GROUP 14—CHILDREN'S CLOTHING

HC Deb 16 May 1972 vol 837 cc246-471

Item No.

1. Footwear of a kind suitable for children.

standing in the name of the right hon. Member for Leeds, East (Mr. Healey) and the names of his hon. Friends.

Mr. Healey

Amendment No. 33 is the first of a series intended to lift the burden of value added tax from the most vulnerable and deserving sections of the population—the children, the sick, the disabled and those who work in dangerous trades. The Chancellor proposes to tax goods used by these persons which are essential to their life or their work, and we propose to remove the burden.

This is the first time in our history, as far as I have been able to discover, that any Government have proposed to tax children's clothes and shoes. Even Sir John Simon, when he introduced the purchase tax in May, 1940, in what was undoubtedly Britain's darkest hour for many centuries, refrained from imposing it on children's clothes and shoes, and it has taken a Conservative Government in 1972–32 years later—to break that precedent.

There are two issues which I think require examination. The first is the needs of the revenue, which are of concern to the Chancellor; the second is the needs of the consumers and, in particular, of those consumers who represent the most vulnerable and deserving sections of our population. I shall seek to show that the needs of the consumers and of the revenue can both be met by a concession on this issue.

First, I deal with the problem of the revenue. So far on almost every single debate we have had on this Bill the Chancellor has refused even to consider any concession on the ground that any concession on zero-rating of value added tax would be the thin edge of the wedge, would lead to further concessions and to the whole collapse of the structure of the tax. But this really cannot be argued on children's clothes and shoes because every previous Chancellor, whether Conservative or Labour, has had no difficulty in relieving children's clothes and shoes of tax even when he has imposed tax on clothes and shoes of adults.

I think that at this moment the Chancellor must be deeply worried by the sluggish response of consumer demand to the temptations he laid before it in his Budget, and that he might well consider relieving the children of this tax without requiring any compensating action elsewhere in the Bill. But if he is not prepared to go so far, let me suggest to him that he could do what he has already done with motor cars—to other goods which were previously subject to the higher rates of purchase tax, like fur coats, jewellery, perfumes and consumer durables. That is to say, he could perfectly well take the opportunity of the Bill to add to such goods a tax in addition to the VAT. thus restoring the purchase tax rate which they bore in 1970.

The figures are exceedingly interesting. In 1970 goods chargeable at the two highest rates of purchase tax brought in about 60 per cent. of the total yield of purchase tax in that year—some £789 million; yet on the same volume of these goods VAT would bring in only £202 million. I concede—and no doubt the Chancellor is banking on this—that consumption of these goods is likely to rise somewhat if the tax falls, but it is inconceivable that it would rise enough to produce a yield of VAT capable of bridging the gap of £587 million. If the Chancellor wants to recoup the money which he will lose by relieving children's clothes and shoes from tax, he can do with furs, perfumes and other goods previously in the highest rates of purchase tax what he is proposing to do with motor cars. There is no technical problem there whatever. The question is simply one of social values and humanity, not of the needs of the Revenue.

I turn from the needs of the Chancellor to the needs of the consumer. The Prime Minister at least is now deeply dedicated to the needs of the consumer. He has been telling us almost nightly for the last few weeks that he believes it is his job to represent the needs of the consumer—at any rate in discussions with the trade unions and in matters of industrial relations. But, however tender he may propose to be to the consumer when he is clobbering the unions, his whole tax policy is devoted to clobbering the consumer.

The parents of large families constitute the poorer sections of our population. The family expenditure survey of 1970 showed that the average family with three children was spending £1.06p per week on clothes for their children, 70p per week on footwear and 30p per week on hats, caps, gloves and other clothing material, of which about 52p was spent on the children. In other words, in 1970 the average family of three, according to the statistics collected by the Government, was spending an average total of £1.58p a week on children's clothes and shoes. As we are all too conscious, in the last two years there has been a staggering increase in the cost of living, but, nevertheless, a small increase in the volume of sales of clothes and shoes which adds altogether about 20 per cent. to the average expenditure of a family of three. Today the average family with three children is spending £1.90p a week on children's clothes and shoes, and, as a result, unless the Amendment is carried that family will be paying an extra 19p a week in VAT from April next year.

Mr. A. E. Cooper (Ilford, South)

What would the same family spend on bingo each week?

Mr. Healey

The hon. Member for Ilford, South (Mr. Cooper) would be doing his duty to his constituents a little better if he took seriously the family lives of our citizens.

A family with three children is liable to have to spend 19p a week extra on children's clothes and shoes from next April unless the Amendment is carried. On the same basis, a family with two children will have to pay 13p extra a week in VAT as soon as the Bill comes into operation.

The Government have been rather coy about this so far, but it is worth pointing out that clothes and shoes for adults will also go up under the VAT. There will be an increase of about 4 per cent. in the cost of clothes and shoes for adults from next April, assuming the VAT rate remains at 10 per cent. and does not rise, as is possible, to 15 per cent. on that date because the 10 per cent. VAT is equivalent to 15 per cent. purchase tax and the actual purchase tax rate on clothes and shoes is only 11¼ per cent. at present.

Some hon. and right hon. Gentlemen opposite may believe that the burden of 19p extra a week on children's clothes and shoes can easily be borne, but it represents a total cost of £10 a year for the average family of three and another great reduction in that famous £1 which the Chancellor purported to give away to the average consumer in his Budget last month. The point emerged in our debate on sport last night that that £1 has already been eaten into by an 8 per cent. increase in prices across the hoard, a 12 per cent. increase in food prices, an 11 per cent. increase in rates and a possible doubling of council house rents next October. In addition, for many of our taxpayers there will be a big increase in national insurance contributions next autumn.

The Chancellor has done something which no Chancellor before him has ever done—he has produced an elastic £1 note. That £1 note is supposed not only to cover the raging inflation over which the Chancellor has presided since he first took office in the summer of 1970, not only the increase in price of food and other goods, the increase in rents and rates, the further increase in food prices which will start next January as a result of our entry into the Common Market, but, as we heard last night, it also has to pay for the increased admission charges to football matches, cricket matches and any other matches one cares to name, and now it is supposed to cover the extra 19p a week expenditure on children's clothes and shoes. We have seen nothing like it since the miracle of the loaves and fishes.

We shall be discussing in a few hours' time the Government's proposal to find, out of this £1 a week, £40 million a year from the private subscribers to the telephone service. The decisions which the Chancellor has already taken and presented to the House in the Bill will more than wipe out the whole value of the tax concession which he purported to present to the British public last March.

The Chancellor may say that that is all very well but no one has to pay this extra money for children's clothes and shoes the existing clothes can be made to go a little further and cheaper clothes and shoes can be bought. That would not be very good news for my constituents in Leeds, which is probably the main centre of the clothing industry, or very good news for hon. Members on the Government back benches who represent constituencies in East Anglia which are desperately dependent on the boot and shoe industry—

Mr. George Wallace (Norwich, North)

And on this side of the Committee.

Mr. Healey

And on this side, too, as my hon. Friend the Member for Norwich, North (Mr. Wallace) reminds me.

4.0 p.m.

But I think the Committee must consider the effect of the imposition of the tax on the children themselves. The moral humiliation for many children of having to wear handed-down clothes from their elder brothers and sisters is something about which hon. Members on the Government side may be totally unconscious. [Interruption.] But it is really serious.

Mr. Cooper

Do not be so cheap.

Mr. Healey

The hon. Member who a moment ago attempted to divert the Committee's attention from the problem of ordinary families in paying for food, clothing and shoes for their children by talking about bingo would be wise not to use the word "cheap" during this debate.

What is much more serious still for these children is the effect of a substantial increase in the cost of shoes. I would like to read a letter which I have received from Mr. M. D. England, who has worked at the London Foot Hospital since 1927. He recently retired as its principal but is still in charge of the shoe clinic. He has given me permission to quote the letter which says: Tax is not at present imposed on children's shoes and a more dangerous moment could not have been chosen to impose it than now. Each year children gain control of their parents at an earlier age,"— I suspect that is true— and the more intelligent parents are already fighting a losing battle to ensure that their offspring are properly shod with shoes in a range of fittings. The increased cost will tend to force even the most thoughtful of them to buy cheaper shoes, which are not made in a range of fittings and therefore stand a much slighter chance of fitting correctly. The tax is likely to prove one of the final nails in the coffin of children's foot health, and therefore eventually of the foot health of the nation. The suggestion is incredibly short-sighted, because the very small revenue from the tax will not begin to meet the eventual cost to the health service of the treatment for the resulting crippled feet, to say nothing of their effects on general health, productivity and the premature immobility of the aged. He concludes: There can be no disputing the fact that the proposed tax will make it impossible for many parents to resist the temptation to buy for their children shoes which are initially too large and to keep them until they are too small, quite apart from encouraging the "handing down" of shoes from one child to another. I appeal to the Chancellor to take note of these views which I know are shared by medical men of all political views, including many of the Chancellor's hon. Friends. I suggest that the Prime Minister has opened the door for a concession here. After long months of abrasive divisiveness the Prime Minister has said that he wants to return to the philosophy of "one nation". I applaud this if it is a sincere conversion, and there can be no better issue on which to demonstrate it. Having "one nation" does not mean imposing a 10 per cent. tax on children's shoes and school uniforms and reducing the price of fur coats by 13 per cent. Last week we saw the Chancellor crumble with remarkable speed before the prayers of the auctioneers and art dealers, and yet he maintains a rigid inflexibility before the children. All we are asking this afternoon is for him to show the same sympathy and consideration for the children of this country as he has already promised to show to Sotheby's and Christie's.

Mr. Anthony Fell (Yarmouth)

That is unfair.

Mr. Healey

This is not unfair at all. The plain fact is that the only concession the Chancellor has promised so far—and this is already the fifth day of the discussions in Committee of the whole House—is a concession to auctioneers and art dealers. He has remained totally inflexible to the theatre, to the museums, to the footballers and the cricketers and to every other single group to whom we have sought to persuade him to apply zero-rating.

Mr. Fell

I am grateful to the right hon. Gentleman for giving way, because I know he does not normally like to be unfair. But it seems, shall we say, just bordering on unfairness to attribute to my right hon. Friend the Chancellor the desire to help auctioneers, when obviously the entire case that was raised in the Committee about the trade in antiques was the question of this nation being the centre of the antique trade of the world. It is therefore a litle unfair for him to compare that with shoes for children.

Mr. Healey

With respect to the hon. Member, I sat through the whole of that debate and I read all the briefs with which I, like other hon. Members, had been showered by the auctioneers, antique dealers and art dealers all over the country. I stand precisely by what I said. The only concession the Chancellor has promised to consider making—so far he is far from having made it—is the concession to the auctioneers and art dealers.

I concede that there is a case for such a concession on the ground which the hon. Member has just mentioned. But there were far stronger grounds for making concessions to those other groups on whose behalf we pleaded in this Committee. I have never heard a more lamentable failure to reply to a debate than we had from the Financial Secretary to the debate about VAT as it affects sporting entertainment in this country. But both sides would agree that the case of the children, which has been recognised by every Chancellor in British history so far—Conservative and Liberal no less than Labour—is one to which the Chancellor should consider surrendering.

The concept of "one nation" does not consist of forcing the working-class child to walk to school on ill-fitting shoes while the millionaire rides to his office in a Rolls-Royce paid for out of tax by his own business or, if he has bought it himself, bought on hire purchase at an effective interest rate of 1½per cent. The Chancellor has resolutely refused to identify himself with the Prime Minister's new theme. Along with the Secretary of State for Employment, he appears to be fighting in the last ditch for the philosophy of Selsdon Man, and, as he told us in a weekend speech, he does not want to muddle along with wishy-washy compromise—a more direct rebuke to the Secretary of State for Trade and Industry I cannot imagine.

But this is not just an issue of politics and the revenue. This is an issue of common humanity, and for the Chancellor to give way on this issue would pose no financial or technical difficulties which are not easily overcome. I plead with him to take this opportunity to return to the human race.

Mrs. Elaine Kellett-Bowman (Lancaster)

Considering the immense importance of this question, it is interesting to note that there have been throughout the discussion four times as many back benchers on the Government side as on the Opposition side.

There was one point on which I believe the right hon. Member for Leeds, East (Mr. Healey) was misinformed. Unless I am mistaken, he said that no previous Chancellor had proposed to tax children's shoes. Sir John Simon sought so to do when purchase tax was introduced at the time of Dunkirk, and it was only the strong feeling in this House that prevented him from doing just that.

Mr. Healey

Of course, the hon. Lady is absolutely right. But if she looks at HANSARD in the morning I think she will see that I did not say that no Chancellor had proposed to do this; I said that no Chancellor had imposed such a tax.

Mrs. Kellett-Bowman

I wrote the right hon. Member's words down and I understood him to say that no Chancellor had proposed such a tax. I do not believe that my right hon. Friend the Chancellor of the Exchequer is inflexible on matters that concern the well-being of the children of this nation.

At the outset I declare an interest. There is a well-known shoe firm of which I am very proud in my constituency, and my family has been engaged in that trade for not less than three generations. I am passionately interested in this subject, because I believe that this is the only item of clothing which can inflict severe and permanent physical damage on children. For this reason, I and a large group of my hon. Friends, many of whom are sitting here now, have been discussing the problem of children's shoes ever since the matter of VAT was raised in the Green Paper.

Hard-up mothers of young families can do all sorts of things to mitigate the damage to old clothes other than shoes. They can cut up their husband's old shirts and trousers and make perfectly respectable and serviceable clothes for youngsters. I did this myself when my children were young, and nobody would have known that the resulting garments were old. Mothers can go to jumble sales and bazaars and equip their children with second-hand coats and dresses without doing them any physical harm. I am by no means suggesting that this is desirable. I am saying that this will do the children no physical harm.

Shoes and slippers are a very different matter. Every shoe becomes moulded to the wearer's foot, a fact which emerged from the letter that the right hon. Member for Leeds, East quoted. It is never advisable to try to cram another child's foot into a cast-off shoe. Even a week or two in an ill-fitting or tight shoe can permanently damage the very delicate bones of a small child's foot and leave it with a permanent injury. This is not always apparent for many years to come. It sometimes comes out in teenagers, but sometimes it does not come out until the sufferer is aged 20, 30 or 40. The damage is there, and it is, unfortunately, too often irreparable.

Two years ago I read a report called "Crippling Them Young" which gave the results of very careful research into children's foot problems. The amount and severity of the damage which can be caused was horrifying. I should greatly have liked to read to hon. Members some of the statistics given in that report, but I have been unable to obtain a copy of late. The impression it made on me vividly enforced the practical experience I have had as a social worker over many years and in bringing up a family.

It would be a high price to pay for uniformity and a false economy to insist on putting the VAT on children's shoes which are at present exempt from tax. If the tax is put on the whole range of children's shoes the effect will be threefold. First, there will be an incentive for mothers to allow their children to "wear up" the shoes of brothers or sisters which are nothing like the right fitting. They may well be the right length, but that is very different from being the right fitting.

Second, mothers may allow their children to wear shoes when they are still sound but are, in fact, outgrown. It is very tempting to allow a child to go on wearing a good solid shoe which costs a lot of money; such a shoe may keep out the rain, but that is all that it will do. That is a very dangerous practice.

Third, parents will be driven to purchasing shoes in a cheaper price range which have no half sizes and insufficient fittings.

A BMA conference some years ago devoted a great deal of time to discussing the problems of foot damage caused by ill-fitting shoes. What worries me and many of my hon. Friends—both medical and non-medical—is that, though there have been some very valuable experiments on a small scale, there has been no thorough, high-level inquiry into what children ought to wear. In the past we have had a far too negative point of view.

We want to know not what shoes children ought not to wear but what shoes they ought to wear, and the zero rate should be used accordingly.

I am painfully aware that our sub-Amendment to the proposed Amendment would not, if accepted, entirely solve the problem that exercises us. What I press my right hon. Friend to do is to set up for the first time in history a high-powered committee of medical specialists in this field to work out with the shoe manufacturers proper medically approved sizes, half sizes and widths. Such shoes do not need to be expensive, but when a standard has been worked out the Chancellor of the Exchequer could discriminate positively in favour of shoes which will allow a child's feet to grow healthy and straight.

4.15 p.m.

I do not mind if my right hon. Friend chooses to slap tax on high-heeled shoes or shoes with pointed toes. I agree with the right hon. Gentleman for Leeds, East that that would indeed help parents when shopping with fashion-conscious youngsters to resist their demands for damaging but fashion-wise shoes.

When I ask my right hon. Friend to set up an inquiry I do not mean a device for delaying decisions. My hon. Friends and I regard this matter as one of extreme urgency. We have seen of late how rapidly processes can be speeded up when the Government appreciate that a matter is urgent. I see no reason why such a committee could not be appointed virtually immediately and make a report before VAT comes into effect, so that my right hon. Friend the Chancellor could take action to zero-rate approved shoes by order before they ever bear tax.

Mr. Adam Butler (Bosworth)

I have great sympathy with the point of view that my hon. Friend is expressing. Is she saying that shoes which at the moment are exempted from purchase tax are not necessarily medically sound and that what she proposes now is something different from that specified in the sub-Amendment to the proposed Amendment?

Mrs. Kellett-Bowman

Yes, I would go further than the footwear which is exempt at the moment, because not all of the shoes which are at present exempt are sound as children's shoes. I want there to be a range of shoes which has the tax system biassed in its favour.

I know that to zero-rate anything costs money. As the alternative is lasting physical damage with possible painful operations and no certainty, unfortunately, of cure even then, I beg my right hon. Friend to take the matter very seriously and to accede to my request.

Mr. Bob Brown (Newcastle-upon-Tyne, West)

I support entirely the Amendment to which my right hon. Friend the Member for Leeds, East (Mr. Healey) has spoken so ably.

I shall not follow the hon. Lady the Member for Lancaster (Mrs. Kellett-Bowman) in all that she said. She supports, as I broadly support, the move to exempt children's footwear. I take grave exception to her suggestion that working-class children will take no harm from being clothed in articles obtained from jumble sales and secondhand shops. Such clothing might not do the children any physical harm, but it does not do them any good psychologically to know that they are wearing clothes obtained from such sources. I was very surprised that the hon. Lady, who spoke in the humane manner that she has on the subject of footwear, could not support us fully on our Amendment.

Mrs. Kellett-Bowman

Clothes that are secondhand can be made to look not so. A housewife can cut down a pair of her husband's trousers and make them into two pairs of pants for a small boy without anybody knowing that the resulting pants are secondhand. Two children's shirts can be made out of a man's shirt, using the same buttons and the same frontage.

Mr. Brown

I hope that the Chancellor was listening to that and that he will provide his grandchildren with "new" shirts from his old ones. The hon. Lady cannot deny that she mentioned jumble sales. It is customary, unfortunately, for people in the lower income bracket to drag their children to jumble sales for them to try on such things as jerseys, pants and, indeed, shoes. I suggest that the hon. Lady should not be in Parliament if she suggests that that is good psychologically for any child.

Mrs. Kellett-Bowman

I said that it is not desirable but that it did not do physical damage, as the hon. Gentleman would know if he had listened to my speech.

Mr. Brown

I accept that the hon. Lady is now conceding that she said what I have said she said. It does no physical damage, but the hon. Lady cannot deny that it does psychological damage.

Children's footwear, at present exempt from purchase tax when it is for children up to the age of 11, must be zero-rated. There can be no argument but that the present exemption from purchase tax is as essential preventive health service to the country. If children's footwear is not free from tax, parents will be increasingly tempted to buy new shoes for their children only when the old ones are worn out, not when they are outgrown. A child under the age of 4½ outgrows shoes two to 2½times a year, and in the case of the younger child about every three months.

I believe that the BMA conference to which the hon. Lady referred was held in November, 1964. It drew attention to the disturbing fact that 75 to 80 per cent. of the children in this country suffered from foot abnormalities. The importance attached to children's correct foot fitting in the United Kingdom is unique in Europe. A survey in Germany discovered that of 661 school-beginners 70 per cent. were wearing shoes that were too short. In Denmark, of a sample of 417 children in day nurseries it was found that very few aged four and over had a straight big toe. The picture in the United Kingdom is not perfect, but the standards of foot health are continually improving.

I draw the contrast between European and United Kingdom children's footwear because there is also a tax differential. In Europe there has not been a history of tax relief on children's shoes, nor was any differential introduced at the advent of VAT in Europe. I do not see any reason why the Chancellor should slavishly follow his fellow-Chancellors in Europe.

The greatest cause of Hallox Valgus, a bending of the big toe towards the other toes, resulting in distortion of the big toe joint known as a bunion is ill-fitting shoe. Only 35 per cent. of boys and girls up to the age of 11 take an E fitting shoe, the so-called standard width. That fitting will fit more children than any other single fitting, but almost two-thirds of all children require other fittings, ranging from a narrow B to a wide G.

As a result of my visits to clinics in my constituency and discussions with members of the medical profession, I am convinced that if children wear correctly-fitted shoes they will have a much more comfortable and healthy adult life. Further to increase the price parents will have to pay to provide their children with correctly-fitting shoes, by the addition of VAT, will dissuade parents from keeping their children in correctly fitting shoes. It is imperative for the future health of the nation to leave children's shoes as they are, untaxed. Children's shoes must be zero-rated.

The Chancellor of the Exchequer (Mr. Anthony Barber)

I intervene at this stage because I think it might be useful if I said something about some of the problems raised in the three Amendments. I shall come shortly to the very serious matters with which we are concerned, particularly those raised by my hon. Friend the Member for Lancaster (Mrs. Kellet-Bowman), who spoke with authority and conviction.

First, I should like to say that I thought the opening remarks of the right hon. Member for Leeds, East (Mr. Healey), were extraordinary. He said "The whole of his"—meaning "my"—"tax policy is devoted to clobbering the consumer." That must be one of the most extraordinary statements ever made. Never before in the whole of our history have a Government cut taxes on expenditure as much as we have, and never before in the whole of our history have a Government increased taxation on expenditure as much as the right hon. Gentleman and his colleagues did.

But it is well to get away from these debating points and come to the very serious matters with which we should be concerned in these Amendments. It would be helpful if before coming on to the merits of the Amendments I said something about the background to the taxation or exemption of children's clothes. For some time there has been increasing difficulty in the administration of the exemption for young children's clothing, which relates to garments of a kind suitable for young children's wear, but not including fur garments. I shall deal with shoes later.

It is a basic principle of the purchase tax, and the same consideration applies to VAT—that liability to tax should depend on the nature of the article and not the particular use to which it may be put by the final consumer. This means that the administration of the exemption must be based on the physical characteristics of the garments, which is done mainly by a schedule of measurements which is revised from time to time after consultation with various trade interests. In practice, therefore, it is not young children's clothing as such that receives the benefit but clothing of less than a certain size.

The problem with regard to girls' clothes, for example, is pretty obvious. It is one of the facts of life that these days girls of 14 are not so much smaller than those of 17, 18 or 19. In some respects the situation has become ridiculous in recent years, with the changes in fashion which have tended to obliterate the distinction between clothes for children and clothes for teenagers or young women. We have all watched with interest, some of us no doubt with a certain kind of fascination, the trend of the mini-skirt. [HON. MEMBERS: "Hear, hear."] I am pleased to know that I carry the Committee with me so far.

When I asked the Customs and Excise whether it could distinguish in law between a mini-skirt for a child and a mini-skirt for an adult it replied that it could not have regard to the particular use to which the mini-skirt might be put by the final consumer". The difficulties are not merely apparent but obvious. The distinction between clothes for children and adults is now in many respects absolutely ludicrous.

It has long been the practice to make use of styling as a secondary criterion for determining eligibility for the exemption. Recent changes in fashion have inevitably given this much greater importance. Quite apart from the effect of measurement limitations, any garment in a style unsuitable for young children's wear, or marked, got up or advertised as intended for wear by persons other than young children, should be taxable regardless of size. But this inevitably leaves a considerable degree of uncertainty and unevenness in the application of the exemption.

A further difficulty arises because the terms of the exemption refer to garments of a kind suitable for young children. They do not say, and the Amendment does not say, "of a kind suitable only for young children". This ambiguity is unavoidable if the exemption is not to be severely restricted, but the simple truth is—and I am still referring only to clothing—that it has led to some firms flouting the official interpretation because they contend that anything which a young child could wear is within the exemption unless it is manifestly unsuitable. This brings within the exemption most fashionable outerwear, even when bought for an adult. The result, as people in the trade know, is a complete nonsense and it is not possible to enforce a consistent standard of interpretation of the exemption.

4.30 p.m.

Customs and Excise—and the Committee should know this, too—receives frequent complaints from reputable traders about the uncertainty of the application of the exemption and complaints also of unfair competition from less scrupulous traders who take advantage of this situation. Meanwhile, there is a steady flow of complaints from parents of schoolchildren who find that the tax applies to the larger sizes of garments which are worn by children, including, for example, blazers.

Mr. Healey

I do not think that anyone would seriously dispute the difficulties of classification to which the Chancellor has referred and the problems which arise from teenage children wearing clothes suitable for them though they may not be designed for them, but surely the Chancellor will admit that he is going too far when he suggests that this applies to all children's clothes. Does he seriously suggest that in his leisure hours he wears a pair of grey flannel shorts and a school cap suitable for a boy of 8?

Mr. Barber

The right hon. Gentleman may treat this as a joke. If, instead of making the sort of speech that he made this afternoon, he were to go around and make inquiries of people in (he trade and find out what happens he would learn that this is not a joke but a very important point which the Committee should take into account.

Mr. Joel Barnett (Heywood and Royton)

Would the right hon. Gentleman care to give the percentage of adult clothing which is free of tax because it is treated as children's clothing?

Mr. Barber

I cannot give the percentage, but a considerable proportion of clothing which is free of purchase tax can be bought by adults for the use of adults. It depends to some extent on whether the trader is unscrupulous.

Mr. Barnett

Oh!

Mr. Barber

The hon. Gentleman is an accountant, and when I talk about an unscrupulous trader he says "Oh" as though it does not matter whether the trader is honest.

Mr. Michael Fidler (Bury and Radcliffe)

Having been in the clothing trade for nearly 30 years, may I tell the hon. Member for Heywood and Royton (Mr. Joel Barnett) that the figure could be as high as 20 to 25 per cent., it being a common practice for the most reputable large stores and chain stores to ask for goods below a certain length to be invoiced free of tax as suitable for children's wear but, in fact, they are part of a range intended for adults.

Mr. Barber

That is information which my hon. Friend volunteered the other day when I was discussing this matter with him, and he has had practical experience of this problem.

If purchase tax were not being abolished it is almost certain that drastic changes would have had to be made to avoid the ridiculous situation which exists now. In the light of what I have said, and as VAT is a broadly based tax, I must advise the Committee to reject Amendment No. 33.

I now turn to the question of shoes. I think that, perhaps unwittingly, the hon. Member for Newcastle-upon-Tyne, West (Mr. Bob Brown) was a little unfair to my hon. Friend the Member for Lancaster. What she said is the case, and perhaps I may now explain my comment that the hon. Gentleman was a little unfair.

My hon. Friend declared an interest because she has a shoe factory in her constituency. What she did not disclose, because she was too modest to do so—and I hope she will forgive me if I put this to the Committee—is that I know, but I do not know how many other hon. Members know, that there was one period of her life when she went through a very difficult time indeed and if anyone knows about the problems of bringing up a family in the kind of difficult circumstances through which she went, she does. She has personal experience of this problem, and I think that it is right to make that point.

My hon. Friend concentrated, as her Amendment does, on young children's shoes, and I accept unreservedly that this is a most important matter. I agree with my hon. Friend that if a child wears ill-fitting shoes which he has outgrown the damage done to his feet may lead to abnormality which will persist throughout his life. I think that that must be accepted by everyone.

Before I come to the substance of the case, I should perhaps advise the Committee about sub-Amendment (a) in the names of my hon. Friend the Member for Lancaster and others, to Amendment No. 33 and Amendment No. 58 tabled by the Opposition, and I take the latter first.

Amendment No. 58, which deals with shoes, refers to Footwear of a kind suitable for children. The Committee should know that that goes far wider than the existing exemption from purchase tax, which, as the Committee knows, is in respect of young children's footwear. Ever since purchase tax has been in existence the exemption has been on that basis, and it has been taken as applying to children up to their fourteenth birthday. The Opposition Amendment goes far beyond that, and Customs and Excise tells me that it would have to interpret the Amendment as referring to individuals up to the age of 18.

Mr. Healey

Is the right hon. Gentleman aware that the wording of the Amendment was taken straight from the schedule of purchase tax exemptions which his Government have authorised on three occasions during the last two years?

Mr. Barber

I think the right hon. Gentleman will find that that is not so. I think he will find that it refers to young children.

Mr. Healey

Our Amendment, too, refers to young children. I wish that the right hon. Gentleman would read the Notice Paper before he makes his statements—[Interruption.]

The Chairman

Order.

Mr. Barber

Perhaps I can deal with the situation.

Mr. Healey

Withdraw.

Mr. Barber

Having asked me to withdraw, perhaps the right hon. Gentleman will listen for a moment. The Purchase Tax Act of 1963 refers to footwear of a kind suitable for young children's wear and Amendment No. 8 refers to "Footwear of a kind suitable for children", not "young children". I hope that the right hon. Gentleman will withdraw his comments.

Mr. Healey

I know that the right hon. Gentleman does not want to be unfair. He devoted the first part of his speech to criticising the terms of our Amendment No. 33 which refers to Garments and footwear of a kind suitable for young children's wear. In the purchase tax regulations for which the right hon. Gentleman is personally responsible, Notice 78 of November, 1971, refers in group 1, paragraph 1 on page 7 to Garments an footwear of a kind suitable for young children's wear. Will the right hon. Gentleman now withdraw all the absurd criticisms in the earlier part of his speech?

Mr. Barber

The right hon. Gentleman must act in an adult way. If he has made a mistake in drafting, that is understandable. I said specifically that I was referring to Amendment No. 58. That Amendment does not refer to footwear of a kind suitable for young children. It refers to "Footwear of a kind suitable for children".

The Committee should know that the difference in cost between one and the other is the difference between £12 million and £50 million. I am sure that the one thing which the right hon. Gentleman, having had that explained to him, will not do at a cost of £50 million is to press the Amendment to a Division.

Mr. Healey

Is the right hon. Gentle-may saying that he is prepared to accept Amendment No. 33? If he is, we should be prepared to withdraw Amendment No. 58.

Mr. Barber

If I may say so, this is typical—

Mr. Healey

Answer the question.

Mr. Barber

—of the slippery approach of the right hon. Gentleman.

I am dealing in turn——

Mr. Bob Brown

Will the right hon. Gentleman give way?

Mr. Barber

No. I am dealing in turn with the three Amendments.

Mr. Healey

Deal with the first Amendment.

Mr. Barber

What does the right hon. Gentleman think I have been talking about? I have been talking about children's clothing which is contained in the first Amendment.

I should like to turn to the more sensible Amendment in the name of my hon. Friend the Member for Lancaster and others of my hon. Friends who appreciate this point. Sub-Amendment (a) refers to "Children's footwear of the type and size at present free from purchase tax". To accept the substance of that Amendment would be to exempt a zero-rating for VAT which would be on a par with the present exemption from purchase tax. Therefore, it is perfectly clear that my hon. Friend's Amendment, if translated into the proper wording which would be necessary for technical reasons, would cost £12 million as distinct—

Dr. John Gilbert (Dudley)

What would be the proper way?

Mr. Barber

I am asked: what would be the proper way? If the hon. Gentleman wants to know I will explain, but I wanted to get on. The proper way is quite simply that it is wrong to refer at this stage of the Bill to "Children's footwear of the type and size at present free from purchase tax" when, as the hon. Gentleman knows, later in the Bill there is a Clause which abolishes purchase tax. One thing is absolutely clear. My hon. Friend means that there should be zero-rating of VAT for children's footwear on the same basis as the exemption from purchase tax. The Committee should realise that to do what my hon. Friend has suggested will cost £12 million, but that to do what the right hon. Gentleman has suggested would cost £50 million. All I am saying now is that I am sure he did not mean to do what he has stated in his Amendment.

Mr. Healey

I understand the right hon. Gentleman is now accepting that the definition which he criticised at the beginning of his speech of "Garments and footwear of a kind suitable for young children's wear" is not only the definition which he has adopted in the purchase tax regulations but is perfectly consistent with the wording of the Finance Bill. So I again put to him the question: why is he not prepared to accept the Amendment as worded?

Mr. Barber

For the reasons which I gave when dealing with the first Amendment and before turning to Amendment No. 58.

I want now to deal with the proposal in the sub-Amendment standing in the name of my hon. Friend the Member for Lancaster.

Mr. Bob Brown

Whether it costs £12 million of £50 million, surely the future of the nation's foot health is worth either figure. If the right hon. Gentleman does not accept that, how can he justify a handout of £300 million to people with investment incomes?

Mr. Barber

I think I have already said—I hope the hon. Gentleman will accept it from me—that I accept that it is indisputably a matter of great importance for the health of children's feet. I have said that it can do lasting damage to children's feet and cause great hardship when they get older.

I make the point that to do what my hon. Friend has suggested, unlike the other Amendments, would cost £12 million. I point out to the Committee that the Government have substantially increased expenditure on health and welfare, but, even so, we all know that there is a great deal more to be done. There can be no doubt that with an additional £12 million a year a great deal more could be done. I will give one example to put the £12 million into perspective. I am coming to the substance of what my hon. Friend said later. The cost of zero-rating all shoes on the same basis as purchase tax would be enough to cover the running costs of six 500-bed hospitals. That gives some idea of what we are talking about.

Mr. Healey

No.

Mr. Barber

The right hon. Gentleman says "No", but that is the case. The Committee will therefore want to consider whether this is the best way to spend another £12 million. I do not doubt that children of well-to-do families as well as children of poor families wear ill-fitting shoes. However, I should think that hon. Memebers on both sides of the Committee are primarily concerned with low income families. It is said that the imposition of VAT on children's shoes will encourage mothers to buy ill-fitting or secondhand shoes or hand shoes on to other children whose feet arc not suited to the shoes of the previous child.

[Miss HARVIE ANDERSON in the Chair]

4.45 p.m.

Whatever view the Committee takes at the end of the day, it must be accepted that if £12 million were to be used for this purpose most of the benefit would go to families other than low income families. If the cost of fitting out a child in decent shoes, with a complete change of shoes for a young child two to two and a half times a year, is about £10, I ask the Committee to consider whether VAT of £1 a year—I put it no higher than that—is a real deterrent. It is equivalent to about four or five packets of cigarettes a year.

I now come to health grounds, the main point referred to by my hon. Friend. One is bound to ask: to what extent are badly fitting shoes worn by children the result of the cost of shoes and to what extent the result of fashion shoes?

The hon. Member for Newcastle-upon-Tyne, West (Mr. Bob Brown) referred to a particular medical conference which took place. He quoted certain remarks from that conference. I will remind the Committee of one or two other points made at that conference, which was concerned with this particular matter. One of the most eminent consultant orthopaedic surgeons said: There are two deforming causes: badly designed and made shoes and badly fitted shoes. He went on to say: It is not so much a matter of modifying the way shoes are made as of influencing the whole approach to fashion in shoes. This comes from the report referred to by the hon. Gentleman.

The consultant continued: Fashion influencing older girls' shoes has been a problem for a long time. Fashion hit the boys' shoe trade about five years ago. By two years ago it was influencing five-year-old girls' shoes, and in the last year it has crept down as far as the toddler range.

A manufacturer who was also involved in the conference—the hon. Gentleman knows the details—said: I want to stress that in order to meet the heavy pressure for moderately styled shoes, the manufacturer is faced with the problem of how to reconcile orthopaedic needs with consumer demand so that he could produce not necessarily a perfect shoe, but a marketable shoe. The operative word is "marketable". He then said that manufacturers were forced to compromise.

One of the four conclusions of that medical conference was that there should be control of footwear worn for school and that it should be of approved design. One of the other conclusions was: All footwear approved as above to be free of purchase tax. That was the result of that conference.

I believe that my hon. Friend the Member for Lancaster was right when she said very frankly, in what was not only a courageous but a sincere speech which I am sure the whole Committee will respect, that in these matters not enough is known to decide whether relief from VAT should be given at a cost of £12 million, most of which would not go to low income families.

I agree that a decision on this matter must be reached before VAT comes into operation, and my hon. Friend the Member for Lancaster was right to say that before a final decision is reached there should be some form of inquiry. Perhaps this should be set up in conjunction with the medical profession. In any event, it should in my view deal broadly speaking with three matters: first, the correlation between foot health and the price of shoes; second, the incidence of foot abnormality in children; and, third, the ways in which the wearing of shoes of medically approved standards can be encouraged. This latter point was brought out clearly at the previous medical conference.

I see no reason why such an inquiry could not be concluded in good time to take any consequential decisions before VAT comes into operation in April of next year.

Mr. Eric S. Heffer (Liverpool, Walton)

Come off it!

Mr. Barber

Should it be decided to take action on zero-rating in respect of young children's shoes, that could be done before April of next year.

Mr. Brian Walden (Birmingham, All Saints) rose—

Mr. Barber

I am anxious to conclude my remarks on this point.

I am sure the Committee will agree that the two Opposition Amendments should be rejected—[HON. MEMBERS: "No."]—and, as for the proposal of my hon. Friend the Member for Lancaster, I hope that she and her colleagues, who have a genuine interest in this matter, will agree to proceed in the way I have suggested and will not, in the light of my remarks, press her Amendment to a Division.

Mr. Tam Dalyell (West Lothian)

Is it not strange for the Chancellor of the Exchequer to be saying at this stage that an inquiry into this matter is necessary? If such an inquiry is necessary after this debate, why on earth did it not occur to Treasury Ministers to conduct it before this point was reached?

This raises the whole question of Treasury decision-making. What medical advice was sought before this debate? Did any Minister or Treasury official seek advice from, for example, the London Foot Clinic? May we have a factual reply from the Chancellor now? [HON. MEMBERS: "Answer."] In the absence of an answer from the right hon. Gentleman, I can only conclude that no such medical advice was sought.

Here we have the brilliant luminaries in Great George Street making decisions on behalf of millions of children without taking the trouble to make medical inquiries. Are we really to take it that they did not look into the medical implications of what they are doing?

Mr. Robert Sheldon (Ashton-under-Lyne)

I urge my hon. Friend to ask the Chancellor what discussions the Treasury had with the Department of Health and Social Security.

Mr. Dalyell

I trust that before this debate concludes the Financial Secretary will inform us on that score. Was anyone in Alexander Fleming House consulted on this issue? May I have a reply, immediately? In the absence of a reply, we are bound to take it that no such consultation took place.

Rank and file hon. Members have taken the trouble to look into this question and to consult the London Foot Clinic, school doctors and others. These experts agree unanimously that what the Government propose is crazy. I will not go over the ground covered by the hon. Lady the Member for Lancaster (Mrs. Kellett-Bowman). Suffice to say that she made her inquiries, that my right hon. Friend the Member for Leeds, East (Mr. Healey) made his inquiries, that hon. Members generally made theirs, yet the Treasury did not bother to make any. This reflects the maximum discredit on Ministers in general and on the Treasury Bench in particular.

Mr. Brian Walden

I make no complaint about the sort of life I have enjoyed, especially in this House. In many respects I have been extremely fortunate. However, when I went into the Royal Air Force in a combatant rôle the Service was obliged to spend hundreds of pounds to get my feet right simply because throughout my childhood I had never been properly shod. I discovered that a very large number of boys—I cannot speak for girls; let us hear no more about fashion—coming from working-class families had never been properly shod. I assure the Committee that many children are not properly shod now and will not be properly shod as a result of the imposition of VAT.

Mr. Dalyell

I agree with my hon. Friend. This tax is bound to cost the nation more through the National Health Service at the end of the day. This is a crazy policy that the Government are pursuing, as well as being harmful medically.

In addition to criticising, I am anxious to be constructive. I agreed very much with the hon. Member for Lancaster when she asked that somehow or other the fiscal system should be biased towards what is medically necessary. I hope that the Financial Secretary will deal with this point because I recall his argument on an earlier Amendment, dealing with pollution, to the effect that he was not exactly enamoured of the way in which the fiscal system was not biased in this respect.

It is clear that the Financial Secretary agrees that a modern technical country like ours must get down to this problem. I appreciate that it is difficult and that snags must be overcome. In the end, the fiscal system must be biased towards promoting anti-pollution measures. In the same way, we must make sure that our children wear medically good shoes. I leave the matter there for now in the hope that by next year the Treasury will have given more thought to this subject.

I am anxious to pursue what the Chancellor said about clothing. He began by saying that it was difficult to deal with clothing from the tax point of view, and went on to make a distinction between the nature of an article of clothing and the use to which it would finally be nut. He said, in effect, that we must have such a distinction.

I did not follow the right hon. Gentleman's reasoning. I am prepared to be told that such a distinction has always existed in our tax law, although the reason for it is not immediately obvious to me. Unless there is good reason for having it. my right hon. Friend's Amendment should be accepted.

Perhaps when he replies the Financial Secretary will explain, if not in words of one syllable then of two, why this distinction must be maintained between the nature of an article of clothing and the use to which it will be put. Although the Treasury may say that this is based on precedent, there is no reason why it should go unchallenged.

Mr. Fidler

I trust that the hon. Gentleman will bear in mind the difficulty of identification. One can identify the article but not necessarily the person who will eventually wear it.

Mr. Dalyell

I note the hon. Gentleman's comment, though I do not think he has great experience of the industry. There may be point in the Treasury argument that such a distinction must be made, but it is certainly not clear to the layman.

The Chancellor said that it was not possible to enforce the consistent application of exemptions in this sphere. That was a somewhat egregious argument considering what the right hon. Gentleman said in our debates on last year's Finance Bill. I appreciate that matters of this kind are always difficult to resolve, but suddenly to introduce the argument of consistency is bound to cause us to wonder.

Finally, the Chancellor referred in his speech to complaints that he had had from the parents of fairly well developed teenage children. We can all have complaints. My right hon. Friend asked whether the Chancellor really would appear in the clothes of an 8-year-old with a cap on. That may have been an exaggerated and witty way of putting it. But there is here a serious problem. How much evidence does anyone in Great George Street have that clothes that were designed for teenagers are being bought for those older than teenagers? Is there any evidence to support that view? In discussing the Finance Bill we are entitled to have that evidence, so I ask the question whether there is any evidence in the Government machine, in Great George Street or elsewhere, to show that on any significant scale clothes designed for teenagers or school pupils are being worn by adults. Although my right hon. Friend put it in a witty way, it is a serious question.

5.0 p.m.

Mr. Piers Dixon (Truro)

I rise to support my right hon. Friend the Chancellor, both on the main Amendment and on his remarks on the sub-Amendment in the name of my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman).

First, I take up the right hon. Member for Leeds, East (Mr. Healey) on his imputations that certain of my hon. Friends have had quite different family experiences from those of certain hon. Members on the Opposition benches. In my family we always shared clothes. I have shared clothes with the wife of my hon. Friend the Member for Blackpool, South (Mr. Blaker). [Laughter.] My children share each other's clothes.

I should like particularly to refer to the remarks made by my hon. Friend the Member for Lancaster. The problem of the proposal that children's shoes should be taken outside the net of value added tax is that one has what can be described as the domino theory of tax. Where does one draw the line? As my right hon. Friend the Chancellor has pointed out, one moves from children's shoes, logically, to children's clothes, and my hon. Friend the Member for Lancaster has granted that children's clothes should be within the tax net.

I have found a certain inconsistency on both sides of the House in the arguments which have been deployed. Some hon. Members have been saying at one moment that parents are inhibited from buying clothes for children by the tax system and that, therefore, their children suffer: but almost in the same breath they say that they are not inhibited from making these purchases and that, therefore, they suffer financial disadvantages. One of those arguments can be logical, but one cannot have both arguments at the same time.

The other day the hon. Member for Dudley (Dr. Gilbert) invited the Chancellor to say that g he ever introduced new commodities into the VAT net he would then undertake, on behalf of the Government, to increase social security benefits by the same amount. I invite my right hon. Friend to give just as silly an undertaking, and that is that if he is proposing to exempt or to zero-rate any commodities in the future he will reduce social security benefits by the same amount. I say that as a ridiculous suggestion. I do not believe it any more than I think that the hon. Member for Dudley believed his argument.

The hon. Member for Newcastle-upon-Tyne, West (Mr. Bob Brown) referred to the Common Market. I shall not drag the right hon. Member for Leeds, East into further discussions about the Common Market. However, it is interesting to know that VAT is paid on children's shoes in not only the Common Market countries but also the Scandinavian countries.

Dr. Tom Stuttaford (Norwich, South)

Would my hon. Friend agree that the standard of foot health in Common Market countries, in children and adults, is very much worse than it is in this country? One of the reasons frequently given for that is that in the Common Market countries correctly fitting shoes are not available in sufficient numbers and sizes.

Mr. Dixon

I should have said that that was a case of post hoc ergo propter hoc. I should be glad to know whether what my hon. Friend says is also true of Scandinavian countries. I suspect that those splendid Scandinavian children have just as good feet as, or better feet than, we have.

Dr. Stuttaford

I shall look forward to hearing my hon. Friend after he has read the report of Maier of Germany, published in 1962, and of Hicks of Denmark. They have found that in those countries children's feet are badly deformed by ill-fitting shoes.

Mr. Dixon

I am grateful to my hon. Friend. I mentioned the Common Market experience and Scandinavia not to suggest any inevitability but merely to demonstrate that some countries—countries which are admired by hon. Members on the Opposition benches—have seen fit to impose a value added tax on children's shoes.

The right hon. Member for Leeds, East referred to social values. Often I wonder what he and his hon. Friends mean when they expand so extensively about social values. What we are interested in, and what we should pay much more attention to, is personal values. Our people want to have tax reduced. They do not want to be told how, in their consciences, they can spend their money.

Mr. Brian Walden

The hon. Gentleman is most courteous in giving way, as he has already been interrupted once. I understand that children may transpose clothing and wear an odd jersey or pair of pants and so on. But does the hon. Gentleman have any idea of the kind of effort that some of us have put in to persuade ordinary families not to allow their children to wear the kind of shoes that deform their feet? Does he understand that he would not do that to his children? I am certain that, though they might wear an older child's jersey or pair of pants, he takes them along to have their feet correctly measured for a proper pair of shoes. Does he realise that the majority of the population in this country do not do that? It has been hard enough to persuade them that they ought to do it, without this tax.

Mr. Dixon

I should have thought that it was not a very large majority. I think that it is a very small minority.

Mr. Walden

All right—a majority.

Mr. Dixon

It is for the consciences of parents.

Mr. Walden

No.

Mr. Dixon

If the parents decide to spend an equivalent amount on cigarettes and not on their children's shoes, it is not for us to impose our moral values on a family.

Mr. Walden

Again I am grateful to the hon. Gentleman for giving way, and I promise that I shall not interrupt him again. But I do not agree with him about this. Often it is not the individual duty of people who do not have the kind of knowledge of these matters possessed by the hon. Gentleman. It is for the State in this regard to encourage people to right behaviour, as the State does in respect of smoking and many other things. The taxation system ought to reflect more enlightened times and a desire to push people towards right behaviour. On this matter I disagree completely with the hon. Gentleman.

Mr. Dixon

I know that the hon. Gentleman has views very different from mine. I do not go along with his rather puritanical view of our duty to society. I conclude on that note.

Mr. Wallace

I congratulate the hon. Member for Lancaster (Mrs. Kellett-Bowman), whose speech was in the fighting spirit of a good hardworking mum, and in that sense I pay tribute to the campaign and the fight she has put up in this Chamber. I hope she succeeds in her objective.

The Chancellor of the Exchequer outlined the old, old Treasury problem—that of the meaning of words. There are times when I wonder whether the Treasury officials indulge in very complicated crosswords. Some years ago I had to come to the aid of the then Chancellor, the late Hugh Dalton, in defining the difference between fairground equipment and children's playground equipment. The Treasury could not find the meanings of words to give exemption from tax for children's playground equipment. My simple solution was in the words, "Not being mechanically operated". This shows that possibly the Treasury might have an advantage in occasionally calling in a few simple people able to give simple definitions and to ease the Treasury's problem with words.

The Chancellor also referred to the £12 million which, it is claimed, this concession would cost, and which would equal the running costs of six hospitals. I think that his arithmetic is a little out of date. From my experience, I should say no more than three hospitals—perhaps even only two. The Treasury must consider this problem very seriously. I will not repeat the arguments of others about clothes being cut down and shoes handed down from child to child. I have had experience of that myself.

One of the main reasons for my taking part in the debate is that I represent Norwich, North, which has within its boundaries most of the shoe manufacturing concerns in the area. There are specialist firms which have done a tremendous amount of good work in research and development and making sure that children's shoes fit and that the children's feet have the right start. It is very important that we follow the problem through. For example, the Chancellor has referred to the running costs of hospitals, I wonder whether he has evaluated the cost of rheumatism not only to our hospitals but to industry. Badly fitting, leaking shoes can set the start of rheumatism in young children which develops as the years go on. I am not a medical man but I know from personal experience that that is so.

In Norwich we have specialist firms which have developed the proper fitting for children's shoes, and the effect of value added tax will lead many parents to divert their money to cheaper, ill-fitting shoes with damp penetration due to cheap production methods. An aspect which we have not considered in debate so far is that this in turn would lead to redundancy of skilled workers in an industry already facing acute competition from Europe and elsewhere. Imports of cheap boots and shoes are increasing and a great proportion of them are not up to British standards.

The subject of feet is most important. Above all people in this country, apart from postmen and possibly sections of the infantry, we in this Committee should know all about the care of the feet. With the long sittings of the House and the tramping through the Division Lobbies, it is a wise Member who takes care of his feet. Indeed, it seems that most hon. Members do so. It is all right for us to take care of our feet, and we are receiving an income to do so, but we should certainly consider people with lower incomes and who have young children and make sure that children's shoes are not taxed. The taxation of children's clothing and shoes should not be tolerated for a moment because it hits at the family at a time when it is facing financial stringency in bringing up young children. In spite of family allowances, this is where taxation hits most and that is why the Committee should oppose the Chancellor and carry the Amendments.

5.15 p.m.

Dr. Stuttaford

I congratulate my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman). Regrettably, she has now left the Chamber.

I do not think that it is realised that there is considerable feeling among a great many hon. Members on this side of the Committee that to tax children's shoes is a retrograde step. So many of my hon. Friends felt this to be so that when it came to putting down an Amendment we had to draw lots to decide whose name should appear first. Having heard the speech of my hon. Friend the Member for Lancaster, I have no doubt that the gods of chance played the game correctly. Hers was a first-class speech, well and sincerely delivered. She covered all the points we have been discussing for a long time and there is little need to expand on them.

My hon. Friend put questions in a very straightforward way to my right hon. Friend the Chancellor of the Exchequer, and we were to a certain extent gratified to hear at any rate the last part of his speech. But there are other points which I hope will be answered in greater detail. First, we must once and for all solve the problem of what this concession would cost the State. Figures have been bandied about. They all sound large, even when one considers how big is the gross national product. But it must be remembered that this tax will be taken from a source which has not hitherto been taxed at all—children's shoes.

It is important to know whether the manufacturers' figure of £7 million to £10 million as an outside estimate is correct or whether the Customs and Excise is correct in saying that the figure would be £12 million. There must be a breakdown of the figures and how they are reached, particularly in relation to the number of shoes sold. But whatever the figure—be it £7 million or £12 million—the theory of hypothecation, that if we save money somewhere we shall spend so much on so many hospital beds, is dicey. It is not one that I would argue myself, and one must take into consideration that we are discussing something which has not hitherto been taxed.

I welcome my right hon. Friend's idea of referring the problem of foot health and children's shoes to a panel of experts so that Government and Parliament may have the benefit of their advice and reach a speedy conclusion whether children's shoes should be included in the value added tax. Additional items in the Schedule of the tax can be zero-rated up to a year after the Bill goes through if indeed it does.

But I think that to ask a panel of doctors to consider foot health in relation to price is a wrong approach for medical men. They must be asked to consider foot health but not in relation to price. How a shoe is manufactured, what goes into it and what it costs is perhaps a matter for the Customs and Excise but more especially for the shoe manufacturers. It has little to do with doctors. They are concerned only with the end product and with the effect it will have on their patients. They are not concerned with the pricing.

Secondly, there is the problem of toot abnormalities in children. This point has frequently been made but it is only a very small part of the problem, because children grow up. They leave their childhood with some minor defect in their feet caused by the wearing of ill-fitting shoes, whether because of poverty or of foolishness, and that condition will increase insidiously and slowly throughout the years until, by the time of retirement, many people are crippled. They are anchored to their chairs not by senility but by agonising feet. As a practitioner, I have seen this sort of condition constantly, with otherwise mobile persons imprisoned because of feet grossly deformed, often because of shoes worn in childhood.

Treasury Ministers must realise that this is more than a question of foot abnormalities in children. Any referral to a medical panel, or whatever it may be, must take into consideration not only the degree of abnormalities detectable when children leave school but the effect which such abnormalities will have in later life. It seems to me, therefore, that the second head in my right hon. Friend's terms of reference is far too narrow.

Thirdly, not only must we consider ways in which medically approved shoe designs can be encouraged; we must consider what those medically approved designs should be. As the hon. Member for Norwich, North (Mr. Wallace) said—I feel that I could call him my hon. Friend—an immense amount of research and care has been put into producing a safe child's shoe with a good fit. We want these standards endorsed by the medical profession—I am sure that doctors would do so—so that there can be readily available good children's shoes in half sizes, broad fitting, with varying fittings as to breadth as well as length, and of a reasonable shape, reasonable from the medical point of view and reasonable from the point of view of the pride in appearance of the child who has to wear them.

There must be no suggestion that the only form of shoe exempted or zero-rated will be the surgical boot obtained on prescription. If we have medically approved shoes, they must be of designs approved by the trade as well as by the medical profession. It must be the outcome of work in collaboration. It is perfectly possible to have an elegant shoe which is not a damaging shoe.

I want Ministers to give close attention to these points. Many of us on this side are unhappy at the idea of a tax being imposed upon footwear of this kind, adding to the difficulties of both parents and children, and we shall be mollified only if we can be certain that it would be not a penalising tax but a tax which would be lightly borne, if it must be borne at all, by those who are sensible, considerate and show self-sacrifice for their children, ensuring that shoes are readily available to them of a type which will not lead to deformities in later life.

Mr. Gwynoro Jones (Carmarthen)

I echo and support what has been said by the hon. Member for Norwich, South (Dr. Stuttaford). It was the Chancellor's duty to defend his case. How could the Chancellor imagine that the imposition of a 10 per cent. value added tax on children's footwear would not be an intolerable burden and would not be detrimental to the health of children's feet and the frequency with which parents would buy shoes for their children?

The right hon. Gentleman's speech, instead of being a strong defence of his proposal, was a rather amorphous contribution, and I am still not sure whether he is in sympathy with the Amendment supported by his right hon. and hon. Friends or whether he totally disagrees with our Amendment. All we know is that there is now to be an inquiry into the effects on children of the wearing of ill-fitting shoes.

The Chancellor should have realised long ago that such an inquiry ought to be made. He did not need the excellent speech of his hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) to convince him of the need. The Amendment has been before him for many a day, so I am sure that he did not think up the idea of an inquiry in the last three-quarters of an hour. He admitted that there was great concern among medical men, social workers and so forth, so he must have thought deeply about it. The Chancellor has a duty to tell the Committee.

When is the inquiry to begin work? If the question is urgent, as we are told it is, will the inquiry begin in the next few weeks? Who will be the inquirers, and from whom will they take evidence? What sort of time scale does the Minister have in mind? When will the inquiry report—before the end of the year? We cannot let the Chancellor get away with it without more assurance. We are supposedly grown up in this place. I am not sure what is the IQ of hon. Members, but I know that we are all wise enough not to let the Chancellor get away with the idea of an inquiry and nothing more, in the hope that his hon. Friends will tramp through the Lobbies, satisfied with a bland assurance of that sort. There is deep concern on both sides of the House, and we must be told far more.

Mr. Barber

I said that I should reply to one or two further points later, but I wish to correct the hon. Gentleman on one matter now. I said that the inquiry could be completed in good time for any consequential decisions to be taken before the VAT comes into operation in April next year.

Mr. Gwynoro Jones

I am grateful for that encouraging intervention. However, if there is urgent need for an inquiry now, there was an urgent need months ago, long before the Finance Bill appeared. The value added tax proposals were first mooted in the 1971 Budget and before.

The Chancellor also pursued the question of opportunity cost, suggesting that if £7 million, or £12 million, is to be lost to the central Exchequer, by abandoning VAT on children's footwear less might be spent on hospitals or school places. He knows very well that taxation and public expenditure are not allocated in that way. If £12 million comes into the Exchequer through a tax on children's shoes, the money will not be allocated directly to hospital building as he suggested. This is the great argument of the motoring organisations, which say that revenue from petrol taxation and other motor vehicle taxes is not spent on roads, as it should be. Everyone knows that there is not that sort of direct traceable reallocation.

The effect of the tax would be minuscule in the broader context of Government expenditure, yet the burden on parents and children would be great. I speak as someone with two children both under 3½ years of age. The Chancellor spoke of parents having to buy shoes twice a year or two and a half times a year. I wonder whether he is a grandfather or a great-grandfather, for my experience over the last two or three years is that one has to buy shoes three or four times a year in the early years, and that per child.

Mr. Nicholas Winterton (Macclesfield)

And possibly more than that.

Mr. Gwynoro Jones

And possibly more than that, as the hon. Gentleman says. It will be a heavy imposition on low-income parents and others. The Chancellor did not say that all the public anxiety and the concern of the medical profession is unfounded and that we can go ahead with the tax without fear. Of course, he could not do that. Nor is it any use saying, "Let the people choose. Let them make their own individual decisions in the matter". Inquiry or no inquiry, our common sense tells us the fact: that is for the first time, it is proposed to put a tax on children's shoes. I will not outline the danger to children in the misuse of new footwear—this has been adequately done—but it is the duty of this Committee to ask why that is a good thing, and an equitable thing to do.

5.30 p.m.

Mr. Fidler

I should like to inject into the discussion a little cold, hard logic and common sense. When I first saw Amendment No. 33, as a former clothing manufacturer I was attracted to it, because throughout children's clothing has been traditionally exempt from purchase tax. But I was the opposite of attracted to it when I heard the silly supporting arguments put forward by the right hon. Member for Leeds, East (Mr. Healey). He said that the rich man's child rode to his destination in his Rolls-Royce and the child of the poor parent had to walk to his. But that is to ignore the basic argument, which is whether the articles themselves, regardless of who will possess them or purchase them, should attract taxation

My first reaction was sympathetic, and it was that children's clothing should be completely exempt, that the exemption should apply to any clothing suitable for children. But it is impossible to devise any system with a precise definition of an item of clothing suitable for young children alone.

The industry has tried to lay down criteria based on the length of garments. At one stage it was suggested that a child's raincoat should be a maximum length of 42 in. if it was to be exempt from tax. But manufacturers decided that there ought to be 3 or 4 in. hems to allow for children growing, and this effectively increased the length of the garment to 45 in., and then it became suitable for wear by older people, teenagers or adults.

Another criterion suggested was bust measurement. This measurement was obtained by laying the garment on a table and measuring across the bust and allowing for freedom of movement. This criterion was circumvented by purchasers moving the buttons and making a double breasted into a single-breasted garment.

Other criteria were the measurement of the collar to the edge of the shoulder, or from the shoulder down to the cuff, or the width of the cuff itself, not to mention waist and hip measurements. But all these were circumvented by skilful manufacturers who cut and produced their garments so that they could not be said to be produced exclusively and solely for use by young children.

Those are the facts of life. I speak as one who has supplied hundreds of thousands of garments, outer coats and rainwear. It had become accepted that sizes 10 and 12 in the ladies' ranges were invariably invoiced to customers as tax exempt for young children, while sizes 14, 16, 18 and 20 were not chargeable to tax and were plainly for adult ladies. I emphasise that there was no difference whatever in the styling or workmanship of the garments themselves.

Reluctantly, I am therefore driven to conclude that, attractive though this suggestion is, it is impracticable to provide that sizes 10 and 12 and other sizes that would be worn by young people should be tax exempt. It might interest the hon. Member for West Lothin (Mr. Dalyell) to know that 25 to 30 per cent. of all garments ostensibly sold for children are, in fact, sold to and worn by ladies. That is why I cannot support Amendment No. 33.

Nor can I support Amendment No. 58, because of its looseness of definition. Without a definition not only of "children" but of "young children" it would be impracticable to implement that proposal without an impossible system of policing. One cannot define what shoes are suitable for young or very young children as distinct from those to be worn by ladies or gentlemen blessed with small feet.

However, there is a strong reason why I support sub-Amendment (a) to that Amendment. It was moved eloquently and persuasively by my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman). It is not connected with the inquiry into surgical and other health factors which my right hon. Friend promised to institute.

From the age of three, children wear out their shoes completely. There is no question of their shoes being kept for some other child once the wearer has grown too big. My hon. Friend the Member for Lancaster spoke of a man's shirt being cut in two and made into two shirts for boys, or cutting one lady's dress and making it into two dresses for girls. Those are garments which may be worn over and over again because an adult's size does not change. Eventually the garment reaches the stage when it has been worn too well or becomes worn out.

The situation with children is different. Because children grow quickly, a garment is still virtually as good as new by the time it is too small for the child. The garment is then kept in the family for the next child coming up. There is nothing shabby in that, and there is no approbrium to be attached to the parent who keeps a garment for that purpose, for after having been worn only a few weeks or a few months it will be as good as new.

However, that is not true of shoes. From the time a child is 3 or 4 shoes get such a flogging and bashing that they are incapable of being used by the next child, even were the size right and the feet of two children in the same family identical. I therefore appeal to my right hon. Friend to look with more sympathy at my hon. Friend's proposal and remember how quickly children's shoes are literally worn out irrespective of the size of a child's feet. As the "turnover" is so frequent, and as the shoes cannot be worn again, my right hon. Friend should find it possible to limit a concession to shoes to be worn by those under 10.

Mr. Robert Hughes (Aberdeen, North)

Much of the discussion has centred around possible malformation of the feet of young children because of the use of incorrect shoes. That is important, but it is a matter of education and good practice. It is a matter not only of manufacture but of making sure that stockists have the range of shoes now made, and a great deal more could be done in that respect.

Amendment No. 33 is extremely attractive because of its wide nature. I recall to the Committee that it says "Garments and footwear of a kind suitable for young children's wear". The Amendment avoids the difficulty of the definition of size mentioned by the hon. Member for Bury and Radcliffe (Mr. Fidler). Where do small shoes cease to be for children and at what stage does a child begin to wear adult footwear? I do not think anyone could define that sufficiently specifically.

I have five children—and I do not declare an interest—two of whom are teenage daughters. I get many complaints from my wife that the sizes of clothing which my daughters want to wear are subject to purchase tax because they are produced for adults. As the general wealth and well-being of our children increase, this will be an increasing problem, and it is extremely important that the Amendment should propose providing wide choice. It is the question of the width of that choice that divides the two sides of the Committee.

The Chancellor is concerned to see that as few items as possible escape the taxation net. He is framing his legislation so that the opportunities for evasion by unscrupulous or enterprising manufacturers, such as those described by the hon. Member for Bury and Radcliffe, are kept to the minimum. I believe that he should be thinking of keeping the widest possible choice for children so that they may wear as many different kinds of clothes as they desire.

One of the features of the British system and the British way of life that I cherish is the freedom of choice that is available. I also cherish the fact that teenagers may avail themselves of many different styles of clothes and indulge in what may be called the fickleness of fashion. That is one of the disadvantages, because the greater the free- dom of choice the greater the stress on lower-income families.

I have often argued with my colleagues about the desirability of school uniform. In a sense, school uniform is a great leveller, because parents are then not under such pressure to provide different kinds of clothing. If I had that argument with my own children, they would probably regard me as on the wrong side of the generation gap, and I do not like to think of myself like that. I am not referring to the latest position in London, or to children's strikes to get rid of school uniform, but there is a general movement in some schools to abandon school uniform because children no longer wish to wear it, and I applaud giving children that choice.

However, I am concerned that this very range of choice puts a financial stress on families without much money to spare. Taxation on clothing reduces choice and places many disadvantaged children at an even greater disadvantage—"Because Jeannie down the road has a few more dresses than I have". That may seem frivolous, but in terms of the ordinary day-to-day life of the children of working parents it is serious.

It is difficult to make a precise definition of a garment suitable for children, hut, although the Amendment would allow some adults to escape the taxation system and wear clothing suitable for children, I still support it. I do not know what is middle-aged and what not, but nowadays people up to the age of 35 are able to wear fashions and styles worn by teenagers of 14, 15 or 16. I should prefer the Chancellor to remember that, even though some adults would escape taxation.

Socialists are often accused of too much wanting a society too regulated. But we do not want to hem in society with every little item defined. It is the Treasury which so often wants to define us and to hem us into little categories. For our objectives Amendment No. 33 is eminently suitable and it should have the widest support, as it gives the individuality and the freedom of choice desired by both sides of the Committee.

5.45 p.m.

Mrs. Jill Knight (Birmingham, Edgbaston)

A fallacy is growing up in this debate which needs a few words to dispose of it. Hon. Members opposite, notably the hon. Member for West Lothian (Mr. Dalyell), sought to make great political capital out of the fact that my right lion. Friend did not approach medical experts before including this provision in the Bill. Frankly, nothing whatsoever in the Chancellor's intentions with regard to children's shoes has an obvious and immediate relevance to foot health as such, and I see no reason at all why my right hon. Friend should have been in touch with the experts for the simple reason that anyone who has brought up a family of children and knows anything about buying shoes for children will know that it is not only the cheap shoes that are bad for children's feet. There are many pairs of shoes which children might want to buy because they look smart or are pretty which can do just as much harm as cheap shoes to children's feet. So that was a bogus point.

This has been an interesting debate because often one comes into the Chamber with one's mind firmly made up, and although we call this a debating Chamber it does not really sway the views of many people. This debate has certainly swayed mine. I was very much intending to support sub-Amendment (a) moved by my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman). Although I accept the argument that to exempt all children's shoes from tax means that help is going to some families who do not really need it and that there is such a thing as family income supplement, I also feel strongly that there are many families who are not in the income range to receive family income supplement but are very hard-pressed to find the money to pay for their children's shoes and clothes throughout the year. I therefore felt very much inclined to say that I disliked the idea of a tax on children's shoes.

But how much more sensible was the idea mooted by my hon. Friend and taken up by the Chancellor that we might think in terms of having something positive through the tax system to encourage parents to choose shoes which are good for their children's feet. This makes more sense than anything else. As the hon. Member for Birmingham, All Saints (Mr. Brian Walden) explained, he had to correct defects in his feet caused through having unsuitable shoes. I am sure that this was not only a question of the cost of the shoes.

Mr. Dalyell

Is this not more reason rather than less why the Treasury should consult expert authority, in this case medical authority?

Mrs. Knight

I can only think that the hon. Member was not paying attention to what the Chancellor said, because this is exactly what he said he would do. This is why I commend him, and this is why I say that, although I had fully intended to support this sub-Amendment, if my right hon. Friend now intends fully to investigate the possibility of widening the tax on specific types of shoes which will help children's feet, I can support that all the way and I give notice that I shall do so.

Mr. Robert Boscawen (Wells)

I must express my indebtedness to my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) for putting the case so well and getting something practical done to investigate this question of the fittings of children's shoes.

I declare my interest in that I have in my constituency the headquarters of the largest shoe manufacturers in the country, Clark's, a name which is synonymous with well-made children's shoes, and a firm which all hon. Members will agree has shown a considerable social conscience for many years. It is the contention of the industry that parents always tend to go for the cheaper end of the market if they can and that parents take far too little care and trouble in choosing the correct shoes for their children.

I came here prepared to make a different speech altogether, on the lines that I would find it hard to support a tax on children's shoes, but since I heard my right hon. Friend's reply my mind has been changed by his flexible response to the idea of a high-level inquiry into this problem to see whether there is anything in the contention of the manufacturers and whether placing a tax on these shoes will make parents go for cheaper shoes. I would like the reassurance of my right hon. Friend that he has a completely open mind on this. If the result of the inquiry is that shoes made to a certain medical standard or recommendation should be exempt from VAT, will he consider this very seriously?

My right hon. Friend also took seriously the conclusions of the medical conference that there is a need for the control of approved designs of footwear. This is an important advance. If we can use VAT to ensure that manufacturers produce the right designs in the right widths and sizes it will be most satisfactory. There will always be thoughtless and selfish parents who are prepared to skimp on their children's shoes. The experts tell us that very often children suffer no pain while this is going on and their parents often do not realise it. If this inquiry does nothing other than bring home to people how vitally important it is for them to have shoes that are properly fitted and results in a tax that can be made to encourage this, the debate will have been well worth while.

Mr. Winterton

I have some personal reasons for wishing to take part in this debate, because I am one of those people who were born with very wide feet and a very high instep. I am pleased that from an early date my parents took an interest in my feet. I also speak now because I am the father of three young children who would test the toughest shoes. There is every temptation for parents to skimp and make their children's shoes last as long as possible and to pass them from one child to the next. It is obviously bad for young children and undoubtedly leads to abnormality and deformity later in life.

If I may change the subject for a moment, I imagine that I am perhaps the only Member in the Committee wearing a secondhand suit. I hope that it hangs fairly well off me. The quality is good, and it will no doubt last and I will pass it on to one of my sons.

It has been said that children's shoes have been exempt from tax for many years. That was qualified by my right hon. Friend, who said that shoes for children up to the age of 14 had been exempt. This is an important point that has perhaps been missed by some speakers. Feet are an important part of anyone's body, and the care of the feet is never more important than during their development. Therefore, children's shoes have an important effect on the health of a person's feet not only during childhood but during adolescence and in adult life. The imposition of VAT on child- ren's shoes will undoubtedly lead to a rise in prices, and this must be considered unfortunate.

This is not only because of the possible damage that might result to children but also because of the precarious position of the shoe industry, which has not really been reflected in today's debate so far. There is growing unemployment in that industry, as my hon. Friend the Member for Norwich, South (Dr. Stuttaford) knows only too well. The result of a price increase will be that mothers will make their children's shoes last longer than they otherwise would. There will be a pronounced increase in the habit of passing shoes from one youngster to another, irrespective of whether they fit properly. Parents will feel that while there is any wear in a shoe it must be used and not thrown away. This will undoubtedly lead to deformity, great pain and physical disability in later life. I leave this point to those who are professionally qualified to talk about it.

[Sir STEPHEN MCADDEN in the Chair]

An increase in the price of shoes will also lead to wide use of cheaper manufacturing materials, which as everyone knows, is false economy in the long run. This unfortunate proposal to impose VAT on children's footwear will also lead to a reduction in the number of fittings being available for children. There will not be that flexibility in half sizes which is so important. The manufacturers will ignore children with very narrow or wide feet.

The figure of £12 million has been bandied about today. To concede £12 million for the health of young children's feet will be money well spent, and I hope that my right hon. Friend or one of his Treasury colleagues will give an assurance that the Government will accept the report of the inquiry which my right hon. Friend is prepared to set up and that if it indicates that the health of children's feet is closely tied up with the design of shoes for young children he will zero-rate children's shoes.

6.0 p.m.

Dr. Gerard Vaughan (Reading)

I sense that the Committee feels that most of the important matters have been covered in this interesting and wide-ranging debate and that it should now conclude. Therefore, I do not propose to make the speech, and particularly the medical points, which came into my mind earlier.

I came here today intending to vote in favour of the sub-Amendment so forcefully and cogently moved by my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman). She put the case extremely well. I was delighted—and I think that I speak for many of my hon. Friends—at the way in which my right hon. Friend the Chancellor of the Exchequer dealt with the matter, and with his statement, which he had clearly been considering for some time, about setting up an inquiry.

My right hon. Friend has the unhappy task of weighing up the health considerations, fashion considerations, education considerations and, because it is very much a case of "save now and pay later", family financial considerations. Against them he has to set the problem of how the money might have been better spent and the effects of a system of taxation which we on this side of the Committee wish to see introduced. We want it to be simple and effective. Therefore, I am happy not to vote in favour of the sub-Amendment in my name and that of my hon. Friend the Member for Lancaster.

However, I should like an assurance from the Chancellor that the inquiry will not be limited to medical matters, because this is not entirely a medical matter, and that he appreciates our strong hope that out of the inquiry will emerge a category of suitable shoes for young children which will be zero-rated. If he can go that far, and if he can say that the inquiry will be aimed towards the making of a decision of that kind, I know that I speak for many hon. Members on this side of the Committee in welcoming what my right hon. Friend said.

Mr. David Madel (Bedfordshire, South)

I support the remarks of my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman), which were powerfully endorsed by my hon. Friend the Member for Norwich, South (Dr. Stuttaford).

First, I wish to take up the point made by the Opposition that if we did not go ahead with value added tax on children's shoes we would have to raise the money elsewhere and have to put an extra tax on some goods carrying VAT. Some people said that that would upset the neatness of VAT as we wanted a single rate of 10 per cent. The Government have already blown a hole in that argument by putting a 10 per cent. tax on cars. It is wrong to say that we cannot raise the extra money needed if we zero-rate children's shoes by putting it on other goods because we have already done that in regard to the 10 per cent. car tax.

Children are encouraged to take exercise and to go walking. No one could pretend that the school bus service is perfectly efficient. A number of children have to walk quite a distance to school. It will compound the difficulty and possibly damage their health if we place value added tax on children's shoes.

What most concerns me is this. The danger arises not so much when a child is young but when people employed in industry suffer injury as a result of shoes not fitting properly when young and, therefore, are off work through sickness or disability. The country is obsessed with the question of strikes. I wish that it was more obsessed with the question of days lost through industrial injury because they are considerable, and in industries where it is necessary to have nearly everybody present in the factory in order to achieve full production this matter cannot be lightly regarded.

The Chancellor says that £12 million would be lost if children's shoes were not subject to the tax. This is a relatively small figure, particularly when we are told that we are on the verge of a great boom and that production and investment will rise rapidly. I should have thought that £12 million could easily be raised as a result of expanding the economy. The Chancellor mentioned his indirect tax cuts and economic policy. Surely the nub of his policy is to put money in the pockets of people who basically need it, not the other way round. The effect of placing value added tax on shoes for children in families with low incomes cannot be disregarded.

For these reasons, I urge the Chancellor to zero-rate children's shoes, as proposed in the sub-Amendment of my hon. Friend the Member for Lancaster.

Mr. Kenneth Warren (Hastings)

One advantage of speaking at the end of a debate is that all one's best points have been made far more adequately than one could have made them.

I welcome the initiative of my right hon. Friend the Chancellor of the Exchequer in setting up the inquiry. I am slightly perturbed at the idea that it should be a high-level inquiry. Standing as I do alongside a medical man, I must be careful, but I hope that my right hon. Friend will include in the inquiry representatives of the manufacturing and retailing interests in the trade. It is important that we should concern ourselves not only with the fitting of shoes but with the structure of shoes and the materials with which they are made. We often hear parents say that shoes do not last long nowadays. It is about time that we took this into account, because shoes must be seen to be of good quality. I hope that the question of quality will be a term of reference for the inquiry. I hope that the invention of the shoe all over again will not emerge from the inquiry but that it will have simple, straightforward terms of reference whereby one can identify the shoe in question, which, I am sure, will be zero-rated.

I stand with my back to my hon. Friend the Member for Truro (Mr. Dixon) and dare to say that I take issue with him about his idea that the domino theory is bad in relation to value added tax. I see no reason why we should not go ahead and do something when something clearly needs to be done.

Mr. Dixon

We then end up with no value added tax.

Mr. Warren

We are talking about exceptions to the rule, and this place should be built on an understanding of what the members of the public expect us to do in making law which satisfies the needs of the people. Therefore, having entered the Chamber supporting sub-Amendment (a), I am delighted to be able to leave it without having to vote for it. It identifies a need which the Chancellor has recognised.

Mr. Geoffrey Stewart-Smith (Belper)

I have a sense of unease about the fact that we have no guarantee that the vague assurances which we have been given will become law. It would be encourage- ing if we could have a commitment in this respect.

I have a very large number of lower-paid workers in my constituency. For a miner with three children under the age of 14, the cost of shoes is a burdensome factor. Such people cannot afford an increase in the cost. That the Government should be associated with anything which might damage children's feet is intolerable. It is extraordinary that in Group 3 of the Schedule children's Picture books and painting books are exempted. If we can exempt them, surely we can exempt shoes.

There is also a stark political issue here. We cannot afford another school milk scandal for the sake of £12 million. In Group 4 of the Schedule the Government are exempting from the tax facilities for gaming and lotteries. It seems extraordinary that the Government should exempt them but not children's shoes. I beseech my right hon. Friend to give a commitment that he will decide to zero-rate children's shoes.

Mr. Barber

Before the right hon. Member for Leeds, East (Mr. Healey) concludes the debate—because we have been primarily discussing his Amendment—I should like to reply briefly to one or two of the points which have been made since I last spoke. I was asked, quite fairly, whether it would not have been better to have conducted the proposed inquiry before now. I say frankly that, with the benefit of hindsight, my answer is simply "Yes" without qualification.

Having said that, I must tell the Committee that what has influenced me to make the suggestion which I have put has been the genuine concern expressed to me by my hon. Friends. I must also say that I can see nothing wrong in a Chancellor of the Exchequer being influenced by his own hon. Friends if he feels it proper to propose something which was certainly not originally in his mind—and the inquiry was not in my mind before I was approached by my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) and other hon. Friends. In response to some of the questions raised about the proposed inquiry, it would be helpful to say one or two things to make the position clear. I have dealt with the timing, so I shall not go into that again.

My intention is that the medical profession should be involved. I think that is essential. But I agree with my hon. Friend the Member for Reading (Dr. Vaughan), himself a medical man, that the inquiry should not be limited, as he put it, to a medical inquiry. It should go wider than that. I agree with my hon. Friend the Member for Hastings (Mr. Warren) that the trade should be involved in any inquiry. I hope that the outcome of the inquiry will form the basis of further open-minded consideration of the possible need to zero-rate value added tax on certain categories of approved Young children's footwear.

My hon. Friend the Member for Norwich, South (Dr. Stuttaford), who has been very active in these matters, referred to the cost. The figure of £12 million as the cost of accepting the Amendment is the best estimate which the Customs and Excise can make. My hon. Friend put forward a figure which, I think, had been given to him in all honesty by certain manufacturers. I can only say that I suppose that if we were to get our statisticians together and find out the basis of the different figures, we might find that £7 million to £10 million was correct or that £12 million was correct. I ask the Committee to bear in mind, however, that the Customs has very great experience in estimating cost and has the benefit, under both parties, of having estimated the cost of various actions and seen how its estimates have worked out in practice. I think the Committee would be well advised to take the view that the cost would be something about £12 million.

My hon. Friend seemed to suggest that there was something perhaps not wholly convincing about saying that if one were to use £12 million for this purpose, there would be £12 million less available elsewhere. My experience after two years at the Treasury is that not to proceed on those principles is just the way to allow public expenditure to get out of control. [Laughter.] Hon. Members opposite may laugh, but public expenditure got out of control under the Labour Government and we got into great difficulties because of it.

6.15 p.m.

The Committee will remember that my hon. Friend the Member for Macclesfield (Mr. Winterton) is the man with the wide feet and high instep, wearing a secondhand suit which he has bought specially for his grandson. He made the valid point—I mean no disrespect when I say that it is almost a self-evident point—that cost in these matters is important. He is right. But, of course, as my hon. Friend the Member for Birmingham, Edgbaston (Mrs. Knight) and my hon. Friend the Member for Wells (Mr. Boscawen) both pointed out, it is not just a question of cost. There is also the very important question, which came out in the extracts I read from the medical conference, of style and design. As has been pointed out, some of the more expensive children's shoes are undoubtedly among those which are both harmful and deleterious to good health. Thus one of the crucial factors is the design and style of shoes.

My hon. Friend the Member for Bury and Radcliffe (Mr. Fidler) spoke from his considerable experience of the clothing trade. If anyone ever had any lingering doubts about tax relief for children's clothing, they would have been dispelled by what my hon. Friend said because he made it apparent that the present exemption is working in a most nonsensical way. He welcomed the inquiry and hoped that the question of the turnover on children's shoes—how many times a year they need to be changed so that children's feet are kept decently shod—would be given due importance. I must not anticipate the way in which the inquiry will be held but I think this must surely be one of the principal factors considered.

This has been a very good debate for one simple reason—because I have certainly been influenced by what has been said in it. I hope that the Committee has also been influenced by what I have said.

Mr. Healey

This has been a most interesting debate, as the Chancellor of the Exchequer has rightly said, particularly as it has led to a change of front by the right hon. Gentleman. All who have spoken have done so with deep feeling and deep personal knowledge of the problem. It is noticeable that almost all hon. Members have spoken against the Chancellor's original intention—that is, with the exception of the hon. Member for Truro (Mr. Dixon), who delighted the Committee with a chapter from his experience as a juvenile transvestite.

The Chancellor himself put the matter in a perspective which we will all understand when he said that he was changing his mind because of the weight of opinion presented by his hon. Friends. It is clear to those of us who have sat throughout the debate that there are enough of his hon. Friends to defeat the Government if they choose to vote with the Opposition for their own Amendment on this issue. I regret to inform them that the Chancellor is probably more influenced by their power in the Lobby than their power of argument. The hon. Member for Belper (Mr. Stewart-Smith) let the cat out of the bag. He said that hon. Members on the Government side did not want another row as big as the row over school milk over a measly £12 million. This I am sure also weighed heavily with the Chancellor.

The Chancellor attempted to deal with Amendment No. 33 by separating the issue of children's clothes from the issue of children's footwear. He spent almost 10 minutes complaining about the wording of the Amendment- suitable for young children's wear '. He is now aware, although he was not at the beginning of the debate, that the words are taken straight from the purchase tax regulations of November, 1971, which he himself approved. Successive Governments for the last 20 years have had no difficulty in handling purchase tax on the basis of that definition. That part of the right hon. Gentleman's argument was typical of the nit-picking of the Government Front Bench in the course of the debate.

The second part of the Chancellor's argument has, I readily admit, some weight to it. He said that with young people growing faster and with fashionable trends reaching lower down in the age groups there is an area of overlap between young children and older people which can be exploited by unscrupulous traders or by adults. The Chancellor had no idea when we asked him the question how big was the area of uncertainty, and he plucked a figure out of the air. I am astonished that he should have rested the whole weight of his argument on the overlap when he, the Chancellor, responsible for the Department which loves quantification, lives on numbers and knows the price of everything and the value of nothing, had absolutely no idea what was the size of the overlap on which he rested his whole case.

I put it again to the Chancellor that there may be some children of 12 or 13 who are big enough to wear clothes suitable for older people, and there are some older people who will wear clothes produced for children of 12 or 13, but no one will deny that the overwhelming number of children under 10 wear clothes which are not suitable for older people.

If the Chancellor really wanted to relieve families of the burden of tax on children's clothes, he and his officials could easily find a way of doing so which reduced the area of confusion. After all, as he admitted, the real question concerns not the words used in the regulations, suitable for young children's wear": but the definition in terms of size and so on that goes with them. Had the Chancellor wished to meet the feeling of the Committee he could have accepted the Amendment as drafted and then drawn regulations so as to get round the difficulties to which he referred.

The Chancellor appeared to accept tie feasibility of the definition of footwear in Amendment No. 33 and said that the cost of accepting it would be £12 million. He claimed that if it applied to children rather than young children, the cost of the concession contained in Amendment No. 58 would rise from £12 million to £50 million. Again, that is not a valid argument. It is perfectly open to Customs and Excise when drafting the regulations which would follow the acceptance of the Amendment to define children's clothes and footwear in a way which avoids this level of expense. It is part of the job of Customs and Excise to turn broad definitions into precise identifications which meet the administrative needs of the trader as well as the fiscal needs of the Chancellor.

The Chancellor then suggested that £12 million was a lot of money and that we might have to stop running six hospitals with 500 beds if this concession were made. He could have pointed out that the cost of the concession is one-twenty-fifth of the £300 million he is giving away to people with incomes of over £5,000 or with investment incomes. He could just as well have pointed out that the cost of the concession is one-hundredth the cost of the Concorde project——

Mr. Barber

The right hon. Member could just as well have pointed out that that is not what I said.

Mr. Healey

That is the clear inference of what the Chancellor said. He was demonstrating the question of choice. He could just as well have said that he is happy to devote to the Concorde project 100 times what it would cost to zero-rate footwear for young children.

The Chancellor tried to confuse his hon. Friends by discussing the medical aspects. It was an excellent display of what he and I, as Yorkshiremen. call "bobby-dazzling". We were no clearer at the end of what he said than we were at the beginning what precisely will follow in terms of the zero-rating of children's shoes. We often make mistakes—I no less than the right hon. Gentleman—and I am glad he recognised that he made a mistake in not consulting the doctors before deciding to charge VAT on children's footwear. I am surprised that the Financial Secretary to the Treasury, who has been boasting almost continuously for the last five days of the depth of consultation which has been carried out over the last year, should have allowed this decision to have been taken without investigation. The reason is simple. The only people the Treasury has consulted are the traders; the Treasury has not consulted the consumers. Although, as I said earlier, the Government now claim to represent consumer interests in industrial relations, they have shown a total contempt for the interests of the consumer in their approach to VAT.

We are no clearer on precisely what will be the outcome of the inquiry to which the Chancellor has now firmly pledged himself on the zero-rating of children's shoes. As I understand from the Chancellor's remarks a moment ago—I did not take down his words precisely, so if I misrepresent what he said I hope he will correct me—the purpose of the inquiry is to define categories of children's shoes for zero-rating on grounds conducive to health. Those were not the words he used but that was the sense of what he said. In other words, the purpose of the inquiry is not to find whether zero-rating is feasible but to define those categories of children's shoes which will be zero-rated on the ground that their wearing will be conducive to health.

If that were the outcome of the inquiry most of us would welcome it, but it would knock the whole of the Chancellor's case for VAT into a cocked hat. Here the hon. Member for Truro is right. The Chancellor and the Financial Secretary have been selling us VAT for the last two weeks on the grounds that it does not distort consumer choice, that it is a comprehensive tax which covers the widest possible range of goods and that, unlike purchase tax, it does not distort its fiscal and economic purposes in the pursuit of social, medical and environmental objectives. Now the Chancellor is promising the Committee that he will deliberately use the VAT to encourage the purchase of one type of shoe rather than another on the grounds that it is conducive to health. That is exactly opposite to the line he took last week when he rejected the use of VAT to discourage the purchase of devices which pollute the atmosphere or spoil the environment.

If the Chancellor is prepared to use; VAT for social and economic purposes, in logic he will accept the succeeding Amendments which will be debated later today and which are concerned with relieving from VAT commodities which are even more essential to health—drugs, equipment for disabled people and equipment to reduce the risk of accidents at work. By making the statement he has made this afternoon—as the hon. Member for Truro recognises well—the Chancellor has blown a gaping hole in the side of the ship which he launched with such confidence only a fortnight ago.

6.30 p.m.

My doubts and suspicions about the Chancellor's intentions arise from the fact that the general principles to which he has committed himself ever since he launched VAT on a fearful public two years ago are made a nonsense of by the very concession which he is purporting to offer. The Committee must decide. Does it believe what the Chancellor said when he opened the debate on VAT last week, or does it believe what he said this afternoon when he was trying to persuade a number of his hon. Friends not to vote for their own Amendment?

I think the Chancellor is a man of principle. I think when it comes to it he will stick to the principle which he announced to the House, the principle on which the whole of his VAT is founded. For that reason I believe that the Committee will wish to divide not only on Amendment No. 33 but on the sub-Amendment to it, and also on Amendment No. 58.

The Temporary Chairman

Does the hon. Lady the Member for Lancaster (Mrs. Kellett-Bowman) wish formally to move sub-Amendment (a)?

Division No. 181.]	AYES	[6.31 p.m.
Albu, Austen	Evans, Fred	Loughlin, Charles
Allen, Scholefleld	Ewing, Henry	Lyon, Alexander W. (York)
Archer, Peter (Rowley Regis)	Faulds, Andrew	Lyons, Edward (Bradford, E.)
Armstrong, Ernest	Fitch, Alan (Wigan)	Mabon, Dr. J. Dickson
Ashley, Jack	Fletcher, Raymond (Ilkeston)	McBride, Neil
Ashton, Joe	Fletcher, Ted (Darlington)	McCartney, Hugh
Atkinson, Norman	Foley, Maurice	McElhone, Frank
Bagier, Gordon A. T.	Foot, Michael	McGuire, Michael
Barnes, Michael	Forrester, John	Mackenzie, Gregor
Barnett, Joel (Heywood and Royton)	Fraser, John (Norwood)	Mackie, John
Baxter, William	Galpern, Sir Myer	Mackintosh, John P.
Benn, Rt. Hn. Anthony Wedgwood	Gilbert, Dr. John	McMillan, Tom (Glasgow, C.)
Bennett, James (Glasgow, Bridgeton)	Ginsburg, David (Dewsbury)	McNamara, J. Kevin
Bidwell, Sydney	Golding, John	Mahon, Simon (Bootle)
Bishop, E. S.	Gourlay, Harry	Mallalieu, J. P. W. (Huddersfleld, E.)
Blenkinsop, Arthur	Grant, George (Morpeth)	Marks, Kenneth
Boardman, H. (Leigh)	Grant, John D. (Islington, E.)	Marshall, Dr. Edmund
Booth, Albert	Griffiths, Eddie (Brightside)	Mason, Rt. Hn. Roy
Broughton, Sir Alfred	Griffiths, Will (Exchange)	Mayhew, Christopher
Brown, Bob (N'c'tle-upon-Tyne,W.)	Grimond, Rt. Hn. J.	Meacher, Michael
Brown, Hugh D. (G'gow, Provan)	Hamilton, James (Bothwell)	Mellish, Rt. Hn. Robert
Brown, Ronald (Shoreditch& F'bury)	Hamllng, William	Mendelson, John
Buchan, Norman	Hannan, William (G'gow, Maryhill)	Mikardo, Ian
Buchanan, Richard (G'gow, Sp'burn)	Harper, Joseph	Millan, Bruce
Campbell, I. (Dunbartonshire, W.)	Healey, Rt. Hn. Denis	Miller, Dr. M. S.
Cant, R. B.	Heffer, Eric S.	Milne, Edward
Carter, Ray (Birmingh'm, Northfield)	Horam, John	Morgan, Elystan (Cardiganshire)
Carter-Jones, Lewis (Eccles)	Houghton, Rt. Hn. Douglas	Morris, Rt. Hn. John (Aberavon)
Castle, Rt. Hn. Barbara	Howell, Denis (Small Health)	Morris, Rt. Hn. John (Aberavon)
Cocks, Michael (Bristol, S.)	Hughes, Rt. Hn. Cledwyn (Anglesey)	Moyle, Roland
Concannon, J. D.	Hughes, Mark (Durham)	Mulley, Rt. Hn. Frederick
Corbet, Mrs. Freda	Hughes. Robert (Aberdeen, N.)	Murray, Ronald King
Cox, Thomas (Wandsworth, C.)	Hughes, Roy (Newport)	Oakes, Gordon
Cronin, John	Hunter, Adam	O'Halloran, Michael
Crossman, Rt. Hn. Richard	Irvine,Rt.Hn.SirArthur (Edge Hill)	Orme, Stanley
Cunningham, G. (Islington, S.W.)	Janner, Grevllle	Palmer, Arthur
Cunningham, Dr. J. A. (Whitehaven)	Jeger, Mrs. Lena	Pannell, Rt. Hn. Charles
Dalyell, Tam	Jenkins, Hugh (Putney)	Pardoe, John
Davies, Denzil (Llanelly)	Jenkins, Rt. Hn. Roy (Stechford)	Parry, Robert (Liverpool Exchange)
Davies, Ifor (Gower)	John, Brynmor	Pavitt, Laurie
Davis, Clinton (Hackney, C.)	Johnson, James (K'ston-on-Hull, W.)	Pendry, Tom
Davis, Terry (Bromsgrove)	Johnston, Russell (Inverness)	Pentland, Norman
Deakins, Eric	Jones,Rt.Hn.Sir Elwyn(W.Ham.S.)	Perry, Ernest G.
de Freitas, Rt. Hn. Sir Geoffrey	Jones, Gwynoro (Carmarthen)	Prentice, Rt. Hn. Reg
Dell, Rt. Hn. Edmund	Jones, T Alec (Rhondda, W.)	Prescott, John
Dempsey, James	Kaufman, Gerald	Price, J. T. (Westhoughton)
Doig, Peter	Kelley, Richard	Probert, Arthur
Dormand, J. D.	Kinnock, Neil	Rankin, John
Duffy, A. E. P.	Lamborn, Harry	Reed, D. (Sedgefield)
Dunnett, Jack	Lamond, James	Roberts, Albert (Normanton)
Eadie, Alex	Lawson, George	Robertson, John (Paisley)
Edelman, Maurice	Leadbitter, Ted	Roper, John
Edwards, Robert (Bilston)	Leonard, Dick	Rose, Paul B.
Edwards, William (Merioneth)	Lewis, Arthur (W. Ham. N.)	Ross, Rt. Hn. William (Kilmarnock)
English, Michael	Lewis, Ron (Carlisle)	Rowlands, Ted

Mrs. Kellett-Bowman

No, thank you, Sir Stephen.

Mr. Joel Barnett

In that case, Sir Stephen, I beg to move the sub-Amendment to the proposed Amendment, leave out 'Garments and footwear of a kind suitable for young children's wear' and insert: 'Children's footwear of the type and size at present free from purchase tax'.

Question put, That the Amendment to the proposed Amendment be made:—

The Committee divided: Ayes 203 Noes 220.

Sandelson, Neville	Strang, Gavin	White, James (Glasgow, Pollok)
Sheldon, Robert (Ashton-under-Lyne)	Summerskill, Hn. Dr. Shirley	Whltlock, William
Shore, Rt. Hn. Peter (Stepney)	Swain, Thomas	Willey, Rt. Hn. Frederick
Short,Rt.Hn.Edward(N'c'tle-u-Tyne)	Taverne, Dick	Williams, Alan (Swansea, W.)
Short, Mrs. Renée (W'hampton, N.E.)	Thomas,Rt.Hn.George (Cardiff,W.)	Williams, Mrs. Shirley (Hitchin)
Silkin, Hn. S. C. (Dulwich)	Thorpe, Rt. Hn. Jeremy	Williams, W. T. (Warrington)
Sillars, James	Tinn, James	Wilson, Rt. Hn. Harold (Huyton)
Silverman, Julius	Torney, Tom	Wilson, William (Coventry, S.)
Skinner, Dennis	Tuck, Raphael	Woof, Robert
Smith, John (Lanarkshire, N.)	Urwin, T. W.
Spriggs, Leslie	Wainwright, Edwin	TELLERS FOR THE AYES:
Stallard, A. W.	Walden, Brian (B'm'ham, All Saints)	Mr. James Wellbelovcd and
Stewart, Donald (Western Isles)	Watkins, David	Mr. James A. Dunn.
Stoddart. David (Swindon)	Weitzman, David

NOES
Adley, Robert	Fraser,Rt.Hn.Hugh (St'fford & Stone)	Mather, Carol
Alison, Michael (Barkston Ash)	Galbraith, Hn. T. G.	Maude, Angus
Allason, James (Hemel Hempstead)	Gibson-Watt, David	Mawby, Ray
Archer, Jeffrey (Louth)	Gilmour, Ian (Norfolk, C.)	Maxwell-Hyslop, R. J.
Astor, John	Gilmour, Sir John (Fife, E.)	Meyer, Sir Anthony
Atkins, Humphrey	Goodhew, Victor	Mills, Peter (Torrington)
Awdry, Daniel	Gorst, John	Mills, Stratton (Belfast, N.)
Baker, Kenneth (St. Marylebone)	Gower, Raymond	Miscampbell, Norman
Baker, W. H. K. (Banff)	Grant, Anthony (Harrow, C.)	Mitchell, Lt.-Col.C.(Aberdeenshire, W)
Barber, Rt. Hn. Anthony	Green, Alan	Moate, Roger
Bell, Ronald	Grylls, Michael	Molyneaux, James
Bennett, Dr. Reginald (Gosport)	Gummer, Selwyn	Money, Ernie
Berry, Hn. Anthony	Hall, Miss Joan (Keighley)	Monks, Mrs. Connie
Biffen, John	Hall, John (Wycombe)	Monro, Hector
Blaker, Peter	Hall-Davis, A. G. F.	Montgomery, Fergus
Boardman, Tom (Leicester, S.W.)	Hamilton, Michael (Salisbury)	Morrison, Charles
Body, Richard	Hannam, John (Exeter)	Mudd, David
Bossom, Sir Clive	Harrison, Brian (Maldon)	Nabarro, Sir Gerald
Bowden, Andrew	Haselhurst, Alan	Neave, Airey
Bray, Ronald	Hastings, Stephen	Nicholls, Sir Harmar
Brewis, John	Havers, Michael	Noble, Rt. Hn. Michael
Brinton, Sir Tatton	Hawkins, Paul	Normanton, Tom
Brown, Sir Edward (Bath)	Hayhoe, Barney	Nott, John
Bruce-Gardyne J.	Heseltlne, Michael	Onslow, Cranley
Buchanan-Smith,Alickf (Angus,N&M)	Hicks, Robert	Oppenheim, Mrs. Sally
Bullus, Sir Eric	Higgins, Terence L.	Orr, Capt. L. P. S.
Butler, Adam (Bosworth)	Hiley, Joseph	Owen, Idris (Stockport, N.)
Campbell, Rt.Hn.G. (Moray&Nairn)	Holland, Philip	Page, Graham (osby)
Cary, Sir Robert	Holt, Miss Mary	Page, John (Harrow, W.)
Chapman, Sydney	Hordern, Peter	Parkinson, Cecil
Chataway, Rt. Hn. Christopher	Hornby, Richard	Percival Ian
Chichester-Clark, R.	Howe. Hn. Sir Geoffrey (Reigate)	Powell, Rt. Hn. J. M. L.
Churchill, W. S.	Howell, Ralph (Norfolk, N.)	Prior, Rt. Hn. J. M. L.
Clark, William (Surrey, E.)	Hunt, John	Proudfoot, Wilfred
Clarke, Kenneth (Rushcliffe)	Iremonger, T. L.	Pym, Rt. Hn. Francis
Clegg, Walter	Jenkin, Patrick (Woodford)	Quennell, Miss J. M.
Cooke, Robert	Jessel, Toby	Raison, Timothy
Coombs, Derek	Jopling, Michael	Redmond, Robert
Cooper, A. E.	Kaberry, Sir Donald	Reed, Laurance (Bolton, E.)
Cordle, John	Kershaw, Anthony	Rees, Peter (Dover)
Cormack, Patrick	Kilfedder, James	Rees-Davies, W. R.
Costain, A. P.	King, Evelyn (Dorset, S.)	Ridley, Hn. Nicholas
Crouch, David	King, Tom (Bridgwater)	Rippon, Rt. Hn. Geoffrey
DalKeith, Earl of	Kinsey, J. R.	Roberts, Wyn (Conway)
Davies. Rt. Hn. John (Knutsford)	Kirk, Peter	Royle, Anthony
Dean, Paul	Kitson, Timothy	St. John-Stevas, Norman
Deedes. Rt. Hn. W. F.	Knight, Mrs. [...]	Scott, Nicholas
Dixon, Piers	Knox, David	Sharples, Richard
Drayson, G. B.	Lamont, Norman	Shaw, Michael (Sc'b'gh & Whitby)
du Cann, Rt. Hn. Edward	Lane David	Shelton, William (Clapham)
Dykes, Hugh	Legge-Bourke, Sir Harry	Skeet, T. H. H.
Eden, Sir John	Le Marchant, Spencer	Smith, Dudley (W wick & L mington)
Edwards, Nicholas (Pembroke)	Lewis. Kenneth (Rutland)	Soref, Harold
Elliot, Capt. Walter (Carshalton)	Longden, Gilbert	Speed, Keith
Emery, Peter	Loveridge, John	Spence, John
Eyre, Reginald	Luce, R. N.	Stainton, Keith
Farr, John	MacArthur, Ian	Stanbrook, Ivor
Fell, Anthony	McCrindle, R. A.	Stewart-Smith, Geoffrey (Belper)
Fenner, Mrs. Peggy	McLaren, Martin	Stodart, Anthony (Edinburgh, W.)
Fidler, Michael	Maclean, Sir Fitzroy	Stoddart-Scott, Col. Sir M.
Fisher, Nigel (Surbiton)	McMaster, Stanley	Stokes, John
Fletcher-Cooke, Charles	McNair-Wilson, Michael	Sutclifle, John
Fookes, Miss Janet	McNair-Wilson, Patrick (NewForest)	Tapsell, Peter
Fortescue, Tim	Maginnis, John E.	Taylor, Sir Charles (Eastbourne)
Foster, Sir John	Marples, Rt. Hn. Ernest	Taylor,Edward M.(G'gow,Cathcart)
Fox, Marcus	Marten, Neil	Taylor, Frank (Moss Side)

Tebbit, Norman	Walker, Rt. Hn. Peter (Worcester)	Woodnutt, Mark
Thatcher, Rt. Hn. Mrs. Margaret	Walker-Smith, Rt. Hn. Sir Derek	Worsley, Marcus
Thomas, John Stradling (Monmouth)	Warren, Kenneth	Wylie, Rt. Hn. N. R.
Thomas, Rt. Hn. Peter (Hendon. S.)	Weatherill, Bernard	Younger, Hn. George
Trafford, Dr. Anthony	Wells, John (Maidstone)
Trew, Peter	Wiggin, Jerry	TELLERS FOR THE NOES:
Tugendhat, Christopher	Wilkinson, John	Mr. Oscar Morton and
Turton, Rt. Hn. Sir Robin	Wood, Rt. Hn. Richard	Mr. Hamish Gray.
Waddington. David	Woodhouse, Hn. Christopher

Question accordingly negatived.

Question put, That the Amendment be made:—

Division No. 182.]	AYES	[6.43 p.m.
Albu, Austen	Galpern, Sir Myer	Mason, Rt. Hn. Roy
Allen, Scholefield	Gilbert, Dr. John	Mayhew, Christopher
Archer, Peter (Rowley Regis)	Ginsburg, David (Dewsbury)	Meacher, Michael
Armstrong, Ernest	Golding, John	Mellish, Rt. Hn. Robert
Ashley, Jack	Gourlay, Harry	Mendelson, John
Ashton, Joe	Grant, George (Morpeth)	Mikardo, Ian
Atkinson, Norman	Grant, John D. (Islington, E.)	Millan, Bruce
Bagler, Gordon A. T.	Griffiths, Eddie (Brightside)	Miller, Dr. M. S.
Barnett, Joel (Heywood and Royton)	Griffiths, Will (Exchange)	Milne, Edward
Baxter, William	Grimond, Rt. Hn. J.	Morgan, Elystan (Cardiganshire)
Benn, Rt. Hn. Anthony Wedgwood	Hamilton, James (Bothwell)	Morris, Charles R. (Openshaw)
Bennett, James (Glasgow, Bridgeton)	Hamilton, William (Fife, W.)	Morris, Rt. Hn. John (Aberavon)
Bidwelt, Sydney	Hamling, William	Moyle, Roland
Bishop, E. S.	Hannan, William (G'gow, Maryhill)	Mulley, Rt. Hn. Frederick
Blenkinsop, Arthur	Harper, Joseph	Murray, Ronald King
Boardman, H. (Leigh)	Healey, Rt. Hn. Denis	Oakes, Gordon
Booth, Albert	Heffer, Eric S.	O'Halloran, Michael
Broughton, Sir Alfred	Horam, John	Orme, Stanley
Brown, Bob (N'c'tle-upon-Tyne,W.)	Houghton, Rt. Hn. Douglas	Palmer, Arthur
Brown, Hugh D. (G'gow, Provan)	Howell, Denis (Small Heath)	Pannell, Rt. Hn. Charles
Brown, Ronald(Shoreditch & F'bury)	Hughes, Rt. Hn. Cledwyn (Anglesey)	Pardoe, John
Buchan, Norman	Hughes, Mark (Durham)	Parry, Robert (Liverpool, Exchange)
Buchanan, Richard (G'gow, Sp'burn)	Hughes, Robert (Aberdeen, N.)	Pavitt, Laurie
Campbell, I. (Dunbartonshire, W.)	Hughes, Roy (Newport)	Pendry, Tom
Cant R. B.	Hunter, Adam	Pentland, Norman
Carter, Ray (Birmingh'm, Northfield)	Irvine, Rt. Hn. SirArthur(Edge Hill)	Perry, Ernest G.
Carter-Jones, Lewis (Eccles)	Janner, Greville	Prentice, Rt. Hn. Reg.
Castle, Rt. Hn. Barbara	Jeger, Mrs. Lena	Prescott, John
Cocks, Michael (Bristol S.)	Jenkins, Hugh (Putney)	Price, J. T. (Westhoughton)
Concartnon, J. D.	Jenkins, Rt. Hn. Roy (Stechford)	Probert, Arthur
Corbet, Mrs. Freda	John, Brynmor	Rankin, John
Cox, Thomas (Wandsworth, C.)	Johnson, James (K'ston-on-Hull, W.)	Reed, D. (Sedgefield)
Cronin John	Johnston, Russell (Inverness)	Roberts, Albert (Normanton)
Crossman, Rt. Hn. Richard	Jones, Rt.Hn.SirElwyn(W.Ham,S.)	Robertson, John (Paisley)
Cunningham, G. (Islington, S.W.)	Jones, Gwynoro (Carmarthen)	Roper, John
Cunningham, Dr. J. A. (Whitehaven)	Jones, T. Alec (Rhondda, W.)	Rose Paul B.
Dalyell, Tam		Ross, Rt. Hn. William (Kilmarnock)
	Kaufman, Gerald	Rowlands, led
Davies, Denzil (Llanelly)	Kelley, Richard	Sandelson, Neville
Davies, Ifor (Gower)	Kinnock, Neil	Sheldon, Robert (Ashton-under-Lyne)
Davis, Clinton (Hackney, c.)	Lamborn Harry	Shore, Rt. Hn. Peter (Stepney)
Davis, Terry (Bromsgrove)	Lamond, James	Short, Rt.Hn. Edward (N'c'tle-u-Tyne)
Deakins, Eric	Lawson, George	Short Mrs Rénee (W'hampton N E.)
de Freltas, Rt. Hn. Sir Geoffrey	Leadbitter, Ted	Silkin Hn S C (Dulwich)
Dell, Rt. Hn. Edmund	Leonard, Dick	Sillars, James
Dempsey, James	Lewis, Arthur (W. Ham, N.)	Silverman, Julius
Doig, Peter	Lewis, Ron (Carlisle)	Skinner, Dennis
Dormand, J. D.	Loughlin, Charles	Smith, John (Lanarkshire, N.)
Duffy, A. E. P.	Lyon, Alexander W. (York)	Spriggs, Leslie
Dunnett, Jack	Lyons, Edward (Bradford, E.)	Stallard, A. W.
Eadie, Alex	Mabon, Dr. J. Dickson	Stewart, Donald (Western Isles)
Edelman, Maurice	McBride, Neil	Stoddart, David (Swindon)
Edwards, Robert (Bilston)	McCartney, Hugh	Strang, Gavin
Edwards, William (Merioneth)	McElhone, Frank	Summerskill, Hn. Dr. Shirley
English, Michael	McGuire, Michael	Swain, Thomas
Evans, Fred	Mackenzie, Gregor	Taverne, Dick
Ewing, Harry	Mackie, John	Thomas, Rt. Hn. George (Cardiff.W.)
Faulds, Andrew	Mackintosh, John P.	Thorpe, Rt. Hn. Jeremy
Fitch, Alan (Wigan)	McMillan, Tom (Glasgow, C.)	Tinn, James
Fletcher, Raymond (Ilkeston)	McNamara, J. Kevin	Torney, Tom
Fletcher, Ted (Darlington)	Mahon, Simon (Bootle)	Tuck, Raphael
Foley, Maurice	Mallalieu, J. P.W. (Huddersfield, E.)	Urwin, T. W.
Foot, Michael	Marks, Kenneth	Wainwright, Edwin
Forrester, John	Marsden, F.	Waiden, Brian (B'm'ham, All Saints)
Fraser, John (Norwood)	Marshall, Dr. Edmund	Watkins, David

The Committee divided: Ayes 203. Noes 225.

Weitzman, David	Williams, Mrs. Shirley (Hitchin)
White, James (Glasgow, Pollok)	Williams, W. T. (Warrington)	TELLERS FOR THE AYES:
Whitlock, William	Wilson, Rt. Hn. Harold (Huyton)	Mr. James Wellbeloved and
Willey, Rt. Hn. Frederick	Wilson, William (Coventry, S.)	Mr. James A. Dunn
Williams. Alan (Swansea, W.)	Woof, Robert

NOES
Adley, Robert	Gilmour, Sir John (Fife, E.)	Moate, Roger
Alison, Michael (Barkston Ash)	Goodhew, Victor	Molyneaux, James
Allason, James (Hemel Hempstead)	Gorst, John	Money, Ernie
Archer Jeffrey (Louth)	Gower, Raymond	Monks, Mrs Connie
Astor, John	Grant, Anthony (Harrow, C.)	Monro Hector
Atkins, Humphrey	Green, Alan	Montgomery, Fergus
Awdry, Daniel	Grylls, Michael	Morrison, Charles
Baker, Kenneth (St. Marylebone)	Gummer, J. Selwyn	Mudd, David
Baker, W.H.K. (Banff)	Hall, Miss Joan (Keighley)	Nabarro, Sir Gerald
Barber Rt. Hn. Anthony	Hall, John (Wycombe)	Neave, Airey
Bell, Ronald	Hall-Davis, A. G. F.	Nicholls, Sir Harmar
Bennett, Dr. Reginald (Gosport)	Hamilton, Michael (Salisbury)	Noble, Rt. Hn. Michael
Berry, Hn. Anthony	Hannam, John (Exeter)	Normanton, Tom
Biffen, John	Harrison, Brian (Maldon)	Nott, John
Blaker, Peter	Haselhurst, Alan	Onslow, Cranley
Boardman, Tom (Leicester, S.W.)	Hastings, Stephen	Oppenheim, Mrs. Sally
Body, Richard	Havers, Michael	Orr, Capt. L. P. S.
Boscawen, Hn. Robert	Hawkins, Paul	Owen, Idris (Stockport, N.)
Bossom, Sir Clive	Hayhoe, Barney	Page, Graham (Crosby)
Bowden, Andrew	Heseltine, Michael	Page, John (Harrow, W.)
Bray, Ronald	Hicks, Robert	Parkinson, Cecil
Brewis, John	Higgins, Terence L.	Percival, Ian
Brinton, Sir Tatton	Hiiey, Joseph	Powell, Rt. Hn. J. Enoch
Brocklebank-Fowler, Christopher	Holland, Philip	Prior, Rt. Hn. J. M. L.
Brown, Sir Edward (Bath)	Holt, Miss Mary	Proudfoot, Wilfred
Bruce-Gardyne, J.	Hordern, Peter	Pym, Rt. Hn. Francis
Buchanan-Smith, Alick (Angus,N& M)	Hornby, Richard	Quennell, Miss J. M.
Buck, Antony	Howe, Hn. Sir Geoffrey (Reigate)	Raison, Timothy
Bullus, Sir Eric	Howell, Ralph (Norfolk, N.)	Redmond, Robert
Butler, Adam (Bosworth)	Hunt, John	Reed, Laurance (Bolton, E.)
Campbell, Rt. Hn. G.(Moray&Nairn)	Iremonger, T. L.	Rees, Peter (Dover)
Cary, Sir Robert	Jenkin, Patrick (Woodford)	Rees-Davies, W. R.
Chapman, Sydney	Jessel, Toby	Ridley, Hn. Nicholas
Chataway, Rt. Hn. Christopher	Jopling, Michael	Rippon, Rt. Hn. Geoffrey
Churchill, W. S.	Kaberry, Sir Donald	Roberts, Wyn (Conway)
Clark, William (Surrey, E.)	Kellett-Bowman, Mrs. Elaine	Royle, Anthony
Clarke, Kenneth (Rushcliffe)	Kershaw, Anthony	St. John-Stevas, Norman
Clegg, Walter	Kilfedder, James	Scott, Nicholas
Cooke, Robert	King, Evelyn (Dorset, S.)	Sharples, Richard
		Shaw, Michael (Sc'b'gh & Whitby)
Coombs, Derek	King, Tom (Bridgwater)	Skeet, T. H. H.
Cooper, A. E.	Kinsey, J. R.	Smith, Dudley (W'wick & L'mington)
Cordle, John	Kirk, Peter	Soref, Harold
Cormack, Patrick	Kitson, Timothy	Speed, Keith
Costain, A. P.	Knight, Mrs. Jill	Spence, John
Crouch, David	Knox, David	Stainton, Keith
Dalkeith, Earl of	Lamont, Norman	Stanbrook, Ivor
Davies, Rt. Hn. John (Knutsford)	Lane, David	Stewart-Smith, Geoffrey (Belper)
Dean, Paul	Legge-Bourke, Sir Harry	Stodart, Anthony (Edinburgh, W.)
Deedes, Rt. Hn. W. F.	Le Marchant, Spencer	Stoddart-Scott, Col. Sir M.
Dixon Piers	Lewis, Kenneth (Rutland)	Stokes, John
Drayson, G. B.	Longden. Sir Gilbert	Stuttalord, Dr. Tom
du Cann, Rt. Hn. Edward	Loveridge, John	Sutcliffe, John
Dykes, Hugh	Luce, R. N.	Tapsell, Peter
Eden, Sir John	MacArthur, Ian	Taylor, Sir Charles (Eastbourne)
Edwards, Nicholas (Pembroke)	McCrindle, R. A.	Taylor,Edward M.(G'gow, Cathcart)
Elliot, Capt. Walter (Carshaiton)	McLaren, Martin	Taylor, Frank (Moss Side)
Emery, Peter	Maclean, Sir Fitzroy	Tebbit, Norman
Eyre, Reginald	McMaster, Stanley	Thatcher, Rt. Hn. Mrs. Margaret
Farr, John	McNair-Wilson, Michael	Thomas, John Stradling (Monmouth)
Fell, Anthony	McNair-Wilson, Patrick (NewForest)	Thomas, Rt. Hn. Peter (Hendon, S.)
Fenner, Mrs. Peggy	Maginnis, John E.	Trafford, Dr. Anthony
Fidler, Michael	Marples, Rt. Hn. Ernest	Trew, Peter
Fisher, Nigel (Surbiton)	Marten Neil	Tugendhat, Christopher
Fletcher-Cooke, Charles	Mather, Carol	Turton, Rt. Hn. Sir Robin
Fookes, Miss Janet	Maude, Angus	Vaughan, Dr. Gerard
Fortescue, Tim	Mawby, Ray	Waddington, David
Foster, Sir John	Maxwell-Hyslop, R. J	Walker, Rt. Hn. Peter (Worcester)
Fox, Marcus	Meyer, Sir Anthony	Walker-Smith, Rt. Hn. Sir Derek
Fraser, Rt. Hn. Hugh(Sffford & Stone)	Mills, Peter (Torrington)	Warren, Kenneth
Galbraith, Hn. T. G.	Mills, Stratton (Belfast, N.)	Weatherill, Bernard
Gibson-Watt, David	Miscampbell, Norman	Wells, John (Maidstone)
Gilmour, Ian (Norfolk, C.)	Mitchell, Lt.-Col. C.(Aberdeenshire, W)	Wiggin, Jerry

Wilkinson, John	Woodnutt, Mark
Winterton, Nicholas	Worsley, Marcus	TELLERS FOR THE NOES:
Wood, Rt. Hn. Richard	Wylie, Rt. Hn. N. R.	Mr. Oscar Murton and
Woodhouse, Hn. Christopher	Younger, Hn. George	Mr. Hamish Gray.

Question accordingly negatived.

Mr. Joel Barnett

I beg to move Amendment No. 35, in page 101, line 34, at end add:

GROUP 14—SURGICAL APPLIANCES, DRUGS AND MEDICINES

Item No.

1. Invalid Chairs.

The Temporary Chairman

With this Amendment it will be convenient to discuss the following Amendments:

No. 34, in page 101, line 34, at end add:

GROUP 14—SURGICAL APPLIANCES, DRUGS AND MEDICINES

Item No.

1. Elastic Stockings.

No. 36, in line 34, at end add:

GROUP 14—SURGICAL APPLIANCES, DRUGS AND MEDICINES

Item No.

1. Over-bed tables and bed rests.

No. 37, in line 34, at end add:

GROUP 14—SURGICAL APPLIANCES. DRUGS AND MEDICINES

Item No.

1. Commode chairs, commode stools

No. 38, in line 34, at end add:

GROUP 14—SURGICAL APPLIANCES, DRUGS AND MEDICINES

Item No.

1. Bath rails and seats for use in baths or under showers.

No. 39, in line 34, at end add:

GROUP 14—SURGICAL APPLIANCES, DRUGS AND MEDICINES

Item No.

1. Electrically or mechanically-adjustable beds specially designed for invalids.

No. 40, in line 34, at end add:

GROUP 14—SURGICAL APPLIANCES, DRUGS AND MEDICINES

Item No.

1. Sanitary pans and similar devices.

No. 41, in line 34, at end add:

GROUP 14—SURGICAL APPLIANCES, DRUGS AND MEDICINES

Item No.

1. Disposable incontinence pads.

No. 42, in line 34, at end add:

GROUP 14—SURGICAL APPLIANCES, DRUGS AND MEDICINES

Item No.

1. Nelson knives and forks.

No. 43, in line 34, at end add:

GROUP 14—SURGICAL APPLIANCES, DRUGS AND MEDICINES

Item No.

1. Sound records for the blind.

No. 44, in line 34, at end add:

GROUP 14—SURGICAL APPLIANCES, DRUGS AND MEDICINES

Item No.

1. Surgical dressings.

No. 45, in line 34, at end add:

GROUP I4—SURGICAL APPLIANCES, DRUGS AND MEDICINES

Item No.

1. Chair lifts and stairs lifts for use with invalid chairs.

No. 62, in line 34, at end add:

GROUP 14—SURGICAL APPLIANCES, DRUGS AND MEDICINES

Item No.

1. Goods complying with the provision of Part II of Schedule 1 to the Purchase Tax Act 1963.

2. Goods specified in the Schedule to the Purchase Tax (No. 5) Order 1971.

No. 63, in line 34, at end add:

GROUP 14—FAMILY PLANNING DEVICES

Item No.

1. Family planning aids, materials and prescriptions not covered by a doctor's certificate.

No. 99, in line 34, at end add:

GROUP 14—HEARING AIDS AND BATTERIES

Item No.

1. Hearing aids and mercury cell batteries.

No. 108, in line 34, at end add:

GROUP 14—ARTICLES FOR THE DISABLED

Item No.

1. Any articles specifically designed for supply to disabled persons.

No. 112, in line 34, at end add:

GROUP 14—DEAF AIDS

Item No.

1. All aids for the deaf and hard of hearing.

No. 118, in line 34, at end add:

GROUP 14—SURGICAL APPLIANCES, DRUGS AND MEDICINES

Item No.

1. 1. Sanitary towels.
2. 2. Tampons.

Mr. Laurie Pavitt (Willesden, West)

On a point of order, Sir Stephen. I do not wish to query the selection of Amendments, but I notice that the only vote on the Amendments which have been called will be on No. 108. I and some of my hon. Friends wish to speak to Amendment No. 99. My point of order is whether the vote on Amendment No. 108 will, if carried, include hearing aids with which Amendment No. 99 deals. If not, will you consider allowing a separate vote on Amendment No. 99 which concerns people who are deaf and have a special need?

The Temporary Chairman

I should point out that I have no power to permit a separate vote on Amendment No. 99. Amendment No. 108 has been selected and we can discuss No. 99 with it. If a favourable vote were taken on Amendment No. 108, it would include the arguments which the hon. Gentleman may advance in the debate on Amendment No. 99. He will be able to argue that hearing aids and mercury cell batteries refer to articles for the disabled and it will be for the Chancellor to deal with those arguments.

Mr. Pavitt

Further to the point of order. Will you give a ruling. Sir Stephen, that in the event of Amendment No. 108 being carried, the provisions of Amendment No. 99 will be included in the carrying of Amendment No. 108?

The Temporary Chairman

I cannot give any such ruling. It is not a point of order for the Chair. It is a matter of the meaning of words, which I hope will be brought out during the debate.

Mr. Joel Barnett

Perhaps I may say to my hon. Friend the Member for Willesden, West (Mr. Pavitt) that I hope, in view of the last debate, the Chancellor will recognise the strength of the case that will be advanced in this short debate and it will not be necessary to have a vote as we shall persuade him to accept the Amendments.

This series of Amendments seeks to zero-rate such items as invalid chairs, elastic stockings, over-bed tables and bed rests, commode chairs, commode stools, bath rails and seats for use in baths or under showers, electrically or mechnically-adjustable beds specially designed for invalids, sanitary pans and similar devices, disposable incontinence pads, Nelson knives and forks, sound records for the blind, surgical dressings, chair lifts and stairs lifts for use with invalid chairs. Amendment No. 99, referred to by my hon. Friend the Member for Willesden, West covers hearing aids and mercury cell batteries. Amendment No. 108, in the name of my hon. and learned Friend the Member for Stoke Newington and Hackney, North (Mr. Weitzman), refers to Any articles specifically designed for supply to disabled persons. I suppose my hon. and learned Friend would consider it a kind of wedding present if Amendment No. 108 were accepted. I am sure the Committee would wish to congratulate him on his recent marriage.

None of these items for which we are seeking zero-rating in this series of Amendments has previously been subject to tax. Therefore, they have something in common with the last Amendment.

The Chancellor has claimed as a virtue for VAT that he is taxing items which no previous Chancellor has ever dreamed of taxing. The whole burden of his case is that VAT is comprehensive. I should correct myself. The whole burden of his case was that the tax was comprehensive. I should have thought the last debate totally destroyed that sort of argument because, as my right hon. Friend the Member for Leeds, East (Mr. Healey) pointed out, we saw a gaping hole created in the tax by the Chancellor. I imagine that the Financial Secretary, with his great love of the tax which he has shown to the Committee, must have been appalled at the concession made by his right hon. Friend. The comprehensive case has gone overboard if the Chancellor's assurance has any meaning. We hope that it has some meaning.

In effect the Chancellor was saying that he is prepared to institute an inquiry and that if that inquiry shows that certain items not at present subject to purchase tax should not be subject to VAT on medical grounds, he will zero-rate them. He did not spell it out, but if that is not what he meant he was guilty of misleading the Committee to a considerable degree. I do not suggest for a moment that the Chancellor had in mind—I am sure it was far from his mind—the intention to blow this great hole in his own tax. This great reform and the constant boast of comprehensiveness now mean that the Chancellor is seeking to keep the rate low for the healthy. To do that he is seeking to tax the sick and the disabled, which he would do if these Amendments were not accepted. His case will be the usual one that by accepting these Amendments we would by creating anomalies.

The Amendments represent easily defined items which it would be simple to zero-rate. Indeed, if the Chancellor, the Financial Secretary or the Minister of State suggest in reply that the drafting is not as good as it might be, we are prepared to accept that. We hope we will not have the sort of nit-picking we had from the Chancellor in the previous debate about the wording of the Amendment not being precisely right.

The only other argument that the Chancellor or the Financial Secretary can adduce is one which we have heard on many occasions in this series of debates—namely, that if we grant one concession the door is open to many others. The Chancellor has breached that argument by the VAT zero-ratings he has made and the concessions that have been granted in our four days of debates.

If the right hon. Gentleman made further concessions along the lines proposed in this group of Amendments he would, I agree, be breaching his sacred cow of not wishing to have exemptions or zero-ratings, but he would be doing so only for the disabled, a step which would receive the unanimous agreement of the Committee, since he called it a precedent it would be a precedent not for the healthy but for the disabled and no hon. Member would object to that.

[Sir ROBERT GRANT-FERRIS in the Chair]

7.0 p.m.

What case is left to the right hon. Gentleman for not accepting these proposals? The items listed in the Amendments are supplied largely by the National Health Service or, on occasion, through the Supplementary Benefits Commission. They are, therefore, not taxed from the individual's point of view. Nevertheless these items must be supplied, which means that it would be right for them to be completely zero-rated.

The Chancellor would save himself a lot of trouble by accepting the Amendments. To begin with, he would avoid the nonsense of transferring money from one pocket to another. This should appeal to him, especially when we bear in mind how the Labour Government were chided on this score in relation to SET.

It is worth bearing in mind that a great many items are involved. For example, in the County of Durham in 1969, about 235,000 incontinent pads were supplied. We are, therefore, discussing a very large number of items that are of vital importance to the sick and the disabled. If, as is almost certainly the case, some, if only a comparatively small number, of the disabled are able to scrape together a few pounds to buy the items listed in these Amendments to ease their pain-ridden lives—items which the Supplementary Benefits Commission or the NHS does not provide—we should not put further obstacles in their way or add to the cost of these items.

Some charitable bodies provide some of these items. How will they be affected by VAT? For example, the British Red Cross Society supplies some of the items that are listed. Will that society and other charitable bodies receive refunds of VAT? The same question is applicable to charitable bodies which supply items not listed in the group of Amendments, including bedding, clothing and shoes. In other words, will these charities by this tax, despite what hon. Gentlemen on the Government side have said in the past about SET, be at a disadvantage?

Each items listed should be zero-rated and I appeal to the Chancellor to accede to our request. I trust we will not receive more of the feeble excuses from the Treasury Bench to which we have become accustomed in debating VAT in general.

Mr. David Weitzman (Stoke Newington and Hackney, North)

I thank my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) for his remarks, and even for the rather facetious ones.

It has already been pointed out that the extra cost as a result of VAT to telephone subscribers will bear heavily on the chronically sick and the disabled. I make a special plea on behalf of Amendment No. 108 for relief in regard to articles specifically designed for the disabled.

We are faced with a number of Amendments referring to articles of this kind. There are many such articles—household goods like spoons, knives, forks and tables, and cooking utensils specially adapted for the disabled, like articles used in sport. There are vehicles, there are outdoor electrically-operated patients' controlled chairs which are not available under the NHS. We also have specially adapted vehicles and adaptations in housing, all entailing the supply of certain articles.

I remind the Committee of the statutory duty laid on local authorities under Section 2 of the Chronically Sick and Disabled Persons Act to provide certain services for the disabled. Again, the provision of these services entails the supply of certain articles. It is absurd that on the one hand the Government should give a grant to local authorities to provide these services and on the other place an additional tax on the goods necessary to comply with that requirement. I appreciate that grants are made and that there is additional provision under the NHS, but these sums will not cover all cases.

The Prime Minister recently boasted of the valuable steps which the Government were taking for the disabled. The Minister with responsibility for sport recently welcomed any efforts to enable the physically handicapped to join fully in sporting activities. The tremendous desire of the Government to help the disabled in every way is constantly being reiterated. Here is an opportunity for them to take practical action.

I emphasise that Amendment No. 108 refers to articles "specifically designed" for the disabled. As my hon. Friend the Member for Heywood and Royton rightly pointed out, the Chancellor has agreed to conduct an inquiry based on health grounds. If anything should be based on health grounds it is a request of the kind I am making on behalf of the disabled. Indeed, it should be without hesitation that the Government accept Amendment No. 108.

Time and again the Government have told us of the importance of VAT being a comprehensive tax. Amendment No. 108 is a comprehensive Amendment. Let us combine the two. Its acceptance would represent a comparatively trivial loss to the Revenue. I beg the Government to accede to my plea.

Mr. Patrick Cormack (Cannock)

I want to confine my remarks to Amendment No. 43, which is concerned with sound records for the blind. Without necessarily going along with all that was said by the hon. and learned Member for Stoke Newington and Hackney, North (Mr. Weitzman), I largely accept the validity of his general case. On the other hand, the Government are in an extremely difficult position, in that we are dealing with a broad based tax. It is right that it should broad based, because in that way the uniform rate can be low.

Amendment No. 43 seems to me to deal with a real anomaly. Books are exempt from the tax: they are being specially treated because they are educational, though it could be debated that many of them are not educational. The blind, too, are being helped, in as much as braille is, as is right, being given favourable treatment. But there are many blind people, particularly those who become blind in later life, who cannot read braille and may never learn, perhaps because their fingers are not sufficiently sensitive. This should he borne in mind by my hon. Friend. The Financial Secretary said last week that between this stage and Report he would consider what could be done, and I urge him to make sure that the consideration is detailed and in depth.

For many blind people the talking book or the sound record or the wireless is their only possible means of enjoyment or education. These are people who are deprived of so much in a way that other disabled people are not. Other disabled people are able to read, and can therefore benefit from the concessions which have already been granted. That ability is denied to the blind people, and those of them who are not able to read by means of braille ought to be singled out in the way suggested.

My hon. Friend the Financial Secretary also indicated last week that, although he would look at the problem, it might prove to be insurmountable. That is not good enough, because there is no problem to which there is not a solution, and in this instance it is the Government's job to find a solution so that these people can have the same benefit as we shall all enjoy when the tax comes into operation and books are given special treatment. I therefore ask my hon. Friend to bear this point very firmly in mind and do something about it between now and Report, though I fully accept that he cannot necessarily give a complete answer this evening.

Dr. Shirley Summerskill (Halifax)

The Government have seriously weakened their case on these Amendments by their attitude to the Amendments which we have just debated, although I understand that we are not supposed now to mention those other Amendments. Nevertheless, one can say that if the Government are prepared to talk about medical grounds in respect of one part of the anatomy it follows that medical grounds should also be taken into consideration for others who might be disabled or chronically sick. The Government cannot have their cake and eat it. They cannot set up an inquiry into medical grounds as they relate to feet and at the same time claim, as they may seek to claim later in the debate, that medical grounds must not be treated as a separate entity in considering the chronically sick and disabled.

The items we are now discussing are essential for the limited life that the chronically sick and disabled can lead, and are certainly essential for the maintenance of any health that these people still possess. If the Government are prepared to give way to some extent on the subject of feet, they should certainly consider the medical grounds involved in these major items which are of such vital necessity to the chronically sick and disabled.

7.15 p.m.

The Chancellor of the Exchequer might take a lesson from the experience of his right hon. Friend the Secretary of State for Education and Science, who blithely pronounced about "medical milk" and has been learning her lesson on that subject ever since she first used the phrase. She has found that it is extremely difficult in practice to decide which children medically require what she calls "medical milk"—although milk is a physiological substance—and the whole scheme that she set up has been fraught with difficulty from beginning to end. If the Government now intend to talk about medical feet and get themselves involved in an inquiry which I think will be fraught with problems, they should at least be logical and extend their inquiry to the chronically sick and disabled, who are those who will be affected by the tax unless the Amendments are accepted.

We get a vast assembly in the Chamber for debates on fish and chips, the live theatre and sport, and perhaps the chronically sick and disabled do not have the glamour or the humour offered by some of these other subjects. Nevertheless, we have here six or seven Amendments which affect many thousands of very sick people. As my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) said, although the National Health Service will bear some of the burden—and this we do not accept, because the drugs and appliances bill is already too high for the National Health Service—and local authorities will also accept some of the burden, there will be many people, proud people, trying to save up for one or two of these items in order to make their lives a little easier, or actually managing, in extreme difficulty, to pay for them themselves.

The tax will impose extra hardship on those people. We therefore urge the Government to be logical and follow their own example in regard to the last Amendment by making the chronically sick and disabled a special category as they have done for children's feet.

Mr. John Astor (Newbury)

I hope that my hon. Friend will give most careful consideration to Amendments Nos. 43 and 108, as many of the items mentioned in them are not available through the National Health Service or local authorities, and individual disabled persons at present have to try to provide them for themselves or with the help of charitable organisations. The talking book is one example, and the justification for its favourable treatment has been very ably shown by my hon. Friend the Member for Cannock (Mr. Cormack).

These items of equipment for disabled people do not come under the heading of consumer choice. They are necessities which enable these people to move about, to get as much enjoyment as they may, and as much educational benefit as they can, on as near equal terms as they can. They start with the disadvantage of needing this extra equipment for enjoyment, or to make them mobile, or to keep them warm, or, indeed, to keep them shod, because many of them wear out their shoes more quickly than do other people. This, therefore, is not a question of the free choice that is exercised by able-bodied people: these items are necessities for the disabled.

I am sure that my hon. Friend will not underestimate the amount and strength of feeling there is on both sides of the Chamber and among the public that over the years the disabled people have not been given as fair a deal as they should be given and as the community can offer them. We seek only to enable them to live lives as normal as possible.

Mr. Pavitt

I find it incredible that the pleas of the deaf, who perhaps suffer from one of the loneliest of all disabilities, have fallen upon deaf ears in the Treasury. The Minister of State, should consult with his hon. Friend the Under-Secretary of State for Health and Social Security, who would be only too pleased to issue Medresco aids to his officials, to open their ears to the cries of the deaf.

I have had the privilege of seeing some of the answers that the Financial Secretary has sent to the British Association for the Hard of Hearing, the Royal National Institute for the Deaf and others. I join with the hon. Member for Cannock (Mr. Cormack) in making a plea that blind and deaf persons constitute sections of the disabled who need special consideration.

I speak for the Amendment in my name and the names of my hon. Friends on the zero-rating of hearing aids. We do not like talking about deaf aids, in the same way as we do not talk about niggers: we talk about negroes. We do talk not about deaf aids but rather about hearing aids.

Each year 80,000 hearing aids are sold commercially. The Treasury is trying to get £500.000 tax from the production of aids, mercury cells, services and rehabilitation fro midsabled people who, by paying for a commercial aid, are saving the National Health Service the cost of something for which they have a free entitlement, both the Medresco free aid and batteries. Having decided to opt out and to pay for their aid, they will now be charged a further value added tax. It is not only that the aid will be taxed; there is also the great problem of coping with how to learn to use an aid. It means a great deal of rehabilitation and service, service to the aid and to the person. It is time consuming. It needs coaxing. All this will be rankling. Unless the Minister accepts my Amendment and the Amendment of my hon. and learned Friend the Member for Stoke Newington and Hackney, North (Mr. Weitzman), this will mean an additional charge to these people already struggling with their deafness.

I have included in my Amendment the question of mercury cells because each cell costs 14½p, what used to be nearly 3s. a week. They last most of us for between five and seven days. Aged people who are hard of hearing will be faced with an extra cost of 1½p a week on what is already a fantastically heavy charge. The other main use of these cells is for the bleepers used in hospital services for calling doctors. This is another social service which should not attract a special taxation.

The Bill provides for the exemption of goods and services on other health services given by persons on medical registers, but for some unearthly reason the Treasury has decided to exclude the register under the Hearing Aid Council Act, 1968, whereby no one can sell a hearing aid unless he is a registered dispenser. I cannot understand why in Schedule 5 and the section dealing with health matters, in which other registers are included those dealing with deaf people are omitted. Only qualified people who have passed the standards of competence can sell and dispense hearing aids.

I know that one of the arguments will be that everyone is entitled to a free Medresco National Health Service aid. But I support very much the campaign of my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley). We do not think any longer of just giving a wooden peg to sailors who have lost a leg; we give the most modern artificial limb. The Medresco aid is a good one, but second best to the latest developments. Some of us who have special jobs are rather in the situation of a man with a mini-car. It is all right in the suburbs, but to a Member of Parliament, such as myself—I wear two hearing aids—it is more like driving a heavy load over an alpine pass. To cope with such a job we need that 5 per cent. extra hearing to struggle to remain in the mainstream. We do not want to go into "sheltered" work. We have a contribution to make. My hon. Friend the Member for Stoke-on-Trent, South has lost the whole of his hearing but is one of the finest contributors to our debates.

The Treasury are saying to us "Taxation for you people, and if you cannot pay more you had better take supplementary benefit and a sheltered occupation". It is no encouragement to use intelligence, rather to give in to a hearing disability, accept it, and drop out of life.

I ask the Government to accept the Amendment and to realise that by accepting it they will save money. If they do not accept it, those who do not wear a hearing aid where it would enable them to cope will require help from three departments—the Department of Health, the rehabilitation department of the Department of Employment, and the Department of Social Services.

Of course, I am pleading a special case, but when has compassion been so shrivelled and a Government so heartless that the deaf, the blind the halt and the lame cannot be treated as special cases? I plead with the Minister to listen to the voice of the deaf and to give this concession. I ask him to clarify the point I raised earlier as a point of order, that if Amendment No. 108 is accepted the other things for which the hon. Member for Cannock and myself have asked are stipulated as being part of those things that can be exempted from this vicious VAT on the chronically sick and disabled.

Mr. Lewis Carter-Jones (Eccles)

Although I support all the 18 Amendments, I am particularly concerned about Amendment No. 41. It is the type of thing that we do not normally talk about in the House of Commons, but it represents a very serious problem to people who suffer incontinence. I speak about disposable incontinence pads.

Is the Minister of State saying that VAT is so inflexible that it cannot be removed from incontinence pads? His hon. Friend the Under-Secretary of State for Health and Social Security will agree with me about this. I would not mind for a moment if all this equipment were provided free by the Government. It would then be a transfer of income and there would be no problem. If the hon. Gentleman had come with me from time to time to Multiple Sclerosis Society conferences of the relatives of multiple sclerosis patients he would realise what a problem this is. Poor people are caring for incontinent people, and now the Government propose to add to their burden, saying that not only should they buy the pads but that the price should increase.

Relatively speaking, this would be an easy problem to solve. If the Alf Morris Act were well and uniformly applied throughout the country there would be no problem. But if the Minister had been with me at conferences to discuss how one cares for relatives and looks after these sufferers, perhaps he would realise that the Bill is a damnable indictment of our taxation system and that he should find a way around it.

I would accept every one of the 18 Amendments. But I ask the Minister to bear in mind that he and his Department, the Treasury, are saving money in that people are prepared to change incontinence pads because they happen to love their relatives and to be dedicated and devoted to them. The hon. Gentleman now wants to tax those people for doing that. Is it a fair tax? Does it meet the tenets of taxation? Will he ultimately say that the Government can find a way of avoiding VAT on the subject of Amendment No. 41? If he cannot, in all conscience he should resign.

Mr. Robert Hughes

Initially, we all come to the House of Commons with a feeling of optimism and enthusiasism, thinking that if only we put our arguments persuasively enough, even the hardest hearted and hardest faced Minister will be found to change his mind. I suppose that as time passes we gradually have this enthusiasm and optimism knocked out of us, as succeeding Amendments are brushed aside, no matter what the power of the argument or the power of back benchers to influence Government actions.

Perhaps I still retain my optimism, having seen the Government being quite inflexible about Amendments until today but with the shaft of light that the Chancellor brought today when he said that he was prepared at least to look at questions about children's footwear and zero-rating and that he would be setting up an inquiry into the whole system of children's footwear sizes, materials and so on, showing a great and unusual initiative of inter-departmental investigation.

In umpteen Committees and debates I have always been told that one never introduces health matters on a Finance Bill, that one never introduces broad matters of finance on Housing Bills, and that one has to wait for the right moment. But the right moment has come for the Chancellor to do a bit more than simply look at the question.

[MR. RICHARD CRAWSHAW in the Chair]

7.30 p.m.

The Amendments are very broadly based. They cover essentials such as incontinence pads, sanitary pans, corn-modes and commode seats. They also cover other matters that are not absolutely essential in the medical sense but affect the quality of life. The provision of over-bed tables and rests, bath rails and seats for use in baths and under showers goes a long way to improving the quality of life. The quality of life is often spoken of as something abstract, but if we can give people independence of action it goes a long way to improving their self-esteem, their status and their belief in themselves, which are very important. That is why this group of Amendments is important.

Some of the items may be supplied under prescription or under the Social Work (Scotland) Act. But the tact that they are sometimes paid for by local authorities does not mean that the tax should be imposed. The fact that it is perhaps paid not by the individual concerned but by the ratepayers corporate is not a good argument for saying that it should be levied. I do not know what would be the cost of taking all the items mentioned into zero-rating. I concede that it might be a considerable sum, so considerable that it would distort the kind of provision made by local authorities if they must meet a good deal of VAT.

To have a broad-based tax like VAT imposed in such a way that the sick and disabled must sacrifice something to make their contribution is wrong. The Chancellor would be mean and petty if he did not accept the Amendments.

Mr. Clinton Davis (Hackney, Central)

I declare my interest straight away in that I am president of the Hackney Association for the Disabled.

Like my hon. Friend the Member for Aberdeen, North (Mr. Robert Hughes), I was a member of a very progressive local authority with a distinguished record in the provision of services for the disabled. One of the proudest claims we had in Hackney was that we were, together with some other local authorities, the initiators of many schemes. One of them was workshops for the disabled. When we see disabled persons working in those workshops and making a very distinctive contribution to society, a contribution they would not otherwise be able to make, and when we realise that so many of them are enabled to go to those workshops to make that contribution only because of the provision of their invalid chairs and so many of the items covered by the Amendments, we realise how fatuous is the Government's case.

My own local authority also initiated Continental holidays for the disabled. One of my most wonderful memories of local government is of seeing the disabled people assembling one night for the first of those holidays. They were people who were terribly disabled, who had to obtain all sorts of assistance to get to the terminus so that they could make their holiday arrangements and embark on the aeroplanes. There they were assembled and able to enjoy a remarkable holiday.

Hackney has undertaken such holidays over a number of years. Their provision would not have been so readily possible if taxation had been imposed on so many of the implements that enable the disabled to assemble in that way and to enjoy their holidays.

We were also one of the originators of the idea of holiday homes for the disabled. It is a very costly business to make provision for a holiday home. It is necessary to provide for a number of invalid chairs, over-bed tables, bed rests, commode chairs and stools, bath rails and seats for use in baths and showers, the very things enumerated in a number of the Amendments. If the effect of the Government's policy is to deter local authorities from pursuing such schemes, it will be a terrible indictment of the Government.

While it would be extremely burdensome for local authorities to undertake such tasks with the burden of VAT imposed on them, the impost on the individual disabled person is that much heavier. An impost on the disabled is mean, unjust and inequitable. I cannot see how the Government can justify their case.

It would be interesting to know what sort of saving the Government expect by imposing this form of taxation. It would also be very revealing, although I cannot think that the Government's case can be justified by whatever saving they may make, to know what form of consultation they undertook before deciding on this policy. This point was made during the last debate on the question of shoes for children, when we learnt that the Government had undertaken no consultations beforehand. They are to undertake consultations afterwards, but that is always the way of buying off opposition on their own side. We want to know what consultation the Treasury Ministers have undertaken with medical authorities. If they cannot satisfy the Committee on this point, their case has no validity.

The point has already been made that we are no longer arguing about the principle, because it was conceded when the Government said they would consult the medical authorities on the question of children's shoes. Therefore, the Government must make out an overwhelming case for imposing an unjustified tax on the disabled. As my hon. Friend the Member for Willesden, West (Mr. Pavitt) so eloquently put it, they are people who are making a contribution to society through the help of local authorities and their own dedication and efforts. Anything that is done to deter disabled people and local authorities would be an appalling condemnation of our society.

I hope the Government will have second thoughts about the matter and will help to enable people to continue to make life tolerable where it would otherwise be impossibly burdensome.

Mr. Christopher Woodhouse (Oxford)

A year ago at this stage of our consideration of last year's Finance Bill the Government agreed to make an important concession in favour of disabled drivers and their passengers which was very welcome. My belief is that they made it because they were strongly pressed to do so, not merely from one side, which is common form in Finance Bill Committee stages, but from both sides of the Committee. Therefore, it is desirable to make clear to the Government that the feelings which have been expressed by Labour hon. Members are strongly shared on the Government side. My hon. Friend the Member for Newbury (Mr. Astor) has already spoken in this sense and I am very happy to join him and Opposition hon. Members in supporting the case, not for all the Amendments but for a substantial range of them.

I make a distinction within this group of Amendments—18 in all, I think—because it seems to me that a clear division can be drawn between those articles which could be used only by the disabled, which would never be manufactured for anyone else and which would be quite useless to anyone else, and those which could be of utility to almost every one of us at some time or other. I need not go through the catalogue. It is obvious that there is that distinction.

Mr. Weitzman

The hon. Gentleman appreciates that Amendment No. 108 refers directly to articles specifically designed for…disabled persons".

Mr. Woodhouse

The hon. and learned Gentleman, with his customary acumen, anticipates the very point I was about to make. It seems to me that Amendment No. 108 is the most desirable of all to support, since it covers all those articles which will be of use to the disabled, and only those articles. The adverb "specifically" limits it in that way. If one tried to draw up a catalogue of items which fell within the terms of Amendment No. 108, one might well add a good many more which are not directly listed in the other more specific Amendments—for example, artificial limbs and appliances for thalidomide children, things which one could not contemplate being of use to anyone else. The notion is absurd, and plainly such things would fall into a distinct category.

I hope, therefore, that the Minister will recognise this distinction and be prepared to make a concession, even if only an undertaking to reconsider the matter with reference to Amendment No. 108.

Mr. Carter-Jones

The hon. Member will appreciate—this is what concerns me—that a perverse Customs and Excise man could find an alternative use for a disposable incontinence pad, for example. This trouble arises all the time. Such People are looking for alternative uses. If they would look for the major use, it would be more helpful.

Mr. Woodhouse

I recognise that and it passed through my mind while the hon. Gentleman himself was speaking that some of the articles are of that marginal character. Nevertheless, I am sure he agrees that there are some about which there could be no argument, which could be used only by the disabled. and it is these that I want my hon. Friend the Minister of State to look at again. I must advise him that, if he is not willing to do so. I should not be prepared to support him in opposing Amendment No. 108.

Mr. Will Griffiths (Manchester, Exchange)

I was delighted to hear the concluding words of the hon. Member for Oxford (Mr. Woodhouse). Over the years, as I have attended debates on Finance Bills, I have often thought that our proceedings can resemble a charade. Hon. Members speak, as they have to day, with passion and conviction about injustices as they see them inflicted on their constituents or a section of their constituents. We listen with attention, and often we are convinced by the argument. But it does the House of Commons and its Committees no credit if, having uttered sentiments of that kind year after year, hon. Members refuse to follow their voice by their vote. It is no credit to the House of Commons as a free democratic institution that that should happen, and I congratulate the hon. Member for Oxford—I have done the same myself—on saying what he did at the end of his speech.

Like my hon. Friend the Member for Hackney, Central (Mr. Clinton Davis) who spoke with justifiable pride of the achievements of his local authority in its work for the disabled, I come from a city, the City of Manchester, which is proud of its record in looking after disabled people. As I listened to hon. Members' speeches—I support everything that my hon. Friends have said, and the pleas of the hon. Members for Cannock (Mr. Cormack) and for Newbury (Mr. Astor)—I thought of our recent experience in my own family. My aged parents have been stricken with illness, and our local authority services have given us in the family enormous support and help.

I do not see why an enlightened authority, such as Manchester or Hackney—there are many others—should have to carry an extra tax burden in caring for the disabled. If they are progressive authorities, not dragging their feet in services to the disabled, why should they, let alone the individuals about whom we are so concerned, have to meet an extra impost? I hope, therefore, that the Government will give us some consolation and I hope that the matter will be looked at again.

7.45 p.m.

I finish as I began by referring to the speech of the hon. Member for Oxford. I cannot help but reflect, when so many Members of Parliament are deeply moved on a matter such as this, almost with tears running down their faces like a miniature Niagara Falls, that if it had not been for their vote in favour of British entry into the Common Market, we should not be debating this tax at all.

Mr. Cormack rose—

Mr. Griffiths

No, I will not give way. As the years go by, we shall increasingly see various social consequences flowing from that historic decision, consequeneces which hon. Members did not fully appreciate in the autumn of last year. I do not want them to think that when those consequences emerge we shall fail to remind them of what they did.

Mr. Arthur Lewis (West Ham, North)

I am glad to follow my hon. Friend the Member for Manchester, Exchange (Mr. Will Griffiths), because I want to take up in more detail the last point he made. I have sat through most of these debates. I have heard hon. Members on both sides extolling this cause or that, arguing that one item should be given zero-rating, that another should be excluded and so on. My hon. Friend is entirely right to remind the Committee that the value added tax is one of the—I say this facetiously—benefits of entry into the Common Market.

Many of my hon. Friends who have kept us here hour after hour—I make no complaint—were among those who voted for entry into the Common Market, knowing that we should have this tax. It would have been better if hon. Members on both sides had appreciated that, without that decision, these 18 Amendments, all of which I support, would never have been needed.

I am glad that my hon. Friend the Member for Manchester, Exchange, is present, because he had for a long time one of the proudest jobs he could have had, as PPS to the late Aneurin Bevan. I remember Aneurin Bevan's wise words when some of my hon. Friends, who should be here tonight but are not, were prepared to support charges for teeth and spectacles under the National Health Service. He said that they would regret it, because one day there would be a reactionary Tory Government who would start taxing the sick. I was in the House when he said it, as was my hon. Friend, and I remember the loud shouts of the Tories that they would never do such a thing.

But what is happening now? The Chancellor of the Exchequer is taxing the sick, the infirm and the disabled, people least able to look after themselves. This Tory Government are taxing sick and disabled men, women and children. What is more, two hours ago there came on the tape the report that the Government are holding back until the railway go-slow is over an announcement that they will give £100 a week more to people already on £400 a week. They intend to pay to the higher civil servants, chairmen of nationalised boards, judges and others already on £20,000 a year another £100 a week.

Yet the same Chancellor of the Exchequer, who says that the ordinary railway worker on £20 a week is blackmailing the rest of the population, tonight proposes to tax the disabled and the sick, those poor devils that my hon. Friend the Member for Willesden, West (Mr. Pavitt) told us about, the hard of hearing and so on, as well as those referred to by my hon. Friend the Member for Hackney, Central (Mr. Clinton Davis), many of whom have given a lifetime of service in building up the nation's wealth but who now, reaching the twilight of their lives, can do little more than struggle along without dying off a bit prematurely.

These people need the artificial aids and helpful devices of one sort or another mentioned in the Amendments. They are to be taxed because, deliberately and with malice aforethought, the Government are taking us into the Common Market, knowing that value added tax is one of the penalties of doing so. The very Government which are doing that and which will no doubt refuse to give way on any of the Amendments are to allow £100 a week to men already receiving £400 a week, an increase to a selected few, some of whom are in the Treasury, some of whom are advising Ministers to resist the claims of the railwaymen.

When the late Aneurin Bevan suggested that we might get a reactionary Tory Government taxing the sick, the Tories laughed and jeered and said that it could never be done. I was pleased to hear the hon. Member for Oxford (Mr. Woodhouse) say that he would follow his convictions and his voice with his vote. Like my hon. Friend the Member for Manchester, Exchange I have been here approaching 27 years.

Sir Harmar Nicholls (Peterborough)

And you look it.

Mr. Lewis

Perhaps I do. If I look old, it is because I have sat here through so many Tory Governments. The hon. Gentleman has supported them through thick and thin, and that has put more years on my life than on his. Like the rest of the population I suffer under the present Government, but I do not suffer as much as the sick and the disabled.

The Amendment suggested by my hon. and learned Friend the Member for Stoke Newington and Hackney, North (Mr. Weitzman) is the best, because that would cover all 18, including the proposal to help the hard of hearing. But we are faced by the most vicious, wickedest and cruellest Government I have ever experienced in 27 years in the House. They are putting up rents, including the rents of the very sick and disabled whom they now refuse to help.

My hon. Friend the Member for Manchester, Exchange rightly paid tribute to his local authority, as did my hon. Friend the Member for Hackney. Central. I, too, represent a progressive, go-ahead authority which over the years has developed workshops for the blind and for old people and has helped the sick and disabled in other ways. It, too, will he hit by this tax and it, too, will have to pay it.

What is not generally realised is that progressive and go-ahead local authorities, mainly Labour controlled, that provide these services will have to pay an additional tax, and that means that the rates will have to go up. So rates will go up in poorer areas where Labour controlled authorities try to help the disabled, the sick and the infirm, while in the so-called salubrious areas, luxury areas which are Tory controlled and which do not worry too much about the sick and disabled, there will be a saving on the rates.

Sir Harmar Nicholls

Will the hon. Gentleman give way?

Mr. Lewis

No. The hon. Member has just walked into the Chamber. He has been laughing and joking, but he could have been here earlier when the Chamber was empty when he would have heard my hon. Friend the Member for Halifax (Dr. Summerskill) say that the Chamber was packed when we were talking about the tax on football and cricket, but when we started to deal with the poor, the sick and the disabled there were four hon. Members on the Government side and 16 on the Opposition side, four to one. The hon. Member was not then present. If he likes to sit there and mutter he may do so. If he wants, he may take part in the debate later and we shall listen to what he has to say.

We have to spend time asking the Government, which go out of their way to help the wealthy and which give large tax reliefs to surtax payers, which aid and support the higher income groups, to help the sick and the poor and the disabled. It is a crying shame.

When the Minister replies, we shall have to listen to false arguments again as he explains why he cannot accept the Amendments. To some extent, I sympathise with him. The reason that he has not been able to accept Amendments has been that he is wedded to value added tax as a principle, and he has said so. He and I know that the Common Market rules provide that eventually all the value added taxes in the Community will be harmonised and that the rate will be not 10 per cent., but 17½ per cent. He is jockeying along and cajoling his own supporters by saying that it is only 10 per cent.; but the position will change when we are in the Common Market.

I hope the hon. Gentleman will agree to exclude or zero-rate all these items, but I ask him to confirm or deny that if we enter the Common Market, if the Commission in Brussels agrees to harmonise taxes, tax will be paid on all these items whether we like it or not. He knows as well as I do that once the Council of Ministers has accepted the Commission's proposals for harmonisation, the agreement will automatically apply and the national Parliaments of the Six and eventually of the Ten will have nothing to say about it.

Let my hon. Friends who voted for entry be warned about that. If there is an agreement with the enlarged Community next year, as there may well be, that there should be a rate even higher than 10 per cent. and that it should apply to all these items, we in the House of Commons will not be able to do anything about it. I ask hon. Members to press the Amendments to Divisions. Let those hon. Members opposite who have been strongly opposed to the value added tax and to entering the Common Market join us and vote for the Amendments.

8.0 p.m.

Sir Robin Turton (Thirsk and Malton)

I am sorry that I was not present earlier in the debate. I apologise to the Committee, but I have been attending a Select Committee.

I ask my right hon. Friend to give more consideration to Amendment No. 112, to which my name is attached and which deals with hearing aids. It may well be that the answer to the problem is not to zero-rate hearing aids under this Schedule but to fill the gap which has been made in Schedule 5, with which the Standing Committee will deal, providing that the hearing aid dispenser should be included in the bodies mentioned in Group 7 of Schedule 5 under "Health".

It is extraordinary that the hard of hearing and the deaf are entirely excluded from the provisions of exemption under Schedule 5, and yet their position medically is as important as those who are connected with suppliers of services or registered medical practitioners, or registered dentists, or ophthalmic opticians, or registered under the Professions Supplementary to Medicine Act.

The hearing aid trade has raised this matter with the Department and is disappointed that it has not been dealt with. When I was attending the Select Committee, I observed that the hon. Member for Willesden, West (Mr. Pavitt) was speaking, and he may have dealt with this subject, but I hope that my hon. Friend will do so. If he cannot accept Amendment No. 112 as it stands, I hope he will give an assurance that the matter will be reconsidered when Schedule 5 is discussed by the Standing Committee.

Mr. John Golding (Newcastle-under-Lyme)

Two years ago in the House we were offering a helping hand to the disabled. Tonight the Government are kicking them in the teeth. This is a tax on the sick, the elderly, the chronically disabled and their families. My hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris) is sorry that he cannot be here tonight and sends his apologies. He would be the first to say that disablement is poverty, that disablement leads to poverty. Very few disabled families are well off because the disabilities drain family resources.

In these circumstances this is not only a tax on the disabled but a tax on the impoverished, impoverished because they are disabled. When the hon. Member for Cannock (Mr. Cormack) justifies some of these items because VAT is to be an overall tax he is posing a dilemma that does not exist. It does not seem that if hearing aids or aids for the deaf are zero-rated it must logically be said that the rate for sport will be higher. The alternative is simple, and it is that instead of getting revenue by taxing the sick we should obtain it by taxing the rich.

It has been deplorable in the last 18 months to see the Government pursuing policies whereby the poor are taxed more and more while greater tax concessions are given to the rich. That is what we are debating tonight, who will pay the money into the national exchequer—the family that has to buy surgical dressings and cotton wool to keep a sick and disabled person in reasonable comfort or the rich person? One of my hon. Friends has referred to his experiences. I would like to see hon. Gentlemen opposite who would put taxes on incontinence pads, cotton wool and surgical dressings, lying wounded in a wet bed unable to be comfortable because of the cost of replacing dressings, the cost of replacing incontinence pads. That is the situation, and it is intolerable. The disabled are entitled to have their dressings changed, their incontinence pads changed. Circumstances have arisen over the last few years which have led to people buying these dressings directly from the shops. It is getting more and more difficult to see a doctor, to get a prescription, to be taken to hospital by ambulance. So people help themselves they buy in the local chemist shop.

The hon. Member for Willesden, West (Mr. Pavitt) argued well for the hard of hearing. Most people when talking of the deaf refer to the hard of hearing. I want to make a plea for the deaf, those from whom deaf aids are no use at all. If we accept any Amendment concerning those whose hearing is defective it must include a reference to the deaf as well as the hard of hearing because the deaf have the hardest time of all. I hope that tonight everyone in the Committee will support these Amendments.

Mr. Jack Ashley (Stoke-on-Trent, South)

I want to make a brief contribution in respect of Amendments Nos. 99 and 112 and I wish to support particularly the points made by my hon. Friends the Members for Willesden, West (Mr. Pavitt) and Newcastle-under-Lyme (Mr. Golding). The main reason why I support them is that they are trying to help people who are hard of hearing and it is those people who need help more than most disabled persons because at the moment they are deprived of assistance by the National Health Service in the sense that every other disability gets the best possible assistance from the State, but not the hard of hearing, they get only second-best appliances supplied by the Health Service.

I support these Amendments because I believe them to be an interim measure. It is a scandal that the deaf and people who are hard of hearing and who could benefit from ear level hearing aids should be denied these unless they can afford up to £80 a time. That is entirely wrong. Every deaf person is entitled to ear level hearing aids because he is deaf, not because he may be able to afford up to £80. The State ought to provide ear level hearing aids for all people.

I have done some research and worked out an astonishing figure. People pay up to £80 for a hearing aid; yet I believe that it can be manufactured for £8. People are making a profit out of the disabled. What a scandal! I have been greatly encouraged by the Secretary of State for Social Services who has promised to consider my suggestion for the provision of ear level hearing aids for deaf people. He could not go farther than that, and I recognise his financial problem. He and the Treasury have this problem and they must work together with good will to help deaf people. I know they will do all they can, and I would urge them to do it as quickly as they can, because deaf people really need their assistance as soon as possible.

8.15 p.m.

Mr. William Wilson (Coventry, South)

I want to refer to Amendment No. 99, and I do so because it is only those of us who wear hearing aids who know what a tremendous benefit they are and what they could do for others. My life would be completely different if I did not wear a hearing aid. I would be virtually stone deaf. Last Saturday afternoon in the Olympic Stadium in Berlin I would not have been able to hear the rain-soaked English supporters singing "You'll Never Walk Alone" if it had not been that I was wearing a hearing aid. It is because I realise what a difference to my life a hearing aid makes that I speak in favour of this Amendment.

There are benefits in being deaf because there are Members of the House whom it is useful to switch off—what one would call "taking advantage of one's natural disabilities!" There are many people who ought to wear hearing aids but for one reason or another refuse to do so. They pretend that they can hear when they cannot. If the price of aids and batteries is to be deliberately increased, they have another built-in reason for refusing to purchase the aid and thus enjoying the full life which many of them could enjoy if they were prepared to face up to this situation.

Because of my disability I get plenty of correspondence from the deaf complaining about the high cost of the aid and of the batteries. After the hearing aid has been purchased the cost of batteries per week is considerable. In this day and age it is beyond belief that we should have a Government deliberately legislating to increase the price of articles which to those of us who are deaf are absolute necessities. It is beyond my comprehension that we cannot run a society without going to such lengths as this Government seek to do. I hope that the Chancellor will have the courage of his convictions, following his last statement, and accept Amendment No. 99.

The Minister of State, Treasury (Mr. John Nott)

The group of Amendments 34-45 which are headed Surgical appliances, drugs and medicines on the Amendment Paper is intended to zero-rate a number of articles which are at present exempt from purchase tax While the motives behind these Amendments, and I group them all together at the outset, are well understood I have to say to begin with that on several grounds there are objections both of policy and of administration to the suggestions contained in them [HON. MEMBERS: "Shame."] That does not in any way diminish the importance or quality of the appeals which have been made tonight.

It has been a short debate but one full of compassion and feeling. I share, as do the Government, the strong concern felt in the Committee for the problems of the disabled and I will do my best in this intervention to give some satisfaction to the Committee on the points that have been raised.

I have to begin by saying that the list of articles chosen in the majority of the official Opposition Amendments is obviously an arbitrary list. I do not mean that there is anything wrong with it but it is an arbitrary list although it is taken from the purchase tax exemptions. It is easy to see from the list how so many anomalies grew up in the old purchase tax system. Take the examples of walking sticks and wigs, which are frequently of great benefit to the disabled. They are also in general use among the hale and hearty. In designing VAT the Government are trying to improve the situation, which has been outlined clearly, by tackling them in an entirely different way.

I want to outline how we have attempted to approach this problem. I know hon. Gentlemen opposite who have spoken with great feeling will readily agree that however desirable the particular reliefs suggested in these Amendments may be, most of the items that have been selected must derive from subjective judgment. There is nothing wrong with subjective judgments in politics or policy based on emotion, but the Government have attempted to design the reliefs with the problems of definition and administration to the fore. My hon. Friend the Member for Oxford (Mr. Woodhouse) was very sympathetic to the motives underlying the Amendments, but he did not agree with all the items selected. I mention that to show that the items selected are based on a subjective judgment and therefore they could cover an enormously wide field.

I am sure it is right that we should tailor our reliefs for the sick and disabled not so much to the strength or otherwise of pressure in favour of particular articles, as often happened under the purchase tax system but seek special definitions which embrace the need for appliances, drugs and medicines strictly for the use of the sick and disabled. Throughout my remarks I want to underline the simple distinction—I do not think it has been recognised tonight—between a long list of articles exempted from purchase tax and VAT where we have tried to help the disabled by giving relief with reference to the source from which the articles are obtained.

I wish to give examples of what we have done and how we have tried to meet the points made. We have already provided very extensive reliefs for medical goods—that comes under Amendment No. 62—and these appear in Group 13 of the Schedule where The supply of any goods dispensed by a pharmacist on the prescription of a doctor or dentist are zero-rated. By giving this relief we have been able to select a very wide range of drugs and medicines without the need to resort to purely arbitrary judgments by listing separate items.

The yield of purchase tax from proprietary drugs and medicines is at present approximately £17 million a year. Under value added tax, all drugs from pharmacists on prescription by a doctor will be zero-rated and, as far as we can estimate, the balance which will bear the tax will yield an estimated £10 million a year. Thus in this general field of drugs and medicines which fall outside the present purchase tax exemptions and which will be zero-rated under VAT, we shall lose a very considerable amount of revenue.

The second point which I do not think has been taken by hon. Members—and here I refer to Amendments Nos. 34 to 45—is that we have provided exemption for goods provided by hospitals, nursing homes and some institutions as part of their care and similar treatment under Schedule 5, Group 7. In National Health Service hospitals and clinics, which is where the vast majority of patients, whether in-patients or out-patients, obtain their appliances, no tax will be chargeable to the patients. Any tax charged on the sale by the manufacturer to the National Health Service would be borne on the National Health Service Votes. Therefore, the vast majority of patients obtaining appliances will pay no tax.

Mr. Carter-Jones

Does the hon. Gentleman realise that a survey showed that there were 3,250,000 sick people, not including people under the age of 16 or people in hospital or in care? The hon. Gentleman had better choose his words with care about where treatment is given, whether in or out of hospital.

Mr. Nott

I am tempted to read to the hon. Gentleman the definitions, which are quite wide. Paragraph 4 of Group 7 in Schedule 5 reads: The provision of care or medical or surgical treatment and, in connection with it, the supply of any goods, in any hospital or other institution approved, licensed, registered or exempted from registration by any Minister or other authority. That is an extremely wide group of institutions. I made the point that this applies to in-patients and out-patients who obtain their appliances by this means. I shall try after the debate to help the hon. Gentleman about the 3,250,000 people to whom he referred, but I do not think the problem which he has raised exists.

Mr. Woodhouse

For the sake of clarification, will my hon. Friend tell us whether all the items covered by Amendment No. 108 will be covered by Group 13 in Schedule 4 or Group 7 in Schedule 5?

Mr. Nott

I said that I believe the vast majority of them will be covered.

Mr. Weitzman

Why not the lot?

Mr. Nott

Does the hon. and learned Gentleman want me to go back to the beginning of my speech and state that the principle we are adopting is the source from which these appliances are obtained rather than adopting the purchase tax system under which every item was listed separately?

Mr. Weitzman

The hon. Gentleman says that the vast majority of people are covered. If that is so, and a small proportion is not covered, why not give exemption to the lot?

Mr. Nott

Because we are trying to help the sick and disabled who are in need and to get away from listing a series of items for purchase tax exemption which may or may not be used by the disabled. The vast majority of these articles are obtained through the Health Service from hospitals or, in the case of drugs and medicines, on prescription from a doctor through a pharmacist.

Mr. Weitzman

What listing is required for all articles specifically supplied to the disabled?

Mr. Nott

I say for the fourth time that there is no listing of articles. I have said that we are seeking to ensure that disabled and sick people are freed from value added tax when they obtain these articles under the National Health Service through nursing homes or clinics or, in the case of drugs and medicines, when they obtain them from a chemist through a prescription from a doctor. Under the National Health Service a statutory charge is sometimes levied for specialised appliances, but it will not attract value added tax since it is not technically a consideration for a taxable supply.

The hon. Member for Heywood and Royton (Mr. Joel Barnett), recalling my right hon. Friend's offer earlier to set up an inquiry into the question of children's shoes, implied that some great gap had been driven through the principles of value added tax. That was not a happy reaction from him. He asks the Chancellor for a concession in a specific area, and when my right hon. Friend endeavours to meet the point the hon. Gentleman, on the very next group of Amendments, say "Yah! The Chancellor has driven a hole through his tax." My right hon. Friend has not done so, for the simple reason that there is a fundamental distinction between the items now under debate and children's shoes. The distinction is that children's shoes cannot be obtained on doctor's prescription through a chemist, nor in National Health Service institutions and clinics. They cannot be obtained under the National Health Service. Therefore, they are in a different category from the items we are now considering.

[Miss HARVIE ANDERSON in the Chair]

8.30 p.m.

Several hon. Members have referred to local authority services. The local authorities provide a range of articles. and one which has been mentioned several times is the incontinence pad. The hon. Member for Eccles (Mr. Carter-Jones) raised this point in particular. Blankets are also provided by local authorities for use in their welfare and social services, in the home nursing service and other services. Charges for the services are levied by the local authorities and these are related to the patient's means. But the charge is not a consideration for something done by way of business, so no tax at all falls on these supplies. These items, when supplied by local authorities, do not bear VAT.

Moreover, the local authorities will get the tax back on their purchases of these articles under Clause 15, which says that: …the Commissioners shall, on a claim made by the body at such time and in such form and manner as the Commissioners may determine, refund to it the amount of the tax so chargeable. Therefore it is untrue to suggest, as the hon. Member for West Ham, North (Mr. Arthur Lewis) did, that the tax will reflect on the rates. It will have no such effect. The local authority providing these items, through the home nursing and other statutory services, will get a full rebate on all the tax it pays. It will be done under Clause 15.

Mr. Carter-Jones

Perhaps the hon. Gentleman will now answer this question. Since incontinence pads are not always available under the National Health Service, and since whether or not they are provided is a matter for discretion by the local authority, will he please tell me—I am prepared to name the authorities concerned—that there is no value added tax on sufficient supplies of incontinence pads for multiple sclerosis patients who need them but they are not supplied by the National Health Service or the local authority? Will he now come clean?

Mr. Nott

Am I trying to hide anything from the hon. Gentleman? I had not yet got to that point. He asks me to come clean before I have even mentioned the point. As I have said, if incontinence pads are obtained from the local authority—and this must he a matter for the discretion of local authorities—or through the National Health Service in the way I have described, or if they are obtained through a chemist on doctor's prescription, they will be free of VAT. I think I have answered the hon. Gentleman.

Mr. Carter-Jones

May I please pursue this? If the hon. Gentleman is telling me that all the incontinence pads needed will be provided, I will sit down happy. I am merely telling him that it happens that there are patients who do not get adequate supplies from the resources he talks about. If he assures me that no patient will not get sufficient pads supplied, I will end the argument.

Mr. Nott

That raises far wider questions. If the hon. Gentleman is saying that some local authorities arc not performing their statutory functions in certain areas, that is not a matter for this Committee.

The hon. Member for Heywood and Royton raised the question of charities. The supply of goods by charities where it is not a supply in the course of business—and invariably it would not be—does not bear VAT. Advice and services given by a charity again are welfare services and will not bear tax. Charities of course bear tax on their inputs, but I remind the hon. Gentleman of the great concessions which my right hon. Friend the Chancellor has given to charities in his Budget.

Mr. Joel Barnett

I accept that the charity would not be a taxable person and therefore would not be charged VAT, but what about input? How will the charity be able to reclaim?

Mr. Nott

The hon. Gentleman was holding a whispered consultation with his hon. Friend when I answered that point, but I will repeat it. Charities bear tax on their inputs on the sort of goods we are describing but not on their outputs. My right hon. Friend in his Budget has given major concessions to charities—

Mr. Barnett

How will it balance out?

Mr. Nott

It is impossible for me to say precisely how it will balance out. In view of the great concessions which my right hon. Friend has given to charities in his Budget, taking the whole Budget together, I do not think that charities will be any worse off in relation to the items now under debate.

I come now to Amendment No. 99 tabled by the hon. Member for Willesden, West (Mr. Pavitt) and Amendment No. 112 tabled by my right hon. Friend the Member for Thirsk and Malton (Sir Robin Turton) and supported by hon. Gentlemen opposite. We have had quite a long debate on the subiect of hearing aids. My colleagues and T have referred again and again in Committee in our debates on Schedule 4 to the need to avoid providing reliefs where there is no objective and simple border line. Once we accept the principle of an open-ended list, as with purchase tax, we should be under constant pressure to add other items to it and there would be no satisfactory criteria of where the line should be drawn. [Interruption.] I wish that the hon. Member for West Ham, North would not shout from a sitting position.

Mr. Arthur Lewis

I am annoyed because the Minister is treating the Committee so shabbily. I am disgusted with the Government, and the Minister represents the Government.

Mr. Nott

I have not yet come to Amendment No. 108. When I do I shall deal with it. I am dealing now with the Amendment on the subject of hearing aids. To give an example of the problems which arise, micro-cell batteries which come within Amendment No. 99 have several uses apart from their use for hearing aids. For example, they are used for cine cameras, and, bearing in mind the comprehensive basis of the VAT I am sure it is right that we should not relieve micro-cell batteries for cine photography. I repeat my earlier remark that the Government have set out to design their reliefs with the problem of definition very much in mind.

About four-fifths of all the hearing aids presently supplied to patients are supplied, with their batteries, through the National Health Service, and VAT on these items will be borne on the National Health Service Votes. In effect, hearing aids obtained through the NHS will be fully relieved of VAT. These hearing aids, which are supplied through the NHS, are regarded by the standing advisory committee as being satisfactory for meeting the clinical needs of a deaf person. Individuals having difficulty are referred to the ENT department of the local hospital and the aids provided are fitted by hospital audiology technicians. All these goods and services would not bear VAT.

The proposed Amendment is relevant only to hearing aids and batteries sold to patients by commercial dispensers, since all other hearing aids obtained in the normal way through hospitals will not bear VAT. In other words, I am referring here to that range of cases where aids are provided for non-medical reasons.

Mr. Pavitt

I assure the hon. Gentleman that anyone who wears a hearing aid does so only for medical reasons. There is no question of merely cosmetic value. There is a difference in the strength and clarity of binaural and monaural hearing by body-worn or postaural aids.

Mr. Nott

The hon. Gentleman knows a great deal about this subject, and I appreciate that, but I am informed that the Medresco aid meets all the requirements in medical terms. This is a separate matter, but that is what I am informed.

It has been argued that the only people who will have to pay tax on hearing aids are those who get them privately. It has been argued that this is an unfair discrimination in this area, depending on where the aids are obtained. The relative cost of the privately-supplied aid is such that it is doubtful whether the imposition of VAT will have any effect on a potential user's decision whether to purchase one privately or to obtain it through the National Health Service.

The hon. Member for Willesden, West has tabled another Amendment and this was referred to by my right hon. Friend the Member for Thirsk and Malton—to exempt dispensers of hearing aids registered under the Hearing Aid Council Act. This is an Amendment to Schedule 5. I cannot give any undertaking about selection but, as my right hon. Friend said, it is possible that this will be discussed in Standing Committee, and it would therefore not be in order for me to comment on the possibility of including this as an additional exemption under Schedule 5. We are now debating Schedule 4.

Sir Robin Turton

During the debate my hon. Friend has been arguing that the reason why he cannot grant this concession is that it is covered by Schedule 5. Now that he is dealing with hearing aids he is adopting a different approach. He is saying that he must exclude consideration of Schedule 5. He has said that Medresco aids are suitable for all impairments of hearing. If he consults his colleague the Under-Secretary of State for Health and Social Security he will realise that that is not quite accurate. He should not dismiss the consideration that, by including hearing aid dispensers, the Government would fill the gap which they have made in Schedule 5.

Mr. Nott

I am sure that the point made by my right hon. Friend will be discussed when we come to Schedule 5. The hon. Member for Willesden, West has tabled an Amendment to that Schedule and I take the point made by my right hon. Friend. I understand what he is saying, and before that debate I shall consult my right hon. Friend the Secretary of State for Social Services.

Mr. Pavitt

Can the hon. Gentleman say whether any prosthetic device other than hearing aids will attract VAT?

8.45 p.m.

Mr. Nott

I told the hon. Gentleman that we have not designed a list of articles in the same way as one finds in the purchase tax arrangements. What we are doing is relating the relief from VAT to the source from which the appliance is obtained. Therefore, I cannot say whether there is a particular appliance that will or will not bear VAT that used to bear purchase tax. If appliances are obtained through the National Health Service, though a doctor's prescription, through a chemist or from the local authority in the circumstances which I have outlined, they will not bear VAT. The important matter is the source from which these appliances are obtained.

My right hon. Friend the Secretary of State for Social Services has recently said that he will consider the point about ear level aids. The matter is under consideration by the Secretary of State. I hope that will answer the hon. Member for Willesden, West who was concerned with these aids.

Mr. Pavitt

The matter has been under consideration since 1966 and it is now 1972. The fact that postaural aids cost three times as much as body-worn aids means that under this Government it will be under consideration for a much longer time still.

Mr. Nott

I have been referring throughout my remarks to Amendment No. 108. That is the Amendment which is concerned with this matter. Several of my hon. Friends spoke on this subject. The Amendment is concerned with the zero-rating of any article specifically designed for supply to disabled people. I think I have said enough already to show that we cannot draw up a list of articles in the way the Amendment proposes. We are not attempting to draw up a list of articles designed for supply to disabled persons. We are endeavouring to meet the points raised reasonably in Committee about the source from which the articles are obtained.

May I summarise and say that under Schedule 4, Group 13——

Mr. Will Griffiths

This is an important matter. Is the Minister of State saying that all appliances that the disabled may need, not just those individually specified in the Amendment, if they are supplied from a general hospital or on a doctor's prescription will be exempt from VAT? Further, is he saying that dental treatment and ophthalmic optics come under the National Health Service provided they are supplied through the existing National Health channels and that none of these either will bear VAT?

Mr. Nott

I can give the hon. Member for Manchester, Exchange (Mr. Will Griffiths) the assurance he seeks. I listened to the hon. Gentleman's intervention, and in all the circumstances he outlined under the National Health Service the articles would have relief in one way or another. They will be either zero-rated under Schedule 4, exempted under Schedule 5 or bear no tax because they were supplied through a local authority.

Mr. Pavitt

Dental treatment can be supplied in two ways, either under the National Health Service or by private treatment. Is the Minister of State saying that if it is provided by a dentist on the local executive council list, whether under the National Health Service or not, it still does not attract VAT?

Mr. Nott

If a dentist is supplying goods in connection with his service as a dentist, whether it is under the National Health Service or privately, the answer to the hon. Gentleman's question is that it will be exempted under Schedule 5.

I have not had time to deal with the point raised by my hon. Friend the Member for Cannock (Mr. Cormack) but I have explained the principles under which we have designed the tax. The point my hon. Friend raised was debated last week and answered by my hon. Friend the Financial Secretary. I have nothing to add to what my hon. Friend then said. I should like to help my hon. Friend but I have nothing more to add to what was said in the earlier debate.

I hope the Committee feels that we have done our utmost to ensure that VAT does not fall on the sick and disabled. In seeking this objective we have approached the problem in a different way from the system now prevailing under the purchase tax. This is where the confusion has arisen. There cannot be any exact parallel with the present situation. I feel confident that the Committee will feel we have done our best to meet our obligations to this less fortunate section of the community. In that spirit I hope that my hon. Friends and the Committee will be satisfied with my reply and that the hon. Member for Heywood and Royton will be prepared to withdraw his Amendment.

Mr. Carter Jones

Before the hon. Gentleman sits down, he has the advantage—

The First Deputy Chairman

Order. I understood the Minister to have sat down.

Mr. Joel Barnett

The Minister of State said he hoped that hon. Members on both sides would be satisfied with his reply. I should be astonished if hon. Members were to say that they were satisfied.

We have had some moving and passionate pleas from hon. Members on both sides of the Committee. We have had contributions from three of my hon. Friends who are themselves disabled in that they are either deaf or hard of hearing. I refer to my hon. Friends the Members for Coventry, South (Mr. William Wilson), Willesden, West (Mr. Pavitt) and Stoke-on-Trent, South (Mr. Ashley). My hon. Friends put forward very moving arguments, as indeed did all hon. Members who spoke in the debate.

The Minister did not answer any of the points which were raised. It is no use saying, as he did, that the Government are approaching this matter from a different point of view. He is absolutely right; the Government are approaching it from an appalling point of view, because they will be taxing the sick and the disabled. The hon. Gentleman said that the Government were ensuring that the items with which we are concerned will not be taxed at source: many other sources will be taxed.

My hon. Friends the Members for Manchester, Exchange (Mr. Will Griffiths) and Eccles (Mr. Carter-Jones) referred to the serious case of incontinence pads. The Minister replied that local authorities will generally provided these pads; but he was compelled to concede that not all local authorities will do so. That means that many suffering people will be compelled to buy them elsewhere and, when they do so, they will be subject to VAT. The Minister cannot deny that, because he virtually said that.

The Minister said that the Government are approaching this matter very differently. They certainly are. If it were not for the lateness of the hour, I am sure many of my hon. Friends would have wanted to speak again to tell the Minister just how bad they found his reply. However, we shall have other opportunities in Committee upstairs on the exemptions Clause to show the Minister just how bad this aspect of the tax is.

The hon. Gentleman told us that it he made the concession he would be recreating the anomalies. Certainly there would be some anomalies, but there are anomalies already in VAT. If the hon. Gentleman and his right hon. and hon. Friends before coming to these debates thought they had a comprehensive tax without anomalies I hope they are now satisfied that they have nothing of the sort.

The worst feature in the hon. Gentleman's reply was when he conceded that charities are now to be subject to VAT. I do not mean on their output. The Minister made it clear that when charities buy items set out in these Amendments, or other items such as blankets, they will have to pay VAT. When I recall what hon. Gentlemen opposite said about SET and charities, I am amazed to hear an official Treasury spokesman now say, without apology, that charities will be subject to VAT across a whole range of goods. The only respite is that the Chancellor will give some of the money back to them in another way.

Mr. Arthur Lewis

We are not told how much will be given back.

Mr. Barnett

Or how much VAT they will pay.

It is clear that this so-called wonderful principle of VAT, a tax beloved of Treasury Ministers, remains inviolate. The Government insist on keeping its

Division No.183.]	AYES	[8.55 p.m.
Albu, Austen	Golding, John	Morris, Charles R. (Openshaw)
Allen, Scholefield	Gourlay, Harry	Morris, Rt. Hn. John (Aberavon)
Archer, Peter (Rowley Regis)	Grant, George (Morpeth)	Mulley, Rt. Hn. Frederick
Armstrong, Ernest	Grant, John D. (Islington, E.)	Murray, Ronald King
Ashley, Jack	Griffiths, Eddie (Brightside)	Oakes, Gordon
Ashton, Joe	Griffiths, Will (Exchange)	Ogden, Eric
Atkinson, Norman	Grimond, Rt. Hn. J.	O'Halloran, Michael
Bagier, Gordon A. T.	Hamilton, William (Fife, W.)	Palmer, Arthur
Barnett, Joel (Heywood and Royton)	Hamling, William	Pannell, Rt. Hn. Charles
Baxter, William	Hannan, William (G'gow, Maryhill)	Pardoe, John
Benn, Rt. Hn. Anthony Wedgwood	Harper, Joseph	Parry, Robert (Liverpool, Exchange)
Bennett, James (Glasgow, Bridgeton)	Harrison, Walter (Wakefield)	Pavitt, Laurie
Bidwell, Sydney	Healey, Rt. Hn. Denis	Pendry, Tom
Bishop, E. S.	Helfer, Eric S.	Pentland, Norman
Boardman, H. (Leigh)	Hooson, Emlyn	Perry, Ernest G.
Broughton, Sir Alfred	Horam, John	Prescott, John
Brown, Bob (N'c'tle-upon-Tyne, W.)	Houghton, Rt. Hn. Douglas	Price, J. T. (Westhoughton)
Brown, Hugh D. (G'gow, Provan)	Howell, Denis (Small Heath)	Probert, Arthur
Brown, Ronald (Shoreditch & F'bury)	Hughes, Robert (Aberdeen, N.)	Rankin, John
Buchan, Norman	Hughes, Roy (Newport)	Reed, D. (Sedgefield)
Buchanan, Richard (G'gow, Sp'burn)	Hunter, Adam	Roberts, Albert (Normanton)
Campbell, I. (Dunbartonshire, W.)	Irvine, Rt. Hn. SirArthur(Edge Hill)	Robertson, John (Paisley)
Cant, R. B.	Janner, Greville	Roper John
Carter, Ray (Birmingham, Northfield)	Jeger, Mrs. Lena	Rose, Paul B
Carter-Jones, Lewis (Eccles)	Jenkins, Huge (Putney)	Ross, Rt. Hn. William (Kilmarnock)
Castle, Rt. Hn. Babara	Jenkins, Rt. Hn. Roy (Stechford)	Rowlands, Ted
Cocks, Michael (Bristol, S.)	John, Brynmor	Sheldon, Robert (Ashton-under-Lyne)
Concannon, J. D.	Jones, Rt. Hn. Sir Elwyn(W.Ham,S.)	Shore, Rt. Hn. Peter (Stepney)
Cox, Thomas (Wandsworth, C.)	Jones, Gwynoro (Carmarthen)	Short, Rt. Hn. Edward(N'c'tle-u-Tyne)
Crossman, Rt. Hn. Richard	Jones, T. Alec (Rhondda, W.)	Silkin, Hn. S. C. (Dulwich)
Cunningham, G. (Islington, S.W.)	Kaufman, Gerald	Sillars, James
Cunningham, Dr. J. A. (Whitehaven)	Kelley, Richard	Silverman, Julius
Dalyell, Tam	Kinnock, Neil	Skinner, Dennis
Davies, Denzil (Llanelly)	Lamborn, Harry	Smith, John (Lanarkshire, N.)
Davies, Ifor (Gower)	Lamond, James	Spriggs Leslie
Davis, Clinton (Hackney, C.)	Lawson, George	Stewart, Donald (Western Isles)
Davis, Terry (Bromsgrove)	Leadbitter, Ted	Stoddart, David (Swindon)
Deakins, Eric	Lewis, Arthur (W. Ham, N.)	Summerskill, Hn. Dr. Shirley
de Freitas, Rt. Hn. Sir Geoffrey	Lewis, Ron (Carlisle)	Swain, Thomas
Dell, Rt. Hn. Edmund	Loughlin, Charles	Taverne, Dick
Dempsey, James	Lyon, Alexander W. (York)	Thomas, Rt. Hn. George (Cardiff, W.)
Doig, Peter	Lyons, Edward (Bradford, E.)	Tinn, James
Douglas, Dick (Stirlingshire, E.)	Mabon, Dr. J. Dickson	Torney, Tom
Duffy, A. E. P.	McBride Neil	Tuck, Raphael
Dunn, James A	McCartney, Hugh	Urwin, T. W.
Dunnett, Jack.	McElhone, Frank	Wainwrigt, Edwin
Eadie, Alex	McGuire, Michael
Edeiman, Maurice	Mackenzie, Gregor	Walden, Brian (B m ham, All saints)
Edwards, Robert (Bilston)	Mackintosh, John P.	Walker, Harold (Doncaster)
Edwards, William (Merioneth)	McMillan, Tom (Glasgow, C.)	Wallace, George
English, Michael	McNamara. J. Kevin	Watkins, David
Evans, Fred	Mallalieu, J. P. W. (Huddersfield,E.)	Weitzman, David
Ewing, Henry	Marks, Kenneth	White, James (Glasgow, Pollok)
Faulds, Andrew	Marsden, F.	Whitehead, Phillip
Fitch. Alan (Wigan)	Marshall, Dr. Edmund	Whitlock, William
Fletcher, Raymond (Ilkeston)	Mason, Rt. Hn. Roy	Willey, Rt. Hn. Frederick
Fletcher, Ted (Darlington)	Mayhew, Christopher	Williams, Alan (Swansea, W.)
Foley, Maurice	Meacher, Michael	Williams, Mrs. Shirley (Hitchin)
Foot, Michael	Mellish, Rt. Hn. Robert	Williams, W. T. (Warrington)
Ford, Ben	Mendelson, John	Wilson, William (Coventry, S.)
Forrester, John	Mikardo, Ian	Woof, Robert
Fraser, John (Norwood)	Millan, Bruce
Galpern, Sir Myer	Miller, Dr. M. S.	TELLERS FOR'THE AYES:
Gilbert, Dr. John	Milne, Edward	Mr. James Wellbeloved and
Ginsburg, David (Dewsbury)	Morgan, Elystan (Cardiganshire)	Mr. James Hamilton.

purity whatever harm it does to the sick and the disabled. If we were not pressed for time my hon. Friends would go on discussing this matter for ages.

Question put, That the Amendment be made:—

The Committee divided: Ayes 190, Noes 206.

NOES
Adley, Robert	Gorst, John	Nabarro, Sir Gerald
Alison, Michael (Barkston Ash)	Gower, Raymond	Neave, Airey
Allason, James (Hemel Hempstead)	Grant, Anthony (Harrow, C.)	Nicholls, Sir Harmar
Archer, Jeffrey (Louth)	Gray, Hamish	Noble, Rt. Hn. Michael
Astor, John	Green, Alan	Normanton, Tom
Atkins, Humphrey	Grylls, Michael	Nott, John
Awdry, Daniel	Hall, John (Wycombe)	Onslow, Cranley
Baker, Kenneth (St. Marylebone)	Hall-Davis, A. G. F.	Oppenheim, Mrs. Sally
Baker, W. H. K. (Banff)	Hamilton, Michael (Salisbury)	Owen, Idris (Stockport, N.)
Bell, Ronald	Hannam, John (Exeter)	Page, Graham (Crosby)
Bennett, Dr. Reginald (Gosport)	Harrison, Brian (Maldon)	Page, John (Harrow, W.)
	Haselhurst, Alan	Parkinson, Cecil
Biffen, John	Hastings, Stephen	Percival, Ian
Biggs-Davison, John	Havers, Michael	Powell, Rt. Hn. J. Enoch
Blaker, Peter	Hawkins, Paul	Proudfoot, Wilfred
Boardman, Tom (Leicester, S.W.)
	Hayhoe Barney	Pym, Rt. Hn. Francis
Body, Richard	Hicks, Robert	Redmond, Robert
Boscawen, Robert	Higgins Terence L	Reed, Laurence (Bolton. E.)
Bowden, Andrew	Hiley, Joseph	Rees, peter (Dover)
Brewis, John	Holland Philip	Rees-Davies, W. R
Brinton, Sir Tatton	Holt, Miss Mary	Ridley, Hn. Nicholas
Brocklebank-Fowler, Christopher	Hordern, Peter	Rippon, Rt. Hn. Geoffrey
Brown, Sir Edward (Bath)	Hornby, Richard	Roberts, Wyn (Conway)
Bruce-Gardyne, J.	Howell, Ralph (Norfolk, N.)	Royle, Anthony
Buchanan-Smith, Alick (Angus,N&M)	Hunt, John	St. John-Stevas, Norman
Buck, Antony	Iremonger, T. L.	Scott, Nicholas
Bullus, Sir Eric	Jenkin, Patrick (Woodford)	Sharples, Richard
Butler, Adam (Bosworth)	Jessel, Toby	Shaw, Michael (Sc'm'gh & Whitby)
Campbell, Rt.Hn.G.(Moray&Nairn)	Kaberry, Sir Donald	Shelton William (Clapham)
Chapman, Sydney	Kilfedder, James	Skeet, T. H. H.
Chataway, Rt. Hn. Christopher	King, Evelyn (Dorset, S.)
		Smith Dudley (W wick & L mington)
Churchill, W. S.	King, Tom (Bridgwater)	Soref, Harold
Clark, William (Surrey, E.)	Kinsey, J. R.
Clarke, Kenneth (Rushcliffe)	Kirk, Peter	Speed, Keith
	Kitson, Timothy	Spence, John
Clegg, Walter		Stainton Keith
Cooke, Robert	Knight, Mrs. Jill	Stanbrook Ivor
Coombs, Derek	Knox, David	Stewart-Smith, Geoffrey (Belper)
Cooper, A. E.	Lamont, Norman	Stewart-Smith, Geoffrey (Belper)
Cordle, John	Lane, David	Stoddart-Scott, Col Sir M.
Cormack, Patrick	Legge-Bourke, Sir Harry	Stokes, John
Costain A P	Le Marchant, Spencer	Stuttaford, Dr. Tom
Crouch, David	Lewis, Kenneth (Rutland)	Sutcliffe, John
Davies, Rt. Hn. John (Knutsford)	Loveridge, John	Taylor, Edward M.(G'gow, Cathcart)
Dean, Paul	Luce, R. N.	Taylor, Frank (Moss Side)
Deedes, Rt. Hn. W. F.	MacArthur, Ian	Tebbit, Norman
Drayson, G. B.	McCrindle, R. A.	Temple, John M.
du Cann, Rt. Hn. Edward	McLaren, Martin	Thatcher, Rt. Hn. Mrs. Margaret
Dykes Hugh	Maclean, Sir Fitzroy	Thomas, Rt. Hn. Peter (Hendon, S.)
Eden, Sir John	McMaster, Stanley	Trafford, Dr. Anthony
Edwards, Nicholas (Pembroke)	McNair-Wilson, Michael	Trew, Peter
Elliot, Capt. Walter (Carshalton)	McNair-Wilson, Patrick (NewForest)	Tugendhat, Christopher
Elliott. R. W. (N'c'tle-upon-Tyne,N.)	Madel, David	Turton, Rt. Hn. Sir Robin
Emery, Peter	Maginnls, John E	Vaughan, Dr. Gerard
Eyre, Reginald	Marten, Nell	Waddington, David
Farr, John	Mather, Carol	Walker-Smith, Rt. Hn. Sir Derek
Fenner, Mrs. Peggy	Mawby, Ray	Weatherill, Bernard
Fidler, Michael	Maxwell-Hyslop, R. J.	Wells, John (Maidstone)
Fisher, Nigel (Surbiton)	Meyer, Sir Anthony	White, Roger (Gravesend)
Fletcher-Cooke, Charles	Miscampbell, Norman	Wiggin, Jerry
Fookes, Miss Janet	Mitchell, Lt.-Col.C. (Aberdeenshire.W)	Wilkinson, John
Fortescue, Tim	Mitchell, David (Basingstoke)	Winterton, Nicholas
Foster, Sir John	Moate, Roger	Wood, Rt. Hn. Richard
Fowler, Norman	Molyneaux, James	Woodnutt, Mark
Fox, Marcus	Money, Ernie	Worsley, Marcus
Galbraith, Hn. T. G.	Monks, Mrs. Connie	Wylie, Rt. Hn. N. R
Gardner, Edward	Monro, Hector	Younger, Hn. George
Gibson-Watt, David	Montgomery. Fergus
Gilmour, Ian (Norfolk, C.)	Morgan-Giles, Rear-Adm	TELLERS FOR THE NOES:
Gilmour, Sir John (Fife, E.)	Morrison, Charles	Mr. Michael Jopling and
Goodhart, Philip	Mudd, David	Mr. John Stradling Thomas
Goodhew, Victor	Murton, Oscar

Question accordingly negatived.

Mr. Sheldon

I beg to move Amendment No. 46, in page 101, line 34, at end add:

GROUP 14—PROTECTIVE CLOTHING AND DEVICES

Item No.

1. Protective boots designed for use by miners or quarrymen or moulders.

The First Deputy Chairman

With this Amendment it will be for the convenience of the Committee to discuss also the following Amendments:

No. 47, in page 101, line 34, at end add:

GROUP 14—PROTECTIVE CLOTHING AND DEVICES

Item No.

1. Protective helmets designed for use by miners or quarrymen.

No. 48, in line 34, at end add:

GROUP 14—PROTECTIVE CLOTHING AND DEVICES

Item No.

1. Fire guards.

No. 59, in line 34, at end add:

GROUP 14—PROTECTIVE CLOTHING AND DEVICES

Item No.

1. Crash helmets.

No. 87, in line 34, at end add:

GROUP 14—PROTECTIVE CLOTHING AND DEVICES

Item No.

1. Safety belts and mountings for safety belts.

No. 95, in line 34, at end add:

GROUP 14—PROTECTIVE CLOTHING AND DEVICES

Item No.

I. Fire extinguishers.

No. 109, in line 34, at end add:

GROUP 14—FIRE PRECAUTIONS, PREVENTION,

AND FIRE FIGHTING APPLIANCES

Item No.

1. 1. Hand fire extinguishers.
2. 2. Hose reels.
3. 3. Fire alarms.
4. 4. Other appliances required as a condition of the issue of a fire certificate under the provisions of the Fire Precautions Act, 1971.

Mr. Sheldon

This group of Amendments concerns the various protective devices used by private individuals as well as industry and which hitherto have largely been exempt from taxation.

In a speech at Perth on Saturday the Chief Secretary to the Treasury talked about the great virtues of value added tax. He said: It is a broadly based consumption tax which will get rid of almost all those ridiculous anomalies and distortions which have characterised selective employment tax and purchase tax. We have heard about the way in which we are for the first time taxing things such as incontinence pads, and I doubt whether the Chief Secretary can maintain that he has ended the rule of the ridiculous anomalies. We are now having not only ridiculous anomalies but ridiculous and dangerous anomalies. That is what the Amendments are very largely about.

The ridiculous anomalies that we knew in purchase tax caused little harm and, perhaps, little danger. But the problems about the group of articles we are now about to tax for the first time are that we are taxing those things that can do so much to save life and property and to save individuals from injury. In our view these are items which have a very strong case for subsidisation. When we consider the various ways in which we subsidise articles which save life and property, we think of the end result. We do not subsidise the fire brigades, the Factory Inspectorate or the Transport and Road Research Laboratory as such. What we do is to subsidise safety by the prevention of fire and to try to prevent accidents in factories and on the roads. When we spend our millions of pounds on the fire services, the Transport and Road Research Laboratory and the Factory inspectorate, we are saying that these are functions which the State regards as of great importance and that we think they should be the recipients of Public funds in order to produce a better life for the citizens of Britain and an absence, or at least a reduction, of the dangers from accidents in these various areas of risk.

Mr. Golding

If that is my hon. Friend's principle, why is it that the Amendments in his name do not cover all workers? Why are quarrymen, foundrymen and miners singled out? I represent men in all three groups, and I want them to have safety equipment, but why has my hon. Friend excluded Post Office engineers and construction workers, who, according to the accident statistics, face the greatest hazards?

Mr. Sheldon

What my hon. Friend says is right. The reason for the inclusion of the items named in the Amendments is that they are specifically exempted from purchase tax. The Amendment names those items readily identifiable under all previous Governments as being justifiably exempt from tax but now for the first time coming under tax. The Amendments are not exclusive of other valuable Amendments which could be tabled once the principle was accepted. A host of very important safety devices follow on from those mentioned. Those we consider to be the most important are those for which the case had been made out conclusively in the past, and accepted by all Governments, but on which for some reason that we fail to understand, unless it be an over-addiction to a new-found dogma, the present Government are reversing the decisions in principle taken by all past Governments.

Large sums of money are spent on improving the safety and wellbeing of the people. Helmets have always been free of tax, and protective boots for miners, quarrymen and moulders, and possibly for some others, have also been exempt. Fire extinguishers and fire guards for use in the home have always been exempt from purchase tax. These items and safety belts should also be zero-rated under the VAT system.

When we compare the cost of zero-rating them with the alternative expenditure on achieving the same result, we must see that these means of achieving safety are very cheap. For example, the cost of zero-rating fire extinguishers and fire guards must be a trivial part of the total cost of reducing the danger of fire. Yet under the rate support grant in 1970–71 about £70 million was spent on the fire services. The tax lost on helmets, protective boots and protective clothing must be a small part of the cost of factory inspection, which is the work of the Factory Inspectorate, doing precisely the same task and receiving far greater sums. The amount of tax lost by zero-rating safety belts on motor cars must be small compared with the vast expenditure on the Transport and Road Research Laboratory. The expenditure on the fire services, Factory Inspectorate and Transport and Road Research Laboratory is all justified, but they are far more expensive than would be zero-rating the articles for which we seek zero-rating. Smaller amounts of money can be spent very profitably in supplementing the work of the bodies I have mentioned.

The Chancellor, whose words have been echoed by all the Treasury Minis- ters, tells us that he wants a comprehensive tax. The end result of a comprehensive tax is the taxing of almost everything, even those articles which should be subsidised.

9.15 p.m.

The final absurdity is that we are to subsidise and tax the same articles at the same time. Naturally, there will be a demand for expenditure on various items of equipment of this kind, which the Government will either purchase or make funds available for, thus introducing an element of subsidy, while at the same time taxing those very articles.

Our 30,000 firemen act bravely in their work, and they have stated explicitly, on the basis of great experience in fire fighting, that the danger of fire is greatest in the first few minutes, that the best time to bring a fire under control comes in the first few minutes when it starts to gain a hold. It is at this point that appliances are required, appliances which the fire authorities encourage people to put in their buildings—hoses, reels, extinguishers and so forth—so that all parts of a vulnerable building—all buildings are vulnerable nowadays—may be readily and amply supplied with the necessary fire fighting equipment.

It is a dangerous nonsense to tax such devices which are used purely for the purpose of saving life and property. They have no other conceivable function.

The Financial Secretary to the Treasury (Mr. Terence Higgins)

Would the hon. Gentleman regard a bucket of water or a bucket of sand as fire fighting equipment in this context?

Mr. Sheldon

If the hon. Gentleman says that there are problems of definition, I agree at once. There are always such problems. He must not delude himself into thinking that he has a perfect tax without continuing anomalies. The Bill is riddled with anomalies. He has zero-rated a range of items, books, water, food, and so on. But people feel that there are other articles which can save life and property which in any civilised society ought to be heavily subsidised, and in any event ought not to be taxed. Yet the Government, to their shame, are taxing them.

Mr. Higgins

Seeking to understand the hon. Gentleman's argument, I put a simple question. Does he regard a bucket of sand as something which ought to be taxed?

Mr. Sheldon

The Financial Secretary knows very well that one runs into problems of definition on the taxing of a bucket of sand. It might depend on the shape of the bucket, and so on. His question has nothing to do with our Amendment. How does he justify taxing a foam fire extinguisher, or hoses, reels, and all the various equipment which can be used for nothing but fire fighting and fire prevention—all the appliances required as a condition of the issue of a fire certificate under the provisions of the Fire Precautions Act, 1971"? Those are specific items readily distinguishable from anything outside that category. They have been clearly distinguished in the past, they have been exempt from tax, they ought to be subsidised, and in no circumstances ought they to be subject to value added tax.

There is the further absurdity that fire insurance will be exempt from value added tax, but the cost of preventing, detecting and putting out a fire will be taxed. The construction of a building will be zero-rated, but the provision of fire-fighting appliances to protect it will be taxed. On the one hand, millions of pounds will be zero-rated, while, on the other, this miserable tax will be put on the few items which can protect life and property.

The loss of revenue would be negligible. These articles are designed to save life and to save property, their installation and use ought to be encouraged, ought even to be subsidised, and in no circumstances ought to be taxed.

Mr. Alex Eadie (Midlothian)

I have not spoken on the Bill previously, but I should like to comment on the Amendments concerned with protective clothing. Although the mining industry and the quarrying industry have been mentioned, I shall address myself to the whole range of protective clothing in industry.

In our debates there sometimes comes what I would describe as the litmus test of politics, and I regard these Amendments as just such a test. Much as I am bitterly opposed to the value added tax in principle, I do not believe that the Government introduced the propositions in the Schedule out of prejudice. They introduced them because of their complete misunderstanding of the realities of industry.

Hundreds of thousands of pounds a year are spent in this country on safety, on imploring workers to work safely. We introduce all sorts of measures to encourage them to use protective clothing. In some industries the problem has been solved to the extent that some items of safety equipment are compulsory. I cite the example of the mining industry.

It was the trade unions which were responsible for saying that no man should be allowed to go underground without wearing a safety helmet. But we were conscious of the fact that a man might buy a cheaper helmet, or an inferior helmet, to hold his lamp, but a helmet that was not safe. In the interests of safety, we laid it down that no man should be allowed underground unless he was wearing a safety helmet as prescribed by the necessary safety rules. I am convinced that as a result some men left the industry, but we also saved people from serious injury and we saved lives.

The Government now propose that there should be a tax on such clothing. I say that the proposition is born not out of prejudice but out of complete misunderstanding. It is a charge often levelled at hon. Members opposite that they do not understand what is happening in industry, whether the building industry, mining, quarrying, the Post Office, or anywhere else. But the problem of safety has to be uppermost, because we are discussing not only injury but the loss of life.

Much the same rules about safety helmets apply in quarrying as in mining, and building firms are now insisting that men on building sites should wear safety helmets. The Government now propose that they should be taxed for doing so. But the matter becomes more difficult when we deal with safety boots, because there is nothing compulsory about the wearing of safety boots. We have not been able to introduce compulsion in this respect, so when a man goes down a mine or works in a quarry or on a building site he may not be ordered to wear safety boots, although he is advised to do so.

The Government propose that there shall be a tax on safety boots, and the result will be a great temptation to many men to buy inferior or cheaper material because of the cost. Is it argued that that will benefit the nation? The Government will find that the result of this proposition will be that men will be encouraged not to wear protective equipment, and so the number of accidents will increase. I have spent my life in industry dealing with safety, and it has to be remembered that we are concerned not only with people being maimed but with people being killed. Now the Government propose a financial penalty on workers who wear protective equipment and clothing while safety committees are imploring them to wear them. There are now safety committees in every reasonably sized industry. Members of those committees will now he trying to do their job with their hands tied behind their backs because of the financial penalties which the Government propose.

An example of protective clothing is gloves. My hands are torn. I was in the garden during the weekend and I forgot that my hands were softer than they used to be. I omitted to put on gloves, and as I was dealing with roses I tore my hands, as hon. Members can probably see. It would not have happened 10 years ago when my hands were harder.

Safety officers do not tell men that their hands may be hard; they tell them that they must wear gloves because gloves will save them from serious injury. The Government proposal will encourage men not to bother to wear gloves. What kind of task is the Committee asking industrial safety committees to undertake when we propose that people who try to work safely should be penalised? As I have said, I do not believe that this proposition is born out of malice or prejudice. It results from a complete misunderstanding of the position in industry.

Mr. Dennis Skinner (Bolsover)

I wonder whether my hon. Friend would comment on the proposition that while some miners might discard some of this protective equipment which they are bound to wear according to regulations most of them will surely continue to buy such clothing. There is a way of getting round this, perhaps even with the help of hon. Gentlemen opposite. My hon. Friend will be aware that miners receive a standard expense allowance set against expenditure. What we should attempt to do is to have the standard allowance raised so that the effect will be that it will be taken with one hand and given out with another.

[Sir ROBERT GRANT-FERRIS in the Chair]

9.30 p.m.

Mr. Eadie

That is a possibility, but it is rather absurd when we are being told that the Inland Revenue is overworked. This proposition will mean that every industrial worker will be claiming this concession. It will result in a huge amount of extra work for the Revenue. If the Government were to accept our case it would have a great psychological effect on industry and on safety committees which would feel that their work was being recognised by the Government, that there was a recognition of the need to work safely in industry. There is a great deal of money at stake here.

My hon. Friend said he thinks that the men will continue to wear this equipment. I wish I were as convinced. I am certain that the temptation will be there. Many of us know what it is like to be a weekly wage earner in the coal or steel industry. If two or three days are lost, income is drastically cut. There is a tendency to cut one's cloth according to one's income. Based on my experience I would say that there was a great temptation for people not to buy safety equipment unless it is compulsory or else to buy equipment that is inferior.

Mr. James Dempsey (Coatbridge and Airdrie)

My hon. Friend will know of our experiences with the small steel works in the private sector, where there is no obligation to provide equipment such as safety gloves. We have tried to persuade them to do this and have so far failed. Does my hon. Friend think that we are more likely to succeed if VAT is imposed?

Mr. Eadie

My hon. Friend has a very good point. If this Committee accepts the Government's view of this, it would be seeming to be completely ignorant of what happens outside and, in my view, will be deserving of the contempt of the people. This place is supposed to understand the feelings and aspirations of the people: it is appealing to industry for increased productivity. We are subject to some criticism at present, much of it unfair, but this would be completely justified. I often think that a debate on safety matters would be well worth while because it is something which ought to be paramount in our minds.

Mr. Higgins

Can the hon. Gentleman help the Committee, from his great experience in this area? Would he care to hazard a view as to what extent safety equipment, be it helmets or gloves, in the coal or steel industry is provided by the firms concerned and to what extent by the individual?

Mr. Eadie

There is some help and assistance given but it is very little. For example, protective boots are much more expensive than ordinary boots. This is one of the problems we had within the industry. We arranged to get them through the stores at a concessionary price. One could buy another type of boot at a very substantial saving in cost. I concede that financial assistance is given by some industries, but in the vast majority of cases it is done on a wholesale basis rather than given free. At this year's conference of the National Union of Mineworkers, and probably at the conferences of other industrial unions, there will probably be a resolution on the agenda asking that safety equipment be provided free, but we have never managed to get it.

In mining or quarrying knee pads are an essential part of equipment. Unless men wear them they get what is known outside as "housemaid's knee", but in industry we call it "beat knee". It is a scheduled disease and men get compensation for it, but it means drastic loss of earnings for them. It is very painful. Sometimes people go to hospital to have the knee lanced. Sometimes it takes a long time to clear up. It may flare up again after a man has returned to work.

We have always tried to encourage people to wear knee pads. When I was in the mines, if men were working in a seam 3 ft. high it was a comfortable seam, but if they did not have knee pads on they were asking for trouble. The pads wear out rather rapidly and then people are encouraged to improvise with all sorts of other material—such as rags wrapped round the knees—which is inferior and second best. I am willing to predict that if men in quarrying or mining were to stop using knee pads the number of certifiable beat knees would escalate.

The question of protective equipment for men in all industries is very important. I hope that the Financial Secretary will consider the Amendment sympathetically because it concerns a matter of great importance to industry and the country as a whole.

Mr. David Mitchell (Basingstoke)

This is a continuation of the series of special pleadings which we have had during our debates on this part of the Bill. It provides a field-day for every special interest, whether it be sport, safety or clothing. But any tax designed to be a general tax and fixed at the rate of 10 per cent. can be exempted only if the rate is increased above 10 per cent.

Mr. Golding

No.

Mr. Mitchell

It is all very well for the hon. Gentleman to say "No", but the Government have made it clear that they cannot accept exemption unless the rate of 10 per cent. is increased. We have disposed of a number of Amendments concerning subjects which hon. Members would have wished to see exempted, but they realise that it cannot be done in practice.

The effect of accepting this Amendment would be to put a higher rate than 10 per cent. on a series of good causes which we have agreed should not be exempted from that rate. If we pass this Amendment, the Amendment after and the Amendment after that, all the special cases which we have not exempted will pay 12 or 121 per cent., or whatever the higher rate has to be because of exemption. The Committee is entitled to ask my hon. Friend the Financial Secretary for an assurance that he has gone into the position and that it will not mean any less safety equipment being available and used.

I concur with the views of hon. Members opposite on safety in industry. The appalling figures of industrial injury are a grave cause for concern. My hon. Friend knows how serious these figures are and how serious is the national loss in terms of working days as a result. We are thus entitled to ask for his assurance that he has made adequate inquiries and is satisfied that there will be no reduction in the amount of safety appliances and equipment in use as a result of their not being exempted from VAT.

Am I right in thinking that if firms were to attempt to reduce the use of safety appliances and equipment they would find that their compulsory employers' liability insurance would have a higher premium loading because of their failure to make sufficient use of protective devices and equipment? There is also a series of requirements under the Factories Acts which presumably would not be affected by VAT in any way.

The hon. Member for Midlothian (Mr. Eadie) spoke about conditions at the coal face, where men have to crawl about on their hands and knees in three feet of space, and how in such circumstances injuries to the knees can be a serious matter. I see another miners' Member sitting opposite who took me down a coal mine in just such conditions. I recognise entirely the strength of the hon. Member for Midlothian's case and the appalling conditions in which people have to work at the coal face. I find it the more surprising, therefore, that the National Union of Mineworkers has not pressed for these things to be provided by the employer rather than insisting on a wage increase in cash which, I would have thought, was a lesser priority in terms of the sincere remarks which the hon. Gentleman made about the necessity for safety equipment.

Mr. Eadie

I do believe that the hon. Gentleman's speech is motivated not by prejudice but by lack of experience of reality. He has related his experience down a coal mine. He knew what I meant when I spoke about crawling on hands and knees. Is not he aware that the National Union of Mineworkers has campaigned, as most unions have, for protective clothing to be provided free?

Mr. Mitchell

I am aware of that but the degree of forcefulness with which the union has campaigned for it has been substantially less than that with which it has campaigned for cash. I will not exacerbate the situation by using the sort of phrase one might use about it, but the miners had a major strike and the country had major difficulties, not over a request for safety equipment, but for cash. Certainly one would imagine that the unions would be very alert to ensure that there was no reduction in the amount of safety equipment because of the introduction of VAT. Again, however, I ask my hon. Friend to give us that assurance. Perhaps he will also give us figures concerning the proportion of safety devices supplied by employers compared with those bought by employees. These are important matters. I would be surprised if my hon. Friend, having spent so much time studying the matter in depth, had failed to examine the possible effects of VAT in this sector.

9.45 p.m.

Mr. Peter Archer (Rowley Regis and Tipton)

If I understood him correctly, the hon. Member for Basingstoke (Mr. David Mitchell) argued that a reduction of the incidence of tax on certain items would inevitably lead to increased tax on other items. There appears to be a basic fallacy in that argument in relation to this group of Amendments, which is not merely an appeal for a deserving cause but an invitation to the Government to make a financial investment. By conceding the items they will thereby obtain a financial saving.

My hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) said that the cost of making the concessions would be small. My hon. Friend the Member for Midlothian (Mr. Eadie) spoke of the enormous amount we spend on attempting to reduce personal injuries from industrial accidents. My hon. Friend the Member for Bolsover (Mr. Skinner) said in an intervention that the probable effect of increasing the cost of safety equipment would be an application for increased allowances and more form-filling, so that the economy as a whole is likely to be the worse because of the incidence of VAT on these items.

We are discussing means of reducing personal injuries and the loss of limb and life, but I want to speak in the coldest possible financial terms. There is no need to elaborate on the cost of fires. The insurance companies never tire of rending our hearts about the amount they lose on fire insurance.

I want to say a word about the cost of industrial accidents. Many of us from time to time have indulged in the exercise of attempting to cost them, including medical attention, loss of working time, damage to plant, disruption of the process and compensation. The latest figure I have seen in an attempt to assess the cost to the economy of accidents leading to reportable injuries—by the British Safety Council—is about £600 million a year. I attempted to work out what that might mean to the Exchequer in the way of free school milk or in the concessions on tax which we have been debating. I warmed up to wondering what reduction that would entail in income tax, and at that stage I gave up. The mind boggles. A substantial reduction in the cost of industrial accidents would mean that there would be no question of an increase in tax on other items but a substantial reduction.

Of course it would not necessarily mean that the whole of the cost we are talking about would be saved. I know of no statistics to indicate what proportion of our industrial accidents are due to failure to use protective clothing. I may be maligning the Chief Inspector of Factories, who normally produces very informative reports, but I have searched his reports in vain for those figures. Now that the question has occurred to me, the Secretary of State for Employment may be called upon to give us the figures during Question Time.

The hon. Gentleman by making these concessions would assist substantially in reducing industrial accidents in two ways. First, the cost of the equipment would be reduced. In many cases the equipment is provided by the workman himself. Although a miner may well continue to buy a pair of safety boots, there is always in a restricted family budget a temptation to buy a slightly inferior pair of safety boots, or safety boots which are a little less safe, and sometimes one pays the inevitable price.

In so far as the bulk of the cost falls upon management, if we wanted evidence of the concern with cost we have it in paragraph 139 of the report of the National Institute of Industrial Psychology on the study of 2,000 accidents. Those who were observing the workshops in question commented on the sheer niggardly Scroogism of foremen who were asked to issue safety equipment. They said that they had the impression that those concerned were paying for it out of their own pocket. They added that possibly it made a difference that in many cases this was part of the on-cost attributed to a particular shop, and they suggested that it might be attributed to the factory as a whole.

If one wanted evidence, that is evidence that by increasing the cost of safety equipment of this kind one makes people more reluctant to issue it. Even if, in the end, they ensure that nobody is without it, the gloves are worn for a little longer before somebody issues a new pair. They are worn until they are not safe. That is one obvious consequence of the failure to make these concessions.

The other consequence is perhaps in some senses a little more subtle. Everyone knows that we spend money on campaigns designed to persuade employers to provide safety equipment of this kind. Even more money is spent an campaigns designed to persuade employees to wear the equipment. We know why they do not wear it. Often the equipment is uncomfortable to wear. If the helmet were less heavy, if the goggles could be worn for a little longer before they steamed un, if boots did not feel like two heavy slabs of concrete—and those of us who have had to wear this equipment know what the unions are talking about when they raise these matters—it may be that more people would wear the equipment for more of the time, but this entails expending more money on better design, and sometimes on slightly more expensive equipment. Already, improved design is solving some of the problems. But there would be a much greater incentive to spend more money on design if it were not going to be subject to additional tax.

For the last few moments of my speech I propose to deal with the question of fire appliances, and I do this because of a case which has come within my own experience. Last year the Chief Fire Officer of Warley directed his mind to the problem of elderly and handicapped people who were subject to fire risks. He designed a low-cost warning system which operated by heat and activated switches which warned both the resident and others who could come and assist him. In July, 1971, 16 of these systems were tried out in various houses in Warley, and they proved their value on at least three occasions by contributing substantially to having the lives of elderly persons.

It transpired at that time that the systems were subject to 30 per cent. purchase tax. I wrote to the Chancellor asking whether in the Budget some consideration could be given to reducing the cost of the systems, and in a courteous reply the Financial Secretary said, quite naturally, that I could not expect him to anticipate the Budget—and I did not—bat that some consideration would be given to this problem when the Budget was framed. When, during the Chancellor's speech, we heard that there was to be VAT I thought that as a result of the deliberations at least these systems would be exempted from that tax. Nothing that I have heard since indicates the results of any consideration given to these systems which may be of vital importance in saving the lives of a large number of elderly and handicapped people. In many cases these systems will be provided by local authorities, and if they can be made marginally less expensive, we may be able to persuade more local authorities to use them.

We are appealing to the hon. Gentleman to make these concessions on humanitarian grounds, because we do not want so many people with one leg, or so many with their skulls cracked because they were not wearing helmets. We do not want a society consisting of widows and orphans. But if he is not persuaded by these considerations, if the hon. Gentleman is concerned about cost, we are inviting him to make a financial investment.

Mr. Thomas Swain (Derbyshire, North-East)

This is the first time in the history of taxation that a poll tax has been placed upon accident prevention. If the Chancellor of the Exchequer knew the value of the safety equipment worn by miners, I am certain he would immediately reconsider his decision to inflict a poll tax on safety equipment.

As my hon. Friend the Member for Midlothian (Mr. Eadie) stated, as we go around the country we see more and more people on building sites wearing safety equipment which they have provided themselves or their employer has provided for them. The introduction of safety equipment to that type of job has drastically cut the number of accidents.

I take up the point made by my hon. Friend when he said that miners are subsidised to a certain extent when they purchase safety equipment. There is no subsidy at all. All that happens in the provision of safety equipment to the miners in my area is that the middleman's profit is cut out. As a consequence the article in question is considerably cheaper, particularly in the case of boots, than it would have been had they gone to a shop or a multiple store. Do not let anybody be under any misapprehension that miners' safety equipment is subsidised in any shape or form.

I now come to the serious matter of dust masks. We have had great difficulty in the past in encouraging men to wear masks at machines or power-loaded faces. There are now 40,000 men who have been disabled as a result of pneumoconiosis. We are trying to bring that serious complaint within limits but we can only do so by encouraging people to wear the necessary safety equipment. If the Chancellor inflicts his tax upon us he will make the task of the union, management and everybody else far more difficult when our inspectors, union officials and safety officers at the pit and on the works try to get the men to wear that type of safety equipment.

Another important piece of safety equipment which for 20 years we have been trying to encourage miners to wear is safety pads. These pads are an expensive piece of safety equipment. In some parts of the workings underground where the roadways are fairly high it is essential that the men wear spine pads. If there is a 10 per cent. tax on spine pads, this will inevitably discourage the men from wearing them. I hope that the Minister looks at this matter from the practical viewpoint of accident prevention and seriously considers accepting the Amendments.

The only trouble with the Amendments is that they are not wide enough. They should have covered not only equipment worn by miners and quarrymen but the whole range of safety equipment that is being used more and more in industry by construction workers, by sea-going men and by other categories.

We had a debate lasting seven and a half hours on sport. If safety in mines and industry and the prevention of accidents is not more important than sport, I consider that we have got our valuations all wrong. I do not mind if the debate goes on all night, provided that the problems can be ventilated and solved and that the Minister will see reason and accept the Amendments without trooping us through the Division Lobbies. If value added tax is imposed on industrial safety equipment, it will create untold harm in every major engineering and mining industry in this country.

10.0 p.m.

The speech by the hon. Member for Basingstoke (Mr. David Mitchell) can only be described as poppycock. If he were doing a crossword puzzle and the clue was "manual labour", I imagine he would put the answer "Spaniard". That is how I analyse his speech and regard the extent of his knowledge of this subject. The hon. Gentleman suggested that the Minister had done his homework. I should like to contradict him. If the Minister had done his homework and the Department had properly carried out research throughout industry and considered the matter from both the management and trade union sides, I am sure this poll tax on safety equipment would never have been introduced.

Mr. Gordon Oakes (Widnes)

The theme throughout all these Amendments, whether they relate to industrial safety, safety of miners and construction workers, safety on the roads by means of crash helmets or safety belts or safety from fire, is that we on this side consider that the provision of safety is essential and ought to have some fiscal incentive for the individual.

The hon. Member for Basingstoke (Mr. David Mitchell) said that if we exempt various categories of goods the tax must go up on other items. I hope the Minister will tell us what the effect of the Amendments, if accepted, would cost the Revenue. I agree with my hon. and learned Friend the Member for Rowley Regis and Tipton (Mr. Peter Archer) that the cost to the Revenue would be exceedingly small.

We consider safety to be essential. The Government consider housing essential, so they make land exempt. They consider food to be essential, though not to the extent that we consider it to be essential, and exempt food from tax. Therefore, why do they not exempt safety equipment from tax?

Many of my hon. Friends have spoken about the miners. I was surprised to learn that in this day and age miners have to buy their own safety equipment. That is a disgraceful state of affairs.

The number of accidents in the construction industry is enormous because of the lack of protective equipment. Again, construction workers have to buy their own protective equipment. Surely we all agree that safety, whether on the roads, in factories, or in mines, is vitally important.

Mr. A. P. Costain (Folkestone and Hythe)

What evidence has the hon. Gentleman that construction workers have to buy their own safety equipment?

Mr. Oakes

My experience in my constituency is that they usually buy their own boots or other forms of safety equipment.

I want to leave that matter and come to the specific subject of fire extinguishers.

Mr. Harold Walker (Doncaster)

I should like to draw my hon. Friend's attention to the fact that one of the curses of the building industry in the last few years has been the enormous growth of the self-employed person and those who are described as the "lump". They are people from whom, by and large, there are no employers to provide protective clothing, and often these people will not buy it, thereby endangering or risking their own lives as well as the lives of others.

Mr. Oakes

I agree with my hon. Friend that not only their own lives but the lives of their fellow workers are put in jeopardy because of the way they operate.

Mr. Heller

May I intervene to point out to the hon. Member for Folkestone and Hythe (Mr. Costain) that in the construction industry, although helmets and protective clothing are provided by employers, boots and protective shoes are normally purchased by the workers themselves? I am talking not about rubber boots but about protective boots with steel toe caps either inside or outside. As a shop steward I have on many occasions made arrangements direct with firms to provide such boots, and their workers have paid for them by weekly payments.

Mr. Oakes

That is exactly the experience in my constituency, which is not far from the constituency of my hon. Friend, and I understand that it is generally true throughout the construction industry.

Millions of pounds are lost annually—I am speaking only of financial considerations—in fires in factories, shops and especially in homes. Most of the financial loss, not only to insurance companies but in many instances to individuals, is a needless loss, and if there were proper fire precautions and extinguishers in the home and elsewhere many fires could be halted without the need to call the fire brigade. Not only should the Government not be taxing items which can help to prevent fires and put them out quickly; they should be giving every possible fiscal and financial incentive to people to provide these items.

The return to the nation from making such items readily available would be enormous. The return to the nation in terms of saved limbs and health by making protective clothing and fire equipment more popular by giving fiscal and financial incentives would be equally enormous. We are saying in this group of Amendments that in the view of Parliament safety is vital on an individual, group or factory basis, and safety devices which prevent loss of life and damage to property should be free of tax. In the way that homes and food are essential, safety is equally essential.

Mr. Harold Walker

I intervene for the first time not only in this Finance Bill but in the debates on any Finance Bill since I entered Parliament many years ago.

I hope that my hon. Friends will accept a mild reproach when I express regret that the Amendments do not cover a wider sphere. My hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) was anxious to get the taxation principle which the Government have in mind abundantly clear. I suggest that the question of industrial safety embodies a higher principle.

I thought it extraordinary that the hon. Member for Basingstoke (Mr. David Mitchell) on the one hand hoped that the Minister was listening sympathetically to the case hon. Members were making on industrial safety and the need to make safety equipment more readily available, and on the other said he appreciated how it would upset Treasury calculations to accept the Amendments. It is extraordinary that the hon. Gentleman should tell us that tax principles are to be elevated somewhat higher than the safety of life and limb.

Mr. David Mitchell

If the hon. Gentleman recalls what I said, or will look in HANSARD tomorrow, he will know that I prefaced that comment by asking my hon. Friend for an assurance that there would be no reduction in the use of safety equipment as a result of accepting this part of the Bill and rejecting the Amendment.

Mr. Walker

The Committee will equally recall that the hon. Gentleman started by frankly acknowledging that in his view his hon. Friend could not accept the Amendments as that would mean a loss of revenue which would have to be borne by the other areas to which the tax applied. The hon. Gentleman cannot have it both ways. He is either on our side or on his hon. Friend's side, and one can see how the cookie is crumbling.

My hon. and learned Friend the Member for Rowley Regis and Tipton (Mr. Peter Archer) pointed out some of the consequences of imposing value added tax on these items of equipment that have not previously borne tax, and also the effect as it seemed to him, and as it seems to us, of the continued imposition and extension of the tax on safety equipment.

I am surprised to see that Amendment No. 46 deals exclusively and specifically with protective boots. In the greater part of industry, protective boots have been replaced by protective shoes. The extreme importance of ensuring the utmost foot safety for people in particularly hazardous occupations is obvious, and it is, therefore, very important that people in industry generally should not be deterred in any way from purchasing safety shoes and, indeed, the whole range of other safety equipment. I can well understand the argument that nowadays these shoes are given such an attractive appearance that people might well buy them for ordinary wear, but is it suggested that people should bear this tax simply as a deterrent to the purchase of attractive safety shoes?

My hon. Friend the Member for Liverpool, Walton (Mr. Heller) was right in saying that the majority of building trade employees are required to buy their own safety boots and shoes—those fitted with steel toecaps—but I know from my own experience that that practice applies universally throughout industry. Other safety equipment comprises such items as safety helmets, as worn particularly in the construction industry, goggles and industrial spectacles. No one could say that industrial spectacles were attractive. I have worn them and I know that they are uncomfortable, but they are necessary in some parts of industry. Metal-faced gloves are necessary when handling swarf—extremely sharp cuttings from metal. There are also the helmets worn by shot blasters.

The hon. Member for Folkestone and Hythe (Mr. Costain) was right in suggesting that, by and large, these items are bought by the employers, but our argument against the tax remains valid whether they are bought by the individual wearer or by the employer, and even more valid when we think of the small employer who has to buy equipment which is normally too expensive for the individual employee to buy. As my hon. and learned Friend the Member for Rowley Regis and Tipton was saying, we do not want to extend the life of these things so that people will be using them in a less safe condition than they have hitherto.

Mr. Higgins

It may be for the convenience of the Committee and may, perhaps, prevent us pursuing a false point if I remind hon. Members that if the equipment is purchased by an employer and provided free no tax will fall upon it because the input tax paid will be deductible from the output tax of the concern involved. Therefore, the hon. Member for Doncaster (Mr. Harold Walker) is on a completely false point. I hope he will not detain the Committee further on that matter.

[Sir STEPHEN MCADDEN in the Chair]

10.15 p.m.

Mr. Walker

If the Minister is assuring the Committee that when these items are purchased by an employer no burden whatever will fall on the employee, that is all right and I accept that he has gone half way towards that. I am glad to see the Minister nodding his agreement that there will be no burden whatever falling upon the employee when the items are purchased by the employer. Therefore, that is all the more reason why the Minister should make absolutely sure that the individual is exempt. One cannot see any reason for any inequity. It seems implicit in the kind of case that the Minister is making in his interjections.

The other point is that if the Government reject the Amendments and those items that we are seeking to have zero-rated will in future have to bear tax, following the line of reasoning advanced by my hon. and learned Friend the Member for Rowley Regis and Tipton, there will be a tendency not only to prolong and protract the life of some of these items beyond that point at which they are no longer safe but to turn towards cheaper products. There has been considerable concern about this recently. I have tabled a Question to the Secretary of State for Employment about the introduction into this country of cheap and substandard safety boots and shoes which do not conform to the British Standards Institution requirements but which, none the less, have still been on sale. This will be another very dangerous tendency.

I conclude by reminding the Committee that during the last war people took all kinds of stringent precautions to safeguard themselves from the consequences of falling bombs. They plastered up windows, put safety devices on windows, constructed shelters, and so on. But there is a higher annual casualty rate in British industry than there was as a consequence of enemy bombs falling on this country during the last war. Equally, in British industry a doctor is sent for over 1,000 times a day and an ambulance twice a day.

Anything that we can do to diminish this awesome toll should be done. Anything we do that may in any way detract from the efforts of those who are seeking to do this is to be deplored, if not condemned. We ought to pay a premium on industrial safety and not a discount on it. To impose value added tax on items and measures which may contribute to a diminution of the toll of life and limb in British industry can extract only blood money. If the Government are not prepared to respond sympathetically to the Amendments and the arguments in their support, it will at best show an indifference and apathy on their part and at worst display a countenance which I do not believe they have.

Mr. James Hamilton (Bothwell)

As a member of the Constructional Engineering Union before I entered the House, I think I can speak with some authority about the construction industry. I am glad the Minister said that helmets, safety belts and nets are all essential items of equipment in the industry. The accident rate in the industry is the highest in the country, and the union has always been deeply concerned about the safety of its members. One of the major weaknesses is that we are not allowed to have a safety officer on a particular site, because he is based on the number of people employed by the company concerned. Consequently, we do not have the supervision which we feel is required.

Some of my hon. Friends have referred to gloves. We have had industrial disputes because employers did not supply gloves. In one instance gloves were passed on from one employee to another and we discovered that there was a high incidence of dermatitis on the job in question. We had a dispute about the matter which lasted for four weeks. From then on, because of the union's strength, the employers supplied the necessary gloves—but only because of the union's strength on that job.

To the best of my knowledge no employer supplies boots free of charge to any of his workers. We should also consider industrial shoes. The spidermen in the construction industry go for the shoes, for obvious reasons.

Mr. John Page (Harrow, West)

The hon. Gentleman is always a very fair debater. Does he not agree that the Government he supported retained purchase tax on industrial shoes, a fact which removes some of the agony and tears from the hon. Gentleman?

Mr. Hamilton

It is true that they did, but I am not talking about the present Government or my own Government. I am talking about industrial safety. Every hon. Member, on whichever side of the Chamber he sits, should be concerned with safety.

Mr. Harold Walker

I should not like my hon. Friend to think that his argument and that which I and others of my hon. Friends have deployed is weakened by the intervention of the hon. Member for Harrow, West (Mr. John Page). If what the hon. Gentleman says is a legitimate rebuke and reproach, we should accept it, but it does not diminish our case.

Mr. Hamilton

I thank my hon. Friend for that intervention. The hon. Gentleman was provoking me. We should remember that it was our members who constructed the Forth Road Bridge, the Severn Bridge and all the power stations in the country. When we realise the height at which the spidermen work we should understand why they prefer wearing shoes to industrial boots.

The Government must consider our point of view if they are concerned with safety. I raised an Adjournment debate on the matter when we were in Government. The points of view I stated then are on the record, and could be repeated tonight. I hope the Government will give those employed in the construction industry the same consideration as they are giving to the employers. The Financial Secretary has told us that when employers purchase equipment they get the money back at the end of the day. If that is the argument, obviously it could be advanced in relation to the workers in the industry.

Now, the question of goggles. Every employee in our industry has to buy his own goggles. If a man loses his goggles, he has to buy another pair. Everyone conversant with the work that goes on at construction sites knows that workers will sometimes have to buy as many as three pairs of goggles in a week. To have tax added will be an additional burden on such individuals.

The Minister has been very fair in his interventions so far. I ask him to take full note of the points which we have made and do something for the employees in the various industries to which we have referred.

Mr. Dempsey

I should have liked the Amendments to be more generalised than they are, because protective clothing and safety equipment are important in service industries as well as manufacturing and construction, but we have heard very little about that.

What prompts me to my feet, however, is that among various small-scale employers in the private sector of the steel industry the situation is by no means all it should be. I have had the dickens of a job trying to persuade employers in my constituency to supply protective equipment such as gloves to men handling hot steel shapes coming from the ovens. Hon. Members may not realise that workers will use their bare hands when handling these hot steel shapes. It needs little imagination to realise how great can be the effect on the skin, on the hands and arms, and so on.

I have asked the Department of Employment to use its good offices to try to prevail upon such employers to give working people protection against the possibility of being maimed for life by being badly burned. We have so far failed to make much impression upon the small industrialists, and what concerns me is that if such essential equipment is subject to value added tax it will be more difficult still to persuade them to make such indispensable protection available to working people.

I am sure that the Minister is as interested in safety as we are. Why has he not applied his mind more thoroughly to these matters? All right hon. and hon. Members on the Government side are bound to feel most perturbed if ordinary working chaps suffer severe disabilities, perhaps for the rest of their lives, because of the lack of protective equipment such as the gloves to which I have referred. I ask the Minister, therefore, to take these Amendments in the widest sense so that further thought can be given to the serious problem confronting workers in smaller factories, in particular.

I recall being asked to visit a certain factory. Before I was allowed to enter the building, where certain foodstuffs, attractive cosmetics and other things were being made, I had to wear protective clothing. No individual, no matter what his status in the community or in society, dared to enter the precincts of the production units of that factory without being adequately protected. so that the commodity was proected against the individual, or the individual was protected against the commodity.

10.30 p.m.

I should have liked the Amendment to be so arranged that we could have gone into this wide characteristic of safety and protective equipment in industry and protective clothing in the service industries. I recall being asked to visit a modern maternity hospital. I thought it would be usual to say "Hallo" to one or two patients and to look round the wards. To my surprise, I was dressed like Ben Casey in Emergency Ward 10 before being allowed inside the building. I understand the reasons; the authorities were afraid of individuals conveying infection to the patients, or patients conveying infection to individuals. The cost of such a spread of infection would be much greater than the cost of zero-rating protective clothing. Would the Minister consider this wider aspect of safety clothing in industry generally and the service industries in particular?

Has the Minister thought of the additional cost that value added tax will impose on local authorities which have to provide their work people with certain safety equipment and clothing for a variety of reasons? At a time when we are told that the rate burden is too high and when rents have to be increased to reduce that rate burden, it seems incon- sistent of the Minister to talk about adding to costs by value added tax on all sorts of safety equipment and safety clothing. This aspect of the matter has not been given the consideration it warrants or the attention it deserves. If value added tax is to be constructed in this fashion and applied to the items I have mentioned, it will do a disservice to the country and we shall be penny wise and pound foolish.

Mr. Dalyell

Curiosity about the weapons of the Treasury has overcome me. Here we have a situation when my hon. Friends have argued with great power for various causes. I want to ask two questions. First, what serious discussions did the Treasury have before coming to these decisions?

For example, this country maintains extremely expensively and well housed research laboratories. Before these decisions were reached, were any questions put to the Transport and Road Research Laboratory at either Crowthorne or Livingston, in my constituency? Were its views asked? If a road research laboratory organisation is asked to improve safety on the roads, it is rather sensible to discuss with it how it can get on with its job and do it effectively.

Secondly, was the fire service consulted in any form? One would imagine that the fire service would of course be consulted and, Government consultation being what it normally is, that these things were fairly rationally and sensibly done. Yet we have this astonishing admission earlier from the Chancellor that on other matters he did not carry out fairly obvious consultation, that there was no consultation with medical authorities on children's shoes and he says that with hindsight he should have consulted such people. We are entitled to ask these questions because of this. Who was consulted about safety equipment? Where did the advice come from outside the Treasury, and if advice was not given from outside the Treasury, why not?

Mr. Higgins

May I reply to this interesting debate originated by the hon. Member for Ashton-under-Lyne (Mr. Sheldon)? I would like to take up the points he raised at the outset, and I shall also seek to reply to some of the points made with great feeling and sincerity by many hon. Members concerned in this sphere, particularly those concerned with the problems of coalmining, steel and other heavy industries and construction.

It is true that we are reversing the principle hitherto pursued of a system of indirect taxation which is discriminatory. We are again abandoning the principle of specific lists of exemptions. That is something which I am sure has become apparent to the Committee over the last few days. It is also the case that we are not going for a multiple rate. That element of discrimination is also being eliminated. We are also broadening the basis of taxation. This necessarily means that we are bringing into tax a number of items which have not hitherto been taxed. It also means that our objective is to get rid of many of the anomalies and non-senses which have existed under the previous system of indirect taxation.

I will not now pursue the question of SET, but in this context it is worth saying a word or two about the present position under purchase tax. In that connection I would like to stress that the Amendments before the Committee in many ways perpetuate the "line-drawing" exercises which existed under purchase tax. It is worth spending a moment examining some of those anomalies. Safety equipment is an area in which I know from personal experience over the last two years there are a great many anomalies which are quite nonsensical. In many ways safety equipment is most difficult. My hon. Friend the Member for Harrow, West (Mr. John Page) pointed out in an intervention that under the present purchase tax system safety boots are not taxed whereas safety shoes are. It is true that hon. Gentlemen opposite immediately responded by saying that they fully accepted that their Government had been wrong to create this kind of anomaly. It was a very sympathetic response, although they said it with perhaps a little too much enthusiasm, but it brings out the kind of anomaly confronting us.

Similarly, with purchase tax we are confronted with a situation whereby, for example, a medical chest with a special safety catch so that children cannot open it and get at the pills inside, a matter of great importance, is taxed. If we look at an example on the other side, miners' safety lamps are not taxed, nor are clogs or safety helmets, whereas chemically-resistant headware is subject to the tax. I could go on with the list. It is true that normally consumer products with special safety designs of one kind or another have been subject to purchase tax. The point I seek to make——

Mr. J. T. Price (Westhoughton) rose—

Mr. Higgins

I will not give way. The hon. Member has not been in for all of the debate and I prefer to concentrate on those of his hon. Friends who have spoken in considerable detail about these matters.

There are a great many anomalies, and the problem of drawing lines between them is one with which the Committee is familiar. For instance, protective arm bands for children have remained in tax under successive Governments because of the difficulty of drawing lines. Hand cleansers, which have some safety aspects, are not taxed, whereas hand soaps are. We are imposing a broadly based tax at a low rate across the field.

The Committee has not fully appreciated, as was apparent from the speech of the hon. Member for Doncaster (Mr. Harold Walker), how the tax works in some cases. I find myself in a slight difficulty because, as my hon. Friend the Member for Basingstoke (Mr. David Mitchell) said about the speech of the hon. Member for Midlothian (Mr. Eadie), in some heavy industries firms do not provide safety equipment and in others they do. It would be wrong for me to enter into the very finely balanced argument about whether this was a proper objective for industrial action or negotiation. But I should like to spend a moment or two in pointing out how the situation will be affected by the Government's proposals in the Bill.

I leave the Committee to judge whether, on balance, there will be a tendency for employers to provide equipment or for people to buy it themselves. If the price of safety helmets, for example, increases as a result of the imposition of the tax, the unions will no doubt make representations to the Inland Revenue about higher standard expenses, and no doubt—there is no administrative problem about this—the Inland Revenue will listen to their argument. That concerns the question of purchase by an individual.

We have a mixed bag of Amendments about purchase by firms. I propose to deal first with the question of industrial safety equipment, secondly, with the question of fire equipment, and then with the question of cars and safety belts, to which very few hon. Members have referred.

The crucial point about protective clothing and devices for miners, quarrymen and moulders is the one which I made in an intervention which arose from the speech of the hon. and learned Member for Rowley Regis and Tipton (Mr. Peter Archer), namely, the provision of safety equipment by an individual firm. If the item is taxable, it will be an input tax on the firm. That can be deducted from the output tax charged on the production of the firm. As a result, the firm gets a deduction of the input tax. Therefore, if the equipment is provided free the credit mechanism will operate, particularly in the case of coal mining where coal will be zero-rated. That applies to some extent to the construction industry.

Mr. Sheldon

There seems to be some confusion about this in the minds of some of my hon. Friends and the Financial Secretary may be adding to it. If a firm is zero-rated it will not have to pay the tax on the safety equipment. But if it is not zero-rated the value added tax on the piece of safety equipment will be charged forward to the final consumer. Therefore, it is a tax on that safety equipment.

10.45 p.m.

Mr. Higgins

The position, as the hon. Gentleman is aware—he has only to consult the examples in the Green Paper—is that the tax operates in a way whereby an output tax is charged at a fixed rate. If the equipment is provided free to the employee and he pays tax on it, that is input tax and he will be able to deduct it from the output tax. If it is a zero-rated item, he will get the rebate in the normal way. If it is exempted, that is a different situation.

Mr. Eadie

I wish the hon. Gentleman would clarify this matter. In his intervention in my speech he raised the question of the cost of equipment. I explained that most of the equipment was bought from the factory or the mine, for example. Is he now telling us that if the employer buys this safety equip- ment there will be no VAT on it but when the employee buys it from the employer it will be zero-rated? I think the hon. Gentleman was skipping over this matter, which is important.

Mr. Higgins

I was not skipping over it. I was about to come to it. Let us take the coal industry as our example. If the firm pays input tax on the safety equipment, that is deductible from the output tax. In the coal mining industry the output is zero-rated. There will, therefore, at the end of the accounting period, be a rebate on the input tax paid on the safety equipment. That is the first proposition. We are assuming that the particular item is provided free to the employee. If that is not the situation but the employer sells the item to the employee, whether it be at a reduced rate or not, that, of course, if he is a taxable trader, will be a particular operation in a normal commercial way, and if it is charged at the full rate the tax will be payable. If it is at a reduced rate, the tax will be correspondingly reduced.

Mr. James Hamilton

I thank the hon. Gentleman for giving way, because he has got me confused and I would like clarification. If, for example, in factory A we discover that, because of union negotiations, the employer is giving helmets free to his employees, whereas in factory B up the road, where the union is not so strong, the employer is selling helmets to his employees, does that mean in essence that the employees in factory B have to pay VAT?

Mr. Higgins

I said when I picked up this point that I would be ill-advised to go into the question of whether the unions should negotiate for such equipment to be provided free rather than going for wage claims, which was the point put by my hon. Friend the Member for Basingstoke. I would not wish to get involved in that delicate situation. I am seeking to clarify the position of the tax at the moment and am leaving hon. Members to draw their own conclusions as to what the net balance is likely to be between the provision of equipment by firms and the provision of equipment sold at wholesale rates or at full rates.

Mr. Swain

Will the Minister give a straightforward "Yes" or "No"? He talks faster than he used to run and this makes it difficult for slower men to understand. The coal industry is zero-rated. Will the safety equipment, whether provided free or sold to the employee, be zero-rated? Will he say "Yes" or "No"?

Mr. Higgins

I am seeking to do so, and I need necessarily to go over the ground again. If the hon. Gentleman reads HANSARD he will find that I have already given the answer. I fully understand the difficulty. It is not easy for me to explain it quickly or for hon. Members to assimilate it quickly. The hon. Member for Ashton-under-Lyne may find it easy since he has been involved in our debates all the way through, but other hon. Members may not have followed these points right the way through during the last four days.

If employers provide protective boots or helmets free of charge where they are necessary on safety grounds no tax will be charged on them. If the employer pays input tax he will be able to claim it back against his output tax, and if he is zero-rated he will not pay the tax. If the employer engages in a different commercial transaction from that which is zero-rated—namely, retailing safety helmets—the tax will apply in the normal way, except that if the item is sold at a reduced rate the tax will be at a correspondingly reduced rate.

Mr. Swain

In two words.

Mr. Higgins

I may not have been able to say it in two words—economy of words has not been a feature of this debate—but I am anxious to put the matter as clearly as I can.

I turn now to two points made by several Opposition Members on various items of fire-fighting equipment. One concerns fire guards and the other fire extinguishers. On the provision of fire guards there is already some anomaly in the purchase tax. If it is a fire guard pure and simple it is not taxed. If it incorporates a heating element it is taxed. It seemed to us that on a broadly based tax one would run into that kind of anomaly again if one sought to draw a distinction, as with purchase tax, between one item and another item. For that reason we have not proposed to do so in the Bill. Having purchased such a fire guard myself not long ago, I strongly stress that the tax is not regressive. We have designed it specifically to exclude major items of expenditure which are important to low income families, and, taking the tax as a whole, I do not believe that that situation will be of disadvantage to the broad structure of the tax.

I want now to say a word or two on the points raised by the hon. Member for Ashton-under-Lyne. I intervened on what may have seemed a trivial point on fire-fighting equipment to ask whether I proposed to tax buckets full of sand, and he failed lamentably to give a clear answer. I am quite clear what is the position under the tax as it stands, but I am not clear about the position under the Amendment.

The reliefs which are argued for are largely unnecessary. We have carried out considerable consultations. I understand that about 95 per cent. of the firefighting equipment that is purchased is purchased by commercial concerns, and exactly the same argument I put forward a moment or two ago applies. If tax is paid on an item the input tax will be deductible from the output tax paid by the individual firm, and that applies to 95 per cent. of the fire-fighting equipment.

If one seeks to go further and draw lines of the kind suggested by the hon. Gentleman one runs into the difficulty of where to draw the line. Does one tax buckets, spades, and so on? There are already some absurdities in purchase tax. Buckets are subject to purchase tax, and when the hon. Gentleman was in Government he did not move an Amendment to correct that anomaly.

We are proposing that this should be a broadly based tax without the detailed exemptions mentioned by the hon. Gentleman. We do not believe that we should create a situation in which we have to draw lines of the kind suggested by the Opposition this evening. I therefore suggest to the Committee that it should reject the Amendment and leave the Bill as it stands in this respect.

Mr. Sheldon

We have had a valuable debate. We heard a powerful speech from my hon. Friend the Member for Midlothian (Mr. Eadie), who pointed out—as did a number of my other hon. Friends—what happens in the factory and how what is being proposed will affect the job being done there.

My hon. Friend the Member for West Lothian (Mr. Dalyell) started his questioning in the way that he ended it. He asked what discussions had been held with the Transport and Road Research Laboratory about the effect which the taxing of safety belts might have. One can apply the question about consultations to a whole range of items. What discussions did the Government have with the fire services?

The Government are proposing for the first time to tax something which should be subsidised. We know that there are a number of anomalies in the Bill. There is a long list of anomalies, but the crucial one is here, in that fire-fighting appliances are clearly defined, are readily distinguishable, can be mistaken for nothing else, no alternative use, are of special value to the community and are of enormous help in fighting fires which cost this country between £120 million and £130 million a year. Instead of subsidising these appliances, for the first time the Government have decided to tax them.

The hon. Gentleman repeated today, for the umpteenth time, that the Bill was designed to reduce taxation, that it will have no regressive effects upon living standards, and that it is designed to put an end to anomalies. We know that that is nonsense.

Let me deal first with the Government's contention that this is not a regressive measure. Nothing—or almost nothing—is freed from tax which was previously taxed, and yet the amount of tax to be raised is about the same as before. The reason for that is that a number of goods which were previously taxed are not to be so heavily taxed in future. What are these goods? These are goods in the top band of purchase tax—what we call luxury goods. Every time a Government spokesman addresses the Committee he denies the regressive nature of the tax, but we have not been told how the changes will be made without increasing the regressive nature of VAT.

We are not content with the assurances that we have had. We want to be told the reason for the tax. We want the Government to allay our doubts that the tax is as good as they say it is. What is even more important, we want to satisfy our- selves that the tax will not harm ordinary people in the way that we suspect it will.

Our Amendments have been put down largely to cover three important points. We have tried to reduce the regressive effect of this measure, to reduce the anomalies and the hardship. In this case it is a matter of safety equipment.

[Mr. RICHARD CRAWSHAW in the Chair]

11.0 p.m.

There has been some criticism of the limited nature of the pieces of safety equipment mentioned. There is a lot more we should have put down, like pieces of safety equipment for machines which can cause danger to limb. When the hon. Gentleman talked about the way in which this tax worked, I do not know whether he was trying to complicate the issue unnecessarily or trying to make a simple matter more difficult in the hope that it might not be so easily understood, but the matter is simple.

If one has a zero-rated industry and a piece of safety equipment is bought for that industry, it will get its tax back. If that industry is not zero-rated, it will not get its tax back. That tax will be charged forward to the final consumer, so that, whether it is the consumer who pays or the manufacturer by trying to reduce prices to the final consumer, the important thing is that the tax on that piece of safety equipment is paid.

For the employee, it does not matter whether he is in a zero-rated industry making biscuits or in a non-zero-rated industry making children's shoes; to him that piece of equipment is as important in the one industry as the other. Only if it is zero-rated will tax be rebated.

Mr. Arthur Lewis

indicated dissent.

Mr. Sheldon

My hon. Friend doubts it?

Mr. Arthur Lewis

No. I was not shaking my head at the Front Bench. Is this what happens in the EEC? Is this what we are getting to? I voted against it, that is all.

Mr. Sheldon

I have not details of the input and output tax in the EEC.

The Bill demonstrates the lamentable failure of the Government to make it clear that this safety equipment could have been rebated. There are methods of refunding tax on pieces of safety equipment, and it is a tragedy that in these matters where we should be subsidising we are taxing. If there is a disincentive to purchase these goods, that will come from the action of the Government. I

Division No. 184.]	AYES	[11.2 p.m.
Allen, Scholefield	Griffiths, Will (Exchange)	Morris, Rt. Hn. John (Aberavon)
Archer, Peter (Rowley Regis)	Grimond, Rt. Hn. J.	Moyle, Roland
Ashley, Jack	Hamilton, William (Fife, W.)	Murray, Ronald King
Ashton, Joe	Hamling, William	Oakes, Gordon
Atkinson, Norman	Hannan, William (G'gow, Maryhill)	Ogden, Eric
Bagier, Gordon A. T.	Harper, Joseph	O'Halloran, Michael
Barnett, Joel (Heywood and Royton)	Harrison, Walter (Wakefield)	Paget, R. T.
Bennett, James (Glasgow, Bridgeton)	Healey, Rt. Hn. Denis	Palmer, Arthur
Bidwell, Sydney	Heffer, Eric S.	Pardoe, John
Bishop, E. S.	Hooson, Emlyn	Parry, Robert (Liverpool, Exchange)
Boardman, H. (Leigh)	Horam, John	Pavitt, Laurie
Booth, Albert	Houghton, Rt. Hn. Douglas	Pendry, Tom
Broughton, Sir Alfred	Howell, Denis (Small Heath)	Pentland, Norman
Brown, Bob (N'c'tle-upon-Tyne,W.)	Hughes, Rt. tin. Cledwyn (Anglesey)	Perry, Ernest G.
Brown, Hugh D. (G'gow, Proven)	Hughes, Robert (Aberdeen, N.)	Prescott, John
Brown, Ronald (Shoreditch & F'bury)	Hughes, Roy (Newport)	Price, J. T. (Westhoughton)
Buchan, Norman	Hunter, Adam	Probert, Arthur
Buchanan, Richard (G'gow, Sp'burn)	Irvine, Rt. Hn. SirArthur(Edge Hill)	Reed, D. (Sedgefield)
Campbell, I. (Dunbartonshire, W.)	Janner, Greville	Roberts, Albert (Normanton)
Cant, R. B.	Jeger, Mrs. Lena	Robertson, John (Paisley)
Carter, Ray (Birmingh'm, Northfield)	Jenkins, Hugh (Putney)	Roper, John
Carter-Jones, Lewis (Eccles)	Jenkins, Rt. Hn. Roy (Stechford)	Rose, Paul B.
Castle, Rt. Hn. Barbara	John, Brynmor	Ross, Rt. Hn. William (Kilmarnock)
Cocks, Michael (Bristol, S.)	Jones, Rt. Hn. Sir Elwyn(W.Ham,S.)	Rowlands, Ted
Concannon, J. D.	Jones, Gwynoro (Carmarthen)	Sheldon, Robert (Ashton-under-Lyne)
Cox, Thomas (Wandsworth, C.)	Jones, T. Alec (Rhondda, W.)	Shore, Rt. Hn. Peter (Stepney)
Crossman, Rt. Hn. Richard	Kaufman, Gerald	Short, Rt. Hn. Edward (N'c'tle-u-Tyne)
Cunningham, G. (Islington, S.W.)	Kelley, Richard	Short, Mrs. Renée (W'hampton, N.E.)
Cunningham, Dr. J. A. (Whitehaven)	Kinnock, Neil	Silkin, Hn. S. C. (Dulwich)
Dalyell, Tam	Lamborn, Harry	Sillars, James
Davies, Denzil (Llanelly)	Lamond, James	Skinner, Dennis
Davies, Ifor (Gower)	Latham, Arthur	Smith, John (Lanarkshire, N.)
Davis, Clinton (Hackney, C.)	Lawson, George	Spriggs, Leslie
Davis, Terry (Bromsgrove)	Leadbitter, Ted	Stoddart, David (Swindon)
Deakins, Eric	Leonard, Dick	Summerskill, Hn. Dr. Shirley
de Freitas, Rt. Hn. Sir Geoffrey	Lewis, Arthur (W. Ham, N.)	Swain, Thomas
Dell, Rt. Hn. Edmund	Lewis, Ron (Carlisle)	Taverne, Dick
Dempsey, James	Loughlin, Charles	Thomas, Rt. Hn. George (Cardiff,W.)
Doig, Peter	Lyon, Alexander W. (York)	Torney, Tom
Douglas, Dick (Stirlingshire, E.)	Lyons, Edward (Bradford, E.)	Tuck, Raphael
Duffy, A. E. P.	Mahon, Dr. J. Dickson	Urwin, T. W.
Dunn, James A.	McBride, Neil	Wainwright, Edwin
Dunnett, Jack	McCartney, Hugh	Walden, Brian (B'm'ham, All Saints)
Eadie, Alex	McEthone, Frank	Walker, Harold (Doncaster)
Edelman, Maurice	McGuire. Michael	Wallace, George
Edwards, William (Merioneth)	Mackenzie, Gregor	Watkins, David
English, Michael	McMillan, Tom (Glasgow, C.)	Weitzman, David
Evans, Fred	McNamara, J. Kevin	Wellbeloved, James
Ewing, Harry	Mallalieu, J. P. W. (Huddersfield, E.)	White, James (Glasgow, Pollok)
Fitch, Alan (Wigan)	Marks, Kenneth	Whitehead, Phillip
Fletcher, Raymond (likeston)	Marsden, F.	Whitlock, William
Fletcher, Ted (Darlington)	Marshall, Dr. Edmund	Willey, Rt. Hn. Frederick
Foley, Maurice	Mason, Rt. Hn. Roy	Williams, Alan (Swansea, W.)
Foot, Michael	Mayhew, Christopher	Williams, Mrs. Shirley (Hitchin)
Ford, Ben	Meacher, Michael	Williams, W. T. (Warrington)
Forrester, John	Mellish, Rt. Hn. Robert	Wilson, William (Coventry, S.)
Fraser, John (Norwood)	Mendelson, John	Woof, Robert
Gilbert, Dr. John	Mikardo, Ian
Ginsburg, David (Dewsbury)	Millan, Bruce
Golding, John	Miller, Dr. M. S.	TELLERS FOR THE AYES:
Gourley, Harry	Milne. Edward	Mr. Ernest Armstrong and
Grant, John D. (Islington, E.)	Morgan, Elysian (Cardlganshire)	Mr. James Hamilton.
Griffiths, Eddie (Brightside)	Morris, Charles R. (Openshaw)

have no doubts in asking my right hon. and hon. Friends to divide on this.

Question put,That the Amendment be made:—

The Committee divided: Ayes 183, Noes 201.

NOES
Adley, Robert	Grylls, Michael	Nott, John
Alison, Michael (Barkston Ash)	Hall, John (Wycombe)	Onslow, Cranley
Allason, James (Hemel Hempstead)	Hall-Davis, A. G. F.	Oppenheim, Mrs. Sally
Archer, Jeffrey (Louth)	Hamilton, Michael (Salisbury)	Owen, Idris (Stockport, N.)
Astor, John	Hannam, John (Exeter)	Page, Graham (Crosby)
Atkins, Humphrey	Harrison, Brian (Maldon)	Page, John (Harrow, W.)
Awdry, Daniel	Haselhurst, Alan	Parkinson, Cecil
Baker, Kenneth (St. Marylebone)	Hastings, Stephen	Percival, Ian
Baker, W. H. K. (Banff)	Havers, Michael	Pounder, Rafton
Barber, Rt. Hn. Anthony	Hawkins, Paul	Powell, Rt. Hn. J. Enoch
Bell, Ronald	Hayhoe, Barney	Prior, Rt. Hn. J. M. L.
Bennett, Dr. Reginald (Gosport)	Hicks, Robert	Proudfoot, Wilfred
Bitten, John	Higgins, Terence L	Pym, Rt. Hn. Francis
Biggs-Davison, John	Hiley, Joseph	Raison, Timothy
Blaker, Peter	Holland, Philip	Redmond, Robert
Boardman, Tom (Leicester, S.W.)	Holt, Miss Mary	Reed, Laurance (Bolton, E.)
Body, Richard	Hordern, Peter	Rees, Peter (Dover)
Boscawen, Hn. Robert	Hornby, Richard	Renton, Rt. Kn. Sir David
Bossom, Sir Clive	Howell, Ralph (Norfolk, N.)	Ridley, Hn. Nicholas
Bowden, Andrew	Hunt, John	Roberts, Wyn (Conway)
Brewis, John	Iremonger, T. L.	Royle, Anthony
Brinton, Sir Tatton	Jenkin, Patrick (Woodford)	St. John-Stevas, Norman
Brocklebank-Fowler, Christopher	Jessel, Toby	Scott, Nicholas
Brown, Sir Edward (Bath)	Jopling, Michael	Sharpies, Richard
Bruce-Gardyne, J.	Kaberry, Sir Donald	Shaw, Michael (Sc'b'gh & Whitby)
Buchanan-Smith, Alick (Angus,N&M)	King, Evelyn (Dorset, S.)	Shelton, William (Clapham)
Buck, Antony	King, Tom (Bridgwater)	Skeet, T. H. H
Butler, Adam (Bosworth)	Kinsey, J. R.	Soref, Harold
Chapman, Sydney	Kirk, Peter	Speed, Keith
Churchill, W. S.	Kitson, Timothy	Spence, John
Clark, William (Surrey, E.)	Knight, Mrs. Jill	Stainton, Keith
Clarke, Kenneth (Rushcliffe)	Knox, David	Stanbrook, Ivor
Clegg, Walter	Lamont, Norman	Stewart-Smith, Geoffrey (Belper)
Cooke, Robert	Lane, David	Stoddart-Scott, Col. Sir M.
Cooper, A. E.	Legge-Bourke, Sir Harry	Stokes, John
Cordle, John	Le Marchant, Spencer	Stuttaford, Dr. Tom
Cormack, Patrick	Lewis, Kenneth (Rutland)	Sutcliffe, John
Crouch, David	Loveridge, John	Tapsell, Peter
Davies, Rt. Hn. John (Knutsford)	Luce, R. N.	Taylor, Sir Charles (Eastbourne)
Dean, Paul	MacArthur, Ian	Taylor, Edward M.(G'gow, Cathcart)
Deedes, Rt. Hn. W. F.	McCrindle, R. A.	Taylor, Frank (Moss Side)
Drayson, G. B.	McLaren, Martin	Tebbit, Norman
du Cann, Rt. Hn. Edward	Maclean, Sir Fitzroy	Temple, John M.
Dykes, Hugh	McNair-Wilson, Michael	Thomas, John Stradling (Monmouth)
Eden, Sir John
Edwards, Nicholas (Pembroke)	McNair-Wllson, Patrick (New Forest)
	Madel, David	Thomas, Rt. Hn. Peter (Hendon, S.)
		Trafford, Dr. Anthony
Elliot Capt. Walter (Carshalton)	Marples, Rt. Hn. Ernest	Trew, Peter
Elliott, R. W. (N'c'tle-upon-Tyne,N.)	Marten, Neil	Tugendhat, Christopher
Emery, Peter	Mather, Carol	Turton, Rt. Hn. Sir Robin
Eyre, Reginald	Maude, Angus	Vaughan, Dr. Gerard
Farr, John	Mawby, Ray	Waddington, David
Fenner, Mrs. Peggy	Maxwell-Hyslop, R. J.	Walker-Smith, Rt. Hn. Sir Derek
Fidler, Michael	Meyer, Sir Anthony	Weatherill, Bernard
Fletcher-Cooke, Charles	Miscampbell, Norman	Wells, John (Maidstone)
Fookes, Miss Janet	Mitchell, Lt.-Col.C.(Aberdeenshire,W.)	White, Roger (Gravesend)
Foster, Sir John	Mitchell, David (Basingstoke)	Wiggin, Jerry
Fowler, Norman	Moate, Roger	Wilkinson, John
Fox, Marcus	Molyneaux, James	Winterton, Nicholas
Gardner, Edward	Money, Ernie	Wood, Rt. Hn. Richard
Gibson-Watt, David	Monks, Mrs. Connie	Woodnutt, Mark
Gilmour, Ian (Norfolk, C.)	Monro, Hector	Worsley, Marcus
Gilmour, Sir John (Fife, E.)	Montgomery, Fergus	Wylle, Rt. Hn. N. R.
Goodhart, Philip	Morgan-Giles, Rear-Adm.	Younger Hn George
Goodhew, Victor	Morrison, Charles
Gorst, John	Mudd, David
Gower, Raymond	Neave, Alrey	TELLERS FOR THE NOES:
Grant, Anthony (Harrow, C.)	Nicholls, Sir Harmar	Mr. Tim Fortescue and
Gray, Hamish	Noble, Rt. Hn. Michael	Mr. Oscar Murton.
Green, Alan	Normanton, Tom

Question accordingly negatived.

Mr. Sheldon

I beg to move Amendment No. 49, in page 101, line 34, at end add:

GROUP 14—ESSENTIAL HOUSEHOLD GOODS

Item No.

1. Babies' high chairs, cots and playpens.

The Temporary Chairman

I suggest that it would be convenient for the Committee to discuss at the same time the following Amendments: No. 50, in line 34, at end add:

GROUP 14—ESSENTIAL HOUSEHOLD GOODS

Item No.

1. Household brushes, brooms and mops.

No. 51, in line 34, at end add:

GROUP 14—ESSENTIAL HOUSEHOLD GOODS

Item No.

1. Cooking appliances—

1. (a)stoves, ranges and ovens;
2. (b)boiling rings, grills and hot-plates.

No. 52, in line 34,at end add:

GROUP 14—ESSENTIAL HOUSEHOLD GOODS

Item No.

1. Soap and soap substitutes marketed exclusively as household cleansers.

Mr. Sheldon

This group of Amendments deals with essential household goods and covers items which we hold to be of special need for the community generally, including household brushes, brooms, cooking appliances, soap substitutes; but we are concerned more with the class of goods they represent than with the individual items.

11.15 p.m.

The core of this group of Amendments is Amendment No. 51, which deals with cooking appliances—stoves, ranges, ovens, and so on. We have a particular interest here because we are told that the Bill is supposed to end anomalies; yet we have seen that it creates various forms of discrimination extending even to distilled water. The anomaly with which Amendment No. 51 seeks to deal is particularly sad. As the Bill stands, if a housewife buys cooked food—as, for example, food from the fish and chip shop, about which my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) waxed so eloquently last week—no tax is imposed, but if she brings raw food into her home she has to cook it on a taxed cooker.

Cookers have been untaxed in the past because they have been regarded as inseparable from the food cooked in or on them. Now, the housewife who cooks her own food will do so on a taxed cooker while the woman next door who may not have the skill, the ability or the wish to prepare her family's food will not have to pay the tax. This strikes us, as it has so many Chancellors of the Exchequer who have come across it yet have taken no action, as being wrong, and something calling for change.

We have here possibly one of the most regressive elements in what I consider to be a regressive tax system, and I should like the Financial Secretary to tell us how we can judge the regressive nature of the tax.

The hour is late, so I shall not say very much more, except that if I had to select one type of thing for which I would particularly seek a concession it would be cooking appliances. I hope that the hon. Gentleman will look on these Amendments reasonably sympathetically.

Mr. Higgins

The hon. Member for Ashton-under-Lyne (Mr. Sheldon) has concentrated his entire argument on Amendment No. 51 which deals with stoves, ranges, ovens, boiling rings, grills and hot plates, and says that these items exemplify the impact of value added tax as broadening its scope in some way which had not struck him before.

What I find curious about the Opposition is their extraordinary attachment to the existing system of purchase tax gradings between what they are pleased to call luxuries and what they describe as essentials. I shall not, as I did on the previous Amendment, read out the very long list of the various graduations which the Labour Government made in the rates of purchase tax—always, I must say, in an upward direction. When we took over office in June, 1970, we found that they somehow thought that mirrors were not essential household items and intended to tax them at 36⅔ per cent. We reduced that first to 33 per cent., and then, in the last Budget, to 25 per cent., and it will fall even lower as a result of value added tax.

The hon. Gentleman was very selective in the way in which he moved the Amendment. He might also like to consider the fact that, for reasons which remain obscure, the Labour Party did not regard cutlery as an essential item, which seems a little curious. Under the Labour Government, electric light bulbs—which are never used by old-age pensioners or the poor—were to be charged at 36⅔ per cent., whereas we have reduced the rate to 30 per cent. and to 25 per cent. and it will fall even further under value added tax.

The hon. Gentleman simply picked out one or two particular items which happen to suit his argument until this evening he reduced it to almost the final point of a single item, the household cooker.

Mr. Sheldon

Surely the hon. Gentleman has failed to understand an important part of our Amendments. We are seeking not to create a new tax but to show that certain things are clearly and readily distinguishable and by their nature cannot be confused with anything else. A household cooker can be confused with few other things. Because of that, it lends itself splendidly to discrimination of a kind which the hon. Gentleman ought to try, or aim for, even if he does not accept it.

Mr. Higgins

I fully accept that the hon. Gentleman is not seeking to create a new tax. It is we who are doing that, because the absurdities of the old taxes are blatantly obvious and show how clearly the Labour Party failed to achieve their objectives with regard to grading luxuries and essentials. Therefore, I shall do just what the hon. Gentleman did. I shall take one particular item and consider it with him.

As for whether the tax is regressive, I dealt with that point at considerable length when I spoke in the first day's debate on VAT. I referred to the speech made by my hon. Friend the Member for Dartford (Mr. Trew) in the Budget debate. He produced some figures provided by the House of Commons Library to show that the effect of the tax was not regressive. No one in the Committee would for a moment accuse the House of Commons Library, or the data which it produces in response to a straightforward request from an hon. Member, of being in the least bit politically biased. I quoted the figures, and they showed what we on the Government side of the Committee have maintained; namely, that there is no reason to suppose that the tax is regressive. That is not surprising, because my right hon. Friend has given relief to food, housing, fuel and travel. Those are items of major importance to low income group families.

Mr. Sheldon

Will the hon. Gentleman give way?

Mr. Higgins

No. The hon. Gentleman was very brief, and I shall be brief accordingly.

Mr. Sheldon

They were not taxed before.

Mr. Higgins

The hon. Gentleman says that these items were not taxed before. But food was taxed. We all know that the Labour Party complained about the purchase tax on food remaining at the standard rate under VAT. But that is at a significantly lower level than the level of tax imposed by the Labour Party when it first widened the scope of tax to cover items which were not covered before, and then raised the tax on a number of occasions. We have reduced the level of tax on food. We have also said that we shall abolish SET, which raises the cost of distribution, which in turn puts up the cost of food. The hon. Gentleman has no case on that.

I now turn to one particular item. The hon. Gentleman laid much stress on the question of household cookers. For reasons which remain obscure, that was the item which happened to strike him—to use his expression. Strangely enough, the tax on domestic water heating appliances did not strike him in the same way. It is a slightly strange sense of priorities that an elderly family are to be allowed to cook at a reduced rate of tax but that if they want to have a bath that is something with which we ought not to be concerned, or concerned only, at least, if it is a cold bath.

The Labour Government imposed a tax of 36⅔ per cent. on that item. We have reduced it to 30 per cent. and to 25 per cent., and it will be even lower with VAT. We are getting away from the absurdities in purchase tax, which the Opposition wish to retain. It is much more sensible to go to a system of indirect taxation which does not discriminate and is at a single low rate of the kind my right hon. Friend has suggested.

Mr. Dalyell

The Financial Secretary has just made a not very edifying yah boo speech. He rebukes my hon. Friend for being selective, but my hon. Friend had the virtue, as he always has on these occasions, of being brief at this late hour, and therefore had to be selective.

I hoped the Financial Secretary might say something about Amendment No. 49, which concerns babies' high chairs, cots and playpens. To what extent is tax to be placed on newly-married couples, often at a time when they are least financially able to bear the price of equipment? What calculation has the Treasury made of putting these items at 10 per cent. rather than zero-rating them? Are there any readily available figures of how much this would bring into the Revenue, or how much zero-rating would erode the Revenue? Is a factual answer available?

Mr. Higgins

I am sorry the hon. Gentleman did not come in earlier. I would gladly have included in my remarks—[Interruption.] I am aware that the hon. Gentleman has been here all day and has made a considerable number of contributions to our debates. I appreciate his point about Amendment No. 49, though his hon. Friend on the Opposition Front Bench did not seek to emphasise it. The Amendment is concerned with babies' high chairs, cots and playpens. The tax is broadly based, and we believe it right that these items should be included at the low rate of 10 per cent.

I hesitate to appeal to personal experience in these matters, because I did so at Question Time about six weeks ago and was immediately inundated with letters when I said I was carrying out a personal survey.

The items mentioned in the Amendment are important to families, and particularly the newly-married. But the tax must be considered as a whole; it is in that light that we must judge whether it is regressive. My right hon. Friend has given relief for food, housing, fuel and travel, which are major items in the budgets of individual families, particularly low-income families and the newly-married. But a number of other items need to be used for small children, such as toilet soap, toothpaste and dusting powder. The tax as a whole, taking into account all the items mentioned, is not regressive.

The cost of giving relief would be about £750,000 a year. I do not find the hon. Gentleman's arguments convincing, and I recommend my hon. Friends to reject the Amendments.

Mr. Sheldon

I am sorry the hon. Gentleman does not find arguments convincing. I feel that he came to that conclusion long before we started our debates. The difficulty is that on all these Amendments the Government have a closed mind. They heard their industrial advisers and civil servant advisers and felt that the Committee could add nothing to the weight of evidence they had received. In that they were greviously wrong. Having committed themselves to a tax which allows no Amendment, they find themselves unable to take account of those points made not only from the Opposition side but from their own benches. It is a gross discourtesy to the Committee, and the Minister will come to regret it.

I speak briefly only because of the lateness of the hour. I should like to deal at great length with the advantages of zero-rating babies' high chairs for the young married couple, who face problems when they have to buy what seems to them almost a luxurious piece of equipment, but one which is essential for the wellbeing of their child. The fact that I did not speak at length should have commended the argument to the hon. Gentleman and not been a source of tetchy criticism. But so be it.

I am sorry that the Treasury team has come to the Committee with a closed mind. I hope that at some stage they will see the advantages of some of the Amendments which they have so far refused. They relate to items which can be clearly distinguished. There would not be the anomalies to which the Financial Secretary refers. He can have his fun about the anomalies in the old system, but we are not trying to restore that. Our Amendments are directed purely to matters which can be clearly distinguished. There can be no confusion between a baby's high chair and some other piece of furniture, or between a cooker and some other article in the kitchen. Where there can be doubt and problems of distinction, we have not put down Amendments asking for such things to be zero-rated.

The Amendments have been directed to items of value to the community which should be zero-rated, and it is a great disappointment that the Treasury's mind is still closed.

Amendment negatived.

11.30 p.m.

Mr. Kenneth Marks (Manchester, Gorton)

I beg to move Amendment No. 56, in page 101, line 34, at end add—

GROUP 14—EDUCATION

Item No.

1. 1. The provision of education if—
1. (a) it is provided by a school, college of education, college of further education, polytechnic or university; or
2. (b) it is of a kind provided by a school, college or university and is provided otherwise than for profit.
399
2. 2. The supply of goods or services incidental to the provision of any education included in item 1.
3. 3. The provision of any instruction supplemental to the provision of any education included in item 1.
4. 4. The provision by a youth club or institute of adult education of the facilities available to its members.

When I first saw the Finance Bill, I looked at once at the provisions affecting education. I was told by the experts that in this matter of value added tax if one wanted to help a particular service one should go for zero-rating. That is what I have done. If value added tax is bad, then, like four legs in "Animal Farm", exemption is good, and zero-rating, like two legs, is better.

The Bill subjects to the 10 per cent. value added tax certain items of education equipment which were not formerly subject to purchase tax. My first idea was to move spending on education facilities from Schedule 5 "Exemptions" to Schedule 4 "Zero-rating". In my naive way I started to copy out "Group 6—Education", which appears in Schedule 5 on page 103. It seemed to me that there were certain flaws and omissions there which I should have to correct if I were to put it in Schedule 4.

Group 6 refers to The provision of education … if it is provided by a school or university". There are gaps there. Perhaps it was drafted by people who thought that all there is to education comes at school and then university. It seemed to me that the whole gamut of further education, adult education, colleges of education and teacher training and the polytechnics should be included. I understand that the Department of Education and Science is satisfied that the words cover what is necessary, but, to my mind, the notes defining school and university do not cover just those important branches of education which I have brought within my Amendment.

My hon. Friend the Member for Lewisham, North (Mr. Moyle) noticed the significant words, The supply of any goods or services incidental to the provision of education. That did not seem to him—and I agree—definite enough to cover all the matters which we want covered.

As an afterthought, the Government have included, The provision by a youth club of the facilities available to its members". We must go further than that and include other community developments. I have, therefore, added institutes of adult education.

In our consideration of finance and other matters we should pay much more attention to adult education. Has nobody in the Treasury read the report "Youth and the Community"? Does not the Treasury know that it argued that youth should be treated not as a separate group but as part of the general community? I should like to know from the Chief Secretary when he replies whether in the definition of education authorities community councils will include community associations of a voluntary nature.

My hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding), who is present, has tabled a sub-Amendment. He realises that education is provided not only by local authorities and independent schools but by trade unions and a great many other bodies also. The sub-Amendment in the name of my hon. Friend the Member for Walthamstow, West (Mr. Deakins) is presumably intended to eliminate the private sector from any benefits to be gained from zero-rating. But the private sector is not only the independent schools. There are also the trade unions, the Workers' Educational Association and community associations. Pre-school playgroups are also in this sector. What about the individual parent who wants to buy educational goods and equipment for his children? What about the adult or the child itself who wants to buy these things?

My hon. Friends know my views on independent schools. I would bring them all within the aegis of the local authorities and I would abolish fee-paying and selection except on the basis of need. In the meantime I would abolish some of the subsidies which these schools get but which other schools do not. I would, however, encourage them to do something more about educational equipment, because this is one of the things which many private schools lack and on which they do not spend enough money.

But why zero-rating instead of exemption? It is illogical to zero-rate books and not the tremendous range of other educational material. All books are zero-rated whatever their purpose, whether it is education, entertainment or anything else. Valuable educational material, however, because it is not found in a book, is not zero-rated. An example I have seen is published, I think, by Heinemann's specially for the raising of the school leaving age and could presumably be used for the unemployed school leaver. It contains such items as insurance forms, licences and dummy pay packets. That is liable to tax. It is bought by an individual and it is liable to tax. It is not zero-rated as books are.

I do not know whether there is any political significance in the fact that the Chancellor of the Exchequer is zero-rating "The Carpet Baggers" and taxing empty wage packets, but this is something of which the Chief Secretary should take note. I know he will reply that it is all covered by Clauses 15 and 20 and that local councils will be able to obtain a refund of tax; but this does not necessarily mean that the education service will benefit directly. Judging by the amount that some councils spend on education supplies, some local authorities need a great deal of encouragement and pressure before they raise their spending on equipment and on books to what their own association has said is reasonable. Refunds may go to help the rate fund balance rather than to specific educational projects.

Should we not also encourage other organisations, parents and children themselves to buy the kind of equipment that is educational and is not zero-rated as books are? It has been argued that VAT is a substitute for and an improvement on purchase tax and selective employment tax. But many instructional materials which do not at present bear purchase tax will come under VAT, and those items include some of the equipment and materials proposed by the Schools Council, a body which is supported by the Government, by local authorities and by teachers. Those which are not in book form, however, will not be zero-rated. When they are not in book form, they will not be zero-rated.

By taxing things such as art materials and science apparatus and structural mathematical apparatus, are we not discouraging innovation and experiment? Are we not discouraging self-help and self-education if these are not available untaxed to the ordinary individual? I hope that the Minister will be more forthcoming than in his reply to a similar Amendment last Thursday. I hope that he will make clear the reasons for this apparent omission.

After I had submitted my Amendment some time ago, I received messages of support from a number of other organisations. I rather expected the Educational Equipment Association to support it, because it is to its benefit, and I know that it has sent its own proposals to the Chancellor and that he has considered them. But there were also the educational publishers, whose goods are mainly books, which are zero-rated, the Headmasters Association, the National Association of Schoolmasters and the National Union of Teachers. Never has the teaching profession been more united than in demanding that these goods be zero-rated.

Mr. Dalyell

May I pursue the matter of the refund and establish the facts? According to the White Paper (paragraph 120), the purpose of the refund of VAT to local authorities is to avoid imposing a burden on the rates. It is therefore within the spirit, as well as the letter, of the Finance Bill for any authority to use money so refunded to keep down the rates, rather than to provide materials for schools. In the past, purchase tax on learning materials has been taken into account in the computation of the Rate Support Grant. There is no evidence to show that increases in the RSG, resulting from increases in purchase tax, have been reflected in capitation allowances. Indeed, the year following the purchase tax increases of 1968 was a particularly lean one for capitation allowances. I am interested in the view of the educational publishers and—

The Chief Secretary to the Treasury (Mr. Patrick Jenkin)

I thought the hon. Member said that he was about to read from the White Paper. His introductory words gave that impression.

Mr. Dalyell

According to the White Paper——

Mr. Jenkin

From what is the hon. Member reading?

Mr. Dalyell

Candidly, from a memorandum on the subject of the refund sent out by certain educational publishers. I am asking the Treasury whether they have a case. They say: Most authorities receive discounts from suppliers for educational materials. In some cases, in effect, these discounts are not passed on in full to schools. In view of this it cannot be assumed that the full refund of VAT will automatically be made. Accounting procedures vary markedly from authority to authority. Informal discussions with local authority representatives have led us to believe that there could be an accounting system instituted by which the budget allowances of schools were debited only with the net invoice, excluding VAT, on the expectation of refund. The Government, however, is not prepared to instruct authorities on the use of refunded money and the present wide variations in local authority accounting procedures would make it unlikely that such a system would be universally adopted without any kind of central direction or advice. All I am asking for is the Treasury view, because in a number of cases, I am told, this is a matter of substance.

As my hon. Friend the Member for Manchester, Gorton (Mr. Marks) has been approached by the National Association of Schoolmasters, I have been approached by the Scottish Schoolmaster's Association and by individual branches of the Educational Institute of Scotland. What they say is that the effect of this would be that a great many educational supplies, including such things as non-book printed material, would bear tax which would be paid out of a school's capitation allowance. Although the local authority would reclaim the tax paid, there is no way of ensuring that the money would find its way back to the schools. The Scottish Schoolmasters Association believes that all educational supplies used in schools should be zero-rated. This would enable schools to spend their capitation allowances so as to obtain maximum value for the money and would be in the best interests of economy in the educational service.

My question to the Treasury is on this matter of capitation allowances. What discussions have taken place with the Department of Education and Science and the Scottish Office?

11.45 p.m.

Mr. John Pardoe (Cornwall, North)

I had better start by declaring an interest as adviser to the National Association of Schoolmasters.

I regard this Amendment as of considerable importance to the whole educational system. The Government are pro- posing to exempt education, and that means there will be no liability to account for the tax and no credit for the tax invoiced to the education provider for supplies. The problem does not arise in items 1, 3 and 4 of the Amendment but arises primarily in item 2, which refers to the supply of goods and services incidental to the provision of education.

What exactly are these goods and services likely to be? They are a very wide range of services and might include such things as hire of playing fields, facilities for cooking and preparing school meals and hiring a bus for school outings. The goods might include furniture, teaching aids, books, stationery and sports equipment. Some of these goods and services may be and are exempt under the Bill; some may be zero-rated. But there will be others which will have paid tax and the invoices from the supplier will state that the tax is paid. The provider of education, whether a local authority or a school, apart from the qualifications that have been mentioned in the other Clauses, will have to pay a price which includes the tax, and will not be able to claim it back as would be the case if all these items were zero-rated.

The Government will say that there is nothing new in this, that many educational supplies have always been taxed. That is certainly true. Books were never charged. Originally it was intended to charge them, but the protests at that time were successful and they were not charged on the grounds that it would be a tax on knowledge and that books were used for education.

Similar arguments applied successfully to scientific apparatus, art material and school furniture, none of which was charged purchase tax. There were ludicrous anomalies whereby school desks were not charged but tables, even if the school wanted to buy them and use them for the same purposes, were charged, unless the manufacturer went to the trouble of boring holes for inkwells in them, in which case they were not charged. The trouble has been that as educational techniques have developed teachers have needed to use more and more everyday things. It is far less possible than it was 10 or 15 years ago to distinguish between school equipment and the ordinary everyday things used elsewhere.

So purchase tax became a tax on innovation in the classroom. It was not charged on conventional school equipment but it did, unfortunately, tend to be charged on the new things being used. To quote an article in the June, 1971, edition of "Where?" by Michael Bodman, Vice-Chairman of the Educational Equipment Association, schools wanted to use such things as plastic buckets, scales, hamster cages, drawing pins, recorders and sandplay materials. … the more the infant schools concentrate on providing the sort of play materials that the children will be familiar with from playgroups or their own homes, the more tax they will pay. That was the case against purchase tax, which was a very heavy burden.

The Government will doubtless say that VAT will be a lesser burden. Purchase tax was chargeable in 1971 on school materials at rates ranging from 9 per cent. to 37 per cent. One leading supplier and manufacturer collected in purchase tax in the first six months of 1971 alone 16 per cent. of the total value of the goods he supplied. About 14 per cent. of the total expenditure of that year—in other words, £4 million—went back to the Treasury in tax. The Government will say that this has always been true, but it was always a nonsense and it is time to change it, and we should change it now that we are making this very sweeping change in our tax system. It is much easier to do it under VAT than under purchase tax.

May I remind the Government of the reasons given for not exempting these materials from purchase tax? In 1971 I took up the matter with the Department of Education and Science at the behest of a headmaster in the West Country. I received a letter in June, 1971, from Lord Belstead in that Department in which he said: I am aware, of course, of the feeling within the education service on this subject and other people have in the past put forward in various forms the suggestion that arrangements might be made for local authorities to reclaim tax. It is a long-standing principle that purchase tax, and any exemptions from it, must be related to the nature of the goods and not to the use to which they are put or to the status of the user". That was not a very honest answer, because there was nothing new in the principle that one sort of purchaser should be free from tax. It already applied to the Stationery Office and Government Departments, overseas customers and regional hospital boards. But that was the reason given. It does not apply to VAT, and if we zero-rate the education providers it will, to a large extent, solve most of the problem left from the Government's proposals, because the question which arises from these proposals is: who would get the rebate if it was given to the local authority? Would it be the local authority or the schools?

This is an extremely important matter to teachers. The schools are allowed a very small per capita allowance to buy education materials. It is far too small. But if the invoice goes to the local authority which pays the bill, presumably it will be the local education authority which will get back the tax, and presumably it will simply then go into the local authority's general fund—or will it go into the education account, which would be better? It would be far better if it went on education materials. The best solution of all is that it should go back to the schools to increase the per capita allowance for materials and books.

I hope that the Government will think hard about this matter. The total tax will be less, I accept, under VAT, but it should not be levied at all.

Mr. John Page

I hope that my hon. Friend the Chief Secretary will consider the Amendment favourably. It allows us to take a completely ecumenical view of education because, whereas under the Bill independent education is exempted, if the Amendment were accepted and the notes which apply to Group 6 on page 103 of the Bill remain the independent schools would also have this advantage.

We can all feel ecumenical about this because we should all wish to encourage the provision of education, whether in the independent sector or under the State umbrella. With the Committee in a quiet mood and in a totally relaxed sense of independence, not under pressure from hon. Members or being pressed too strongly by the Opposition Front Bench, I hope that my hon. Friend will feel that this is an opportunity for him to give a little something for education.

I have not up till now—and I do not think I shall later—tried to seek special exceptions, but the Government have already shown enlightenment by giving exemption to education. It would not, therefore, be a major step to change from exemption to zero-rating, which is all that is asked for in the Amendment. I hope the Government will look at this sympathetically. There are parents of modest means, and some with less modest means, who support independent schools, thus saving other taxpayers some £230 million, which would have to be found if they did not selflessly provide for the education of their children. I hope the Government will accept the Amendment.

Mr. Fred Evans (Caerphilly)

The Committee will forgive me if I speak, from my own practical experience in primary schools, of what life is like for harassed teachers and head teachers who try to exist on the meagre education budget. Surely the time has passed when any reasonable person can look at the primary school child and say that the whole range of his needs can be met on a figure of under £4 per annum, or that a secondary pupil, with all the complexity of secondary education today, can be adequately catered for by a sum smaller than £8 per annum.

At the same time, we are in, and should be grateful for it, one of the most formative periods in British education for a very long time. The amounts of experimentation and opportunity for worthwhile projects, many encouraged by the Department of Education and Science, by the dedicated inspectorate and by organisers at local authority level, all add up to a very significant move forward in our education system. It would be a matter of great regret if we were now to see this formative period being hampered in any way by the lack of resources that is now amounting to crisis.

I would like to illustrate this as someone who has had experience at all levels of education, having been head of a small primary school, of a modern secondary school and of a highly-selective grammar school. The problem is one of degree as between the schools, but the problem remains acute. The band of teachers and head teachers willing to carry on experimentation and mould the education system into something which can be held out as an example throughout the world will feel that the Government have it in their own hands, if they so wish, to perform a very great service. We know that the capitation grants in schools are much too low. I do not suppose that any hon. Member here tonight does not accept that that is so. Zero-rating will provide the resources which are needed.

[Miss HARVIE ANDERSON in the Chair]

12 midnight

We are moving towards metrication, which will mean a totally new look not only at the books but at the equipment used in the teaching of physics and mathematics. The Schools Council has exciting projects. My own school was the first school in Wales to introduce the Nuffield project for teaching chemistry. In spite of the ingenuity of the teachers in making a great deal of the materials, there was a great drain on the capitation allowance. Although we were excited by the experiment and the pupils found it acceptable, we were continually having to look carefully at school budgeting and having to pare down what we would have liked to spend. Equally, the School Council projects for teaching science, mathematics and French are all geared to more practical methods of teaching.

The emphasis in language teaching, rightly, has moved away from the textbook to the spoken language. This requires tapes and tape recorders. Even without the luxury of a language laboratory, there is great demand on audiovisual resources. All this means that we must have money.

In infant teaching more and more emphasis is laid on the discovery method, which opens up the minds of young children and allows them to develop a sense of creative excitement and interest in the world around them. To do this we require a great deal of material that can be used practically. I have here documents written by teachers in infant schools with which I can justify this great need, and I ask hon and right hon. Gentlemen to accept that evidence from the teachers.

In primary schools, whether we take one side or the other in the controversy about the experimentation that is going on, we accept, as does the teaching profession, that education must be child centred, and that the discovery method arouses in children excitement about their education. Again, this method calls for a great deal of practical material. How are we to teach children to discover things for themselves if we deny them the resources with which to do so?

A period of formative experimentation and discovery at the lower age levels of education inevitably becomes reflected in the methods used at the secondary level. Here again in the post-war years, and particularly in the last 10 to 15 years, there have been exciting new approaches to the teaching of many subjects.

I will comment on one or two aspects of the usual school curriculum to show how the practical resources required can be hit. It is the right of every child not only to have intellectual stimulus but to be taught to have some skill with his hands and experience the joy of practical creativity. This calls for a good deal of money. Because of inflation and the imposition of purchase tax some worthwhile crafts such as weaving and leather work have been dropped from school curricula. The other thing that happens is that heads of schools shop around for inferior materials in order to get enough to provide some kind of practical outlet for children, and this is particularly true of woodwork.

The less able children are the most likely to be left behind. It is an unfortunate truth—I know that this is not a popular thing for a former headmaster to say, but it is the case—that less able children tend to be pushed into the background and all too often, with the best will in the world, they do not get the allocation of resources which their situation demands.

I now go to the other end of the scale and express the concern which I have felt all my life as a teacher about what is going to happen to the really high fliers in our schools. They, too, need a special approach, and the most worthwhile approach to their problems is to see that they have the stimuli with which to satisfy their intellectual levels. The brightest child does not mind working in a mixed ability group provided that he can have access to the resources that will stimulate his mind. Often all that he needs to enable him to use the resources is not detailed teaching but guidance and he will get something out of the education system.

We are all familiar with the demands of all kinds of other services which, in local authority budgeting, are looked upon as part of the education system. It is again regrettably the case that the capitation allowance is the last item to be settled. This is done after allowing for all the other costs, such as what the architect's department is doing for the school, what the school meals service is doing, what administration is being carried out by the local authority, and so on. It is only after all that has been allowed for that the capitation allowance is decided upon.

If VAT is reclaimed by an authority there is a danger that all the invoices will go into one big draw and at the end of the day the treasurer will say "Here is the global amount that I can reclaim" and it will all go into the authority's treasury. If the authority does not wish to exploit the situation it will he placed in great difficulty in deciding what it ought to allocate to the education department and to various other departments, because local authority financing is very much a battle of departments and deciding what share of the cake each will receive. Those concerned with the education service feel that it could suffer greatly under this system.

The hon. Gentleman's suggestions about the way in which this can be fed back into schools are sound and worth examining, but the obvious way to avoid any of these complexities is to adopt zero-rating. If the Government wish to offset some of erosion of the capitation allowance, this is a golden opportunity for them to do so. They should announce that they will zero-rate all the educational materials referred to in the Amendment. I do not altogether like the word "incidental", because many things which some people would regard as incidental would be considered by a teacher as necessary tools for the carrying out of this job.

If we can look at this matter purely as one of enabling schools to carry on worthwhile work which is now being done, we can lift this out of the party politics ring and agree that education in this field is exciting and has a possibility of giving a lead to the world in many spheres of present activity.

I ask the Government seriously to consider allowing educational materials. which are now just as necessary as were books in previous eras of education, to be zero-rated, and thus to give our schools and dedicated teachers a chance.

Mr. Eric Deakins (Walthamstow, West)

I wish to make two brief points. The first is on the position of independent schools related to my hon. Friend's Amendment seeking to take these items out of Schedule 5 and to put them into Schedule 4.

This Amendment, and the Government's original placing of education in Group 6 of Schedule 5, would give a big and valuable tax concession to the independent sector which many, although not all, hon. Members on this side regard as a retrograde step.

Although it may enable the independent sector to survive for a few more years, in the long term it will not amount to much. One should, nevertheless, make some protest about it because it is a matter of principle which divides the two parties, although I do not know where the Liberal Party stands on this.

I would point out to hon. Members opposite that the more tax concessions they give to this sector the easier it will be for a future Labour Government, merely by virtue of removing those concessions, to end the sector without need of statutory take-over. I hope that that sounds a warning note and that even at this late stage the Government may think again about it.

The second point is concerned with the wording of the Amendment and of Group 6 of Schedule 5. Is it perfectly clear—perhaps the Minister could explain this—that "school or university" includes polytechnic, technical college and evening institute? It is peculiar wording for the section of a Finance Bill dealing with education merely to mention two of the major institutions providing education and not some of the other major institutions. It may be that paragraph (b) of Item No. 1 of Group 6 of Schedule 5 covers this where it talks of education of a kind provided by a school or university", but it is peculiar to mention two major educational institutions and not the whole lot. One would have thought that a simpler form of wording would suffice.

There should be an assurance on this from the Minister. One does not want to see the universities in the advanced education section being rather more favourably treated than the polytechnics through their educational outputs not being taxed. Obviously, the educational inputs to polytechnics and technical colleges will be able to get rebates because they are part of the local authority sector, but the Minister will, I hope, reassure us that the institutions of higher education will be on an equal footing, even though they are not specifically mentioned in Group 6 of Schedule 5.

12.15 a.m.

Mr. Golding

I support everything that my hon. Friends the Members for Manchester, Gorton (Mr. Marks) and Caerphilly (Mr. Fred Evans) have said about the need for zero-rating in education. I, too, lay stress on the need for adequate provision of play materials, particularly in junior schools.

I quarrel with my hon. Friend the Member for Gorton about the wording of the Amendment where it refers to, The provision of education if— (b) it is of a kind provided by a school, college or university". It could be argued that adult education, which is an important sphere of education, does not fall within this definition. Many of us are proud of the role which we played in trying to make adult education different from that provided in schools, colleges and universities. I should prefer the Amendment to provide for adult education.

Many hon. Members on this side of the Committee, particularly in the trade union group, owe their education to the trade unions from whence we received initial training and education and to the Workers' Educational Association. I should not like any debate on education initiated from this side of the Committee to ignore the role of those organisations in adult education.

I am not certain about the position of the trade unions vis-a-vis value added tax, so I will not argue the trade union view too strongly. However, I should point out that the trade unions—I have an interest to declare, because I was a trade union education officer for a number of years—are playing an increasing rôle in both the training of workplace representatives and the general education of their members. I will not labour that point.

I want to draw attention to the Workers' Educational Association in two ways. First, it can be said of education in this country that the methods being used in the junior school are also being developed in adult education. I refer particularly to visual aids and the use of tape recorders. The free activity, which is a good mark of our junior schools, is also being developed in adult education. I should be sorry to see aids which are improving education taxed in any significant way.

Another aspect of the work of the Workers' Educational Association and trade unions——

The First Deputy Chairman

Order. I hope the hon. Gentleman will not stray to an Amendment which has not been selected.

Mr. Golding

I will return to the Amendment which has been moved. In all types of education, which includes adult education, one aspect deserves attention. Residential education for adults—perhaps covered by the Amendment, perhaps not—will be more expensive with VAT than it is now. That would be to the disadvantage of much of our adult education.

For those reasons, I support the general tenor of the Amendment, but regret that it does not go as wide as it might have done.

Mr. Michael Cocks (Bristol, South)

Strong representations have been made to me by the flourishing parent-teacher association of a primary school in my constituency. The association is concerned that when it raises funds and provides materials and aids to assist the staff to educate the children in the wider sense VAT will have to be paid on those items.

The Government should take advantage of the Amendment by ensuring that groups of parents who join associations of this kind and so indirectly save the State money are not hampered by this new tax being levied on the items their activities provide. While it may be difficult to devise machinery to make this possible, I trust that the matter will receive further Government consideration.

Mr. Patrick Jenkin

One of the compensations of the job of a Treasury Minister is that from time to time one has the opportunity of taking part in a debate which touches on matters concerning other Departments. Indeed, one sometimes finds oneself dealing with a broad spectrum of Government activities. I have found this short debate of great interest, and I have welcomed all the contributions made from both sides of the Committee.

I have an interest in this subject because my four children attend four different kinds of school. Although, therefore, I need not declare an interest in the conventional sense, hon. Members will appreciate that I have real concern with the subject matter of the Amendments.

I want to get one thing clear at the outset. Much the greater part of education in this country is carried out in local education authority schools or schools maintained by local education authorities. As the hon. Member for Manchester, Gorton (Mr. Marks) pointed out in his interesting speech, VAT will in those cases be refunded under Clause 15(1) and Clause 15(3)(a). I will come to the anxieties that have been expressed about how this will be handled by education authorities. Basically, the effect of Clause 15 so far as it applies to the input tax incurred by local education authorities or by schools maintained by them will be the same as zero-rating.

For the rest, the intention of the Government is that education shall be an exempt service under Group 6 of Schedule 5, which we believe is the right treatment for a service of this sort. Zero-rating under the Bill is confined to a relatively few groups, a few defined areas of personal expenditure, being either exports, which are not relevant in this context, or where the cost enters substantially into the budgets of the less-well-off members of the community; for example, with food, fares, fuel and new housing. That is the primary purpose of the zero-rating Schedule. In other words, the aim is to ensure that the tax is fair and does not have a regressive effect.

The hon. Member for Caerphilly (Mr. Fred Evans) pointed out that books are zero-rated. Under Group 3 books and other items there mentioned are zero-rated pursuant to a clear and specific pre-election pledge given by Mr. lain Macleod and repeated in our election manifesto, and we felt it right to honour that pledge. The reason given by Mr. Macleod when he made the pledge was that it had long been a tradition that in this country we should avoid a tax on knowledge, but we felt it right to confine this to the printed word, including picture books, braille, music, all of which are very closely analogous to the printed word. As such, the group is a readily defined category of articles not in any way dependent on the end use, and it is not likely to give rise to serious border disputes.

What is at issue in this Amendment is whether we should go on to zero rate the other inputs of education; the services of which the hon. Member for Cornwall, North (Mr. Pardoe) gave some very relevant examples, and, perhaps one might say, mundane examples—cleaning and maintenance of schools, and so on, and the education materials, from the plastic buckets and other equipment to be used in the primary schools right up to the most advanced electric and electronic aids at language laboratories, and so on.

It was the hon. Member who made the point that one is not dealing here with an area which has been free from the tangle of anomalies and contradictions under the purchase tax. This is a very important point to make. There has seemed to be very little rhyme or reason not only why some articles should be charged or not but also why some should be charged a high rate and others a low, depending on whether they are classified as toys or household goods—for example, the plastic buckets—or classified, like tape recorders, and so on, as consumer durables. There is a huge range of goods and services much of which goes to other sectors of the economy and is not by any means confined to education—schools and colleges.

The question is, therefore: should we zero-rate educational institutions so that they all recover the input tax on these goods or services, or should we—this is the Government's solution—let it be and save the very considerable administration cost which would be involved in zero-rating so as to make sure that the tax was recovered, and compensate where appropriate for the additional burden, if such there be, by other means? On balance, we believe that the latter course is the right way of approaching this area.

I make it perfectly clear—and I do not think that anyone has suggested otherwise—that the revenue at stake in this Amendment is not a crucial factor. The cost would be some £3 million, but I place no emphasis on that. Obviously, the sum is small.

Mr. John Page

The concern is whether the global figure of £3 million is returned to the local authority or would be over and above what would already happen, as it were, if the Bill went through as it is.

Mr. Jenkin

I understand that it would be the latter.

But the point on the question of cost—a number of my hon. and right hon. Friends have made this point—is that one cannot just look at the cost of this one Amendment. If one were to find oneself with a much less defensible line, inevitably other Amendments and concessions would be sought which it would be impossible to grant. In this area there are other groups covering aspects of health, charities, and so on, where we would see very great difficulties in holding the line if we were to concede zero-rating for these educational institutions. It would certainly be fair to say that any redrawn line where one was able, as it were, to call a halt would make zero-rating go well beyond the area of relieving the poor and ensuring the progressivity of value added tax, and confer significant benefits on the well-to-do in a manner which is not the intention of this fiscal reform.

12.30 a.m.

That having been said, there are, however, undoubtedly areas of education where anxieties have been expressed. It is right that I should deal with those. First, we have the grant-aided private sector. Secondly, we have the independent schools, to which my hon. Friend the Member for Harrow, West (Mr. John Page) referred. The majority of the independent schools which are charitable foundations and non-profit-making organisations will benefit from exemption. They will save the SET. There are significant inputs for which they will be relieved of purchase tax. Insofar as they are charitable—and there is a later Amendment—they stand to benefit from the concessions which my right hon. Friend has made in other parts of the Bill on estate duty and capital gains tax. This represents a significant measure of support and encouragement to the independent schools.

Several points can be made about the grant-aided sector and the independent sector. Many of the inputs for these schools are already zero-rated—the new buildings, food and books, which I have mentioned. Secondly, it is perfectly feasible to compensate the institutions, if one so decides, by adjusting the level of financial support.

Here, perhaps, I could give the Government's intentions in this matter. Our intention is that educational bodies which receive grants direct from central Government shall neither gain nor lose as a result of the tax changes—the introduction of VAT and the abolition of purchase tax and SET. The grants to these bodies will continue to be related to their estimates of income and expenditure. Once the tax changes are in force, they will be reflected in the prices paid by the bodies concerned for their purchases of goods and services and will, therefore, be reflected in their estimates of future expenditure. Thus, the incidence of tax will be taken into account automatically when the grants to these bodies are settled. The capitation grant to direct grant schools will be treated in the same way as other grants for this purpose.

There is a special problem of estimating the effect of the tax changes in the first year of VAT. It is intended to make the best possible estimate of the net effect of the change, allowing for the relief of purchase tax and SET and the introduction of VAT, on the total cost of the bodies concerned, and to adjust their grant accordingly for that first year. The effect of the tax changes in the first year will be monitored, and if it differs significantly from the estimate, an adjustment will be made to the grant in the following year. In other words, for this sector of education, which includes universities, colleges and many other areas that are grant aided, we intend to see that the institutions do not lose by reason of the switch from SET and purchase tax to VAT.

I return to the point made by the hon. Member for West Lothian (Mr. Dalyell) and others about local education authority schools. That is, whether the Clause 15 refund will enure for the benefit of the schools and, in particular, for the capitation grant, or whether it will be absorbed into the general finances of the local authority, or be used for other purposes to reduce the rate burden. I, too, have read the circular which the hon. Gentleman was good enough to read to the Committee, sent to hon. Members by the Educational Publishers Council and the Educational Equipment Association.

I say straight away that I do not accept the implications of that statement. I would expect local authorities to have the best interests of their schools at heart and to see that they get the benefit of the refunds, under Clause 15, of the VAT paid on their purchases of supplies for the schools. There is absolutely no reason why they should want to use the VAT refunds on school supplies to finance non-educational goods any more than they should use VAT refunds on other goods for education

It is not for the Government to tell local authorities how to organise their purchasing and budgeting, but I expect that many of them—I hope most of them—will adopt the practice of budgeting for the net cost of purchases, by which I mean the amount left after the tax has been refunded, as they already do with SET, and allot resources to the schools accordingly. The Educational Publishers Council and the Educational Equipment Association have given a great deal of publicity to the relationship of VAT to the supplies to these schools. I am confident that we can leave it to the local authorities to adopt a sensible budgeting policy.

Mr. Marks

Is the hon. Gentleman aware that some local education authorities do not spend the amount on education generally that the Government presume they will spend when the rate support grant is given?

Mr. Jenkin

It is up to the electors electing the members of such education authorities to see that they get the kind of education they want.

The view I have been putting was powerfully reinforced by the County Treasurer of the North Riding, Mr. Hounsome, in a letter to Education. The letter, in which he commented on an article by John Savage in the 21st April issue, in which the points to which I have just referred were deployed, was published in the issue of 12th May. Mr. Hounsome said: Mr. Savage dresses up his campaign by playing on the fears of your readers that those well-known bogeymen, the local authority treasurers, will use the Value Added Tax refund to take money away from education and give it to other services, or even—perish the thought—pass it on to the ratepayer. As to the first of these alternatives, it seems very likely that the accountancy treatment of the VAT refund will be to charge a particular purchasing account the net amount of each invoice and that the effect will, therefore, be to reduce the charge against the budget allowance for supplies. Mr. John Savage's comment on the letter was: Mr. Hounsome's contribution to the discussion is most welcome, particularly his suggestion that purchasing accounts could be charged with the net invoice excluding VAT. If all authorities permanently adopted this procedure and only charged the net amount against budget allowances there would be little need to press further the case for zero rating. One of the leading education authorities is commending this example to the local authority world. Perhaps we can express the hope that the example may be followed.

A number of hon. Members raised the question of the definition in Schedule 5—whether it would be adequate to cover the colleges of education, polytechnics and so on. It is intended that they should be so covered. If the drafting is in any doubt, I will give an undertaking to see that it is considered by the draftsmen, and that a suitable Amendment is tabled later if it is thought appropriate.

Adult education is referred to in item 4 of the Amendment. There are difficulties here. We need to distinguish those areas of so-called education which are purely of a commercial nature, such as driving schools, dancing schools, secretarial colleges and so on, when it would be difficult to argue for exemption. They are much more in the nature of commercial services, though they obviously have an educational bent. Therefore the phrase "institute of adult education" is too wide. But it is the intention that those which are analogous to colleges and places of further education, and which rely on Government support, should be in the same category.

To sum up: the maintained sector will be adequately protected by Clause 15, and it will be up to the local authorities to see that the schools do not lose. We intend to see that the grant-aided sector neither loses nor gains from the switch of the tax. In the independent sector those that are charities will be helped elsewhere by the concessions made by my right hon. Friend. It is intended that the colleges of education, polytechnics and so on should be exempt.

Mr. Winterton

My hon. Friend has clearly indicated that certain educational hardware and art equipment is not exempted or zero-rated. Can he tell the Committee how the totally independent sector will be compensated for the additional costs involved?

Mr. Jenkin

I thought I had made that clear. It was one of the points in my right hon. Friend's Budget statement. Referring to the question of charities as a whole, he explained—it is clear on the figures—that the advantages to charities by reference to the concessions made on estate duty and capital gains tax are substantially greater than any possible additional cost which may be incurred by them because they are not specifically exempted or zero-rated in respect of value added tax. One must to some extent take the rough with the smooth.

I have said that colleges of education, polytechnics and so on are intended to be exempted, and I shall look at the drafting.

In the Government's view, it would be wrong to add to the list of zero-rated services. I hope that I have convinced the Committee that the Amendment is not necessary to achieve the objects which both the Government and the supporters of the Amendment have in mind. It would add heavily to the administrative costs of the VAT, and it would open up demands for further reliefs in related sectors of the economy. I hope, therefore, that the Committee will agree that exemption under Schedule 5 is the appropriate treatment and will not accept the Amendment.

Dr. Gilbert

The occasional inconsistencies in the Chief Secretary's speech deserve further attention. He began in the most idealistic way, quoting from his election address and the pledge given to a lady in the crowd that this Government would avoid a tax on knowledge—a thoroughly commendable ambition. Then he went on to say that he thought it right to confine that pledge to the printed word, giving that as a bald assertion, without any supporting reasons that I could detect save a reference to administrative simplicity.

I endorse all that was said by my hon. Friends the Members for Manchester, Gorton (Mr. Marks) and for Caerphilly (Mr. Fred Evans) about the types of equipment now being used every day in schools—not books, not charts, not the other things which come under zero-rating, but equipment of a sort which in previous days was not normally thought relevant to the educational purpose but which is now widely used, especially by the most intelligent and imaginative teachers.

The Chief Secretary discussed the arrangements for compensating educational institutions other than local education authority schools from the impact of value added tax. Right at the end, he let the cat out of the bag with a vengeance. He made clear that the direct grant schools would have a grant for the first year of VAT on some arbitrary basis, but thereafter it would be carefully monitored to ensure that, if the Government could avoid it, they did not get one penny more than they were paying in additional tax as a result of the VAT. His logic was impeccable and inexorable; his generosity was limited.

When the hon. Gentleman came to the public school system, however, we heard a different story, with the old Tory scale of values at work again. He assured his hon. Friends that the amounts which the public schools would receive through the other concessions given by the Chancellor in his Budget would far outweigh any additional costs they would have to bear as a result of the value added tax.

We have been told many times that this is not a regressive Budget. What hypocrisy! There it came, right at the end of the hon. Gentleman's speech; and the only consolation he offered us was that "We have to take the rough with the smooth". In other words, it will be the rough for the Workers' Educational Associations; it is to be the smooth for Eton, Balliol, Charterhouse and Winchester. That is the Chief Secretary's standard of values. We on this side reject it, and we shall seek to illuminate these murkier sides of the Finance Bill at a later stage.

12.45 a.m.

Mr. Marks

I am grateful to the Chief Secretary for his clarification of some of the issues. I was surprised at his apparent claim that books had been specially earmarked rather than other visual aids because that was an election pledge and because the late lain Macleod had promised it. Mr. Macleod also promised more family allowances, but that one seems to have been forgotten. However, I am sure that both sides of the Committee will want to look at this whole question again, not only in Standing Committee but on Report. In view of that, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Ashley

I beg to move Amendment No. 85, in page 101, line 34, at end add—

GROUP 14—GOODS PRODUCED OR MANUFACTURED BY DISABLED PEOPLE

Item No.

1. The supply of any goods produced or manufactured by disabled people, whether working singly or in any group or organisation.

The First Deputy Chairman

I think it will be for the convenience of the Committee to discuss at the same time Amendment No. 116, in line 34, at end add—

GROUP 14—GOODS PRODUCED OR MANUFACTURED BY DISABLED PEOPLE

Item No

I. The supply of any goods produced or manufactured by any organisation which exists primarily for the employment of disabled people.

Mr. Ashley

I wish to direct my remarks also to Amendment No. 116. I should like briefly to give the background reasons why the Amendment should be accepted. It was in part compiled by my hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris), who is unable to be with us tonight. We regard it as an important Amendment.

The primary consideration is the effect of the Amendment on unemployment among the disabled, and it is with this that we should be mainly concerned tonight. I do not suggest that unemployment would be solved by acceptance of the Amendment, but the level of unemployment among the disabled would certainly be ameliorated if it were accepted. We have the astonishing situation that 14.9 per cent. of disabled people are unemployed. The situation cries out for something to be done over a wide front. Although a number of Ministers are involved in tackling this problem, I believe that acceptance of the Amendment would substantially affect the level of unemployment.

The Disabled Persons (Employment) Act, 1944, is simply limping along. It is creaking badly and has proved wholly inadequate to the purpose of protecting disabled people from unemployment. Firms with more than 20 workers must employ a 3 per cent. quota of disabled people. Today, however, half of those firms are not employing their quota. It is a scandalous situation.

I know that firms do not break the law by not fulfilling their quota. They break the law only if they take on new workers. I refuse to believe, however, that many firms have not taken on new workers over a very long period. This means that a significant number of firms are breaking the law because they are below the quota and are taking on new workers. The Government seem to accept this situation virtually with equanimity.

If more than 50 per cent. of firms are in that situation and not fulfilling the quota that is bad enough, but the trend is even worse, because, whereas in 1967 52 per cent. of firms were not fulfilling the quota, by 1970 the proportion had increased to 57 per cent., which shows that instead of getting better firms are getting worse.

I believe that the Government—and, to be fair, their predecessors—have been issuing permits to firms far too freely. Firms have been allowed to employ less than their quota of disabled because too many permits have been issued.

Tonight I am concerned with the firms that do not even have permits. It is time that the Government began to take action, because these firms are breaking the law by taking on new workers and should be prosecuted. At least a few shots should be fired across their bows so that a warning is given by the Government. Secondly, the names of firms failing to fulfil their quota should be publicised by the Government. That would be a deterrent to others.

But the most serious problem with which we are concerned tonight is that of the very severely disabled, and the Amendment would substantially assist them. I do not have the latest figures, for, although I have a series of Questions due to be answered in the next few days, unfortunately the debate has come a little ahead of the answers.

However, on the latest estimate that I am able to make, about 13,000 very severely disabled work in 138 sheltered workshops. These people need special consideration. I know that the Chancellor of the Exchequer and his colleagues would be willing to help if they could. I am a great football fan and I know that many eloquent speeches were made on behalf of football, rugby, museums and so on. One has sympathy with those pleas, but priority should be given to assisting the very severely disabled, and the Amendment would do so.

I estimate that, apart from those in sheltered work, there are about 12,000 very severely disabled who are unemployed. We must frankly recognise that about one third are unemployable because they are simply too disabled to take a job. If my figures are correct, however, they mean that about 8,000 very severely disabled people are looking for work. That means that the unemployment rate among the very severely disabled is about 40 per cent., a staggering figure that the Committee cannot tolerate.

This is a serious problem affecting a relatively small number of people. Although the Amendment would not solve the problem, it would go a long way towards helping to solve it, and I hope that the Government will see their way clear to accepting it as sympathetically as possible and as soon as possible.

Mr. Non

I would relate my remarks primarily to Amendment No. 116 to which the hon. Member for Stoke-on-Trent, South (Mr. Ashley) addressed his remarks, concentrating upon the goods produced or manufactured by any organisation existing primarily for the employment of disabled people. I will also refer to Amendment No. 85 because it covers a broadly similar situation about which the hon. Member was concerned, unemployment among the disabled. He talked about a short-fall in the quota. I am sure that the Committee shares his concern in both respects, but, as he rightly said, this Amendment is concerned with VAT, and I will deal with that specific aspect.

There are about 620,000 disabled people in the country, many of whom are self-employed, many of whom are employed. A relief for goods produced by any one of these disabled people working in any group or organisation would be extremely difficult to supervise. Only about 52,000 severely disabled individuals take advantage of the public schemes for assisting the disabled. Of the remaining 550,000 large numbers are employed in business under normal conditions often with no one knowing about their disability. I am relating these remarks to the question of exempting or zero-rating the goods which these people produce.

A good example is the largest of the sheltered workshops, Remploy, employing about 8,000 disabled individuals. It is run on commercial lines, and its products, such as luggage, furniture, brushes, printing and clothing, compete with those of other industrial organisations. Sheltered workshops set up under the Disabled Persons Employment Acts are supported financially by the Department of Employment, and in the event of any financial difficulty they will be helped, as in the past, by Exchequer grants. I am sure that it is preferable to go on helping these sheltered workshops through the existing system and at the same time help them to sell their goods on commercial lines. This means that their goods bear the same tax as those of their competitors. If they run into financial difficulties we can meet the problem under the Exchequer grant system.

Mr. Golding

As I understand it, in Remploy there is no payment of SET. With the ending of SET and its replacement by VAT, the sheltered workshops, particularly Remploy, will be put at a disadvantage because their levels of prices and costs will increase more rapidly than their competitors.

Mr. Nott

The hon. Gentleman is right that no SET was payable by Remploy and in saying further that goods produced by it will in future bear VAT. These goods are similar to those being produced by a whole range of other commercial concerns which will be turning out goods bearing the 10 per cent. VAT. They will be competing on precisely the same terms as at present.

Mr. Golding

That is not so. If at present the private manufacturers are paying SET and the sheltered workshops are not, when SET is abolished the competitive position of Remploy must of necessity deteriorate.

1.0 a.m.

Mr. Nott

But SET is not payable by private manufacturers. There is no difference now, nor will there be in future, in the basis on which private manufacturers compete with Remploy. If any problems arise, the difficulty can be met in the way in which it is met now—by Exchequer grants. This system is already in operation. Fairly good Exchequer grants are given to sheltered workshops.

I come to the point concerning small groups or individual disabled people. I have many in my constituency who may be running one-man businesses. These people, working alone, will benefit in the same way as other small traders from the exemption of those whose turnover in taxable goods and services does not exceed £5,000 a year. I took the point which the hon. Gentleman made about unemployment and the quota system, but these people do not fall within the scope of the Amendment because we are debating VAT.

I hope that I have given a reasonable answer and have shown that the people to whom the hon. Gentleman has referred will be in precisely the same position in future as they are in now.

Dr. Gilbert

Will the hon. Gentleman, who has been helpful, address himself to the point about disabled people who are making supplies on their own and not in sheltered workshops, which often get their supplies from local authorities, or if they get them from some other source it is immaterial whether they have to pay for them? If they get their supplies free from local authorities VAT is not a problem. But if they have to pay for supplies, even at a reduced rate compared with the normal market cost, presumably VAT will be attached to their input costs. If they are exempted, as the Minister suggests, they will not be able to reclaim the tax; so to that extent their economic position is prejudiced.

I take the point that for most of them the total value of their output in any year may be below £5,000, but I ask the hon. Gentleman to be seized of the fact that the Central Council for the Disabled and the National Fund for Research into Crippling Diseases very strongly urge the Government to treat disabled people as a special case and not simply to take care of their situation by fiscal exceptions. In other words, the limiting factor should he their disability rather than any arbitrary fiscal limits of the sort which the Minister has been discussing.

The Minister said that if sheltered workshops ran into any financial difficulty as a result of the introduction of VAT they would be helped by grants. I hope that the Government will be a little more generous. Surely they can make an assessment of the additional cost that VAT will involve for the sheltered workshops. I realise that it must be passed on, but it is, in effect, a tax on their output. Would it be possible for the Government, rather than waiting until the sheltered workshops ran into financial difficulty, to do for them what the Chief Secretary proposed to do in respect of the grant-aided schools; namely, make sure that they do not lose at all? The amounts involved cannot be large. It would be easy for an assessment to be made of the additional burden that the sheltered workshops would have to carry as a result of VAT. Why cannot the Government undertake to monitor the situation and ensure that the capitation grants are adjusted accordingly without there being any question of financial difficulties for Remploy and similar operations arising before increases in the grants could be exploited?

Mr. Nott

The position for the sheltered workshops will not be changed. On their output, a 10 per cent. tax will be payable, but they are competing with their products with other manufacturers who will also be paying 10 per cent., so it is unduly pessimistic to think that Remploy or the sheltered workshops will be put at a disadvantage compared with their present position. There are no grounds for saying that they will. But if some- thing that we cannot foresee arises the problem can be met through Exchequer grants.

There are probably 550,000 disabled persons, some of them working singly in their own home, others perhaps in a shed in their garden. To zero-rate their output would be administratively extremely difficult to supervise. The Government have done a great number of things for the severely disabled in their legislation and the other measures which they have announced. My right hon. Friend the Secretary of State for Social Services has only recently, for instance, set up the Sharp Committee to consider some of the additional problems of the disabled. We are very concerned about them. But I do not think there are any grounds for concern on the points which the hon. Gentleman has raised.

Amendment negatived.

Mr. Golding

I beg to move Amendment No. 113, in page 101, line 34, at end add:

GROUP 14—POST OFFICE SERVICES

Item No.

1. 1. Telecommunication services provided by the Post Office.
2. 2. Postal Services provided by the Post Office.

The Temporary Chairman (Sir Stephen McAdden)

With this Amendment the Committee can discuss Amendment No. 115, line 34, at end add:

GROUP 14—TELEPHONE CHARGES

Item No.

1. 1. The supply, connection or installation of any telecommunications equipment by the Post Office.
2. 2. Rental or dialling charges for the use of telecommunications equipment supplied by the Post Office.

standing in the names of the hon. Member for Hendon, North (Mr. Gorst) and the hon. Member for Worcestershire, South (Sir G. Nabarro).

Mr. Golding

I want to talk about the impact of value added tax on the Post Office, particularly on its telecommunications services. The fact that £40 million will be added to the residential charges has hit the headlines, but I do not want to labour the point because I have supported the last two price increases imposed by the Post Office. The record of the Post Office since 1965 shows that the increases on the telecommunications side have been well below the national average because of technical innovations and the rapid increases in productivity by the telecommunications workers.

I oppose the imposition of VAT on telecommunications on several grounds. First, it is wrong that a different set of principles should be applied to the telecommunications side as opposed to the postal side. They are both complementary and competitive services. It is desirable that both should be treated in the same way. It is particularly wrong that the telecommunications services should be discriminated against, for it appears to many of us that they are in the best position to develop at the present time.

I am disturbed to discover that for the purposes of the value added tax a telegram is not to be regarded as a postal packet, so that it appears that neither zero-rating nor exemption will apply to telegrams. For many years the telegraph service has been in a state of financial crisis and it receives a considerable subsidy. The application of VAT to telegrams will make the situation worse.

There are good social reasons for the retention of the telegram service. The thinking of Members of Parliament is dominated by the ease with which they can make telephone calls, but for working-class people the telegram is the normal lifeline. Many people find it difficult to use the telephone or do not have access to the telephone. The people with whom they wish to communicate may not be on the telephone. To those people the telegram is very important. Whatever else the Government may do, I hope they will reconsider the definition of "postal packet".

My second objection to the application of VAT to telecommunications is that the following absurd situation will arise. Roughly £200 million a year is borrowed by the telecommunications business from the Treasury. Value added tax will be collected by the Post Office and handed over to the Treasury. Immediately the Post Office will apply to the Treasury to borrow the money back, paying interest on it. Were the telecommunications service to be in competition with private enterprise I could see the logic of applying VAT so that no unfair advantage would be given to the private sector, but telecommunications and posts are a public monopoly, so that that argument does not apply.

Gas, electricity, local authorities and transport, including air transport, will not be subjected to VAT. It is ironic that it will be possible for a person physically to carry a message through the air without VAT being chargeable while a message sent by the telecommunications system will be subject to VAT.

I believe strongly that there will be an impact on Post Office finance. The Minister said the other day—perhaps he will admit to some small error—that the application of VAT would have little impact on the telephone calling rate. Speaking to the learned economists on our Front Bench, I find it difficult to visualise a situation in which suddenly in the year 1972 there is an inelastic situation as it applies to telephone calling rates. As far as one can see there is a degree of price elasticity in the telephone service.

1.15 a.m.

It is important for the Minister to realise that neither SET nor purchase tax has previously been applied to telecommunications services, so that the relative increases in price in telecommunications will be greater than in most businesses where either purchase tax or SET has applied.

Increases in postal and telecommunications rates are always followed by economy drives in business and in the home. Those who have been concerned with Post Office finances for a number of years have noted that. These economy drives may be short-lived, but they are significant at the time.

It may be that the Post Office will welcome the increases in installation charges and rentals which will follow from the imposition of VAT because it is unable to cope with the demand due to the failure, as the Minister of Posts and Telecommunications knows, of private manufacturers to deliver on time. Many people in the Post Office would like to see connection charges and installation rates go sky high in order to fend off the demand. They are not arguing that price increases will have no effect on demand. They are hoping that there will be price increases because they know what a dramatic effect they can have on demand, at least in the short term.

Everybody in the Post Office must be concerned about the impact of price increases on the residential subscriber's calling rate, because this is the heart of the problem of Post Office finance. People use their telephones to a very small extent. The residential calling rate is fantastically low. A few years ago I did a survey and found that the residential calling rate was as low as five calls a week per phone.

The charge for a call does not seem to make a great impact on the calling rate. Most people think that it is more expensive to make a phone call than it actually is. A few years ago I carried out a survey among people involved in telecommunications and found that not one could tell me what the cost was to him of making a call from his own home. Everyone over-estimated the charge. What is important is how much people believe a call costs them, and if they are faced with a 10 per cent. increase in call charges their immediate reaction will be to cut down on the number of calls they make. This would be very undesirable indeed. Although an argument can perhaps be adduced for increasing connection or rental charges in present circumstances, no argument can be presented for increasing the price of off-peak residential calls.

It is utter nonsense for the Post Office to have to employ people to work out how much it owes the Treasury. It is nonsense for the Treasury to have people to check up on those calculations. In the circumstances of the day where the Post Office is going year by year to the Treasury to borrow substantial sums of money, it would be better for posts and telecommunications to be subject to zero-rating.

Mr. John Gorst (Hendon, North)

I do not know whether the hon. Member for Newcastle-under-Lyme (Mr. Golding) is correct in saying that the Treasury will be taking away with one hand what it gives with the other, but it is clear the Post Office finds itself in a unique situation. It pays no SET on telecommunications activities, and no purchase tax, both of which are to disappear, and for the foreseeable future, while investment is at its present level, it is clearly paying no corporation tax. The imposi- tion of 10 per cent. value-added tax on all telecommunications activities will clearly be a big change from what we are used to. That is what we have to become used to in future.

I question whether the nation is entitled to the 8 per cent. return which is, by and large, the average which the Post Office has been getting on its capital investment over the last few years, with such a huge capital investment programme about £418 million in the last financial year for which accounts are available—when most normal businesses with such a huge capital investment would expect to have to bear a much lower rate of return during a period of heavy investment.

I make this point because, looking at the matter from the point of view of telephone users, this imposition of 10 per cent. will clearly have the effect the hon. Member for Newcastle-under-Lyme indicated, of damping down demand, and is coming at the very time when telephone usage in this country with a mere 25 telephones per 100 people, according to the statistics in World Telephones in 1971, and when demand for telephones among residential subscribers is 47 per cent. higher in the current year than in the year before. This surely cannot be in the interests of the industry and particularly in the inerest of the future prosperity of the Post Office.

One is concerned not so much whether value added tax will kill the goose which produces so many wrong numbers but much more whether VAT will price the system out of business or, at least, out of the present expansion which everyone wants for it.

It would be my contention, and I hope the Minister will listen and give sympathetic consideration to this, that telecommunications are a special case for a number of reasons. First and foremost, there ought to be freedom for all individuals and businesses to speak freely at a distance to one another. I believe that this is a basic freedom, however technological it may appear at first sight.

Secondly, it is very important, in the nature of the society in which we live, that there should be access by telephone at the cheapest possible price to remote and inaccessible places whether in this country or abroad.

Thirdly—here I am concerned as much with the old-age pensioners, the disabled, the handicapped and the blind as any other section of the community—there ought to be for these categories of people some form of inexpensive lifeline to the outside world, a world with which they may no longer, for reasons beyond their control, be able to make adequate contact.

From the economic point of view, communication by telephone and by all other forms of telecommunication is one of the basic infrastructures of industry and commerce. Indeed, given the opportunity, it is rapidly becoming a standard fixture in the household. In this connection I refer my hon. Friend to that part of Schedule 4—Group 7 "Construction of Buildings"—which provides that articles of a kind ordinarily installed by builders as fixtures will be subject to zero-rating. Can we look forward to the day when a telephone installation wired at the building stage will he zero-rated as opposed to attracting value added tax?

Why is a postal packet exempt, why is news in a news report zero-rated, but a telephone conversation fully taxed? Where is the logic, the consistency and the justice, be it social, economic or fiscal, in this distinction which is being arbitrarily drawn regarding telecommunications?

Is it imperative to raise the £30 million, £40 million or £70 million which is expected to come from value added tax? Recent accounts of the Post Office indicate that its income last year was £772 million. Are we to assume that £77 million is the more accurate figure that the Treasury expects to receive from value added tax?

I believe that telephones are a basic necessity, as are many of the other items which have already been zero-rated. They are essential to old-age pensioners and the like. They are a basic necessity for a fast moving commercial and industrialised society. To the resident they are, or should be, a standard fixture. To the industrialist they are part of the infrastructure of his business. To the idealist they are an important aspect of the freedom of communications.

Every therm of gas which comes into the home or office in a pipe, every unit of electricity which comes on a wire, and every drop of water which comes via the mains has been zero-rated. Is there any reason why what comes along the electric wire provided by the Post Office should be penalised by the imposition of value added tax compared with the other items which I have mentioned? If revenue is the only criterion, is it considered right to tax the foundations on which our prosperity and freedom of communication were established and a basic social necessity for many of the handicapped?

1.30 a.m.

Mr. Charles R. Morris (Manchester, Openshaw)

I take a charitable view of the difficulties, indeed the confusion, which the Minister of Posts and Telecommunications manifested at Question Time on 10th May last in his efforts to define the difference between exemption and zero-rating from the point of view of the impact of VAT on the finances of the Post Office Corporation.

I do not subscribe to the view that the Minister was seeking to mislead the House, though he and the Corporation have demonstrated a lack of thought and consideration in making clear the financial impact which VAT will have for Britain's telephone subscribers and users of the postal services.

To impose VAT on telecommunications and exempt the postal services is illogical. After all, both are means of communication. It is clear that the imposition of VAT on the telephone services will bear particularly heavily on subscribers, and perhaps I may draw attention to an Early Day Motion which I have tabled drawing attention to this fact from the point of view of the chronically sick and disabled subscribers, for whom the telephone is virtually a lifeline rather than a luxury.

The most recently published figures of Post Office expenditure on mechanisation refers to mechanising the letter and parcel sorting systems. The figure given is £250 million. The imposition of a 10 per cent. VAT on that sum is bound to place a formidable burden on the Corporation. Both the Corporation and the Minister have not been as forthcoming as they might have been in keeping the nation informed of the likely effect of the impact of VAT on the finances of the Post Office. I hope that tonight the Chief Secretary will comment on, among other things, the likely effect of VAT on postal tariffs. Are postal rates likely to be increased? Those are some of the considerations which I hope the Chief Secretary, and perhaps even the Minister of Posts and Telecommunications, whom I am glad to see in his place, will bear in mind in replying.

Mr. Dalyell

It seems very strange to me that this tax should be imposed at a time when we should be encouraging old people, often living alone, to have their own telephone installation.

Mr. Gregor Mackenzie (Rutherglen)

I make no apology for speaking now, because if we are to have such charges put on the consumer it is right and proper that we should comment on them. It is a pity that we are not able to spend some little time on the subject at a more appropriate hour.

We should like to know the precise effect of the tax on the Post Office and on those who use its services. Like my hon. Friend the Member for Manchester, Openshaw (Mr. Charles R. Morris), I make no complaint at all about the error made by the Minister of Posts and Telecommunications, whom we are glad to see in his place now, when he replied last week on the subject of zero-rating and exemption, but I must remind him that he then said that most of the details of this tax depended on the way in which it was put into effect, and that the decisions had not yet been taken. Frankly such an answer is just not good enough, as this tax will effect 6,400,000 private telephone subscribers and thousands of people who use the telegraph service. It could also put at risk Post Office investment in telecommunications, and if the assessment of my hon. Friend is right it could put back some of the mechanisation programme so badly needed at present.

My hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) said that he had in the past supported increases in telecommunications charges, and I well understood his argument on those occasions, but it is right to say from this side that of the extra money to be charged to the consumers not a penny piece will go to the Post Office to support its much-needed investment programmes. We want to know the rate of the tax, and the total sum which will be passed on to users of telecommunications systems. My arithmetic is probably not as good as the Minister's, with his expertise, but looking at the whole field of telecommunications, data processing and postal services, I arrive at a figure higher than have some of my hon. Friends. They have put it at about £40 million to be passed on, but I believe it will be between £60 million and £70 million. Passing on such a sum to the consumers would have a very serious effect on the whole system which the Post Office is now building up.

We should concern ourselves with the Corporation's investment programme. For many years the Post Office was starved of the investment necessary for the carrying out of its functions, but over the past decade there has been a considerable improvement. Over the past few years the Post Office has spent a great deal of money on improving its equipment and plant, and that money has come out of current earnings. The Post Office has not relied only on increased charges but has tried, as the hon. Member for Hendon, North (Mr. Gorst) has said, to increase usage and to maximise usage and improve the efficiency of the telecommunications business. He also said that there is still a great deal of scope for further penetration and quoted the present calling rate for the telecommunications system, as did my hon. Friend the Member for Newcastle-under-Lyme. When the Post Office is at present engaged in a campaign to improve telephone usage, it seems a peculiar attitude for the Government to try to damp down usage by imposing a tax of this kind.

What will be the effect on the Post Office investment programme if users find it impossible to bear this increase of, perhaps, 10 per cent. in addition to the 3½ per cent. which is already in the pipeline for telephones? Some of us beg leave to doubt whether the Post Office can continue the present programme of £400 million, and this would be a disaster for the thousands of people waiting for telephones. for those who work in the telecommunications side of the Post Office and for those employed by manufacturers of telephone equipment.

I mention briefly the position of the users and two points which have already been stressed by my hon. Friend the Member for Newcastle-under-Lyme and the hon. Member for Hendon, North. I have read in the newspapers recently how anxious the Prime Minister is that at all times we should consult the consumer interests in these matters. Only very recently the Minister of Posts and Telecommunications asked the Post Office Users National Committee to consult on the increase of 3½ per cent. which he has at present in the pipeline. I am not certain whether the Government have consulted the Post Office Users Committee about VAT. In the light of the Prime Minister's statements of the last few days, it would be interesting to establish whether the Users Council was consulted on this matter.

I come next to the point made by my hon. Friend the Member for Newcastle-under-Lyme about the effect on telegrams. My hon. Friend said that many thousands of people, certainly the elderly, could not afford telephones at present and rely greatly on telegrams. Why telegrams should be included when other things are not is something which escapes the mind of many of us. Such increases will have a serious effect on the elderly and the disabled. Last week I was chastised by the Prime Minister for suggesting that they were being penalised. He said that I must not take a tax of this kind in isolation. But it is worth noting that the Post Officer Users Committee has said that this matter should be looked at by the Government because hardship is involved for the elderly and the disabled, who have no benefits, as far as we can judge, which would cover them in this respect. We feel that the Post Office will be hurt rather badly by this tax. This certainly does not live up to the promise of the predecessor of the present Minister of Posts and Telecommunications, when he spoke about price increases some two years ago. I cannot help but remind the hon. Member for Hendon, North, whose interest in Post Office affairs is always welcome, that when the present Minister for Industrial Development was the Minister of Posts and Telecommunications, he attended the Conservative Party conference two years ago—perhaps in the first flush of victory—to tell the conference what the Post Office would do. He ended his speech by saying: This afternoon this conference has expressed a determination that a more efficient Post Office should contribute to price stability. He went on to say on behalf of the Government that he shared that determination. That is something which is not very obvious from what has been forthcoming from the Government during the last few weeks in so far as the Post Office is concerned. We therefore expect answers to the questions we have passed in this short debate.

1.45 a.m.

Mr. Patrick Jenkin

I shall deal with the points raised in this short debate as briefly as I can in view of the hour.

The Amendment deals with two sides of the Post Office's activities, but the VAT treatment proposed is quite different. For the postal side the treatment proposed in the Bill is exemption under Group 3 of Schedule 5, but the proposal is that the telecommunications side, including telegrams, should be within the charge to the VAT.

It has been suggested that this is illogical. I believe that, having regard to the differences between the two sides of the Post Office, it is a wholly logical solution. The telecommunications side has a huge capital investment programme, and this will all bear VAT. If it were to be exempt there would inevitably be a very large sum of hidden tax in business costs. It is very important that firms which are the customers of the telecommunications side of the Post Office should not bear that hidden tax. It would have to be reflected in the charges, and there would be no input tax which could he set off against the customer's output tax. Therefore, it would impose a hidden input tax, and this would be thoroughly undesirable. Indeed, to exempt the telecommunications side would be to raise the yield from value added tax, thus representing a heavier burden than what is intended by putting the telecommunications side within the charge to tax.

But on the postal side there is comparatively small capital investment, so the amount of hidden tax is relatively small—perhaps between £3 million and £5 million. When we compare that with its total expenditure of £450.1 million for 1970–71, the most recent accounts, we are entitled to say that the effect is likely to be marginal. Similarly, the effect of zero-rating would be marginal, because there is very little tax involved, but that would involve a substantial administrative burden on the postal service. We have only to imagine the problem of giving VAT invoices for every purchase of stamps, posting of parcels and every other transaction across the counter to realise that that would be an impossible administrative task, totally disproportionate to the sums that would be involved.

Therefore, I think we are absolutely right, following the example of every other European country that has introduced a VAT, in applying exemption for the letter post. One or two countries tax the parcel post. Belgium, Denmark and Sweden do so, and France has a tax at an even higher rate—18 per cent. But in Holland and Germany it is exempt, and that is what we propose for the parcel post. It is significant that none of those countries applies zero-rating to the postal services. Therefore. I think we have the right answer for the postal services.

On the telecommunications side there are different considerations, mainly because of its very large investment programme. The figure given the other day was between £35 million and £40 million additional tax imposed on the private consumers. It is estimated that by 1973–74, when the tax will start, the gross yield of VAT on the telecommunications side will be about £100 million, rather higher than the £70 million suggested tonight. But of that £100 million about £60 million to £65 million will represent input tax for business charges to business customers and, therefore, deductible in their VAT accounts, leaving only £35 million to £40 million which will fall on the private customers and the unregistered traders. Spread over 8 million customers, this is about equal to £1-£1.25 on the quarterly bill.

The question we must ask is: "With a comprehensive tax intended to cover the broad range of consumer expenditure, is it right that the telephone service should be free of tax"? Is it analogous, as my hon. Friend suggested, to the gas, electricity and water supplies which are piped to the house, and is the telephone, as it were, in consimili casu?

This is a comprehensive tax on consumer spending. There are exceptions for exports and for low-income——

Mr. Joel Barnett

The hon. Gentleman mentions the exemption for exports. Will he accept that there is an element of taxation of exports here on the telecommunications side, inasmuch as when it is charged to exempt services such as insurance and financial services, the use of which by exporters would be substantial, it would not be rebatable?

Mr. Jenkin

That is right. I fully concede that. The treatment of export services is a difficult question, and it is right to say that there will be a small element of hidden tax, small in relation to turnover, and part of that will be on the post office side.

Mr. Gorst

Many business men have to make overseas telephone calls late at night from their private numbers because the time difference for export markets may be as much as five or ten hours. Will there be some way by which they can get that back? It will appear in their private telephone account.

Mr. Jenkin

I tell my hon. Friend frankly that that is a question to which I have not the answer. It is important. I do not know whether it would be administratively feasible, but I shall look into it and write to him.

I was saying that this is a comprehensive tax. The question whether an item is a luxury or a necessity is not in point. That has been argued on many previous Amendments. It is consumer spending, and it ought, in principle, to be taxed. Of the 8 million subscribers who will bear the burden, the great majority are not poor. The tax as a whole is not regressive, and I therefore contend that there is no good case for zero-rating.

Several hon. Members, including the hon. Members for Manchester, Openshaw (Mr. Charles R. Morris) and for Rutherglen (Mr. Gregor Mackenzie), have spoken about the elderly, the disabled and those who, as the hon. Member for Openshaw put it, need the telephone as a vital lifeline, or, as my hon. Friend the Member for Hendon, North (Mr. Gorst) put it, as a link with the outside world.

As regards the elderly, we have agreed to the annual uprating of pensions. This will take account of any increase in the cost of living due to the value added tax. For many, the telephone is a great convenience, but it is just one of the items of expenditure in the household account. The SET and purchase tax will be corning off other things, the television set, for instance. It is right to look at the overall effect of the change.

Different considerations apply to the disabled and chronically sick. I agree that the argument which I have just put does not meet their case. It is more than just a convenience; it is a vital necessity. Although people in this category have been substantially helped by the attendance allowance, the invalidity pension and so on, there may be cases in which the imposition of VAT would cause difficulty. It is right to remind the Committee that the social services departments of local authorities have permissive powers under the National Assistance Act to help certain people with the cost of a telephone. Moreover, as the hon. Member for Openshaw knows, they were given additional powers under the Chronically Sick and Disabled Persons Act, which will always be connected with the name of his hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris).

Section 2 of that Act provides that where a local authority is satisfied that, in the case of a person qualifying for assistance, it is necessary in order to meet his needs for the authority to make arrangements for, inter alia, the provision for that person of, or assistance to that person in obtaining, a telephone, and any special equipment to use a telephone, it shall be the duty of the authority to make those arrangements. The extent of the assistance is left to the discretion of the local authority. Of course, where local authorities already pay a rental the VAT addition will automatically be payable by those authorities.

I should perhaps also remind the Committee that the Supplementary Benefits Commission may also consider claims for additional benefit to help towards the cost of a telephone. As we all know from our constituency experience, however, the people whose needs include a telephone on grounds of disability or medical need are encouraged to turn to the local authorities and to exercise their powers under the legislation to which I have referred rather than turn to the Supplementary Benefits Commission.

Mr. Dalyell

From our constituency work we also know that there are tremendous discrepancies in this field between authorities.

Mr. Jenkin

As I said in an earlier debate on education, this is a matter in which local electors should see that their local authorities adhere to the provisions of the Act.

Mr. Gregor Mackenzie

The story that the hon. Gentleman is now telling us about the disabled is one we have heard many times before. It is only two weeks since the Post Office Users' National Council asked the Government to look at this problem afresh. Is the answer that the hon. Gentleman has just given to our questions the answer he will also give to the Post Office Users' National Council?

Mr. Jenkin

No answer in the House of Commons is ever final. As has often been said, the most dangerous word in politics is "never" and I would have no intention of using it.

The view of the Government is that in view of the annual up-ratings VAT will be taken into account so far as it has an effect on the cost of living. With the power to which I have referred—to help the disabled and others with the cost of a telephone—and as overall the change from purchase tax and SET to VAT is not regressive, I suggest that the case for zero-rating based on grounds of hardship is not made out.

The telephone service is a substantial element in ordinary consumer spending. The tax yield on telecommunications would be £35 million to £40 million, which is not insignificant in relation to the yield of VAT as a whole. There is no evidence that the likely quarterly increase will materially affect demand for the installation or use of telephones. I therefore submit that it is right that in a comprehensive tax like VAT it should be included and taxed. I accordingly advise the Committee to reject the Amendments.

Amendment negatived.

Mr. Michael Grylls (Chertsey)

I beg to move Amendment No. 124. in page 101, line 34, at end add:

GROUP 14—ENVIRONMENTAL HORTICULTURAL

PRODUCTS

Item No.

1. 1. Nursery stock.
2. 2. Seeds and other means of propagation of plants.
3. 3. Cut flowers.

The Temporary Chairman

With this Amendment it will be convenient to discuss also Amendment No. 84, in line 34. at end add:

GROUP 14—NON-EDIBLE HORTICULTURAL CROPS

Item No.

1. Cut flowers

Mr. Grylls

I make no apology for moving the Amendment at so late an hour, although I regret keeping a number of my colleagues here at this time. It is, however, the duty of those of us who have a great deal of horticulture in cur constituencies and who take an interest in these matters to ensure that in considering the effect of value added tax on this industry we have a proper discussion, although I am the first to admit that this is an uncivilised hour at which to do it.

I am delighted to move the Amendment, and I hope that my hon. Friend the Financial Secretary will accept the constructive spirit of this attempt to improve the tax position, because I have all along been a suporter of VAT as a fairer method of taxation and as being more broadly based and, therefore, better. Rightly, my right hon. Friend the Chancellor of the Exchequer has exempted food both for humans and for animals. Therefore, all agricultural products are to be spared value added tax.

The trouble we have to deal with tonight is the division of horticulture into parts. Those who produce edible crops will be zero-rated but those in what some of us call the environmental sector of horticulture are to be made to pay VAT. The point of the Amendment is to extend zero-rating to all sections of horticulture, whether edible or ornamental.

2 a.m.

It has always been accepted that all sections of horticulture are essential parts of agriculture. The present proposal to make a dividing line down the middle will be regarded by horticulturists as divisive and likely to have an unhappy effect on the industry. For some years we have had horticulture improvements schemes by which grants have been given to individual growers, and there has never been any question of giving one grower a grant because he produces an edible crop and not giving a grant to another grower because he produces ornamental crops. It has always been considered to be one industry.

I hope to show that positive discrimination in favour of one sector as against another is not only dangerous but inequitable and unworkable. Any careful consideration of nursery stock, apparatus or seeds will clearly show that all those activities are one integral part of agriculture. The danger of allowing the proposed division of horticulture is that growers will concentrate on edible products and move away from ornamental products, and it is easy for a grower to make such a switch if he wants to. That would inevitably have a dangerous effect on the trade.

It is ironic that we have a Government which I thoroughly applaud as dedicated since coming to office to improving the environment, to getting more trees planted and otherwise beautifying the country. All of us like to see this. If as a result of taxation proposals there is a swing away from developing the environmental side of horticulture, that will be sad.

It is a little strange that only two months ago the Department of the Environment wrote to growers asking them to send to the Department a report of what stocks of environmental trees they had so that the Department in turn could inform local authorities to encourage them to order. This shows that the Government have a keeness, which I applaud and about which I am delighted, to encourage the environmental sector of the trade. Unfortunately, these taxation proposals seem to do exactly the opposite. There is also the problem of encouraging afforestation, and that will be affected by these taxation proposals.

This tax and this division of horticulture will prove unworkable. I will give two or three examples which may not be known to everybody. The camellia, which is common in so many gardens, is the same basic plant as the tea plant. A camellia leaf, such as I have in my hand, may be used to "brew up" and make tea. It would be rather heavily scented, but it would be a form of tea and perhaps not altogether disagreeable to drink at 2 o'clock in the morning. That plant would not attract VAT if it were used to make a tea.

The bay tree, laurus nobilis—.a much better name than "bay"—is used by housewives in their cooking to try to improve the British cuisine, but many people also find the bay tree attractive in the garden. Again there is the prunus, the flowering almond. Is it bought because it looks attractive or because of the chance that it will produce some almonds? People struggle to grow the vine; it does not always produce many grapes but they may be eaten if one risks a stomach ache. Many people, equally, find the vine attractive. How are such matters to be decided? No one seems to know.

Nursery catalogues contain all these plants and ordering would be difficult. The whole of agriculture and horticulture should be zero-rated or taxed at a special low rate of VAT. Since we have rightly promised not to apply VAT to food, the only solution is the former and to include horticulture in zero-rating. I hope the Government will have second thoughts about this.

I am aware that the Amendment is not the tidiest way of doing it. An alternative method would be to take out from item 3 of Group 1 of Schedule 4 the words "comprised in item 1 or 2". That would mean that all horticulture would be exempt. It is important to bear in mind the unique structure of horticulture. On one side of horticulture, production units for other crops are distinct from the sales outlets that handle them. But the nurserymen are invariably growers and retailers. They have no centralised system of separating the two functions, which is what happens with edible crops since they pass through markets such as Covent Garden. The nursery sector alone in horticulture will be exposed to the full effect of the tax. The NEDC report in 1968 recognised the important role of horticulture in import saving. I hope that the Government will bear these factors in mind.

We are dealing with highly perishable goods where margins are necessarily very narrow. There is not a great deal of fat left to live with. There are high labour costs. In my constituency in Surrey the employers have to compete for labour with London Airport, among others. These people have high wages, and there would be difficulty in withstanding this pressure.

The Amendment refers particularly to seeds. This is important because here, too, the anomalies become obvious. Consider small seed shops, of which there must be hundreds of thousands throughout the country. Such shops will find it difficult to separate the edible seed from ornamental seeds. It is bound to lead to abuse, which is bad. Who is to control the sale? In such establishments that sort of control is almost impossible. These people are not geared up to the intricate accounting procedures necessary for this. Most difficult is how to segregate grass seed that is to be used for pasture for horses or cattle from grass seed to be sold for the garden. It is almost impossible.

Earlier my right hon. Friend the Chancellor of the Exchequer, in replying to the debate on children's clothing and footwear, rightly drew a distinction between purchase tax and VAT in saying that the important thing about VAT was the nature of the article, not its use. This is the strongest argument for not dividing horticulture among itself between the edible and ornamental sections because the nature of the plants is the same, and if we try to judge between the different uses to which the plants are put we shall be in very great difficulty.

I hope that the Government will look at this matter after all the representations made from the industry and people greatly concerned and worried about the effect of the tax on their businesses. Conservative Governments in the past and the present Government have a proud record of support for horticulture, and they have done horticulture very well. I hope that for the good of horticulture, which, although perhaps small in terms of the numbers of people it employs, is very important in many parts of the country, the Government will give very serious consideration to this problem.

Sir Derek Walker-Smith (Hertfordshire, East)

I support the Amendment so persuasively and powerfully moved by my hon. Friend the Member for Chertsey (Mr. Grylls). He has covered the ground so amply that supporting speeches can be kept short, but if they are short I am sure that my right hon. and hon. Friends on the Front Bench will realise that their length is in inverse proportion to the importance of the subject and the feelings and sincerity which it evokes.

I speak as one who for over a quarter of a century has had the honour to represent the major part of the Lea Valley horticulture industry. I have seen it go through difficult circumstances over the years, and horticulture has tended sometimes to seek the less challenging vicinity of areas in the neighbourhood of Worthing, for example. Nevertheless, the Lea Valley horticulturists have soldiered gallantly on and seek to make their contribution to a prosperous and efficient horticulture industry. Of late years their prosperity has been increasingly dependent on the cut-flower trade, the brightest spot—and pessimists say the only bright spot—in the horticulture industry. I appreciate that these sympathetic considerations are not enough to melt the hearts of Treasury Ministers—a notoriously difficult task—and that we must put forward in addition considerations which show that cut flowers are ill suited to the overall pattern of VAT in its standard form of unmitigated severity.

There are two major interlocking considerations which show this: first, the perishable nature of the commodity, and, secondly, the fact that the financial burden imposed by the tax will, in the special circumstances of this industry, weigh most heavily on the producer rather than on the consumer on whom the philosophy of VAT would direct the burden.

Most perishables are foodstuffs and consequently zero-rated. It is difficult, and may well be impossible, to identify any perishables, other than the subject of this Amendment, which are not zero-rated Like should be treated alike. We should follow what lawyers call the ejusdem generis rule: things of the same kind should be construed together. There is a flaw in the logical pattern of the legislation if cut flowers alone as perishables are subject to full VAT.

2.15 a.m.

Secondly, I do not, of course, say that the incidence of the tax will fall on the producer; it will fall on the consumer if he buys. But the point is that he may well be deterred from doing so. The essential burden will fall on the producer. My hon. Friend will appreciate, with his special knowledge of the industry, that the distinguishing characteristic of the flower market is that it must be cleared quickly. The ordinary retailer of durable commodities can take more chances, can store his goods and has longer to pass the tax on to the consumer. But, because his commodities are perishable and because of the consequent need to clear the market quickly, the flower retailer will reduce his purchases or demand a reduction in the wholesale price. Either way, the burden of tax rests on the producer. He either sells less or the same amount at a reduced price. Either way he gets less and either way the industry is contracted. It is cold comfort in such circumstances to say that the incidence of tax may technically rest on the consumer.

The result is at variance with the stated objectives of the White Paper, so I conclude by saying that there are clear grounds for saying that horticultural produce does not fit the pattern, philosophy or purpose of VAT. There are equally strong grounds for saying that horticulture deserves special treatment, the more so with its impending loss, it may be, of its tariff protection.

I commend to my hon. Friend a precedent in this matter. It is now 11 years since I moved an Amendment in Committee to the Finance Bill to exempt the glasshouse industry from an increase in fuel oil tax. It was the only Amendment accepted in that year to the Finance Bill. The Chancellor who accepted it was an extremely distinguished Chancellor, having previously been Foreign Secretary, and now he is Mr. Speaker. So if my hon. Friend cherishes any of these laudable ambitions for his future he knows what to do—accept this Amendment.

Mr. Richard Body (Holland with Boston)

I endorse every word said by my hon. Friend the Member for Chertsey (Mr. Grylls) and by right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith). I want in particular to draw the attention of my hon. Friend the Financial Secretary to the plight of the flower industry. I know that he will not regard it lightheartedly because it is an important and. in some areas, very large industry.

There are some 14,000 acres of flowers in this country, and 8,000 of them are in the County of Holland, where there are to be found 4,500 acres of daffodils and 3,500 acres of tulips. Together their acreage exceeds that of the other Holland across the Channel. In addition, there are many acres of glasshouses in which flowers are grown.

More than 300 million flowers are grown in this country, and two-thirds of them are grown in the County of Holland. That work is done by more than 20,000 people. I obtained the figure this morning. These men and women are almost entirely dependent upon horticulture. Although it is true that many of the women are seasonal workers, there is none the less a large number. In the County of Holland a very high percentage of the workers are women.

I do not want to overstate the case but we in the County of Holland feel that some jobs are at risk. As my right hon. and learned Friend has said, nothing is more perishable than flowers; they can be neither stored nor refrigerated. Most flowers are sold on Fridays and Saturdays; and the retailer buys for that trade, knowing that the flowers cannot be kept until Monday, which is a dead day for his trade. He therefore buys no more than he is likely to sell by Saturday evening. Florists will tend to buy fewer flowers once VAT is imposed, because they would rather turn away customers on Saturday afternoon than risk holding stock that may not be sold. The producers in turn will be forced to reduce the number of flowers they grow, and this in turn will put at risk some of the 20,000 jobs in this branch of horticulture. There are no other jobs for the people of Holland to turn to. I hope the Minister will understand our concern.

There is another reason why we fear the loss of jobs. The English are not flower-minded. The market for flowers is known to be precarious and very sensitive to any change in price. Any retailer will confirm that a slight increase in price at any time of the year will cause a sharp fall in purchases. In the language of the economist, the demand for flowers is elastic. We know that VAT is to be a consumer tax. The consumer of flowers—if there can be such a creature—will be reluctant to pay tax, so reluctant that he may recoil from buying as many flowers as he does now.

My right hon. and learned Friend resisted the temptation to refer to the EEC, but on our entry to the Common Market all forms of horticulture will face higher costs. Of that there can be no doubt. Fuel bills will rise; wages must rise—and horticulture is labour intensive; transport costs will rise, as indeed eventually must social security contributions. VAT is therefore one more burden to be borne by the growers.

We are told that inside the Community we shall all be equal and that the same rules will apply to everyone. That may be true, but we shall face three major disadvantages. First, our light is of a weaker intensity than that across the Channel, and for that reason we have to consume much more fuel in our glasshouses than is consumed by growers across the Channel, and considerably more than is consumed by growers in Italy or the South of France. Our transport costs are also likely to be higher, and growers in Lincolnshire and Cornwall, being further away from the markets, will he at a disadvantage. Our flower growers know only too well that air transport is the thing of the future for the movement of flowers which will make it much easier to import flowers grown at a lower cost.

I accept that our growers are ill-placed for integration into the European market. In such a market whatever is to be produced should be produced in the place where it is most profitable to do so. We could, if we wanted, grow our flowers—tulips—even on the slopes of Ben Nevis—at a terrible price—but our Scots and Welsh friends have learned over the years to migrate to Lincolnshire and Cornwall—particularly to the former—in order to practise intensive horticulture. There they have found places in our own market more suitable in terms of climate, soil and other factors. If we enter the Community no doubt the trend will continue and many of our growers will in due course find it necessary to migrate to France and Italy to practise their skills successfully. I accept that, as I think most forward-looking growers do.

The Green Paper on VAT made it plain that the reason why this form of the tax was to be adopted was that it was the prescribed form. I urge the Government not to force the pace. Already there are many misgivings and fears amongst growers. I am told—perhaps my right hon. Friend can confirm this—that Italy, which is planning a VAT, is proposing to zero-rate flowers and all forms of horticulture. If that be true, I urge the Government to follow a similar course. What should be good enough for Italian growers should be good enough for us.

There are anxieties amongst flower growers, and I hope that I have not done anything to inflame those fears, certainly not in my constituency. They have these fears, and it is time that some of these points were answered.

2.30 a.m.

Mr. Stephen Hastings (Mid-Bedfordshire)

I rise briefly to support the Amendment. I think that there is a case for the Chancellor to think deeply again. Most of the points in this argument have been covered. Inevitably, there are not many, but such as there are are effective.

My hon. Friend the Member for Chertsey (Mr. Grylls) said that this is the first time that such a distinction has been made within what is known as part of the horticulture industry, and he pointed out the impracticability of it to growers, many of whom, certainly in my area, are concerned with not only non-edible but edible crops as well.

Every hon. Gentleman who has spoken has pointed to perhaps the most convincing section of the argument, perish-ability, which applied to cut flowers. They are sold on commission at the highest price obtainable consistent with their being got rid of, and this much mean that the pressure of an arbitrary rise in price must fall on the producer.

My hon. Friend the Member for Holland with Boston (Mr. Body) referred at the end of his remarks to the fact that he understood that there was zero-rating in Italy——

Mr. Body

Proposed.

Mr. Hastings

Proposed. Well, if they have not won, they are engaged in the battle, as we are. I should like to know whether the Financial Secretary can confirm this, and that in Holland the rate has been lowered to 4 per cent. from a previously high figure.

One range of statistics has to be considered in the body of this argument. It applies to cut flowers and results from an examination by Mr. Rogers of Interflora. Anybody connected with this trade, actively or otherwise, knows that he is likely to be a reliable witness. He conducted a survey of six countries, in the EEC and where VAT has been applied, and his examination indicates that in Denmark, where the rate has been 15 per cent. for five years, the sales have gone down as much as 25 per cent. and there has been a 20 per cent. cut in the number of staff engaged in the same period. In Sweden, where 15 per cent. has been levied for three years, sales are down by 15 per cent., and in Belgium, where the rate is as high as 18 per cent., sales are down by 10 per cent.

These are alarming figures for anybody contemplating the 10 per cent. rating which the Government have wisely chosen—a low rate. I understand the argument that it must be kept simple and that exceptions of any kind are a difficult matter, but here is evidence that a whole trade can suffer seriously, perhaps by about the same figure as the contemplated rate of VAT. Sales could go down by 10 per cent. if that is so.

The Financial Secretary could confirm this at Worthing, where there are many horticultural growers who, having seen the danger to horticulture from the Common Market, felt that here was an opportunity to keep going and to get round some of the difficulties and obstacles which are inevitable when we go in. These are probably the most progressive, able, and active growers. These are the people on whom this will fall, and it cannot be consistent with the Government's general aims that that should happen and that these growers should risk a fall in sales in cut flowers of the order I have indicated in other countries.

It is clear to all of us, whether we be pro-European, as I am, or have doubts about entry, that, whatever the circumstances, this sector of agriculture is to be faced with considerable difficulties as a result. I do not suppose that there is any sector of any industry where it is more plain that the circumstances of competition will alter greatly and in many respects to our disadvantage. Surely here is a case to be looked at sympathetically. I would not have thought that there should be any question of distinction of this kind.

I am glad to see the Parliamentary Secretary to the Ministry of Agriculture on the Front Bench. I am sure he will have listened with great care to what we have said and I hope he is in a position to confirm or deny whether the figures I have adduced and the examination I have described are accurate or not. If so, whatever the decision of the Government—naturally, I hope they will look sympathetically at the Amendment—I earnestly hope the Parliamentary Secretary will take to the Minister of Agriculture, Fisheries and Food a report of the debate and ensure that something is done after entry to mitigate the undoubted and, I think, unfair blow which will fall on one particular sector of horticulture as a result.

Mr. John Wells (Maidstone)

There is a habit in this place that farmers do not normally declare an interest when they speak on farming matters. Because my right hon. Friend the Chancellor of the Exchequer has seen fit to include horticulture for VAT, I have an unpleasant feeling that as of tonight horticulture is becoming marginally less agricultural and is slowly moving away from the guardianship of my right hon. Friend the Minister for Agriculture, Fisheries and Food.

I deplore the imposition of VAT on horticultural ornamental plants because it will split the industry up the middle. For this reason I must declare an interest as a producer and vendor of the horticultural ornamental plants. I employ, and shall continue to employ, two men, even if the Amendment is not accepted.

My hon. Friend the Member for Mid-Bedfordshire (Mr. Hastings) said that there has been unemployment in the horticulture industries of those countries where VAT has been imposed on ornamental plants. My hon. Friend the Member for Holland with Boston (Mr. Body) said that the Netherlands has reduced the level from 10 per cent. to 4 per cent. on horticultural crops.

Mr. Higgins

If my hon. Friend is referring to the situation in Holland, I should point out that, although my hon. Friend the Member for Mid-Bedfordshire (Mr. Hastings) said that the rate was 4 per cent., I understand it is actually 14 per cent.

Mr. Wells

But it has been reduced because of unemployment and discomfiture in the industry there.

My right hon. Friend the Chancellor of the Exchequer hopes to net £11 million from this tax on horticulture. Of this sum, about £5 million will come from cut flowers. The cost of collecting the tax, the extra men in the Customs, and the misery to the industry and the people who will be unemployed far outweigh the gain that will accrue to the Treasury.

I am aware that my right hon. Friend is anxious to make no exceptions—one must applaud that intention—but VAT has been claimed to be the tax to replace purchase tax and SET. Horticulture has never borne either purchase tax or SET. It is, therefore, a completely new tax which is being imposed on a broad sector of an industry.

We are all aware that the Minister of Agriculture, Fisheries and Food has told us that the larger horticulturist, the large flower grower, is doing extremely well and is an affluent character. However, there are many small men in this industry who are not so affluent. Many producers who have turnovers of less than £5,000 a year will be zero-rated. As a result, in the wholesale markets we shall have boxes of flowers which are zero-rated—after all, the man in the market is acting only as a commission agent; he is not a principal in the transaction—because they come from a grower with a turnover of less than £5,000 alongside boxes of flowers from a great tycoon which will or should carry tax at 10 per cent. How on earth is the man selling the flowers in the market to say to the buyer "You can have that one at so much" and "You can have that other one at so much plus 10 per cent.?" It is clear that the whole lot will tend to be sold at the higher price, and the producer will suffer because fewer will be sold.

We appreciate that after a long day and half the night the Financial Secretary is still in his place. He will not have seen today's Daily Mirror in which there is a cartoon portraying my hon. Friend in the guise of Andy Capp emerging from a flower shop carrying one bloom. The florist is standing at the door saying "He always was a man of few words." I urge my hon. Friend to accept that in future flowers will be sold by the one rather than by the dozen.

A rather stupid and, I would call it, impertinent letter from a housewife appeared in a Sunday newspaper a fortnight ago asking why, because her local flower shop had gone decimal, she had to pay the same amount of money for 10 daffodils as she paid for 12 three years previously. That is a measure of the small increase in price that daffodil growers have had in the last three years. Virtually every other industry has had greater price increases.

This is the only industry in which the law of supply and demand operates 100 per cent. effectively because of the perish-ability of the produce. Tonight we have discussed medical goods, clothing, the Post Office, education and one hundred and one subjects. In all of them the supplier or manufacturer can at any rate to some extent dictate his price. In horticulture, and particularly in the cut flower sector, the producer is in no position to dictate prices.

The imposition of SET will add another burden to an already hard-pressed industry. I hope that the Chancellor will change his mind on this occasion, not only because of the complications to which I have referred or the difficulties of definition mentioned by my hon. Friend the Member for Chertsey (Mr. Grylls), but because he may find himself with the sort of camellia plant to which my hon. Friend referred.

After all, it was an ignorant man, a late Duke of Argyll, who introduced what has been commonly known as the "Duke of Argyll's Tea Plant", though if one tried to brew up a pot of tea from it one would soon be complaining of a nasty stomach ache. The Duke was firmly convinced that the plant would be edible and he planned to lay down great acres of it with the aim of producing tea.

This sort of situation may well arise in future. Some worthy producer may set out to farm some edible crop only to discover, too late in the day, that he has made a mistake about its nature, but he will probably have been surcharged for past VAT by that time.

I plead on behalf of a hard-pressed industry that is being burdened with an extra tax which could prove to be the last straw.

2.45 a.m.

Mr. David Mudd (Falmouth and Camborne)

I wish to deal with this subject as much from the consumer's as from the grower's point of view. Amendments Nos. 84 and 124 have a certain simple beauty and majesty in that neither seeks to create any precedents or preferential treatment. They merely attempt to remove a foolish anomaly before it is allowed to exist. In this alone these are very commendable and constructive Amendments. They merely seek to point out and to recognise once and for all that the horticulturist who concentrates on the non-edible product is still a man of the same skill, knowledge and experience, and shows the same care, and runs the same risks as does his brother who turns out edible horticultural products. So the Amendments end once and for all any hint of a second-class citizenry in British horticulture.

One of the things that impress me in this argument is that flower buying to the British housewife is an impulse action. When she goes out on Saturday afternoon and buys a bunch of flowers it is because she happens to be in a shopping centre. She has done her other shopping and, with some money left, buys a bunch of flowers. It cannot be argued that she goes out to buy a bunch of flowers and, having been attracted by a bunch of flowers, then spends the rest of her money on the household shopping. The act of purchasing flowers is an impulse action.

Let us take it a step further. Mrs. British Housewife who has gone out shopping on Saturday afternoon has travelled in the family car, into which she has put a couple of gallons of petrol, and so has paid petrol duty. She has also paid for the road fund licence, and has bought various goods on which she has paid value added tax. Surely the Treasury is not so unromantic and unimaginative that it cannot say to her as a tribute to her tax contributions "We'll give you the odd copper off your bunch of flowers." Surely, the Treasury could see the logic of paying that tribute to the housewife by not taxing her in this way.

My hon. Friends on the Treasury Bench are very human men. [HON. MEMBERS: "Oh!"] Yes, they are. Over and over again at the drop or even at the mere rustle of a Parliamentary Question they tell us what wonderful family men they are. But can these be family men who try to tax their children on the bunch of flowers they buy for their mother on Mothering Sunday? Can these be family men who try to tax their young sons on the flowers they buy for their girl friends on St. Valentine's Day? Can they be the same family men who would tax the flowers that go to their elderly and sick relatives in hospital? Of course not.

However, my argument is based not on an appeal to basic emotion but on the fact that Amendments Nos. 84 and 124 are good Amendments and certainly deal with a situation that must not be allowed to arise in the first place.

Mr. R. J. Maxwell-Hyslop (Tiverton)

My right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith) correctly recollected an occasion when the Chancellor of the Exchequer happened to look round and see how many there were in the Committee. His face changed several colours in rapid succession and he arrived at the decision which certainly was not in his mind a few minutes before, and that was to accept the Amendment exempting the horticultural industry from a proposed 2d. a gallon increase in fuel tax.

Other hon. Friends have put forward the characteristics that distinguish horticultural produce from everything else that is covered by value added tax, and it is necessary to do this if we are to establish the case for the Amendments—necessary, that is, for those of us who believe that there is a merit in value added tax being a quasi-universal tax at one rate.

One of the important characteristics which have been mentioned is that there is a tremendous crossover between the production of food, which will be zero-rated, and horticultural produce. Perhaps I may cite the tomato grower as a case in point. Tomatoes, being a food, will be zero-rated. But one cannot grow tomatoes for 12 months of the year because there is not enough sun. It does not lie within the power of the Treasury Bench to alter our climatic conditions. Therefore, the capital involved in glasshouses today can be up to about £35,000 an acre in the production of tomatoes, but it cannot be used for producing them for 12 months of the year.

What happens at other times of the year is that that capital is applied to growing flowers in the place where tomatoes, which are zero-rated, are grown at other times. If VAT is applied to those flowers, as my right hon. and hon. Friends have already shown, this will result in a decrease in revenue to the producer. Part of the burden is bound to fall in increased costs on the production of food products, which are zero-rated. This follows as night follows day, because the overhead costs represented by the very heavy capital costs per acre will be spread over the entire produce for the year; they will not be confined to the flowers. The effect of VAT on flowers grown under glass will, therefore, permeate into the area which the Chancellor intended should be untouched by VAT. This is a major point which my hon. Friend the Minister ought to bear in mind.

We are here concerned not with the very small producer of under £5,000 worth a year but with the producer of over £5,000 worth a year. The characteristics which distinguish horticultural produce are first, perishability; second, the fact that the wholesaler in the market does not buy that of which he disposes entirely; third, the fact that the produce cannot be returned in any real or valuable sense to the producer for offering on another occasion or in another market; fourth, the fact that the costs can transpose from that on which it is proposed to impose VAT to that on which it is not proposed to impose VAT; and, last but not least, the financial posture of the horticulture industry is not such that it can bear a decrease in revenue when so many of the costs involved are not under its control.

I expect that my hon. Friend the Minister will have noticed that the oil-producing countries are not minded to reduce their prices. The opposite is very much the case. The further north a country lies, the more it is dependent on artificial sources of heat to produce horticultural products. Therefore, we have a natural disadvantage with our fellows, in or out of the Common Market. That is an additional reason why we should not impose extra costs upon this industry.

In the case of fuel duty, it was recognised by the Chancellor that over the years we have been producing horticultural improvement schemes designed to produce a posture for our horticulture industry such that it can survive competition from overseas. Let us not now weaken its precarious income position in this way. That would be dangerous not only for horticulture but also for the Treasury Bench, for exactly the same reasons that it was dangerous for the Treasury Bench when it was originally proposed to increase fuel duty. On that occasion my right hon. Friend the Chancellor took a quick decision, and the right decision. My hon. Friend does not have the advantage of having the Chancellor next to him, but he would he equally well advised to adopt the same principle and follow the same practice.

Mr. Dalyell

I shall not join the hon. Member for Tiverton (Mr. Maxwell-Hyslop) in making any threat to the Treasury Bench, but I agree that the further north horticulture is situated the heavier are the costs.

It might be thought from this debate that all horticulture was in East Anglia, South-West England or Kent, but there is what has been a flourishing market garden and tomato industry in the Clyde Valley, only a little of which is in my constituency. Some of my Scottish colleagues and I spent a day in September as guests of the Scottish NFU Horticulture Section going around the Clyde Valley and learning a little at first hand of the very real problems there. The further north one goes, the higher are one's oil costs. I want to speak up briefly for a number of people who have sunk a lot of money into glass in Scotland and are now very worried.

Mr. Robert Hicks (Bodmin)

In modern footballing jargon, my role tonight is that of sweeper. Fortunately, so effectively have my right hon. and hon. Friends put the case that the onus of responsibility on me is small, but there are two additional points worth making before my hon. Friend the Financial Secretary replies to the debate.

First, in a recent Written Answer my hon. Friend told me that the revenue derived by the Treasury as a result of the levying of the value added tax on non-edible horticulture crops would be about £13 million. Our researches show that for cut flowers it would be about £5 million a year. Therefore my hon. Friend cannot argue that to show a degree of "give" in this instance would effect the whole question of the balance and the revenue to be obtained from the VAT. There would be no adjustment of the figure as a result of a sympathetic gesture to a hard-pressed industry.

There has been mention of our proposed entry into Europe. My right hon. Friend the Minister of Agriculture has said on a previous occasion that compensation will be paid to those growers who find themselves in difficulty—and even perhaps put out of business as a direct consequence of our entry. It seems somewhat inconsistent to me that any Government would be prepared to assist the grower who finds himself in difficulties and yet at the same time could be in part responsible for those difficulties suffered by individual growers as a result of the incidence of the tax. I ask my hon. Friend, who was kind enough to see a small delegation at the Treasury recently, for which we were most grateful, to consider particularly the question of cut flowers, in replying to this valuable debate.

I represent a part of the United Kingdom which is also a peripheral region, the South-West, and Cornwall in particular. In that part of my constituency which specialises in horticultural products there would be, regrettably, no alternative employment for those in horticulture if they were to find themselves out of business.

3.0 a.m.

Mr. Higgins

We have had a remarkable debate on the subject of horticulture. Treasury Ministers have been flattered, if I may say so, on several occasions; we have been promised publicity in the national newspapers, and even cartoons of oneself holding flowers. A great weight of opinion has been brought to bear by my hon. Friends in presenting their case. What is more, throughout the debate not one argument has been repeated. The case has been deployed in all its aspects.

I am in some difficulty now in trying to follow the advice given by my right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith), that one should be brief in inverse proportion to the importance of the issue. Given the complexity of the arguments, I hope that the Committee will allow me to expand a little on the case which has been made and reply as broadly as 1 can to the debate itself.

I stress at the outset what one has been stressing consistently now for almost 12 hours, that the value added tax is designed as a comprehensive tax, apart from the broad tranches of expenditure on such items as food, housing and fuel for which exceptions have been made. During the past many debates the Committee has decided not to give special treatment by way of zero-rating to gramophone records, building services, children's clothing, safety equipment, telecommunications and so on.

Mr. Hastings

We know all that.

Mr. Higgins

We know all that, as my hon. Friend says; but one must take a consistent line in these matters.

I refer, first, to the division of the horticulture industry. My right hon. Friend has given relief in respect of food because we were anxious that the design of the tax should not be regressive. My hon. Friend the Member for Bodmin (Mr. Hicks) referred to an answer which I had given in which the cost was set at £13 million. On the basis of Amendment No. 124, the figure would be about £13 million. For cut flowers alone his figure of £5 million is correct.

However, if we were to give special treatment to cut flowers, or if we were to accept the wider Amendment, we should soon—be it £5 million or £13 million—find that many of the cases argued during the last few hours would be represented because the order of magnitude is much the same.

However, having said that and indicated that we could not accept the Amendment, I greatly welcome the opportunity to discuss it, since many of the arguments advanced stem from genuine misconceptions in the industry about the tax, and I am anxious that people's minds should be put at rest.

I know that this matter is causing concern in the industry. As has been said, I have a constituency interest in Worthing—Worthing tomatoes are world famous—and I am certainly not unfamiliar with the problems of the indus- try. My right hon. and learned Friend spoke of the Lea Valley growers and the competition between them and the growers of Worthing. On social functions it is normal for horticulturists from the Lea Valley to visit Worthing. Indeed, over the years there has been a considerable migration of expertise from one to the other and perhaps some influx of capital also from those who have sold up in the Lea Valley and moved to Worthing. These, however, are common problems, and I should like to turn to the various matters which have been raised by my hon. Friends during the debate.

I come first to the question of administration. I think that the problems my hon. Friends have raised are exaggerated, and I should like to deal particularly with the question of the problem of accounting for VAT when one has a horticulturist some of whose products are food and, therefore, are zero-rated and some of whose products are cut flowers, for example, and are, therefore, in the Bill, to be charged at the standard rate. I believe there has been misconception about this. It is felt it would be extremely difficult for growers with mixed outputs to segregate their inputs, for example, on fertiliser between taxable and zero-rated items. That is not a difficulty because all input tax would be deductible in those circumstances. The only need would be to distinguish between the edible and non-edible outputs.

If I may get away from that jargon as much as I can to explain the point in other words, I am saying that, while the output tax in the case of cut flowers will be charged and the output tax in the case of food will be nil because the items are zero-rated, if one takes the whole of those two together one can deduct the input tax all in one account in the accounting period. Therefore, there is not the need to split the input tax between those items which are zero-rated and those which are not. Therefore, the problems of administration are not significant ones.

My hon. Friend the Member for Chertsey (Mr. Grylls), who moved the Amendment, referred particularly to the problems of small retailers, especially when selling for example, small lots of seeds which are taxable and those which are zero-rated. The Customs department is carrying out consultation with the trade on a special scheme for retailers to operate which will simplify their accouning in this respect, and I am sure that it will he possible to arrive at a satisfactory conclusion on it.

I turn now to the points made by my right hon. and learned Friend the Member for Hertfordshire, East. Some problems have arisen or are envisaged concerning marketing. I do not think there is any reason why, for example, the sale of cut flowers by auction should interfere with the normal VAT credit mechanism. It is envisaged that the auctioneer will be able to issue a tax invoice on behalf of the seller which will show the tax and can then be credited by the trade buyer, assuming he is registered. If the sale is made on a tax-inclusive basis, the tax can simply be calculated as one-eleventh of the total tax-inclusive price. I admit that at ten minutes past three in the morning that sounds complicated, but——

Mr. John Wells

My hon. Friend's words imply that he thinks that the bulk of cut flowers is sold by auction. That is not so. If he goes to Covent Garden in 10 minutes' time he will not find an auctioneer in sight. I hope that by allowing the words "sold by auction" to creep in my hon. Friend is not showing that he is under a misapprehension.

Mr. Higgins

I certainly was not doing that. I intended to come on to other forms of sale. I regret, therefore, to have to tell my hon. Friend that the situation is a little more complicated, although I feel that the fears will prove ill-founded.

Before dealing with that, I should like to turn to the other point made by my right hon. and learned Friend the Member for Hertfordshire, East concerning the sale of perishables, because much of the case which has been made—while there was not repetition about this, it was a thread running through my right hon. and learned Friend's remarks—was the idea that the sale of flowers is the sale of items which are extremely perishable. There is no reason why, if the items are perishable, the price should not rise by the amount of the tax when sold by way of trade, and the trade buyer might then take credit for the tax and, therefore, his buying price would be effectively unaltered compared with that in the pre-VAT days. The normal working of the credit mechanism will operate, but Customs and Excise will be paying particular attention to this aspect of the tax on buyers in the period before the tax is introduced. The price paid on perishables and other goods may well alter after VAT but with the VAT credit mechanism working through the chain of distribution the tax will fall to he paid by the final consumer. Some horticulturists have feared that they would not be in a position to pass the tax forward. I will deal later with the effect on the ultimate consumer.

I should like now to turn to the general argument of my hon. Friend the Member for Maidstone (Mr. John Wells). He mentioned as an example the operation of Covent Garden Market. There is some concern about this, especially about the position of the large trader and the trader who is exempt. Some traders will come below the £5,000 taxable turnover limit. In that context, I think we shall find that the situation reaches a point of reasonable equilibrium, and I do not think that there will be the kind of distortion of competition that some of my hon. Friends seemed to envisage when the other day they did me the courtesy of coming to discuss the matter with me.

I come to the effect of the tax on the demand for the product. Flowers are not now subject to purchase tax, and one can well understand the growers who feel that the imposition of value added tax may have an adverse effect on demand. In that context, I should like to tell my hon. Friend the Member for Mid-Bedfordshire (Mr. Hastings) that it would be wrong to extrapolate from the experience of some other countries, particularly Scandinavia, of value added tax. Clearly, if there is some increase in prices it is likely to have some effect on the level of demand, but my hon. Friend had a point when he said that many purchases of flowers were impulse buying, and I suspect that it is possible to exaggerate the price sensitivity, if I may put it that way, of purchases of cut flowers.

With the change to value added tax and the abolition of purchase tax and SET, an increase in the tax burden on certain products will be matched by reductions in the cost of other products which figure in consumer expenditure. There is therefore likely to be a redistribution of expenditure so that the pattern of expenditure changes. But it does not necessarily follow that this will involve a reduction in the demand for nursery stock, seeds or cut flowers.

One or two hon. Members have expressed concern that the industry was especially worried about the large numbers of trees and shrubs and bedding plants and so on that were produced by local authorities for landscaping. They have argued that it would be environmentally undesirable for these products to attract tax. To be parochial for a moment, last night the annual banquet of the Mayor of Worthing took place and we had the finest display of flowers that one could see probably anywhere in the world. [HON. MEMBERS: "The second finest."] I concede that in the circumstances I should say "the second finest." although I would prefer the original view I put forward.

Local authorities will secure the full refund of all input tax paid in respect of their non-business activities under the powers contained in Clause 15. The impact of the tax on these large purchases by local authorities for landscaping and environmental purposes will be offset.

3.15 a.m.

I turn to the point raised by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) about the way in which overheads are spread between one part of horticultural output and another. He suggested tomatoes for part of the year and cut flowers in another part, in the same greenhouse. It is the case that this industry is now very capital intensive in many parts of the country. I have often visited establishments where this is quite clear. In the context I would not necessarily share his view as to the extent to which tomatoes may be grown throughout the year. I would suggest that often a combination can be tomatoes and winter lettuces, in which case the problem he raises will not necessarily manifest itself.

Even if it is the case that for part of the year flowers are grown instead of tomatoes, I still think that the impact of this tax at this level, and for the reasons I mentioned earlier, will not be such that the spread of overheads will in any way significantly affect, if at all—and I would be inclined to suggest not at all—the actual costs of producing the items which my right hon. Friend has zero-rated for horticulture.

A word now about the more international aspect of the question. I stress first that exports will be zero-rated, which is not unimportant in the Common Market context, where we may well find further export opportunities. Imports will bear the same rate of VAT as those items grown in this country.

A number of my hon. Friends have drawn a comparison with the rate of VAT imposed on cut flowers in other parts of Europe. I confirm the point I raised in an intervention with regard to the rate in the Netherlands which is extremely important, despite the size of the operation there compared with the operation in the constituency of my hon. Friend the Member for Holland with Boston (Mr. Body). That point is that there is a reduced rate in the Netherlands of 4 per cent. My understanding is that bulbs, flowering trees, plants and flowers are charged at the rate of 14 per cent. in the Netherlands together with floral decorations. The figure of 14 per cent. was mentioned.

As for EEC entry, the Government have already recognised in the White Paper on entry that horticulture will face special problems. My impression is that the industry has become immensely more efficient over the last five or eight years. There is no doubt that in many areas we shall be extremely competitive and there will be great opportunities. But discussions are taking place on how best the adverse effects of EEC entry on horticulture can be minimised, but it would be contrary to our international obligations to use the indirect tax system to protect home-produced items. Imported non-edible horticultural products will be liable to VAT at the same rate as home-produced goods, and exports will be zero-rated.

Mr. Maxwell-Hyslop

Nobody doubted that. My hon. Friend is telling us what we already know. Nobody has recommended that there should be a different rate of VAT on home-produced horticultural produce from that on imported horticultural produce. So it is not necessary to knock that down. That proposition has not been advanced.

Mr. Higgins

I understand that. I have sought not to compete with my hon. Friends who are more expert in this subject, despite my constituency interest, than I can hope to be. There is in the country and in the horticulture industry some misunderstanding of the way in which the tax will operate, and the fears which have been expressed reflect to some extent that misunderstanding. Therefore, I thought it right to mention that point should there be any doubt outside the Committee on it.

The Government see nothing inconsistent in a policy which includes a particular item—in this case, the items covered by the Amendment—within a comprehensive tax which prevents anomalies from arising. If help is to be given, it is very important that it should be given in the way which is most effective and most efficient, and that is what the Government's assistance for horticulture does, and it is not inconsistent with what is proposed in the Bill.

Division No. 185.]	AYES	[3.25 a.m.
Barnett, Joel (Heywood and Royton)	Maxwell-Hyslop, R. J.	TELLERS FOR THE AYES:
Gilbert, Dr. John	Meacher, Michael	Mr. John Golding and
Healey, Rt. Hn. Denis	Sheldon, Robert (Ashton-under-Lyne)	Mr. Tom Dalyell.

NOES
Atkins, Humphrey	Gray, Hamish	Nott, John
Barber, Rt. Hn. Anthony	Green, Alan	Owen, Idris (Stockport, N.)
Blaker, Peter	Hall, John (Wycombe)	Pym, Rt. Hn. Francis
Boardman, Tom (Leicester, S.W.)	Harrison. Brian (Maldon)	Redmond, Robert
Boscawen, Robert	Haselhurst, Alan	Reed, Laurance (Bolton, E.)
Brinton, Sir Tatton	Higgins, Terence L.	Shelton, William (Clapham)
Butler, Adam (Bosworth)	Hordern, Peter	Soref, Harold
Clark, William (Surrey. E.)	Jenkin, Patrick (Woodford)	Stanbrook, Ivor
Clegg, Walter	Jopling, Michael	Stuttaford, Dr. Tom
Cooper, A. E	King, Tom (Bridgwater)	Sutcliffe. John
Dean, Paul	Knox, David	Trew, Peter
Edwards, Nicholas (Pembroke)	Le Merchant, Spencer	Weatherill, Bernard
Emery, Peter	MacArthur, Ian	Winterton, Nicholas
Fortescue, Tim	Mills, Peter (Torrington)
Fox, Marcus	Morrison, Charles	TELLERS FOR THE NOES:
Goodhart, Philip	Murton, Oscar	Mr. Paul Hawkins and
Goodhew, Victor	Normanton, Tom	Mr. Kenneth Clarke.

Question accordingly negatived.

Question proposed, That this Schedule be the Fourth Schedule to the Bill.

Mr. Healey

I do not want to detain the Committee for long at this late hour, but it is worth saying a word or two on the Question "That this Schedule be the Fourth Schedule to the Bill," because we have spent a fascinating four days on the

Mr. Grylls

How is it proposed to deal with plants or trees which are both edible and ornamental or edible or ornamental?

Mr. Higgins

I think that that was the only point which, in the interests of brevity, I omitted to make. My hon. Friend referred to camellias, tea plants and bay trees. To some extent he was confusing the tree itself with the product of the tree. The problems of definition he raised do not arise in that context. Nevertheless, I appreciate the point, and the Customs will be glad to pursue any points of definition. But I would not agree that the tax is unworkable for that reason.

We can be proud of the Government's record of support for the horticulture industry, but it is in no way inconsistent with the proposals in the Bill. I hope that my hon. Friend the Member for Chertsey will feel able to withdraw the Amendment.

Question put, That the Amendment be made:—

The Committee divided: Ayes 6, Noes 47.

Schedule. The interest displayed in the zero-rating discussion shows that we could easily have had 40 days on it without exhausting the concern of hon. Members who wish to add to the number of trades which are zero-rated under the Government's proposals.

The debates have served to throw a startling light on the contradictions and inconsistencies of the Government's case.

The Government started by claiming that VAT was a comprehensive and neutral tax on public expenditure. The Financial Secretary to the Treasury seems to have got his needle stuck in that groove of the record. We have heard it in every single debate in the last four days.

On the one hand, the Financial Secretary claimed to avoid the anomalies of the purchase tax, but that claim dissolved on the first day in the frying fat of the fish and chip shop of my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett). On the other hand, he claims that it avoids the distortions of purchase tax because its spread is determined solely by fiscal and economic considerations. But the fact is, as the Chancellor and the Financial Secretary well know, that 45 per cent. of the trades in this country are already zero-rated or exempted on the Government's proposals. We have found during the last four days that in some cases the Government have deliberately arranged to offset the effect of VAT by making concessions in other areas. We heard for the first time tonight that the concessions to public schools under the charities Clauses will far outweigh the burdens falling on them through the imposition of VAT.

Mr. Patrick Jenkin

That is not what said. I said that in relation to the charities sector as a whole I had not the slightest idea to what extent the benefits which my right hon. Friend has given to charities in other parts of the Bill would enure to the public schools. I should have expected a very small part of it, if any. The great bulk of it will go to broadly accepted national charities. That is clear. I know that the hon. Member for Dudley (Dr. Gilbert) tried to link my remarks to public schools, but that was not what I intended or what I could reasonably be taken to have meant.

Mr. Healey

I listened carefully to what the hon. Gentleman said in reply to that debate. I understood him to mean that the public schools which are included in the charities provisions in other parts of the Bill will share the benefits which charities will get from those provisions. But if that is not the case the hon. Gentleman or some other Government spokesman will have every opportunity of making that clear in the debates later this evening.

The Government are not seeking to ensure that no distorting effects arise as a result of the application of VAT when they compensate for the application of VAT in some cases, though not in others, and change the incidence of VAT on some trades or supplies as distinct from others. In two cases during these debates the Government have hinted at concessions, although there is no rhyme or reason for picking these areas for concessions, except party expediency.

One of the concessions was made to a formidable elder statesman and of the Conservative Party, the right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith), who has proved his nuisance value to the Government on many occasions. The other concession hinted at was made to the descendants of Hereward the Wake, the Young Turks from East Anglia who spoke during the debate on shoes yesterday afternoon. The flower people from the adjoining areas had much less success in attempting to force a concession in the debate that we have just enjoyed.

If the Chancellor really meant what he said—and having read the full text of it in this morning's papers I can see how,carefully his statement was drafted—when he hinted at concessions on children's shoes, he has undermined the whole basis on which the Government have sought to justify the introduction of VAT and the replacement of purchase tax, and nobody can be more conscious of that than the Financial Secretary, who repeated again in reply to our last debate the point that he has made so often.

By offering at least to consider zero-rating certain shoes on grounds which have nothing to do with fiscal or economic policy but purely on the ground that he would seek to encourage the purchase of shoes on the basis of medical considerations, the Chancellor is overthrowing the whole basis on which he, no less than his acolytes, has sought to commend the Bill to the House. In doing that he has strengthened more than ever the suspicions of this side of the Committee that his real motives and objectives in introducing this tax are different from those which he sought to convince the House they were.

We shall look forward to pursuing these matters during the labyrinthine discussions that will follow elsewhere, but I thought it worth while at this time to emphasise again the massive contradictions and inconsistencies in which the Government have involved themselves by seeking to introduce this tax.

Question put and agreed to.

Schedule 4 agreed to.