HC Deb 17 July 1975 vol 895 cc1765-860
Mr. Robert Banks (Harrogate)

I beg to move Amendment No. 108, in page 86, line 1, at end insert— (ii) burglar alarms and ancillary equipment".

Mr. Deputy Speaker

With this it will be convenient to take Amendment No. 121, in page 86, line 5, at end insert— (l) distress alarms and door entry systems for the elderly, disabled or handicapped".

Mr. Banks

In Committee I drew attention to the introduction of varying rates of VAT applicable to burglar alarm systems. I owe a debt to my hon. Friend the Member for Braintree (Mr. Newton) for raising this matter in Committee.

In my constituency there are two small firms which sell burglar alarm systems and parts, and undertake the installation themselves or through other manufacturers.

The number of rates of tax and their application as established in the Bill are confusing. There is a zero rate, an 8 per cent. rate and a 25 per cent. rate. Basically, the 25 per cent. rate applies to burglar alarm systems suitable for domestic use. The problems which this differentiation brings are considerable. A great number of systems are used for the protection of domestic property and for commercial or industrial buildings. The commercial type is rated at 8 per cent. The question of the meaning of "domestic use" therefore arises. A private school, a boarding house, a small hotel or a large country house can acquire an installation every bit as complicated as, and possibly identical to, that fitted in a warehouse, a factory, a shop or an office building.

5.30 p.m.

There are many anomalies. For instance, a first-time installation put in during the construction or alteration of a building is rated at the zero rate. What then is the definition of "alteration"? Does an alteration mean the addition of a few new windows, an extension, or what? That is another question that must be answered.

Repairs to existing systems, depending on whether the system is suitable for domestic use and irrespective of the type of building it protects, carry the 25 per cent. domestic type rate. If the system is not suitable for domestic use it carries the 8 per cent. rate. How do companies discover what sort of system they have if it was installed several years previously?

This demarcation applies also to parts supplied and rental charged. Rental for the first year after installation is zero rated. Banks are singled out for the 8 per cent. rate, whatever type of system is used, because of their high security risk. Why should not a sub-post office enjoy the same privilege? It is every bit as vulnerable as a bank, if not more so. A sub-post office has to pay 25 per cent. if it chooses a domestic type of appliance to suit the building.

A person who buys the parts and installs the system himself has to pay 25 per cent. if the appliance is of the domestic type. Here again, a shopkeeper or a person who runs a small business and may need a domestic type of installation is penalised. The person who wishes to install his own system in his own house has to pay the higher rate.

This policy works against the efforts of the police to prevent crime. The police deserve our support, but this fiddly legislation will only produce complications and make necessary confusing explanations.

I have this axe to grind because I see this as a bad Government decision which should be reversed, not only because of its adverse effects on the police in their attempts to prevent crime, but also because of the effect which confusing and varying rates will have on companies whose paper work will be considerably increased in administering the different rates. I see no sensible reason for this policy.

The amount of revenue that will be produced is not known. Even so, it must be small. I imagine that a great number of people will suddenly find that a commercial type appliance has been installed. There has been no determination of exactly what a domestic type installation looks like or what it is composed of.

I therefore ask the Financial Secretary to accept the amendment, to exclude all types of burglar alarm system from the 25 per cent. rate and to make an announcement to that effect in the debate.

Mr. Tony Newton (Braintree)

I should like briefly to support my hon. Friend the Member for Harrogate (Mr. Banks). He referred to my remarks on this subject in Committee. I shall not attempt to add to what he said beyond pointing out, as I did in Committee, that it is farcical that the Home Office should spend large sums of public money in encouraging citizens to prevent crime while the Treasury is intent on making it far more expensive for people to protect themselves against theft.

Although I realise that the Financial Secretary will not accept the amendment in view of what he said in Committee I hope that he will consider this subject as a candidate for one of the orders he is to make, according to his recent statement, if for no other reason than that if the Treasury do not encourage people to hang on to their possessions there will be nothing for the Treasury to take in wealth tax when the time comes.

Amendment No. 121 concerns distress alarms for the elderly, handicapped and disabled. It takes me back to the day in Committee when I was left almost speechless because the Financial Secretary undertook to consider the points raised by two successive amendments I had moved. We were overwhelmed by his helpful approach at that time. He said: I should like to go into this a little further, coming back on Report after a more satisfactory investigation which I intend to follow up."—[Official Report, Standing Committee, H, 17th June 1975 c. 185.] He was referring to the possibility of the 25 per cent. rate of VAT being charged on bells and distress alarms for the severely disabled, the handicapped and the elderly. I do not want to press the Financial Secretary beyond asking him to clarify the position and, if possible, to indicate his intention when he starts to make orders in accordance with his recent announcement.

Mr. Robert Sheldon

The rates of VAT applicable to burglar alarms—

Mr. David Howell

I apologise for intervening before the hon. Gentleman has got going, but I want to ask about his general approach to the amendments before he goes into the details of this one.

A few moments ago I spoke about the orders which the Treasury is to bring in under Clause 17(2), and I said that the negative resolution procedure would be used. The Financial Secretary interrupted to say that the procedure would be the affirmative resolution procedure. In his statement to the House he said: The reliefs I have announced have, of course, still to be the subject of legal drafting and the Treasury order itself will be subject to negative resolution procedure."—[Official Report, 16th July 1975; Vol. 895, c. 1531.] Which is right? Is the procedure for the orders already agreed to be different from that used for future orders, or is the Financial Secretary wrong in what he said this afternoon and right in what he said on 16th July? This matter should be clarified before we get to the details of the amendments.

Mr. Sheldon

If I might go on with what I was saying about the matter under discussion, I shall deal with the point raised by the hon. Member for Guildford (Mr. Howell) later.

The position about the burglar alarms is that before the introduction of this legislation there were two rates. A buglar alarm which was installed during the course of construction or alteration was zero rated. If a burglar alarm was bought and installed by a person it was rated at 8 per cent. There has always been a difference in treatment according to whether the burglar alarm was installed during construction or alteration or whether it was installed subsequently. The hon. Member for Harrogate (Mr. Banks) is aware of that position.

For the installation of a burglar alarm suitable for domestic use, instead of 8 per cent. the rate is now 25 per cent. The position remains as it was before, except that if a burglar alarm suitable for domestic use is put in afterwards, or is subject to a rental agreement subsequently, after the first year it will be rated at 25 per cent, instead of 8 per cent. I hope that clarifies the matter.

I understand that the hon. Member for Harrogate has a constituency interest in this, and I hope that what I have said will be of assistance to him. Perhaps I should say that, following the representations that the hon. Gentleman made, there were some meetings with the British Security Industry Association to try to define the area between special concession systems and systems suitable for domestic use. We tried to get clarification, and I think that we have achieved that division satisfactorily for the time being.

The hon. Member for Braintree (Mr. Newton) referred to distress alarm systems and door entry systems for handicapped people, and the marketing of such systems commercially. Many of these systems are designed particularly for the severely handicapped but many of them are modified versions of systems of more general application.

The distress alarm or door entry system that is installed as a fixture in the purpose-built home for handicapped people is zero-rated under the ordinary provisions applicable to construction. If a system is installed in the home of a handicapped person under the terms of the Chronically Sick and Disabled Persons Act 1970 the supply of the equipment will be charged to the local authority and the tax may be refunded. From investigations that I have carried out it seems that many systems are installed in that way. However, we all know that the performance of local authorities in these matters tends to be variable. I accept that there could be a problem when a handicapped person has a system installed.

The treatment of these items is still being discussed at official level with the Department of Health and Social Security. I am sorry to say that we have not reached the final stage of considering specific proposals. I can assure the House that the discussions are continuing. We have hopes that we might be able to come to some suitable outcome.

Mr. Newton

I take the Minister's point, but it does not seem to me that he is providing an entirely satisfactory answer. I am glad to hear that discussions are continuing, but I hope he will do his best to ensure that no one is left in the position of having to pay a substantial extra tax burden on a piece of equipment which could be said to be essential. The Minister, in his reply to me, specifically referred to our discussions in Standing Committee. I refer the Minister to column 185 in the Official Report of Tuesday 17th June, where I made a point about pensioners. The hon. Gentleman has referred to the handicapped but will he turn his attention to old people's homes and pensioners?

Mr. Sheldon

To do anything for pensioners would involve a wide range of considerations. Many of the systems that we are discussing are suitable for purpose-built homes of the kind that I have described. I have undertaken to proceed further as regards disabled people.

Next, I refer to the question raised by the hon. Member for Guildford. He said that he was worried—I understand his great concern—about the large increase that might be levied under value added tax. I compared the position with the purchase tax arrangements, and showed how those arrangements had operated under a number of Governments and had met with the general approval of the House. These matters will continue in the same way to be subject to affirmative resolution.

We are discussing what will be reliefs under the statutory instruments. Relief as such is subject to the negative procedure.

Mr. David Howell

Are we to understand that the orders to be made governing the items for which concessions were made before our proceedings in Standing Committee are to be under the negative resolution procedure, and that any future orders that arise from any further changes of the Government's mind will be under the affirmative resolution procedure? Does that mean that, whether or not they are made during the recess, we shall have to debate them in due course according to the affirmative resolution procedure?

Mr. Sheldon

I thought that what I said was clear but I shall repeat it. It is right that concern has been expressed about increased taxation. If additional taxation is required it will be subject to affirmative resolution, but if reliefs are involved the negative resolution procedure will apply.

5.45 p.m.

Mr. Newton

I make one final point before the Financial Secretary sits down. I sense that he is rather uncomfortable about this situation. I also sense that it is extremely unlikely that we shall get a satisfactory outcome following the discussions that are taking place. Should not the hon. Gentleman consider exempting bell systems and door entry systems altogether from 25 per cent. VAT? As he says, they will be zero-rated if they are built into new construction because new construction is zero-rated. In practice that must be the way in which the vast majority of these systems are installed. However, people who become disabled or grow old and require assistance will be installing these systems. The Government would lose very little revenue and avoid the problem altogether by chopping the item out of the 25 per cent. VAT bracket.

Mr. John Nott (St. Ives)

I cannot let the debate conclude without saying that the Financial Secretary's arguments are increasingly absurd. It is nonsensical that we have to go through this farce every time we argue Schedule 7 matters. It is no use the Financial Secretary going back and saying that in the original legislation if a burglar alarm was part of a building and was inherently part of a new structure it was zero-rated and if it was subsequently installed it bore the basic rate of tax. The fact is that under these new arrangements if an alarm is installed it will bear the 25 per cent. rate, whereas virtually every other sort of security device, a lock or whatever, bears a rate of 8 per cent. when installed. It is ridiculous that burglar alarms should bear the higher rate for no purpose that can be understood by anyone apart from those occupying the Treasury Bench.

There are two rates being levied on safety devices, devices which are necessary for the security of a home. Day after day we hear from the Home Office, from other Departments and from the police of the necessity of securing our homes against burglars. That is said by various Departments, but the Treasury Bench chooses to place on burglar alarms the 25 per cent. rate whereas every other security device bears a rate of 8 per cent.

In answer to the points that my hon. Friends have raised, the Financial Secretary has said "But when you were in office you brought forward a measure which involved a zero rate and a basic rate". The Government are continuing with a basic rate of 8 per cent. and adding the 25 per cent. rate. No one can understand the difference between burglar alarms and other security devices. That is what we are complaining about. The ponderous style of the Financial Secretary might well help those who suffer from insomnia, who instead of counting sheep jumping over a stile can come along to these debates and listen to his replies, but his style does not alter the absurdity of his replies. That absurdity is becoming more and more obvious as the debates proceed.

I hope that at the end of the next debate we shall have a more sensible reply which will distinguish between the Government's creation of four rates of VAT and the original legislation which provided for zero rating and a basic rate. As my hon. Friend the Member for Guildford (Mr. Howell) has said, zero rating was requested by the then Labour Opposition. It is no good throwing the matter back at us.

We are debating why a burglar alarm should bear a rate of 25 per cent. and every other security device a rate of 8 per cent. We have had no answer on that point whatever. We should not put legislation of this nature on the statute book.

Amendment negatived.

Mr. Wiggin

I beg to move Amendment No. 22, in page 86, line 23, at end insert: '(g) shackles and bottle screws'. This earth-shattering amendment, which is of immense importance, has been tabled because it highlights the anomaly created under Schedule 7. I understand from a number of sources, not the least of which have been the retailers of hardware items, that because some shackles and bottle screws and other items of fittings for wire ropes can be used as rigging on boats, the Customs and Excise authorities, ever sleuth-like in looking for the smallest possible loophole, have assessed all these things at the higher rate. Therefore, in some small Midland town, 80 or 100 miles from the sea, a farmer or ordinary householder buying an item for his garden fence has to pay 25 per cent. VAT.

When Item No. 5 was drafted, obviously the drafters of the legislation appreciated that some items such as nuts, bolts, screws, hinges, wheels and other bits and pieces, finishing with sewing machine needles, should be exempted. It is absurd that these tiny bits and pieces such as shackles and bottle screws should be included.

Although my amendment is specific, I hope that the Minister of State will accept that it raises as much a point of principle as of detail. I hope that the amendment will receive a favourable response, even though the Government have already indicated that they will not accept it.

Mr. Hector Monro (Dumfries)

I support my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin) who in Committee carried out a tremendous battle on behalf of the boat building industry. I agree with him that Amendment No. 22 raises an important matter of principle.

In Committee the Government argued that they had included boats within the VAT increases because they related to so-called "large ticket items". In the amendment we are dealing with minute items—with something as small as a thumb nail or as large as a man's hand. I should be interested to know the answer to the question "When is a screw a bottle screw?" In the present economic crisis, it is astonishing that the Government seek to create anomalies of this kind.

In Committee upstairs, on 24th June, in c. 369, the Minister said, in a somewhat muddled way, that ropes and chains were not part of boats. I wish to know when a bottle screw has been classed as not part of a boat. Umpteen fathoms of chain may be charged at 8 per cent., the anchor at the end at a similar figure, and the shackles holding them together at 25 per cent. This is monstrous nonsense. If the Government persist with legislation of this kind, I shall be surprised if the House rises before the end of August.

The Minister of State, Treasury (Mr. Denzil Davies)

The amendment seeks to add shackles and bottle screws to Item 5 in Group 1. That group of items deals with matters of general use such as nuts, bolts, nails and hinges. They were specifically excluded because they are recognised to be items in general use.

The reason why I cannot accept the amendment—although I may be able to say something which will go part of the way to satisfy the hon. Member for Weston-super-Mare (Mr. Wiggin)—is that it is not conclusive that shackles and bottle screws, whatever their virtue, might be items of general use, although I can think of many uses for shackles. But the Customs and Excise authorities do not regard shackles and bottle screws as items of such general use that they can be brought into the category of items listed in Item 5.

Mr. Nott

The Customs and Excise has agreed with manufacturers a whole long list of components used in a vast range of goods which they have decided are "parts of goods" for the purpose of this definition and should bear a 25 per cent. rate of tax, even though they are used universally in many different kinds of appliance. If that is the case, why is it that these particular items are singled out as being essential goods when others, which appear to be as essential to any sane, normal person, are singled out as being parts and bear a rate of 25 per cent.? What is the logic behind the list?

Mr. Davies

The logic is that those goods, such as nuts and bolts, are goods in general use. We cannot accept the amendment in respect of shackles and bottle screws because such items are not considered to fall within the category in Item 5.

Mr. Nott

But a sewing machine needle is surely used as a specific item. Any normal member of the public knows that a sewing machine needle is used in a sewing machine.

Mr. Davies

Having anticipated that point, I took the opportunity to ask the Customs and Excise authorities why they had included sewing machine needles among items of general use. The answer is very clear. Electric sewing machines are charged at 25 per cent. but hand sewing machines at only 8 per cent. Sewing machine needles can be used for either electric or hand sewing machines. Therefore, sewing machine needles have to be included in items of general use, although I accept that they are not in as general use as are nuts and bolts.

Mr. Nott

Where can an electric filament be used except in an electric filament light bulb?

Mr. Davies

Perhaps I should leave these matters to my hon. Friend the Financial Secretary, who is an engineer. I cannot take the matter any further I did not ask the Customs and Excise authorities about electric light filaments.

The fact is that we do not accept that shackles and bottle screws are items of general use but, on the other hand, the Customs authorities recognise that shackles and bottle screws may be used for non-marine general purposes. We accept that some specific shackles and bottle screws may be used only in larger boats which are zero rated. For that reason, because there might be an anomaly in those cases and because specific shackles and bottle screws might be used only in larger boats not subject to zero rating, discussions are taking place between the Customs and trade organisations to see whether we can introduce uniformity into the situation.

6.0 p.m.

We may still not be able to iron out all the anomalies, but the hon. Gentleman can be assured that we are looking at the matter in the hope of being able to draw a distinction between items of general use and items which might be used specifically in boats carrying 25 per cent. VAT and boats which are zero rated. At least I can go that far. For the reasons I have given, nowever, I cannot advise my hon. Friends to accept the amendment.

Mr. Nott

The Minister was kind enough to say that his hon. Friend the Financial Secretary was an engineer. May we therefore have an answer from the engineer on the Treasury Bench about where an electric filament is used except in an electric filament light bulb?

Mr. Wiggin

I think that what has escaped the Minister of State—there might have been a slightly misleading element in the wording of the amendment—is that this matter was raised not by the boating industry but by the hardware industry. Bottle screws particularly are used in fencing, and cheap galvanised bottle screws can be bought anywhere in the countryside, but because the Customs and Excise authorities knew that the same manufacturer made the most beautiful chromium-plated bottle screws for boats they said that they should all be rated at the higher rate of VAT. As my hon. Friend the Member for St. Ives (Mr. Nott) said, because of the operation of VAT the Customs and Excise has issued long lists which have often had mistakes in them.

I accept that the Minister of State has taken this particular point on board. There are a lot of others of a similar type. When the hon. Gentleman prepares the orders, which I look forward to seeing, I hope he will bear in mind seriously the points that have been made today.

Mr. Denzil Davies

I am now given to understand that these light bulbs are used as parts of film projectors, which are rated at 25 per cent.

Amendment negatived.

Mr. Pardoe

I beg to move Amendment No. 21, in page 86, leave out lines 24 to 26.

Mr. Deputy Speaker

With this we are to take the following amendments:

No. 23, in page 86, line 24, leave out 'repair or maintenance of'.

No. 26, in page 87, leave out lines 10 to 12.

No. 44, in page 88, leave out lines 20 to 22.

No. 47, in page 89, leave out lines 4 to 6.

No. 48, in page 89, leave out lines 40 to 42.

No. 50, in page 90, leave out lines 22to 24.

Mr. Pardoe

This amendment is concerned with safety, a subject which was debated at some length in relation to a similar amendment in Standing Committee. But it is also concerned with conservation, and I wish to deal briefly with both aspects.

In the Committee stage the Financial Secretary said that the cost of accepting an amendment of this kind would, he thought, be approximately £30 million. That is not a small sum of money, but if we could show that by accepting the amendment—which would reduce the rate of VAT on the servicing and the repair of a whole range of items—we were able to increase the safety of these items, particularly in the homes of people who use them, it would be £30 million well spent. I am sure the Government could hardly say that that was not the case.

The Financial Secretary tended to write off the question of safety. It was not because he did not believe in it—he quite clearly nailed his colours to that mast—but I think he was tending to say in his argument that we were dealing with articles which were of a fairly high price anyway and that, therefore, the increase from 8 per cent. to 25 per cent. on the cost of servicing particularly might not be a sufficient deterrent.

The other part of the argument was that the process of home servicing—do-it yourself servicing—was very much a continuing one and that, therefore, the increased tax would probably make very little difference to it. I do not accept that argument. I still believe that the increased tax, from 8 to 25 per cent. adding £30 million to the cost of repairs, will he a disincentive to having these items repaired properly.

A number of the items mentioned in the schedule are electrical items and clearly need regular servicing. When there is any indication that anything is wrong with them, they need to be looked at and repaired by people with professional and skilled knowledge. These items should not be left to burn in the kitchen or smoke, or whatever else may happen to them.

I should like to concentrate my remarks on a point which was made only very briefly in Standing Committee and to which the Financial Secretary did not reply at all. I hope that he will do so this time. My hon. Friend the Member for Berwick-upon-Tweed (Mr. Booth) said that if we are continually to exacerbate the present trends for putting up the costs of servicing, we carry ourselves further along the dangerous and ludicrous path to the type of throwaway society in which once an appliance is in need of repair one disposes of it and gets another."—[Official Report, Standing Committee H, 19th June, 1975 c. 263.] I think that that is absolutely true and that we have already got ourselves dangerously into that kind of society.

The point was well made in the preface to "The Apple Cart" when Shaw talked about "Breakages Ltd"—a kind of shorthand for his concept of the throwaway society. Such a society has a vested interest in ensuring that light bulbs do not last very long and that cookers are made a lot less substantially than 10 years ago, because if they last more than two or three years or can be repaired at the end of that time either somebody will be out of a job or some manufacturer will not make a substantial profit.

The Government have in effect embarked upon a tax policy which will encourage the throw-away society to go on throwing things away.. That inevitably is what this policy will do. Already the cost of getting electrical articles repaired and serviced is very high indeed because of the labour component. Therefore, to add to that cost, thereby increasing the incentive to throw an item away and get another, seems to be a pity.

I therefore hope that on grounds of safety and of industrial conservation the Government will think again about this range of amendments, in spite of the fact that they rejected this proposal in Committee.

Mr. Newton

I made a long speech in Committee in moving the amendment to which the hon. Member for Cornwall, North (Mr. Pardoe) has referred, and I therefore shall not make another long speech now, but I hope that the Financial Secretary will be prepared to take another look at this matter.

The safety aspect is not by any means the most controversial of the issues raised with the public by the Bill. Television rentals are unquestionably a great deal more controversial with the public, and we shall be coming to that question shortly. But the issue of safety has caused a great deal of concern among large numbers of responsible bodies dealing with the interests of the consumer and with safety in the home, including the electricity supply industry itself.

So far the Government have dismissed the issue altogether too lightly. There has been no convincing argument that the worries expressed by those bodies are wrong. I hope that the Government will not continue to dismiss the safety aspect as lightly as they have done in our previous discussions.

I should like once again to read a paragraph from the "Electricity Supply Digest" issued by the Electricity Council, the body appointed by Her Majesty's Government to run Britain's electricity industry. This is not a body with a simple vested interest but a nationalised industry, speaking with the full authority of the people in charge of the electricity system of this country. The paragraph reads: Lives endangered. The electricity supply industry is most concerned at the consequences this could have on safety in the home. Even the best electrical appliances can break down or develop a fault, and an unskilled attempt at repairs may endanger the lives of the owner and his family. The anxiety is shared by both sides of the House and by large numbers of consumer organisations and representative bodies throughout the country, including those set up to represent the interests of electricity consumers.

As in the case of burglar alarms, we have the situation that the Home Office spends large sums of money circulating pamphlets to every house in the country dealing with the dangers of fire in the home. On almost every page there is a warning about the risk of electricity appliances which are not properly serviced and installed, which are left with wires trailing or which are not connected properly. All these are official worries which have been expressed over a number of years. No one doubts the importance of them. Yet we have a situation in which we have a huge increase in the practice of people installing, servicing, repairing and maintaining electrical appliances which can be a source of considerable danger.

The Bill will make for difficulty in both ways. It will make it more expensive to replace old and out-of-date appliances, because for the most part they now bear the 25 per cent. rate of VAT. It will also make it more expensive to service older appliances which are kept, so that they will be less well serviced.

This cannot be a satisfactory situation. It worries the consumer organisations and the trade organisations which see it as an encouragement to the fly-by-night operator who puts a postcard in a newsagent's window offering to do electrical repairs on a moonlight basis, probably evading VAT in the process. It cannot be satisfactory, and I hope that the Financial Secretary will look at it again.

Mr. Douglas Crawford (Perth and East Perthshire)

I want briefly to support this series of amendments and to endorse what the hon. Member for Cornwall, North (Mr. Pardoe) said.

I come from a Calvinist country, and it may be thought that I represent a Calvinist party. But Scots have a reputation for thrift. Unfortunately, not having been a member of the Standing Committee, I have been unable to follow the arguments in detail. However, I underline the importance of "Waste not, want not", and I hope that the Financial Secretary will outline the logic of the schedule.

What is the logic of having a high, perhaps a punitive, rate of VAT on the installation, alteration, testing, repair or maintenance of goods when to repair or to maintain them can make those goods last longer? In the current economic difficulties of England, I should have thought that this was a consummation devoutly to be wished for.

6.15 p.m.

Mr. Beith

I share the thought expressed by the hon. Member for Braintree (Mr. Newton) that. although there are other clauses in the Bill which will arouse more excitement among the public at large, there is none which should arouse more controversy and be viewed more seriously by ordinary members of the public than this one.

Our debates in Committee did nothing to convince me that there was any logic in it. There was no basis for the Government's decision, representing as it did, I suspect, a refutation of what had been put to them by responsible bodies both inside and outside Parliament. If one could be privy to the discussions which might have taken place between the Treasury and the Departments responsible for safety in the home it would be a very interesting study. I shall be surprised if the Home Office, the Department of Prices and Consumer Protection and even perhaps the Department of Health and Social Security did not express reservations about the dangers which can be so much exacerbated by this heavy increase in the cost of repairs.

The reply of the Minister in Committee with its reference to do-it-yourself electrical work is one which most of us found extremely worrying. It is all very well to encourage people to go in for electrical maintenance in the home as a do-it-yourself activity. There are excellent evening classes, good books, and all sorts of other means by which a person can become a competent amateur electrician, but there is a world of difference between that and encouraging anyone and everyone to poke about inside the washing machine or some other electrical appliance and to try to put it right rather than paying the cost of getting a man in to look at it.

Large numbers of people will be tempted to indulge in their own servicing or to go in for dangerous amateur maintenance which is not of the serious do-it-yourself kind which a former engineer might indulge in. That kind of expertise is not available in the average home, and the average home is a dangerous place for that reason. If electrical appliances are not properly maintained and installed, they are very dangerous. The risks of electrocution and fire are very serious.

The words which we seek to delete from the schedule refer to the installation, alteration, testing, repair or maintenance of goods. Installation is especially important. There are a number of electrical appliances which, if wrongly installed, can immediately give rise to difficulties and become fire risks. The more complicated the instructions get, especially international instructions, the more difficult it is for anyone to carry out installation properly. Alteration, which many people do in order to get the appliance precisely in the form that they want, should not be done without qualified help unless the person proposing to do it has the kind of expertise which ordinary people do not have. Testing, repair and maintenance are the most important of all. Electrical appliances should be maintained regularly, and inspected when they give rise to trouble, by someone who knows how they work and the dangers involved. That will become very unpopular and difficult if this tax increase is allowed.

All this spells danger, especially to elderly people who are less familiar with and more frightened by these appliances. It spells danger to women living on their own and who have not had the opportunity in their work to learn about electrical appliances. I need hardly stress the danger to children in a house where appliances are not installed and working properly.

The Government's proposal is discouraging in two ways. There is the direct discouragement resulting from an immediate increase in charges. In Committee we had evidence before us about the already high rate of the basic charge of getting in a man to look at a faulty appliance. The evidence was incontrovertible. It now costs as much as £4 or £5 to get a man to a house, whether or not there is anything wrong, and to put up the cost by a further £1 adds drastically to the discouragement of regular routine maintenance.

Then there is the indirect discouragement. If we make people less likely to carry out maintenance, trader after trader will find that he cannot carry on a proper servicing side to his operation. This trend is more apparent than the Minister thinks. Many traders, especially in the face of competition from discount warehouses, find it very difficult, as it is, to maintain a satisfactory service. Labour charges are a high element. Labour is difficult to get, and the economics of servicing are very much on a knife edge. That knife edge will be affected by this heavy increase in the costs involved.

I cannot see that the Government have any basis for seeking to maintain this feature of their proposals, and the arguments which they have advanced in defence of other features of this Bill cut directly across what they are trying to do here. Earlier, the hon. Member for Gateshead, West (Mr. Horam) tried to put forward an argument, which has been rejected in many other contexts by the Treasury Bench, to distinguish between luxuries and non-luxuries and essentials and non-essentials. Any attempt to apply that kind of logic to this provision makes nonsense. This is a matter that we should encourage, not discourage. There can be no extension of the Government's philosophy, if philosophy it be, to defend what will be the effect of this provision.

If there were any Government supporters here to ask I would invite them to consider what some of their hon. Friends said publicly earlier. The hon. Member for Chester-le-Street (Mr. Radice) signed the original amendment which we discussed in Committee, concerning the safety of electrical equipment. It is a sad day when there is neither the interest in nor the concern for danger in the home that will enable us to ensure that, by a united feeling throughout the House, the amendment is carried and these features are no longer part of the Bill.

Mr. Robert Sheldon

I listened with interest to the further contributions—further to those we heard in Committee —with great interest. They reflected much of the concern that was then expressed.

I shall deal with the points that have been raised in the order in which they were taken up. Perhaps I might refer first to the hon. Member for Cornwall, North (Mr. Pardoe), who was echoed by the hon. Member for Berwick-upon-Tweed (Mr. Beith) and the hon. Member for Braintree (Mr. Newton), who were concerned about the dangers of the unskilled repairer and the problems he might cause. To sum up their position, they wish to see regular servicing of electrical appliances in the manner that was possible in the past.

The hon. Member for Berwick-upon-Tweed knows very well, because he used this argument in at least one context in Committee, that for a number of appliances the kind of servicing of electrical appliances that used to exist years ago has diminished almost to vanishing point. There are many towns where for certain kinds of equipment there is no regular servicing. The reason is that the cost of an individual visit by a service man with his bag of tools and his oil can is prohibitive, and travelling costs and parking difficulties have increased to such a degree that such a service has ceased to be economic.

The type of service that was possible for a whole range of appliances has rapidly diminished, and it has tended to be replaced by the type of repair service that we now know. I think that in a number of speeches there has been a lack of distinction between those two points. We are more and more concerned with the possibility of repair rather than with servicing. The hon. Member for Berwick-upon-Tweed adduced some interesting figures about the cost of each visit. He went into the matter in some detail, and I give him full credit for the information he put before the Committee on this matter.

There have been attempts by many manufacturers—not as many as one would wish—to improve their reliability so that the cost of servicing and repairing diminishes. Although there are complaints from time to time, my impression is that, at least over a wide range of electrical appliances, reliability has improved.

The difficulty about finding grounds for exempting servicing, quite apart from the financial aspect which I shall come to later, is that although the hon. Member for Cornwall, North made an emotive plea against the throw-away society, often the most convenient method of approaching the problem is not to throw the appliance away but to exchange a defective part which can be renewed or repaired in the factory rather than to make adjustments in the home. This is an increasing facility and one that most people would welcome.

When we talk about the sale of spare parts, we must concede that the rate of VAT must be the same as the rate for the whole appliance, otherwise we would find ourselves reverting to the nonsense whereby kits of parts used to be at different rates of tax from the whole appliance. To avoid that anomaly, both must be rated at the same rate of tax. The replacement of units rather than actual repair has increased not only with motor cars but with domestic appliances.

I turn to the dangers inherent in unskilled repairs. I fully accept the point made by the hon. Member for Perth and East Perthshire (Mr. Crawford) and the hon. Member for Berwick-upon-Tweed. I should like to be as neutral as possible and I hope that I shall not be quoted as giving endorsement to that view. However, in a Sunday paper which has a readership, as far as I can estimate, not far short of 10 per cent. of the population, there has been a series of articles on how to rewire the home. It is not for me to say whether that is a good series. I only draw attention to the level of sophistication that at least one Sunday newspaper believes is possessed by a considerable proportion of the population. I hope that those concerned take full account of the problems involved.

I accept that servicing is declining. We are talking in the main about fairly expensive articles, but the extra cost of servicing such articles has to be seen in that light.

I fully understand the concern that is expressed about safety. My view of society suggests that the kind of experiments which are made are likely to be carried out with greater regard to safety than perhaps used to be the case. That is only a personal observation but I have not seen any direct evidence to controvert it.

However, the financial side must be considered carefully. We are talking about £30 million, which is a considerable sum, and an increase in the number of anomalies of a kind that it would be almost impossible to defend in practice when the operation of the tax is under way during the general course of events. For these reasons I cannot ask my right hon. and hon. Friends to accept the amendment.

Mr. Nott

During this short debate I think there has been a maximum of four Labour Members in the House. This is quite astonishing when we consider that we are debating a 25 per cent. tax on the future repairs of domestic appliances which go into virtually every home in the country. It may be that Labour back-benchers have not taken the trouble to find out the subject of our debate. I think that it would have been beyond belief if two years ago someone had said that the incoming Labour Government would single out the repair and maintenance of domestic, appliances—washing machines, refrigerators and all the other essential appliances that are used in every home—and apply to them a 25 per cent. rate of VAT.

Virtually every Government publication warns people against accidents and fires in the home, yet the Treasury come before us with this measure and excuse it because it is said that it would create anomalies if there were to be a 25 per cent. rate on a domestic appliance and a basic 8 per cent. rate on the repair of that appliance.

6.30 p.m.

The Financial Secretary said that the kind of servicing that we used to know has disappeared to vanishing point. What exactly does that mean?—[Interruption.] The hon. Gentleman may have qualified it, but even when qualified what does that statement mean? Does it mean that when a housewife has a faulty refrigerator she must discard it and buy another? It is not true that the kind of servicing, to use the hon. Gentleman's words, which we used to know has disappeared. At some time or other every household in the country has called in someone to repair a domestic appliance as a matter of course.

Mr. Robert Sheldon

The hon. Gentleman is not drawing the distinction which I drew between servicing and repair. Surely he understands the distinction between them.

Mr. Nott

The parts used in the repair of domestic appliances also bear the higer rate of 25 per cent. The Financial Secretary went into a long rigmarole about sending away to a factory for a part. Presumably that part, when it comes back, needs to be put into the domestic appliance by a fitter and will bear the 25 per cent. rate when it is put in. Therefore, I am unable to understand what the hon. Gentleman was saying.

We must concede that, with the absurdities that this higher rate throws up, there would be a great loss of tax if the servicing and repair of appliances were not to bear the same rate as the appliances themselves. However, that does not mean that we must concede the principle of a 25 per cent. rate on repairs. Surely, when the Government were considering whether to bring in a higher rate of tax they should have taken this matter into account.

We come back to the claim that we have made since the outset of these debates—that the Government could have raised the same amount of revenue with far less trouble if they had sought to bring forward a 10 per cent. rate of VAT

right across the board. That would have been entirely acceptable to the country. People would have understood and accepted a 10 per cent. rate. It was the rate they had until the Chancellor, just before the General Election, reduced it. It was the reduction of the rate from 10 per cent. to 8 per cent. which enabled the Chancellor of the Exchequer to go on television during the election and claim that inflation was down to a rate of 8½ per cent. It was that very cut in VAT from 10 per cent. to 8 per cent. which enabled him to make that scandalous claim.

The Government have now come back with a rate not of 10 per cent., which we would have accepted, but with a proposal that repairs and maintenance of domestic appliances should bear an extra tax impost of 25 per cent. We regard this as totally unacceptable. It shows the utter nonsense of this higher rate of tax. I ask my right hon. and hon. Friends to divide in support of the amendment.

Question put, That the amendment be made:—

The House divided: Ayes 131, Noes 150.

Division No. 286.] AYES [6.33 p.m.
Arnold, Tom Gower, Sir Raymond (Barry) Mitchell, David (Basingstoke)
Bain, Mrs Margaret Grant, Anthony (Harrow C) Moate, Roger
Beith, A. J. Grieve, Percy Monro, Hector
Bennett, Sir Frederic (Torbay) Griffiths, Eldon More, Jasper (Ludlow)
Benyon, W. Grimond, Rt Hon J. Morgan, Geraint
Berry, Hon Anthony Hamilton, Michael (Salisbury) Morrison, Charles (Devizes)
Biffen, John Hannam, John Morrison, Hon Peter (Chester)
Boscawen, Hon Robert Harvie Anderson, Rt Hon Miss Nelson, Anthony
Bottomley, Peter Havers, Sir Michael Neubert, Michael
Brotherton, Michael Hawkins, Paul Newton, Tony
Bryan, Sir Paul Higgins, Terence L. Nott, John
Bulmer, Esmond Howe, Rt Hon Sir Geoffrey Page, Rt Hon R. Graham (Crosby)
Carlisle, Mark Howell, David (Guildford) Parkinson, Cecil
Carr, Rt Hon Robert Irvine, Bryant Godman (Rye) Penhallgon, David
Chalker, Mrs Lynda Jenkin, Rt Hon P. (Wanst'd&W'df'd) Percival, Ian
Clark, William (Croydon S) Kershaw, Anthony Peyton, Rt Hon John
Cockcrott, John King, Evelyn (South Dorset) Pym, Rt Hon Francis
Cope, John Kirk, Peter Rathbone, Tim
Cordle, John H. Knight, Mrs Jill Rawlinson, Rt Hon Sir Peter
Corrie, John Knox, David Rees-Davies, W. R.
Costain, A. P. Langford-Holt, Sir John Reid, George
Crawford, Douglas Latham, Michael (Melton) Ridley, Hon Nicholas
Crowder, F. P. Lawrence, Ivan Rippon, Rt Hon Geoffrey
Dean, Paul (N Somerset) Lawson, Nigel Ross, Stephen (Isle of Wight)
Drayson, Burnaby Le Merchant, Spencer Rossi, Hugh (Hornsey)
Durant, Tony Lewis, Kenneth (Rutland) Sainsbury, Tim
Dykes, Hugh Luce, Richard Shaw, Giles (Pudsey)
Edwards, Nicholas (Pembroke) MacCormick, Iain Shelton, William (Streatham)
Emery, Peter McCrindle, Robert Sinclair, Sir George
Eyre, Reginald Macfarlane, Neil Smith, Dudley (Warwick)
Fairgrieve, Russell MacGregor, John Speed, Keith
Fell, Anthony Marshall, Michael (Arundel) Spicer, Jim (W Dorset)
Fisher, Sir Nigel Marten, Neil Stanbrook, Ivor
Fletcher-Cooke, Charles Mather, Carol Stewart, Donald (Western Isles)
Fraser, Rt Hon H. (Stafford & St) Maudling, Rt Hon Reginald Stewart, Ian (Hitchin)
Fry, Peter Maxwell-Hyslop, Robin Stradling Thomas, J.
Gardiner, George (Reigate) Mayhew, Patrick Tebbit, Norman
Goodlad, Alastair Meyer, Sir Anthony Temple-Morris, Peter
Gorst, John Miller, Hal (Bromsgrove) Thompson, George
Townsend, Cyril D. Warren, Kenneth Wood, Rt Hon Richard
Trotter, Neville Watt, Hamish Young, Sir G. (Ealing, Acton)
Tugendhat, Christopher Weatherill, Bernard
Wakeham, John Wiggin, Jerry TELLERS FOR THE AYES:
Walker, Rt Hon P. (Worcester) Wilson, Gordon (Dundee E) Mr. John Pardoe and
Wall, Patrick Winterton, Nicholas Mr. Cyril Smith.
Anderson, Donald Hamilton, James (Bothwell) Richardson, Miss Jo
Atkins, Ronald (Preston N) Hamilton, W. W. (Central Fife) Roberts, Gwilym (Cannock)
Atkinson, Norman Hardy, Peter Roderick, Caerwyn
Barnett, Guy (Greenwich) Harper, Joseph Rodgers, George (Chorley)
Barnett, Rt Hon Joel (Heywood) Harrison, Walter (Wakefield) Rooker, J. W.
Bates, Alf Hatton, Frank Roper, John
Boardman, H. Hayman, Mrs Helene Ryman, John
Booth, Albert Horam, John Sandelson, Neville
Bottomley, Rt Hon Arthur Hughes, Rt Hon C. (Anglesey) Sheldon, Robert (Ashton-u-Lyne)
Bradley, Tom Hughes, Mark (Durham) Short, Rt Hon E. (Newcastle C)
Brown, Hugh D. (Provan) Irving, Rt Hon S. (Dartford) Short, Mrs Renée (Woly NE)
Butler, Mrs Joyce (Wood Green) Jackson, Miss Margaret (Lincoln) Silkin, Rt Hon John (Deptford)
Callaghan, Jim (Middleton & P) Janner, Greville Silkin, Rt Hon S. C. (Dulwich)
Campbell, Ian Jay, Rt Hon Douglas Silverman, Julius
Canavan, Dennis Jenkins, Hugh (Putney) Skinner, Dennis
Cartwright, John Jenkins, Rt Hon Roy (Stechford) Small, William
Castle, Rt Hon Barbara Johnson, James (Hull West) Smith, John (N Lanarkshire)
Clemitson, Ivor Jones, Dan (Burnley) Spearing, Nigel
Cocks, Michael (Bristol S) Kaufman, Gerald Spriggs, Leslie
Cohen, Stanley Kelley, Richard Stallard, A. W.
Corbett, Robin Kilroy-Silk, Robert Stanbrook, Ivor
Cox, Thomas (Tooting) Lamborn, Harry Stewart, Rt Hon M. (Fulham)
Craigen, J. M. (Maryhill) Lewis, Arthur (Newham N) Summerskill, Hon Dr Shirley
Cryer, Bob Litterick, Tom Taylor, Mrs Ann (Bolton W)
Cunningham, G. (Islington S) Luard, Evan Thomas, Mike (Newcastle E)
Cunningham, Dr J. (Whiteh) Lyons, Edward (Bradford W) Thomas, Ron (Bristol NW)
Dalyell, Tarn McCusker, H. Tierney, Sydney
Davidson, Arthur MacFarqunar, Roderick Tinn, James
Davies, Denzil (Llanelli) Mackenzie, Gregor Tuck, Raphael
Deakins, Eric McMillan, Tom (Glasgow C) Urwin, T. W.
Dormand, J. D. Madden, Max Walden, Briar (B'ham, L'dyw'd)
Dunwoody, Mrs Gwyneth Magee, Bryan Walker, Harold (Doncaster)
Eadie, Alex Marks, Kenneth Walker, Terry (Kingswood)
Edge, Geoff Meacher, Michael Ward, Michael
Ellis, John (Brigg & Scun) Mellish, Rt Hon Robert Watkins, David
English, Michael Mikardo, Ian Watkinson, John
Evans, Fred (Caerphilly) Miller, Dr M. S. (E Kilbride) Weitzman, David
Evans, Ioan (Aberdare) Molloy, William Wellbeloved, James
Evans, John (Newton) Moonman, Eric White, Frank R. (Bury)
Fernyhough, Rt Hon E. Morris, Alfred (Wythenshawe) Whitehead, Phillip
Flannery, Martin Mulley, Rt Hon Frederick Williams, Alan (Swansea W)
Foot, Rt Hon Michael Newens, Stanley Williams, Rt Hon Shirley (Hertford)
Forrester, John Noble, Mike Williams, W. T. (Warrington)
Fowler, Gerald (The Wrekin) Ogden, Eric Wilson, Alexander (Hamilton)
Freeson, Reginald Ovenden, John Wise, Mrs Audrey
Garrett, John (Norwich S) Palmer, Arthur Woodall, Alec
George, Bruce Pavitt, Laurie Wrigglesworth, Ian
Gilbert, Dr John Powell, Rt Hon J. Enoch
Ginsburg, David Prentice, Rt Hon Reg TELLERS FOR THE NOES:
Gould, Bryan Prescott, John Mr. James A. Dunn and
Graham, Ted Radice, Giles Mr. David Stoddart.
Grocott, Bruce

Question accordingly negatived.

Mr. Wiggin

I beg to move Amendment No. 25, in page 86, line 40, at end to insert: 'but excluding radio equipment designed for communication or navigational purposes primarily on radio frequencies designated for maritime or aircraft use'. The aviation interests are grateful for the concessions announced by the Government in their statement yesterday. This is common sense. I am sorry that those interests should have had to fight for this and to experience worry and concern for a period over this matter. I believe that the action taken by the Government is quite proper. The only problem that arises is about boats and boat radios, where the concession is limited to those radios that are on fixed distress frequencies.

I am sure that the hon. Gentleman who is to reply will appreciate that a majority of radio sets used in boats for communication purposes are of a specialist nature. They are frequently on the very high frequency range for voice communication operating under licence from the telecommunication authority of the country concerned, in our case the Post Office. Of a set number of frequencies, sometimes 12 or 16, and in expensive radio sets very large numbers of frequencies, there are always one or two that are fixed on distress frequences, the others being for perfectly ordinary communication purposes.

6.45 p.m.

It strikes us on this side of the House that common sense would say that the ability to communicate with a local harbour authority, with other boats or the Coastguard, would lead to a vast improvement in safety, and that the use of the fixed distress channels should be confined to real, full-scale emergencies. And how often these emergencies can and should be avoided by the use of other frequencies that might be available.

The Financial Secretary may reply by saying that in this respect the difference between aircraft and boats is that aircraft are required statutorily to carry this equipment whereas boats are not; but the radio sets which are used in boats are licensed by the Post Office and manufactured to a certain standard. They are not the kind of thing that can be bought off the shelf in any shop and carried home at the end of a day's sailing. They are specifically and solely used in navigation and for the safety of vessels.

I hope, therefore, that before the order is printed the Minister may see fit to look again at this point. It would scarcely mean any real loss of revenue, but I believe it would enhance safety at sea, and lead to a reduction in fatalities and accidents. Safety at sea is something we shall be pursuing in a later amendment. Since the Treasury has so clearly accepted the basic principle of our argument in the way it has treated radios for aeroplanes, I hope it will see fit to give similar concessions across the board for boats.

Mr. Monro

I want to add but a very few words to those of my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin), who has put his amendment with such clarity. I agree that the concessions made by the Government for aircraft are certainly very beneficial, but the Government are only making a concession about something that should not have been there in the first place.

I would emphasise the importance of safety at sea in relation to marine trans- mitters and receivers. I am sure the Financial Secretary would agree that to try to prevent disasters and accidents it is important, if possible, to receive meteorological forecasts, gale warnings, and even advice from the Coastguard or others. Having a receiver on board may well go a long way towards preventing even the launching of a lifeboat, let alone the worst eventuality.

The concession that would be made by this amendment, and the inclusion of transmitters and receivers in these provisions, would have only very small financial results for the revenue. This is something which the hon. Gentleman should look at again, and I add my support for this amendment.

Mr. Robert Sheldon

The hon. Members for Weston-super-Mare (Mr. Wiggin) and Dumfries (Mr Monro) welcomed the announcement that an order is to be made with effect from 11th August that radio-communications equipment and radio-navigational aids of the kind used solely on aircraft, provided they meet the approved standards for such equipment, which are laid down by the Civil Aviation Authority, as well as marine radio equipment operating solely on any of, he recognised maritime distress frequencies, will be relieved of the extra tax. I thank them for their comments on that.

I am now asked to go further. The hon. Member for Weston-super-Mare was right about the main reason why the Government have not found it possible to accept the amendment—on the ground of a comparison between marine and aircraft use of radio equipment. As he said, the main reason is that it is mandatory for much of the radio equipment to be in aircraft. It would be wrong if we insisted on certain equipment being carried and then taxed it at 25 per cent. That is a justifiable reason for the concession we propose.

The same argument does not apply to safety at sea and the problems associated with it. Any one who knows the hazards of voyaging at sea is aware of the great importance of safety, though the voyaging be undertaken for sport or amusement, but at least those who can afford to indulge in it would be unlikely to be deterred by the modest increase in cost resulting from the increase in VAT. However, I do not base the argument on that. I merely mention it to show the reality of the situation.

The radio equipment used in boats is not usually of such a highly specialised nature as that used in aircraft. Many other items of equipment are used for recreational purposes as well. That is right, because that is in accordance with the requirements of those who engage in such leisure activities, but it means that one cannot establish a borderline, and, therefore, a concession has not been possible. However, I hope that our appreciation of the problems to which the hon. Gentleman referred in Committee will be understood and welcomed by the House.

Mr. Wiggin

I find the Minister's arguments increasingly hard to understand, although I do not wish to belittle the further concession. The hon. Gentleman has rightly agreed that compasses and echo-sounders shall bear the lower rate. They are aids to safety.

The definition of radio sets could be left to Customs and Excise. My hon. Friend the Member for Dumfries (Mr. Monro) and I are not prepared to squabble across the Floor of the House about the precise definition. If the Minister removed the word "distress" from his specification, he would largely meet our point. Perhaps Customs and Excise could specify that the sets should be fixed to the boats so that they could not be taken home and used for entertainment purposes, though a 155-channel VHF set is scarcely likely to be used for entertainment purposes.

The Minister should again listen carefully to the detailed arguments of the industry. In the hope that he is prepared to do so, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. MacGregor

I beg to move Amendment No. 30, in page 87, line 25, at end insert: '(4A) On and after 1st August 1975 item 1 shall not include any television set which was, and so long as it remains, supplied under a contract of hire entered into prior to 16th April 1975'.

Mr. Speaker

With this amendment we are to discuss the following amendments:

No. 27, in page 87, line 17, at end insert: 'but do not include any television sets supplied on hire pursuant to a contract the period of which began before 16th April 1975'.

No. 28, in page 87, line 19, at end insert: 'but do not include any television sets supplied on hire'.

No. 29, in page 87, line 19, at end insert: 'but do not include any television sets supplied on hire for a period beginning before 1st May 1975'.

Mr. MacGregor

We had a brief debate on the television rental situation late one night on the Floor of the House in Committee, and then had extensive debates in Standing Committee. It is right to make one last attempt to make the Government see the justice of our case. There is on the Order Paper an Early Day Motion in the name of well over 70 hon. Members, including many Labour Members. Most of those Members were unable to take part in the Standing Committee debates. This debate gives them an opportunity to make their feelings on the issue felt.

It is inevitable that we shall rehearse some of the arguments advanced in Standing Committee, where we dealt with television sets and rentals as a whole and contracts in force before 1st May. In this group of amendments we return to the one point of existing contracts. We have now changed 1st May to 16th April, for a reason that I shall explain.

I prefer Amendment No. 30, because it refers to an 8 per cent. rate being applied to television rentals On and after 1st August 1975". The reason is to prevent a large number of repayments for the period from 1st May, complicating the life of both the Customs and Excise and the retail industry.

When the amendment was tabled I did not appreciate that the Government would make their new orders, on the concessions that they are giving, apply from 11th August. If we also had had the date of 11th August we should at least have been consistent, but our intention is the same as the Government's.

We have changed to 16th April to deal with the point that the Budget Statement was made on 15th April, and people who had contracts before then could not have known that the Government were about to impose a 25 per cent. VAT on those contracts. The first reason for pressing the amendment is the unfairness to millions of people who had contracts before 16th April, and the hardship to some.

We are not talking about the better-off. They were able to buy their television sets before the Budget Statement, or in the period between the statement and 1st May, or they could have rented for a year or more ahead at the 8 per cent. VAT instead of the 25 per cent. that everyone else is having to suffer. In this debate we are concerned mainly with the poorer sections of the community.

Like practically every other hon. Member I have received shoals of letters from all over the country from people who have little discretionary spending left, for some of whom the television is a lifeline and for many of whom it is their only pleasure. I think particularly of pensioners. A number of those letters were mentioned in Standing Committee. They told genuine stories of pensioners who had, alas, to conclude that the only way to eke out their income was to give up their television because of the increased rental.

7.0 p.m.

The Government's new economic policy had not been announced when we were having our Standing Committee debates. We now face in the year ahead an absolute ceiling on income increases of £6 a week, which for many people means £4 a week net, with substantial increases in the cost of living. Therefore, this extra burden on the television rental is serious. I recognise that in the case of colour television it is between £1.20 and £1.45 a month and in the case of black and white television it is less than 50p. Nevertheless to the many people who have written to us saying that they are having to give up their television rentals and the pleasure of television that is a significant sum.

It has been recognised as being significant in other countries. On 12th June, in a Written Answer, the then Financial Secretary gave the rate of VAT which applies to rental television sets in most of the EEC countries. In no country is the rate anywhere near 25 per cent. The highest is in France where it is 20 per cent. In Belgium it is 18 per cent., in Denmark 15 per cent., and so on down to Ireland where the rate is 6.75 per cent.

The Irish position is particularly interesting. Perhaps I may have the Financial Secretary's attention for a moment, because this is a new point which has not been put in any of the debates so far. I understand that in Ireland there is a rather different although complex arrangement for dealing with rentals for television sets. The purpose of this was to keep down VAT for the millions of people who did not have substantial incomes and who had always taken out rentals. I know that the industry is still divided on the merits or otherwise, as I imagine the Government will be, of the Irish system. It is for that reason among others that we have not sought to table an amendment at this stage to adopt the Irish system. However, the intention of the Irish system seems a sensible one and I hope that the Financial Secretary will look at it with the industry.

There are 12 million people in this country who have existing rentals and it is the aspect of unfairness that is the reason for the amendment. There is an element of retrospection in what the Chancellor has done in seeking a variation of existing contracts. In many cases contracts have run for five, six, seven, or eight years, and the people who took out those contracts understood at the time that there would be a steady decline year by year in the rentals they would have to pay. In many cases they have found that the rentals have increased. One of the main reasons for the increase has been the steep rise in the rate of VAT, from 8 per cent. to 25 per cent. Thousands of people simply do not understand why suddenly their weekly rental has risen in this way. They took out the contract as one would take out a contract to purchase a television set. At a much later stage suddenly to impose fresh VAT is discriminatory and retrospective. It certainly looks discriminatory as against people who were able to buy their television sets.

There is another aspect of unfairness in hitting renters more than purchasers. There is one element in the rental charge which does not apply in the case of purchasers, namely, the cost of the capital or the interest charged on the rental. The 25 per cent. VAT is being put not only on the original purchase price of the set which the rental company has to bear, on the profit of the rental company and on the maintenance and service charges, which are included in the weekly rental charges—all of which applies to sales—but in addition it is put on the interest charge. If someone were fortunate enough to buy a television set but financed it through a bank loan, which is in many ways the equivalent of a rental, he would find that he did not have the 25 per cent. applied to the interest on the bank loan. Similarly, if he did it through hire purchase the 25 per cent. would not be applied to the hire-purchase charge. Therefore, it is only on interest charged in the case of rentals that the new 25 per cent. rate is applied.

In Belgium an attempt has been made to recognise this precise point because in that country a 25 per cent. rate of VAT on sales of television sets is imposed but on rentals the rate is 18 per cent. I understand that this has been done precisely to take into account the interest element.

In reply to this argument about the unfairness towards rentals, in Committee the Financial Secretary said that he could not make an exception of television rentals otherwise he would have to extend that exception elsewhere and there would then be, in some sense, an incentive to people not to buy other goods but to rent them. That is not a powerful argument, because we know perfectly well that the concession applies only to television sets and not to other forms of rental. I do not want to press this point, because one of the difficulties of following the Belgium precedent would be to complicate the VAT system even more by introducing yet another rate, and that is something I wish to avoid. However, it points out the additional unfairness of applying the 25 per cent. rate of VAT to existing rentals which were previously incurring tine 8 per cent. rate.

My final argument does not relate solely to existing rentals, although the extra 25 per cent. on existing rentals has had a major impact. I want to deal with the effect on the television industry. It goes without saying that the increase to 25 per cent. will have a significant effect on the turnover of retailers who concen- trate mainly on television and radio and who have large rental businesses. There are certainly fears of big redundancies on the retail side.

I want to concentrate on the manufacturers of television sets because there the implication is not quite so clear. The rental companies are by far the biggest customers of the manufacturers of television sets. At this time of year—the summer season is normally the off-peak season—there is a custom for retailers, particularly rental companies, to take sets from manufacturers through forward-buying schemes. It has become clear this summer that these forward-buying schemes are not taking place. One reason for this is without doubt that more sets are being taken back by the rental companies and rental retailers than are going out to new customers. This means that there are many sets, especially colour television sets, on the shelves. Naturally the rental companies are considerably reducing their orders to the manufacturers. This is leaving the manufacturers with large stocks which they will have to finance at high interest charges. In the last three months the reduction in the number of orders, for colour television sets place with manufacturers—which they attribute to the 25 per cent. rate of VAT —has been about £130,000.

In the electronics industry as a whole, of which television is a major part, there have in recent months been 11,000 redundancies. It is feared that this figure will rise to 20,000 by the end of the year. In many parts of the country where these manufacturers are concentrated—for example, South Wales, Norfolk, Bradford and other areas—and from which I have received representations, these redundancies are being forecast; they may even have begun. This major employment effect can be traced back to television rentals.

I am also worried about the future of the industry. It has been a matter of regret to me that such a large proportion of our home sales of television sets has been of overseas products, either as complete sets or as components. I fear that when the next boom comes—if there is one—there will be a more significant import factor in sales of television sets, especially colour sets.

The home industry is particularly concerned about this. The loss of the home base which it is now experiencing will not be compensated by the exports which can be achieved at present. Therefore it is afraid that when the next large increase in television sales comes, it will not be in a position to take as much advantage of it as overseas suppliers will be able to do. The Japanese have a vast industry and are able to switch markets more freely than our own much smaller home industry. I am told that one major manufacturer who invested £17 million in new technology to manufacture envelopes for cathode ray tubes to fend off Japanese imports is now accepting that that investment will have to be written off. Regrettably, therefore, because of the constant chopping and changing of tax rates, we shall find that next time round, when the big increase in sales comes, yet another home industry will not be in a position to compete with overseas competitors even in our own home market.

Those are the many powerful reasons, not all of which have been advanced previously, which lead me to believe that the amendment is desirable. I hope that even at this late stage the government can give us some comfort in this matter.

Mr. Robert Kilroy-Silk (Ormskirk)

I find myself in the invidious and somewhat uncomfortable position of having to endorse virtually everything that was said by the hon. Member for Norfolk, South (Mr. MacGregor). I rise to speak in support of Amendment No. 28, but with great regret, given that it is in the names of hon. Members of the Liberal Party, none of whom is present in the Chamber while this series of amendments is being debated. They have expressed their concern about this proposal, as have hon. Members on both sides of the House, yet their concern for people who rent television sets seems to go no further than putting down publicity-seeking motions. Certainly none of them is present to press their case tonight.

Nor can I support the official Conservative Opposition's amendment, which would seem to divide the country into two nations, in the sense that it would mean—although I am open to correction —that those who had entered into certain rental commitments by a certain date would be exempt and those entering into rental commitments afterwards would not be exempt. That would be socially divisive and unnecessary. I should like, therefore, to support Amendment No. 28, in the names of Liberal Members.

It is with great regret that I find myself having to make this speech. I had hoped that, after the debate on Second Reading, the Government would have considered the various heartfelt pleas made on both sides of the House and taken them into account in Committee. The tax on rentals will hit hardest those on the lowest incomes and particularly the poorest families, the families whom, I understood, I was sent here to represent and to look after.

These are not people who can afford to buy their television sets outright and who would, therefore, in many circumstances, as the law stands as a result of the Government's proposals in this measure, have evaded the increase in VAT from 8 per cent. to 25 per cent. Again, many of these people are not able to pay their television rental payments well in advance. I would accept that many people who rent televisions are not of the poorest categories and not on very low incomes. Nevertheless, many were able to rush in after the announcement and pay instalments for six months in advance and so avoid the new penalty of the higher rate of tax. That option was not open to the vast majority of my constituents, who are on low incomes.

Again we seem to have a situation in which, for one reason or another, the Government hit our people hardest by their measures. The way in which the Chancellor has consistently shown a lack of sensitivity to the real problems of working-class families and their pressures and difficulties in meeting taxes is extraordinary.

This is not merely a question of working-class families who are in employment who are hit by the higher rate of VAT. It also hits the pensioners, the housebound and the disabled, for many of whom the television is in a real sense their only communication with the outside world, and who rely upon it for companionship because they have little else of companionship and company to which to turn. To enact, as is proposed, a much higher, punitive rate of tax on their single and only pleasure seems to be unnecessary and regrettable.

However, there is also a much wider aspect to this matter than simply the effect it has upon so many members of our community, particularly those on low incomes. There is also the serious consequence for employment prospects. This was pointed out by the hon. Member for Norfolk, South. In the constituency adjoining mine, represented by my hon. Friend the Member for St. Helen's (Mr. Spriggs), there is a threat currently hanging over the heads of 750 men who work at the Ravenshead glass factory, which is owned by Pilkingtons and is engaged in the manufacture of television tubes. Those men are to be made redundant next week because of the effects of Japanese competition, because they can no longer compete in that commodity.

7.15 p.m.

That is a separate problem, but it seems insensitive, to say the least, that the Government should then come along and, as it were, add to their problems by metaphorically kicking them in the teeth and saying "Yes, all right, you are suffering from foreign competition, we know, but we shall add to that by further increasing the problems for your industry and reducing the potential demand for television sets and tubes by increasing the rate of tax from 8 per cent. to 25 per cent." That will have a spin-off not merely in the industry concerned with the manufacture of televisions and components but throughout the economy as a whole.

Again, as the hon. Member for Norfolk, South pointed out, many of the people who rent television sets have already paid purchase tax on those televisions and now they are to be taxed again by a double and almost retrospective tax, which seems to be insensitive and unnecessary.

I do not object in principle to the Government raising extra revenue by means of taxation or by taxing certain commodities. I know that the Chancellor does not regard television as a luxury, and it is not for most people, but television sets are essential for certain members of the community, such as the disabled, the housebound and pensioners. Therefore, I wanted to speak on this issue. Having done so I should like to say, with deep regret, that I cannot find myself able to support my Government in the Lobby on this issue.

Mr. Sydney Tierney (Birmingham, Yardley)

I apologise for being absent from the Chamber at the beginning of the debate. I was confined in a Standing Committee.

Many of my hon. Friends have expressed their unhappiness about the clause. This was registered in an Early-Day Motion, which carried a good number of names of Labour Members. I am sure that most Members of Parliament have had correspondence and representations regarding the effect of the clause. I want to speak specifically to Amendment No. 30.

Under the clause, all television rental payments, whether or not the agreement was entered into or the set installed before 1st May 1975, will attract the new 25 per cent. VAT rate. There are 12 million television renters in Britain. A great proportion of them would have no television if they could not hire a set in this way. A great number of these sets are hired by retired people and those others mentioned by my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk). This much higher burden of taxation discriminates against them and is unfair compared with those who choose to purchase and can afford to purchase a set or acquire a set by hire purchase. It hits particularly the less well-to-do.

The effect of the clause is inequitable as regards those who were renters on and prior to 30th April 1975. I give a simple, straightforward, factual example. Those who bought a television set on 30th April paid 8 per cent. VAT and not 25 per cent. Those who rented a set on 30th April, the same day, and agreed by contract to pay 8 per cent. VAT now have to pay 25 per cent. VAT.

My main objection to the clause lies in the inequality of treatment between purchasers and renters. Many rental agreements have been in existence for some years and a considerable proportion of the sets have already attracted purchase tax. The rental paid by television subscribers has three elements—the purchase of the set, interest on finance for the purchase, and servicing. I do not think anybody would argue that the servicing element should not attract VAT because other forms of maintenance, like car servicing, attract the tax. However, that does not justify the remaining elements of the rental being taxed at the higher rate on existing agreements. This must be the first case of payments of interest attracting VAT.

I do not suppose there has ever been a Finance Bill that did not ride roughshod over some section of the community, and one appreciates the pressures on the Treasury to put into effect these measures, and I understand why this is done. I understand Ministers' desire to get the Bill through more or less intact. It may be said that the increase is not high. Figures of 8p a week for black and white sets and 25p a week for colour televisions have been quoted, but this tax is not like the tax on beer or cigarettes. People cannot cut down their consumption and save money. Contracts are made, and payments made now or in the future are already contracted in full. People cannot cut their suits according to their cloth. If they cannot afford the increased payments, their only option is to hand back the set to the dealer. I know a number of hon. Members have received letters from constituents, and other letters have been passed on by the television rentals companies, from people who have had to do just that.

It is inequitable that the 25 per cent. rate should apply to all contracts before 16th April. I received from a constituent a letter that was reprinted in the local paper under the heading: "We have been fiddled." I agree with her.

Mr. J. Enoch Powell (Down, South)

I dare say that the few observations I propose to make will in due course be made from the Dispatch Box by the Financial Secretary. I shall be disappointed in him if they are not. This may be one of those cases in which it is right that it should not be left solely to the Minister to make some of the more obvious points.

Many of us hope that the day will soon come when the relatively very high rate of VAT on a number of items will be reduced and we shall once again have 10 per cent. VAT applying to television sets and rentals. I assume that hon. Members who will support this amendment will also argue, when that reduction occurs, that the 25 per cent. rate should continue to be paid on current rentals until they run out. If one has it at one end of the process, one must have it at the other end.

We have an historical example. When representations were made to me on this subject, I inquired of some of those who made them whether they had made such representations previously when the rate was reduced from 10 per cent. to 8 per cent., when the reduction, contrary to all these arguments, was applied to current contracts. I was informed that no such representations had been made. So this is not the first time in the last 12 or 18 months that this issue has arisen.

No doubt the Financial Secretary will confirm that when VAT was first introduced and necessarily applied not only to the purchase of sets but also to renting—and it is obvious that if it is to apply to one, it must be for the sake of non-avoidance apply to the other—exactly the same rule as the schedule proposes was applied. So I am sure that the official Opposition, used though they are to U-turns and repeated U-turns, will not be carrying this amendment to a Division.

The Financial Secretary should be supported if it is his intention to maintain that we are dealing here with a continuous supply of a service and that the incidence of a change of VAT must arise if the service continues to be supplied. There is in the long run no inequity unless hon. Members sustain the case that VAT rates are destined continuously to increase. That is a point of view which I hope neither side will sustain. I believe that the Financial Secretary will be right if he resists the amendments.

Mr. Max Madden (Sowerby)

Contributions by the right hon. Member for Down, South (Mr. Powell) are always of interest, but I am surprised that he made no reference to the fact that the amendment we are discussing comes about as a consequence of our membership of the Common Market. This tax would not be with us if we were not members of the EEC.

Finance Ministers are always being exposed to special pleading, but I appeal to them to take special note of the pleas being made in this amendment. Ministers should be vigorously reminded that television today is not a luxury for many people. In a rural area like my constituency, it is a necessity. For many people, it is their only form of company, communication and entertainment. It should be regarded in a very special way.

There is a superficial attraction in Amendment No. 30, but this would create two distinct categories of people—those with existing agreements who would be exempt from the increase and those with new contracts who would have to bear the increase.

At Question Time today we were reminded of the difficulties which that sort of situation creates. The first Question on the Order Paper dealt with concessionary television licences awarded to elderly people living in a particular type of accommodaton. Many others, among them the most needy, do not receive concessionary licences. For that reason, the philosophy of Amendment No. 30 should be resisted. It would create even greater unfairness and bitterness.

I intend to support the logic of Amendment No. 28. I am sure that, in his reply, the Financial Secretary will remind us that, if all hired television sets were relieved of VAT, the cost would be enormous. I am advised it would be about £100 million. I am advised that it is technically possible for the television rental companies to absorb the charge. A very limited number have done so, but the vast majority have not, and I am sure that they will continue to say that it is impossible in the present economic situation for them to absorb these charges. That situation will probably continue, and I am, therefore, again drawn to argue that we should support Amendment 28. If the Government want to know where to get the revenue, we should tell them, not for the first time. that they should reduce defence expenditure, reduce expenditure on roads and change the corporation tax. I offer three possibilities to enable them to meet our wishes.

This is a social issue on which social justice should apply. We should alter our priorities and relieve all television rentals of any VAT charge. If we still need to find additional revenue, the Exchequer should find it in the ways I have recommended.

7.30 p.m.

Mr. Newton

The House will not expect me to endorse every word uttered by the hon. Member for Sowerby (Mr. Madden), but in general I support his sentiments. It is a pleasure to have heard vigorous speeches on the subject from the Labour benches in view of the utterly supine attitude Labour Members adopted in Committee. Two of them have signed the Early-Day Motion, but neither uttered a word or gave any sign of supporting our attempt to do something about the matter.

Mr. John Ryman (Blyth)

What does "supine" mean?

Mr. Newton

I meant that they laid very low indeed and showed no sign of activity, and, as I understand it, that is, broadly speaking the meaning of the word "supine", although I do not have a dictionary with me and I cannot give a precise definition. Whatever we may argue about the meaning of the word, I can tell the hon. Member that his hon. Friends did absolutely nothing in Committee. It is a pleasure, therefore, that some Labour Members have taken the trouble now to speak out.

I have an interest to declare in the matter in that I rent a colour television set under a contract extravagantly entered into by my wife. We paid a year's rental in advance, so we are not affected at this moment, although, clearly we shall be at the end of the year. In that sense I have a financial interest which I suppose I should declare in view of our increasing sensitivity in these matters.

Running through the speeches of all hon. Members has been the point that Conservatives have sought to m0ake throughout the debates on the schedule, which is the absolute nonsense of pretending that the 25 per cent. rate is in some way a tax on luxuries or less essential goods or a tax on the better off. This is merely one example, perhaps a classic one, which shows that the 25 per cent. rate is hitting the less well off, those least well able to defend themselves and those who already have fewest possessions in the affluent society. This totally undermines anything the Financial Secretary may wish to say about the need to raise revenue. The figure in question probably is £100 million, if I recall correctly what we were told in Standing Committee. However, if the hon. Gentleman even begins to accept the argument his hon. Friends have been advancing, which I endorse, that this tax is hitting the least well off, surely he cannot say that it is essential in the present economic situation to take £100 million of extra tax from the poorer sections of our community. Surely he is not saying that there is no other way of raising this revenue. Would it not be preferable to have a 10 per cent. flat rate, spreading the burden evenly across the board, because that is the alternative in practice? If the Financial Secretary stands on his revenue argument, unless he is prepared to say that the higher rate does not hit the less well off he is admitting that he must take £100 million from the least well off to solve the country's problems.

We then come to the question of employment. With the 25 per cent, date we are witnessing a return to one of the discredited fiscal expedients of the 1960s, a method which is now widely acknowledged to have done enormous harm to some of our main industries. It consisted of singling out important consumer industries and putting a tax on their products because a lot of revenue could be raised by subjecting them to a specially harsh treatment. Very few hon. Members would challenge the view that the way in which the motor car industry was treated, with these occasional huge surges in taxation during the 1950s and 1960s, is one reason why it is in its present mess. Nevertheless, that is exactly the policy the Government are adopting in respect of television sets, washing machines, refrigerators and all the rest.

The same mistake is being made, and we shall pay the price when the next expansion comes. Then we shall find that our domestic industry has not made the investment and is not in the position to meet the demand, and a flood of foreign goods—cars, television sets and so on—will come in. The Financial Secretary has argued that we cannot separate the overall effects of the depressed state of the economy from the effects of this tax. I accept that that would involve a long, complicated and difficult statistical job, and people might not accept the results when it was completed. It does not follow, however, that it does not matter if tax rates are put up. His argument is that the industry is in difficulties anyway and there is no certainty that the increased tax is adding to those difficulties. He must realise, however, that one cannot hit an industry which is on its knees on the head and push it on the floor, because that is what he is doing with the tax.

Mr. Mike Noble (Rossendale)

The hon. Member is concerned about employment prospects, and has mentioned the effects of the tax on the recession. Will he say something about the control of imports of television tubes as a means of protecting employment?

Mr. Newton

That is not a policy I would support. Protectionist policies in the end do not strengthen our industries. They must be given a stronger market and encouraged to invest and build up for the future. It is against that situation that the tax militates.

The right hon. Member for Down, South (Mr. Powell) advanced a logical argument. In a world which operated in a perfect and logical way no one could deny the force of the points he made. He fails to realise that we are not in a world of perfect logic. Above all, this is such a large tax increase that it has created a bitter sense of injustice among many people about the way our tax system works. That is damaging to the tax system, to the Government, which I do not mind, and to our political system, which I do. There are large numbers of people who cannot accept that this should have been done to them. They thought they had signed agreements to pay a certain price for the supply of something. They do not understand, and think it unfair that the Government should say in April or May "No", whatever you thought, we are changing the price. We are putting the price up by an Act of Parliament, backed by the full machinery of the law." They may be right or wrong to feel as they do. There is a logical argument about how our tax system works. However, there is a burning sense of injustice about this matter. It is difficult to defend the political and parliamentary system when it treats ordinary people in this way. It cannot be good for Parliament to create such a situation

Part of the Government exercise is to reduce people's expenditure on television. That means reverting from colour to black and white television, or giving up a television set. Many of my constituents have written to me about this matter. Home Office policy prevents people from obtaining a refund of television licence fees if they decide to change their colour television for a black and white set, or give up their television set. According to the correspondence I have had with the Home Office, this policy has been endorsed by the Treasury. Unless people have purchased their licence within 28 days they cannot claim a refund.

Part of the letter which I received from the Minister of State at the Home Office reads: television licence fees are issue fees and are nowhere expressed as rates per month, per quarter, or for any other period. Vehicle excise licence fees, on the other hand, are expressed as four monthly and annual rates. That is a fair point, although I would not attach any importance to it as a distinction of any consequence.

The letter continues: Vehicle excise licence fees, on the other hand, are expressed as four monthly and annual rates. These licences are substantially more costly than television licences, so the proportion of the revenue absorbed by the administrative costs of providing for variable periods of licensing should be less. That is nonsense. The four-monthly vehicle licence is more costly than the black and white television licence, on which there is no refund. I hope that the Minister will look at this question.

Two of my constituents have complained that, having given up their television sets, they cannot even obtain the money they paid for the use of the television for the rest of the year. The Treasury appears to have endorsed that Home Office policy. I cannot believe that it is right.

The proposed measure will cause unemployment in the industry and create a sense of unfairness and injustice to the less well off. Therefore, I hope that the House will accept this amendment.

7.45 p.m.

Mr. Noble

I support Liberal Amendment No. 28. I notice that a few Liberal Members have now arrived to speak to it.

The Budget strategy is one of outdated demand management without the associated measures required to bring stability to the economy. Having made many speeches on textile and footwear, I am now pleased to speak on behalf of another industry in my constituency. The only growth industry, in modern technological terms, in my constituency produces television components. Some of the constituents of my right hon. Friend the Member for Heywood and Royton (Mr. Barnett) work at that factory.

This section of the Finance Bill will cause indignation among the ordinary people whom I represent as a result of the amount they must pay for what they regard as a necessity, not a luxury. Before the Christmas Recess I spoke in the television licencing debate. The point was made then that our old people are indignant at the anomalies caused by the dual system of television licence charges. That is why I cannot support the Conservation amendment, which, if accepted, would create further television hiring anomalies. Many of my elderly constituents recently visited me and complained about the tremendous increase in the charges for their window on the world.

In the debate before the Christmas Recess I produced a petition signed by my constituents complaining about licensing charges. Since then the licence charges and the VAT rate on the hire of sets have increased. As the Government are committed to social justice, to helping the underprivileged and to ensuring that the elderly have a dignified retirement, this proposal is shameful.

I support the Liberal amendment. The Conservative amendments, if passed, will create divisions in our society, while the Government's proposals will create much resentment amongst the majority of our people.

Old people often hire television sets. Many of those sets are reconditioned and have been in service for eight or 10 years. The purchase price of those sets included purchase tax. The sets constantly need repairs and provide only the minimum of service. In my view, it is totally immoral to impose a 25 per cent. VAT rate on the hire charges of those sets.

Many factories producing television components are situated in the assisted areas. There is one in the North-East and there are several in the North-West and in North-East Lancashire. The factory at Simonstone, in the Clitheroe division, is one of the major employers in the area. It also draws its workers from the surrounding areas. It pays good wages, albeit that it operates a 168-hour week. There is a subsidiary factory in my constituency. Recently the employment offered by that factory declined by 300 per cent. When the main factory and its subsidiary came to the area they were hailed as the high spots of new development which would change the image of the traditional footwear-textile-coal mining area into a modern industrial area. We now find that short-time working and unemployment are realities. The measures proposed in the Finance Bill will exacerbate the situation facing my constituents and those of the surrounding areas.

I wish that the Government had not put forward these proposals and that they had recognised that ordinary people, especially the old and the deprived, regard television as essential. On those grounds, I support the Liberal amendment.

Mr. Beith

It is a most interesting experience to have an amendment in the name of myself and my hon. Friends supported by the Labour benches. A short time ago when we debated an amendment which aroused equal controvery and had in some ways a greater element of significance the Labour benches were totally empty. I say this not as a party political gibe, but not one Member of the Labour Party was prepared even to attend, let alone to speak or vote on the argument I was advancing, which was for the exemption of electrical repairs and maintenance from the 25 per cent. rate of VAT. It comes ill from the Labour benches to suggest that there is a shortage of Liberal Members in the House. However, we must not look a gift horse in the mouth. We have an impressive array of Labour Members present, and we shall hope to carry them into the Lobby with us.

The imposition of 25 per cent. VAT on television rentals hits at the section of the community which the Government by their policies proclaim they seek to assist. It is difficult to sustain that view when one examines in detail aspects of the Government's policy such as this one. It appears to be the Government's intention to concentrate increased tax burdens on those most able to afford them, but that is far from the case with this tax. This proposal has the added unpleasant feature of a retrospective element. It imposes additional tax on people who entered into an agreement in the expectation of being able to continue with it at a particular price.

In my constituency this new imposition has to be added to a large number of others. People living in a rural area such as the one I represent have to pay not only rent on a television set and the licence fee but also a relay fee, which is at least as much as the licence fee, because they cannot get a picture from a conventional aerial. To add to that this high rate of VAT on rental is extremely burdensome on people who live in areas where there is no other form of entertainment. I would not go so far as the hon. Member for Rossendale (Mr. Noble) and claim that television is a necessity. We have come to a pretty pass if we have to say that. But it is of great importance and value to old people, the housebound and people who live alone.

In Committee we spent a long time trying to discover the justification for this tax. I suspect that Government supporters may still suppose—not having heard the Financial Secretary's argument —that the tax is a luxury tax. I have news for them. It has been said time and again from the Government Front Bench that it is not a luxury tax. It has a much more subtle purpose, the definition of which is rather elusive. One feature of the items selected for tax is that they are single purchases, which are usually fairly expensive and represent a one-off payment. It is argued that it is, therefore, right to put on them an additional tax burden. That argument manifestly does not apply to television rentals.

The difficulty with which we were confronted in Committee was that we just had this will-o'-the-wisp definition of the tax, and whenever we sought to apply it to any item to which the tax was being applied, the definition was changed and the Government sought another definition. When we claim that a particular item is not a luxury, we are told that the tax is not a luxury tax. We are told that it is a tax on a large single purchase. When we find something to which that definition does not apply, we are told that that is not what the tax is either.

There is no coherent definition of the tax, just a general vague jumble of confused prejudices which do not add up to a sensible basis of distinction between the 8 per cent. and the 25 per cent. levels of tax. The attempt to apply a consistent logic breaks down yet again on this amendment. I welcome the support that has been given to the amendment by both sides of the House, and I hope that it will be carried.

Mr. Robert Sheldon

I do not intend to go into whether a television set is a necessity. I accept, as some of my hon. Friends pointed out in several valuable contributions, that whether it is a luxury depends upon the way in which it is regarded by the person concerned. For example, people living in remote areas on their own are in a different category from people who have at hand more varied entertainment. What we have to consider is the way in which the tax was introduced.

Perhaps I might be allowed to deal with some of the more detailed aspects which have been mentioned. The hon. Member for Norfolk, South (Mr. MacGregor) asked about VAT in Ireland and wondered whether the method used there might be adopted to handle the taxation of VAT on television rentals. It is extremely difficult to compare with any degree of precision methods of raising tax in various countries. I understand that in Ireland the rate of tax on television is 36¾ per cent. levied at the manufacturing stage. That illustrates how difficult it is to compare the methods used in one country with those used in another.

My hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk) spoke of the tax on rentals and said that 60 per cent. of all television sets were rented. That point was also mentioned by my hon. Friends the Members for Birmingham, Yardley (Mr. Tierney), Sowerby (Mr. Madden) and Rossendale (Mr. Noble). I understand that this is the method by which a large number of people provide themselves with television sets, but it is not easy to be certain that this method is used only by the less well-off. I run my television set in that way and so, I understand, does my right hon. Friend the Chief Secretary.

We must not assume that this method is applicable only to people with a certain income level. It is clear from the number of rented television sets—12 million—that that is not so. There will, of course, among that number be many people who rent television sets because they cannot within their budget afford to buy one.

I shall not comment on the advantages, pleasures and usefulness of television. As Members of Parliament we do not have the opportunity to see television very often but we are aware of its importance to the community as a whole and to our constituents.

My hon. Friend the Member for Yardley referred to the distinction between people who purchased television sets on hire-purchase terms and those who rented television sets. We must not forget, however, that people who enter into a hire-purchase arrangement have to pay for repairs and replacements.

As the right hon. Member for Down, South (Mr. Powell) pointed out, we must not assume that VAT will move permanently in an upward direction. VAT is a buoyant tax, which means that there is a limit to the level to which it can go. It is unlike excise duties which are not on a percentage basis and have to be raised regularly. As it is on a percentage basis, my hon. Friends will be able to make a calculation as to the maximum amount that can apply.

Obviously, this is a rate which is fixed by the Chancellor. My right hon. Friend decided that he needed this revenue at this time and he fixed the rate accordingly. Of course, no one would presume to suggest that it is a low rate; it is nothing of the sort. In future, given an improving economic situation, it must be the hope of everyone that the rate will be reduced. That would be a problem for those who wish to produce the arguments that we have heard this evening. They would find that people who had purchased their sets at 25 per cent. would be caught on the dilemma of a reduction in the rate of value added tax. I do no more than draw the attention of the House to that matter. It is not the main argument that I wish to develop.

8.0 p.m.

Mr. Beith

I am puzzled by what the hon. Gentleman has said as regards VAT and excise duty. He seemed to be saying that there is a limit to the rate at which VAT can be applied which we can work out whereas that is not true of excise duty. Does he mean that or does he mean the opposite?

Mr. Sheldon

Surely the hon. Gentleman will be able to understand that on a percentage basis there is a fixed increase. I assume that no one would wish to go that far. I do not think there is anyone who is that enthusiastic about VAT, although those who introduced the tax saw great advantages which I fail to see. We are suffering from a number of problems because of its introduction. The disadvantages of the tax are obvious and they caused great problems at its introduction.

The particular difficulty with which we are concerned is that VAT applies to services as well as goods. That means that the hiring of goods is a taxable item. That is laid down in the definitions of the Finance Act 1972, under which value added tax was introduced. That means that when a person pays for a month's hiring he is enjoying a taxable supply under the terms of the Act for which VAT will be charged.

The cost of the amendment would be considerable. Before I deal with that matter, however, I turn to what the amendment means for the ordinary person who is renting a television set. My hon. Friend the Member for Rossendale pointed out that social justice demands that consideration should be given to people with eight- or 10-year-old sets who are trying their utmost to maintain a picture in front of them and who face certain difficulties. I well understand that argument. However, it must be remembered that, on the calculations we have made, the extra cost to the ordinary person with a black-and-white set will increase by about 8p a week. A set that is eight or 10 years old will obviously be a black-and-white set. For colour sets the increase will be 20p to 25p a week. That is the extra cost of the VAT increase. I understand that that extra cost is a matter that has to be considered by many people.

It might help to put the matter into perspective. Let us bear in mind that licence fees are £18 a year for colour sets and £8 a year for black-and-white sets. Not so long ago licence fees increased considerably and those who had colour sets were able to make the payments. At this stage I must dispose of the ques- tion raised by the hon. Member for Braintree (Mr. Newton) about a refund on television licences. I ask him to pursue the matter with my right hon. Friend the Secretary of State for the Home Department, to whom all such representations should be made.

I turn to the problems that would arise if the amendment were to be carried. First, there would be two rates in force. There would be those people who after August would be paying at the rate of 25 per cent. and there would be other people who had entered into contracts before 16th April who would be paying at the rate of 8 per cent. That would be a continuing situation. Over a period there would be a privileged number who would be paying a lower rate of VAT. That number would not grow to any great extent because any change of contract they made would involve them in paying a higher rate of VAT. That situation would exist side by side with the obvious administrative problems as well as the social anomalies which would arise.

Such a situation would not help the problems of the radio industry, a fact which was alluded to by my hon. Friends the Members for Ormskirk and Rossendale. One of the things I have sought to do—it has not been easy to come to grips with this matter—is to try to determine the effect upon the radio and television industry of the increasing of valued added tax. I have met the Radio Industry Council and I have found it difficult to separate out the effect of the increase in VAT from the ordinary seasonal changes. We are moving into the summer period when sales decline, and I find it difficult to separate out the long-term implications. The worsening economic situation obviously produced its problems. They in turn meant that people were less inclined to spend money on new television sets. These factors must be borne in mind as well as the increase in imports. There are a number of factors to be considered and it is not easy to separate out what is due to the increase in VAT.

If the amendment were carried it would mean that a large proportion of the 12 million people would then be paying VAT at 8 per cent. but would have to pay at the rate of 25 per cent. if they were to change their sets. We must not underestimate the effect that that would have on the production industry. It would mean that the incentive to change sets and to buy new models would be that much reduced, and the consequential drop in sales could be considerable.

Mr. Kilroy-Silk

I am having difficulty in following the logic of my hon. Friend's argument. Is he saying that the increase from 8 per cent. to 25 per cent. will have the precise effect that he has described and will be consequential on the amendment we are discussing?

Mr. Sheldon

I am saying that production would be hit very hard. There would be little incentive for people to change their sets. In fact, there would be a very great disincentive as they moved from paying 8 per cent. on their existing sets to 25 per cent. on their new sets.

Mr. Deputy Speaker (Sir Myer Galpern)

I am sorry to have to intervene in the Minister's speech, but for a little while I have been getting a very poor picture from the television set and hardly any sound.

Mr. Sheldon

I shall try to improve the quality, Mr. Deputy Speaker. Th. point I am trying to make is that if people wish to change their sets they will have to pay at the rate of 25 per cent. That would be the position if there was the lower rate of VAT on pre-Budget contracts and they wished to change their set. There would be that discouragement. It would feed back in respect of sales and production in a way which would disturb those who are interested in the manufacturing industry.

Mr. Nigel Lawson (Blaby)

Surely the Minister realises that the people about whom we are most concerned could not afford to buy new sets or to change to a television which would be more expensive. Had they been able to do so, they would have taken that step before 1st May because it would have been cheaper.

Mr. Sheldon

The hon. Gentleman will not deny that sales of television sets will continue. If a number of people were paying 8 per cent. and now had to rent a new set at a rate of 25 per cent., that would amount to a disincentive.

Mr. Newton

I am puzzled at the situation. The Financial Secretary is directing most of his arguments to his Labour colleagues. I had understood that Labour back-benchers supported Amendment No. 28, to which none of these arguments applies.

Mr. Sheldon

I dealt with the hon. Gentleman's argument a little earlier.

Let me seek to show how the amendment would have an impact on the social services and on total costs. My hon. Friend the Member for Rossendale spoke about social justice. I understand the point and it is a matter of great concern to everybody. However, the amendment is no way to achieve some of the social purposes for which we stand and for which we shall continue to fight.

One problem in discussing Finance Bills is that we deal with concessions, but we never discuss ways in which money could most usefully be spent. We look at one side of the accounts and rarely at the other side. We have to ask whether these are the right ways in which to spend money.

We are talking about a very substantial sum indeed. [HON. MEMBERS: "How much?"] The amendment would cost up to £90 million in the first full year; the average length of hiring agreements is between four and five years. It means that the total cost over that period would work out at between £200 million and £250 million. [HON. MEMBERS: "Oh."] I know that some Conservatives may take that figure a little lightly. I am much more concerned about the public sector borrowing requirement and obviously I have a much greater concern on these matters than they have.

These figures of course assume that the length of time that a person keeps a set would remain the same as at present. It can be estimated, however, that such a fiscal advantage would mean that older sets would be retained longer than they are at present.

We have had a number of suggestions as to the way in which we should examine these matters in discussions on the Finance Bill. My hon. Friend the Member for Sowerby referred to social purposes. Perhaps we may have to look at these matters together rather than in isolation. I support any changes in that direction.

Mr. Madden

I welcome the Treasury's approach. I referred in my remarks to the need for concessionary television licences to be extended to all elderly people regardless of where they lived. In the new enlightened approach from the Treasury, will the Treasury be prepared to support the extension of free television licences?

Mr. Sheldon

This is a matter for the Department of Health and Social Security. I cannot commit my right hon. Friend the Secretary of State for Social Services. We are now talking about the distribution of £200 million to £250 million. I am sure that if my right hon. and hon. Friends had that sum at their disposal in the Department of Health and Social Security they would spend it on the disabled, to relieve unemployment or to assist with other problems. I doubt whether the matter which we are now discussing would be their first priority.

I accept the necessity to bring these matters to the Government's attention. However, if the amendment were to be carried, we must consider the cost.

8.15 p.m.

Mr. Lawson

The Minister inadvertently misled the House when he said that concessionary television licences were a matter for the Department of Health and Social Security. They are a matter for the Home Office. I have been in correspondence with the Home Office and the Minister of State, Home Office has informed me that the cost of half-price television licences to all old-age pensioners would be £15 million. The Financial Secretary should get his figures right.

Mr. Sheldon

I am pleased that the hon. Gentleman gave that figure because it is a useful contribution to the debate. I was not dealing at that point with the figures but was seeking to point out that if these sums of money were available they might well be used in quite different directions. We are concerned with very large sums of money indeed, and in the present economic situation I must ask my hon. Friends to oppose the amendments.

Mr. David Howell

Enough has been said in the last hour or two to show the strong feelings in almost all parts of the House on this matter. The Conservative Party has made its position absolutely clear—namely, that we are in favour of 10 per cent. VAT rather than 25 per cent. VAT. We believe that this would be a better way of securing revenue.

The Financial Secretary said enough to show that he was in an uncomfortable position, and in the end he threw in almost every argument. At the conclusion of his remarks he concentrated on public expenditure. I do not accept, in the way in which the Minister argued the case, that those public expenditure implications were right.

Labour Members have put their case with feeling and sincerity and have been attracted by the simplicity of Amendment No. 28 tabled by the Liberal Party. Amendment No. 30 relates to Early-Day Motion No. 477 on value added tax on television rentals, signed by 78 hon. Members and referring to television rental agreements entered into before Budget Day. I think that those hon. Bembers are right in their proposal in preference to Amendment No. 28. The motion to which they originally put their names makes sense because it deals with the basic injustices of the situation as proposed by the Government.

First, it deals with the inequity as between those who rented before May 1st and those who bought before 1st May. Secondly, it deals with the bewilderment—which my hon. Friend the Member for Braintree (Mr. Newton) described so vividly—of those who thought they had entered into a contract at certain rates over the years and had found that these rates were being adjusted.

Most television rental companies started by charging the VAT at a lower rate, following certain agreements with the Customs and Excise, and were just raising the rates through the years. Most people had entered into a contract under which they were paying weekly or monthly at a certain rate, and were suddenly confronted by the problem created by the 25 per cent. swingeing increase.

I shall not presume to add to all the details of the different arguments made. The Financial Secretary has tried his best. He is in a very awkward position. He has no ground to stand on in this matter. We are rather more concerned than experience would suggest that the Financial Secretary and his colleagues are about the public sector borrowing requirement and the present revenue position. Our VAT 10 per cent. proposal would look after that.

That is why we feel justified in proposing that Amendment No. 30 be pressed, and why I would urge Labour Members who share our objectives—even if they start from a different point of view—to follow what they have said in their own Early-Day Motions and support us in the Lobby.

Mr. Pardoe

On a point of order. Now that you have heard the debate, Mr. Speaker, may I suggest that there are two distinct principles at stake in Amendments Nos. 28 and 30, which have been discussed widely in the debate, and ask

whether it would be possible to have a vote on Amendment No. 28 as well as Amendment No. 30?

Mr. Deputy Speaker

I am glad that the hon. Member has raised the point. I have given it very careful consideration. I indicated earlier that only if Amendment No. 30 were withdrawn could we have a vote on Amendment No. 28, and I adhere to that decision.

Question put, That the amendment be made:—

The House divided: Ayes 108, Noes 106.

Division No. 287.] AYES [8.23 p.m.
Arnold, Tom Jenkin, Rt Hon P. (Wanst'd&W'df'd) Rippon, Rt Hon Geoffrey
Atkins, Rt Hon H. (Spelthorne) Kershaw, Anthony Roberts, Michael (Cardiff NW)
Bain, Mrs Margaret King, Evelyn (South Dorset) Ross, Stephen (Isle of Wight)
Beith, A. J. Kirk, Peter Rossi, Hugh (Hornsey)
Benyon, W. Knox, David Sainsbury, Tim
Berry, Hon Anthony Langford-Holt, Sir John Shaw, Giles (Pudsey)
Biffen, John Latham, Michael (Melton) Shelton, William (Streatham)
Bottomley, Peter Lawrence, Ivan Silvester, Fred
Brotherton, Michael Lawson, Nigel Sims, Roger
Campbell, Ian Le Marchant, Spencer Sinclair, Sir George
Carlisle, Mark Luce, Richard Smith, Dudley (Warwick)
Chalker, Mrs Lynda MacCormick, Iain Speed, Keith
Cockcroft, John McCrindle, Robert Spicer, Jim (W Dorset)
Cope, John Macfarlane, Neil Stewart, Donald (Western Isles)
Corrie, John MacGregor, John Stradling Thomas, J.
Crawford, Douglas Marten, Neil Taylor, R. (Croydon NW)
Crowder, F. P. Maxwell-Hyslop, Robin Tebbit, Norman
Dean, Paul (N Somerset) Mayhew, Patrick Temple-Morris, Peter
Drayson, Burnaby Meyer, Sir Anthony Thompson, George
Durant, Tony Mitchell, David (Basingstoke) Trotter, Neville
Dykes, Hugh Moate, Roger Tugendhat, Christopher
Edwards, Nicholas (Pembroke) Monro, Hector Van Straubenzee, W. R.
Eyre, Reginald More, Jasper (Ludlow) Wainwright, Richard (Colne V)
Fisher, Sir Nigel Morgan, Geraint Wakeham, John
Fletcher-Cooke, Charles Morrison, Charles (Devizes) Wall, Patrick
Gardiner, George (Reigate) Nelson, Anthony Warren, Kenneth
Goodlad, Alastair Neubert, Michael Weatherill, Bernard
Grant, Anthony (Harrow C) Newton, Tony Wiggin, Jerry
Grieve, Percy Nott, John Wilson, Gordon (Dundee E)
Griffiths, Eldon Page, Rt Hon R. Graham (Crosby) Winterton, Nicholas
Hannam, John Pardoe, John Wood, Rt Hon Richard
Harvie Anderson, Rt Hon Miss Parkinson, Cecil Young, Sir G. (Ealing, Acton)
Hawkins, Paul Penhaligon, David
Higgins, Terence L. Percival, Ian TELLERS FOR THE AYES:
Hooson, Emlyn Rathbone, Tim
Hordern, Peter Rees, Peter (Dover & Deal) Mr. Adam Butler and
Howe, Rt Hon Sir Geoffrey Reid, George Mr. Russell Fairgrieve
Howell, David (Guildford) Ridley, Hon Nicholas
Anderson, Donald Cunningham, G. (Islington S) Forrester, John
Atkinson, Norman Cunningham, Dr J. (Whiteh) Fowler, Gerald (The Wrekin)
Barnett, Rt Hon Joel (Heywood) Davidson, Arthur Freeson, Reginald
Bates, Alf Davies, Denzil (Llanelli) Garrett, John (Norwich S)
Blenkinsop, Arthur Deakins, Eric George, Bruce
Boardman, H. Dormand, J. D. Gilbert, Dr John
Booth, Albert Dunwoody, Mrs Gwyneth Gould, Bryan
Brown, Hugh D. (Provan) Eadie, Alex Hardy, Peter
Butler, Mrs Joyce (Wood Green) Edge, Geoff Harrison, Walter (Wakefield)
Canavan, Dennis Edwards, Robert (Wolv SE) Hayman, Mrs Helene
Castle, Rt Hon Barbara Ellis, John (Brigg & Scun) Heffer, Eric S.
Clemitson, Ivor Ennals, David Hooley, Frank
Cocks, Michael (Bristol S) Evans, Fred (Caerphilly) Horam, John
Cohen, Stanley Evans, Ioan (Aberdare) Hughes, Rt Hon C. (Anglesey)
Coleman, Donald Flannery, Martin Hughes, Mark (Durham)
Irving, Rt Hon S. (Dartford) Mulley, Rt Hon Frederick Summerskill, Hon Dr Shirley
Jackson, Miss Margaret (Lincoln) Newens, Stanley Taylor, Mrs Ann (Bolton W)
Janner, Greville Ogden, Eric Thomas, Mike (Newcastle E)
Jenkins, Hugh (Putney) Palmer, Arthur Thomas, Ron (Bristol NW)
John, Brynmor Pavitt, Laurie Tinn, James
Jones, Dan (Burnley) Powell, Rt Hon J. Enoch Urwin, T. W.
Kaufman, Gerald Prescott, John Walker, Harold (Doncaster)
Lamborn, Harry Radice, Giles Walker, Terry (Kingswood)
Litterick, Tom Roberts, Gw[...]ym (Cannock) Ward, Michael
Lyons, Edward (Bradford W) Roper, John Watkins, David
McCusker, H. Ryman, John Watkinson, John
MacFarquhar, Roderick Sandelson, Neville Weitzman, David
Mackenzie, Gregor Sheldon, Robert (Ashton-u-Lyne) Wellbeloved, James
McMillan, Tom (Glasgow C) Short, Rt Hon E. (Newcastle C) White, Frank R. (Bury)
Magee, Bryan Short, Mrs Penée (Wolv NE) Williams, W. T. (Warrington)
Marks, Kenneth Silkin, Rt Hon John (Deptford) Woodall, Alec
Meacher, Michael Skinner, Dennis Wrigglesworth, Ian
Mellish, Rt Hon Robert Small, William
Miller, Dr M. S. (E Kilbride) Smith, John (N Lanarkshire) TELLERS FOR THE NOES:
Mitchell, R. C. (Solon, Itchen) Spriggs, Leslie Mr. James Hamilton and
Molloy, William Stewart, Rt Hon M. (Fulham) Mr. Joseph Harper.
Moonman, Eric Stoddart, David

Question accordingly agreed to.

Mr. David Howell

On a point of order, Mr. Deputy Speaker. In view of that result, is not it now clear to the Government that what this country wants is the 10 per cent. rate of VAT which we have proposed and not the 25 per cent. high rate, which is clearly leading to intolerable anomalies? In view of the outcome of the Division, will not the Chancellor of the Exchequer come to the House to explain the Government's intentions?

The Chief Secretary to the Treasury (Mr. Joel Barnett)

Further to that point of order, Mr. Deputy Speaker. What is clear in this House and outside it is the hypocrisy of the Opposition, who talk about the public sector borrowing requirement and are prepared to increase it by up to £100 million a year. Certainly we shall take note of that.

Mr. Pardoe

Further to that point of order, Mr. Deputy Speaker. Is not it obvious to the House that, in fact, this is not an attack on the borrowing requirement? It is not an attempt to raise it. A 10 per cent. rate of VAT would cut the borrowing requirement substantially more than this would increase it by.

Mr. Nott

Further to that point of order, Mr. Deputy Speaker. It is quite wrong for the Chief Secretary to make an inaccurate remark of that sort on a point of order. Since these debates began we have proposed and said that the country wants a 10 per cent rate which would raise more revenue than the proposals that the Government have put forward. Therefore, we repeat our request that the Chancellor of the Exchequer should come to the House and withdraw the higher rate of VAT, as we have said all along, and replace it with a 10 per cent. rate across the board which would raise more and not less revenue for the Government.

Mr. Joel Barnett

Further to that point of order, Mr. Deputy Speaker. I take note that what the Opposition want to do is to increase the standard rate of VAT to 10 per cent. and add to the retail price index accordingly.

Mr. Deputy Speaker

We must get on to boats, canoes. etc.

Mr. Wiggin

I beg to move Amendment No. 36, in page 87, line 42, at end insert—

  1. '(ii) boats and canoes of rigid construction designed to be propelled solely by oars or paddles, and
  2. (iii) open or partially decked boats with an open cockpit whose principal form of propulsion is by sails and which are not constructed or capable of being adapted to be propelled by machinery internally installed and which have no built-in living accommodation:'.

Mr. Deputy Speaker

With this we shall discuss the following amendments: No. 35, in page 87, line 42, at end insert— '(ii) boats having an overall length of less than 10 metres.

No. 39, in page 87, line 43, at end insert— 'except those excepted from Item I above'.

No. 41, in page 88, line 3, at end insert— 'unless necessary for the safety of the vessel'.

No. 42, in page 88, line 8, leave out subsection (d).

No 43, in page 88, line 18, at end insert— 'if fitted before the first issue of a certificate of airworthiness or permit to fly'.

Mr. Wiggin

I can only hope that the result of the next Division will be as propitious as the result in the last one. [Interruption.]

Mr. Deputy Speaker

Order. Let us have some quiet please.

Mr. Wiggin

The situation is highlighted by the fact that the total revenue received from the higher rate of VAT on boats will be a mere £4 million, and the Bill has now been altered to the extent of £90 million. I suggest that the Government should withdraw Clause 17 and Schedule 7 from the Bill and adopt the suggestion that has been made so many times by the Opposition. We, the boating industry and all the other industries which have been singled out, are prepared to accept a 10 per cent. flat rate because we believe it to be fair. It was quite wrong of the Chief Secretary to make the remarks he did a few moments ago, because he knows full well that if we have repeated it once we have repeated it a hundred times. We have offered him extra taxation. This is a unique situation.

This group of amendments can be divided into various sections. Amendment No. 36 deals with boats that are propelled by oars or by sail but do not have an internally mounted engine. The amendment is designed to exempt rowing boats and small sailing dinghies from the higher rate. "Physical boats" is perhaps too much of a shorthand term, but I am quite certain that the legal language is easily understood, and the House will appreciate the point I am making.

The hon. Member for Newham, South (Mr. Spearing) tabled a similar amendment which he has now removed from the Notice Paper. I assured him that I would make it clear that there was no conflict of interest on this matter. We both agree that there is a special case to be made for small boats, very often manned by young people who have had instruction at public expense on how to row or sail these boats and who cannot in any way be described as rich or as doing anything which should be singled out by a Socialist mind for a special fiscal penalty.

Amendment No. 35 deals with boats that have an overall length of less than 10 metres, which I believe is approximately 32 ft. 6 ins. This section of the boating industry largely contributes to repairs and exports. That is the main value of the industry. It does not include the very large yachts, the luxury boats, or those which can truly be described as being in a different class. They are not owned to a large extent by rich people, although it is true to say that some boats of 30 ft. and over can be extremely expensive.

The industry means a great deal to this country because of its exports. If Amendment No. 35 were accepted, it would be a valuable concession to the boat building industry.

Grouped with these amendments are Amendments Nos. 41, 42 and 43. I suspect that the hon. Member for the Isle of Wight (Mr. Ross) will have something to say about the general safety provisions in Amendment No. 41.

Amendment No. 42, which proposes leaving out subsection (d), relates to specific items of equipment needed for safety purposes.

Amendment No. 43 is on a separate point regarding spare parts for aeroplanes. In view of the grouping, I will deal with that matter in a different way towards the end of my speech.

I think it might be useful to mention Amendment No. 42 initially. Item 5(d) will alleviate the burden on compasses, echo sounders, radar sets, logs, wind speed, wind direction and boat speed indicators, and other navigational and meteorological instruments and recorders. I said that it alleviated the burden. I should have said that it included the heavy burden on those items. Yesterday the Government indicated that compasses, echo sounders and radar sets would be included in the order which is due to come before the House shortly.

My plea, which I made in Committee—as far as I can see, no cognisance has been taken of it—is that a log, for example, is every bit as important a piece of safety equipment as an echo sounder. I do not think that it can be argued that one is more important than the other. In order to establish one's position at sea, it is necessary to have a log. I am prepared to accept that wind speed, wind direction and boat speed indicators are not in the same category. However, there are various bits and pieces which contribute to the safety and position-finding of small boats.

I am not satisfied that the Government have been as fair and open-minded as they should have been on which accessories to exempt from the higher rate of VAT.

We are in the difficulty of knowing that the Government are not prepared to accept any amendment of the schedule. But I think that they must accept that a delegation from the Royal Yachting Association and other interests should talk to the Customs and Excise and the Minister about these matters. No doubt this matter can be satisfied if the Minister will give a reasonable assurance that he will be open-minded about some of the items of navigational equipment that I have mentioned.

The general question of safety is difficult. I have some sympathy for the Revenue when considering what should or should not be exempted on safety grounds. It can be argued that at sea the vessel itself requires to be sound to ensure the safety of the occupants. A line has to be drawn. Earlier, when the Financial Secretary was arguing about lines being drawn, he in fact produced more lines over which we could argue. This extra rate has created the difficulty.

We had some fairly lengthy debates both in this Chamber and upstairs on the whole effect of the higher rate of VAT on the boat building industry. But the Government have consistently failed to take any cognisance of the effects of their actions.

I should like to remind the House briefly of the figures that the Ship and Boat Builders National Federation has received as a result of its questionnaire. Since the announcement of the higher rate, the federation has been looking into its effect on inquiries, orders and employment. Despite the fact that the Treasury has time and again said that this decline will flatten off and that people will get used to the higher rate, the evidence does not show that.

8.45 p.m.

The percentage cut-back in employ- ment, which was 31 per cent. in the first fortnight in May, rose to 42 per cent. in the second half of May. It was 37½ per cent. in the first half of June and 37½ per cent. again in the second half of June. It shows a consistency that leads me to believe one can assume a permanent cut-back of 35 to 40 per cent. in the labour force. The hon. Gentleman says a mere 10,000 people work in the boat building industry, but here we are talking of 2,000 or 3,000 people. What is the cost of keeping them on unemployment benefit? What is the cost of paying redundancy and so on? This has to be balanced against this piffling quantity of revenue, £3¼ million to £4 million, to be produced, apparently, from this tax.

Since I am on the subject of revenue, the Minister of State will recall that we had an argument in Committee as to what revenue this tax would produce, and the cut-back in boat sales that had been estimated by the Treasury. I checked the Official Report of the Committee proceedings, and the Minister's answers on this point were extremely unsatisfactory. It is quite clear that the revenue estimates had been made on the assumption that there would be no reduction in sales of boats, or repairs, or all the other things.

Mr. Denzil Davies

indicated dissent.

Mr. Wiggin

The hon. Gentleman shakes his head but he must make out a better case on the Floor of the House than he made upstairs.

Confirming the trend, the Boat Builders Federation tells me of a very unhappy record, that 44 firms have left the federation, having either closed down or having a receiver in as a result of the economic pressure being put on the boat building industry. This is an infinitely greater number than it has ever recorded at a quarterly meeting, and is two or three times greater than has been reported in the past. These items are the proof. The Minister must accept that these things have happened. He cannot turn a blind eye to them.

The industry sells about £100 million worth of items on the home market and exports £41½ million worth of goods. Time and again, history has shown that without a healthy domestic market exports cannot be maintained. The Government talk of the shipbuilding industry, but that part of the boating industry that we are discussing, that part which builds boats, is 47 per cent. of the shipbuilding industry, a very substantial part of the whole. It has been a very prosperous industry and has done an extremely good job in producing exports in the few years since the war in which it has really been prospering.

I do not know the Minister's thoughts on the figure at which unemployment is now running. It has been suggested that unemployment in the industry could be as high as 5,000, or even more. The hon. Gentleman may have access, through his right hon. Friend, to other figures, and perhaps he can tell us how many people he has put out of work, out of the work that was, and is, and should be available, about which the Government make so many noises on the one hand and on the other introduce a selective imposition of this nature.

Remarks have been passed from the Government benches that boating is not necessary at this time of crisis, and vet 62 per cent. of all boat owners are in the socio-economic classes C1 and C2, which include highly skilled tradesmen, teachers, bus drivers and the like. Anyone who goes to an average sailing club will realise that this is not a rich man's sport but a sport enjoyed by more people—2¾ million—on a fine Saturday afternoon in the summer than watch football from all the terraces in the country.

The Treasury has made a great mistake here. I believe it thought that it was going to put out of business a few rich people with a few large yachts, but it has affected the weekly sport of 2¾ million people. That does not seem to tie up with some of the other objectives that the Minister of Sport talks about. Why should boating be picked out in this way? Why should those who go out in a dinghy be treated separately from those who go to a golf course or, for that matter, play polo? It is a ridiculous way of raising tax revenue. The industry is now estimating a cut-back of some 50 per cent. if this imposition is not lifted. This will leave the United Kingdom market bereft of some of its finest builders and open to foreign competition when our general economic position improves. It is tragic that the industry should be treated in such a way.

I turn to the amendment about smaller boats. In relation to the whole industry, the dinghy, canoe and rowing boat manufacturers are quite a small part, but it is their products that the largest number of people enjoy and use every week. There is not a strong revenue argument on dinghies and rowing boats. I do not know how the Minister thinks the revenue would be affected if the amendment were passed. The sum involved would certainly not be large, although measurable.

In view of your grouping, Mr. Deputy Speaker, I hope that I shall be forgiven if I change the subject, because Amendment No. 43 deals with spare parts for aircraft. Boats and aircraft are grouped in the schedule, so it is not as illogical as it may seem to take these items together.

It is difficult for the small number of firms concerned to deal with high-rate VAT on spare parts of aircraft. When the matter was raised in Committee upsairs, the sense of the Minister's argument in rejecting our amendment was simple. The suggestion was that if we had one rate on completed aircraft and a different rate on spare parts it would be possible to buy all the spare parts, screw them together and make a whole aeroplane at the lower rate of VAT. It would be possible, and in the old days of purchase tax people used to do that sort of thing with certain motor cars. But we have found out the figures. The major parts for a Cherokee 140 from America would cost only £700 less than the complete aircraft. The cost of the work of assembly and bits and pieces, such as nuts and bolts, is almost certainly about 50 per cent. more than the cost of spare parts, so nobody would carry out the exercise that the Government envisaged. I am certain that the General Aviation Manufacturers and Traders Association would be willing to make out the case to the Minister.

Spare parts for aircraft are on the whole extremely expensive—between 40 per cent. and 50 per cent. more expensive than when part of the whole. In addition, the high rate of VAT will make it hard for some clubs and others to keep aircraft in the air. The parts have to be inspected, maintained and fitted to standards set by the Air Registration Board.

One leading agent in this country for a well-known make of American aircraft carries over 2,000 separate spare parts, and it will have to argue with the Customs about every one, more particularly since the Government's recent concessions. It may well be involved in three rates of VAT—zero rate, standard rate and the 25 per cent. rate. The administrative work will be tedious beyond belief. There will be almost no revenue from the sale of spare parts for aircraft. It will certainly be smaller than anything that we have talked about so far. The cost of administering the higher rate and the inspecting and checking will probably wildly exceed the total revenue.

The case for the amendment is lengthy. I have said enough, having already raised the matter upstairs. The Opposition's main purpose is to vote on the amendment on small boats, but we have made out a case for the whole boating industry and for certain sections of the aircraft industry.

There are several other points about aircraft that have not been answered. No amendments have been tabled by the Government, and there are substantial inequalities in this area. Therefore, I remind the Minister once more that if, on the one hand, he is prepared to introduce selective taxation of one industry, put many people out of work at considerable cost to our export and domestic markets, and to do so without rhyme or reason—political, fiscal or domestic—this is the worst possible way of levying taxation. It is something that the whole House should—and, I hope, will—reject.

Mr. Deputy Speaker

In view of the fact that there was considerable noise in the Chamber when I announced the groupings of the amendments under discussion, I make it clear to the House that we are discussing Amendments Nos. 36, 35, 39, 41, 42 and 43 together.

Mr. Nigel Spearing (Newham, South)

I wish to address my remarks solely to Amendment No. 36, which happens to be the first in the grouping and, therefore, technically the amendment on which this debate hangs.

The amendment seeks to exempt broadly three classes of vessels—those propelled by oars or paddles, namely rowing boats and canoes, and what effectively are called sailing dinghies. I originally tabled an amendment of this nature. In view of its similarity to the amendment tabled by the Opposition—the origin of which I know—I withdrew my amendment although some consultations had taken place on it, but not with the Opposition. The hon. Member for Weston-super-Mare (Mr. Wiggin) has mentioned this although he and his party have been more concerned with the larger vessels, equipment for sea-going pleasure vessels, the proper interests of the Ship and Boatbuilders National Federation and the employment of people in the small ship industry.

However, my concern is with the users of small boats, particularly young people, youth clubs, uniformed organisations and those who use their own muscles to propel these vessels. A large number of young people row or canoe on our lakes and rivers. I believe that inadvertently the Chancellor, in looking at the boating industry as a whole and its aura, for the reasons we know, has clobbered youth organisations and young people to the extent of 25 per cent. VAT on this form of recreation and sport.

My concern is increased because during my five years as a teacher in Inner London I coached in rowing on the Thames. My own local authority has provided water recreation centres not only in Essex but even in my own area. The activity of young people propelling themselves on water is one of the most character-building activities I know. In the general public's esteem, boating as a whole and this sort of activity is not held high, certainly not by the Chancellor.

There are two junior championships of world standard taking place in this country this year, the Junior Sailing Championships and the World Rowing Championships, which will take place at Holme Pierrepoint, Nottingham. It is unfortunate that those championships have coincided with an increase in tax on these craft from 8 per cent. to 25 per cent.

9.0 p.m.

The amendment was put together principally by the combined efforts of the Amateur Rowing Association, the British Canoe Union and the Royal Yachting Association. They feel that participants in these sports have been singled out.

These three sports, sailing, rowing, and canoeing—are Olympic sports. They are not just recreations. They are sports in their own right. Although other sports may be taxed in certain ways, and certainly some pastimes are taxed, I think I am right in saying—my hon. Friend the Minister will correct me if I am wrong—that these are the first sports in which substantial equipment is used which is taxed in this way. Until the onset of VAT they were not taxed at all. Then we had VAT at 10 per cent. and at 8 per cent., and it has now suddenly shot to 25 per cent. This is a substantial part of the cost of equipment, which is significant in these sports.

I tabled a number of Questions immediately this matter was raised by the Budget speech as to the yield not from boatbuilding in general or large craft but specifically from boats propelled by oars or paddles and centre-board sailing dinghies. The Chancellor has not been able to reply. I have put down Questions but he has merely referred to his previous answers, in which he has not been able to tell me about this. Therefore, I hope that my hon. Friend the Minister of State will at least be able to give an estimate of the yield from these specific types of small boats. Even if he maintains his position, he has a duty to tell the House what the yield will be.

But these things are not in the luxury class. I do not think that anyone paddling a small canoe on the Thames or the lakes of this country or its rivers can be regarded as enjoying a luxury. Furthermore, anyone will know that if young people are at risk or in trouble, the paddling of a canoe, perhaps on the River Wye, the River Wey or the canals, is a very good prospect. I know of very few other activities which can incorporate a physical challenge to young people, a certain amount of risk, a certain excitement and a sense of achievement. We talk about combating vandalism. That is something about which we know quite a lot in East London.

These are the sorts of activities that we ought to encourage. In the end it depends on dedicated individuals and dedicated youth leadership. It is true that certain of these craft might get VAT exemption because they are purchased by local education authorities, but certain youth clubs and other organisations cannot obtain that rebate. When young people become enthusiastic about these physical sports, they want a vessel of their own. A 25 per cent. charge on a £40 or £50 canoe is quite substantial for a young person.

The Chancellor, in imposing at least some differential taxes on boating as a whole, perhaps rightly—I shall not go into that matter in principle because it is contentious—ought to have given some sort of concession on the class of vessel I have been describing.

Dinghy sailing is not the class occupation it once was. Certainly in canoeing there is a mass of young persons participating. There are 400 clubs in this country and an estimated 500,000 young people go canoeing. Local authorities are encouraging young people to take up rowing. Who knows—even the London docks may have some use for this in the future.

That has been recognised by the Government, because the Minister responsible for sport, on receiving representations from one rowing club, wrote to Lord Greenwood, a letter containing the following paragraph: I am particularly concerned with the impact which this"— that is, the tax— may have on the cost of the smallest classes of boats such a s skiffs and canoes which are used by so many sportsmen and sportswomen, and particularly the young. I sympathise with the view that these craft should not be subject to higher rate, and I am already discussing this with the Chancellor of the Exchequer. I fear very much that my hon. Friend the Minister responsible for sport may not have been successful, although I hope that my hon. Friend the Minister of State may have something to tell us, because this is a very specific and narrowly-drawn amendment which should have universal support from the whole House.

Not surprisingly, there has been a reaction from those involved in the sports. They have been asked why they should be singled out. The answer, of course, is that the tax is easy to collect and is part of a larger Government exercise. The people involved with small boat sailing are not only very law-abiding; they are usually civic-minded. The fact they have been clobbered in this way, perhaps unintentionally, produces an understandable reaction and an "us and them" attitude.

The Government pay lip service to the building of character and the encouragement of healthy sports. I know hon. Members think that I have strong views about the Common Market, but the Minister will not tell us how much this concession costs and I must point out that the Revenue contributes £12 million, from the Treasury no doubt, to support tobacco growing in Europe. I can think of nothing more incongruous than that the Chancellor should put a 25 per cent. tax on these craft without telling us how much money it will bring in and at the same time there is going through the books, unknown to the country as a whole, £12 million to the Common Market for tobacco growing in Europe. We have to pay it whether we like it or not. This is an anomaly which causes distress and a certain amount of justified criticism.

I think it is likely that the Minister will not accept any of the amendments, but I hope that in future when macro-tax changes, like this one or television rentals, come along, he and his advisers will show a little more care, finesse and skill in the way the tax is imposed.

There is probably a case for taxing some of the larger vessels and maybe even the boat building industry as a whole. However, any such amendment should have included some sort of concession for the vessels and people whose case I have put tonight.

Mr. Stephen Ross (Isle of Wight)

I represent a constituency whose livelihood over the years has depended greatly on the sailing industry. I know that my hon. Friend the Member for Berwick-on-Tweed (Mr. Beith) defended the sailing industry during the Standing Committee proceedings, and I will not repeat what he said there.

My constituents are extremely worried about this tax, which will have a pretty disastrous effect on boat builders and the many ancillary industries which depend on them for their livelihoods.

We are proud of our history in sailing generally and the fact that the National Sailing Centre was recently erected on the River Medina. That does not cater for the wealthy. It caters for the people of whom the hon. Member for Newham, South (Mr. Spearing) has just been speaking.

Over the years we have built up an expertise in the building of craft. The present boat of the former Leader of the Opposition, the right hon. Member for Sidcup (Mr. Heath) was built elsewhere, but his two previous boats were both built on the island.

I invite Members of the Government Front Bench, the Prime Minister and the Chancellor of the Exchequer to come to the Isle of Wight during the Summer Recess, if they have time, to see who enjoys the sailing facilities on the Solent. It is not the wealthy but the small people of modest means who are enjoying their weekends, holidays and recreation time.

9.15 p.m.

I would like to quote from one or two letters that indicate what I have beeen trying to say. One comes from Royal Solent Yacht Club, which it is probably true to say does not have among its members many of the harder-up section of the community. It pointed out that: over 2,000 boats started off on line last year and at least 90 per cent. of these fall into the category of those who sail on a very tight budget. About one third of them sail small boats such as Scows or Mirror dinghies. That is a very large number.

The Yarmouth Sailing Club represents what I would describe as the artisan side of the sport which started up only a few years ago. It wrote: Most of our dinghy sailors are young people and from the point of view of maintaining their boats and safety equipment it does not seem right to impose a tax just because they happen to live by the water and are being taught to use it for their sport and leisure. This club has been the happy recipient of a Sports Council Grant, and there is a National Sail Training Centre 10 miles away, it does not make sense to encourage a sport and then tax it extra heavily. Copland Boats, set up with the aid of a grant under the arrangements for rural industries at Ventnor, sent me a letter which says: Since the 1st May when the new tax became effective we have received only one new order and this resulted from an insurance claim so the customer is not himself affected by the tax. We have also received cancellations of orders placed by our UK agents totalling some £35,500 and as you can well imagine for a small firm like ourselves with only twenty-five employees this is disastrous. The island does not receive any Government assistance, but we have always suffered from a high rate of unemployment, and if a firm with even 25 employees closes down, that could have very serious effects on unemployment, particularly in the winter months.

A. H. Moody and Son Limited will have written to many hon. Members. The firm is amongst the biggest yacht and boat builders. It wrote earlier in the summer saying that it had not had a single order since the tax was imposed, and I have received many letters from it since. Naval architects who are resident and established on the island are similarly losing business.

Baron Instruments Limited wrote to me saying: I am sure that as the Member for the Isle of Wight you are fully aware of the problems besetting the industry, and the inevitable results in unemployment and lost sales that we now face. These are the people who make the safety instruments that go on the boats. The world-famous firm of sailmakers, Ratsey and Lapthorn Ltd., wrote to me saying: we would emphasise the very serious effect the imposition of such a high rate of Tax would have on our home sales. These had already declined very considerably due to the general retrogression in the boat-building industry in the past year. Dodnor Marine Limited, a small company up the Medina River, wrote to the Chancellor to say how horrified it was over the tax. The letter said: I would beg you to consider who suffers most in this kind of situation. It is those who do not have a powerful voice. The firm recognises the special financial situation of the country, but it goes on to say: it seems as if our boat-building industry will take a terrible knock from the 25 per cent. VAT". It says that perhaps the Chancellor was justified in having a go at the top end of the market: but even that might be questionable in terms of the suffering imposed on the work force in the Industry. It was suffering enough from the two year restriction on mortgages and most yards have been reducing their labour force because of this, further reductions seem inevitable. Many of these men will simply go on the dole in areas like this. In my opinion they would be better having the dignity of work rather than being a burden on the State. This is one company which specialises in the cheaper types of boat which sell for under £1,000, so that it hardly caters for clients in a rich man's sport.

I would like to go on to deal with the question of safety equipment, although I accept one concession has been made. I have heard from bilge pump manufacturers, but I understand that they are not included in the category of safety equipment. That is one of the stupidities of VAT which can be compared with purchase tax. The 25 per cent. rate applies to properly fitted bilge pumps, whereas portable bilge pumps, which are markedly less effective, attract an 8 per cent. rate.

9.15 p.m.

I now refer to national lifeboat launchings, which is relevant to the question of safety equipment In 1974, 2,659 lifeboat launches were recorded, of which 1,512 were in respect of the rescue of pleasure craft. Unfortunately, 215 lives were lost, 54 from pleasure craft.

We know of the great calls on the lifeboat services and helicopters in the summer when people get into difficulties. It is important that all boats should carry proper safety equipment. We would like the Government to look at the other amendments dealing with safety equipment to see whether their concession cannot be extended over the whole range.

Mr. Monro

The hon. Member for the Isle of Wight (Mr. Ross) highlighted the disastrous mess which the Government have made of the small boat building industry. He was supported by the hon. Member for Newham, South (Mr. Spearing) on the question of recreation. The trouble is caused by the fatal mistake of increasing the VAT rate on boats, canoes and equipment to 25 per cent. The arguments against doing so were ably deployed in Committee. However, no hon. Member, having read the Official Report of the Committee proceedings, could accept the Government's case.

I do not want the Minister of State to say that the Conservative Party is asking the Government to increase public expenditure. We do not call for that. We think that the rate of VAT should be reduced to 10 per cent., in which case the anomalies and hardships would not occur. We have seen the ridiculous position of the Government, who are spending £12 million to deal with tobacco growing in Europe while we are talking about £3 million or £4 million for the boat building industry.

The boat building industry and the activities of shipyards, chandlers and related suppliers, much of whose production is exported, is based on a sound home market. That home market has now disappeared. I was astonished that the Minister of State shook his head when the figures produced by the Ship and Boatbuilders National Federation were read out. Does he not accept those up-to-date figures? There is a definite hush from the Government. If he is not prepared to accept the figures produced by a reputable federation, it is hard to produce arguments to convince him of anything. Those figures show a catastrophic fall in the activity of the industry for orders received, monthly inquiries and employment.

I hope that the Minister will say something about employment. It is no use the Government shrugging the matter off and saying that it is of no significance and that it will right itself in the future. I do not see it that way. Will the Minister give the up-to-date figures? He was unable to do so to the satisfaction of the Committee. That was brought out on 24th June as reported at col. 373 of the Official Report. Hon. Members demonstrated that the Minister of State had made no allowance for the large reduction in sales.

We should like to know what return there would have been this year if the rate had stayed at 8 per cent. and what return is expected from the 25 per cent. rate this year. After the Minister has further reflected on the figures given to him by hon. Members of the fall in production, he will have to work hard to produce figures to convince the House that the increase in tax will have a significant impact on the economy. There is no doubt that it will cause hardship to recreation and employment.

In view of the hardship which is being caused, we condemn the Minister and his colleagues in the Treasury for failing to explain why boats, gliders and aircraft have been chosen for this heavy imposition. Either Ministers have been woefully badly advised by Treasury officials or they are completely out of touch with industry, sport and recreation.

We are glad for the concession made by the Government in relation to safety on certain items. I do not regard it as a concession because the Government should never have imposed those extra burdens in the first place. In Amendments No. 41 and 42 we make a further plea for relief on additional safety equipment for which we argued earlier this evening. I hope that the Minister will also remember that the repair and maintenance of boats are just as important as safety.

The Government are hammering all those who are interested in canoes, sailing, dinghies, kayaks and rowing. Amendment No. 36 covers all those items. The drafting of that amendment was difficult bearing in mind that we had to keep down the size of the boats. We shall be happy if the Minister will say that this matter will be dealt with in another place.

There are large numbers of people, many of whom are young, who enjoy sailing and messing about in boats. Last year 60,000 people went through approved Royal Yachting Association courses. The argument is put forward that many rich people indulge in these sports. Of course there are some rich people who do so, but they are a very small proportion of the total number of people who enjoy all types of sailing.

It is significant that the Minister for sport has not been present either tonight or during the Second Reading debate. I understand that either this week or next week there is to be a White Paper on sport and recreation dealing with the development of opportunities for young people to take part in sports of all kinds, yet the Minister responsible for sport is not present tonight when the Treasury is seeking to make it much more difficult for people to take part in sailing, rowing and canoeing. It does not add up. Either the Treasury and the Department of the Environment do not speak to each other or they are on totally different wavelengths. It is high time that they got together and sorted out plans for our young people. Why does the Sports Council have its grants kept down to the minimum by the Treasury when we know that generally we are trying to develop sport and recreation through all manner of means?

Mr. Denzil Davies

I thought that the hon. Gentleman's party wanted to reduce public expenditure, but he is now asking for greater public expenditure on sport.

Mr. Monro

Good Lord, we have had this argument time and time again. This is a matter of priorities. If the Government want to spend thousands of millions of pounds on nationalisation involving land, oil pipelines and Lord knows what, let them do so, but I want to have another £10 million of the Government's vast expenditure put into sport and recreation. The expenditure of £4 million or £5 million would have taken all the nonsense out of this debate. We are talking about priorities that the hon. Gentleman does not begin to understand. He does not understand where the nation wishes the priorities to lie. It certainly does not want them to lie in the Department of Industry or in undesirable matters stemming from the Department of the Environment.

I pressed on the Government on Second Reading that in high-performance sports such as rowing, canoeing and kayak racing the boats are comparatively expensive. This increase in VAT will be very damaging. In canoeing and kayak racing the boats are battling in difficult water conditions. In white-water racing the casualty rate for boats is high. When a boat may cost £300 or £400, the addition of 25 per cent. VAT is a crippling burden.

The Government claim that they wish to finance the British Olympic Team in Montreal next year, but they handicap the training of our canoeists and others by this tax. It does not make sense. I hope that for no other reason than for the benefit of our youth in sport and recreation, the Government will look again at this ridiculous imposition.

No doubt the Minister will argue about the "large ticket" application of VAT and claim that it is simple to apply it to boats. I hope that by now he has discovered what a rag-bag of anomalies he has produced in the past few weeks. Although we shall welcome the order that will appear on 11th August, I very much doubt whether it will deal with anything more than a small proportion of the anomalies of which we are so critical.

The other amendments are related to aircraft. We have had an explicit explanation of the situation as regards aircraft parts. I hope that the Minister will accept the amendments or take them away for consideration in relation to the total issue, including those matters which lead to the award of a certificate of airworthiness. If everything up to that point was accepted, that would be a further step towards helping the light aircraft industry, an industry which has suffered a heavy blow as a result of the Bill.

We are particularly disappointed that the Minister has not tabled any amendments on the points he promised to look at again in Standing Committee. No amendments have been tabled to deal with gliding. Nothing has been done for solo flying courses. I hope that those matters will be considered again.

Tonight we see a devastating attack by the Government—admittedly, I believe that they acted without realising what they were doing—on the recreational side of small boats, on rowing, on canoeing and on boats up to 10 metres. Surely, in view of the minute amount of revenue that is likely to accrue from these provisions, the Minister will say "We have made a mess of things. Therefore, we shall take the matter back and deal with it later by order".

9.30 p.m.

Mr. Jim Spicer (Dorset, West)

In this debate there has been a degree of unanimity in the House which we have seldom seen in the past year. Everybody will agree with the remarks of the honourable Member for Newham, South (Mr. Spearing) about provision for sport for young people. I personally can vouch for the comments by the honourable Member for the Isle of Wight (Mr. Ross) about the National Sailing Centre. I attended a course held at the centre, and I know that that organisation is short of money. Certainly the increase in rate will mean a restriction of its work.

In my constituency we have an adventure centre which caters for the 30,000 to 40,000 young people a year who undertake short courses. The organisers are under pressure from the Department of Education and Science, and that pressure will grow. The organisation carries out canoeing and small boating, and there is a desperate need for it to continue its work.

I wish to turn to the other aspect of the matter—namely, the employment consideration. This afternoon we heard the Lord President of the Council say in ringing tones that one of the main aims of social policy was to bend all our energies towards ending unemployment. The hon. Member for the Isle of Wight spoke of a firm employing 25 or 30 people, and I am certain that the hon. Member for Southampton, Test (Mr. Gould) could also point to other small employers with that kind of work force in his constituency, which is suffering as a result of these measures.

I can give evidence of one firm in my constituency which is a boat-building concern employing 22 people. In the year 1972–73 the firm's turnover was £68,000, and of that total 19.3 per cent. went for export. In 1973–74 its turnover had increased to £120,000 of which 33.3 per cent. went for export. The firm's expectations for 1974–75 are £136,000, of which half will go for export. But the vital component within that overall export order lies in the fact that the firm must have a firm base and a good home market. The firm has not sold a single boat on the home market since the imposition of VAT, and it will go out of business. It is hypocrisy of the worst order for the Government to lay this legislation before the House and yet impose this levy on a small section of industry which caters for a wide section of people who occasionally wish to enjoy themselves. At the same time, Labour claims to be a party that wishes to keep unemployment down to an acceptable level.

I can also point to other areas of employment in my constituency, such as the caravan trade, in which 25 to 30 people inevitably will lose their jobs following the Government's decision to increase VAT. The provisions of the Finance Bill in this respect are idiotic. I hope that even at this late stage the Government will see fit to withdraw them. They are nonsense, and nobody in the House, apart from the Minister, can accept what has been proposed.

Mr. Ridley

I wish to support what has been said on this amendment. I shall not repeat the arguments, since they stand on their merits—and those merits are extremely good ones.

It is extraordinary that the Government wish to discriminate in this fashion. The hon. Member for Gateshead, West (Mr. Horam) said that a flat rate amounted to discrimination of the Con- servative sort—thus implying that by substituting a 25 per cent. rate on boats and small boats, the tax amounted to Labour discrimination. In other words, both methods were discriminatory and he felt that no system of indirect taxation could be non-discriminatory.

I wonder whether those sentiments would be echoed by the Minister of State? It is extraordinary that there should be discrimination against those who row in boats or who canoe or sail. I shall not make any special argument for these people—my hon. Friends have done it with great skill—but it seems to me to be the most extraordinary idea of the meaning of non-discrimination that a flat rate is discriminating against some groups of people but that to single out this particular category is non-discriminatory.

I shall vote for the amendment—I do not think it will cost very much money—and I want to say why I think it should be made part of the Bill. I suspect that it might be accepted by the House. We have just had an amendment accepted by a majority of two. The Chief Secretary, with monstrous impishness, said that we were trying to increase the borrowing requirement, and that it was humbug on the part of the Opposition to press these amendments when the borrowing requirement would go up as a result.

I do not think that anybody has tried harder than I have over the years to reduce the borrowing requirement of this Government and the previous Government. I remind the House that I and many other hon. Friends have consistently said that VAT should be at 10 per cent. I do not know how many hundred million pounds more would be brought in if the VAT were at 10 per cent.—I cannot remember the exact figure—but, if it is not enough, let us put it at 12 or 15 per cent. I do not mind. I am quite happy to see VAT raised to reduce the borrowing requirement. What I find obnoxious is that the Government should discriminate in this way.

I do not think the Government's argument is fair, and I hope that the Minister of State, whom we all respect, will not use it on this occasion. If we had been able to move, either here or in Committee, to increase the rate of VAT, we could easily have caused the cost of this amendment and the previous one to disappear. We are quite prepared to do that. If the hon. Gentleman will move a recommittal motion and a new financial resolution, I will go back to the Committee upstairs in order to facilitate the increase in the rate of VAT over all items, provided that he undertakes to drop the discriminatory selective 25 per cent.

There is a challenge to the Government. If they accuse the Opposition of trying to reduce taxation and increase the borrowing requirement, let them take us at our word and see if they cannot get our votes in Committee to increase the rate of VAT to 10 per cent., even though it might mean prolonging the Session beyond 8th August. I am not worried about a holiday.

Why were the Government defeated on the last amendment and why will they be defeated on this amendment? We saw the massed ranks of the Left wing of the Labour Party. Some of them even spoke, but none voted. It was not as if the fringe parties were fully manned and voting in the Lobby with the Opposition in the last Division. Neither from Ulster, from Scotland nor from Wales did we have support, though I acknowledge with pleasure and gratitude the support of the Liberal Party on that occasion.

So why were the Government defeated? Was it because of those who wished to increase the public sector borrowing requirement deliberately? Was it because of those who had deep fear and concern for people who are paying television rentals under existing contracts? Or was it because there was some other factor which made Labour Members unhappy to support the Government on this occasion? Could it be that, having had their salaries cut from what Boyle suggested, they thought that they would save some money which could be put to a good purpose, like reducing the VAT on television rentals? I am certain that they would be prepared to spend a little more on reducing the tax on rowing boats, canoes and sailing boats. I am sure that they would feel that this was the case. But what state has Parliament reached if the Government cannot control their own majoriy and get through their own tax law?

This seems to be a moment when we should see the Chancellor of the Exchequer here telling us how we can accept the defeat of his proposals in the Finance Bill on Report.

I believe that this amendment will be defeated. Perhaps the maxim is, as it was in the days of the Roman Empire, that what causes the dissolution of the governing party is when Caesar does not pay the troops. If Caesar has failed to pay the troops more than an increase of £6 a week for four years, he deserves the defeat that he had on the last amendment, and he may be defeated on boats, too.

But I do not claim the aid of the Left wing on this occasion. I rely on the arguments of my hon. Friends and those of the hon. Member for Newham, South (Mr. Spearing) and the hon. Member for Isle of Wight (Mr. Ross), which do not need repeating. But if the Government dare say to us on another occasion that the reason why we pressed this amendment, the one before it and the one to follow it was that we wanted to reduce the rate of taxation and to increase the public sector borrowing requirement, they will not be telling the truth. We have made it clear throughout that we regard these proposals as discriminatory. That is why I shall support my right hon. and hon. Friends if they press the amendment to a Division.

Mr. Tony Durant (Reading, North)

I shall not attempt to equal the eloquence of my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), who put the argument so expertly and explained the underlying feeling of the Opposition about the imposition of a VAT rate of 25 per cent. instead of retaining the 10 per cent. rate which we introduced.

I want merely to support what the hon. Member for Newham, South (Mr. Spearing) said on behalf of the rowing fraternity. I represent a constituency which has three rowing regattas each year. It is the only town which does, and it is a very important activity within my constituency.

I might point out that the people who row in those regattas are ordinary citizens of the area who come very often with their own boats, which they load on to vans. They put their boats into the water, and they row with great enthusiasm. Many go off with cups in great triumph. This is important to our society, and I believe that the Government have not considered this correctly.

In my area there are two waterways, the Thames and the Kennet and Avon. We have been pleading in the all-party Inland Waterways Group for more money for inland waterways. I shall not go into the argument about that other than to say that if the Government had announced that the yield from the 25 per cent. rate of tax on small boats would be spent on waterways, people who row and sail might have said that this was quite a good idea because at last they would be likely to get a few locks open and a little more waterway on which to pursue their activities. But they know that the money will not be spent on that purpose. They know that it will be spent on general Government expenditure. Therefore, I make this special plea on behalf of this group of people who are ordinary citizens wishing to pursue these activities in their recreational time.

It seems extraordinary that the Government have not taken account of the fact that this year in Nottingham we have the world championships taking place on 20th August. It may be that the Prime Minister will be there welcoming everyone to the great rowing function, slapping everyone on the back, eating another strawberry and making the whole thing a wonderful function. If he is there, I hope he will be reminded that a great many British rowers have suffered meanwhile by not having the right boats for what they wish to do. The Olympic Games will be held next year. We have a high reputation in this sport and we have taken away many rowing prizes.

We must understand that the price of the average sculler is about £400. People save up and buy the boats themselves; they are not provided by clubs. With 25 per cent. VAT there is approximately an additional £70, which is a considerable sum.

We are an island race, and boats are part of our great tradition. The. Government have taxed one of the fundamental rights of the British citizen to enjoy his leisure. There have been speeches not only from hon. Members who represent seaside constituencies but from the hon. Member for Newham, South and from myself, who represent the ordinary citizen who wants to partake in this sport. Therefore, I strongly support Amendment No. 36 and hope that it will be passed.

Mr. Denzil Davies

I shall deal first with Amendment No. 35, which is the main amendment relating to boats. I shall then deal with the other separate amendments and Amendment No. 36, to which my hon. Friend the Member for Newham, South (Mr. Spearing) spoke, and the amendments concerning safety and spare parts for aircraft.

Amendment No. 35, which we debated in Committee, would exclude practically all the boats which are now affected by the increase of 25 per cent. VAT. Many arguments have been put forward about why we should accept this amendment. They were put forward in Committee and we attempted to deal with them.

The first argument that I was going to put forward—but I do not think I can put it forward as the first argument now concerned the loss of revenue and the public sector borrowing requirement. I shall come back later to the figure for loss of revenue. Having sat here last night and listened to very good speeches from the Opposition and having been lectured about the public sector borrowing requirement by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), who has now left the Chamber, but who has spoken so eloquently in the past about the need to contain the borrowing requirement, I studied my brief and concluded that the first reason for not accepting this amendment must be the effect on the borrowing requirement, small though it might be in relation to the last amendment. Alas, I cannot use that as the first argument now because the Opposition have shown in this regard, as in others, that so many of their speeches on public sector borrowing and public expenditure are hypocrisy and humbug.

Hon. Gentlemen may moan and groan, but they went into the Lobby on the last amendment and quite clearly voted for a loss of revenue in one year of £90 million and over three or four years of £200 million. They cannot get away from that. They put forward certain arguments, but the House has accepted a 25 per cent. rate of VAT. The Opposition put their arguments against it, but they were defeated. We argued a particular clause and Opposition Members who have made speech after speech about the public sector borrowing requirement trooped into the Lobby to reduce the revenue by at least £100 million in one year. If they have a conscience about it now, I am sorry.

Mr. David Howell

The Minister of State is excellently showing that he can follows in his master's footsteps, but before he allows this distortion to follow many of the others which the Chancellor has so ably established in the public mind without any regard for the true facts, let me make it clear that our proposal to raise VAT from 8 to 10 per cent. would have increased the revenue by at least £700 million. The 25 per cent. rate, which we are totally against, would have increased it by £325 million. It is true that we voted for the cancellation of the vehicle excise duty increase of £270 million, but that would have left at least £100 million more in the revenue than anything proposed by the Treasury.

Mr. Davies

The hon. Gentleman cannot get away from it. The consequence of what he has done tonight is that we have lost that kind of revenue.

Mr. Ridley

If the hon. Gentleman accepts my challenge to move a recommittal motion and a new financial resolution, we will go back into Committee and accept a 10 per cent. rate of VAT.

Mr. Davies

The hon. Gentleman knows that is a bogus point. He spoke about conscience. I detected a faint note of conscience in his speech. After the eloquent argument that he put forward, I am sorry that he went into the Lobby as he did.

Hon. Gentlemen opposite talk about unemployment and the public sector borrowing requirement, but when it comes to the point their votes do not always match what they say.

Mr. Durant

May I remind the Minister that he has not answered his hon. Friend the Member for Newham, South (Mr. Spearing), who asked what the effect on the borrowing requirement was? He did not give the loss of revenue to his hon. Friend who raised this matter and has been trying to get an answer.

Mr. Davies

The hon. Gentleman must give me a chance. I have only just started my speech. I said that I would deal with Amendment No. 36 separately. I am dealing witht the main point now. The Opposition cannot get away from the consequences of what they did on the last amendment.

We debated unemployment upstairs in Committee. I said then, and I repeat, that an increase in indirect taxation is bound to have some effect in the short term on employment in the boating industry. It would be foolish and wrong to try to conceal that fact. However, we deny that the effect will be as great as hon. Gentlemen opposite have tried to make out.

Figures have been mentioned, but hon. Gentlemen did not point out that in the first three months of this year—these figures are accepted by the trade—there was a 40 per cent. drop in orders for boats. That was before the increase in VAT was introduced. Most, not all, of the effect that we are now seeing relates to that 40 per cent. drop in the first three months. That drop in sales, caused by world recession and other factors, is now filtering through to the industry. Therefore, most of what is now happening—the 40 per cent. drop in sales—relates to the first three months of the year before the increase in VAT was introduced.

The hon. Member for Weston-super-Mare (Mr. Wiggin) said that at the beginning of May there was a drop in employment of 31 per cent. He then tried to push up the percentage towards the end of May. That drop at the beginning of May was the result of the drop in sales in the first three months of this year.

Mr. Wiggin

If the hon. Gentleman is right, is it not all the more important that he should try not to hit an industry which is already down?

Mr. Davies

I said that I accepted that an increase in indirect taxation would have a short-term effect. The point that I was making was that the figures which were trotted out showed that most of the drop in employment was the result of the drop in orders in the first three months of this year before the tax was introduced.

I should point out that not the whole of the boating industry is affected. The upper end which is concerned with the larger boats is, and will remain, zero-rated. Exports are also zero-rated. Therefore, we are concerned only about part of the industry, not the whole of it. We are concerned with a labour force of 10,000 out of a total of 30,000. That is not an insignificant amount. We are not talking about the whole of the industry, although I accept that our measures will have some effect on a labour force of 10,000.

I turn next to the yield from the tax, on which we had arguments upstairs. I see no reason to resile from the figures which I gave in Committee. I said that in the year 1974–75 the yield at 8 per cent. was about £2½ million. That is the Treasury's estimate. There are no separate figures for the simple reason that all items were taxed at 10 per cent. and there was no need to separate them. As I said, the Treasury's figure was £2½ million, but higher figures have been given. Indeed, the hon. Member for Horsham and Crawley (Mr. Hordern) gave a figure of £3½ million.

If we take the figure of £2½ million, which is our best estimate; and a reduction of 40 per cent. in the first three months of the year; and, though there will be arguments on it, a further fall of, say, 10 per cent. as a result of increasing the rate to 25 per cent.—hon. Gentlemen mutter, but the trade itself accepts that the total effect will be 50 per cent. and that the 40 per cent. in the first three months and the 10 per cent. drop were the result of VAT—if we apply that to the VAT rate of 25 per cent. for the coming year compared with the 8 per cent., we estimate that there will be an additional yield of about £3 million as a result of the increase to 25 per cent. That is how the figures are arrived at. They are based on our best estimates. The result of accepting the amendment would be a loss of revenue of about £3 million, a small amount of money for Conservative Members.

I turn now to the amendment moved by my hon. Friend the Member for Newham, South.

Mr. Spearing

I am grateful for my Friend's comment, but that amendment was moved by the hon. Member for Weston-super-Mare (Mr. Wiggin). The amendment which I originally tabled was withdrawn.

Mr. Davies

I am obliged to my hon. Friend. I turn to Amendment No. 36, to which he spoke eloquently. I entirely accept that he was concerned with what I would call, in no derogatory sense, the bottom end of the market, that part which is mainly of benefit to youth clubs and local authorities in some cases, and was not concerned with the more expensive items at the top end of the market. May I say immediately that there would be hardly any loss of revenue at all—the loss would be insignificant—if we were to accept Amendment No. 36.

I could not, and do not, rest my case on loss of revenue. Another factor has to be taken into account. If we were to accept an amendment because it involved very little or no loss of revenue, that would be unfair as between one person and another because it would reduce the tax burden on one person and not on another only because no revenue was produced in the one case and a substantial amount was produced in the other. For that reason we cannot accept the amendment.

Amendment No. 43 relates to spare parts for aircraft. We accept that there is difficulty in relation to aircraft because some are taxed at 8 per cent. and some at 25 per cent. Customs and Excise has seen representatives of the aircraft industry. There have been discussions, and I believe representatives of the trade accept that it will be possible to come to an arrangement to iron out some of the anomalies which now exist in relation to spare parts. I do not think there is a very large gap between the trade and Customs and Excise after their recent meeting, and I am hoping that we can go some way towards meeting the objective of Amendment No. 43 as a result.

10.0 p.m.

I deal finally with the amendment on safety equipment, Amendment No. 41. I accepted in Committee upstairs that certain items—echo sounders, compasses and radar sets— could be said to be safety equipment, although they are navigational aids as well. They fall on a narrow line between navigational aids and safety equipment. We accepted amendments on those items, and there will be relief in those three cases.

We cannot go any further. I am not convinced that the other items which it is sought to delete could be described as safety equipment. There are other items which on one definition might be called safety equipment. We can go no further than the concessions which I said upstairs we would make, and which will be incorporated in our order.

Mr. Beith

I accept that the Minister might not wish to accept the amendment, but I hope that under the order procedure he will consider certain items which have been mentioned, such as bilge pumps, which are taxed at two different rates. The trade could put before him specific cases, for which he now has a suitable procedure.

Mr. Davies

No doubt the trade will make representations on such matters. We cannot offer a concession in the Bill on the items the hon. Gentleman mentioned. We shall keep the matter under review, and if a case is presented we shall consider it on its merits.

Mr. Lawson

The Minister has talked about the undertaking he gave upstairs. He half-gave an undertaking on Amendment No. 45 in my name, concerning the private pilots' licences course. Will he say something about that?

Mr. Davies

One either gives an undertaking or one does not, and I did not half-give an undertaking. I said that pilots' licences in general and training courses were a supply of services, and, therefore, were taxed at 8 per cent., not 25 per cent. I also said that there was often difficulty of proof, especially in relation to solo flying to obtain a licence. I added that Customs had come to an agreement with the operators of commercial pilots' licences courses, and that there was little difficulty there.

I undertook that there would be discussions with the people who ran the courses for private pilots' licences, to see whether we could come to the same arrangement. It seems that Customs has now reached agreement with the major course operators, and I do not think that there will be a problem, except perhaps in one or two small cases. Where a person pays one sum for the whole course, one package, the tax will 8 per cent., because he is paying for the provision of services.

We cannot accept the main amendment on boats, because it would involve a loss of revenue. Our figure for that loss is £3 million. I see no reason to resile from that figure. I appreciate that Conservative Members are not concerned about such figures, but they are important for the public sector borrowing requirement, and, therefore. I cannot accept the amendments, and I cannot advice my hon. Friends to support them.

Mr. Nott

I am sorry that the Chancellor of the Exchequer has left, because it would have been instructive for him to remain and witness the poor performance of his Ministers. He would have heard a series of some of the most absurd arguments on the higher rate of VAT put forward again and again tonight.

The debate is the last of many that we have had on the subject of the higher rate of VAT on boats. I hope that we shall achieve the same victory here on behalf of the 2¾ million people who enjoy sailing and rowing as we did on the last amendment on behalf of the 12 million households which hire television sets.

My hon. Friend the Member for Weston-super-Mare (Mr. Wiggin), who—if I may put it in this way—has taken charge of this matter throughout the proceedings on the Bill, made another excellent speech, as did my hon. Friend the Member for Dumfries (Mr. Monro), who pointed out rightly that the Minister for sport has not been here for any of our debates. As my hon. Friend said, the Government are about to produce a White Paper on recreation, yet, on a matter of considerable importance concerning one of the principal sports in the country, the Minister has not seen fit to nut in an appearance. I am not surprised. He must be extremely embarrassed by what the Treasury is doing.

My hon. Friend the Member for Dorset, West (Mr. Spicer) also made a short but excellent speech, and we have had support from the Liberal Party. No one can know this industry better than the hon. Member for the Isle of Wight (Mr. Ross). We have had unspoken support from many Labour Members, not least the hon. Member for Southampton, Test (Mr. Gould). The hon. Member for Horn-church (Mr. Williams) supported us in Committee. The hon. Member for Newham, South (Mr. Spearing) has also spoken in this debate.

We can bring our attack on this measure down to a question: why is it that the Government wish to attack recreation? If they wish to attack recreation through the tax system, why is it that they want to single out sailing, canoeing, flying and gliding, and why do they single out dinghy sailing and canoeing for a discriminatory tax? The absurdity of doing so was illustrated in Committee by one of the many admirable speeches made by my hon. and learned Friend the Member for Dover and Deal (Mr. Rees). I should like to quote two sentences from his speech. He said: why is it that the Financial Secretary can ride out on to the polo field paying 8 per cent. on his saddle, on his bridle, and on his hoots…why is it that the Chief Secretary can go, I think it is, game shooting and pay 8 per cent. on his sporting rifle? Why is it that perhaps you. Sir Stephen"— who was the Chairman of our Committee— may choose to join the Chief Secretary at the coverts side and pay only 8 per cent. on your shotgun and your cartridges?"—[Official Report, Standing Committee H, 24th June 1975; c. 350.] Yet the 2¾ million young people who actually sail a canoe and row for their recreation will have to pay 25 per cent. on their particular hobby. Polo sticks—no; Holland and Holland and Purdy's—they all go free. No, it has to be the canoe, boat and the small dinghy sailors who bear a 25 per cent. rate. But the big game shooters like the Chief Secretary all go free—they just pay 8 per cent. on their sports.

The inherent nonsense of Schedule 7 has been demonstrated again and again in our debates. Apparently, the way the Government have proceeded is to find out those sports and recreations which give the most pleasure, particularly to widows and elderly people; for example, the rental of television sets. They have singled out—for no apparent reason—all the items which will cause the most distress and upset, and put a 25 per cent. rate on them.

I turn to the reply of the Minister of State. He said that we hear too much about the threatened severe unemployment situation in the industry. He said that the industry is concerned with boats that are zero-rated.

Mr. Denzil Davies

I said that 10,000 people are concerned with boats affected by the 25 per cent. rate and the balance are not.

Mr. Nott

The balance of the builders would not be affected because the boats they build are either exported or are fishing boats and, therefore, are zero-rated. The Government seem incapable of understanding that the vast majority of boatyards are building both kinds of vessel. In my constituency in the West Country, which must be one of the largest boat-building areas in the country, the boatyards are not just building a large number of dinghies or boats for pleasure, but the majority are building fishing boats, boats for export and boats for sale in the home market. If we shut down the home market by imposing a discriminatory rate of 25 per cent. VAT on those boats, the overheads of the business will go to pot and it will veer towards bankruptcy.

Mr. Beith

If the boatyards in the hon. Gentleman's constituency are anything like those in my constituency, he will probably find that they used to build fishing boats but are now being dealt a double blow because when the fishing industry is in such a crisis that boats are not being built they are having the only other string to their bow, the only other side to their market, hit in this way.

Mr. Nott

That is probably right, but I should not be drawn into the question of the oil subsidy at this stage.

The Minister of State gave us a number of calculations which had been produced to him about the level of the drop in the trade since the Chancellor made his announcement. I do not know where those figures came from. My hon. Friend the Member for Weston-super-Mare told us that 44 members of the trade federation have resigned or gone into receivership in the last quarter, which is two or three times the number in any previous corresponding period. The hon. Member for Isle of Wight (Mr. Ross) gave innumerable examples. The examples I gave in Committee stem straight from the Ship and Boatbuilders National Federation, which has said that between 1st and 15th June this year—long after the Chancellor's announcement in the Budget—as opposed to the comparable period last year, weekly orders were down by 72 per cent. and monthly inquiries had decreased by 73 per cent.

Where is this figure of 10 per cent. obtained from if it is not obtained from the very people who build the boats? Any hon. Member who has a boatyard in his constituency or has talked to anyone interested in the dinghy-building industry or canoe-building industry must know perfectly well that this measure has brought a very serious crisis indeed to the small boat industry. The number of unemployed in this industry is increasing very rapidly.

We want to bring the debate to a conclusion, so I shall not cover the point on flying and the Government's concessions, although we welcome those. I conclude by commenting on the Minister of State's remarks about the public sector borrowing requirement and its relationship to this amendment.

To hear the Minister of State talking about the borrowing requirement is really like hearing Satan rebuking sin. We have put forward our proposals very clearly and have made it absolutely clear that without the higher rate and with a 10 per cent. rate across the board the Government would have raised more revenue. It is no use the Minister saying that it is perfectly right and proper for a Socialist Government to discriminate against 2¾ million people who enjoy dinghy sailing at the weekends and to help the polo players and pheasant shots, back at the 8 per cent. rate. It is no use his saying that polo is all right and dinghy sailing is not. It is no use his saying that we cannot afford to lose another £1 million, or whatever it is, off the borrowing requirement.

Government expenditure since the present Government came to office has increased by £20 billion—not £20 million but £20 billion; £20,000 million. That

is in money terms. In real terms Government expenditure has increased over t ht. last 18 months by £4,000 million. That is more than the entire defence budget and is approximately the same amount as the cost of the present social security system and the personal health and social services system. That is the amount by which Government expenditure has increased in 18 months.

The Minister of State tells us now that we should not stand up for 12 million people who hire television sets and 2¾ million people who enjoy dinghy sailing. What he should say to his right hon. Friend the Chancellor is this: "Why do we not let these extra 2¾ million people continue to carry on with their sport as cheaply as the polo players and the shooters, and as cheaply as the Chief Secretary during his game-shooting expeditions in Africa during the long Summer Recess? Should not we let them go on having their dinghy-sailing at no greater expense to them? In return, what we should do is not go ahead and spend £1,000 million in relation to the North Sea and £500 million, or whatever it is, on land nationalisation and another several hundred million pounds on nationalising the shipbuilding and aircraft industries".

These are all matters which the 2¾ million people who go sailing most weekends in the summer months do not want one little bit. They simply want to go on sailing and enjoying themselves at the weekend. The Government, who have increased public spending by £20 billion in 18 months, should not tell us that we cannot help the 2¾ million people who want to go sailing at the weekend. That would be a very poor and weak argument.

I must ask my hon. Friends to divide on this amendment, and I hope that we shall have the same number of abstentions as we had on the last amendment.

Question put, That the amendment be made:—

The House divided: Ayes 105, Noes 120.

Division No. 288.] AYES [10.16 p.m.
Arnold, Tom Bottomley, Peter Cope,John
Atkins, Rt Hon H. (Spelthorne) Brotherton, Michael Corrie, John
Bain, Mrs Margaret Butler, Adam (Bosworth) Crawford, Douglas
Beith, A. J. Carlisle, Mark Crowder, F. P.
Berry, Hon Anthony Chalker, Mrs Lynda Dean, Paul (N Somerset)
Biffen, John Cockcroft, John Drayson, Burnaby
Durant, Tony MeCusker, H. Silvester, Fred
Dykes, Hugh Macfarlane, Nell Sims, Roger
Edwards, Nicholas (Pembroke) Maxwell-Hyslop, Robin Sinclair, Sir George
Emery, Peter Meyer, Sir Anthony Smith, Dudley (Warwick)
Ewing, Mrs Winifred (Moray) Mitchell, David (Basingstoke) Speed, Keith
Eyre, Reginald Moate, Roger Spicer, Jim (W Dorset)
Fairgrieve, Russell Monro, Hector Stewart, Donald (Western Istes)
Fisher, Sir Nigel More, Jasper (Ludlow) Stradling, Thomas J.
Gardiner, George (Reigate) Morgan, Geraint Taylor, R. (Croydon NW)
Goodlad, Alastair Morrison, Charles (Devizes) Tebbit, Norman
Grant, Anthony (Harrow C) Nelson, Anthony Temple-Morris, Peter
Grieve, Percy Neubert, Michael Thompson, George
Griffiths, Eldon Newton, Tony Trotter, Neville
Grimond, Rt Hon J. Nott, John Tugendhat, Christopher
Hannam, John Page, Rt Hon R. Graham (Crosby) van Straubenzee, W. R.
Hawkins, Paul Pardoe, John Vaughan, Dr Gerard
Higgins, Terence L. Parkinson, Cecil Wainwright, Richard (Colne V)
Hordern, Peter Penhaligon, David Wakeham, John
Howe, Rt Hon Sir Geoffrey Perclval, Ian Wall, Patrick
Howell, David (Guildford) Powell, Rt Hon J. Enoch Warren, Kenneth
Kershaw, Anthony Rathbone, Tim Watt, Hamish
King, Evelyn (South Dorset) Rees, Peter (Dover & Deal) Weatherill, Bernard
Kirk, Peter Reid, George Wiggin, Jerry
Knox, David Ridley, Hon Nicholas Wilson, Gordon (Dundee E)
Langford-Holt, Sir John Rippon, Rt Hon Geoffrey Winterton, Nicholas
Lawrence, Ivan Ross, Stephen (Isle of Wight) Young, Sir G. (Ealing, Acton)
Lawson, Nigel Rossi, Hugh (Hornsey)
Le Merchant, Spencer Salnsbury, Tim TELLERS FOR THE AYES:
Luce, Richard Shaw, Giles (Pudsey) Mr. W. Benyon and
MacCormick, Iain Shelton, William (Streatham) Mr. Michael Roberts.
McCrindle, Robert
Anderson, Donald Grant, George (Morpeth) Rodgers, George (Chorley)
Atkinson, Norman Hamilton, James (Bothwell) Rooker, J. W.
Barnett, Guy (Greenwich) Hamilton, W. W. (Central Fife) Roper, John
Barnett, Rt Hon Joel (Heywood) Hardy, Peter Ryman, John
Bates, Alt Harper, Joseph Sandelson, Neville
Blenkinsop, Arthur Harrison, Walter (Wakefield) Sheldon, Robert (Ashton-u-Lyne)
Boardman, H. Hayman, Mrs Helene Short, Rt Hon E. (Newcastle C)
Booth, Albert Heffer, Eric S. Short, Mrs Renée (Wolv NE)
Brown, Hugh D. (Provan) Hooley, Frank Silkin, Rt Hon John (Deptford)
Butler, Mrs Joyce (Wood Green) Horam, John Silverman, Julius
Campbell, Ian Hughes, Rt Hon C. (Anglesey) Skinner, Dennis
Canavan, Dennis Hughes, Mark (Durham) Small, William
Castle, Rt Hon Barbara Irving, Rt Hon S. (Dartford) Smith, John (N Lanarkshire)
Clemitson, Ivor Jenkins, Hugh (Putney) Spriggs, Leslie
Cocks, Michael (Bristol S) John, Brynmor Stallard, A. W.
Cohen, Stanley Jones, Dan (Burnley) Stewart, Rt Hon M. (Fulham)
Coleman, Donald Kaufman, Gerald Summerskill, Hon Dr Shirley
Cox, Thomas (Tooting) Kilroy-Silk, Robert Taylor, Mrs Ann (Bolton W)
Craigen, J. M. (Maryhill) Lamborn, Harry Thomas, Mike (Newcastle E)
Cunningham, Dr J. (Whiteh) Leadbitter, Ted Thomas, Ron (Bristol NW)
Davidson, Arthur Lyons, Edward (Bradford W) Tierney, Sydney
Davies, Denzil (Llanelli) MacFarquhar, Roderick Tinn, James
Deakins, Eric Mackenzie, Gregor Urwin, T. W.
Dormand, J. D. McMillan, Tom (Glasgow C) Walker, Harold (Doncaster)
Dunn, James A. Madden, Max Walker, Terry (Klngswood)
Dunwoody, Mrs Gwyneth Marks, Kenneth Ward, Michael
Eadie, Alex Meacher, Michael Watkins, David
Edge, Geoff Mellish, Rt Hon Robert Watkinson, John
Edwards, Robert (Wolv SE) Mikardo, Ian Weitzman, David
Ellis, John (Brigg & Scun) Miller, Dr M. S. (E Kilbride) Wellbeloved, James
Ennals, David Mitchell, R. C. (Soton, Itchen) White, Frank R. (Bury)
Evans, Fred (Caerphilly) Moonman, Eric Whitehead, Phillip
Evans, Ioan (Aberdare) Mulley, Rt Hon Frederick Williams, W. T. (Warrington)
Evans, John (Newton) Newens, Stanley Wilson, Alexander (Hamilton)
Flannery, Martin Noble, Mike Wise, Mrs Audrey
Forrester, John Ogden, Eric Woodall, Alec
Fraser, John (Lambeth, N'w'd) Ovenden, John Wrigglesworth, Ian
Freeson, Reginald Palmer, Arthur
Garrett, John (Norwich S) Pavitt, Laurie TELLERS FOR THE NOES:
George, Bruce Prescott, John Miss Margaret Jackson and
Gilbert, Dr John Radice, Giles Mr. David Stoddart.
Gould, Bryan Richardson, Miss Jo

Question accordingly negatived.

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