§ 6.5 p.m.
§ Lord Annan rose to call attention to the problems facing the production and sale of books, in particular of those read in schools and institutions of higher education; and to move for Papers.
§ The noble Lord said: My Lords, the main reason why I am rising to move this Motion is this. Your Lordships may have seen a kite flying over the Treasury with a streamer inscribed "Why not put VAT on books, newspapers and all publications". When Government fly a kite to see how people react, it seems good sense to ask your Lordships whether you in fact agree.
§ Of course, in theory VAT on books would bring in about £85 million a year in revenue. But against this one must offset the reduction in spending on books in universities and schools; and there would also be a reduction in corporation tax. So the actual yield might be something in the order of £45 million; still, a tempting figure. What is more, our partners in Europe, except for Greece and Ireland, impose VAT on books; so why not grab the money and run? Here are some reasons why not.
§ First, the effect on education would be deplorable. The Secretary of State has made a name for himself by taking practical steps to raise standards in the schools and improve literacy as well as numeracy. We all know, of course, that when local education authorities are cut they react like universities. They take the easier option of cutting the library and book grant instead of cutting yet more staff. They should not, but they do. It is a fact of life. That is why the purchase of books has declined every year and this year has nose-dived into a decline of 16 per cent. If VAT is imposed local education authorities will have to find £15 million more. Could the noble Lord, Lord Lucas, confirm that the Government are not intending to undermine the policy of the Secretary of State for Education to raise standards in the schools?
§ The second reason: English is the lingua franc of the world. Unlike European countries, we have an enormous world business in books. English is the language of computers and information technology. As we export £276 million a year, or 30 per cent. of the product, our publishers are contributing to maintaining the balance of payments. That figure of £276 million is 1 per cent. of Britain's total export of manufactured goods. It is produced by 0.1 per cent. of the British workforce. Why hit such a highly productive industry? Why give away our share of the 946 market to American publishers, who are only too willing to grab it? Increase the price of books and the markets in Europe, North America, the Antipodes, India, South-East Asia and Africa will be wide open to American publishers.
§ This is the third reason. If VAT is imposed it will bankrupt hundreds of small booksellers. It will also add numbers of publishers to the unemployed. The Government make great play of the fact that they encourage small businesses. Well, booksellers are small businesses. Over half of them have a turnover of under £60,000, but they have to stock 7,000 to 10,000 titles. Books are not like groceries, where one can stock only a few brands. Even the largest booksellers who survived would stock still fewer books.
§ There are some arguments one cannot put into figures. There are certain traditions, such as free entry to public libraries and—dare I say it?—to museums and galleries, formed in Victorian times which are grand and dear to those who believe in liberty of thought. The tradition not to tax books or newspapers was not established by intellectuals such as myself bleating in their own self-interest. It was established by a long line of Chancellors of the Exchequer, beginning with Gladstone and continuing with Iain Macleod, Lord Barber, Sir Geoffrey Howe and, as late as September a year ago, Mr. Lawson.
§ At this point I feel somebody tapping me on the shoulder. It is Mephistopheles. Mephistopheles says: "Don't be so pious and po-faced. Don't give us that stuff about great literature and taxing knowledge. Why not tell the truth and admit that vast quantities of what is published is cheap, trashy entertainment, ranging from pornography to do-it-yourself books? If the rest of the entertainment industry pays VAT, why should books be excepted? As for the schools, they would be far better off using a word processor and a Xerox: then at least their textbooks might be up to date. All those great biographies, novels and philosophy you jaw about are simply the froth on the pint of lager—lager which ought to be taxed".
§ Mephistopheles, as we all know, is a devilish clever fellow, but he cannot understand any argument which is not put in pounds and pence. Our culture—not just literature or history, but the way we think of ourselves in relation to our friends, to other human beings and, indeed, to the universe itself—comes to us, even if the images appear on television, ultimately from the written word. How should I live? What is it my duty to do? What qualities matter most in life? Those are the profound questions which men and women can explore adequately only in books. Make them that bit more expensive and it is those books which would disappear. Serious books and magazines with short print runs will become so unprofitable that the sales of popular items will no longer be able to finance them.
§ They will not be able to finance serious literature because the sales of popular books will also fall. Ephemeral books often awaken or satisfy curiosity—the curiosity not only of the young, but of the old: of all those who learn to fill their leisure hours by consulting books, say, on gardening or on angling.
§ "Ah", sneers Mephistopheles, "I see you have avoided saying how the Chancellor of the Exchequer could raise £85 million. I suppose like all intellectuals you think it should be raised by direct taxation to 947 bolster your interests and your ego". Unlike some noble Lords who call for greater government expenditure, while at the same time protesting that they want inflation to fall, I take that sneer to heart. If you must raise more revenue, do not tax books; tax television advertising. I beg to move for Papers.
§ 6.14 p.m.
§ Lord Hardinge of Penshurst
My Lords, it is natural and proper to feel humility and trepidation in addressing this House for the first time. I ask the indulgence of the House.
I must also declare an interest. I have spent most of the last 35 years as a book publisher, working on what has been called the coal-face of publishing—that is, discovering and encouraging authors, and doing one's best to see that their creative work is properly respected. I have worked as an employee for various famous book publishers, though never as an owner or shareholder. I have little detailed knowledge of educational publishing, despite the fact that the company I now work for is a leader in that field. My main concern has been and is fiction—fiction both good and popular. The two very often go together.
Therefore my knowledge is peripheral to the central subject of the debate, though I would suggest that these lines are not, in practice, very clearly drawn. It is perhaps worth noting that books read in schools and institutions of higher education are not necessarily books that were first published as educational books. This is part of the complexity of the whole problem. One has only to mention writers like Thomas Hardy or George Orwell in this context, or in another context authors like Koestler or Solzhenitsyn, to see that the most erudite specialist tome may have a great deal less influence than books first published under the general heading of "entertainment".
To come to the subject of the Motion, it is probably naivety on my part, but I am not quite clear what the terms of the debate mean. The Motion refers to,the problems facing the production and sale of books".It is the word "production" that puzzles me here. When we see the absolute avalanche of new titles being published every year—every variety of book from coloured atlases, encyclopaedias and pop-ups to novels—it is difficult to see who is having problems over production. Indeed, book publishers are always being charged with producing too many books. So I can only register my failure to understand what is intended.
As for the problems of selling books, these are—and have always been—manifold. Indeed, it would be possible to weary the House for hours on the subject. Such valued and established practices as the net book agreement would feature large in any such debate. So I will touch only on one aspect which is clearly relevant to selling books, and that is their price.
It is said that books are expensive, and I agree with this. We are told that the rate of inflation—the multiplier used to measure the great debasement of the pound sterling through which we have lived—is something like 21:1 over the last 50 years. Against even these shocking figures books are expensive. In the case of hardback novels the book that cost 7s. 6d, 948 before the war in likely to cost about £9 now. This is a multiplier of 24, which is not much out of line. In the case of paperback novels, it is much worse. Sir Alan Lane's Penguins cost 6d each. The comparable price now is somewhere between £1 and £2. It is reasonable to take £1.50 as an average, and this produces a multiplier of no less than 60. So books are expensive without any direct blame being attributable to any Government.
This debate is being conducted at a time when there is a great anxiety in the book trade about the possibility that VAT may be imposed on books in the next Budget. There is some very well-informed gossip on the subject and reason to believe there is something in the wind. If the gossip is true—as I fear it may be—we have the suggestion that it is newspapers, magazines and books that are chosen for inclusion, almost as though they had something in common. But really these are very different creatures. A yardstick that trade publishers often use for comparisons of price is the cost of theatre tickets. Another comparison is gramophone records. It seems to me that all these curious associations and comparisons merely serve to stress the fact that books are different. There really is nothing—but nothing—that they can be sensibly compared with.
I return to the question of price. As I have said, books are expensive, but the reasons for this are complex. Book publishing is still a cottage industry in the United Kingdom, and what is more it is extremely competitive. No doubt the normal process of competition will contain these prices and as time goes on reduce them in real terms. It is worth noting too that the profits of book publishing tend to be low compared with most other industries. So the idea of making books artificially more expensive—if such an idea exists—is a very bad one. My argument and submission therefore is that books really are different, as the search for comparisons shows. They are also indispensable—I really do not see how even in this electronic age there can be any argument about that.
On first taking advantage of the immense privilege of addressing this House, I was advised to be both brief and dull. I have had no difficulty in following this excellent advice.
§ 6.21 p.m.
§ The Earl of Longford
My Lords, it is a great pleasure to follow my old friend the noble Lord, Lord Hardinge, making his maiden speech. He was certainly brief, though hardly briefer than the noble Lord, Lord Annan, who said more in eight minutes that perhaps any speaker in this House since the noble Earl, Lord Attlee—who was a very brief speaker—on the subject of Suez. That comes back into my mind now. The noble Lord, Lord Hardinge, was brief, but certainly not dull. It is also a great pleasure to think that he is just beginning his political career at a time when some of us happen to have been excluded from office. I looked his name up in Who's Who , and so far as I can make out he is about 64. Well, there is no harm in being 64. The noble Lord, Lord Donaldson, did not become a Minister until he was 66 and look where he has got to. So, after his speech tonight. I see a very bright future in politics for the noble Lord. Lord Hardinge.
949 I am very glad that I am being followed by another maiden speaker, the son of my old friend—the old friend of so many of us, who was so prominent and so fruitful in this House for so many years. I remember the debate he started on Christian unity; then another one on badgers, and then another one on homosexuality—which became quite a topic, almost an obsession, of his in late years. I remember that debate when Lord Montgomery moved an amendment that the age of consent should be 80. That was the age that Lord Montgomery had just attained himself at the time. I am sure that noble Lords will dwell on further matters as time goes on.
In order to keep well within the time limit, following examples so wonderfully well set, I should like to say clearly that I regard the imposition of VAT on books, if it takes place, as a seriously damaging event in the whole history of the culture of this country. I hope that it will not take place. Curiously enough, the Chancellor of the Exchequer was my pupil. That may not be a great claim to distinction on his part. Of course it is a dangerous point to bring up, because pupils are often quite nasty about their old tutors. I remember Evelyn Waugh had a tutor called Crutwell and as time went on he never wrote a book without bringing in a rather sordid character called Crutwell. So I am not suggesting that my having been the tutor of the Chancellor of the Exchequer will be helpful here.
Now I come to think of it, I should declare an interest as the author and the publisher of quite a few books. I am not a publisher in the league of the noble Lord. Lord Weidenfeld, who has published more than 30 books written by my wife, myself, or two of my children. That shows a broad mindedness on his part which certainly wins my praise. However, I have those connections.
I do not intend to say very much. It has all been said so well in those eight minutes by the noble Lord, Lord Annan. I feel that the noble Lord, Lord Hardinge, dwelt on a very important point when he talked about the cost of books. I have just lately reviewed a very fine book published by the noble Lord, Lord Weidenfeld, The Diaries of Barbara Castle. That costs £20. I got it for review. I would not have been able to afford it otherwise. In case anybody thinks that books are more expensive from that great house than elsewhere, I can assure them that The Diaries of Hugh Gaitskell, published by Jonathan Cape last year, cost £25. These figures are very high. The real point about this discussion is that eventually costs will be driven so high that these books cannot be bought. The noble Lord, Lord Weidenfeld, published the first volume of my wife's book on Wellington 15 years ago and the price was £3.50. So the prices of books have gone up a great deal. There has been a tremendous rise in costs. I am not suggesting that the publishers are doing so tremendously well.
If any noble Lord has a relative who has left behind some extraordinarily interesting memoirs and he goes to a publisher and tries to get this book published, assuming that his relative was not Mr. Gladstone—or even if he were—he will probably find that he is asked to guarantee at least £10,000. And he certainly would not get a book published for that unless there was a good commercial prospect by the firm—the firm that 950 I know best; I do not know about other publishers. So it is very expensive to produce a book. I think everybody has to realise that. We are reaching a point where we are pushing the prices beyond the buying capability of the public. This tax would be the straw breaking the camel's back. It would be a vicious move against the culture of this country. I hope it will be strongly resisted.
§ 6.27 p.m.
§ The Earl of Arran
My Lords, since these are my first words in your Lordships' House, I have particular apprehension this evening, knowing so well the great understanding and compassion that my father showed in this House, not only for his fellow humans but also for members of the animal kingdom whom he loved so much.
In making my maiden speech on Lord Annan's debate, I must declare an interest of a financial nature in a group of central London bookshops. Not unsurprisingly therefore it is on a much discussed and indeed expected imposition of a value added tax on books that I wish to talk. Very shortly, as the first salvo is fired in this anti-VAT campaign, a mass of stickers on cars will be appearing across the country, bearing the message, "Don't tax reading". The surprise and delight that Santa is coming so early this year with such fond messages of generosity and good will will scarcely be able to be contained by the good citizens of Reading.
One of the very real problems on the threat of VAT being introduced in any industry is how best to develop those arguments which will most successfully persuade the Chancellor to divert his attentions elsewhere. In this case, as in all other cases, the bookselling industry is besotted with financial arguments, some of which may be justified but many of which have all been heard before—heard before so often from so many industries which have set delegation upon delegation upon those wearied men at the Treasury, industries convinced of the justness of their case and strong in their determination to resist the ever-hovering talons of the taxman.
The booksellers' plea is not exceptional in its economic arguments. It is my firm belief, however, that if the bookselling industry is successfully to resist this tax, it must assemble arguments which are first and foremost of a nature and appeal that will attract all those in the land who read and love books, and those arguments must be well and truly publicised. The compelling argument is that it is against the national interest. The book trade is, and has been for many years, one of this country's best export earners. In fact, it is the largest exporter of books in the world. Conversely, the domestic market has traditionally never been very strong. If VAT is imposed, our competitiveness abroad would be bound to suffer. In the EEC countries, all other member states saving Greece, levy a tax, with the exception of Ireland, which eliminated VAT because of the considerable damage it did to its domestic publishing and bookselling industry. Unlike this country, most member states employ overall VAT rating ranging between 2 and 7 per cent. Here 15 per cent. is being envisaged.
In the home market, it is an indisputable fact that if VAT is imposed on books, their sales will undoubtedly 951 fall. And what will that mean to our local friendly bookseller? It will of course depend very much on where the shop is. In the more affluent communities the probable result will be an immediate fall-off which is likely to be quickly remedied as those with more disposable income readjust. In the poorer and more remote areas there is very likely to be an immediate and sustained sales decrease which in many instances will probably lead to the closure of that bookshop
Even the smallest bookshops which, by tradition, represent the heart of the quality book trade, carry thousands of individual titles in stock—a wider range than supermarkets normally carry—but are, sadly, supported by relatively small sales. It is so easy nowadays to dismiss at a stroke the closure of the small shop. But are we not terribly aware of all the attendant misery that it brings with it? Not only does it succeed in furthering the disappearance and fragmentation of the community, but it also adds to the costs to this nation as unemployment shows scant signs of abating. Would it not be yet another nail in the coffin of the community? And are we really to let this particular nail be driven home to raise some £80 million to £90 million on gross revenue per annum? The final figure is likely to be very much less.
Furthermore, there are many who believe that such a tax. leading inevitably to even tighter margins than currently exist, could prove a serious threat to the continuity of the net book agreement, with smaller shops being put out of business by larger chain stores. But beyond this community aspect. I believe that there is an even nobler and more important element to be considered which affects us all as individuals and thereby the nation. It is that if this tax is brought to bear, it will be a tax on culture, a tax on knowledge. If, my Lords, you weaken either of these, the logic is simple. Illiteracy will increase. So, therefore, will ignorance which, in turn, leads to a weakened quality of democracy. And are not the edges of democracy already frighteningly frayed?
Can any Government really afford to tinker, however indirectly, with that fragile state, and never more so than today? Do we not all have the responsibility as iron guardians of light and liberty? And can any Government afford to endanger the knowledge of the next generation, to tax the books that our children will need in their schools? Are poor Peter Rabbit and Ba Ba the Elephant to suffer the indignity of a value added tax upon their innocent tails?
The Time newspaper, during the course of the repeal of the Stamp Act in 1855, referred to it,as a tax on knowledge, a tax on good order and good government, a tax on society, a tax on the progress of human affairs and on the workings of human institutions".In closing, I beg three questions. Are we to add to the fast fading status of the community? Are we to imperil that already endangered species, democracy? Are we to levy a tax upon reading and learning and to increase ignorance, all for a few million pounds? I humbly suggest to you, my Lords, that the continuity of a civilised society depends upon these very qualities, that these qualities are above value and are in no need of a value added tax.
§ 6.35 p.m.
§ The Lord Bishop of Chichester
My Lords, it is a privilege to follow the noble Earl and to be the first to offer congratulations to him on his maiden speech. The noble Earl, Lord Longford, has anticipated this by an account of the contributions of the noble Earl's father in this House. I can only say therefore that a great tradition is being maintained. We are helped greatly at the beginning of this debate to have a speech giving us so much informed and sensitive advice from someone who is in a position really to know about the subject. We hope to hear the noble Earl on many further occasions.
I should like to apologise to the noble Lord, Lord Annan, if I have to leave before the end of the debate. There is, I am afraid, an urgent matter with which I have to deal before I go home to Chichester tonight. As noble Lords seem to be declaring interests, I should perhaps also declare an interest as an author, although my half dozen works can hardly rival the family production of the noble Earl, Lord Longford. I should like to address myself to the part of the Motion referring to books, in particular those read in schools and institutions of higher education. I start with the problems created in schools by the shortage of books and the difficulties faced by authorities in finding the money to keep an adequate supply of books used in the classroom. I give an instance, about which I heard only the other day, of a class in a secondary school where 24 pupils were studying French. There were 12 copies available of the book being used. One of those had to be used by the teacher. This meant that there were 11 books available between 24 pupils.
Consider the effect of a situation such as this. First, it means that no books can be taken home to be used for homework. No exercises can be set from the book to be done at home. If it is suggested that the exercises could be photocopied, you run into all the problems of copyright and that sort of thing. This puts an extra burden on already over-burdened teachers who have to work out material for homework to be given to pupils to take away. If this school is one of those, of which, unhappily, there are quite a lot, with serious problems of classroom discipline and order—one hears at first hand of places where there are very serious problems indeed, including filthy language used by pupils, girls and boys alike—then having to share books contributes to the problem. Nothing helps more to enable people to have a pretext for disorder than the sharing of books. This leads on to the whole problem of violence in our society of which the state of things in school is so very much the beginning.
A table issued by the Educational Publishers Council shows that there has been a very big rise in the cost of production in the last 10 years. It also shows that the educational book publishers have done their very best to keep costs down and have indeed kept them below what would have been warranted by the rise in the cost of production. But one really wonders how much longer this can go on and how quickly the situation in schools as regard school books will deteriorate much further.
I should like to move on to the more specialised field of religious literature. There is always a sale for the sensational. The latest theory that Jesus did not really die on the Cross—particularly if it can be linked with 953 some occult movement or some new pseudo— scientific theory—will always find a ready sale, especially if it is put out just before Christmas. But there is also a sale for some of those paper books which are subsidised by fringe organisations.
By comparison, serious theological literature suffers greatly. The market is much smaller than that for books of general interest; hence, the publishers have to print smaller quantities, their costs are higher and the retail prices are proportionately higher. This hits the field of source books and books for background material particularly hard. Those are the books which are essential tools for the student who often has very great difficulty in being able to afford them. This again runs into other areas: the cuts in grants to libraries so that they are less readily available there; and the cuts in grants to students so that they are less able to afford these essential tools.
In preparation for this debate I have been in touch with three religious publishers who all tell exactly the same tale; but I have little doubt that other specialists in minority interests would say the same. Certainly as an historian I have noted how even in that field of much more general interest the cost of source books has risen fantastically and they have become almost prohibitively expensive except where they are subsidised. This must place great hindrance in the way of research and scholarship.
I am told that many booksellers are now recovering from the recession and from the cuts of the mid to late 1970s. But there are already signs that recent increases in production costs are slowing down and limiting that growth in the market. Publishers in some areas—notably education—are exploring new techniques of book production which may quite possibly in time reduce costs materially. But at present, so I am informed, the number of systems available makes this a very hazardous and costly exercise if one invests in expensive equipment only to find that in a very short time it is obsolete almost before it has become operational. It is possible that the position may improve in a few years' time, but at present there can be no doubt that in the whole field of scholarly and educational book production the situation is very grave and is becoming worse. If a tax on books is introduced it will be, whatever anyone says, a tax on knowledge and we should remember that that is something which the country and Parliament rejected as abhorrent even in the crisis of a world war.
§ 6.44 p.m.
§ Lord Weidenfeld
My Lords, let me congratulate the two maiden speakers on their pertinent and thoughtful remarks. I must say that it is heart-warming to be able to welcome two new contributors to future debates on cultural topics, topics which are rarely—perhaps I dare say too rarely—debated in your Lordships' House.
In declaring my interest as a book publisher, I am in good and indeed vast company for the insistent—dare I say?—anguished plea against a departure from zero rating of books, which is not just the reflex action of an endangered vested interest, but one that is passionately shared by the entire literary community of this country: publishers and booksellers, writers and large sections of the public, readers old and young, rich and 954 poor, left and right. They are all joining in a concerted call on Her Majesty's Government to retain and thus respect the status of the written word intellectually as well as materially, thus keeping faith with their own avowed and electorally endorsed programme of making Britain prosperous as well as keeping her civilised. For, my Lords, nothing less is at stake.
Book publishing, as the noble Lord, Lord Annan, has reminded us, is a small industry. It employs around 40,000 people and yet they produce 400 million books each year with a turnover of more than £1.3 billion. At least a third of that is attributable to exports, and books account for 1 per cent. of all our manufactured exported goods. Approximately 75 per cent. of all books currently produced can be considered as educational material. The book publishing industry has had its ups and downs in recent years, with short-lived booms alternating with recessions. The current overall profitability of the industry is well under 8 per cent. The effect on this industry of value added tax could really be calamitous for it would lead to steep rises in prices and concurrent dramatic drops in demand. According to recent impeccable research, a 15 per cent. rise in prices must be assumed and would lead to an equivalent 15 per cent. drop in demand. This would entail a lowering of publishers' profit ——margins to well below 4 per cent.—possibly 3 per cent.—which means (most certainly in the high quality ranges of the industry) certain losses for and the probable demise of many time-honoured names as well as many independent young publishing houses.
The process of polarisation of taste and quality, which has already begun, would accelerate. Polarisation means that in order to survive, more publishers would chase fewer best sellers, cut their lists and play safe. Concessions to scholarship and experiment would become unwarrantable. Authors would face far lower incomes from their works. The risks of nursing young talent would become unbearable. The House of Macmillan proudly stated that Thomas Hardy never made them any money until he ceased writing. It is indeed the pride of any self-respecting publisher to have deliberately in each list "loss leaders", works of scholarship and literary experimentation. Constrict and imperil the publisher; how much scholarship will remain stillborn, how much talent unfulfilled?
A weakened home market—weakened by the imbalance of mounting costs and shrinking sales, weakened by the plight of the bookseller whose margin is even smaller than that of the book producer—also means a drastically weakened export market. It is quite clear that you can only export at an inevitably higher discount rate when your home market is strong enough to serve as a base. But our export performance is not only a tangible contribution to the national total: it transcends its commercial role; it is a manifestation of British civilisation, part of the national ethos and that intellectual influence which sustains Britain's reputation as a cultural great power.
As it is, our share in the world's vast English language market is not unchallenged. The powerful American publishing industry, reliant on its vast home market, has only begun to flex its muscle and discover its enormous world-wide opportunities. I remember that 10 or perhaps even eight years ago American 955 publishers hardly bothered about the world market, or only very marginally. Today they have set themselves the enormously ambitious target to dominate it. Already our outposts in the Commonwealth as well as in the open market are threatened. Do we really wish to endanger opposition further and yield our place unnecessarily?
Let me turn to two related issued issues. What is the fiscal logic of abandoning the zero rate on books? The optimum assumptions of £85 million or even £90 million gained by the tax man are demolished by the inevitable drop in publisher's profits so that perhaps only a fraction could be retained—but at what a loss to the nation! Reduction in staff and investment means unemployment and denial of access to a profession coveted by dedicated and enthusiastic young recruits. It means less output of books destined not only for the general reader or the registered student but also for the large number of unemployed in whose ranks there are many avid readers to whom the book means hope and self-improvement. In this repect value added tax discriminates against the disadvantaged.
The other issue begs a side glance at how others live with value added tax on books. Australia and New Zealand are like ourselves free of that tax. As for Europe, the EEC as such does not press for new legislation in this country. It is true that, of the Ten only Greece and Ireland have zero rating, and that all but one of the rest have a special rate of value added tax which is only a fraction of the standard rate; but these countries, if you look more closely, have different cultural environments and traditions. They have vastly compensating tax advantages or public grants governing all phases of the written word from bursaries to authors, to heavy export subsidies. France, which by tradition can almost be described as an intellectual theocracy with the French language as the supreme being, has a robust system of helping writers and exporting-publishers in an environment in which books, writers and literary prizes are front page news and the furtherence of the French language is one of the great national priorities. In Germany, the home market is solid, the writer fiscally favoured. The Government spend substantial sums on translations from German into other languages and underwrite many books of educational relevance. Even a small country like Holland prides itself on keeping the book business in good shape through Government and municipal subvention. At a time when Her Majesty's Government cuts Arts Council spending on literature and curbs the British Council, it would be unrealistic to seek major redress from those quarters either at home or abroad.
I earnestly hope that even a brief overview of a case that has been amply documented should lead the decision-makers in their current deliberations to come to the same conclusion as those who scrutinised this very problem on three previous occasions. In 1940, a national government retained zero rating on books. In 1957, a Conservative government upheld the decision until 1969 when a Labour government re-endorsed it. It is to be ardently hoped that in 1985 a government which harbours writers and scholars in its midst, which has in your Lordships' House a responsible Cabinet Minister who is a poet and was a don, and a 956 Prime Minister who more than once paid tribute to the book as a civilising force will come to the same conclusion: that a healthy book industry is a substantial factor in the recovery of Britain at home and the retention and renewal of British prestige and influence in the world at large.
§ 6.54 p.m.
§ Lord Roll of Ipsden
My Lords, I should like to join previous speakers in congratulating the noble Lord, Lord Hardinge of Penshurst, and the noble Earl, Lord Arran, on their maiden speeches, both of which augur well for the many future contributions which we hope to have from them in this House. Like some previous speakers, I must begin by declaring an interest, but I hasten to add that it is not a pecuniary one. I am not connected with any business involving books, except account books, but I am honorary chairman of the Book Development Council, which is the export arm of the Publishers' Association, and for some years I was chairman of the National Book Committee which brings together all organisations interested in the book from authors to publishers, booksellers, librarians, and so forth.
Therefore, in what I am about to say I shall confine myself to books and not deal with any other types of publications. This is a short debate and there are still a number of speakers, so I shall endeavour to be brief. But the subject is of such importance that even if I have to repeat some of the points which have already been made, I think that the House will bear with me. As I understand it from the noble Lord, Lord Annan, to whom we are all very grateful for initiating this debate, the purpose of the debate is, if I may put it this way, a contraceptive one: we are trying to deflect the thoughts of the Chancellor—should he have such thoughts—from the idea of imposing VAT on books. I need hardly say that I agree wholeheartedly with what has been said by previous speakers about the special nature of books. As the noble Lord, Lord Annan, said, this is a point which is perhaps difficult to demonstrate strictly scientifically, but I hope it is one which will be accepted by most, if not all, noble Lords in this House.
I also agree wholeheartedly with those who have spoken of the retrograde nature of the imposition of value added tax, the present zero rating on books in my view being one of the more enlightened parts of our otherwise not very glorious tax system. In most countries of Europe, as the noble Lord, Lord Weidenfeld, has just told us in some detail, where incidentally the history of taxes on knowledge is not as gratifying as it is in our country, books already enjoy a special status: in some—unfortunately perhaps not in all—there is zero rating; in many others a special status: a rate lower than the standard rate, and in those countries there is a great deal of evidence that the pressure for introducing zero rate is constantly growing. I believe that the preservation of zero rating in Britain will be a powerful inspiration to other countries on the continent to go along that same road.
In the few remaining remarks that I have to make to the House, I want to concentrate on the economic effects that would follow if the Chancellor were to be so misguided as to make this unfortunate change. The first question to ask. as in all matters affecting taxes, is: 957 what will it bring in? The noble Lord, Lord Annan, has told us that it will bring in of the order of £85 million. I believe that this is the estimate of the Treasury and I have no reason to question it, although I believe that the allowance made for the decline in volume, to which I shall refer in a moment, again is probably too modest and may have to be increased.
In this connection, I should like to remind the Chancellor, through the noble Lord, Lord Lucas of Chilworth, of Adam Smith's famous maxim of the economy of taxation. I take the liberty of mentioning that name in the hope—indeed, in the exception—that it will be received by the Chancellor with respect and approval, unlike the names of many other economists of whom I can think. Adam Smith, in his maxim of the economy of taxation, said that it was important that a tax should take out of the pockets of the people not much more than it puts into the public Treasury.
By that he did not mean only the costs of collection, because he went on to state that a tax that may obstruct the industry of the people and discourage them from certain branches of business would be bad and would offend against this maxim of economy. He added:"While it obliged the people to pay, it may thus diminish some of the funds which might enable them more easily to do so".This is exactly the case that would be found to operate were we to have VAT on books, because in the instance of the value added tax on books, as several speakers have already pointed out, there is first to be taken into account the decline in the yield of corporation and personal income tax which would follow on the decline in the volume of business, to which again I shall refer in a moment, both in book selling and in publishing; and there must also be expected, as a number of speakers have already pointed out, increased pressure for greater public expenditure for universities, students, local authorities, and so forth, as well as the cost of unemployment which would result not only directly in the publishing industry, but would spread quickly through book selling and other branches of industry.
In short, I believe that because of the effect of the, shall we say, lack of economy in taxation by the imposition of VAT on books we probably should not count on more than about half of the original estimate of the yield. I think a number of speakers, including the noble Lord, Lord Annan, have already said that something of the order of £40 million to £45 million may be expected.
Beyond these aspects there are other questions of wider economic effects beyond these immediate commercial and fiscal ones. Here the arguments rest essentially on an economic concept which is known as the price elasticity of demand. This sounds very portentous, but it is really a simple concept. It means simply what effect on demand may be expected from a change in price.
This is not the easiest calculation to make, but some careful calculations have been made for the case of books, and the best opinion that can be obtained on this subject is that books have a price elasticity of minus one, which means that any percentage increase in the price of books can be expected to lead to an equivalent percentage decrease in the demand for 958 books. The noble Lord, Lord Weidenfeld, has given us a calculation of what this might involve through a reduction in sales in its effects on publishers' profits, and so on.
The first effect of such a decrease would of course fall on the suppliers, the publishers, and the booksellers, but it would also fall behind them on the producers; namely, the authors. As always in economics, this is a question of judgment: what is likely to be the reaction of those involved in any change in the circumstances that face them in the data on which their original calculations for their actions have been based?
I shall not attempt to take noble Lords through all the intricate chain of first, second, and third stage consequences that might follow from this decline in the demand for books through an increase in price. But consider the cost structure of publishing—to which a number of noble Lords involved in the publishing industry have already referred—and the structure of publishing and bookselling in our country, as well as the important part played in both by relatively small units—a point which has already been made several times—notoriously always on the margin of viability. Given those circumstances—and I am sure I may make this point with, I hope, some favourable reaction so far as this Government are concerned, given their many public professions in this regard—these industries and these small units both in publishing and in book selling are extremely important because they are, and they demonstrate that the industry is, highly competitive; and entry into this industry is always open.
However, the almost inevitable effect of a shrinkage in the demand in the market would be to concentrate more heavily on the larger units, with a consequent decline in competition in this industry. The effect of a decline would be a reduction in titles published or in print runs, or both, and in a reduction in stocks carried by publishers, but more particularly by book sellers. Let us remember how many highly important books are published, even though publishers know in advance that they will not even break even but will result in a loss, as the noble Lord, Lord Weidenfeld, has reminded us.
I remember clearly that my own publisher, the late Sir Geoffrey Faber, who was responsible for encouraging many brilliant authors, particularly poets, to the greater glory of English literature this century, once told me that his greatest pride was to have published a book which became the standard work on the Italian risorgimento but which sold in the first five years exactly 280 copies. This kind of thing could not happen if the margins are severely reduced because it is the books with more popular appeal which have to carry these works of scholarship.
There is one further point. When one remembers the heavy pressure on the budgets of universities, on libraries—many of which will, incidentally, not be able to reclaim VAT; not all these public authorities and universities are in a position to reclaim value added tax—and the greater responsibility which will therefore fall on students and their parents to provide their own books, just at a time when their own access to public funds for tuition and maintenance is being reduced, the wider powerful economic effects of these consequencies can easily be appreciated.
959 Even exports, which have been referred to several times by previous speakers, are bound to suffer. May I just add to the evidence which has already been produced, particularly by the noble Lord, Lord Weidenfeld, about the importance of book exports to the industry of this country, let alone to culture and, dare I say it, to the political influence of this country in the world. I wish to point out that books are, I believe, second only to Scotch whisky in the proportion of the total output that is exported, which is a considerable achievement and something to be proud of.
Thus even if we leave aside the larger cultural arguments which have been adduced so eloquently in this House this afternoon, in sheer economic terms, in what is nowadays called the cost-benefit equation, it must be clear that the imposition of value added tax would produce highly unfavourable results. Thus the question, "Would such a change be worthwhile?" must, in my view, be answered with a categorical, "No".
§ 7.7 p.m.
§ Lord Howie of Troon
My Lords, I should like to support the noble Lord, Lord Annan, in investigating the kite which has apparently been flown, and to join every other speaker tonight who has attempted to tread on its tail—and I hope successfully. Before I go on I should like to congratulate the two maiden speakers who have spoken today. I wish to congratulate them especially on choosing such a civilised subject to speak upon and on choosing, too, the civilised side of that subject.
Most speeches so far have been fairly general in that they have covered publishing as a whole. I should like to narrow the discussion down for a moment or two to a specific and small part of the subject, the part which is within my own experience, which is the publishing of technical information by learned societies and professional institutions. It is a narrow, small part of publishing, but an extremely important one for a highly technical society such as ours. My experience of this—and I declare an interest here—is gathered in Thomas Telford, which is the publishing arm of the Institution of Civil Engineers, one of our oldest engineering learned societies, with which I have been connected for quite a number of years.
A publisher like Thomas Telford—and there are many others in the other engineering learned societies and other institutions in the scientific world— publishes the proceedings of the Institution of Civil Engineers learned society meetings, the proceedings of its conferences, monographs on the state of the art of engineering, academic treatises, journals and periodicals. They tend also to run a bookshop which sells not only their own publications, but also technical publications—always technical publications—from other publishers.
Publishers of this kind do not have a cushion of popular titles with which to support their learned works. The nearest thing which appears in engineering to a popular title is The Theory of Structures by Pippard and Baker, one of whose authors is a well-known and distinguished Member of your Lordships' House. It is a wonderful and popular book, but it will 960 never be filmed. Books such as this start off by being extremely expensive. Each page is covered with mathematical symbols; there are differential equations, graphs and perhaps other diagrams. Typesetting is extremely expensive, proof reading is extremely expensive, and so these books start off by being dear.
It is made worse by the fact that in the nature of things the demand for a technical treatise is likely to be small. If one published 1,500 or 2,000 copies that would be a lot. This is not the world of Frederick Forsyth with many thousands in hard back and a few million copies in paper back followed by the variety of spin-offs in the film world, television, musicals and things of that sort. These are small readerships, buying very expensive books. The costs are dear for readers who are students, academics, researchers, practising engineers, to all of whom cost is acutely important. Cost is always the key.
Lord Hardinge and Lord Longford both mentioned earlier the price of books. Lord Hardinge spoke of books costing £9 and Lord Longford spoke of books costing £20 or even £25.
§ Lord Howie of Troon
My Lords, I know them both well. I ought to say something, which I hope nobody will listen to—they are both actually too big.
That is perhaps an editorial comment and nothing to do with price. What I wanted to say was that a book costing £9, £20 or £25 would be very much at the cheap end of the engineering spectrum. I will give a few examples. I have brought along a bookshop catalogue to illustrate my comments. Both this House and the other place have recently enjoyed Select Committee reports on acid deposition, populary known as acid rain. Earlier this year Butterworth's published nine volumes of the proceedings of a symposium on acid deposition held in Las Vegas about two years ago. That costs £240. Should VAT be added to that at 15 per cent. that would be another £36 bringing the total to £276. I shall not claim that that set of books is absolutely essential for the study of acid deposition, but it would certainly help.
One of the conclusions of each of the Select Committees was that knowledge of this sort should be disseminated much further than it now is, and how better than through books of that nature? That is perhaps a special case, but in my catalogue here I see that a book called The Handbook of Engineering Economics— which would no doubt appeal to Lord Roll—costs £54. Let us add 15 per cent. to that. I turn the page and I see that Probabilistic Methods in Structual Engineering costs £47.50. Cable Supported Bridge comes in cheaply at £37. The Introduction to the Theory of Thin-walled Structure costs £57.50, and there are many more. So these books are extremely expensive. If one were to add 15 per cent. to each of them what joy would that bring to the mind of a student or a practising engineer or researcher? These books are dear enough as it is and they do not need arbitrarily to be made any dearer.
We all know that many books of that nature will not be bought by the average undergraduate. He will go 961 along to the library; not the public library but the library at his university, college or in his firm. About 40 per cent. of our output goes to libraries of that nature. But in my experience—I think this bears out a comment made earlier by Lord Roll—libraries are an inelastic market. I do not wish to fall into economists' jargon, being an engineer, but my impression is that a 15 per cent. increase in price to a library would be followed by a 15 per cent. reduction in the number of books bought; that effect would be near if not precise, so it would have a severe knock-on effect for the publishers of technical literature.
Technical literature of this sort is essential. It needs to be encouraged; it needs to be supported rather than discouraged. All these institutional publications deal with information and knowledge. In no way do they deal with entertainment, except for very special people who seek their entertainment in strange ways. Information and knowledge are the aims of that body of publications, and a tax on them is a direct and a brutal tax on knowledge. If the Chancellor of the Exchequer has any notions of this kind for his forthcoming Budget, I strongly suggest that he should forget them.
§ 7.16 p.m.
§ Lord Beloff
My Lords, we authors—if I may use a phrase once used by Benjamin Disraeli to Queen Victoria—we authors, who also have to declare an interest as well as the booksellers and publishers, are impecunious and often in search of free refreshment. The noble Lord, Lord Annan, and I drank a glass of wine earlier today at a reception to celebrate the four hundredth anniversary of the oldest continuing publication house not only in this country but in the world—the Cambridge University Press—which since 1584 has not let a year go by without publishing at least one, and nowadays it is very many, books. It struck me then how odd it was to be going on to discuss this misbegotten child of some back-room official in the Treasury who believes that uniformity is more important in taxation than its consequences, either economic or cultural.
The economic argument has been so well dealt with by others that I should like only to add a footnote or two about the impact on schools and universities. As the noble Lord, Lord Roll, reminded us, certain public authorities, for instance, local education authorities, can reclaim VAT. This does not apply to universities. It does not apply to parents, whom we are told nowadays buy some one-third of books which their children use in school; and it does not apply to the independent sector of education, for which Her Majesty's present Government have so often expressed particular affection. This is a tax of a very uneven kind and, as the noble Lord who preceded me said, it is a tax on knowledge.
There is another economic point which I am surprised neither of the two maiden speakers—whom we were very pleased to hear—mentioned in regard to book selling. There is not merely the fact that books will become more expensive, and therefore harder to sell, but the fact that the business of administering value added tax (by which one is made to do the work of the Inland Revenue for it) will undoubtedly be a big disincentive particularly to those small bookshops and 962 small enterprises which one assumes that the Government, to judge from their own declarations, are keen to encourage. I think the argument is not, and should not be, wholly on these economic bases. The economic argument is so patent that I cannot believe that the Chancellor of the Exchequer, who is said to have studied economics, could possibly bring himself even to try to refute it.
There is a much more important argument—and here, if I may, I should like to dissociate myself for a moment from the noble Lord, Lord Annan, who brought in newspapers as well as magazines, periodicals, and books. I do not think that the words "tax on knowledge", appropriate in the 1850s to newspapers, are quite so appropriate in the 1980s. The only form of knowledge that one obtains, as far as I can see, from the publications of Messrs. Murdoch and Maxwell is knowledge of the female human anatomy. And that, although a perpetually interesting branch of knowledge, is a very limited one. But I would, if I may—and it is improper perhaps even to question what a maiden speaker has said—say that the word "magazines" is an ambiguous one.
It is not only of the first importance that books should not be taxed; it is also (as again we have just been reminded from the technical side) enormously important that learned periodicals of different kinds should not be taxed. They have been suffering, quite without the question of extra taxation, very difficult times in the light of costs which have been rising for a variety of reasons with which noble Lords will be familiar. I do not think that it is sufficiently appreciated that, quite apart from this new threat, there has been a major fall in the purchase, by nearly all of our universities and polytechnics and other institutions, of learned periodicals necessary at the moment for their students and necessary for future generations. As anyone who has tried to start a university library (as I once had to) will be aware, if you have missed a number of years in the life of a periodical it is very difficult to recover it. So our universities are already suffering an important blow to their capacity to attract good students, particularly graduate students; our competition with the United States (to which the noble Lord, Lord Weidenfeld, referred in relation to the export of books) is also a competition for retaining brains.
I am also worried, and I think this must have been in the mind of the noble Lord, Lord Annan, when he phrased this Motion, in the deeper sense, in that I think there has been a notable decline in the attraction that books have for the youngest members of our community, for children at the earliest stages. I, myself, think that, by and large—and I shall not go back to our vexed debate of yesterday—television has been an unmitigated disaster; and, in particular, that the facility of looking at a screen—which is a facility easier for a young child than learning an alphabet and easier for the mother than reading to it from books—has been a major educational setback.
We have a higher degree of virtual illiteracy in this country than many educationists like to admit, particularly on international occasions, and some of it derives from the fact that unless children acquire the thirst for books at a very early age indeed, they may never acquire it. Anything which is done which would 963 make it more difficult, not only for schools to buy the kind of books to which the right reverend Prelate referred for use in class, but anything that makes it more difficult for families to have enough books about—a variety of books so that they can try out what is likely to attract a particular child—anything which makes that more difficult would be a major blow to our whole cultural future.
It is at all ends of the scale, from scientific research, which is what we are told is in the end going to enrich us, to the ordinary everyday intercourse of society and politics, that books and learned journals and magazines of different kinds are of very great importance. I find it unimaginable that any Secretary of State for Education and Science could remain for 24 hours a member of a Cabinet which had agreed to a tax of this kind; and I hope that, whatever else the noble Lord who is to reply does after this debate, he will refer both to the speeches of the maiden speakers (who, I think, may be a powerful voice if this subject is ever discussed again) but also will give that opinion which is mine and, I suspect, shared widely in this House, to his noble friend the Secretary of State.
§ 7.27 p.m.
Baroness Darcy (de Knayth)
My Lords, I should like to thank the noble Lord, Lord Annan, for enabling us to debate a subject which is so important to us all. Realising what expert knowledge many of your Lordships have of writing, publishing, of education and of economics, I was initially very hesitant in taking part today. But it is precisely because books are important for everyone that I felt that I should give the view of the ordinary consumer. Books are for people of all ages, and it seems to me that the imposition of VAT on books would adversely affect people at every stage of their lives and particularly those least able to bear the extra cost, which the noble Lord, Lord Weidenfeld, has already touched on. Where children are concerned, any book which encourages them to read is a good thing and we would be doing anything but increasing the standards of literacy by raising the price of books, which are already having to compete, as the noble Lord, Lord Beloff, has said, for children's interests with television and with the computer.
We are told that 6 per cent. to 10 per cent. of the adult population are at present, for all intents and purposes, illiterate and it is a devastating restriction on a person's life and it affects it in all aspects. I am particularly worried about children with special educational needs, especially those with physical and sensory handicaps. The greater a child's physical disability, the more essential it is to develop its mind to the maximum possible potential in order to compete successfully in an adult, able-bodied world; and the more severely-disabled children tend to be in special schools. A considerable number of these are charitable institutions with the local authorities paying the pupils' fees. These schools would not be able to reclaim VAT on books.
University and polytechnic students will be increasingly having problems making ends meet and may be faced with a price rise in books of from 17 per cent. to 25 per cent., which is quite a large sum when, in some cases, we are talking about books of from £20 964 to £30 each or, indeed, as the noble Lord, Lord Howie, has indicated, in some cases a very great deal more. Students may find that university libraries have to reduce purchase still further and that they can even be deprived of some works of scholarship altogether because certain specialist books with a very small market may simply not be published. And this, my Lords, is at a time when we are undergoing a technological revolution and it is very important to produce a generation of highly-qualified, well-trained people.
I do not see that it would be practical to exempt educational books from tax, even if it were desirable. It is quite impossible to make a distinction between what is educational and what is not. It would entail dangerous value judgments being made about the quality of individual books. The dangers of such a distinction, I think, apply particularly to adult education. Just because learning about wine is enjoyable, is it any less educational than studying Arabic or, for instance, applied engineering? We are very fortunate in this country to enjoy such diversity of opportunities in adult education; and none of the hundreds of thousands of people who attend evening classes and the Open University—and we must remember that the Open University has very many disabled students—can reclaim VAT on their required reading materials.
When we look at leisure reading, again that would affect the less well-off: the elderly, the disabled and the unemployed. Many, particularly the elderly disabled, are housebound and very avid readers. Even the more mobile disabled still face problems of access to cinemas and theatres and so they find books very important. A rise in the price of books would be a blow to those trying to cope with the additional costs of disabled life. They might even lose that great boon, the mobile library, if libraries are forced to cut down on their services because of an increase in costs due to VAT.
The unemployed will also be affected. According to the British Journal of Social Psychology, a recent study shows that 31 per cent. of unemployed people read more books, compared with only 2 per cent. who decide to take evening classes and courses.
I find it extraordinary that, at a time when we are being told that we must re-think our lives in regard to work and leisure and what an important part leisure will play in our futures, this tax is even being contemplated. For over 100 years successive Chancellors have rejected taxes on the dissemination of knowledge, as has already been said many times, because they recognised the value of books to this country and the damage—out of all proportion to the revenue—that taxing them would bring. The damage will not only be to the consumer and to education generally; noble Lords have fully and expertly covered the problems of those in the trade.
Although the noble Earl, Lord Arran, in what I thought was a very interesting maiden speech, referred to the problems of the small bookseller, may I just point out how concerned I am too, because the small booksellers cannot cut their overheads any further. They already operate with a minimum of staff and any attempt to cut down further on, for example, publicity 965 would just be pointless penny-pinching. Furthermore, the problems they face with small order surcharges would probably worsen if VAT were imposed because they would be encouraged to cut down on stock coding.
Small bookshops provide an invaluable service. Book-selling is very much a matter of responding to an individual buyer seeking a particular book. As the noble Lord, Lord Annan, said, books really are not like groceries. Larger chain stores just do not give the same sort of service and they offer a much more uniform choice. The imposition of VAT is a very real threat. One of my local bookshops, which was family run, and excellent, was recently sold to a chain bookshop, precisely because the family feared they would not be able to cope if VAT was imposed; so they sold out.
Books are a very important part of a nation—one could almost say they are part of a nation's identity. In Orwell's 1984, all literature of political or ideological importance was continuously altered so that every prediction made by the party could be shown to be correct. Of course, it would be ridiculous to suggest that the imposition of VAT would represent a similar violation of a national asset—although, after the words of the noble Lord, Lord Roll, I am not sure that "violation" is not quite the right word after all. But I do feel very strongly that it would be imposing a serious handicap. It would be particularly ill-judged in that it would affect adversely establishments and individuals already under economic pressure at a time when education and training have never been more important; and it could seriously damage an industry we can be very proud of—all for a relatively small yield to the Treasury. I very much hope that 1985 will not see this come about.
§ 7.34 p.m.
§ Lord Blake
My Lords, I suppose that I too, like the noble Lord, Lord Beloff, ought to declare an interest as an author. I shall be very brief. I should like to express my appreciation of the maiden speeches made by the two noble Lords: they were absolutely excellent and most interesting. I think we should be very grateful to the noble Lord, Lord Annan, for having introduced this subject.
My own view, as your Lordships would probably guess, is that the imposition of VAT would be an iniquitous and retrograde step. The often-quoted words of Mr. Gladstone—and I am rather surprised that they have not been quoted already during the debate—when pressing for the repeal of the pepper duties in 1860 are as true today as they were then. He said:The tax has long stood in evil odour.If my right honourable friend the Chancellor of the Exchequer, who was taught by the noble Earl, Lord Longford—I believe I actually had the responsibility of admitting him to Christchurch myself, although I do not think I actually taught him—imposes a tax of this sort in his next Budget he will be doing something, as noble Lords have already pointed out, which, even in the dark days of 1941, when every penny the Government could get was needed, was not done. The Chancellor of the Exchequer was obliged to withdraw 966 because of the public uproar of the whole nation. And if the Chancellor of the Exchequer does this, he will indeed stand "in evil odour"—and, what is more, for a long time to come. Furthermore, he will stand in evil odour with his own political supporters, just as much as he will with those on the Opposition Benches.
One of the successes of the Conservative Party in the last 10 years is to have captured some of the intellectual ground which for so very long seemed a monopoly of the Left. My right honourable friends, the Chancellor of the Exchequer and the Secretary of State for Education and Science, have themselves notably contributed personally to this success in the intellectual and academic world. But can one imagine a step better calculated to alienate the support of the admittedly largely middle-class, intellectual, reading and book-loving world than the revival of taxes on knowledge? That class in society is really the middle and professional class. It is in any case going to be hit very hard by the latest changes in student grants —something which will affect them and their children most adversely if they go through in their present form.
We are not debating that subject today. I mention it only to suggest to the Government that there are limits to the degree to which they can safely alienate their own natural supporters, if I may use the phrase. If, on top of these heavy charges, and on top of all the cuts that have been imposed on institutions of higher education, books and knowledge are to be taxed, I think that alienation will be very greatly enhanced.
I hope that the Government will be convinced of the merits of the case by the cultural and economic arguments which have been used with such eloquence and so convincingly in your Lordships' House this evening. But, in case they are not convinced by reason and sense, they might possibly be influenced by expediency. The imposition of such a tax will rightly and justifiably incense some of their most loyal supporters.
Perhaps I might conclude by venturing to remind my right honourable friend the Prime Minister of the observation of one of her greatest predecessors, the third Marquess of Salisbury. He was faced with the prospect of legislation which would be bound to annoy, if it went through, some of the traditional elements in his party. One of his colleagues argued that politically such people had nowhere else to go, so it would not matter. Lord Salisbury replied:It is all very well to say that they must vote for you, but they will not work for you and you will find it out in the polls.
§ 7.39 p.m.
§ Lord Donaldson of Kingsbridge
My Lords, certainly it is a very important and wise thing to scream very loudly before you are hurt, and it seems to me that on the occasion of this, on the whole, infinitely enjoyable debate, where there has not been a whisper of difference from the view of the opener, we are certainly making a very loud noise indeed, which I hope the Government will be able to hear.
It seems to me that the reply we are entitled to expect from the noble Lord on the Front Bench whose task it is to reply to this very enjoyable debate will be along the lines of: "This has been an interesting 967 debate: I have thoroughly enjoyed it. I do not know quite what the reason for it was because there is nobody in Her Majesty's Government who has the slightest intention of doing away with the zero rating of VAT". If he says that, then we can go home earlier than we can if he gives other explanations. That is what I look forward to—and look forward to confidently.
All that needed to be said, except for our pleasure, was said by the noble Lord, Lord Annan. It was, I thought, a powerful, eloquent and irresistible opening, and extremely short. We could have left it at that, and then had the answer I have given, and by now we should have all been elsewhere.
But there are one or two points that I want to add. First, it is wonderful to have both a publisher and a bookseller as our two maiden speakers. This shows, to some extent, the cultural level of this House, particularly on the hereditary side, and we are very glad to welcome them both. I noted a couple of points—I always try to notice a particular point in a maiden speech—and I especially liked a couple of the adjectives of the noble Lord, Lord Hardinge. He said that books were both different and indispensable. I do not think that you could describe books better. I think that it was a very good concatenation of adjectives. The noble Earl, Lord Arran, asked: Can any Government afford to tax the knowledge of the future?—and went on to include the future child's book, Peter Rabbit, which was exactly right.
The point about the whole debate is that we are concerned with scientific and educational works, but we are also concerned with reading for pleasure. I want to say very little about the first, because I made a long speech 20 months ago in asking an Unstarred Question about the Government's intentions. I pointed out, in particular, the severe reduction in purchases for scientific institutions, for colleges, for polytechnics, for universities and for libraries. The noble Lord who replied agreed that it was a very serious situation and agreed that there was a distinct downward trend. He produced some figures, which were not quite as ominous as mine, but which were still down all right. I was perfectly certain that nothing whatever would be done by the Government, and nothing has.
But now there is a threat, coming, I hope, not from the Government but from some unnecessary and false rumour that they are going to take some action, but in the wrong direction. They are going deliberately to increase the fall in purchases in these various categories of books; in the scientific books and in the scientific papers, purchases of which are, I gather, falling rapidly in some of the universities, and, of course, in the libraries, too. I am told that the library in Somerset is to purchase no new fiction at all this year. This is a very serious situation. I do not believe that any Government will make it worse and I am confident that we shall have the reply which I have already outlined.
I want to say one word about the books in my life. For the first five years of my life I do not think I used them much, but for the next 72 I have never been without two books "on the go' and this has made the 968 background quality of my life one of general contenment. I admit that it has been a very agreeable life and not a very effective one but at least I have enjoyed myself. Very largely this is because I have always been reading books—some good books, some bad books, some long books and some short books, but always books.
I remember Monty James, that great scholar, coming to tea in the country when I was about seven. My mother, who was a widow, asked in despair, "What am I to do? He will not read anything but Buffalo Bill." Monty said, "As long as he reads, that is all he need do" and he was perfectly right, because althought I have acquired no scholarship, I have acquired great contentment.
Is it not the business of Government to secure the contentment of their people and is not one of the most obvious ways of diminishing that contentment to do what has been suggested today? We have had enough of this. I think I am right in saying that, without exception, we all agree, and I am absolutely convinced that the noble Lord on the Front Bench will give the reply that I have anticipated.
§ 7.45 p.m.
§ Baroness David
My Lords, I, too, should declare an interest, though not a financial one, as chairman of the National Book Committee. I succeeded the noble Lord. Lord Roll, in that job. There could not be a more opportune moment to be discussing books and education. It was very lucky that the name of the noble Lord, Lord Annan, was pulled out of the hat in the ballot for short debates. We have had a debate of very high quality and great interest, brilliantly opened by him. and with two excellent maiden speeches as well.
The debate has been very effective and I sincerely hope that the Government spokesman will think so too. I had a feeling that, in a way, this debate might be rather a re-run of the debate of the noble Lord, Lord Donaldson, in March last year when, as he said, he put an Unstarred Question, asking for an assurance that the fall in the purchase of library books for universities, polytechnics, colleges and public libraries would be halted. Today we have a similar but a wider theme, and we have had a wider cast to take part, with a different prologue and epilogue.
I must confess, I am disappointed that the noble Earl, Lord Gowrie, is not responding to this debate, as his position of Minister for the Arts and Libraries and spokesman on tax matters in this House would appear to make him the obvious choice. This is absolutely no disrespect to the noble Lord, Lord Lucas, who is responding, and I hope that he has found the debate educative.
But having first thought that there would be a lot of similarities, when I considered the situation a little more I realised that there have been quite a lot of differences between March 1983, when we had that last debate, and November 1984. I saw three reasons for the difference, the first of which is the students and their new situation. I would say that their ability to buy books is likely to be seriously curtailed as a result of the recent announcement on grants. Many more students will depend on a parental contribution, which may or may not be paid. In 1982–83, 47 per cent. of students 969 did not get the contribution that was expected. The grant is being increased by less than the rate of inflation—and this after it has declined in real terms by 10 per cent. since this Government came to power.
If there is a shortage of cash, book purchase will inevitably be affected and reliance on university and college libraries will be greater. And what has happened to the libraries? The National Book League survey on library book spending in universities, polytechnics and colleges from 1978 to 1982 showed that in universities there was an effective reduction in real expenditure on books and periodicals of over 19 per cent. per student. In the polys the story is even worse; there was a 29 per cent. reduction. The importance of journals to scientists need not be stressed here and the noble Lord, Lord Beloff, has mentioned this. It is significant that university libraries cancelled, on average, 350 subscriptions to periodicals and journals between 1980 and 1983. How do the Government think that our scientists, on whom we depend for inventions, can keep up?
My second point is on new Government legislation and local authority expenditure. In 1983 school books had "a disastrous year", so the Education Publishers Council reported last August. Already, in the first half of this year, school book purchases have fallen by at least 16 per cent. in real terms. The Secretary of State is doing a grave disservice to education when he says that additional cash for teachers' salaries will have to come from school book funds. The 1944 Act makes it clear that the provision of books and equipment is an entirely different responsibility from that of providing teaching staff.
The effect in the schools is all too apparent from HMI reports. I quote from that published in May on primary education, which states:There was a need for many pupils to be provided with more demanding reading and to use books more regularly as a source of information and pleasure".On secondary education it reads:In most lessons the teaching methods did not encourage individual learning and the poor supply of text books and inadequate library provision militated against independent study".The latest HMI report on Norfolk was damning:Each of the schools visited was short of textbooks…There were instances of the inappropriate sharing of books…The book shortage restricted teaching methods, resulted in too much reliance on school-produced reprographic material and reduced the opportunities for pupils in their secondary years to learn to use books".In the three lines on education in the gracious Speech, we heard that educational standards were to be raised. How does the Secretary of State think that that can happen if the basic tool of knowledge and learning, the book, cannot be supplied to the pupil?
I understand that the analysis of expenditure on books by shire county libraries in 1983–84 will show that the shrinkage of book funds will mean that it will now take from six years at best to over 20 at worst before current stocks are wholly replaced. The noble Lord, Lord Donaldson of Kingsbridge, mentioned that Somerset is buying no fiction books next year. The sad situation in local authorities which I have outlined can only be made worse when the Rates Act brings in rate capping, penalties, claw-back and so on.
970 My third point, and most alarming, is the threat of VAT. It is as yet, mercifully only a threat. I hope our debate can help to influence the Government against imposing it. Many noble Lords have given very good accounts of what the consequences would be. I need not repeat them. However, I would add two observations: one about the unemployed which has already been mentioned by the noble Baroness, Lady Darcy (de Knayth). Research at Sheffield University shows that when people become unemployed, 48 per cent. read more newspapers, 31 per cent. more books, 13 per cent. more books for study. This compares with only 2 per cent. who say they have started going to classes or courses.
The evidence shows that the unemployed turn to reading as a major means of occupying their enforced leisure to some purpose and that books provide their major source of self-help and retraining. For a Government which profess to believe in self-help and retraining and which deplore the "nanny" state, a tax on the books of the unemployed seems curiously inconsistent.
My second observation concerns the publishers and booksellers, the channel by which all books reach the public. Publishers are already facing a good many difficulties arising from the shrinking of their markets as a result of the factors to which I have referred. In addition, the copyright laws are out of date and are constantly being infringed. Photocopying is widespread and books are widely pirated in many countries abroad. For all these reasons, publishers' margins are being reduced. They could not possibly absorb the cost of VAT in their prices, and increased prices must inevitably further damage sales in a vicious spiral. Some publishers must go under. Those who remain will be less innovative and experimental, just at the time when new examinations and a change in emphasis are to be introduced into our educational system.
Booksellers, especially the small booksellers, who provide advice and an exellent service to their local communities—something which is not available, as the noble Baroness, Lady Darcy (de Knayth), said from supermarkets—must suffer in the same way. I shall quote from a letter from a Cornish bookseller:If the Chancellor imposes VAT on books he will be directly responsible for forcing me out of business. My turnover is too small to make me eligible for registration, so any VAT I pay is unreclaimable, as is probably true of most booksellers in Cornwall and other outlying parts of the country where we endeavour to serve the small communities. Trade terms are between 25 and 35 per cent. discount, already breadline stuff. Any further erosion would be the last straw and make me part of the unemployed statistics, though I would then be better off".I am not here to plead for the book trade. There is a good economic case to be made out against VAT on books and it has been made by many other noble Lords. But it is the educational case that I would emphasise. If this tax were to be imposed, a tax which could only be passed on to the customer, it would increase to alarming proportions the damage to the education and culture of our country, already inflicted by the other factors I have mentioned.
Twenty-two years ago my husband was giving evidence for the publishers in the Restrictive Practices Court, pleading—successfully—for the retention of the 971 net book agreement on the grounds that "books are different". I did not think that all this time on I should be making the same plea; but I am, because without books, or with fewer and less adventurous books, the whole intelligence and intellectual drive of this country would be impoverished. Books are different.
§ 7.55 p.m.
§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)
My Lords, first I must thank the noble Lord, Lord Annan, for putting his finger, in a very exciting and racy eight-minute speech, exactly on the point which he failed to make in the Motion on the Order Paper. With one notable exception, all noble Lords who have taken part, in a most interesting and sometimes amusing way, in the debate have concentrated on one element: tax. I shall deal in a moment with tax. Believing that this might be the case, I decided to take the opportunity to look at the latter part of the Motion; namely, those books which are read in schools and institutions of higher education. Therefore, I shall use most of the time allotted to me, perhaps to the disappointment of the noble Lord, Lord Donaldson of Kingsbridge, to examine what is happening and what is being done in that connection before I turn to the narrower but undoubtedly important tax issue.
Before doing so, I wish to endorse the warmth of the congratulations to my two noble friends, Lord Arran and Lord Hardinge of Penshurst, on their maiden speeches. Is it not odd that both maiden speakers come from the world of book publishing and that, with the exception of two speakers, all noble Lords who have taken part in the debate are directly concerned with book writing, book publishing, book selling, book making and other related activities? It is that which makes your Lordships' House so unique. Tonight we have heard from the experts.
The noble Baroness, Lady David, regretted the fact that the noble Earl, Lord Gowrie, would not be replying to the debate, since he is the Minister responsible for the Arts. Perhaps my noble friend Lord Gowrie might have answered the questions relating to tax on books. However, I take comfort from the fact that the noble Lord, Lord Howie of Troon, and I are the two engineers who have taken part in the debate. We are not ashamed of that, are we?
§ Lord Lucas of Chilworth
My Lords, the Government fully appreciate the unique contribution made by books to the social, educational, cultural and even the political life of this country. Several noble Lords referred to this aspect. This point has been made on numerous occasions. When my noble friend Lord Swinton replied in March of last year to a debate in your Lordships' House, he spoke of the importance for the wellbeing of this country of an adequate level of provision of books in universities, colleges, polytechnics and public libraries being maintained.
The Government have consistently made it clear that they would like the overall spending per pupil on 972 new books in schools to be increased. I am aware that there was a decline in the expenditure on books in 1980–81. However, the Government responded immediately by making allowances in successive rate support grant settlements for increased expenditure per pupil on books. This indicates how important we believe it to be that there should be adequate book provision in our schools. That probably answers in a nutshell the specific if perhaps rhetorical question which the noble Lord, Lord Annan, addressed to me at the beginning of his speech.
In fact, in 1982–83 there was a significant increase in local education authorities' provision for new books per pupil in England. That was nearly 13 per cent. more in primary schools and 10 per cent. more in secondary schools. Overall, expenditure per pupil returned to its 1978–79 level. The Government are not complacent. The annual report of Her Majesty's Inspectors of Schools on the effects of local authority expenditure policies on education provision in England in 1983, which was published in May this year, confirms an improving situation but states that current levels of expenditure need to be maintained or improved to get provision to an acceptable level generally. I hope that all local education authorities, whose responsibility this is, will take heed of that message.
We do not have the expenditure figures on books for 1983–84. No doubt the noble Baroness, Lady David, can tell me where she obtained her figures; we do not have any, and so I am not able—
§ Lord Lucas of Chilworth
My Lords, I am obliged to the noble Baroness for that information. The council will have to send me a copy of those figures because, I can assure her, I do not have them. We are quite optimistic about continuing improvements, and the Government's plans for the current financial year made allowance for further improvements in provision of books—provided of course that local education authorities contain their costs. Looking ahead, if they can contain costs and make savings in certain areas—caretaking and cleaning are two that quickly come to mind—then there is scope within the Government's plans for local authority expenditure on education in 1985–86 for more to be spent on books per pupil compared with even the 1982–83 levels.
It is of course up to local authorities to determine their own priorities for expenditure within the limits of total expenditure set by the Government. We do not dictate how they should spend the sums available to them.
I will deal briefly with the question of universities. Government funds for universities are made available, as noble Lords will recall, on an annual basis in the form of a block grant. In 1982–83, university expenditure exceeded more than £1.8 billion, of which more than 80 per cent. was provided from public funds. That money goes to the University Grants Committee. The Government have consistently made clear that universities must expect to operate with a high degree of economy and efficiency in their public expenditure plans. Nevertheless, when particular 973 needs have been identified—for example, new blood lectureship, information technology and equipment— additional resources have been found. It is a matter for the University Grants Committee to decide how the grant available should be distributed.
The Government endorse the importance attached to book purchase by the University Grants Committee as recorded in the chairman's grant allocation letter of February 1984, in which he states:The committee consider it important that all universities should seek to maintain expenditure on departmental consumables and on book purchases at levels which maintain the health of both the research and the teaching function.".I am pleased to note that with the objective of making better use of what resources are available, the Standing Conference of National and University Libraries is working well to improve co-operation and collaboration between those libraries and to ensure that their policies are matched. I know that there are many other formal and informal arrangements between library services.
Before I leave the subject of book provision, I will touch on the public library service, which is still the envy of the world. In the financial year of 1982–83, total expenditure by public libraries on books was nearly £60 million. That was 12 per cent. more than in the year before. That represents about one-third of this country's total public institutional spending on books —a proportion which has been steady now for some eight years or so. That has to be seen against a background of increasing expenditure by libraries on other essential items such as sound and video recordings and the staff needed to support the services.
§ Lord Donaldson of Kingsbridge
My Lords, if the Minister will allow me to intervene, does not the figure he has given of a 12 per cent. increase fail to take account of the fact that the price of books has, I would say, gone up a good deal more than that?
§ Lord Lucas of Chilworth
My Lords, I shall come to the price of books and I believe that I shall be able to contain the question asked by the noble Lord in my comments then. I was going on to say that it had to be seen also against a background of the libraries' purchasing power due to the relatively high level of inflation in book prices compared with the general retail price index. This has been particularly noticeable in the case of some very specialised material.
We have heard from my noble friend Lord Hardinge, in his maiden speech, about some elements of cost. He expressed some disappointment that costs had risen so high. Quite fortuitously, I was talking a couple of days ago with a publisher of technical publications. I was surprised to learn from him the breakdown of the retail cost of a book and how, in his particular sphere, so little of the retail price actually goes to the author and how much goes in distribution and wholesale margins. Perhaps the industry there might take note of the concern your Lordships have expressed with regard to the price of books.
Certainly, publishers' input prices—paper, wages, and so on—have risen recently, but there is no doubt that publishers appear to have achieved some enhanced margins in 1983 and in the first half of this 974 year. One has heard this evening figures ranging from 1.9 per cent. to 4.9 per cent. and 8 per cent., and I have heard a figure as high as 10 per cent. mentioned as the gross margin. There seems to be some divergence of opinion within the industry as to the level of profitability it has enjoyed. I do not quarrel with that at all because in a free enterprise system, with free competition, such is to be expected. But I would not want the industry to cry in aid poor profit records against what they have been doing throughout the course of your Lordships' debate.
In respect of public libraries, we should not forget that one other way the Government encourage the wider availability of books and stimulate the reading habit is the public lending right system established in 1979. Parliament allocates a sum—currently £2 million—which is distributed to authors proportionately to the number of times their books were lent out. The first payments were made in February this year. The sum involved was £1.5 million, and that was distributed to more than 6,000 registered authors.
Before answering specific questions, I come to the note I have about taxation. Much has been said—everything has been said, I should think—about the damage that might be caused if VAT were to be imposed on books and on learned journals. I know that there is much concern in the media and elsewhere about the speculation that VAT will be imposed on reading matter. In all seriousness, I have to say that that is all there is to it; it is speculation. It is fed from a variety of sources and is worked up by those who foresee the dangers and the implications of VAT.
All your Lordships will appreciate that Treasury and other Ministers are receiving many representations at this time on this very topic, and your Lordships will be aware that a number of campaigns are being organised. In response, my right honourable friend the Chancellor of the Exchequer is making it quite clear that the Government are committed to a shift in the burden of taxation from taxes on earnings to taxes on spending. This does mean that the indirect tax base may have to be further extended so that income tax can be further reduced. The Government have no set views at present on how this might best be done and all representations are being carefully considered.
Since all bar one noble Lord has spoken on this VAT issue, I cannot deny my noble friend Lord Beloff his appeal. Yes, I will ensure that my right honourable friend the Chancellor of the Exchequer is made aware of the content and feeling of the speeches made in the debate this evening.
§ Lord Beloff
My Lords, it was to his right honourable friend the Secretary of State for Education and Science that I asked my noble friend the Minister to convey this message. It seems to me that in the Cabinet he, above all, is responsible for books.
§ Lord Lucas of Chilworth
My Lords, let me give my noble friend a double assurance. Both my right honourable friends will be made aware of the noble Lord's feelings in this matter.
Turning briefly to one or two of the major points that have been made to which I think I should 975 respond, my noble friend Lord Hardinge spoke of the publishing industry's contribution to the economy. I cannot, of course, deny that. He mentioned some figures and I would not deny those. Certainly my figures indicate that the publishing industry employs around 40,000 people, producing around 400 million books a year. I sometimes think that 53,000 new titles a year is perhaps a rather extravagant usage of its resources when one compares that to the level of 40,000 titles barely five years ago. Certainly of the turnover of £1.3 billion last year there was a considerable contribution to our exports.
The noble Lord, Lord Weidenfeld, spoke briefly and mentioned subsidies in other countries. I suggest to him that there are many United Kingdom publishers who would not perhaps welcome government subsidy because they would probably feel that government subsidy would bring unwelcome controls, investigation and the like. So perhaps it is best that they restrain themselves in calling for subsidies which might have an effect adverse to what they would like.
The noble Lord, Lord Roll, and others, including the noble Baroness, Lady David, spoke about parental contributions. I do not want to get too deeply into that tonight but it has long been a tradition in this country that parents have voluntarily raised funds for schools and have supported their children in various and different ways. The Government welcome the way in which parents so generously demonstrate their support in children's schools, always provided that such support is given on a genuinely voluntary basis.
My noble friend Lord Beloff and the noble Baroness, Lady David, referred to expenditure in schools. My noble friend spoke particularly, as did other noble Lords, about the importance of getting young people (I think they were talking about the very young) to start reading at an early age and emphasised its importance in those early school years. I remind the House, to put the matter in perspective, that in 1978–79 primary school purchases of books in pounds per pupil—I take these figures from the Publishers' Association—was £6.2. The following year it was £6 and the next year £6.2. In 1981–82 it was £6.2 and in 1982–83 it was £7 per pupil. All those figures have been adjusted to 1982–83 prices. Therefore, there has been, particularly in that area, a fairly sharp increase.
I do not think there are other outstanding points on which I should comment. The noble Baroness, Lady Darcy (de Knayth), said she was amazed that there should be any contemplation of a tax on books. I do not know where the contemplation comes from, but I think I have answered that point in my earlier remarks.
In conclusion, if I had to say any one final thing to encapsulate what I have been trying to say tonight, it might well be this. Books do, and we acknowledge it, occupy a special place in the life of the country and in the daily lives of individuals. In an ideal world there would be no limit on what we as a country could spend on providing books for our children, students and those who choose to use libraries, wherever they are. But we do not live in a perfect world. Books have to be paid for along with all the other things that society also deems essential. Despite resource levels and limits, 976 those making the purchasing decisions have to assess priorities for expenditure. Nothing the Government are doing requires those decisions to affect book provision adversely—quite the reverse. The Government have repeatedly stressed the importance of adequate book provision across the whole educational spectrum and I hope that that message is not only being received but, more important, is being acted upon.
§ Lord Annan
My Lords, I rise simply and solely to thank all noble Lords who have taken part in this debate tonight and particularly our two maiden speakers. I am afraid that I have to convict the noble Lord, Lord Hardinge of Penshurst, of an inaccuracy. He was certainly brief but he was far from dull and I very much hope that we shall hear his expert knowledge and that it will be at the disposal of the House in future.
As for the noble Earl, Lord Arran, I cannot help remembering that it was 19 years ago that I made my maiden speech on one of the Bills which his father introduced into this House and which led to the reform of the law on sexual offences. It is a measure which will always be associated with the name of Arran. I am greatly honoured therefore that the noble Earl made his maiden speech tonight. Our names sound so alike that I can now look forward to receiving his mail as indeed I did in times gone by when I received many letters on the subject of badgers which were very near also to the heart of his father, who did his best to protect them.
May I also conclude by thanking the noble Lord, Lord Lucas, for winding up for the Government and simply say that I beg leave to withdraw my Motion.
Motion for Papers, by leave, withdrawn.