpful to the Committee. The differences between the various parties are not particularly significant. I think that there is an acceptance that we want to introduce a zero rate for sanitary products and that we need to do so in a way that is compliant with EU law. There is every prospect that we can do both things by 1 April next year. I hope that clause 115 will stand part of the Bill.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (House of Lords) 12:15, 7 Gorffennaf 2016

I am not 100% sure of the protocol here. Given the Minister’s suggestion that a future Government might look into the matter, and as he has listened to what we have said, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 115 ordered to stand part of the Bill.

Clause 116