"No" to VAT on Postal Services

12.00.00am GMT Thu 18th Dec 2003

An EU Commission move that could have added at least a penny to the cost of first and second class stamps was scuppered in the European Parliament this week, thanks to the key votes of Bill Newton Dunn and other Liberal Democrat MEPs.

The 11 British Liberal Democrats made the difference between winning and losing when the parliament voted down a proposal to insist on member states levying at least 5% VAT on postal services. The vote was 270 against and 253 in favour.

"It would be wrong to load VAT onto postal services," said Bill Newton Dunn MEP

"As liberalisation of postal deliveries is now gathering pace all across the EU - thanks to EU Directives - efficiency in the UK is going to improve, and competitors to the Royal Mail will increasingly appear. It would be wrong to also load VAT on top of the liberalisation." said Bill Newton Dunn, Liberal Democrat MEP for the East Midlands.

"We should learn lessons from Sweden. When they privatised their postal deliveries in the 1980's, the Swedish government loaded a 25% VAT onto the cost of a stamp, so the Swedish public came to believe that privatisation meant a price increase. This is despite much greater efficiency. Four different businesses now deliver letters in Stockholm including one subsidiary of the British Royal Mail!

'The Parliament voted to send the proposal back to the Commission, and I am confident that the Council of Ministers will do the same. There is now no risk of this going through. The Government has a veto on all tax matters, and it should use it on this'

ENDS