§ The provisions of section twenty of the Finance Act, 1948 (relating to purchase tax), and of the Eighth Schedule to the said Act, shall hereafter have effect as if the second rate of the purchase tax is fifty-five per cent. of the wholesale value of the goods and as if all articles at present chargeable to the first 1082 rate of purchase tax are hereafter chargeable to twenty-six per cent. of the wholesale value of such goods.—[Mr. Jay.]
§ Brought up, and read the First time.
§ Mr. Jay
I beg to move,"That the Clause be read a Second time."
You have done a service, Mr. Speaker, not merely to the House but to the Government, in calling this new Clause, because you have given the Government an opportunity to make rather more plain than they have done hitherto their future policy in the matter of Purchase Tax generally.
The purpose of the Clause, as we explained during the Committee stage, is not mainly to alter the rates of tax precisely to those included in the Clause, but rather to ask the Government what their intentions are about Purchase Tax, as well as to give to Members by illustration certain commodities which are now subject to it. I asked the Financial Secretary on the Committee stage what the Government intended to do in the future about Purchase Tax and why, in particular, they had not done in the present year what we did last year and exempt certain household necessities from the tax altogether.
The Financial Secretary did not then give any answer that I can discover as to why no such exemption has been made this year, nor as to what ideas the Government had for the future development of the tax. He did say that a very full discussion on Purchase Tax had been enjoyed in the various stages of the Finance Bill this year. That is perfectly true, but it was not discussion at that stage for which we were asking; it was action by the Government in reducing the tax on certain essential goods.
We want to know in the first place why it is that the Government took no action of that kind this year. It will be remembered that last year we removed the tax from a batch of household goods like bootlaces, toothbrushes and so on. There are still quite a number of other goods, including cutlery, certain types of soap and so on which are still liable to tax. As I said, it would have been our intention this year to see if further progress could not be made in that direction. I hope the Financial Secretary may be able to give us some idea 1083 of how in his view and that of the Government Purchase Tax ought to evolve in the future.
There are different ideas as to how this tax should develop. Our view, which we have tried to make clear on several occasions, is that there is a future for an indirect tax of this kind falling mainly on luxury goods. That is the direction in which the tax developed over the last five or six years, since 1945 up to this year. There is a case for having a tax on certain out-and-out luxury goods, such as furs, jewelry and, in some cases, the very expensive clothes of the type which were non-Utility before the Government introduced the D scheme. There is, indeed, just as good a case for a tax on these things as there is for a tax on tobacco or petrol as a method of raising revenue, and perhaps an even better case.
At the same time, in our view the tax on remaining necessities, particularly 66⅔ and 33⅓ rate, which we suggest should be amended by this Clause, could well be exempt altogether. On the one hand such a tax can serve a useful purpose in raising revenue on luxury type of goods, and on the other there is still useful work to be done in the general campaign to get down the cost of living by the removal of the tax from the remaining items of necessity on which it falls at present. It is not, of course, possible to make a major attack on the cost of living by further exemptions from Purchase Tax. It has been removed from so many goods already that the total revenue still raised by the tax on goods of the household necessity type is comparatively small.
Nevertheless, some further progress can be made, and I should have thought that in a period of full employment—and I take it it is still the Government's intention, in spite of the events of the last few months, to maintain a policy of full employment—when there is likely to be some upward pressure on the cost of living, that we should all welcome any measure which would help in the general campaign to get down living costs.
Before some of my hon. Friends confront the Financial Secretary with questions relating to particular commodities, I should like the Financial Secretary to tell us what sort of tax the Government want 1084 to see. Do they want to go back to the idea of a general sales tax falling at a flat rate over all types of goods, including children's shoes, children's clothes and so forth, which were included in the scheme when it was originally introduced in April, 1940. That, I gather, is the conception favoured by the right hon. Gentleman the Member for Blackburn, West (Mr. Assheton). Is that their idea, and is it for that reason that they did not introduce any exemptions this year?
On the other hand, do they accept our conception and look forward to retaining a luxury tax on the one hand and exempting necessities on the other? Finally, do they believe in the total and early abolition of Purchase Tax altogether? If so, we naturally should like to know how they intend to replace the very large amount of revenue which would be lost. Is it their idea that this tax should go and that the revenue should be raised by higher direct taxation instead?
I dare say that the Financial Secretary will not be able to answer all the questions I have put, but I hope, after he has listened to what my hon. Friends may say about particular goods which are household necessities and not in any sense luxuries, he may be able to give us a little more idea than he did on the Committee stage as to how the Government, if they are still in power, would like to see this tax evolving over the next year or two.
§ Mr. F. Blackburn (Stalybridge and Hyde)
My right hon. Friend has explained the reason for this Clause and, as this is the last opportunity we shall have on this Finance Bill to discuss the problems arising from Purchase Tax, I feel we should take advantage of it. I know there is no hope of persuading the Chancellor to make further concessions than those he has already made. He looks upon himself as a prince bountiful because he has made some slight concessions on Purchase Tax on textiles. The Chancellor himself said that a Chancellor must expect to be unpopular. I do not think he need fear that he is suffering from a surfeit of popularity at the present time in the textile areas because of the concessions he has made.
The whole problem of this Purchase Tax needs to be investigated. As was said on a previous occasion, it is a question of Purchase Tax serving a dual 1085 purpose. First it is a revenue raiser, and, secondly, it reduces consumption. It was well pointed out that these two purposes conflict, because the more the one succeeds the greater the failure of the other. When we are discussing this tax it is well to go back to its origin and find that it was imposed during the war in 1940 in order to reduce consumption.
Viscount Simon, who was then Chancellor of the Exchequer, said, on 23rd April, 1940:Let me point out the significance and appropriateness of the proposal.. It is, of course, of the greatest possible importance to restrict internal spending at this time.Later he said:…we must be resolute in reducing consumption at home."—[OFFICIAL REPORT. 23rd April, 1940; Vol. 360, c. 77.]That was the purpose for which Purchase Tax was put on.
Since that time there has been a tendency to look upon Purchase Tax primarily as a revenue raiser. It is important to consider the question of Purchase Tax first in relation to war, secondly, in relation to a sellers' market, and thirdly, in relation to a buyers' market. In the case of war, obviously it was in order to reduce consumption. In the case of a sellers' market, since we wanted to concentrate on exports, the more we could restrict consumption in this country the better was the chance of increasing exports. But a different state of affairs comes about when there is a buyers' market and when, as at present, not only is there a buyers' market but, in many respects, a buyers' resistance market. As one hon. Friend said, at present even those who never intended to pay are not putting in orders.
In such a case, surely, we have to consider the whole question of Purchase Tax. Today it is merely being used for the purpose of raising revenue. Looking at the structure of the Budget, we can quite understand that the Chancellor would have great difficulty in making concessions that we should like, but at present there is no need to use artificial means to reduce consumption. I think the Chancellor will agree that, if we leave aside that part of his Budget which he calls the incentive part, for more than 4 million people who were not paying Income Tax before the Budget, purchas- 1086 ing power has been reduced because of this Budget. Therefore, at present we do not need to take any measures for the reduction of consumption; in fact, we need new methods in order to put greater purchasing power in the hands of the poorest section of the community.
Everyone will agree that a healthy export trade is possible when the home demand is sufficient to make production an economic proposition. There has been a serious reduction in demand in a great number of commodities in this country because of the lack of purchasing power in one section of the community. It is always better to maintain high consumption when the purchasing power is more evenly spread throughout the community.
Purchase Tax is very often a charge upon industry and, when we are trying to reduce costs of production and bring down the price of commodities, it is wrong to have a tax which is increasing industrial costs. That is of great importance in a highly competitive world. Purchase Tax increases the cost to local authorities and to other public bodies. It sends up the rates and increases the costs which the Government have themselves to pay, either directly or indirectly.
When we were discussing this problem on Committee stage a number of examples were brought forward of the incidence of the tax on various industries. I referred to the tax on elastic and on commercial and educational stationery. I do not wish to go over the arguments I used at that time, but anyone who has gone through the Schedule to the 1948 Finance Act, with its 35 different groups of commodities included in the Purchase Tax Scheme, must be amazed at the ingenuity of whoever it was who sorted these things out. Under group 10 we find:Window display papers, being fancy papers coated, stained, printed, embossed, laminated or otherwise decorated, including coated poster papers, but not including such papers cut to size suitable for use as box papers or as printing paper.Here is a great field in which the Chancellor can see what help he can bring to industry.
A matter which I did not raise in the previous debate is in regard to Purchase Tax on electric vehicles, a tax 1087 which was first imposed in July, 1950. I do not want anyone to get up and say that it was my party which imposed it. It was, but in 1950 they did not have the benefit of my advice. Since that tax was imposed there has been a very serious reduction in the manufacture and production of electric vehicles. Electric vehicles have the advantage that they are operated by a battery normally charged during the night hours and the current consumed while charging is welcomed by the generating authority as it helps in the efficient utilisation of generating plant during the off-peak periods.
§ Mr. Gerald Nabarro (Kidderminster)
Would the hon. Member agree that the amount of load used in charging the battery on account of the point he is making represents about one-thousandth part of 1 per cent.?
§ Mr. Blackburn
That is a very good point. I thank the hon. Member for making that point. It helps considerably.
§ Mr. Blackburn
No, it does not. Nothing is added to the load during the peak hours. I am sure the hon. Member will agree there.
§ Mr. Nabarro rose——
§ Mr. Blackburn
It is all right, the hon. Member will have a go later. I was pointing out the reduction there has been in the production of electric vehicles since the imposition of the tax in 1950. In 1950 there was a fall of 22.8 per cent. compared with 1949. The number dropped from 2,002 to 1,545. In 1951 there was a fall of 38.6 compared with 1949, and in January of this year—the only month for which I have figures of production—only 43 vehicles were produced.
The very heavy tax on electric vehicles places them at a serious disadvantage in competition with petrol-driven motors. The price of a 10 cwt. electric vehicle in 1950 was £614 and of a petrol vehicle £365. If we add the Purchase Tax, in the case of the electric vehicle the price goes up to £1,073 and, in the case of the petrol vehicle, to £494 10s. I am sure 1088 that other hon. Members will be able to produce numerous cases in which Purchase Tax is working very unfairly towards a certain industry. It may be working unfairly in regard to industry generally by putting a general tax on costs and unfairly as far as local authorities are concerned.
This is a field which could rightly engage the attention of the Chancellor between now and next year. That is, assuming that the present Chancellor is still in office. But I should also like my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) to look at it because, being hopeful, it is possible that between now and the Finance Bill of next year we may have a different Chancellor of the Exchequer and a different Government. Therefore I want to make my appeal to both sides, so that both sides will be looking into these anomalies in order that between now and the time of the Finance Bill next year a good many of them can be removed.
§ Mrs. Jean Mann (Coatbridge and Airdrie)
I should like to support my right hon. Friend in asking the Government Front Bench to declare their intentions with regard to Purchase Tax. A year ago their intentions were exceedingly good, even honourable. They were very impressed with the burdens that the housewife was bearing in regard to Purchase Tax; so impressed that there were scores of Tory Members filling these benches at all hours of the day and night, and the early morning.
Tonight there are a whole five of them here to exhibit their interests in the harsh burden that the housewife is bearing because of Purchase Tax. Perhaps it is that on these benches there is always more light. Perhaps it is that these benches are much more comfortable than the benches opposite. At any rate, the speeches made on Purchase Tax by hon. Members opposite when they occupied these benches were most enlightened. Today they are entirely silent.
For example, when we were discussing the Finance Bill last year, from this side of the House and from the mouth of hon. Members opposite we heard about the Purchase Tax on pins, hat-pins, hat ornaments, boot laces, socks for shoes, elastic, butter muslin, gas water heaters, refrigerators, domestic heating appliances, radio and television sets, valves and cathode ray 1089 tubes, tooth brushes, nail brushes, toilet brushes, hair brushes, hat and shaving brushes, etc., etc. And today we do not hear a word. There is absolute silence from hon. Members opposite.
Was that what was meant when they put up posters announcing, "Time for a change"? Did they mean, "A change when we shall cease talking about these burdens of Purchase Tax; when we shall allow you to bear them without ever mentioning them or when we intend to get rid of them"? Was that the change that was meant? I noticed that in his speech last year the right hon. Member for Leeds, North (Mr. Peake) said that…had we been in office during the last six years Purchase Tax would long ago have disappeared."—[OFFICIAL REPORT, 19th June, 1951; Vol. 489, c. 362.]Well now, will they remove one-sixth this year? That is a modest sum to ask? If according to the right hon. Member for Leeds, North, the party opposite could have removed Purchase Tax entirely could have wiped it out in six years, is it too much to ask that the proportion of one-sixth be removed this year? Will he tell us?
I remember the hon. Member for Tyne-mouth (Miss Ward) talking about the burden on the housewife because of the tax on Hoovers, on the cost of water heaters, because of the tax on refrigerators and on domestic heating appliances. Where are the hon. Ladies opposite tonight? Are not the burdens just as onerous as they were last year? And why are the hon. Members opposite saying nothing at all about them? I remember an hon. Gentleman opposite, when he was on this side of the House last year, talking of the burden on radio and television sets because of the Purchase Tax, and the Purchase Tax on valves and cathode ray tubes, and the possible unemployment which would ensue if Purchase Tax was retained on radio valves and cathode ray tubes.
§ Mr. Stephen McAdden (Southend, East)
In reply to the representations made by the hon. Lady on the question of radio and television sets, the retort of the then Government was to double the tax.
§ Mrs. Mann
It was only because the then Government had doubled the tax that hon. Members opposite made protests and talked of unemployment. Do not for one moment think I am trying to evade that issue. I should like hon. Members opposite to square up to their responsibilities and to the things they said last year. They asked for this last year. They are not even asking for it this year although, as the hon. Member for Southend, East (Mr. McAdden) said, the tax was doubled. Everything was to be better, was it not? There was to be a removal of the onerous Purchase Tax on these items, and surely since we are concerned about the increased unemployment problem, now is the time to give us more employment, or at least to prevent unemployment spreading outwards and inwards through our whole domestic economy.
There were talks from hon. Members opposite, who kept us till the early hours of the morning, about the tax on tooth brushes, nail brushes, toilet brushes, hair brushes and hat and shaving brushes. My right hon. Friend gave way in regard to some of these. He gave way to the tune of £2½ million and gave relief in regard to tooth brushes, hot water bottles, air pillows, air cushions, toilet paper, water beds, boot laces and several other items like insoles for shoes and elastic.
What is the right hon. Gentleman opposite going to do tonight? Surely he will listen to at least one small plea for some added relief to the over-burdened housewife—so over-burdened not only because of the Chancellor's 1s. 6d. per head extra, because of the removal of food subsidies, but also because of the 27 items of groceries which have been increased in price in addition to the increase in the rationed goods through the removal of controls.
Surely all these burdens now thrown on the housewives is sufficient to cause a crusade among them, since we no longer have the members of the Housewives' Leage raising their voices. Could I represent them and plead with hon. Members opposite to do some little thing for the housewife in this Budget?
All that has been done so far has been to increase the burden on the housewife. During the Election many pleas were made about Purchase Tax. I can remem- 1091 ber hon. Members taking piles of napery and linen goods on to the platforms and giving the exact Purchase Tax on each item—on soap, notepaper, towels, dish cloths, toilet cloths and so on. They gave the impression that they intended to remove the tax. There was a campaign, no doubt calculated to help hon. Members opposite into power, by one of the leading newspapers which showed details of Purchase Tax day after day.
Many candidates for the Conservative Party who have come to this House as M.P.s promised in the columns of that newspaper that their voices would be heard on behalf of the housewives in an endeavour to remove this tax. Where are the voices? Probably at 8 o'clock those hon. Members are busy in the Dining Room. Their voices have been eternally stilled.
I remind the Minister of what his right hon. Friend said last year:Had we been in office during the last six years, Purchase Tax would long ago have disappeared.I hope that he will tell us tonight just how much of it he intends to wipe out.
§ Mr. Ralph Morley (Southampton, Itchen)
I hope that the Financial Secretary will be able to make some concession on this new Clause, even if he does not grant all that it demands. It has already been said that in the first place Purchase Tax was levied for a sumptuary purpose. It was levied during the war to discourage the purchase of the articles concerned. But the sumptuary purpose of the Purchase Tax disappeared a long time ago. The tax is now levied, not to discourage people from buying, but to raise revenue.
When requests have been put to successive Chancellors and to successive Financial Secretaries for some remission or reduction, the reply has usually been that the Chancellor or the Financial Secretary had the utmost sympathy with the demand but they could not afford to lose the revenue which a reduction in the tax would entail. If Purchase Tax has no longer any sumptuary purpose, and evidently it has not, and is levied merely to raise revenue, then in common fairness it should not be levied upon necessities. It should not be levied upon anything which everybody has to buy at one time 1092 or another. It should be levied only upon luxuries or semi-luxuries such as jewellery, furs, motor cars, television sets, and so on.
The country in its wisdom has decided that it is necessary that all our children should have some sort of education in the 10 years between five and 15 years of age. It is not possible to give those children any kind of education without supplying them with school stationery. Every child and every school in the land requires exercise books, copy books, drawing books and foolscap paper. A great deal of school stationery is consumed every year.
That school stationery bears a Purchase Tax. I believe that during a financial year about £600.000 is paid in Purchase Tax on school stationery alone by the local education authorities. Nor does the taxation on school requisites stop at stationery. There is a fairly substantial tax upon a common and necessary article in use in all our schools-chalk. The chalk is manufactured and sold to the wholesaler. The wholesaler puts his additional price upon it and Purchase Tax is levied upon the manufacturer's price plus the wholesaler's uplift.
Years ago it used to be considered that the mark of a good teacher was the efficient way in which he used the blackboard. Today, there are many other visual and mechanical aids for teaching, and the blackboard is not used so much. But chalk is still an essential and every day part of the apparatus in our schools, and chalk is taxed. Something like £1 million a year is paid in Purchase Tax by education authorities upon school requisites. This tax upon school requisites seems to be particularly stupid.
The local education authority pays the tax. Then it puts its expenses to the Ministry and gets a Ministerial grant if the expenditure is approved. Of the £1 million paid in Purchase Tax the local education authorities probably get something like £500,000 or £600,000 back in the form of grants from the Ministry of Education. I cannot see how the Treasury benefits from that. It receives a tax and it has to find the money to pay a grant in part payment of the tax which has already been paid. On balance, there is very little advantage to the Treasury.
1093 Therefore, I ask the Financial Secretary at least to say that some concession should be made on school stationery. It would not cost a great deal of money. As the debate last year showed, there is a fairly strong feeling on both sides of the House that stationery generally, and at least school stationery, should be exempt. A tax upon stationery generally is a tax upon production. Stationery is a necessary article used by every business.
The Financial Secretary may say that he would be pleased to remit the tax upon school stationery but would be afraid that such a remission might be abused and that stationery for scholastic purposes on which tax had been remitted might be diverted to other purposes. I should have thought that the officials of the Treasury had sufficient ingenuity to find some method of marking tax-free stationery so that it could be used for school purposes only. That is not beyond the ingenuity of the Treasury officials who have successfully tackled much more difficult problems in their time. I ask the Financial Secretary to make at least this one concession. It would cost him little. It would be most acceptable to the local education authority and it would help the Ministry of Education.
The Minister of Education recently sent out Circular 242 asking the local education authorities to curtail their expenditure in their forthcoming estimates, and, although I do not agree with Circular 242, if the Purchase Tax upon school requisites was abolished, it would help the local authorities to fall in line with Circular 242, without any reduction in educational efficiency as far as the supply of school requisites is concerned.
I hope that the Financial Secretary, in his reply, will be more forthcoming on this occasion than he was on the last, and will be able to give us some concessions with regard to school requisites.
§ Miss Alice Bacon (Leeds, North-East)
We are not asking in this new Clause for the abolition of Purchase Tax on all articles, because we have always maintained that it is better to have a tax on luxuries than to lose the revenue through the abolition of that tax and have to substitute a new tax, which would probably hit the poorer sections of the community 1094 more than did the Purchase Tax on luxuries.
The previous Government was going through a gradual process of exempting from the tax many of the articles which were considered necessities, but now the tax is being imposed on many things which can still be regarded as essentials, and I want tonight to indicate some of these articles which I believe are necessities and which I think the Chancellor ought to exempt from Purchase Tax.
First of all, there is the soap which was referred to by hon. Members opposite last year, and the razor blades, brushes and combs. A tax on such articles is a tax on cleanliness, and I would put forward that group first if the Chancellor is to make any Purchase Tax concessions. Then, there is a very heavy duty on mirrors. Some people may argue that a mirror is not a necessity but something of a luxury, but maybe it is a good thing to see ourselves occasionally as others see us, and not to inflict ourselves on others without first having had a look in a mirror.
Then, there are floor coverings, and I think there is an anomaly here. I was very surprised, when visiting a house a few weeks ago, to find that the people had chosen their new linoleum for their floors in squares, because, I was told, if they bought it in squares, there was no Purchase Tax on it, whereas, if they bought it by the roll, the Purchase Tax had to be paid. Perhaps the Financial Secretary will inform us whether or not that is so. There is a case for exempting all forms of floor coverings, and similarly, with regard to wallpaper. Many of these articles are very necessary to those who are setting up a home, and, nowadays, when there is much less purchasing power about, it is difficult to put into our homes all the new things that we would like.
Then, there is a whole group of cutlery, which, again, is a necessity. There is also a fairly heavy Purchase Tax on umbrellas. I do not know whether we should argue that an umbrella is a necessity or a luxury. I suppose it depends where one lives, but it would be regarded as a necessity in Manchester. Again, that is something which I hope the hon. Gentleman will look at.
I should like to mention one or two other items, particularly radio receivers, batteries and accumulators. There are 1095 still millions of homes without a supply of electricity, which means that many who are living in the depths of the country and dependent to a larger extent on the wireless than those of us who live in the more urban parts, have to pay a heavy tax from time to time on batteries and accumulators which they use with their radio receivers. I know that such people feel this burden very greatly, because they are not sufficiently lucky to have a mains supply of electricity.
Then, of course, there are pedal cycles. My hon. Friend the Member for Southampton, Itchen (Mr. Morley) has indicated some of the things used in schools that are subject to tax, and, in these days of rising fares, it is essential that pedal cycles should' not be taxed, particularly children's machines. Many children depend on their cycles to take them to school. We must not forget that the right hon. Lady the Minister of Education has made the pedal cycle much more of a necessity for school children in these days than it was a year ago, because of her policy of cutting down on school transport. This makes it more necessary that this matter should be looked into.
I should like to reinforce what my hon. Friend from Southampton has said about school stationery, although I would disagree with him on one point. It is very difficult indeed to distinguish between stationery and other articles used in schools and those articles used outside schools. Most of the things subject to Purchase Tax that are used inside schools are probably just as much of a necessity when used outside schools.
§ Mr. Anthony Fell (Yarmouth)
Is it not just as difficult to distinguish in the case of many of the other articles which the hon. Lady has mentioned?
§ Miss Bacon
No. I was merely saying that, with regard to children, it was more of a necessity than ever. Many of these things, such as stationery, which are used in schools are just as much a necessity outside school as inside, and I appreciate to a great extent the difficulty which there is in distinguishing between those articles used in schools and those used outside.
I have indicated a few of the things which I regard as necessities and which 1096 I think we should have exempted from the tax had my party still been the Government. The previous Government was pursuing a policy of curtailing and abolishing the Purchase Tax on many necessities, but, this year, we have had no such concessions, I hope that, when the hon. Gentleman replies, he will indicate, that, to some extent, the party opposite will keep some of their Election promises in the abolition of Purchase Tax on these articles.
§ Mr. Grimond
I wish, very briefly, to support the plea which has been made by the hon. Lady the Member for Leeds, North-East (Miss Bacon) for a reduction in or abolition of the Purchase Tax on bicycles and batteries.
Batteries are essential to people living in the country who have no mains electricity, if they are to listen to the radio. I would add an additional reason to those given by the hon. Lady that it is just those people who live in the country, and are particularly dependent on the wireless for their entertainment, who deserve some concession. If the Financial Secretary can see his way to give some concession on these two articles, I think that it would be very welcome on all sides of the House.
I really rose to say a few words about the principle involved, because it was the main purpose of the Clause to find out what is the general policy of the Government in relation to this tax. The Labour Party supports the Purchase Tax in so far as it is a tax on luxuries, but there are obvious difficulties about that, and they did not confine it to luxuries when they were in office.
But who is to decide what is a luxury and what is not? Again, while it may be easy enough to say that the poorer people do not use the more expensive things like Rolls-Royce cars, there are many poor people who make these articles. In many industries there is a case to be made for the reduction of Purchase Tax on what are called luxury goods. Again, this country is very dependent too on its output of quality goods, and, even if they are made for export, that trade, as we know, is dependent to a very considerable extent on the home market and may soon have to depend on it even more than it has done to date.
I am perturbed to think that this tax still falls very heavily on a number of 1097 articles in every day use. In all these debates we hear urgent pleas for a reduction in the rate of the Purchase Tax on such things as tooth brushes, batteries and bicycles. But, surely, the real conclusion to be drawn is that this is a very unsatisfactory tax.
It was defended by the late Government and is defended by the present Government for perhaps the same reason, and I agree that in the situation which faces us today we are not in the position lightly to stop any source of revenue. But former debates on this tax have shown that it is an almost impossible tax to administer fairly, and in the changing state of our economy it is becoming more and more difficult to apply it only to luxuries or to use it only for revenue purposes without doing considerable damage to vital industries.
The speech of the hon. Member for Southampton, Itchen (Mr. Morley) illustrated some of the difficulties. He said that originally this was a sumptuary tax, but that it is now a revenue raising tax and, therefore, should only be levied on luxury goods, which of course is to treat it again as a sumptuary tax. We must face the fact that this tax was introduced as a temporary tax in time of war and that it is certainly time that we decided what use it has to play in our economy in time of peace. It would be very useful if we could have some indication of what the Government are thinking on a long-term basis for its replacement by some other form of revenue raising measure.
§ Mr. Coldrick (Bristol, North-East)
On the last occasion that we debated this tax we pressed, as has been suggested, for the complete elimination of the 33⅓ per cent. rate, but the terms of the new Clause have been somewhat modified. I have appreciated for some time that there is always a great transformation in the mental outlook of people when they pass from this side of the House to the other side, because we used to listen to the most eloquent arguments against the tax in general when the present incumbents of the benches opposite were sitting on this side.
I think I can claim on behalf of most of the people we represent that we have consistently been opposed to the Purchase Tax because we believed right from its 1098 inception that its impact would be felt much more severely by the lower paid people than by those in possession of very substantial incomes. When it was first introduced we recognised, of course, that it had a twofold purpose. First of all, it was supposed, to use the common expression, to mop up a great deal of the surplus purchasing power, and, secondly, it was intended to restrict the consumption of scarce goods in order that labour and supplies should be diverted to the war effort.
As time has gone on we have listened to a hundred arguments as to why the tax should be kept in existence for reasons totally different from those originally adduced in its support. Therefore, I want at this stage merely to enforce the plea that has been made to exempt from this tax the articles that have already been mentioned. For some time now we have been trying to get the various Governments to agree that, even if they could not remove the tax in its entirety, they should at least remove it from those articles deemed to be necessary in most of the households of this country.
I pointed out on the previous occasion when we debated this tax that we were successful in getting the last Government to agree totally to exempt quite a considerable range of articles from the tax. I believe an important point has been overlooked in these debates and by the Treasury, which is that this tax is inclined to increase prices by more than the amount of the actual tax charged. Anybody familiar with business practice knows perfectly well that, whatever the pundits of economic theory may believe, in practice if a person has to spend, say, £1,500 owing to Purchase Tax in order to acquire stocks which otherwise he could buy for £1,000, then he has to find the interest on that extra £500 from somewhere. The result is that it becomes a factor in raising prices generally, quite independent of the tax itself.
I believe one could find innumerable reasons for recasting the whole of the tax, but this particular Clause is asking not for its complete elimination, but merely for a reduction from 66⅔ to 55 per cent. for the one category and from 33⅓ to 26 per cent. for the other. I believe that the Chancellor or the Financial Secretary would find it extremely difficult to adduce any argument as to 1099 why the articles which have been mentioned, whether they be soaps, razor blades, bicycles or stationery, should be classified as luxuries.
In so far as these articles are fundamentally needed by the mass of the people, I would appeal to the Chancellor to look at this matter again to see if he cannot grant the concession asked for. I do not know at this stage what such a concession would cost, but I am positive that it would confer very lasting benefits upon the people of this country. I sincerely hope that the Chancellor will find it possible at least to reduce the range of tax upon the articles which have been mentioned by hon. Members on this side of the House.
§ Mr. Boyd-Carpenter
During the Committee stage the right hon. Member for Battersea, North (Mr. Jay) moved a Clause in substantially the same form. On that, as on this, he made it clear that he was not unduly concerned with the merits of his new Clause, but desired to use it as a perfectly legitimate Parliamentary peg on which to hang a discussion of certain aspects of the Purchase Tax. As I understand it, he has followed the same practice in this case.
His first question related really to items which will be in next year's Finance Bill. Indeed, he talked of a year or two hence. That is a fascinating intellectual exercise for the right hon. Gentleman, but his own experience, of course, will confirm him in the knowledge that nobody speaking from this Box during the debate on one Finance Bill is going to be so foolish as to give confident forecasts of the contents of its successor.
Apart altogether from the obvious trade disadvantages of any such suggestion, the tax proposals which my right hon. Friend will bring forward next year will be affected in general by the speed with which the Government's measures bring forward national recovery; and until we approach the formative period for the Budget next year it will not be possible to come to any firm decisions on this tax, or, indeed, of others; and I am sure that the right hon. Gentleman, from his own experience of the way these things are handled, will appreciate that that is the case.
1100 8.30 p.m.
I would, however, in reply to him and to his general comments, make one general one. This year we have sought to confine our changes in the Purchase Tax to articles which fall within the zone of the old Utility scheme plus the rectification of certain anomalies on the margin of the scheme. That has been the theme and purpose of my right hon. Friend's Purchase Tax proposals in this Bill.
If justification for that were needed it is, I think, clearly to be found in the state of affairs disclosed by the Douglas Committee, which, I would remind the House, was appointed by the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell), and the fact that, when one is dealing with so vast and complex a field as that embraced by the Purchase Tax, there are limits to the areas with which either Parliamentary time, or even that inexhaustible quality, the physical resilience of Members of Parliament, can enable us to cope. For that reason, quite deliberately my right hon. Friend confined this year his Purchase Tax changes to the very considerable sphere which the House—and the Committee before it—have discussed at considerable length on a number of occasions.
Now, the hon. Gentleman the Member for Stalybridge and Hyde (Mr. Blackburn), not for the first time——
§ Mr. Jay
I think the Financial Secretary is now leaving my questions. May I remind him of one which I asked him? Why did the Government not this year exempt any household necessities in the Budget at all? I do not think he answered that. Second, though, of course, he cannot give any details of future Budgets, surely he can say what is the general idea of the Government as to how Purchase Tax should evolve in the future?
§ Mr. Boyd-Carpenter
On the first point, I think, I did answer the right hon. Gentleman by pointing out to him—and I will do so again, if I may—that my right hon. Friend this year confined his changes to articles within the old Utility schemes. In so far as household necessities of a textile character were concerned, then, of course, my right hon. Friend dealt with them in the D scheme, but, for the reasons that I have now twice given, my right hon. Friend decided 1101 not to make adjustments in the law outside the old Utility scheme area, save, as I said, for a few articles on the margin —rubber boots, I think, are an example.
§ Miss Bacon
The Financial Secretary keeps quoting the fact that concessions have been made inside the Utility scheme. Surely we are not yet certain whether there is to be much less tax paid under the D Scheme, or more. There may not be a concession after all so far as some of these things are concerned.
§ Mr. Boyd-Carpenter
The hon. Lady, I am sure, does not want to go into the argument of the D Scheme as a whole.
§ Mr, Boyd-Carpenter
I doubt whether she could at this stage within the rules of order, even if she does, but if she has an irresistible urge in that direction I will remind her that there are items within the ranges we have been discussing which are ordinary necessities to most people-rubber boots, I think, constitute a very obvious example—which have benefited from the change in the scheme. I would say once again, in reply to the right hon. Gentleman opposite, that that was my right hon. Friend's clear contention—not at this stage to make adjustments outside that area, but to confine his changes to the sphere of that area.
As to general philosophical or metaphysical reflections upon the Purchase Tax, I very much doubt whether they would be of very great value, and for two reasons. In the first place, as I have said, what in fact will be done in next year's Finance Bill will be very seriously affected by the general tendencies in our economy manifest at the time when those proposals are being formulated. Second, to pass general comments which may very well have certain inferences drawn from them could be extremely damaging from the point of view of the trades concerned.
As I was about to say to the hon. Gentleman the Member for Stalybridge and Hyde, when the right hon. Gentleman intervened, who did mention one or two particular articles, there really is great disadvantage in anyone from this Box making statements or allusions which may appear to indicate that changes in a particular product are being contemplated; because I think all of us who have had 1102 any experience of the way this system works will appreciate that the most damaging thing to the smooth flow of any of these trades is for the idea to get about that Purchase Tax changes are contemplated.
When that happens, almost invariably buyers hold back; retailers are not unnaturally alarmed at the risk of being caught with stocks which have paid tax higher than the current rate, and for that reason serious dislocations result, in industry particularly.
§ Mr. Jay
I do not want to intervene again, but does the hon. Gentleman not recall that in response to a request from the then Opposition I made a speech in the Finance Bill debates last year and two years ago on our general attitude to Purchase Tax, which did not have any of these evil consequences which he now fears?
§ Mr. Boyd-Carpenter
I am not all sure that the right hon. Gentleman is not too optimistic in asserting that it did not have evil consequences. He really must allow us to make our own approach to this problem; and, if he will allow me to say so, the state of our national economy in which he left the nation is no justification of his methods of handling it.
To the hon. Member for Stalybridge and Hyde, to whom I must return again, because I do not wish to show any discourtesy to his point of view, I would only say this. He has put forward on this occasion, as on others, particular cases which will obviously have to be considered on their merits. The fact that he has put them forward, as he always does, if he will allow me to say so, with cogency and clarity will enable them to be considered with great ease from time to time.
The hon. Member for Southampton, Itchen (Mr. Morley) brought up, not again in his case, I think I am right in saying, but for the first time, the vexed subject of school stationery. Even if it were desirable to make a special exemption, there is an overwhelming difficulty in making a special case of stationery used for particular purposes. Although he was extremely courteous in his references to the administrative capacity of the Government Departments concerned, I can assure him that it is a matter of very great difficulty indeed to base Purchase 1103 Tax, not on the essential qualities and categories of the goods but upon the purpose to which they may be ultimately employed.
It is a matter of commonsense knowledge that the notebooks, the writing pads and other items used in schools are also used in places other than schools. Then, says the hon. Gentleman, why not exempt the lot? There is a very substantial and material objection to doing that, which is that the Purchase Tax upon stationery generally brings in a yield of between £25 million and £30 million a year. That is a very substantial item in the yield of the Purchase Tax, and whatever may be the case in subsequent years, that is not a sum, I am afraid, which my right hon. Friend could contemplate sacrificing in the present state of our economy.
The hon. Lady the Member for Leeds, North-East (Miss Bacon) again brought up a number of cases of particular items to which, in order not to weary the House with repetition, I will say that the general observations I made in reply to the hon. Member for Stalybridge and Hyde also apply. The hon. Lady has put these items on record, and they are there convenient for consideration from time to time.
She also asked a question on the rather interesting point about floor coverings. The House did discuss this, I think, in the last Parliament. My information is that no action was taken at that time. The present position is that the rather curious situation she described applies only in a small section of the trade. We are going into the question, and I understand that representatives of the trade concerned are coming to see me in the fairly near future. That is the way it stands at the moment, but I quite agree, without committing myself any further, that there is here a matter which justifies looking into, because on the face of it it appears to produce a rather curious situation.
The hon. Member for Orkney and Shetland (Mr. Grimond) referred to the well-known subject of electric batteries. I cannot add anything about that at the moment. He also made what I hope he will allow me to say were, I thought, extremely sensible comments on the difficulty of tying oneself to the idea that this should be a tax on what one might designate as luxuries because, as he 1104 pointed out, luxuries are not a matter about which, in some cases, it is possible to draw a very clear line.
Certain articles may be luxuries to some people and not to others. It is not a very easy line of demarcation. There is also the very important consideration from the point of view of the export trade. There are quality articles which are traditional and valuable exports of this country, and one has to be careful not to cause the tax to be so severe as to deprive them altogether of the support of a reasonable home market. Therefore, although it is no doubt the case, and rightly the case, that certain articles which no one could describe as necessities carry a substantial rate of tax, and a number of articles in precisely that category bear a 100 per cent. tax, there is some social justification for taxing some higher than others.
The simple classification of luxuries and non-luxuries is not a practical way of dealing with the matter, and I agree with a good deal of what the hon. Gentleman has said on that subject. The hon. Member for Bristol, North-East (Mr. Coldrick), who speaks with great knowledge on this subject and who has a distinguished connection with the Co-operative movement, also brought forward certain aspects of the tax which are extremely interesting and valuable. This is not, as he knows, a tax about which anyone in this House appears able to generate any undue enthusiasm. It is, on the other hand, a tax which, because of the substantial amount of revenue it brings in, has survived the vicissitudes of some 10 years of Parliamentary Government.
May I repeat what I said a moment ago? My right hon. Friend does keep this tax under close observation. It is a tax which obviously from time to time must require adjusting, 'and my right hon. Friend is always ready to consider the aspects of the matter which are brought to his attention either by hon. Members on the Floor of the House or, as they are sometimes good enough to do, in correspondence. Certain suggestions, some new and some perhaps not so new, have been made in the course of this evening's debate, and they will all of them from time to time receive the consideration which, I think, hon. Members on both sides of the House appreciate that my right hon. Friend always gives to the views of the House of Commons.
§ Mr. Ede
The Financial Secretary has given us a wonderful example of talking at some length and saying nothing. I believe that I am the only Member now physically present in the House who recalls his father at that Box in a similar capacity, and I am bound to say that this is the worst example I have ever seen of hereditary Government.
What has the hon. Gentleman conveyed to us? That the Chancellor of the Exchequer has certain intentions and that these will be carried out. There is no need to argue as to whether they are right or wrong. They are the Chancellor's intentions and that is what is to happen. Then he tells us that anything he may say this evening may be gravely embarrassing not merely to the Government but to trade during the coming year. What a pity he did not adopt the same line last year.
I wonder how long we should have sat last year if my right hon. Friend the Member for Battersea, North (Mr. Jay), in the hon. Gentleman's place, had made the same kind of speech that we have listened to this evening. We had, I think, the third longest Sitting in the history of the House, even with my right hon. Friend's courtesy and the suavity of my right hon. Friend the Member for Neepsend (Sir F. Soskice) to help us.
The hon. Gentleman has virtually told the House of Commons that the Government will decide and that it is very impertinent, and even dangerous, to ask why they have decided and when they are likely to alter any decision they may have reached. As a result of the operation of the alterations made this year,. the tax is obviously one which will have to be considered in very considerable detail next year.
I never understand why it is thought that, because my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) appointed the Douglas Committee, there is something almost shameful in our suggesting that all its recommendations ought not to be carried out. I have appointed many committees, but I have never felt that I was bound by the recommendations they made. It is as well when appointing a committee sometimes to see that it is likely to give one recommendations which will compel one, as the 1106 appointer of the committee, to think very seriously when one receives them.
It would be a very shameful thing if a right hon. Gentleman on either side of the House, in appointing a committee, so chose the personnel that he was quite sure beforehand that he would get the advice he wanted. I sometimes felt in pre-war days that committees were appointed with that object, but I hope that we now live in more modern times. Even a party which calls itself Conservative without showing very great signs of carrying out that kind of policy might try to bring itself up to date on occasions.
I am sorry that I did not hear the speech of my hon. Friend the Member for Southampton, Itchen (Mr. Morley). I am not at all convinced by what the hon. Gentleman says about the application of Purchase Tax to school stationery. Through the operations of the auditors appointed by the Minister of Housing and Local Government, the Government get an exact account of all the items upon which local authorities spend their money, and if there was a desire to relieve the education estimates of this burden it could quite well be done by making a rebate on the audited expenses of local authorities.
I am no longer actively associated with educational administration, but I am sufficiently in touch with friends who are on both the administrative and the teaching sides to know that the operation of the tax is a most serious handicap to children, particularly seniors, in our schools today. If local education authorities were to increase their estimates to allow these children to use the stationery that is required it would mean such increases in the figures that I doubt if any finance committee in the country would be prepared to look at them. Yet a substantial amount of the money spent on stationery is raised in rates and is merely returned to the Exchequer in the form of Purchase Tax on school stationery and other articles of school equipment.
That is a very serious matter in these days when, I hope, we are all anxious to see that the higher education of our people is made as real and as practical as possible. I cannot see why this rebate system I have suggested could not be adopted. After all, it would be the local government auditor who would deter- 1107 mine whether money had actually been expended, and it would not involve any trouble about this kind of article being used for other than school purposes.
I hope that the hon. Gentleman will draw the attention of the Chancellor of the Exchequer to this suggestion of mine, because I am quite certain that it would be the one way in which the essential fabric of education, which is the only thing apparently with which the Government are concerned, could not merely be maintained but, in view of the experiences of recent years, slightly improved.
I do not imagine that the hon. Gentleman expected to satisfy those of us on this side of the House. He does not have to trouble about those on the other side, because such as have returned from Ascot have all shown by their silence that they are quite prepared to allow him to play ducks and drakes with the education service and any other service of the country if that is the intention of the Exchequer. Let me assure the hon. Gentleman that we are not satisfied and that we look forward to renewing this battle next year. We do not expect that it will be with him, but should it be he may rest assured that next year we shall expect him to be a little more forthcoming and detailed than he has been tonight.
§ Mr. Mulley
After the powerful arguments of my hon. and right hon. Friends I shall detain the House only for a few moments. We did not expect the hon. Gentleman to come to the Box and say that next year the Government would reduce the taxation or exempt it on certain items, and that the year following they would do so and so and something else. But he treated the House rather naively in that respect. What we expect from the Financial Secretary, and what he could assure the House about now is that Purchase Tax, its incidence and anomalies, is under constant revision. Surely he will agree that it is not necessary to wait for a Finance Bill to make alterations either in the tax schedules, or in the incidence of particular taxes on particular articles.
If he will give us that assurance and if he is prepared to meet the cutlery trade to discuss not only the anomalies about the assessments, but the difficulties with which the industry is now faced as a 1108 result of the loss of export markets and the unemployment which is becoming a very serious problem in Sheffield, we would receive his remarks with greater acceptance.
§ Mr. Boyd-Carpenter
I give the assurance that we shall gladly receive at the Treasury any body of persons who have proposals to make, and be glad to hear their point of view. That is constantly happening.
§ Mr. Mulley
I am glad to have that assurance, but in addition to the courtesy of a visit—and I know that they will always be received with courtesy—we want any suggestions put forward to receive due consideration.
It is well known that the cutlery industry has had a difficult time recently. A re-classification has been made which means that industrial scissors are taxed for the first time, but there has been no attempt in the Bill or anywhere else to re-classify them again so that they are exempt from tax, as they were until last April. If such an action as that were taken, we should understand that a serious attempt was being made in the Treasury to meet the difficult cases and in particular to try to assist industries which are meeting difficulties as a result of the loss of export trade.
§ Mr. Boyd-Carpenter
I do not want to interrupt the hon. Gentleman, but it might help him if I did. In my original speech I said that we constantly watched the variations of this tax which circumstances made necessary; I went out of my way to say that. I have already told him that we continually see people concerned who have one point of view or another to express. I am familiar with the point to which he is referring, and probably the most convenient immediate course would be if the hon. Gentleman would discuss the matter with me. I am quite familiar with the issues involved.
§ Mr. Mulley
I thank the hon. Gentleman for that, because my point is that there has been plenty of watching and plenty of concern about these matters but no outgoings in the way of new proposals before the House to deal with them.
I make a special plea for consideration at a very early date of the problems of the cutlery industry and the associated industry of silverware. 1109 In addition to considering the problem of unemployment, we should also bear in mind that knives, spoons and forks are essential everyday articles which should be exempt from tax. In addition, there is the export problem, and I was pleased to note that the hon. Gentleman said special considerations should be given to those industries with valuable export potential so that they might have the necessary home market to continue the industry.
The situation in Sheffield is that unless there is some reduction in Purchase Tax there is a great danger, if skilled workpeople leave the industry because of the present difficulties, that the industry may never again have enough craftsmen to take advantage of the export orders which may be received when, as we hope, the situation in Australia and elsewhere improves. I ask for special consideration in that connection.
The revenue aspect of the tax has been stressed tonight, which we all appreciate. But it occurs to me, as it has occurred to the hon. Gentleman, that if there is a reduction in the rate of Purchase Tax it does not necessarily follow that there will be a reduced total return from the tax. In some cases—and again I have in mind cutlery and silverware—a reduction would probably lead to an increase in the total revenue. At the moment there is great difficulty because of the lack of purchasing power, and, in addition, we have to deal with tax evasion.
The amount of Purchase Tax paid by Sheffield industry has steadily declined over the last three or four years. In certain fields we have seen articles renovated and sold in the second-hand market where no tax is payable, instead of their being sold as new articles. I urge the Minister to consider this matter not only in connection with the rates of tax but also in connection with whether, in certain cases, he might get an increase in revenue from Purchase Tax by reducing the rate of tax charged on some articles.
§ Question put, and negatived.