I propose to take Questions Nos. 4 and 38 together.
EC Economics and Finance Ministers reached agreement on the broad shape of the post-1992 indirect tax rates at their meeting on 24 June 1991. The main VAT rating arrangements approved for the community were: a standard rate of not less than 15 per cent; the option of one or two rates below this standard rate, with a minimum of 5 per cent for a restricted list of goods and services; and the possibility of retaining at least for a transitional period extra low rates, including zero rating, in areas where such rates currently apply.
Subject to observing these general Community requirements, final decisions on the actual rates to apply remain the prerogative of individual member states. The level and scope of VAT rates, both standard and reduced, is a matter for the normal budgetary process and I will be examining this matter in the context of the 1992 budget. The House will appreciate that such decisions cannot be taken in isolation from wider issues of tax policy. I must have regard to the cost implications of the total approximation package and to overall budgetary policy. For these reasons, I am not in a position at this stage to indicate to what extent we can avail of the reduced rate options. Items currently low rated which will be liable to the standard rate after 1992 include telecommunications, adult clothing and footwear, personal services, repair and maintenance services and construction other than housing.
I will be consulting my colleague, the Minister for Industry and Commerce, in regard to ensuring that the benefits of any VAT decreases are passed on in lower prices to the consumer. The implications of the net price effects of any rate changes arising for those on low incomes will also be borne in mind in the general budgetary context.
