HC Deb 08 August 1940 vol 364 cc508-33

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. Amnion (Camberwell, North)

Do you intend, Colonel Clifton Brown, to call the Amendment to this Clause which stands on the Order Paper in my name?

The Deputy-Chairman (Colonel Clifton Brown)

That Amendment is covered by the proposed new Clause.

7.16 p.m.

Mr. Pet hick-Lawrence (Edinburgh, East)

As this is the operative Clause of the Purchase Tax, I think a few words should be said about it at this stage of the proceedings. Those who are associated with me in this matter have, from the beginning, viewed this new proposal with considerable misgiving, and I want to say that that misgiving is by no means wholly removed at the present time. We hope the Chancellor of the Exchequer will watch the working of this tax, because there are a great many people who believe it will not work satisfactorily. If he finds that it is not so successful as he and his advisers at present think, we hope he will not be above repealing the tax and substituting for it such other forms of obtaining national revenue as are not only more workable but more just in every way. At the same time, however, we do not wish in any way to thwart the national effort, and we have no desire to see inflation coming about in this country. In view of that, we have said before, and I repeat it now, that we do not intend to oppose the passage of the Purchase Tax.

Apart from the principle of the Purchase Tax, there has been the method of imposing it. As it was originally proposed, only the principle of the tax would have come before the House in the first instance. The Treasury would have had to have implemented that principle in all its details, and the House would have been asked for a single Resolution, either approving or disapproving of the Schedule which the Treasury would have had the right to frame. That, in my opinion, and most of those with me, was a thoroughly undemocratic and unsuitable method of imposing new taxation, and I am very glad to see that the Chancellor has changed all that. I thank him, because the present method is greatly superior to that which was proposed before. Of course, even in its present form, the method of imposing this tax is somewhat new. What we are being asked to do is to impose several thousand new taxes of varying effect upon all sorts and qualities of commodities. It is not surprising, therefore, that in such circumstances there should be a large number of Amendments to omit, amend and cut down the various parts of the Chancellor's Schedule. I notice that some of them strike at the root of the tax itself. It would not be in consonance with our decision if we supported those Amendments.

There are others which propose the exclusion of a considerable class, and notable amongst Amendments of that kind is a proposal to exclude the book tax and the newspaper tax. I have no doubt that that will give rise to considerable debate, and I am sure the Chancellor of the Exchequer will give due weight to the very substantial case which will, no doubt, be made out against that part of the Schedule. The final set of Amendments, which are among those to which my hon. Friends have put their names, are of a rather different character. They are not aimed at the main substance of the Schedule, and they are not designed to destroy any large part of the revenue which the Chancellor expects, but they are designed to take out from taxation certain small articles which, in our opinion, press with particular heaviness on certain persons. I believe it is fully in consonance with our attitude towards the tax as a whole that the Chancellor should give his careful attention to these Amendments. Of course, we recognise that, in asking for that, the special commodities which we hope the Chancellor will exempt—or that he will lower the column in which they are placed —shall be particularised in some way which will enable him to cut them out from the Bill without striking out a large class of goods which would injure the yield of the tax. I hope very much that the Chancellor will be able to tell us, before we reach the Schedule itself, that he will give sympathetic attention and consideration to Amendments of that kind, and that we can be assured that, when we move that class of Amendments, he will be able to give them sympathetic consideration with a view, if possible, to making some concession.

7.24 p.m.

Sir Percy Harris (Bethnal Green, South-West)

I am very glad that the right hon. Gentleman has given the Chancellor of the Exchequer a chance of giving us some lead on this Clause. When I spoke on the Budget Resolution, and had an opportunity to congratulate him on his first speech in his very responsible position, I was one of those who recognised the very great difficulties of his problem. This particular child certainly is not his. He is the foster parent. He had it handed over to him by his predecessor, and already he has made very considerable changes in its appearance. It is a much more attractive child than when it first saw the light of day. I understand that one of the reasons of his appointment is his sweet reasonableness. Everyone has recognised that no Minister at any time in the last few years has been more amenable to persuasion or ready to listen to arguments, and no one can regard him as a bitter, brutal, hard, unsympathetic Chancellor who, having once made up his mind, will not give way. We have to recognise already that he has made some very valuable concessions, which will be appreciated in every home, and, of course, relieve the pressure of his tax on those least able to bear it.

Like every other Member, I have been swamped with letters from every industry and trade in the country. It is suggested that taxicabs should be exempt, and medicines, and a great number of other articles. If all these suggestions were listened to, there would be very little left of the tax, and we all recognise that, if it is to justify its existence and to bring in revenue, which is its main purpose, the Committee would have to join with him in resisting some of these Amendments. Every section of the House has accepted the tax in principle. It is very difficult to devise taxes which, on the one hand, bring in revenue and, on the other, do not press with exceptional hardship on some people. If the right hon. Gentleman wants this tax to go through substantially in its present form, he would be wise to conciliate those who are most clamorous at present. To tax books is so much against the best traditions of the country—a tax on the printed word—that inevitably it is likely to arouse an amount of opposition which will make the passage of the Clause very difficult. The one thing that we want to avoid is Divisions. We are one happy family, with no party differences. Therefore we have all to make our contribution. The right hon. Gentleman will save a great deal of time, and enable us to go away much earlier to our holidays, if he will here and now say he is prepared to make a comparatively small concession in a time of heavy taxation. When we are thinking in milliards, a tax of this character seems rather small, mean and petty. I do not blame him. He did not realise the storm that he would be raising by omitting to omit books. I do not suppose it ever occurred to him that Bibles would come under this category. It is the last thought that would enter his mind.

The Temporary Chairman (Mr. Charles Williams)

I think we must keep off details, or we shall be limiting Amendments.

Sir P. Harris

I was only going to remind the right hon. Gentleman that the distinguished name that he carries— Kingsley—is historically associated with literature. We feel that we can safely leave the subject in his hands. If he will get up now and make this gesture to the Committee, he will prevent a great number of Members making carefully prepared speeches, and he will expedite the passage of his Bill.

7.30 p.m.

Sir K. Wood

I am very much indebted to my right hon. Friends for the opportunity they have given me of saying a few words about the position as we find it on approaching the Purchase Tax. I recognise that there has been a good deal of give and take on both sides in our approach to this tax, and I hope that hon. Members in all parts of the Committee will recognise that I have done my utmost in trying to meet them, while, of course, retaining the tax in its modified form and not prejudicing it in relation to the amount of revenue which I must obtain. I appreciated particularly the criticisms that were made of the tax from the point of view of the poorer people, and it was for that reason that, when my right hon. Friend first approached me and made the suggestion, I said at once that I would be prepared to exempt altogether the clothes and boots and shoes of children, because I felt that otherwise the households having the largest number of children would feel the pinch most. I have also tried to meet hon. Members on the constitutional aspect of the matter. If there is any question of making an alteration in the rate of the Purchase Tax—not that I am contemplating it—it will have to come forward in the Finance Bill in the same way as any other proposal, and not be dealt with simply by Treasury Order. Another important alteration which I made, again following suggestions that were made to me, was to abandon the single tax and to make a sharp differentiation in the two rates of taxation. I hope that this also has gone some way towards making the proposal more acceptable to hon. Members.

Having done these things, I know that the Committee will do its best to support me—as I was glad to hear both right hon. Gentlemen say—in endeavouring to get the necessary revenue, which it is so vital to obtain. I dare say that hon. Members have noticed that, at any rate in some quarters, I have been blamed for not introducing taxation proposals of a much more severe character. I hope that those hon. Members who have joined in blaming me in that way will come to my assistance by seeing that nothing is done to impede me in the particular effort in which I am engaged at this moment. It has been one of my recent experiences that, although a good many newspapers and writers say I should tax the nation much more severely at this time, when we come to discuss specific proposals all of them have their own ideas, and the last thing they want to do is to tax the particular thing which happens to be a favourite of theirs. For instance, after looking at the Amendments on the Paper, I must say that if I do not have the support of all parts of the Committee, practically the whole of the yield of the Purchase Tax will go.

If, for instance, I accepted an Amendment to exempt clothing, I should be exempting a taxable field of over £315,000,000. If I accepted an Amendment to exempt medicines, it would mean the loss of a taxable field of £20,000,000. Everybody has his own idea. Some people want to exempt medicines, and others want to exempt clothes; and so the process goes on. If I exempted tissues and fabrics and domestic textiles, it would represent a taxable field of more than £50,000,000. If I exempted domestic and office furniture, I should lose the revenue on a taxable field of £25,000,000. If I accepted another proposal on the Paper and left out everything in the second column of the Schedule, I should lose a taxable field of more than £350,000,000 The Committee will not expect me to accept Amendments of that kind, for obviously if I did so the tax would have gone; and therefore, I shall look to hon. Members, however they may feel about the tax in respect of specific articles, to support me generally in the matter.

There is another matter to which I want to refer in order to give to hon. Members who will be moving Amendments some indication of how I am thinking about the matter. The suggestion has been made that taxable goods bought by certain bodies, such as local authorities, should be free of tax. The principle of my proposal is that taxable goods should be taxed always, unless they are bought by a manufacturer for manufacturing purposes or by a wholesale merchant for resale. If we once accepted the principle of having certain privileged buyers— whoever they might be—of taxable goods, I ask the Committee where we should draw the line. For example, if I accepted the proposal that local authorities should be privileged buyers, I should have to accept it in the case of their hospitals— and then I should be asked, why not for the voluntary hospitals? And if I accepted it for them, why not for other institutions supported by voluntary contributions? If I accepted it in respect of the schools of local education authorities, I should, in equity, have to accept it for tin public schools, and exempt articles purchased for their use. Once I was on that slippery slope, I should have to exempt goods bought by private preparatory schools, and then by all other educational establishments. If I were prepared to do that for that large body of people, then—since charity begins at home, I suppose—I should have to exempt all similar goods purchased by parents for the education of their children at home. Hon. Members will see the impossible position I should get into if, in connection with a tax of this sort, I set up a sort of privileged class of buyers.

There is only one other observation I want to make. Apart from Amendments relating to the main groups in the taxable field to which I have referred, there is another set of Amendments on the Order Paper that refer to various articles which hon. Members think should be added, not as a class of goods but as particular goods, in one column or the other. I hope that in some of the cases of that kind I shall be able to meet hon. Members, but I say frankly that I must retain the revenue which I want to raise by this Purchase Tax. With regard to newspapers and books, the pet things of my right hon. Friend opposite, which he does not want to have taxed, I will give careful attention to what may be said in the course of the Debate; but here, again, I hope hon. Members will realise that these things represent a substantial taxable field, and that the question of revenue must be considered. Having given those general indications, I hope the Committee will see that I must, in the position in which we find ourselves in regard to this tax, retain the main bulk of revenue, but I am prepared to give careful consideration to any Amendment which may be moved.

Mr. R. C. Morrison (Tottenham, North)

When the right hon. Gentleman made his Budget statement, he estimated that the revenue from this tax would amount to £100,000,000 or £110,000,000 in a full year. Will he tell us whether the modifications that have been made in the tax will affect that figure?

Sir K. Wood

No; I made that estimate after I had made allowance for the changes which have been made. It is an estimate for the proposals in the Bill as they now stand.

Mr. Levy

Has the Chancellor considered the anomaly which exists with regard to tissues? My right hon. Friend made a pledge that juvenile garments should be exempted, but has he considered the anomaly which arises in regard to thrifty housewives?

Sir K. Wood

Yes, Sir. I hope to satisfy my hon. Friend, and I shall look to him for his support in this and other matters.

7.41 P.m.

Mr. Liddall (Lincoln)

I am opposed to Clause 18 standing part because I respectfully suggest that a better alternative is offered in a new Clause standing in my name on page 114, but I understand that it is not to be called. It proposes to put a tax on retail purchases instead of on wholesale purchases. If the Chancellor of the Exchequer would be willing to have a Stamp Duty of 25 per cent., it would eliminate many difficulties. For instance, a farthing stamp could be fixed in respect of a penny sale at fixed-price general stores. In this way he would ensure the collection of vast sums of money at no cost whatsoever.

The Temporary Chairman

The hon. Member must not discuss anything to do with the proposal, which comes later. He can only discuss the Clause now before the Committée.

Mr. Liddall

I am explaining why it is I am in opposition to this Clause, and I suggest that the better alternative is contained in the new Clause which stands in my name on the Paper.

The Temporary Chairman

That is exactly something to which the hon. Member cannot refer.

Mr. Liddall

I must accept your Ruling, but may I say that since this new Clause has not been accepted I could give countless instances where, if this Clause is agreed to, the Chancellor will be faced with difficulties which he will be unable to overcome? No doubt he has foreseen that by the new Clause which he has seen on the Paper he could better overcome those difficulties. I will not press the matter any further. I hope I have shown that, although the new Clause cannot be called, I wanted it called, and I wanted to see this tax placed on retail goods instead of on wholesale goods.

7.43 p.m.

Mr. Barnes

It was not my intention to intervene in the Debate on Clause 18, but I do so in view of a reply given by the Chancellor of the Exchequer to the comments of my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) and the right hon. Gentleman the Member for South-West Bethnal Green (Sir P. Harris). It appears to me that the Chancellor, in replying to these appeals, has given a wrong construction of the concession he has made, and that he has prejudged the Amendments which will have to be considered later. I invite the Committee at this stage, bearing in mind the comments of the Chancellor of the Exchequer, to review the main facts of this Purchase Tax as proposed under Clause 18. The Chancellor of the Exchequer, in reply to the hon. Member for North Tottenham (Mr. R. C. Morrison), re-emphasised the sum of £110,000,000 which he hopes to collect from this tax after the concession has been made in regard to children's clothing and hoots. We have not in any way underestimated the value of that concession. The change in constitutional practice is a valuable one. But the more I examine column 1 and column 2, the more I am convinced that the differentiation in the tax is no concession in fact, and that it is more likely to delude this Committee and the public generally as to what this tax means.

I was very interested to find that the Chancellor has confirmed an examination I have been carrying on which discloses results which I think would be unexpected to this Committee. He mentioned that if he eliminates clothing, he takes out of the £600,000,000 field of taxation a sum of £315,000,000. That at once indicates what an illusion the first column represents. After consulting taxation and trade experts, we have arrived at a deduction which, if it was not so remarkable, I would hesitate to give to the Committee. It has been confirmed by the Chancellor himself with regard to the figure covering garments. The taxable field in the Chancellor's words covering wholesale goods is £600,000,000, and he aims at collecting from that £110,000,000 of revenue. The first thing that emerges is that this is a tax of 3s. 8d. in the £ on wholesale prices. I ask the Committee whether, if they were faced with that clear issue of imposing tax in the ordinary way at the rate of 3s. 8d. in the £ on wholesale prices, they would accept it? I suggest that such a proposal would never go through the House of Commons. I suggest that if it had been levied in the ordinary way, the proposition would not have stood 24 hours' discussion. It automatically advances wholesale prices by 18⅓ per cent., but even that does not disclose the whole of the situation.

The average person who looks at column 1 and notices the vast number of items mentioned would imagine that the bulk of revenue was to be raised on what the Chancellor classifies as luxury commodities. In column 2 there are only four or five groups of commodities mentioned, and one would naturally assume that the Chancellor was letting off household and domestic necessities comparatively lightly with 12 per cent. But that is not the case. As far as I can gather from examination, if you take every £9 spent within the £600,000,000 subject to Purchase Tax, either at one-third or one-sixth, £8 of that £9 expenditure will fall within the second column and will pay the tax of 3s. 8d. in the £. That means that of every £9, £1 6s. 8d. will be collected in the second column on the basis of the one-sixth tax. Only 6s. 8d. will be collected in the first column.

When one analyses the first column one finds that the Chancellor has put many commodities and articles into it which he will subject to a tax of 33⅓ per cent, but which are not luxuries. Whereas in the third column young children's goods are exempted, we find in the first column items like children's cots, bedding, pillows, pillow cases, sheets, blankets, quilts, bath towels, flannels, toilet soap, powder, pin cushions, vaseline, cream, hair brushes, tape and safety pins; so that every item affecting the baby's toilet falls into the first column to be taxed at 33⅓ per cent. When one analyses these things in detail, one sees that the Chancellor is really putting over a bit of a fraud. I do not feel that I can allow his comments on Clause 18 to pass without pointing these things out. It would have been rather difficult for me to get these figures in on Amendments, but fortunately the Chancellor, by his reply on Clause 18, enabled me to put the other side of the picture to that which he tried to present to the Committee.

7.52 p.m.

Sir Henry Morris-Jones (Denbigh)

We all realise the difficulties of the Chancellor in these days, and the speech of my right hon. Friend has confirmed what we know of his enormous task. We are anxious to support the Government in the proposals they make for taxation in order to carry on the functions of the State. Could I, however, appeal once more to the Chancellor to give us a lead on this Clause and tell us what he proposes to do with regard to the Schedules? There are all sorts of Amendments on the Paper for deleting practically every item in them. I take it that the Chairman will not rule out discussion on any item. That will mean lengthy and protracted Debates, and a large number of Members will be placed in a difficulty with regard to special claims that they have made, some of which are not worth considering, but others are serious. The Chancellor mentioned, for instance, the question of medicines. He has omitted food from the Schedules on the ground that it is a necessity, but surely medicine is a necessity of as much importance as food. I can see great difficulties with regard to that item in the Schedule. The Chancellor and the Treasury know now what items they will agree to exclude, and he has given an indication that there are some aspects of the question which he cannot consider because it would limit his field of revenue. Would my right hon. Friend give a general indication now of what he proposes to do with the Schedules in order to avoid a large amount of discussion and probably Divisions in the Lobby, and especially to state whether he is prepared to make concessions on the medicines of the people and on books and periodicals?

7.5 p.m.

Mr. Woods

The Chancellor in his speech seemed to be appealing for the pity of the Committee. He did not seem to be very enamoured of his job in putting this Clause across the Committee and the country. He must realise that when the effects of it begin to operate and men and women go into shops imagining that their necessaries of life are not included in this tax, and feeling how kind the Chancellor is, and then discover that prices have gone up and they have only a certain amount of money in their pockets, there will be a storm, and the right hon. Gentleman will be very unpopular, and will deserve to be. He has to find the taxation, but we contend that it could be found in a straightforward, honest, decent and equitable manner by taxing income. The day will come when all this juggling and setting up of additional machinery and squabbles by various interests will be cut out. Such questions as when a child ceases to be a child, what fabrics are luxuries, and so on, will be done away with, and people will have to pay directly according to their incomes. The Chancellor's job will then be much easier and he will be able to justify it and not have to apologise for it. The real argument he has used is that people will come to him representing special interests and urging the exemption of certain items from the tax, and that if he allows some to go through the sieve, it will leave a hole through which many others will slip.

In column 3 I find charabancs and omnibuses going through the sieve free of duty. If they do not make a hole big enough to let through a baby Austin, let alone a baby's cot, I do not know what will. Agricultural machinery also goes through the sieve and comes out intact. Agriculture is getting a good deal of help nowadays, and agricultural machinery is to go through without paying tax. When it comes to the machinery of the school child, pens and pencils and copy books, the poor father or mother has to pay on the tools of the child's industry. No doubt the average healthy-minded child would be grateful to the Minister if he would tax them out of existence altogether.

Sir Joseph Lamb (Stone)

Would the hon. Member compare them with agricultural implements in the sense of their being productive implements?

Mr. Woods

Certainly. Perhaps the hon. Member, who is always so anxious about agricultural interests, would like to treat them as wasting assets. A typewriter in an office is doing as necessary work as agricultural machinery or any other machinery. The point I am making is that the Chancellor is trying to get away with the plea that if we press him into making concessions on this article or that we shall in the end force him into the position of having to let all sorts of other articles escape the tax. The Chancellor cannot put that across the Committee at a time when he is ready to let charabancs escape. Why charabancs? Who makes the profit out of charabancs? Who uses them? Does he want the engineering industry to turn to the making of charabancs with the idea that they will then be exempt? If the Bill exempts such things as agricultural machinery and charabancs we believe that the baby's cot should be exempt, and that the country would not be the worse off, but the better. I hope the Committee will not be too much impressed with the argument of the Chan cellor that he cannot make a concession here or there because he would be on the slippery slope. He is right over the edge of the slippery slope, and it is for us to see that he does not go crashing to the bottom.

8.2 p.m.

Mr. David Adams

I am glad of the opportunity to oppose this Purchase Tax. I am rather surprised at the statement we have heard from the Chancellor, though perhaps it was the best he could make in the circumstances. He mentioned the concessions that he had made, particularly from the constitutional point of view. In my judgment it is presumptuous on the part of the Chancellor or the Treasury to ask for arbitrary powers which really belong to this House. It was no wonder that there was general opposition to that claim. Then he tells us that he has made concessions in the matter of children's wear, but an examination of the Schedule shows that there is a vast mass of things needed by the industrial workers which will bear the tax. It has been shown that in that taxable field of £600,000,000, no less than £110,000,000 will be subject to tax. When the Budget was introduced the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) reminded us on this side of the Committee that we were in a Coalition Government. That was a mild way of advising us to be prepared to repudiate some of our principles. If we assent to this tax we shall certainly repudiate the doctrine of equality of sacrifice, for this tax is most burdensome to the working class. It has |no relation to the income of the family or individual. Not only the breadwinner but every member of his family will be called upon to pay tax. It will definitely depress the standard of life where it is already low and outside the ambit of war profits.

It is a tax which will stride at the miner in Durham who for years has been unemployed or under-employed and obtains no benefits out of the war. The miners Durham and Northumberland are in for a period of substantial unemployment through loss of European markets, and there is nothing which the Government can do which can prevent that collieries in the county of Durham did not work last week and are to work short-time this week. There was an excellent commentary upon this tax to be found in a leading article entitled "Planning for Peace" in the "Times" on Monday: The national standard of living stands urgently in need of overhaul; for however depleted our resources there are some whose standard not only cannot be lowered, but must imperatively be raised. Even if the Chancellor were to make the concession that all the articles were to be put into the second lisit in the Schedule the burden would still fall upon the workers and not upon the richer section of the community. No one denies that the rich have benefited by war, but they will not spend their surplus upon necessities. The workers have no option in the matter. They cannot avoid payment of the tax, because any extra which they spend must be upon the necessaries of life. After the years of half employment which they have endured the miners in county Durham will be attempting to re-clothe their families, to replace the old bedding, etc., and they will be called upon to pay taxation when performing this very elementary duty to themselves and, really, to the community. The Chancellor asks us to remember his difficulties. We do remember his difficulties. Undoubtedly it would have been equitable, if he must have the money immediately, to obtain it through a graduated Income Tax. No one could cavil at the justice of that. But in my judgment the Chancellor is bound to be acting inequitably until he introduces a capital tax, not a capital levy once and for all, but a capital tax that would mean that each year the capitalist would hand over a certain number of his industrial shares.

The Temporary Chairman

We must not go into other taxes. The discussion on this Clause has already been sufficiently wide.

Mr. Adams

I bow to your Ruling, Mr. Williams, but the Chancellor did ask us to remember that he had to find the money and I was indicating a direction in which he could do so. Sooner or later that solution will have to be followed. I noticed in the Press this week that one newspaper had observed 30 large motor cars outside a West End night club at 11p.m. The newspaper mentions that there is a growing luxury in certain circles. It is clear that the people concerned should be reached by the Chancellor to help him to meet his requirements. Presumably, I am not permitted to enlarge upon this matter, but the disparity between the treatment of the well-to-do and the treatment of the working classes might well be looked into. Certain large companies have expressly stated that they will not lend money to the Chancellor at his 2½ per cent. I see that Sir Robert Kindersley says there is a serious fall in the purchase of War Bonds.

The Temporary Chairman

I am sorry to call the hon. Member to order again, but on this Clause he cannot refer to anything but the Purchase Tax.

Mr. Adams

I conclude by saying that it is very gratifying to notice that the Prudential and distillery companies have decided to employ some of their resources at 2½ per cent.; but large numbers of companies have decided not to do so and to wait for a higher rate of interest. At the same time, the trade unions—

The Temporary Chairman

I must ask the hon. Gentleman again to keep strictly to the Clause that we are discussing, which has nothing whatever to do with rates of interest or with trade unions.

Mr. Adams

I will conclude by stating that when the industrial workers have, through their unions, placed at the disposal of the Chancellor the whole of their resources free of interest, it is a commentary on the general conduct of the Government. Whether there is a Coalition Government or not, I will certainly proceed into the Lobby, if we are called to vote against this monstrous and unjust tax.

8.14 p.m.

Mr. R. C. Morrison

As a loyal and enthusiastic supporter of the Government I think the Government have made a profound mistake in proceeding with the tax. When the predecssor of the Chancellor took himself off to another place, I was hopeful that he would take his tax with him, but it was not to be. Therefore, I take the opportunity of saying that I think the Government have made the first major mistake since they were formed in proceeding with the tax, which will cause the maximum of irritation at a time when it is desirable to allay irritation. We have heard a great deal here about some organisation with which I am not acquainted, and called, I believe, "Cooper's Snoopers." It will have plenty of work to do when this tax is at work in going round and noting a considerable amount of irritation.

What shall we get out of it? Enough revenue to keep the war going for a fortnight, on the basis of present expenditure. For that return, we propose to start irritation and discontent throughout the country. I think I am not over-stating in saying that the working people of the country will probably be called upon to pay at least four-fifths of the tax. If the Financial Secretary to the Treasury or the Chancellor of the Exchequer think it will be possible to raise £100,000,000 or £110,000,000, from at least four-fifths of the working people without starting what everybody wants to avoid, a new move for increased wages which will cost the Government as much in the end as they will get out of the tax, they are confirmed optimists and will be badly mistaken. Your Ruling, Mr. Williams, of a moment ago, prevents my making suggestions at this stage for other methods that might have been adopted. It was surely not beyond the wit of Members of the Government and their advisers to find a more direct way of raising a considerable amount of money without raising the irritation and discontent that will be caused by this tax.

8.18 p.m.

Mr. Viant (Willesden, West)

I agree with the hon. Member who has just spoken that the Purchase Tax can be guaranteed to stir up more irritation than any other proposal. It has been ill-conceived. We agree and sympathise with the Chancellor of the Exchequer in the carrying out of his duty to raise enormous sums of money, but we feel that our support is being unduly strained when we are asked to support a tax so vicious in its application as the Purchase Tax. Some of us would have been pleased at an opportunity to go into the Lobby and register our opposition to the tax, except that, on all sides of the House, we have endeavoured to avoid, during the war, anything in the nature of dividing the House. The Chancellor of the Exchequer has not given a due measure of consideration to our position, and that of the hardly-pressed masses in the country, in including in this tax so many things which are needed in the ordinary households of the people.

In my constituency, many women are already anticipating the manner in which the tax will affect them. Quite a number of wives of serving men, who are already being compelled to seek public assistance to supplement their Service allowances, are already appreciating what effect this Clause will have upon the economic position of their homes and the hardship which it will have on their children. Had there been no other means of obtaining the money, one would have been able to sympathise with the position of the Chancellor of the Exchequer, but there are other avenues which could have been explored and proposals which would have had an incidence more equitable in its effect. No one can argue that the Purchase Tax will apply with equality to all sections of the community. The more hardly-pressed the family may be at the present moment the more harsh and hard will be the effect of this Purchase Tax upon their position. I am glad to have had the opportunity of expressing those sentiments regarding the inequity of this tax, and I rather wish that I had an opportunity of registering a protest in the Lobby.

8.22 p.m.

Mr. Glenvil Hall

I agree wholeheartedly with my hon. Friend who has just sat down, and for my part, if this Clause is taken to a Division, T shall have the utmost pleasure in going into the Lobby against the Government, because I think, as was said a few minutes ago by my hon. Friend the Member for North Tottenham (Mr. R. C. Morrison), it is a pity that the Purchase Tax was not taken to another place with the ex-Chancellor of the Exchequer. It is a bad tax; it will create a tremendous amount of irritation throughout the country; it will hit the poor much more severely than any other section of the people, and I am not at all sure that the Chancellor will get in as much as he says he will. It will also penalise those with large families. There is not the slightest doubt that poor people with large families will pay far more than other people who have smaller families or have no children at all. Not only will it bear hardly on the vast mass of the people, but it will also cause a good deal of heart-burning, and as far as I can see, it will be very difficult to work. To begin with, as has been said by other speakers, its incidence falling as it does upon the wholesaler means that the consumer undoubtedly will in many cases pay far more than the tax. It will be passed on by the wholesaler, and by the time it reaches the consumer far more than the original tax which goes into the Exchequer will be extracted from the pockets of the consumer.

With regard to furniture and children's clothes, it is true that in the Schedule, children's clothes, if made up, will be exempted, but I have yet to learn that if a mother buys the cloth to make up the dresses for her little girls, as many mothers do in my constituency, she will find that that cloth has been exempted from the tax. Perhaps the Financial Secretary to the Treasury, who is to reply to this Debate, will be good enough to say whether cloth so bought, in my constituency at any rate—and I expect in other constituencies—

The Temporary Chairman

There are Amendments on the Paper dealing with this point, and the hon. Member must keep away from such matters at the moment.

Mr. Hall

Of course, I bow to your Ruling. Perhaps I was trespassing beyond the bounds of the Clause. I will therefore content myself by saying—and I believe that the Chancellor of the Exchequer is already aware of it—that there is very considerable feeling in this Committee on this matter. That is shown by the number of Amendments which have been put down and which cover many pages of the Order Paper. I hope that "we shall fight this part of the Bill through to the bitter end, and that those who support the view which we are putting forward, will go into the Lobby with us in order to defeat what is an inequitous tax.

8.26 p.m.

Mr. Naylor (Southwark, South-East)

I am afraid that at this stage of the discussion there can be very little left that has not already been said, and therefore I need not explain that to avoid repetition I shall not detain the Committee, as we are all anxious to get into the Division Lobby and record our vote against this Clause. When the ex-Chancellor of the Exchequer introduced the Purchase Tax in the earlier Budget he said that this tax was imposed for two reasons. The first reason was that money was required, and he thought it was a good plan to raise extra money in this way. The second reason was an economic reason, which was that there was a desire to limit production which was not necessary for the successful prosecution of the war. The present Chancellor of the Exchequer also used the same two arguments, but neither of the two right hon. Gentlemen ventured to estimate to what extent there would be a limitation of production. Although, strangely enough, an estimate was given as to the amount of revenue that would probably be derived from this tax, yet on the economic side no suggestion was made as to the advantage to industry generally by the reduction of production in these departments and as to whether the one would balance the other. Perhaps, if the Financial Secretary is closing the discussion on this Clause, he will tell us how it will bring about a more economic distribution of the labour that will be displaced by the imposition of this tax—and not merely displaced, but deliberately displaced, because both Chancellors of the Exchequer have said that it is in the interests of general production in the conduct of the war to release the labour that would not be required, for the reason that consumption of the goods subject to the Purchase Tax would be greatly reduced and would thus release labour for more utilitarian purposes. For that reason I ask him for a little elucidation of the economic advantages of this tax.

It is obvious that the amount of tax to be put upon these commodities will increase the cost. That has been said over and over again. It will add to the cost, not only the amount of the tax, but the percentage of extra profit that will be made on the higher-priced article. It is really impossible, even for the Chancellor of the Exchequer, to estimate what revenue he will derive from this tax. I am certain that the estimate of the Treasury will be found to be far in excess of the actual yield. If it should happen, as it probably will in the case of many articles mentioned in the Schedule, that the demand falls away considerably, it will mean not only that the poor will have to do without certain things which they have hitherto regarded as necessaries, but that the estimate of the yield will not be fulfilled. I should like to know on what the estimate has been based, and whether the Financial Secretary to the Treasury is confident that it will be fulfilled. There is one technical point that I want to raise in connection with Subsection (2, a), which says: any purchase, made from a wholesale merchant or manufacturer. In the case of newspapers, for instance, who are the wholesale merchants, and who are the manufacturers? Is the tax to be imposed on the copies printed by the proprietors or upon the quantities sent out by the wholesaler for retail purchase? That makes a great difference in the incidence of the tax. The price of a newspaper, whether it is a daily or a weekly, is fixed. If you put the tax upon the source of production, the proprietor would either have to pay the tax out of his profits— in which case he would still issue the newspaper at its present price—or he would increase the price of the newspaper to the wholesalers. In that case, it would seem, the Treasury would be in some difficulty as to which was the right tap to turn on. Newspapers are in a separate class from the ordinary commodity, because the prices are fixed. The Treasury has to determine whether the proprietor, who is the manufacturer, has to pay the tax, or whether it is to be paid by the wholesale distributor to the newsagent. It makes a great difference in what happens to the completely taxed newspaper when it reaches the purchaser.

The Deputy-Chairman (Colonel Clifton Brown)

The time to deal with this matter will be when we reach the Amendment which deals with newspapers. I thought that the hon. Member was merely giving an illustration.

Mr. Naylor

I thank you for that direction, Colonel Clifton Brown; but I was really dealing with the actual wording of this Clause. I am trying, somewhat imperfectly perhaps, but diligently and to the best of my ability, to get some explanation from the Financial Secretary as to the application of the words in this Bill relating to purchases made from a wholesale merchant or manufacturer. I was pointing out the difficulty of distinguishing between the two possible sources of revenue. I am anxious to know whether the Treasury are going to impose this tax upon the newspaper proprietors, or whether it will be paid by the wholesalers. With these remarks, I wish to declare that, in company with many others on these benches, I intend to vote against this Clause.

8.37 p.m.

Mr. Malcolm MacMillan (Western Isles)

A chief characteristic of this Debate is that everybody seems to be unwilling to divide the Committee. A greater danger than that is the effect of dividing public opinion on such measures as this which affect people so directly in their everyday life. Another remarkable thing is that nobody on this side has said a word in support of the Bill, except my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence). It puts him and us in a difficult position if nobody on this side can support the Chancellor as completely as he asked us to do in his opening remarks. The Financial Secretary will remember the sincere good intentions of the Government in regard to the Prices of Goods Act. Already, it is clear that their intentions have not been fulfilled. A rise in the cost of living by something like 32 per cent, shows that the Act has not been effective. In addition to that rise in the cost of living, we are to have the effects, especially on the poorer classes of the community, of the tax that we are now discussing. We are driving people into bulk purchase of cheaper goods. It will put a premium on shoddy, to tax the better qualities of goods, as we are doing. We are forcing the poor into economies with which they are already too familiar. We are forcing them to try to give up buying the more and more expensive goods, and to purchase larger quantities of cheaper quality goods. We are thereby threatening the health standards of the people, which is a thing that we cannot afford to do at the present time. I do not think that the Chancellor of the Exchequer needs to be the least bit tender about taxing luxuries, if necessary, out of existence. The argument will admittedly arise that the revenue will disappear if people stop buying luxuries, but that is not so extremely important as the labour that is wasted on the production of luxuries, which could be better employed on the more productive needs of the war. If in a total war, we cannot use our labour more usefully than in luxury production, then we are still not waging total war in the economic field and in the field of labour.

The Chancellor promised careful—he did not say sympathetic—reconsideration of the tax on knowledge and on information. We have on the one hand set up an expensive and elaborate machine—the Ministry of Information—and we ought to be supporting that Ministry as much as possible by subsidising the supply of literature rather than taxing it. I understand the Chancellor of the Exchequer is particularly sympathetic in regard to giving reconsideration to the taxing of textbooks, and I hope that he will give it his most sympathetic consideration. There is also the question of technical books, which come under textbooks. The statement of the Minister of Labour to-day that we are to have hundreds of thousands of men and boys brought into the technical training scheme will mean that there will be a greatly increased demand for technical textbooks which, next to legal tomes, are one of the most expensive kinds of textbooks. I hope that he will give special consideration to the position of those who take advantage of the offer of the Minister of Labour and have to purchase such books.

We as a party, whatever the declarations of individual Members may be, must, in our hearts, be against any tax upon information, truth and knowledge. If a tax is put upon "Mein Kampf" and other fiction, and, equally, we are to tax the Bible, textbooks and other educational books, it will mean that there is something sadly wrong already with the Government's mentality. It is a financial censorship; an intellectual plague of darkness. I cannot imagine that the Ministry of Information could have been consulted as it ought to have been. Moreover, it affects this party more than perhaps any party in the country, because our people in general throughout the country cannot afford to pay such a tax. This may be only the beginning of a creeping barrage of taxation upon newspapers and books especially. The workers can afford least of anybody to pay a tax upon literature and upon informative and political books, so that the proposed tax is really in the nature of a political tax as well.

There is another aspect of this tax. Educational authorities which supply books to schools will have to meet the tax out of local taxation, and it will be a very serious burden upon them. I hope the Chancellor of the Exchequer will give that point sympathetic consideration too. Education has suffered terribly already in this war. In Scotland, at any rate, we are determined to resist more attacks on education. I must declare myself against the tax, but what we shall do about a division is an extremely difficult question. It is an absolute blackmail position at the moment. We are anxious not to divide this Committee; but we are anxious, above everything else, not to divide public opinion on this question at this time when the national interest is so important. And this proposal in general will have the effect of putting up prices, and for that reason it will largely penalise the poor. It cannot be pretended that it will hit people equally or that there will be complete equality of sacrifice. The rich will still buy what the poor can no longer afford.

There is one final point that I want to mention in relation to the effect of these taxes. If the demand for certain goods in common use is to be diverted towards the purchase, instead, of cheaper substitute goods, it will cause local pockets of unemployment and will put out of use men and plant in some areas and cause a sudden increased demand in other areas and directions. There will be chaos in areas producing certain of the commodities coming under this Bill.

8.45 p.m.

Mr. Ellis Smith

I do not intend to detain the Committee for more than a few minutes, as the ground has already been well covered, but we on this side of the Committee and others must realise that there is only one way to avoid paying for a war, and that is, not to have a war. The war is here, and therefore, our problem is, how to pay for it. I associate myself with hon. Members on this side of the Committee who have protested against this tax, and I want to confine myself to the main principles of it. My interpretation of the objects of the Clause, if I understand it correctly, is that they are, to raise revenue, restrict luxury and restrict consumption. I listened to the reply of the Financial Secretary on the Second Reading of the Bill very carefully so that I should be able to understand the object of this Clause. It is upon the basis of that reply that I have stated what I consider are the main principles of the Clause.

I agree to the proposed tax on luxuries. But what is a luxury? I also agree that consumption must be restricted, but will this tax achieve that object? Could it not have been done in a fairer way? I am convinced that the object of the Clause could have been secured in a more scientific way than is provided for under the wording of this Clause. According to the statement which the Chancellor of the Exchequer made when introducing the Finance Bill, £8 out of every £9 raised by this tax will come from the poorer sections of the community. In order to give a concrete illustration of how these principles will apply, I will take the case of a pair of boots. In September, 1939, they would have cost 10s., and in July, 1940, they would have cost 13s., but after the application of the principle contained in this Clause when the Bill becomes an Act that same pair of boots will cost 15s. 9d. I have here an extract from the "Observer" of 28th July, which contains interesting advertisements when one considers how our people will be affected by the putting into effect of the principles contained in this Clause. I see from the shop windows in Knightsbridge, which I passed this morning, and the advertisements in the "Observer," that model gowns are still being sold for £5, and that fur coats are being sold at £89, £98 and £130. Therefore, I have no hesitation in saying that there is something wrong with taxation when the wholesale price of boots can be increased from 10s. to 15s. 9d. as a result of the increased cost arising out of the war, and we raise no objection to that. But we do raise an objection to the increased cost of certain goods because of the application of the principles contained in this Clause. When it is considered that people can still afford to pay anything from £80 to £150 for a fur coat, and all that that means, we would be lacking in our duty, in spite of the fact that we are supporting this war, if we associated ourselves with a tax which will bear so hardly on the poorer sections of the community.

8.50 p.m.

Mr. Gallacher

I want to associate myself with the opposition to this Clause. There has been much talk about workers earning colossal wages, but workers who put in 90 hours a week have a right to the higher wages they obtain by doing extra work. But I represent a constituency of miners and agricultural workers. Is there any Member in this House who would suggest for one moment that the miners and agricultural workers there are getting more than a bare wage? Is there any Member who will deny that there is already poverty in my constituency? Any hon. Member who will come with me to my constituency, or go to that of the hon. Member for South Shields (Mr. Ede), will find men and women suffering from chronic poverty and paying in sweat, blood and tears for the bankrupt politics of the decadent ruling class of this country. Hon. Members may mutter, but it is true. Now, in addition to having to endure their poverty the burden of the war is being placed on these people. How many Members on the other side would like to work shift after shift for week after week for £3 or £2 10s. a week?

Mr. Levy

Is the hon. Member appealing to passionate emotions?

Mr. Gallacher

The hon. Member is very anxious that nothing of an emotional character should be said in this House, when we are discussing finance. He has made that plea on several occasions. He does not care how much emotionalism is displayed in stimulating workers to greater efforts or stimulating others to rob the workers, but when it comes to a question of cash he does not want any emotion. He has told us on another occasion that all he wants is a fair, just and equitable profit. That is his philosophy—profit. If the hon. Member, or any right hon. Gentleman on the Front Bench, had to work hard all the week in a dangerous occupation for £2 10s. and had to face a tax of this kind, would there be emotion? Plenty of it. This tax will increase the poverty of the ordinary poverty-stricken workers, while the wealth of the rich in this country is increasing. Do not talk to me about Income Tax and Super-tax. The facts are that the millionaires of this country are increasing in number. This tax is directed against the masses of the people. To those who have money to spare and need only write a cheque, it does not mean much if they have to pay a shilling or two or a pound or two extra. But the housewife does not take up a cheque book. She has to count every penny and finds it almost impossible to obtain sufficient food for her family. The hon. Member opposite who smiles may think this is a good joke, but he will probably spend as much on a dinner to night as some housewives have to spend for food for the week. It is easy for him to laugh and shut his eyes as to what is going on, but one of these days the hon. Member may get his eyes opened. Consider the language which has been used in this House about the workers and their big wages. This Clause implements the appeals which have been made to take away from the workers their rightful earnings. Consider that and then the miserable appeal made by Sir Robert Kindersley to the bankers to be patriotic and subscribe to Government loans—

The Deputy-Chairman

The question of subscribing to Government loans is certainly not in order on this Clause.

Mr. Gallacher

I am sorry if I have transgressed but I thought it worth while to try to compare the difference between the attitude adopted to the workers and that shown to the banks, who are piling up wealth all the time. The spokesman for the Government yesterday drew attention to the fact that the Nazis were using Gestapo methods and exploiting the masses of the people on the Continent, a-id that this could easily lead to revolutions. Hon. Members opposite are prone to speculate on revolution on the Continent. It seems to them to be very desirable. It reminds me of the well known lines of Russell Lowell: I du believe in Freedom's cause. Ez fur away ez Paris is. There are certain Members in this Committee, representatives of the Government and their supporters who are deliberately following the Nazi methods.

The Deputy-Chairman

The making of charges against hon. Members has nothing to do with this Clause. The hon. Member must keep in Order.

Mr. Gallacher

The Clause represents one of the methods of attack on the masses of the people of the country which will have repercussions not to the liking of Members opposite.

Question, "That the Clause stand part of the Bill," put, and agreed to.