CLOCKS, WATCHES, ETC. (Hansard, 30 September 1915)

§ Mr. LOUGH
My right hon. Friend has invited us to discuss the features of these particular taxes. The complaint that we make against him is this: Suddenly a Resolution is read out at the Table. It falls like a bombshell in the House. We do not know why clocks and watches are chosen. There has been no justification put forward for this tax. The Chancellor of the Exchequer said, in reply to my right hon. Friend (Sir A. Mond), that he had justified the tax. I ask the House has any justification for the selection of these articles been given? Nothing of the kind. Probably my right hon. Friend would say he has given a general justification, which was that it is necessary to stop imports. Then we ask why do you not take imports which are increasing—very large imports? He seems to have selected imports which are rapidly diminishing, and he is giving nearly a final blow to trades which are already suffering very much. With regard to clocks and parts thereof, the import is rapidly diminishing as it is. The figures are, for the first eight months of the year 1913, £294,000; 1914, £278,000; and 1915, £174,000. So the thing has gone down nearly 50 per cent. before the tariff was introduced at all. The imports of watches for the some periods were £1,100,000 in 1913; in 1914, £875,000; and in 1915, £782,000. So that there again the imports are rapidly diminishing. We are told these things are luxuries. What kind of clocks are these which are imported? Wooden clocks; the cheapest clocks that you see in the houses of the poor. What kind of watches? Waterbury watches; the watches of the working man at 5s. or 10s. apiece. What will happen? You say that watches of the same kind, of British manufacture, will be sold. Let the House bear in mind the speech to which we have just listened. The 10s. watch in this country will be increased to 13s. 4d., although no tax is put upon it at all. The cheap 1063 watch will be shut out, and the other watch will be increased to 13s. 4d. The Chancellor of the Exchequer will get £250,000 out of the tax, but the nation will pay at least £500,000, perhaps £750,000, and instead of that large sum coming into the Treasury he will only get that small share of it that goes on foreign watches.
My right hon. Friend said one thing on the last tax that I rather resent. He said no business arguments were presented, and he urged his good character. I admit that he has obtained recognition from us all of his consideration, and I was going to say his honesty, but that might be wrongly interpreted, with regard to motors. He has met us largely with regard to motors, but he made no concession with regard to musical instruments, the gramophone, or the jew's harp, or the piano, or any instrument of the poor. I want him to consider this point of omitting parts of watches and clocks. The imports of clock parts has hardly diminished at all, showing that our people, to keep up the manufacture, want the parts. The imports of the parts were £313,000 in 1913, in 1914 £232,000, and in 1915 £197,000, so they have only gone down very little, and it shows that the parts are very much wanted. Our manufacture in this country will be greatly embarrassed, and our export, which we want to increase, will be greatly diminished if these facilities for manufacture are removed. I present these two arguments, and I would ask my right hon. Friend respectfully to answer them. In both cases the import is rapidly diminishing as it is, and the people in these trades are suffering very much. I will not go into the general argument again, which has been put so often, about the compensating Excise Duty, but trade which is to pay our taxes and carry us through the War is suffering very much. My second point is that the parts might very well be omitted. In fact, a word stuck into all these taxes without sufficient consideration will give more trouble than anything else, because the parts are often useful for other things. I do not say that of clocks and watches, but many motor parts are used for other things. I suggest, therefore, that my right hon. Friend would do well to consider this point in this tax, and we should be greatly indebted to him if he could give some lucid explanation of the reason why he has selected these things in which the import 1064 is diminishing so rapidly, and which are not luxuries of the rich but necessities of the poor.

§ Mr. McKENNA
It is quite true that the import of these articles has diminished, as compared with the pre-war period. I think the right hon. Gentleman will agree with me that in the midst of war the import of these articles is still excessive. We have really not got the power to produce goods for export in order to balance our trade. We have neither the capital nor the labour available, having regard to the claims upon both owing to the necessity for war construction. In view therefore of the limitation of our possible exports, it seems to be only rational and proper that we should seek by measures such as these, in some degree at least, to limit our imports. The particular articles which we have chosen have been chosen, as I have endeavoured to explain so unsuccessfully, primarily upon the ground that their consumption is not required in this country; secondly, upon the ground of improving our fallen exchange, and thirdly, upon the ground that, in satisfying these two objects, we shall still obtain a certain degree of revenue. I quite admit the force of all the objections which are raised to these taxes. I only propose them during the War. They are limited in time to 1st August next. They will have to be renewed, therefore, in the next Budget in order to go on for the suceeding year, and in the absence of any direct argument touching the actual business concerned, I would appeal to the House to accept these taxes. I think there is great force in the speech made by my hon. Friend (Mr. Yeo). I will certainly do my best to explain to the manufacturers the folly of putting up their prices 33⅓ per cent. They will certainly have to raise their wages, and they will find it very difficult to get those wages down again when the tax comes off. I will certainly do my best to explain those elementary facts to them. But we have to look at larger considerations, and looking at those objects, I think this is a tax which the House might be asked in the circumstances to accept.

§ Mr. LOUGH
What about parts?

§ Mr. McKENNA
If we excepted parts the tax would become absolutely nugatory. All the goods would be brought in in parts, ready to be put together again, and the whole tax would be rendered inoperative. When we come to the next two taxes I 1065 shall have something in the opposite sense to say, in view of the business representations which have been made to me with regard to the trades.

§ Sir A. MOND
I really cannot quite follow my right hon. Friend in his defence of this particular duty. I could understand if the bulk of these watches and clocks were imported from America, in which the exchange is unfavourable to us, there might be some slight point in it; but a very large proportion of the trade, I am informed on authority which cannot be denied, comes from Switzerland; particularly the better class of watch, and not the very cheap watch. It has been represented to me that whereas 33⅓ per cent. on a very cheap watch may not much diminish the sale of that watch, 33⅓ per cent. on a better and more expensive watch is practically prohibitive, and the question put to me is why we select this in order to very much damage a considerable Swiss industry, in view of the fact that Switzerland already is in an unhappy condition owing to the position in which she is placed through the War. I will not put it any higher than that. It seems rather an unfortunate thing to do, because the Swiss exchange, after all, is fairly normal, and I do not see that you are going to benefit the exchange by taxing Swiss watches or clocks.
6.0 P.M.
There is another business point I should like to present. I have a letter from a very large wholesale firm dealing in watches, chiefly of Swiss manufacture. They say the immediate result of the announcement of the duty is to cause a rush of people anxious to buy at low prices. For a short time their returns will be abnormally increased, and likewise their profits. In the endeavour to continue business they must replenish their stock. A slump in trade will follow as a matter of course, and if on 31st July next these experimental duties are discontinued, as indicated, they will lose at once 25 per cent. of their capital, which is represented by the stock they are at all times compelled to hold. They will have no option but to face a loss, and many firms will be severely crippled. It will, of course, be open to any speculator to come to England and to supply their customers at greatly reduced prices, and they will have to face their loss, while at the same time those people will benefit who contributed nothing in the way of taxes to the upkeep of the country. I should like to point out to the right hon. Gentleman 1066 that there is a business objection which does not seem so far to have been considered—that is, the temporary nature of these duties. The right hon. Gentleman said that he is going to point out to the rapacious manufacturer who is raising prices the fact that the duties may come off next July, and that it is very foolish of him now to take temporary advantage of the duties. But has he considered that if people have imported goods and have paid the duty, if the duty comes off they will be left with a large amount of stock on hand?
It is one of the inherent difficulties and vices of this protective form of duty that you cannot get away from, whatever motive you have, that if you keep altering and tampering with it you must inflict a very grievous disturbance of business on a large number of people. Therefore, what is the result? When that time comes you will be faced, as sure as I am standing here to-day, with an insistent demand that these duties shall be kept on. When the right hon. Gentleman says, "These duties shall be taken off," there will be an insistent agitation that the right hon. Gentleman shall not be permitted to take them off. The right hon. Gentleman stands there, as every Chancellor of the Exchequer has done in these circumstances in the middle of a war, and says, "I will reduce these duties and I promise to take them off." I challenge the right hon. Gentleman to produce a single instance where duties which have been imposed in the time of war have ever been taken off. If he will produce a single precedent in favour of this argument, it will be an interesting historical event.
There is not much to be said for these duties. I cannot see why he should argue that people should not be allowed to buy a watch during the War. I have pointed out before, and may have to point out again, that a very large number of these watches are bought by men and very largely by officers who are going to the front. The possession of a watch is not a luxury but a necessity. All the illuminated watches which officers have to wear in the trenches are not luxuries but absolute necessaries. They form part of their equipment. Yet the right hon. Gentleman says that we do not want anybody to buy a watch during the War. You must know what the time is. That is a daily necessity. People do not buy watches for the fun of the thing, but because they want them, and it is not an extravagance. I know 1067 that none of the arguments of this or any other character are likely to affect the result of what we are doing this afternoon, but I do regret that the right hon. Gentleman has not seen his way to introduce some kind of graduation into the schedule. It is a bare 33⅓ per cent. on all forms of watches. If the right hon. Gentleman said we want to exclude the very expensive gold watches I could understand having a schedule to exclude them, but why must he have the same schedule for every kind of watch? The schedule bears much harder upon the lower priced article than on the higher priced article.
The right hon. Gentleman will answer that this is a simple way of doing it, that these taxes are not going to be permanent, and that it is not necessary now to go into the question of graduation of a tariff schedule. The fact that he will inflict unfair hardship, and the question of the English watchmakers, is not considered at all. I understand that the services of many people who make watches are earnestly in demand for certain fine work in making munitions. Why does the right hon. Gentleman want to encourage people here not to do munitions work, but to make watches? Why does he want to make it still more difficult for the Munitions Department to get the people they want by creating a greater demand for English watches? These questions want looking at as a whole, and not so much as if they were in water-tight compartments. The right hon. Gentleman is taking exactly the same thing as the Minister of Munitions wants from his point of view. That is a very serious consideration. It is better that we should make less watches if we can liberate our watchmakers for munitions work. You cannot liberate the watch makers in Switzerland for making munitions. The tax the right hon. Gentleman is going to get is small. I am sorry he has no cheering news to give to us on this tax the same as he has held out to us in regard to some of the later taxes.