PURCHASE TAX.

HC Deb 01 May 1940 vol 360 cc781-849

Twenty-ninth Resolution read a Second time.

6.4 p.m.

Mr. Foot (Dundee)

I beg to move, in line 9, after "House," to insert: either without modification or with such modifications by way of reduction as may be specified in the Resolution. I raise this point at this stage because it seems to me to affect the control of this House over taxation. It is proposed, as I understand the Resolution, that in future taxes shall be imposed on commodities by way of an Order-in-Council. As hon. Members know, this House never initiates taxation; it rests with the Government to do that; but it has always been part of the powers of the House to refuse to grant a tax and also to reduce the amount that is asked for. Under this proposal an Order will be brought forward, the House will simply have to say, "Aye" or "No," and it will have no power to reduce the amount in question. If, for instance, the Chancellor comes forward with an Order proposing that there shall be a tax of 50 per cent. on boots, it will be open to the House under the procedure as now envisaged only to accept or to reject the Order outright. It will not be open to any hon. Member to propose that the tax should be 25 instead of 50 per cent. We in this part of the House have frequently raised the question whether the House should have the power to amend Orders and Regulations. This is a slightly different question, because here we are dealing, not with ordinary Orders or Regulations, but with Orders which impose a charge.

I am glad to be able to say that I have a precedent in the Safeguarding of Industries Act, 1921. By that Act power was taken to impose duties by Order on goods coming into the country, but the power was specifically reserved to the House of Commons to modify the Order if it thought fit. On this occasion we ought to follow that precedent and keep that power in our own hands. I am aware that there is a precedent on the Government side. They can point to the Import Duties Act, 1932, which did not give the House power to reduce the tax which is placed on imports. Here we are dealing with an even wider range of taxation than was dealt with in the 1932 Act. We are dealing with taxation which will affect not only imported commodities, but a whole range of commodities; in fact, as we understand it, practically everything except foodstuffs. In that case, when we are inventing an entirely new instrument of taxation, I suggest that the House ought to keep in its hand the utmost power over the use of that instrument.

Mr. E. Harvey

I beg to second the Amendment.

6.8 p.m.

Sir J. Simon

As the hon. Gentleman has said, this class of question has been raised more than once before by himself and by others in that part of the House. The question now arises on the point that when the Purchase Tax Bill becomes an Act of Parliament an Order will be brought before the House for approval. I think it was by a slip of the tongue that the hon. Gentleman spoke of an Order-in-Council. In this case it will be a Treasury Order which will be brought before the House, much in the same way as certain other Treasury Orders are brought before the House. The House is asked to say after debate whether it approves or disapproves. That question is one which, as I apprehend, will be in order on the discussion on the relevant Clause in the Purchase Tax Bill when it is before the House, and this Amendment can well be moved then.

Mr. Foot

The reason I put the Amendment down on the Money Resolution is that it appeared to me, as there was a reference to the procedure in the Money Resolution, that an Amendment to the Bill might conceivably be held to be inconsistent with the Money Resolution.

Sir J. Simon

I have taken advice from the draftsman, and I have, I believe, the approval of the Table, when I say that I think the hon. Gentleman may feel safe on that point. I would much sooner we dealt with it then because it is difficult to discuss a thing which is so much in vacuo. I imagine that the House is expecting from me some statement on the general scope and plan of the tax, and I am prepared to give that. I should not at this stage be prepared to accept this Amendment, and as I think the hon. Gentleman may take it that there will be an opportunity of raising it on the Bill later, perhaps he will be so good as to let me say that I have taken note of the suggestion, that I should not think it was a good suggestion, and that it is certainly not one which I can accept at this stage.

6.11 p.m.

Mr. Pethick-Lawrence

I do not want to keep the House from discussing the proposals involved in this Resolution, but the point raised by the hon. and learned Gentleman is certainly one of great substance, and if this were the only opportunity of debating it, I should support his point of view, because it is a serious matter. Probably, however, the most convenient method would be to discuss it on the substance of the Resolution.

Mr. Foot

In view of the opinion which has been expressed and which, of course, I accept, that such an Amendment would not be out of order on the Bill, and in view of the fact that the right hon. Gentleman, while not giving me much encouragement, has at any rate taken note of the suggestion and will consider it between now and the Report stage of the Bill, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

6.13 p.m.

Sir J. Simon

I think that those hon. Members who have been able to attend to-day have done so largely because they expected to have some account on this Resolution of the proposals that we have in mind and which are described in the Resolution as the Purchase Tax. I will do my best to acquaint the House in more detail of what we propose. The idea in this country is novel, and I am not surprised that, as the reference I made to it in the Budget speech came rather late in a long performance, it has not perhaps received the clear understanding that I would have wished to create for it. There are really two propositions involved in this Resolution, and in asking the House to approve it I would ask them to consider these two propositions. Of course, they will not be finally decided to-day, for this Resolution is merely opening the way for a Bill which I will introduce if and when the House approves the Resolution.

The first proposition is that it is right in present circumstances that we should formulate a sales tax. The second proposition is that the sales tax should be that form of sales tax which is imposed and collected at the stage when the wholesale merchant sells to a retailer. Those are the two broad issues which are involved in the Resolution. I address myself first to those two propositions, and then, before I end, I will indicate in outline what sort of machinery will be necessary if we are to put those two propositions into effect.

The first question concerns sales taxes in general. They exist in many parts of the world. They have beer, applied, and applied with success, in the British Dominions; in fact, the Government of New Zealand, the Labour Government of New Zealand, probably provided me with my nearest precedent for a Purchase Tax in this form. Undoubtedly the tax has been found in many countries to be a useful instrument for collecting revenue, and an instrument which has this very important feature, that if it is used with boldness the amount of revenue produced is very considerable. Nothing is more distressing to a Chancellor of the Ex- chequer in these days, when naturally he receives a great many suggestions about taxation—and I always do my best to read every letter about them which comes to me—than to see how almost invariably the proposals submitted, many of which are very ingenious, would produce very little money. The sales tax, in some other countries, has produced a good deal of money, and I have no doubt the Purchase Tax, as I call it, may be made to do so here.

There are various forms in which the tax has been imposed, and I think I had better call attention to four different forms of the tax which, in one country or another, or according to different theories, have been proposed. There is, first of all, what is commonly referred to as the turnover tax. I have had endless letters asking, "Why don't you propose a turnover tax? "A turnover tax essentially means that you charge the tax at each transaction of sale and purchase in the history of an article. It follows that in a great many cases the same article will have to pay tax more than once as it passes from A to B and to C and D, and so on, all in the way of trade, until we finally get to the consumer; and the consumer, therefore, whether he knows it or not—and he does not always know it—is really bearing a very much bigger burden, and a burden which includes the element of a tax upon a tax.

I am myself entirely satisfied that a turnover tax as I have just described it would not be accepted by the commercial opinion of the country as just. Among other things, it has this objection, a serious one, that it would operate very unequally according to the way in which a particular trade is geared, or even as between competitors in the same trade, because it may be that in one instance a commodity ultimately reaches the hands of the consumer after passing through a series of sales and purchases, whereas if there are companies with a vertical construction in an industry or a particular branch of an industry, it may pass straight from the manufacturer to the retail shop and the customer and bears tax only once. There is a very large number of other reasons against such a tax which could be given, and I think we may take it that whatever we may do we shall not prefer a turnover tax to any of the other forms which I am going to mention.

The second form of tax under this general head which has attracted much attention, partly because people travelling on the Continent have come across it and also because theorists have written a great deal about it, is a tax upon the retailer as he sells the article to the consumer in his shop. Examples of it could be quoted from some foreign countries. This form of tax, too, is open to very serious objections. I am disposed to think that one of the biggest objections is that it multiplies the number of recorded transactions, all of which have to be taken account of, in an overwhelming fashion. There are about 750,000 retailers in this country, and in addition about 50,000 other traders who cannot be called ordinary shopkeepers—street traders or people selling in markets. If you say, "I am going to impose a tax in respect of which each one of these people must account," you are bringing into your charge an enormous number of detailed transactions which in a great many cases are done by people who do not keep accountants or cashiers or have records which show what they have been doing. I may say that, even if we confine ourselves to retailers above the Income Tax limit, it is estimated that something like 300,000 of them do not keep accounts, and our efforts to get a proper assessment from them are necessarily of a rather general character. Still, after all, that happens only once a year; but if every day of the week and every hour of the business day we had the small retailer put under a duty to record every sale and to add a tax, we should produce a most fearful state of confusion, in which it is very difficult to think that justice would be done. There are foreign countries which, I believe, are prepared to do it by sending an official into a shop to look round and say, "I assess you at so much. "Then, after whatever discussions are allowed between the taxing authority and the shopkeeper, the money is paid, and the shopkeeper is left to get it out of his customers as best he can. I do not think the House of Commons would ever agree to treatment of that sort in this country, and therefore I feel obliged to reject that method.

Then we are left with two other forms of tax either of which has a good deal to be said for it. One form is what is called a producers' tax. You impose the tax when the article is produced and at that stage only and thenceforth the article carries the tax. It is like an Excise Duty. The other form is the one which I have thought the best and which I hope the House will encourage me to pursue by passing this Resolution, although I would point out that that in itself will not decide the matter, because we shall decide it later when we come to the Clauses of the Bill. There are certainly very strong reasons which can be advanced if we are to have a tax of this character, and to impose it only once in the evolution of the work, for imposing it at the stage when the wholesale merchant is selling to the retailing customer. Complications will occur to anybody the moment I make that statement, and I am well aware of some of them; but that is the main idea. It certainly means imposing the tax at a stage at which we can be pretty sure that records are ordinarily kept, so that we can be sure that it is imposed with equality as between the man who provides the material information which is required and the person who is less willing to let us know what business he is doing.

It has also an advantage for this reason. If the tax is to do any good, it must be widely applied, but I think we shall all agree that, especially in the present circumstances of the country, it must not be applied to the export trade. If we were to apply it to the export trade, I am afraid that all the efforts of the Board of Trade and the Export Council to stimulate exports would be completely nullified. Though as a general rule I should certainly stand up for the proposition that my fellow countrymen ought to be treated at least as well in the matter of trading as anybody else, we must consider how essential it is to increase the export trade in order to provide ourselves with additional foreign currency for the purpose of carrying through the war. We see the necessity of doing our utmost for the export trade and we ought to exclude it from this tax. That can be done very well at the point where the wholesaler is selling to the retailer.

If we go further back and deal with goods in the stages of their production, there will be many cases in which it will be quite impossible to ascertain whether when they are made the goods will go out of the country or be consumed here. In the spinning of raw wool, for example, it is impossible to say whether the yarn will be going here or there, and therefore we must come to the point where something has been manufactured and is in more or less in the condition in which it will be finally dealt with—the cloth rather than the wool or yarn. We do get in our organisation of business the stage which may be described as the stage of the wholesale merchant where, as a matter of practice, we shall be able to apply the tax without bringing in the export trade. And we can put into the Bill an expressed relief for the export trade as well as securing it in other ways.

I have come to the conclusion, therefore, and it is not a conclusion in which I can be charged with any particular prejudice, because I do not know of any problem which is more free from that sort of bias than this, that the right stage at which to apply such a tax is the stage when the wholesale merchant is selling the article to the retailer who buys it from him. I think the tax should be applied at that stage on what one would call the wholesaler's price. There will have to be an adjustment in cases where the wholesaler skips the retailer and sells direct to the individual purchaser. In such a case as that, he very likely charges a higher price, rolling the wholesale and retail profits into one, and as we only want to attach to the goods their value to the retailer as he buys them from the wholesaler the Bill will contain a provision by which that adjustment can be made. But, broadly speaking, the thing which will be taxed is the value of the wholesale article as it is passing from the wholesaler to the retailer. Details about that will naturally have to be discussed on the Bill.

In order to carry through that scheme it is absolutely necessary to create a register. This matter has been the subject of the closest examination by highly-skilled people for some months. We want such a register for two purposes, which at first sight may not appear to have much to do with one another. It will only be the registered person who will have to account for any tax at all. If one retailer sells to another retailer, or one private individual sells to another, that will be quite outside the tax. It is only the registered person who will have to account for the tax, which will be a percentage as determined hereafter by the House on the wholesale value of the article. We must have the register in order to know the people who are to be charged; and not only must we have a register but there must be compulsory power to cause the right people to be registered. I noticed, in a Sunday newspaper which dealt with this matter under several heads, two observations. One was: One may well ask why the preparation of a register was not set on foot months ago. The answer is that you need an Act of Parliament before you can compel people to register. That is one purpose of which I spoke. The other purpose, which does not at first sight seem clearly associated with it, is that those who are on the register will always be able to buy, in the way of their trade, what they want. The transactions in which they will be engaged will never be those in respect of which tax will have to be paid, because the tax will be paid once, and once only. Once you have your proper register of people who have to account for the tax, those who are on the register can buy free of tax what they need—the utensils of their trade, their raw materials or whatever it may be—and you avoid all possible risk of duplication in the taxation or of taxation of raw materials as such.

Perhaps hon. Members now see how this matter is expected to work out. As I say, for the moment all that I am asking the House to do is to approve the Resolution so that I may introduce a Bill which will contemplate the imposition of this Purchase Tax and which will recognise that the Purchase Tax should be imposed once, at the stage where the wholesaler sells to the retailer. There will have to be definitions, and I can easily imagine difficulties arising in trying to draw a line between one stage and another. These matters have been very carefully considered, and I think they will be done in a way that is satisfactory. For instance, manufacturers in many cases also operate as wholesalers. They will require to be registered, and they will gladly register themselves, because that will make it plain that they have not to pay tax in respect of anything they buy. The way we can prove that is that there will be a registered number and a record, and the manufacturer will say: "I place this order with you. I am registered under the Purchase Tax, and therefore I am not accountable for any portion of the tax."

Although I have described this scheme in general terms, it will have to be very carefully worked out. I look forward very much to the whole scheme being made more completely practical and useful, with the assistance of friendly but informed comment, not only in the House of Commons, which comment will be valuable and will, I suppose, mostly arise at a later stage, when hon. Members have seen the Bill, but from associations of trades which will be affected. I told the House last week that I was setting on foot communications with the different associations concerned, because I desired to get their full help as to the best way in which to fit this tax into their trading structure and practice, instead of presenting them with something which had come out of the head of the Treasury and then finding very acute criticisms from business people. Such objections may be overcome by consultation at an early stage.

Therefore, my programme is this: I hope that the House will give me this Resolution to-night. I shall then introduce in the ordinary way the Purchase Tax Bill, which will be in dummy, just like a Finance Bill. I have already got the Commissioners of Customs and Excise, and more particularly one very senior officer, who has been secured for the purpose, to put themselves into communication with trade organisations. I have every reason to know that these organisations are willing to help in every way. We shall go through the suggestions and proposals, because they will greatly help us to see how far the suggested method and machinery of the thing conflict with trade practice and how far they will have to be adjusted in this or that respect. We think this is the right way of procedure.

Of course, the Chancellor of the Exchequer is always exposed to alternative criticisms, and is liable to be caught by either one barrel or the other. One criticism is: "You don't know your own mind, and you come here and speak in general terms. You ought to have the scheme cut and dried. What is the good of coming here and talking like this?" If you try to respond to that criticism, you are told: "This is a trade matter about which traders know very much more than you. If you will only bring these matters to those who know about them, you will be able to produce a much better scheme than you have." I have in mind the history of N.D.C. No. 1 and N.D.C. No. 2. I know that N.D.C. No. 2, which was my own production—it was accepted on its merits, of course, and not because it was my production—had the full help of those who were concerned and who could see how it might work. I hope, therefore, that I shall be able to come to a position this time in which I can settle my Clauses and circulate the Bill. Then we can have a Second Reading Debate in the ordinary way. The Committee stage will be the time to consider whether the Clauses need amendment. I hope by these means that we shall get this instrument approved, before the end of the Session, and that then we shall be able to see the nature of the arguments for imposing, a tax of this sort and the sort of yield which will be likely.

I have two other observations to make. Hon. Members now have the picture before them, as well as I can give it at this stage, and my first observation is that there must claim to be important exemptions to the application of a Purchase Tax. I formulated some of them last week in my Budget speech. I propose that this tax should not apply at all to food or drink for man or to feeding-stuffs in the case of animals. They should be excluded altogether. I think this exclusion will be generally approved. In the same way I wish to exclude fuel altogether. I do not propose to include within the tax at all any form of service as such. There are countries where attempts have been made to apply this tax to travel, but I do not think we should attempt to apply it to services, properly speaking, at all. In the same way it should not be applied to gas, electricity or water supply. These will be the principal exceptions, as the matter has appeared to me after such study as I have made.

Mr. A. V. Alexander (Sheffield, Hillsborough)

There is no question of its being applied to raw materials?

Sir J. Simon

It would not apply to raw materials purchased by producers because the tax would be applied lower down.

Sir I. Albery

Will it apply to petrol?

Sir J. Simon

I shall have to go into such questions. I am not giving a precise list of exceptions at this moment.

Mr. Lipson (Cheltenham)

Will it include clothes?

Sir J. Simon

I am certain that if we are to make this tax work at all, it must be because we have made a number of bold exceptions, taking masses of things to which you cannot apply the tax, and not because you go through the whole category and pick out things here and there. If you do this, the tax will not produce the substantial revenue which is one justification for imposing it. For example, it is extremely easy to say: "This will be a very good tax as long as you apply it to luxuries, but I do not approve of it if it is put upon anything else." You might as well abandon the tax here and now, in that case. I do not want to see burdens put upon things other than luxuries if I can help it, but this scheme cannot be limited to luxuries. To do so would not raise the money. The essence of a tax of this sort is that it should be widely applied. My hon. Friend has just mentioned clothes. I think that it will become necessary to include them, but that is a matter which we can discuss when we come to the Clauses of the Bill. The difficulty is that if you attempt to exclude clothes of every sort and kind, you make a most terrific opening.

Mrs. Hardie (Springburn)

Would the Chancellor consider excluding children's clothes?

Sir J. Simon

I am sure that the hon. Lady will know that it is not uncommon for a good mother to have a piece of cloth, out of which she makes a dress for herself and has something over out of which she makes a dress for her child.

Mrs. Hardie

A good mother thinks of the child first.

Sir J. Simon

Very well, we will put it the other way round. It is very illuminating, and I am delighted that the House is taking such a deep interest in this subject. I think that we shall be occupying our time to-day unprofitably if we discuss the possibility of this exception or that, because this matter needs to be very closely examined. Here we are taking only the Resolution, but I thought it was right to tell the House my own belief that this tax will be bound to apply to a wider range of things than to luxuries. If you attempt to make a series of exceptions, you simply cut out of the tax anything of real value for the purpose of revenue. A further observation which I should like to make is that I regard the tax at the present moment as specially valuable for a reason which has not directly to do with taxation. Indeed, I would go so far as to say that, if we were living in ordinary times, I might see such general objections to certain applications of the tax that I should not be prepared to go any further with it. We are engaged, however, in a tremendous struggle, and one essential thing is to limit civilian consumption. It is no good pretending that we all want to win the war unless we are prepared to face that problem fairly and squarely.

It is greatly to the honour of many men in this country, whose natural instincts are all in favour of championing the cause of those who have not very much to spend or who work for wages with their hands, that they do recognise those facts. It is one of my main concerns and responsibilities that we cannot prevent and contribute to preventing the constant and unrestricted rise of prices unless, in a time like this, when there are enormous additional demands for supplies for war purposes, we succeed in controlling and keeping down expenditure on the demand which is put forward by civilians. The greater part of the civilian demand is for things which most of us regard as quite reasonable, and when one talks about shutting down that demand, it cannot be simply the shutting down of the demand for luxuries. That would not produce anything like the effect which is expected. Shut them down by all means, but we have to apply a very hard rule for the purpose of adapting our economic forces so as to advance victory in the war. Therefore, while, of course, we shall do everything we can to see that we do not unnecessarily impose any burdens, it is my duty to tell the House that I am certain that, when hon. Members examine this tax they will find that, in the nature of things, it has to be widely applied, and that, if we try to make exceptions at every point, we shall destroy the real quality of this tax.

I hope I have succeeded a little better than perhaps I did at the tail end of my Budget Speech in making plain the nature of this proposal. What I am suggesting is not that I should answer everything now, although I have a great deal in my head as the result of having studied this plan for some time, but that the House should give to me the authority, which it will give by passing this Resolution, to introduce this Bill. I hope to present it to the House in a form which has been examined and helped by these trade associations which are ready to serve. When that happens the House will have the freest opportunity on the Second Reading of saying whether or not this scheme is one which we ought to include in our armoury of taxes. As for the way in which the tax will be applied, it is plain that we must apply it in this way. We cannot by passing the Purchase Tax Act on a particular day provide that when the Royal Assent is given the tax shall start. If we did anything of that sort, there would be a forestalling of the most prodigious character all over the country. [Interruption.] The right course, I think, is that when the machine has been approved in the House of Commons the Treasury should make an Order and that Order should be brought to the House. I cannot make an Order and bring it here the following morning—I must have a gap of two days or so—and then we must face the question whether we are prepared to apply that tax then and there at the rate proposed. That would be the most satisfactory way in which to apply it.

The right hon. Gentleman said that it is possible that even already the shadow of the tax is having an effect. I hope a great deal will be done to discourage that, because the only justification for imposing a burden of this sort—and it is a burden—is that it provides a big contribution for the purpose of helping to fight the war. There is no other justification at all. I think that the method which I have proposed, imperfect as it may be, is the best method which can be adopted.

Mr. Barnes (East Ham, South)

Can the Chancellor indicate whether he has any figure in mind which he expects the tax to yield?

Sir J. Simon

That depends on the rate which will be applied. If one has special means of studying the trade figures it is possible to form a rough view as to what will be included, and then one can see the sort of rate which has to be applied to give a particular result. If the tax is applied only once at the right rate, it would have to be not a small, contemptible rate but something substantial. When I say something substantial, I have not got in my mind what it should be, because I would very much sooner wait and see the result of the deliberations which are going on.

Mr. Denman (Leeds, Central)

The Chancellor has talked of a rate of tax. Does he wholly rule out differential rates of tax, so that the more luxurious articles are at a higher rate than the other articles?

Sir J. Simon

The passing of the Resolution will not affect that question, which will remain open. I myself think that there will be a great difficulty in having a differential rate. The first difficulty will be to devise a fair system, because many things are made of a number of materials mixed up together, and it will be an extraordinarily complicated business. There is a second difficulty which I am sure the hon. Gentleman will keep in mind. It is another form of the point which I mentioned just now. When you have a differential rate you really mean putting a heavy tax on the luxuries and a lower tax on the things which are not luxuries. It is a conceivable theory, but the result is that you are losing enormously in the actual result secured. I repeat, we have to face the fact that we have to limit consumption in the present condition of the war, and we shall not limit consumption if we merely say that no one is to buy grand pianos or velvet curtains. We have to limit the consumption of ordinary people. I am not shutting the door to differential rates. It is one of the questions, and a very interesting question, which we shall have to consider.

Mr. Denman

A surcharge Purchase Tax on luxuries is not ruled out?

Sir J. Simon

The hon. Gentleman has the Resolution before him, and no doubt there will be many opportunities of discussing this matter on another occasion. I think I may claim that I have interested the House of Commons on this subject. I am aware that there is plenty of criticism which may be made. I would ask the House after the Debate to give me this Resolution in order that I may take the next step and so that I may present the House with the Bill.

6.51 p.m.

Mr. Pethick-Lawrence

In common with other hon. Members in the House, I settled down to listen to the Chancellor of the Exchequer expounding the details of his scheme with a very considerable measure of interest. I am bound to tell the Chancellor of the Exchequer that I am very seriously disappointed, because I have not been enlightened to any considerable extent beyond what I knew beforehand. On the question of the details of the scheme, I agree with the Chancellor that it is just as well, if the House is presented with a new proposal, that it should not have it all worked out down to the last comma, because in that case there would be very little room for the House of Commons to improve it, but I think we are entitled to a good deal more filling in of the background than the Chancellor has given us. We do not know in the very least what is the magnitude of the sum that the Chancellor of the Exchequer has in mind. It may be £10,000,000, £30,000,000, £50,000,000 or £200,000,000. It is a different matter if Purchase Tax is to bring in a small sum like £10,000,000 or a large sum such as £200,000,000, or whereabouts between those two extremes the Chancellor's mind stands. We do not know—although I think the Chancellor gave an hon. Member a considerable indication—whether the tax is to be at a flat rate or a graduated rate. The hon. Gentleman, no doubt, wants to vote for the Chancellor's Resolution and wants the matter left open.

It is clear from what the Chancellor said the other day and from what he has said to-day that he has practically set his mind on a flat-rate tax. Those are two of the matters which are absolutely left in the air as a result of this further explanation which the Chancellor has given us to-day. But that is not the whole point. The House will, I think, have gathered from the Chancellor's speech that that was to remain in doubt to-day but that the Bill would fill in the details which we do not know, and that therefore we should have the usual stages of a Bill in which those details should be discussed and the House should be able to move Amendments altering some of the details. But if I understand this scheme aright, as we have it in this Resolution, we shall be nearly as much in the dark when we have the Bill and even when the Bill leaves this House, if it does go through at all, as we are at the present time, for the reasons which were given by the hon. Member who spoke from the Liberal benches and who has since left the House. The fact is that this tax is not to be imposed after discussion in this House at all. This tax is to come fully dressed in all its details from the Treasury, and all that the House will have an opportunity of doing is to say aye or no to the proposal in that form. That makes the passing of this Resolution a very serious matter. It is true that in a sense we are not being asked to give a blank cheque to the Chancellor of the Exchequer, because we shall have some opportunities later of saying whether the cheque as it is finally drawn meets with our entire satisfaction, but this is a very considerable departure from the ordinary procedure of this House. I believe that the only case where this method has been adopted before was during our discussions on the Imports Duty. It is one thing to introduce such a method in that case and quite another thing to introduce it for a lame weapon of taxation.

What we have to remember is this: By whatever name you call taxes, whether you call them Purchase Tax or a tax of some other nomenclature, you are really imposing indirect taxes upon individuals. It is no escape from imposing those taxes upon individuals by trying to camouflage them in the form of a Purchase Tax made at a certain stage in the transaction. I agree with the Chancellor of the Exchequer that we shall have to take some steps to prevent or discourage excessive spending if we are to allow the Government sufficient sinews with which to prosecute the war. The other day, after the Chancellor's speech, I said that I agreed with him in turning down what is known as the Keynes scheme, but I would also say that the Keynes analysis, as distinct from his scheme, has a great deal to recommend it, and I think the country owes a great deal to Mr. Keynes for the very penetrating analysis which he has brought to bear on this problem. But that is not saying that we can accept the proposals which are put forward here. When the Chancellor of the Exchequer first brought them forward I was very loath to take up a decided view. I wanted to examine them carefully and I wanted to give the Chancellor the benefit of the doubt, but nothing that he has said has inclined me to be favourable to his proposals; on the contrary, the more I think about them the more I find myself in general disagreement with them. I can see no ground that would justify me in recommending to my hon. Friends who sit on these benches that we should give our support to these proposals. What are the main grounds on which I come to that opinion? The first ground is that by the Chancellor's own showing this will be a regressive tax. A flat rate will press upon different sections of the population in inverse proportion to their income. I object essentially to regressive taxation.

The Chancellor says that you cannot confine the tax to luxuries. I am not prepared to dispute that. What I think the Chancellor fails to see is that there is more than one division in looking at the whole range of commodities. You cannot put luxuries on one side and vital necessities on the other. There are at least three sections, and perhaps four. You start with vital necessaries, which have to be paid for by the poorest as well as by other sections of the population. Then you come to unnecessaries, or things which people can do without, but which most people want to have. Then you come to articles which may be described as semi-luxuries, comforts and pleasures which people can certainly be asked to go short of in war-time. Finally, you come to articles at the top of the scale, which we call luxuries. It is quite clear that if you confine yourself to those at the very top of the scale you will not cover a very wide range, but if you take semi-luxuries, and, still more, if you take what I call unnecessaries, you have a very wide range. But if you come right down to the articles which are necessaries, you are taking a very grave step. The Chancellor has told us quite frankly that, as far as he can see, he will have to come very low. I presume that he will include household requisites and other essentials. That means that the tax will be borne by the poorest of the poor, those whose incomes are already below the poverty line.

If there is one thing which we on these benches will not support, it is addi- tional burdens on that section of the population. I do not want to weary the House by going over ground with which it is already familiar, but we have the well-known statement of Sir John Orr that a large proportion of the people of this country—he puts it, I think, at 30 per cent.—are under-nourished because their incomes are insufficient. If this tax is to put an additional burden on the necessities of life, it will drive down the health of those people. We shall not stand for that. As the tax is now disclosed, we cannot agree to it. It will send up the cost of living, not only in respect of those things which people can do without, but in respect of those things which they cannot do without. We have agreed, without a Division and in very short time, to all the other 28 Resolutions. There has not been a single voice raised against any of those Resolutions, although we know that there are people, who depend upon us to make their views heard, who will be seriously affected by some of them. But when it comes to taxing the necessities of life, we cannot take that attitude.

The Chancellor says that this tax is to be raised at the point where the wholesaler sells to the retailer. If he chooses that method he must take care that the public are protected against exploitation. I presume that he has some plans for doing that, although he has not indicated any to us to-day. What guarantee have we that the retailer will not make his profit on the tax as well as on the article? In fact, the retailer is likely to have considerable argument for taking that course. One of his arguments will be that he will have to lock up additional money in finding the tax before he sells to the customer, because I gather some of these articles are not like tobacco, which is sold quickly by the retailer. Many of the articles may be kept in stock by the retailer for considerably more than a twelve-month. The retailer will demand recompense for that. He will say that one of the objects of the tax is to reduce total sales, and inasmuch as he has to meet his overhead charges for the total quantity of his sales, and inasmuch as his sales will be fewer, he will have to make up his profit on those sales that he makes, so that, whatever money is collected by this tax, we fear that the purchaser will have to pay a good deal more than the Government receive. That, to us, is a very distressing idea, which makes this tax an undesirable one. There is a provision in this Resolution which may be capable of some simple explanation, but on which the Chancellor himself did not touch. It has rather puzzled some of my hon. Friends, and I hope that before the Debate ends some explanation will be given. The Resolution reads: provision shall be made for changing a tax in respect of purchases of goods from wholesale sellers— that is quite understandable, but then it goes on: and in respect of such other transactions relating to goods as may be provided by an Act of the present Session.… Short of an explanation, those words might cover almost anything that the Chancellor might like to do. I expect that there is some quite simple intention behind those words, but I think the House would be unwise to give even skeleton powers to the Chancellor until we have had some limiting explanation put on their meaning. I come to a point which has been already mentioned. Paragraphs (b) and (c) of this Resolution take away from this House the right to criticise in detail the proposals when they have reached their final form. They hand over all power to the Treasury. As far as I can see, this is what can happen.

Suppose we pass this Resolution and the Bill—which I honestly do not think will give us much more information. That does not make anything operative. Then the Treasury decide that certain articles shall be taxed at so much per cent. The Government, on one of the days when Parliament meets, says, "Here is the whole thing, all written out and bound in vellum. The only thing left is to go into the Division Lobby on these proposals." Members of Parliament, as we have seen in the last few weeks, when they ought to be sitting on the Benches opposite are away in the smoking-room. We put up very convincing reasons why, in their proposed form, these Treasury plans are most undesirable. The Division bells ring. Members come in from the Smoking-Room and they vote, and that is the end. The tax is then imposed. There is no opportunity for reading next day what was said and of discussing or hearing opinions on the matter. One short vote, one Division and the whole tax will fall upon the people.

I am bound to say that on so important a matter as this, if we accept that procedure, which is inherent in this Resolution, we shall be giving up one of the essential functions of this House of Commons; we shall be abandoning our right to decide what individual tax shall or shall not be imposed. And mark you, it does not end there, because on Tuesday, 10th June, or whatever day the 10th June may be, the Government may bring in this proposal which the Treasury has formulated, and we may be called upon to vote. Members will come out of the Smoking Room and vote for the proposal. On 10th July the Treasury may propose to extend it to other articles, and to add 50 per cent. to the weight of the tax, and again a single vote will decide the issue. I realty do not think that that is right. If we in this House agree to that form of procedure, we are not serving the country. The Chancellor of the Exchequer seems to think that we can impose upon the populace of this country an omnibus tax with the least amount of detailed discussion by this House, and that in that way he is going to get away with it. He may do. I have seen the docility of Members opposite and the way they come in without having heard any objections. I am not speaking of hon. Members who are here now; they are only a mere handful of their party.

Mr. Lipson (Cheltenham)

That is not limited to Members on one side of the House only.

Mr. Marcus Samuel (Putney)

The right hon. Gentleman should look behind him.

Mr. Pethick-Lawrence

I am not complaining of the Members now in the House, but I am saying that proposals of the Government are carried frequently by a mass vote of people who have not heard the Debate. That is serious enough under the ordinary procedure of the House of Commons, when we have three or four stages. The seriousness is not so great then, because Members talk between the different stages and start understanding what is being done, but the thing is very much more serious when we are asked to dispense with the normal procedure of the House, as we are in this Resolution. My right hon. Friend the Member for Hillsborough (Mr. Alexander) says that it might easily be after 11 o'clock at night. I and my hon. Friends recognise that contributions have to be made to pay for the war from all classes, except those who are right down below the poverty line. We have acknowledged that in what has not been voted against in the early stages of these Resolutions this afternoon. We also recognise that a properly constructed series of taxes on individual articles, discriminating between vital necessities and unnecessaries—merely luxuries and great luxuries—would be a perfectly just proposal to lay before this House, and in the circumstances we would support such a proposal. But I cannot find it in my heart to recommend to those who are sitting with me on these benches that they should support this Resolution, which will open the door to the taxation of the necessities of life, and will indubitably drive up the cost of living. It will be open to grave abuse and will have to be carried through by a procedure which, if not wholly novel, is at least novel and revolutionary in the manner of its application.

7.17 p.m.

Colonel Sir A. Lambert Ward (Hull, North-West)

The right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) favoured us with the time-honoured gibe about Members who support the Government pouring out of the Smoking-Room and voting down the industrious and intelligent Members who have been sitting here throughout the Debate. If he would take the trouble to walk through the Smoking-Room towards the Library he would find just as many Members of his own party who also pour in when the Division bells ring and vote as ordered by their own Whips. If he would also look behind him and count the number of his supporters who have listened to his speech, he would find that their numbers are approximately 12 per cent. of the strength of his party in this House. In these circumstances I do not think that he was either just or fair in turning towards our benches and stigmatising our supporters as being neglectful of their duties.

I understand that any new suggestion with regard to taxation is bound to meet with a great deal of opposition, but although this form of taxation is novel as far as this country is concerned, other countries have experimented with it with a great deal of success for a very considerable time. In Canada a sales tax was instituted a considerable time ago. Although I stand open to correction, I think it was introduced to meet war expenditure, but it proved to be such a success that I understand that it has never been done away with since. There are many countries on the Continent, as anybody who has travelled on the Continent will know, where a sales tax is almost invariably imposed. But I must say, with due respect to my right hon. Friend the Chancellor of the Exchequer, that I cannot help feeling that the system they have in those countries of imposing this tax is better in many ways than the suggestion he has put forward to this House. There it is added directly to the bill which you pay to the retailed trader in the shop. It is either written on the bill—10 per cent., 5 per cent. or 7 per cent. as the case may be—or else a stamp is placed on every bill dealing with every purchase that you make. In my opinion that has the great advantage that it avoids any extra cost of financing the tax, which, the right hon. Gentleman said, might easily mean that the entire proceeds of the tax would not find their way to the Exchequer. The principal argument which he advanced against collecting the tax on these lines was the fact that it was said there were something like 750,000 retailers in this country. That may be true. There are also something like 5,000,000 Income Tax payers in this country yet that is in no way an argument against Income Tax being imposed.

But to get down to what this tax actually means. Will it mean an appreciable addition to the cost of living? What is hitting the people of this country at the present time is not the increased cost of absolute necessities such as bread, meat, bacon, milk or sugar, or anything of that kind; it is the additional cost of local authority and public utility charges. Rates, during the last two or three months, have gone up in various districts from 3d. to 2s., the cost of electricity in London has practically doubled and the water rate is up by something like 10 per cent. The cost of gas is rising in proportion. You cannot attribute these increases to any form of taxation which has been imposed. Taxation of this kind has an advantage in that it will not give any excuse, even to the most predatorily-minded local authority or public utility undertaking, for increasing their costs.

A little time ago the Chancellor of the Exchequer, in answer to a Question from the opposite side, admitted that the cost-of-living essentials, or necessaries, such as bread, milk, meat, etc., were being subsidised by the Government, to keep down the cost of living, at a cost of something like £60,000,000 per annum. The effect of this tax will be that the cost of subsidising these essentials will be met by a tax on what are, to all intents and purposes, non-essentials. The cost of subsidising bread, milk, meat and sugar, etc., will be met by a tax which is now proposed to be imposed on things which, although they may be necessary, are not absolutely essential. I cannot think of a better way of keeping down the cost of living than by subsidising essentials by taxing non-essentials.

7.25 p.m.

Mr. Barnes (East Ham, South)

I think the Chancellor of the Exchequer will agree that there is very widespread interest in the country regarding this proposed Purchase Tax. I do not usually find that the public are interested in the procedure of this House, but I was rather struck by the number of persons who commented on the fact that he was precluded the other night, by a point of procedure, from making what they anticipated would be his more informative statement on this proposed tax. I am confident that now he has had the opportunity of restating the position to the House of Commons, both the public, as consumers, and traders generally, will be very disappointed with his additional statement. Obviously, what the public wish to know is the percentage that is in the Chancellor's mind and roughly the amount he will raise by this new form of taxation. It is very difficult, apart from the attitude one might adopt on the principle of method, procedure, or incidence of taxation of this description, for anyone to come to a definite decision until the Chancellor discloses his mind on the matter. It is most regrettable that we should be in a position this evening of being asked to approve the principle of this tax with practically no more information than we had in the vague statement of the Chancellor when he introduced the subject in his Budget statement.

What is rather disturbing is the language which the Chancellor has used, both on 23rd April and again this evening. He has used language which suggests that he looks to this tax to supply substantial additional revenue to the Exchequer. Referring to the tax this evening he asserted that it should be applied with boldness. That suggests at once that he has some definite sum or percentage in his mind, and I think it would have been of advantage to the community if we had had that indication on which to form our opinion. In the circumstances we have to investigate the potentialities of this tax by an analysis of the range of goods and values on which it could possibly be levied, and I would like the House to consider for a moment the field of this potential tax in relation to the trading figures of 1937.

The Chancellor was very careful to-night to leave in our minds the impression that this tax is likely to fall over practically the whole field of commodities or articles that do not fall under the heading of exemptions. The total value of retail sales in 1937 was £2,830,000,000. The Chancellor has enabled us to obtain definite deductions from that sum by his exemptions. He proposes that all foodstuffs shall be deducted and—I am keeping to the 1937 figures as a definite year of values—the deduction of foodstuffs represents a figure of £1,360,000,000, drink £260,000,000,tobacco £160,000,000, petrol £25,000,000 and coal £65,000,000. In the retail value of sales there are excluded such services as transport, electricity, gas, water and so on. That means there is £1,870,000,000 from the total retail sales of £2,830,000,000. That leaves us with a potentially taxable area of £960,000,000 retail value. The Chancellor has indicated that it is his definite intention to leave this Purchase Tax on the wholesale price and if it is not levied on the wholesale price that figure of £960,000,000 must be reduced, on wholesale values, to a figure in the neighbourhood of £740,000,000 to £750,000,000.

The point immediately arises: Has the Chancellor 1, 5 or 10 per cent. in his mind? A 5 per cent. tax on an amount of £750,000,000—and after all a 5 per cent. tax would be a substantial tax on a whole range of commodities—would only yield £35,000,000 or £50,000,000. No one can face the problem of war finance which the Chancellor of the Exchequer is asking us to face without a grave sense of responsibility, but I submit that the House of Commons in considering a proposal of this kind, which can have repercussions in the community far outweighing the financial advantages, is not entitled to swallow the proposal without consideration. In fact, I think there is no more regrettable aspect of Finance Bills of recent years than these half-baked and ill-digested proposals which Chancellors of the Exchequer have put before the House, and which on examination have met with considerable resentment from the public and the traders.

I feel that in regard to finance matters hon. Members should accept a larger measure of independent responsibility than we do ordinarily in the work of our general legislation. I would urge that on matters of finance Members of Parliament should exercise the fullest degree of independent thought, judgment and courage, and so create a position in which the Treasury would not bring proposals before the House before they have been thoroughly prepared and digested and have some measure of support behind them. Taking the figure of 5 per cent. for our purposes of calculation we are faced with the possibility of getting £40,000,000 of additional revenue but also the creation of additional machinery of registration. Indeed, the process of registration in regard to the traders of this country has become utterly absurd. This will mean the compiling and maintenance of a whole series of fresh accounts which have no relation to normal business processes and methods. It will mean the checking of all these accounts. Take the position of a manufacturer who is selling to a wholesaler and has a considerable business, say, with a local authority over a whole range of contracts for uniforms and in regard to institutions for all kinds of soaps and towelling, and imagine the additional amount of accountancy which will be required for checking and going through all the hundreds and thousands of individual accounts. If we were dealing with a proposed tax which might of itself solve the major problem of war finance we might consider the desirability of this additional machinery, but this additional machinery is created by the Treasury just at a time when all the other processes in relation to Government policy are putting an increased strain on office organisations and accountancy staff.

Apart from the general range of foodstuffs in grocery departments which would be exempt, there are a vast variety of small but necessary grocery goods which possibly might not fall into the food groups and would come into the taxation groups. It is estimated that £37,000,000 of goods sold through grocery shops might very well fall within this tax. The value of women's clothing amounts to £168,000,000; men's clothing to £143,000,000; boots and shoes to £70,000,000; piece goods, like laces and curtains, to £67,000,000; furniture to £118,000,000; the whole range of hardware goods £75,000,000; drugs, including cosmetics, £148,000,000; sporting and travelling equipment £34,000,000; cars and cycles £50,000,000 and finally newspapers £50,000,000. While petrol would be taxed and therefore excluded, it is not clear whether cars and cycles would be excluded, but if they are excluded because they are not taxable articles you reduce the total figure and also the yield of taxation. Therefore, we are faced with the problem that the whole range of these articles would be subjected to this tax with all this cumbersome machinery, and, quite apart from the equity of its incidence, I associate myself with the remarks of the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) and say that the House of Commons should think twice before it passes this Resolution.

My view is that it should refuse to pass the Resolution and put the Chancellor of the Exchequer and the Treasury in the position that they must bring forward their Bill and submit much more definite information before we commit ourselves to the principle of supporting a tax of this kind. It is contrary to the general experience of taxation in this country. Hitherto we have proceeded on the well-tried principle that the Government of the day shall make out its case on each particular form of taxation, whether it is on the income of the individual or on some specific article; and the House of Commons has accepted the responsibility of saying whether the tax could be imposed without injury to the community as a whole. Now we have the worst possible aspect of the old Disraelian theory, that by indirect taxation you can tax the shirt off the workman's back providing he does not know the point at which the tax is being imposed. Under the advent of war the Chancellor of the Exchequer proposes to raise a sum which is not defined, by a method and procedure which are withheld from the House of Commons, and by a breach with the traditions of this House we are asked to say, not that a specific commodity shall be taxed, but that a whole range of goods which are consumed and used by the people of this country shall be taxed.

My second point is that this is contrary to the trend of public opinion in this House and outside. In recent years the trend of public opinion has compelled successive Governments to depart more and more from a system of indirect taxation on foodstuffs. It has been brought back again because of the exigencies of war. I am opposed to this tax, and I sincerely trust that hon. Members, before committing themselves to this principle, will compel the Chancellor to accept the responsibilities of his position, to put forward a case with regard to the sum he expects to collect, and to be more definite about the procedure that will be applied.

7.41 p.m.

Mr. Lipson (Cheltenham)

I hope the Chancellor will not get an easy passage for this Resolution. It is true, as was said by the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence), that we are not asked to-night to give the Chancellor a blank cheque, but we are asked to approve a principle, and if we pass this Resolution it will mean that we approve of the principle of this tax. I am loath to give the Chancellor that support. He told us that in introducing this tax, he had two objects: one was to raise Revenue, and the other was to stop consumption. The Chancellor cannot have his cake and eat it. To the extent that he raises Revenue from this tax, he will be stopping consumption, and to the extent that he stops consumption, he will not get his Revenue. Therefore, I feel he ought to make up his mind exactly what it is that he wants—whether he wants to raise Revenue, or whether he wants to stop consumption. From the point of view of the war, I suggest that perhaps the more important object may be to stop consumption, but my complaint against a tax of this sort is that it will stop consumption only by people of small means; it will not stop consumption by people who can afford to pay the price of the article when the tax has been added. I object to a discriminatory tax of this kind. If the Chancellor wants to stop the consumption of some articles, the fair and proper method is to do what he has done with certain articles of food—to ration those articles, and say that all shall be treated alike, whether they be rich or poor.

I should like now to deal with the second object of this tax, which is to raise Revenue. Has the Chancellor asked himself how much such a tax is likely indirectly to add to the cost of the war? One cannot get away from the fact that this is a tax on the cost of living, because the Chancellor has made it clear that it is not to be a tax on luxury articles only, but a tax on necessities. It is to be a tax of wide application. That is bound to add to the cost of living. If there are any further additions to the cost of living, the Chancellor will be faced throughout the country with a demand for wage increases, and that will be bound to mean additions to the cost of the war. What is the sense, on the one hand, of spending £60,000,000 a year to keep down the cost of living, and, on the other hand, imposing a tax which clearly will add to the cost of living? My hon. and gallant Friend the Member for North-West Hull (Sir A. Lambert Ward) suggested that the Chancellor would be able to provide the £60,000,000 to keep down the cost of living by the proceeds of this tax. That is indeed a case of robbing Peter to pay Paul. I cannot see any very sound financial sense behind proposals of this kind. This tax will fall particularly heavily on the family man. It will not fall anything like so hard on the single man as on the married man and the man with children, and the more children he has, the heavier will be the tax.

Mr. MacLaren

He will be given a family allowance.

Mr. Lipson

If the Chancellor proposes to provide family allowances, he will show that he has some intention of minimising the evil of this tax, but that proposal is not in the Budget, and as far as I know, it is not the Chancellor's present intention to consider it. We are told that the justification for this tax is that it will bring a big contribution towards the cost of the war, but I submit that it will add to the cost of the war probably more than it will contribute in Revenue, because through increases in the cost of living it will send up the wages bill and consequently the prices of materials required for the war, and ultimately that will add more to the cost of the war. It was suggested by my hon. and gallant Friend the Member for North-West Hull that the increases in the cost of living now are due to the actions of local authorities and to the increases in the cost of certain services. I submit that this tax will add to the costs of local authorities, because they have to maintain insitutions of one kind and another in which they have to buy articles that will be affected by this tax. This will add still more to the burdens which they have to bear. War or no war, this is a thoroughly bad tax, and though we are asked in the name of war to do a great many things, I hope the House will hesitate long before agreeing to the principle of a tax of this kind, which personally I cannot support.

7.47 p.m.

Sir Walter Smiles (Blackburn)

I disagree with my hon. Friend the Member for Cheltenham (Mr. Lipson). We are at war, and we have to raise the money somehow. I agree with the hon. Member for East Ham South (Mr. Barnes) about the office staff that will be required, but in war time, all office staffs are increased, specially those of people who have anything to do with Government contracts or the sale of articles to the Ministry of Food. That is one of the small evils of war. In the past, Chancellors of the Exchequer have been criticised for having no imagination. It has been said that they come to the House on Budget day, put a couple of pence a pound on tea and another shilling on the Income Tax, and with that, the Budget is finished. On this occasion, my right hon. Friend has shown some imagination. He knows that the money has to be found, evidently he has taken some trouble in examining what is being done in foreign countries with taxes of this sort, and he has proposed this tax. In most parts of the world, it is an accepted tax. Those hon. Members who have travelled abroad, in Italy, France, Canada, for example, know that when one buys things in various shops in those countries, there is a ticket on those things giving the amount of the tax. The Chancellor has made an effort to simplify this tax, which is being imposed for the purpose of the war.

In my consideration of the tax, I have arrived at very much the same conclusion as the hon. Member for East Ham South, although he has arrived at that conclusion by correct methods and I have arrived at a nearly correct answer by a wrong method. The way in which I look at the matter is that the Chancellor will not impose this tax unless he is going to raise about £50,000,000, for unless he raises that sum it will not be worth his while to create the trouble of putting on a new tax. There are in this country 45,000,000 men, women and children who will have to pay the tax, and it will mean about £1 a head a year. I agree with the hon. Member for Cheltenham that the tax will fall heavily upon the family man. That cannot be denied. We all have sympathy with thefamily—man, wife and three children, perhaps—with an income of less than £3 a week, who will have to pay perhaps £2 or £3 a year towards the tax. What I should like the Chancellor to do is to make a sort of graduated tax. He might be able, without very much more complication, to increase the tax that will be paid on luxuries. That is the primary object.

In the case of fur coats, for instance, there are people who pay £50 for one, and I have seen them advertised in the Press at prices going up to £1,000, although I cannot imagine who buys them and I cannot imagine more than two or three being sold in a year. At any rate I have never bought one, and I never intend to, even if I could afford it. But in the case of a fur coat costing £500, no one here would object to taxation of 500 per cent. Such an article ought to go to America where there are people who can afford to buy it. On the other hand, take the case of the little girl secretary who once a year goes to the sales and buys a coat costing less than £10. Is she not to have the enjoyment and the comfort of her new coat? One wishes her to be taxed as lightly as possible. Then there is the case of diamonds. We know that a lot of marriage rings and engagement rings are being sold now. One does not want to tax those comparatively cheap little rings which boys buy for their best girls. If it were possible to skip over those articles and to tax articles of jewellery costing £500 and amounts of that kind, no one would object to the very expensive articles being doubled or trebled in price. Indeed it would probably be a very good thing.

The hon. Member for Cheltenham mentioned motor cars, and the Chancellor of the Exchequer in the Budget speech said that since raising the horse-power tax, he had increased the amount of money which he received from motor cars, thus falsifying every prophecy that had been made when the tax was introduced. I assume that this tax will be placed on motor cars also, and the Chancellor will probably, as a result, get an even higher amount from the motor car industry than he is getting at present. A heavy tax on motor cars is one thing but I do not think any of us would be keen on taxing such things as bicycles, and certainly not bassinets at a time when we want all the babies we can get in the country. An hon. Lady opposite interrupted the Chancellor with a question about children's clothes. I do not want to place any charge on baby linen or children's clothes if it can be avoided, but it is desirable to tax luxury articles such as beach suits and if you had such a tax there is the possibility that someone might try to evade it by cutting a child's dress into a couple of beach suits. The suggestion which I make is that when the Chancellor brings the necessary legislation before the House he should try to graduate the tax, so that it will bear more heavily on luxuries and so much will not be required from the poorer people.

7.54 p.m.

Mrs. Hardie (Glasgow, Springburn)

I desire to point out the unfairness of this method of raising taxation. I do not dispute the fact that a large amount has to be raised by taxation at the present time, but under this proposal the poorer people, who have to spend a large part of their income on food and clothing, will bear an unfair share of the burden. Take the case of soldiers' dependants. I notice that in calculating the money required by working-class households there is a tendency to overlook clothes and household goods. An amount which will pay the rent and provide food is sup- posed to be sufficient for working-class people, and the allowances given to soldiers' wives and children are barely enough to do that. I had the pleasure of meeting in the House of Commons recently a number of soldiers' wives from the London district who came to ask for better allowances. I was struck by the very pathetic plea which they made about the difficulty of having the children's shoes mended. I thought that their request was a very humble one and showed how little these women asked from life. The only thing they seemed to think about was the mending of little cheap shoes—often hardly worth mending—so that the children would be dry-shod. Are such people to be taxed in providing the necessities of life for their children?

A number of people who have been unemployed for a long time have now got work. Is it fair that those people should be taxed when they go to buy the bare necessities of life? Take the case of a man who has been unemployed for a long time but has been able to scrape along on unemployment assistance, providing the food and perhaps paying the rent for the family without any surplus for clothes. When that man gets a job he needs new clothes and boots. The cost of those articles has already gone up. In addition to that burden, it is now proposed to impose this tax upon him. In the household of an unemployed person articles of domestic equipment will have worn out, and once the housekeeper gets a little money, she proceeds to replacenecessities—cleaning materials and so on—and to buy things like blankets and sheets for a family which has probably been shivering without any blankets for a considerable time. Is she to be taxed on the purchase of those articles? I am sure hon. Members must seethe unfairness of the position. It is no hardship to people who are moderately well off to restrict their purchases. We are told that this tax is intended to raise revenue as well as to restrict consumption but, as has been pointed out, it will not restrict consumption except among the poor people. I am sure the wife of any hon. Member here would not be prevented by the addition of a few shillings to the price, from buying a dress which she wanted. I am sure that the addition of 5s. or even 10s. to the price of a suit, would not prevent anybody of moderate income from buying a suit if he wanted it. The only people who will be restricted are the poor people who have to consider every shilling they spend.

There is another section for whom I desire to speak and with whose welfare I have always been closely associated. I refer to the young women workers. Many people think that the young woman worker does not need to be very well dressed, that she does not require stockings, shoes, gloves and all the rest of it, but any girl who is not properly and neatly clad will not hold down her job very long, apart altogether from her right as a woman to be as nice looking as she can be. Many of these girls have suffered wage reductions because certain industries, particularly in the distributive trades, are not doing as well as they did before the war. Already, the cost of those articles on which they must spend a considerable proportion of their income has increased. Stockings such as the average shop girl buys have gone up by about 1s. a pair, and in addition to that it is now proposed to place a tax on all these articles on which the average clerk, shop assistant and so on, has to spend a considerable proportion of her income. They have to do it. It is not only a question of choice. The wear and tear on the clothes of an individual who has to go to work every day is much greater than it is in the case of a woman who is in the home all day and who can wear a cheaper article and probably look quite nice in it. It is the people to whom I refer who will suffer most by this tax.

Another point which I wish to make concerns the method of imposing the tax. The Chancellor said it would not be possible to put the tax on the retailer and that the easier and better plan would be to put the tax on the wholesaler. I listened carefully to his suggestion that it would be difficult, with open markets and so on, to levy the tax on the retailer. I have had some experience of shop life. I spent about 15 years behind a counter and reached the giddy height of being a buyer, and my experience is that if you put a tax on the wholesaler, it means that the retailer will have to pay it on the goods, whether he sells them or not. The retailer has to lay in a stock. He may not sell it. The sale, particularly of ladies' wear, is a bit of a gamble. What will happen is that he will have to pay the tax on these goods whether he sells them or not, and to safeguard himself he will put a bit extra on the goods sold. Therefore, you will have a very wasteful tax by levying it in this particular way. Not only will you have the shop-keeper making profits on the tax, but the wholesaler, passing the goods on to the retailer will also make his profit. These points, I think, are worth considering by the Chancellor of the Exchequer before he brings in his Bill. I notice that once a man commits himself to a certain line of action it is very difficult to get him to change it, but perhaps if the Chancellor of the Exchequer considers these points before he brings in his Bill, it will help him to produce something which is more satisfactory. Indirect taxes are much more unfair than direct taxation. It would be better to levy Income Tax, even if you brought it down to a lower scale, so that people would know what they were paying.

8.2 p.m.

Mr. Orr-Ewing (Weston-super-Mare)

I was extremely interested in hearing the final words of the hon. Lady who has just sat down. I think all of us would like to be able to know exactly what the incidence of the taxation is to be, and equally many of us would like to know what the ultimate cost of this war will be. Until we know the one, it is difficult to determine the other. The main line of her argument was that she, in common with many hon. Members on the other side of the House, objected to a form of taxation which might, in her opinion, affect the actual standard of living, especially of the poorer classes of the community. I do not suppose anybody in this country would wish to see or would like to see a reduction in the standard of life of any section of the community. We have perhaps built up an artificial standard for ourselves, but I think we have to draw the line somewhere as to the point above which we may be forced to accept a lowering of the standard of living as the result of the brutality of war. Above that point, sometimes called the poverty line, and sometimes called the subsistence level, every single one of us must be prepared to face a reduction in the standard of living. Below that point, obviously, every single one of us would struggle and do our utmost to see that the actual subsistence line is maintained. In all fairness we must try to determine, in our own minds, where that dividing line is.

I should like to feel that this form of taxation was coupled with some form of rationing of necessities—one could quote as an example apparel, clothing, including boots and shoes. It is surely possible to evolve a system by which, in conjunction with a tax of this sort, we could ascertain what the different members of the community will require by way of cheap supplies of necessities, and, having made an estimate and arrived at a reasonable amount which people should be able to buy at a cheap price, could we not also evolve some form of standardised production? But that standard production cannot be economical, and cannot be at the lowest possible price level to the consumer unless we have some conception of what the demand will be. Obviously, if the present price of a suit of clothes is above the price at which it need be, and if we can reduce that price by some form of rationing or standardisation, then the ultimate cost of that same suit, with the tax added, need not seriously be increased.

I hope we shall have some hint from the Treasury Bench to show that this Purchase Tax is not an alternative method of reducing consumption, but that it is a method, coupled with a system of rationing, whether that rationing is carried out through the consumer—that is to say, limiting the amount the consumer may buy—or whether it is a form of rationing carried out by limiting the amount of raw material available to the manufacturer—telling the manufacturer that he may turn out so many boots and shoes of a standard type at the cheapest possible rate. I believe this tax, serving this dual purpose, would better serve if it were coupled with some form of standardisation of production of necessities, and some rationing, either from the consuming end or the producing end, by the supply of raw materials. After all, that was only one purpose the Chancellor of the Exchequer mentioned as being inherent in the Purchase Tax. One was the limitation of consumption which is essential unless prices are going to rise and to be forced up by an increasing demand on a limited supply, and the other was to raise the largest possible revenue in order to enable us to prosecute the war with the greatest possible efficiency. If we can achieve the raising of this larger amount of revenue without oppression to that particular section of the community which lies below the line I have mentioned, and without oppressing any section of the community which cannot afford to be oppressed, while at the same time asking those who can afford it to make this contribution, we shall have achieved something which is not only a financial benefit—

Mr. Ede (South Shields)

It is a miracle.

Mr. Orr-Ewing

This is by no means a miracle or outside the realm of possibility. With careful thought and organisation I believe this dual purpose can be achieved, and that in achieving it we shall be getting something more than the actual provision of cash to enable this war to be carried on as hard as we want to see it carried on. There is no limit to the energy with which the whole House wishes to see the struggle carried on. We shall achieve also the purpose which inspired our entry into the struggle, which is the realisation of the necessity, if we are to live up to the high ideals which we have, of being prepared to sacrifice something if we can afford to do it. What I believe upsets hon. Members opposite more than the suggestion of the tax itself, the tangible or visible effect of the tax, is the suspicion that those who cannot afford, literally in flesh and blood, to give up any more are being asked to do so as a result of the tax. No purpose can be served by attempting to apply a tax which will drive out of existence one section of the community and it is going rather far for hon. Members opposite to make that intolerable insinuation with regard to this tax. After all, the Chancellor of the Exchequer, to whatever party he may belong, surely has the confidence of the House to the extent that he cannot be considered either a complete brute or a complete fool. Otherwise, he would never have arrived at the position which he holds.

I feel, and I believe everybody on all sides feels, the utmost urgency of making sure that the revenue will be available in such a form as will enable us to do our duty and to enable other sections of the community to do their duty too. We do not in this House attempt to teach people outside a lesson, but it is our duty to bring the facts of the situation home to them, not brutally, but as clearly as we can. This tax is necessary, and I believe it can be evolved and developed so as to avoid any form of brutality in its effect. It will, too, bring home, as possibly nothing else would, what the true position is to-day, a position which calls forth every ounce of energy from the country. I hope that the Chancellor will be able to make it clear that, so far as the tax might affect contracts directly concerned with armaments, it will not be applied, for it would be a waste of energy and would add to the cost to the community of the essential raw materials of war. We do not want waste of effort on the part of anybody. It will be a difficult matter to manipulate but if we can cut out redundancy of this sort we shall help the country to raise the necessary revenue.

8.18 p.m.

Mr. Silverman (Nelson and Colne)

I am not quite clear what purpose the hon. Member for Weston-super-Mare (Mr. Orr-Ewing) was attempting to serve in the speech which he has just made. I can only hope that, whatever that purpose may have been, he has achieved it to his satisfaction and to the satisfaction of those who wished him to do what he has done. This is a thoroughly bad tax, and it is a great pity that the Chancellor of the Exchequer, who said that he was anxious to hear what people had to say about it before he committed himself finally to any definite proposals, has not had the opportunity of listening to some of the speeches that have been delivered in the last two hours. In particular, I would commend his earnest attention to the speech of the hon. Member for Cheltenham (Mr. Lipson), who sits on the other side, and the speech of my hon. Friend the Member for Springburn (Mrs. Hardie). The tax is anomalous in itself for the reason that was clearly given by the hon. Member for Cheltenham. The Chancellor ought to make up his mind whether he wants the tax in order to limit the consumption of necessary goods as well as of luxuries, or whether he wants it primarily in order to raise revenue. That is a dilemma which no ingenuity can resolve, because so far as the tax succeeds in one of these purposes it defeats the other. That anomaly by itself would make it a bad form of taxation.

The dilemma is no new one. Whether the Financial Secretary to the Treasury is as conversant with it as the Chancellor of the Exchequer, I am not sure, but the Chancellor, at any rate, will be familiar with it, because it was one of the most effective weapons in the hands of the controversialists with whom he was once associated in the days when Protection as against Free Trade was a live issue. It arose then in the argument that you could not have a revenue duty and a protective duty at the same time. It is true that the dilemma in this instance is not a real dilemma, because the Chancellor has made up his mind which of the two mutually exclusive things he really wants. I think that he really wants the revenue and that he will introduce the tax in such a form as is best calculated to increase the yield of it. All the talk about the desirability of finding new ways of lowering consumption was merely a makeweight to the right hon. Gentleman's argument, and it was not very useful to it, because it produced the dilemma to which I have referred. Let us take it that what he really wants is money. We must take it so because that is the reason for not limiting the tax to luxuries and not grading it steeply as between necessaries and luxuries. The right hon. Gentleman's reason for not limiting it to luxuries is that if he did, he might as well abandon it at once because it would not produce enough money. The Chancellor quite frankly let us know that he wants this tax in order, first, to get money and not so much in order to limit consumption, and, secondly, wants to get the money out of that class of goods upon which the poorest sections of our community spend their wages.

Mr. Orr-Ewing

The statement has been made very often from the opposite side of the House that it is only the poorest section who have any need for necessities. It is an easy sort of slogan, but I think we must be fairer in discussing this proposal. Surely the hon. Member recognises that other sections of the community too have necessities.

Mr. Silverman

If the hon. Member had had the advantage of hearing as much of this Debate as I have, he would not find it necessary to ask me to repeat arguments which have been used repeatedly. The short answer to the hon. Member's point, without debating it, is that while all have the same need for necessaries not everybody has the same means of obtaining them, and to tax the necessaries of a man who has to expend the whole of his small income upon purchasing them is not the same thing as to tax the same necessities when they are purchased by another man out of a very small fraction of his income.

Mr. Orr-Ewing rose—

Mr. Silverman

I am not going to give way again. The hon. Member made a very long speech, and I think we all understand has point of view. I think the hon. Member's leaders on the Treasury Bench will not deny that it is now made clear, first, that the tax is to get money and, secondly, that it must be a tax upon necessaries, because in that way we cover the widest section of the population. Therefore, though the tax will fall on those with most money, among others, it will fall especially upon those the whole of whose income has to be expended upon necessaries. If that be so, then what we have here is a disguised Income Tax upon levels of income not so far subject to Income Tax. That is an inescapable conclusion, and I think the Treasury has not been as candid as it might have been. My own conclusion is that this tax has been proposed, not for its own merits, but because it enables the Government to impose by indirect means what is, in fact, a disguised Income Tax upon those whom this House would not readily agree to make subject to Income Tax.

If the Government have formed the view that this extra money must be raised and that it can only be raised by an Income Tax upon incomes below the present taxable level, it would have been better if the Chancellor had frankly said so and invited the House and the community to face the facts. It would have been better to raise the money honestly and directly in that way. Of course, the Chancellor would have had to convince us that the money could not be better raised from other sources. Why should he not have sought to do it if he had thought it to be right? If he thinks it to be wrong, it cannot be right to impose in this indirect way what he is not confident of being able to impose in a direct way. We must recognise this is an In- come Tax upon the poorest section of the community, and I think my hon. Friends on this side will have no difficulty in coming to the conclusion that they cannot accept it even in principle.

8.25 p.m.

Sir Robert Tasker (Holborn)

The Chancellor is seeking to raise revenue, but in his proposed method of doing so I foresee that he will encounter many difficulties, raising inter aliathe old issue of what is a manufactured article. The article which is manufactured by A may be the raw material of the article produced by B. One could cite hundreds of examples, but perhaps the House will permit me to give one. A firm of steel manufacturers possess mills which roll steel girders, plates, angle irons, bars and other sections. Those products are clearly manufactured articles. Now, if I understand the Chancellor aright, when they leave the rolling mills a duty will be levied upon each girder, plate, angle iron and so on. Those things go to another firm which converts the various sections into compound girders—that is, girders built up of various components: stanchions, pillars, and other things. When the receiving firm have built up stanchions, pillars, compound girders and the rest, they become the manufacturers. Will there also be a charge upon the products of their industry? But included in the thousands of tons of steel purchased there will be a large quantity of the rolled steel joists cut into lengths and sold. No more work will be executed upon these girders than reducing them to the lengths required. I will not pursue the argument, but that is a typical example of the difficulties which I foresee. The same argument could be applied in respect of nearly all materials used in the engineering, building, shipbuilding trades and so on.

The Chancellor invited every Member of the House to communicate with him suggesting means of economising. That was only an invitation to assist him in securing the revenue for the conduct of the war. The response he met with is unknown to me, but let me confess that I did not reply to that invitation, because, to my mind, it would be only beating the air. If one does make suggestions for economy, they are usually ignored, and the effort leads nowhere. There is one source of revenue to which no reference has been made this afternoon, and that is war profiteering. I hold the view that it is criminal and wicked for anyone to make profits out of war. It may be too late, but if it is not, I hope that when the Bill is brought in provision can be made in it for the disclosure and forfeiture of any profit that is being made out of the manufacture of warlike materials, nor would I confine this suggestion to the manufacture of munitions or guns.

Mr. Orr-Ewing

Would my hon. Friend include architects?

Sir R. Tasker

Most emphatically, yes. There are a few people so overwhelmed with professional work which they cannot honestly execute, but, in addition, there are contractors of all kinds. I would extend the tax even further than them. I would extend it to the unskilled labourer, who is pocketing £6, £8, £10 or £12 a week, while the skilled craftsman considers himself lucky to receive £4. If the net were only spread wide enough, it would include all the unskilled labour and compel them to contribute something every week till the end of the war. The last war showed us that these people are improvident; although they were taking anything from £6 to £12 a week, they had nothing at the end of the war. I should not be in order to pursue this point further, but I must add that there are many ways and means of raising revenue. I should not consider I had performed my duty as a Member of this House if I did not state this thing, however unpopular it might be, in order to express my honest conviction, whether it be right or wrong, that it is only right, proper and just to exercise the utmost limit to raise revenue in order that there may be what the Chancellor of the Exchequer and all of us so ardently desire.

8.34 p.m.

Mr. Woods (Finsbury)

The Chancellor of the Exchequer often shows himself remarkably alert in this House to detect inconsistencies between individual Members on these benches, but it is not often that we find a Minister so utterly inconsistent with himself as the Chancellor has been this afternoon. On an earlier Resolution it was urged from these benches that, at least in regard to tobacco, serving soldiers should not be asked to pay an additional tax, because they were giving their whole time in service. The right hon. Gentleman resisted that suggestion on the ground that it would be difficult. The difficulty could have been overcome by the issue of a voucher entitling the soldier to so much tobacco. After having made that excuse for not doing a perfectly reasonable thing, the right hon. Gentleman is apparently prepared to go to no end of trouble to do something which, when all is said and done, will be utterly inequitable and unfair to the population of this country. The last speaker pointed out one of the difficulties. The Chancellor maintains that he has no desire that this tax shall be a sort of snowball, to be assessed at each stage in the sale of a given commodity. That means that there must be a very careful analysis to trace the history of each commodity from the raw material until it arrives at the ultimate consumer, to find at which stage the tax should go on. If it is made clear in the Bill that the tax will be assessed only at one point, it is probable that there will be an enormous amount of further trouble and expenditure in dealing with claims for rebates, on the ground that a tax has been paid on this or that commodity at this or that point. I can even imagine legal difficulties being involved as to which of the various vendors of the said commodity should be liable to the tax.

That is not the only difficulty. Another difficulty was made clear by the hon. Member for East Ham, South (Mr. Barnes). There is hardly a business house doing any volume of business in this country that would not have many sales subject to tax and, on the other hand, have Government transactions, and others that would be exempt from tax. Therefore, estimating the liability of any wholesaler would necessitate an exact, microscopic inspection of all transactions throughout the year and would, I imagine, involve an enormous increase in the staff of those responsible for the work, which would, finally, give no real satisfaction. I mention this point because it must be inevitable that the cost of collecting the tax will add enormously to the expenses of the Exchequer.

The matter does not end there. My hon. Friend the Member for Springburn (Mrs. Hardie) pointed out another aspect of the matter which is that, of every £1 accruing to the Exchequer, the consumer of the commodity will have to pay something plus. It is not difficult to assess these payments, on the figures which were given by the hon. Member for East Ham, South. Roughly, the volume of sales which will definitely come within the orbit of the tax will be in the region of £750,000,000, on the 1937 figures. Let us allow an ample margin for the increase in prices since 1937 owing to the war, and let us make the sum into the round figure of £800,000,000. That would give about £8,000,000 to the Exchequer for each 1 per cent. of the taxation. On a 5 per cent. basis, which seems to be a very substantial levy to raise—1s. in the £ on every article sold—the revenue will be in the neighbourhood of £40,000,000. Let us see how that sum will affect the public, after deducting the additional expenses of collecting it and for setting up new machinery and making innumerable appointments. The general average figure of the difference between the wholesale price and the retail price is an addition of 25 per cent., which includes a range of commodities on which the margin is substantially smaller of the day-to-day products, such as goods that come in weekly or monthly from the wholesaler, and on which there is no risk of loss of stock by deterioration. In such cases the turnover is continuous. This covers practically all the items that are exempt, such as tobacco, foodstuffs, butter, cheese. All those things which have the smallest margin of addition to the wholesale price to cover the cost of retailing are taken out, so that the average figure of 25 per cent. includes all the higher-priced things.

As my hon. Friend the Member for Springburn mentioned, you have to add not only the actual cost of retailing, but a margin to cover non-sales, fashions going out and deterioration of stocks. Many of those commodities are purchased, and may be in stock for three, four or five months or longer. They are the slow turnover goods. Taking 25 per cent. as a very conservative estimate of the actual addition, that means that it will cost the public an additional £10,000,000 to provide the Chancellor with £40,000,000, less the additional incurred expense of collecting. If that is sound economics, I think we should all go back to school and find out what economics really means. To impose such an enormous burden on the public in order to raise £40,000,000 for the Treasury is fantastic waste and absolutely unpardonable in these circumstances of high cost of living.

With regard to the necessity for this tax, the Chancellor said that we have to win the war. But wars are won not only on the battlefield. This war is very largely a war of ideas and ideals, and if the Government of this country have not awakened to the psychological values inherent in modern warfare, the dictatorship countries are quite alive to what is involved in the mentality of the people, and I can conceive of no other innovation in our taxation methods which creates so much resentment among the mass of the people, which gives to the public of this country a sense of the unfairness of this Government and makes the war unpopular so that there will be an enormous increase in the number of those people who will say, "If this is what it means, it is not worth it." On the ground of the necessity of winning the war, I would appeal to the Chancellor to reconsider this innovation in taxation. He went on to say that to win the war we must raise revenue. Surely, it is not outside the capacity of the Chancellor of the Exchequer to raise a mere £40,000,000 without such a drastic innovation as this and without causing so much disturbance. There is no disagreement in this House as to the importance of raising the money, and there is hardly a speaker who has not referred to the willingness of himself and the people whom he or she represents to have an increase on luxuries and unnecessary goods, but this is a tax on the necessaries of life and will cause all the hardship which has been claimed for it by the various speakers.

The Chancellor's second point with regard to the necessity for winning the war was the reduction of consumption. It seems to me that when we have financiers speaking thus airily about reduction of consumption, as if that were the solution of all our ills and financial problems, we must take a second think. Assuming it does achieve any considerable reduction of consumption, what are the secondary results of that apparent superficial economy? Carried to its logical conclusion, we might all become nudists and emulate the example of that robust gentleman who spoke over the wireless recently and told us of the virtues of eating grass. You will have reduced consumption to the nth degree.

Mr. Silverman

You could tax grass.

Mr. Woods

That would react on the cows rather than on the human consumer. By reducing consumption, you will further dislocate the existing unsatisfactory state of trade, add enormously to unemployment, reduce wages and put businesses into bankruptcy. That is the solution which the Chancellor has. The more the proposal is examined, the more fantastic it becomes. I will conclude with a point which has been covered by a number of speakers, and that is the inequity of the proposal. We have had in this House many Debates in which the decline in the birth-rate has been lamented. We are saying to every young wife, "Directly you have a baby we shall tax you," whereas another person who does not have a baby will not be taxed. There is no exemption even on bassinettes, such as was advocated by an hon. Member opposite, and there is no exemption on baby clothing. If the baby turns out to betwins or triplets, it would be a tragedy for the young mother. [An Hon. Member: "She would get the Queen's bounty."] That comes out of the country, at any rate. A burden is being put on parenthood, and it is without justification. Take an example of a young couple, the husband about to be called up. They get married. They will reduce as far as possible the purchase of furniture to the very minimum, but any young bride will want at least one room furnished so that when her husband comes home on leave they can be in a room of their own. Even the most reactionary minded person in this country would concede that that is something to which the young couple are entitled. They go out and start doing their purchasing to make a home of one room, for which the man is prepared to lay down his life. Because he is put to the expense of furnishing a room, the Chancellor says he has to pay so much additional taxation from which the miser or a person who does not trouble to get married is exempt. Such injustices and such disproportionate demands on the public, penalising the highest service given to the country, apart from all the other arguments, condemn this tax and make it imperative that the Chancellor should think again and find another method which would be a practicable and equitable system of raising the necessary funds for the prosecution of the war.

8.48 p.m.

Mr. MacLaren (Burslem)

I have sat listening most of the afternoon and have suffered the usual consequence of patience, which is to hear one's own points anticipated and used by others. However, perhaps my points have been used better than I could use them myself. When the Chancellor of the Exchequer the other day led up to a sort of theatrical prelude to tell us of the great tax which he was going to divulge and when he mentioned this one, I shouted out that this was an insane tax. That seemed to be a disturbing thing to do so far as the Chancellor was concerned, but I think the Debate this afternoon has proved it.

Before saying much about the tax itself I want to go back to what I consider to be something of urgent importance on which the House should keep their eye. The Chancellor has come here to-night and asked this House to allow him to get a Resolution. He has used all the artifice of which he is a master to get this little innocent Resolution passed, and we are promised that afterwards we shall have a Bill the contents of which we do not at the moment know; but the Chancellor wants this Resolution, and if we are so nice and accommodating as to give it him he promises us that everything will appear subsequently in the Bill. In spite of the fact that one's voice is echoing among so many empty seats in the House to-night, I hope that this House will not allow this procedure to go much further, because once this Resolution is passed the Chancellor will have this House hip and thigh for the rest of the proceedings. It may be anything that the Chancellor likes. Hon. Members may make long speeches, but he will not listen to them; he will have his Resolution. He will have us on the slippery slope, and we shall be finished. That is very bad procedure, and I hope that it will be challenged. I notice that already the Whips have been busy, and have put up one or two hon. Members on the other side, to keep the Debate going until other Members come back. Perhaps I am assisting the Whips to keep it going; if I thought that I were doing so, I should sit down at once.

Listening to one Chancellor after another—and I have listened to more than I care to remember—coming forward with new taxes and devices for raising money, I often wonder who is the evil genius who comes and whispers these devices in the Chancellor's ears. The Chancellor always says that he has thought this and thought that, and has come to such and such a conclusion. He never does anything of the kind. I am not over-impressed by the financial and monetary understanding of the present Chancellor, but I am quite sure that he is not responsible for the wonderful innovation we are discussing to-night. There must be some person in the Chancellor's office at the Treasury, some antiquated kind of muck gatherer, running around, who comes and whispers these fancy devices in his ear. If I could lay my hands on that fellow I would get out of his skin satisfaction for what I feel about this tax. Those of us who were here when the Silk Tax was brought in, remember all the trouble there was to discover where the silk could be found so that it might be taxed. Now we get this tax. The Chancellor told us that he had had all sorts of devices examined, and that this was the only one that he thought suitable. It was said that we should adopt this because it was used on the Continent. When did the British Parliament fall so low that it must copy the methods adopted in certain other countries?

Sir A. Lambert Ward

We might copy a good deal from them, with advantage.

Mr. MacLaren

I cannot hear what the hon. and gallant Member is saying. This form of taxation is practised by certain other Governments which are not altogether above suspicion in their monetary dealings. When I heard the Chancellor refer to this tax, it was not so much a case of my being impressed with the wrongfulness of the tax as of my suffering a psychological shock at the thought that we in this country should fall so low as to adopt a financial device of this kind. The Chancellor said that this tax had two strong characteristics—it checked consumption, and it would give him some extra Revenue. These self-destructive arguments have been already answered, and I will not repeat the case against them, which is self-evident to everybody.

I begin to wonder with whom we are at war. Are we out to kill the people in Great Britain or the Germans? The Chancellor seems to be intent upon making life as difficult for the people who remain in England as he would probably like to make it for the people on the other side of the Magi not Line. We have to restrict consumption, we have to make a Spartan life for everybody here at home; and here is his device—a sales tax. Not merely this tax, but all his taxes, have been inspired by this one idea, of making it as difficult as possible for people here at home to live in some measure of comfort. It must have startled even hon. Members on the other side to know that he is not thinking of making this a graduated tax. The hon. Member for Springburn (Mrs. Hardie) told of her own experience. Is there any woman in this country who has to rear a family, who does not know what the effect of this tax will be? It will be a standing disgrace to us if we pass this tax and allow it to be imposed on the clothing of the people of this country. The Chancellor this afternoon, speaking from his great experience of family matters, said that if the wife is making a skirt for herself she can quite easily cut it too short, and have something left over to make clothes for the boy. That was his philosophy of life this afternoon.

This tax, like all the taxes in the Budget, will be passed on to the producers of wealth. I have said this before, but it seems to me that one has always to repeat these things. Throughout these Budget Debates, the phrase has been constantly recurring about taxes being paid by one section of the community as against another section of the community. As a matter of fact, there is only one section which pays all the taxes in this or any other Budget. That point must be driven home time after time, until it is understood. Taxes are paid only by the producers of wealth. Unless wealth is produced, no taxes can be paid. The producers of wealth are those people actively employed in wealth production. Therefore, this Budget, with all its taxes under different designations, is paid for by the working classes of this country.

Sir William Wayland (Canterbury)

What about the middle classes?

Mr. MacLaren

Where do they get their living from except by taking a hand in the production of wealth? All those who are not actively engaged in the production of wealth are parasites.

Sir R. Tasker

Do you include Members of Parliament?

Mr. Henry Haslam (Horncastle)

Are the middle classes parasites?

Mr. MacLaren

I did not say so. Anybody who takes an active part in the production of wealth is a wealth producer, and, therefore, a tax producer.

Sir W. Wayland

Would the hon. Gentleman consider a Member of Parliament a wealth producer?

Mr. MacLaren

No, I do not include him. But let me get down to this basic truth, because, if it is accepted that there are certain stratifications in society, such as a middle class or a lower class, it is easy for Chancellors to play upon the feelings of the public and to say, "The upper classes are paying so much; the middle classes are paying so much; and, therefore, is it not the duty of the lower classes, for the rest of the war, to pay something?" It is these producer classes, who are mostly to be found among what is called the lower classes, who pay all the taxes in the Budget. These taxes, like all the rest, will be passed on, and paid for by the consumers of goods: that will be, the working classes of this country. I will not endeavour to follow the economic arguments that have been so efficaciously used this afternoon, because if there is one thing that I hate it is repetition of old arguments. They have been most effectively put across this afternoon. The Chancellor of the Exchequer was not present, and I am sorry, because in his absence the most effective speeches to which I have ever listened criticising his tax proposal have been in this House this afternoon, and in particular the speech delivered by the hon. Member for Cheltenham (Mr. Lipson) should be read by the Chancellor of the Exchequer to-morrow morning. Let me come back to the main point of my complaint. The action of the Chancellor of the Exchequer is on all fours with recent conduct in that quarter of endeavouring to muzzle this House in its criticism of innovations in taxation and handing over delegated authority to people outside this House to decide increases in taxation, leaving this House without any power over the taxes levied on the country.

Sir W. Wayland

Is the hon. Gentleman aware that this tax has been in operation for a considerable time both in France and in Belgium?

Mr. MacLaren

I said that before the hon. Member came into the Chamber, and I cannot repeat what I have said now. The tax itself, from my point of view, is only a subject for sheer derision. There are ways and means of raising taxes without harassing the public, and without creating a battalion of bureaucrats, making life unbearable for the ordinary wealth-producer in the country, and exacting a vast volume of expenditure and bringing very little back to the Treasury.

There is something I will not mention because all the House knows what I mean. [Laughter.] It may cause a little laughter that I should suggest it now, but make no mistake about it, to-night over in Norway and in France there are the conscripted bodies of men probably in the traps of death defending this land. This House has conscripted the young manhood of this country to defend this land. Who is it that should laugh if I suggest that there are other forms of taxation that would restore to the people their right to the land that they are now defending to-night? Is there any laughter in that? You pursue this policy when sons are on the battlefield, and you go on with these devices, making the lives of their dependants harsher than they ought to be, and making their cost of living rise. We have these oscillations going on on the other side of the House, and it is said, "We must not get in the spiral because it is vicious and we might lose the war." Yet at the same time you are accepting the policy of imposing not merely this tax that we are talking about to-night but other taxes in the Budget with placidity. It makes me afraid that the British House of Commons is losing its individuality and personality, and its right of thinking and criticism, when I see one Budget after another rolling out of this House without anybody getting up and trying to put an end to the cant that is based on economic and financial wisdom from the Treasury.

Every tax in this Budget, not merely the sales tax but Income Tax, which is supposed to be paid by particular rungs of society, is imposed and hits the workers of this country. It is they who have to bear the burden of the millions that are being raised. Therefore, I cannot treat this as a joke. I have for years in this House advocated justice in taxation and I have repeated on more than one occasion—and I do it again—that there is nothing more potent for the destruction of society than the pursuit of a form of taxation which makes the lives of the people unbearable. Taxation has caused revolutions, and it has brought kings from their throne and has made some of the best parts of your Empire divorce themselves from you. You are imposing such taxation now and making life unbearable for people at home at the very time when you ought to be trying to bring some measure of comfort to the dependants who are left behind.

Perhaps I have said more than I ought to have said within the confines of this Debate, but it all comes back to these fundamentals. The experience of politicians may seem to carry them to success along the transient way. They are no sooner dead than they are forgotten, but the harm that they have done in devising expedients brings with it distress, anxiety and destruction. This tax has all these characteristics, and that is why I am speaking as I am speaking now, and I repeat again, that the time has surely come when the House of Commons ought to rouse itself from its lethargy. The House ought to be backed by action and see to it that if taxation is to be raised to finance enterprises of war it should be based upon a system approximating in some form or other to basic justice. It seems to me, as I look at the empty benches opposite, and when we are now gambling in some £7,000,000 or £8,000,000 a day, as if even the House of Commons itself has become almost blinded by the size of the enterprise we are undertaking, and that even this tax, which has occupied our attention for the last three hours, seems such a trivial matter. I hope that the House to-night will divide and that the Chancellor of the Exchequer will not get this Resolution. Let the House on all sides realise that to give him this Resolution is to tie up the power of criticism in this House of the autocratic actions of the Treasury. We should not blindly accept a Resolution which will tie us in every sense when the Bill comes before us.

9.8 p.m.

Mr. A. V. Alexander (Sheffield, Hillsborough)

We have now had a Debate of some considerable length upon the last and one of the most important Budget Resolutions to be reported. As far as I have been able to listen to it, I feel that the Government cannot be very pleased with the amount of support that they have received from the House to night for the proposal in the Resolution. In the first place, this particular Resolution should be considered in its relation to the whole of the Budget problem that the Chancellor of the Exchequer has to face, and I really have not heard a very great deal about that side of it to-night. Certainly the Chancellor of the Exchequer did not enlighten us very much more upon that point than he attempted to do in the course of his main speech upon the Budget or in his winding-up at the end of the Budget Debate. The fact is that when one has made every allowance for the revenue to be raised during the course of the fiscal year, of £1,234,000,000, we have still to raise £1,443,000,000 from other sources, and the proposition which was originally put by the Chancellor of the Exchequer was that he had to look for some source from which there would be a really substantial revenue. My first criticism of this Resolution to-night is that it does not hold out any clear prospect of substantial revenue in relation to the main fact of this Budget—that the Chancellor has to raise £1,443,000,000 by borrowing. If the amount of the revenue is not to be really substantial, then it seems to be even more unjustifiable for the Chancellor to throw into the realm of public controversy, during the course of a war in which it is essential to maintain by all means in our power the unity and morale of the working classes, such a principle as is involved in this tax. That is where his first mistake lies. The Chancellor cannot expect us, in view of the social aspect of this tax, to go to the country and support it. This tax cuts across our principles, as well as inflicting great social injustice on the people concerned, and the Chancellor must consider that. This tax will mean opposition to the Chancellor and his policy all over the country, and it is just as well that, in the midst of a war, he should understand that.

Mr. Orr-Ewing

The right hon. Gentleman has made a very grave statement, and I am not quite clear how he is entitled to make that statement without knowing what the incidence of the tax may be. I put that to him, because he might like to amend what he has said.

Mr. Alexander

If the hon. Member had listened carefully to what I said, he would have seen the strength of my argument. The Chancellor has to produce something substantial, and although one gets the most substantial estimate that one can, the amount is comparatively so small, in relation to the total borrowing problem, that it is not worth the dispute of the principle which is bound to be raised among the working classes, on whom most of the burden will fall. I listened very carefully to the Chancellor, who made one of his best types of Parliamentary speeches, well argued, and gave us much more information than on the Budget. He put up two main propositions which, he said, he had to prove to the House. The first was that it was right to formulate this sales tax, and I listened to what would be the strength of his argument in support of this proposition. But I must say I felt he was not giving us any real argument at all. What he said in effect was that sales taxes of this kind have been utilised elsewhere, that they have succeeded and, therefore, would be found to be most useful for revenue and that, if used with boldness, it would get considerable revenue. He went on to examine the various forms of the tax, and that was the extent of his argument, in favour of his first proposition. By that argument, I am not convinced.

What is the position in relation to the Government's economic policy to-day which would make the Chancellor think it was right to formulate a sales tax? At one moment we were told that the Government found it essential to prevent a vicious spiral in wages and to keep the cost of living down as much as possible. For that purpose they devoted their energies, with a Treasury Committee under the chairmanship of Lord Stamp, whose influence is profound in nearly all the spending Departments, to keeping down the prices of goods. They collaborate with the Board of Trade in the administration of the Prices of Goods Act. On the other hand, we get through the Budget of last year and the September war Budget this startling fact, that we are now levying on the working classes the tremendously increased sum of £46,000,000 a year from tea and sugar alone. Then the Government get another great anxiety, and they say, "This will be unpopular. We must keep down the cost of living. We will temper the wind to the shorn lamb and prevent the poor from being exploited by preventing the cost of bread going up above 8d. or 8½d. We will subsidise farmers for the increased cost of milk by preventing prices from rising." At the end of three months this milk policy could not be continued, the subsidy had to be withdrawn from 1st April, and the new production cost of milk had to be passed on, so this summer we are to have a rise in the price of milk and, also, condensed milk. On top of that, we now get the new proposal of adding a further burden to the cost of living by putting on a sales tax.

The Chancellor in his first argument said with some pride that the tax, used with boldness, could produce large revenue. What sort of boldness does he mean? We are still in the dark. We have not the faintest idea, eight days after the unfolding of the Budget, what is the real sum which the Chancellor has as his objective, what is the rate of tax or what is the exact area of the incidence of the tax. This kind of economic policy seems to be a policy of Bedlam; the Government do not seem to know where they are going unless the Chancellor can tell us that the real object of the measures in the past was so that he could, in the long run, raise a far larger proportion of tax revenue from the working classes than has ever been previously contemplated.

Let me put to the House a figure which I published elsewhere two or three days ago and which will, perhaps, bring to mind something of the increased effort required by the State from the direct tax-paying classes and the working-class consumer. I take what I have dared to describe as the last normal Budget that I remember, the Budget for 1931. In that Budget we had a revenue from direct tax- ation of £447,000,000 and £245,000,000 from indirect taxation. What is the position in the present Budget? The right hon. Gentleman hopes to raise from direct taxation £700,000,000, an increase of £253,000,000. The indirect taxation in this Budget, so far as we can assess it, is £466,000,000, but that does not include any part of what is really indirect taxation which falls on the working classes and no part of the revenue which the Chancellor of the Exchequer hopes to raise from the Purchase Tax. If we put the yield from the Purchase Tax at the modest figure of £25,000,000, then the yield from indirect taxation will be £491,000,000, or an increase of about £248,000,000 over the year 1931. That is an enormously steep rise in relation to the capacity of the people to pay compared with what is being taken from the direct taxpayer. The increase in indirect taxation is almost equal over the years to the amount you are imposing on the direct taxpayer. That is a matter which ought to be carefully considered by the Chancellor of the Exchequer, because if the Government are to get the whole of the people behind them in a great drive, they must persuade them that the Budget is not only adequate but fair. I am not persuaded that this Purchase Tax makes the Budget fairer. I think it makes it more unfair than it otherwise would be.

The second proposition of the Chancellor of the Exchequer was that the tax should be imposed and collected when the wholesaler sells to the retailer. I can well understand that in having to deal with retailers to the number of 750,000 or 800,000 any proposal to make a tax of this kind operate at the extreme end of the transaction would be so unpopular politically that the right hon. Gentleman would seek to avoid it. I have heard it said that the two people of whom the Tory headquarters have always been most afraid are the small retail trader and his power of propaganda over the counter, and the insurance agent calling at the back door [Interruption.] I am not saying that our own organisation has not other ways and means, which, of course, we must have in order to get our case over to the general public. Of course, I can also see the reason why the Civil Service advised him, on the machinery and cost of collection, a tax on the wholesaler, which would prevent the accumulated collection of the tax at more than one stage of the process of any particular commodity. I think that is right and just. They will have a much smaller number of people to collect from, and, therefore, there will be less cost to the Revenue. But I have not yet heard any advice from the Chancellor of the Exchequer as to exactly at what stage of the wholesale transaction it will be. I threw out one or two lines to which I thought the Chancellor of the Exchequer might rise and give us some little information, but it is very difficult indeed, on the explanation of the right hon. Gentleman, to define the wholesaler.

He says that he is going to have a register of wholesalers, and that one of the certain things about it will be that if you are on the register, you will not pay the tax upon the purchase, but you will pay a tax which you can pass on to anybody to whom you sell. I find it difficult to define how you will qualify a person for inclusion in the register of wholesalers. The Chancellor of the Exchequer said that it was not proposed to include in the tax certain services. We have not yet his complete definition of what he proposes to include in the services which are to be exempt, but I would suggest that it will include professional services, and, if so, what becomes of the manufactured article in connection with professional services? Let me illustrate my point. Let me take a great organisation dealing first with the supply of professional dental treatment and, secondly, with the completion of that treatment by the supply of complete dentures. Members of the aristocracy and business men can receive professional services in Wimpole Street from dentists. They can have professional treatment, and I take it that would not be a wholesale sale, and there would be no tax upon it. If they have a denture complete I take it that if it is done by a professional dentist, a workman in his workshop, it is a retail sale, but if you have a large organisation employing qualified dentists, in respect of which all your dentures are made to model in a factory, then the factory supplying dentures would be regarded as performing a wholesale service. How are you going to define things like that? I can produce dozens of other cases. How are you going to define a wholesaler?

If you take another class of business, ordinary dried goods; a firm which is re- garded in the public mind as a large multiple retailer will in fact claim that in their buying operations they are always wholesalers. How are you going to define them? I can see considerable difficulty to the Treasury in dealing with the definition of a wholesaler. The Chancellor said that any wholesaler within the ring selling to another wholesaler will be exempt. Why should he be exempt if it is a question of a finished article? I do not quite understand the logic of the case which has been presented to the House, or exactly how the proposal will operate.

There is one point that has been made by a number of hon. Members to-night which I consider to be fundamental. It has been argued from many points of view, both in discussing the Government's statement and in discussing Mr. Keynes' proposals, that in order to carry through the war successfully there must be an economic policy that will tend to restrict consumption. The Chancellor claims, in respect of this field of commodity taxation, that one of the merits of his proposal is that it will definitely restrict consumption. Is that true? I do not believe it is true. I believe the effect of the proposal will be to restrict consumption by certain classes, but to say that it will restrict the consumption of a particular article in the mass may be quite untrue. Let me take as an example a food commodity which has been rationed—butter. We know now from experience that butter is very largely rationed to the poor by its price, but that does not mean there is a very large restriction in the consumption of butter at the present time. Butter is being bought by the people who can afford to buy it. This applies in exactly the same way to all the commodities which the Chancellor will bring within the purview of this tax. To use the method of a largely increased price, caused by the imposition of an additional tax upon the commodity, is no safe measure for restricting consumption. There may be a restriction in consumption by certain classes, but in the mass, it may be that just the reverse will happen; it may be found in the end that there has not been a restriction of the general consumption of the country, but that it has been left at about the same level as before, and all that has been done is a grave injustice to the poorer section of the community. For these reasons, although I am not unsym- pathetic to the Chancellor's main problem in dealing with the very large Budgetary provision that has to be made, I ask the House to reject this proposal. As hon. Members have said, there are other means of raising Revenue if the Chancellor needs them—as, of course, we know he needs them.

Sir J. Simon

What means?

Mr. Alexander

I suggest that the Chancellor might show some of his enthusiasm of pre-1914 days for seeing that the income from and values of assets created in land are used for the benefit of the community. He was a great exponent of that. Since he has been at the Treasury, he has seen an enormous expenditure of public money on sites and buildings for Government purposes, very often expenditure on land that had no rateable value. This is one thing that he might certainly exploit. Moreover, I think he ought again to consider the general proposition that was made in the Budget Debates in April, 1939, by my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence). That proposition was to mobilise in war-time the capital wealth of the country, to take it as reasonable, not merely to impose a levy upou war wealth at the end of the war, but to say to people who continue to enjoy their wealth that it is reasonable for them to recognise that the continued enjoyment of that wealth depends upon the maintenance of the integrity of the country, and the protection of its law, and for them in a time of national emergency to transfer a fraction of those fortunes to the State. While, as I have said in previous Budget Debates that I think the actual amounts which the right hon. Gentleman proposes to raise by increases in direct taxation are by no means to be despised, much more can be done in this direction if the Chancellor will have the courage to go to the right quarter and if he will bear in mind some of those earlier convictions of which he was such an able exponent from 1906 to 1916, and see that the poor are cared for properly and that they get justice.

9.36 p.m.

The Financial Secretary to the Treasury (Captain Crookshank)

I trust that the final words in the speech of the right hon. Gentleman the Member for Hillsborough (Mr. Alexander) will not cause any gulf between my right hon. Friend the Chancellor of the Exchequer and myself on subjects which in the past were matters of controversy between us. The right hon. Gentleman has given us, as he always does, a very vigorous speech; but taking this Debate as a whole—and I have sat right through it, because I wanted to note all the speeches and their atmosphere andenvironment—I should say that in my view the House is still reserving its judgment on this question. The right hon. Gentleman said just now that we could not expect the Opposition to go round the country supporting this tax, and he ventured on a prophecy as to how it would be received. I will not hold him to that particular prophecy, but I would say this: that while certain speeches have been made from the benches opposite, three of them from hon. Members with special experience of the Co-operative movement, the speeches to-day, on the whole, have not been anything like as critical as the right hon. Gentleman seemed to imply. I think it is true to say that the House, as a whole, is prepared to wait and see in further detail the Measure which will be placed before it.

The hon. Member for East Ham, South (Mr. Barnes) asked the House not to pass this Resolution and suggested that, instead of submitting the Resolution the Chancellor should introduce the Bill in order that the House could examine it. He overlooked the simple proposition that we cannot introduce a Bill of this kind without a Resolution. This Resolution has been drawn, as some other hon. Members complained, in very wide terms in order to enable us to introduce the Bill. When the Bill is introduced there will be ample opportunity for criticism, which will no doubt be directed accurately to the proposals in the Bill and as a result of which, we hope, a good Measure may emerge. So, when the right hon. Gentleman who opened this Debate complained about the lack of detail and said that when we had finished with the Bill and when it had been passed we should be just as much in the dark as we are now, I think he overstated the case. We shall not be in the dark at all by the time the Bill is passed, except, possibly, with regard to the rate of the tax and the date at which it will be introduced; we shall know all about the machinery and the framework of the tax which will have been evolved as the result of our united endeavours.

The hon. Lady the Member for Springburn (Mrs. Hardie) made a very attractive and interesting speech and drew upon her personal experience in these matters when discussing the possibility of a retail sales tax. She begged my right hon. Friend to consider very carefully all that had been said in the Debate to-day before he introduced the Bill. I would like at once to give an assurance that we certainly shall consider all that has been said, and not the least important part of what we shall consider will be the speech of the hon. Lady. We had from the hon. Member for Burslem (Mr. MacLaren) an amplification of his earlier comment on the proposal when he used the word "insane" about it. In a rhetorical and finely phrased passage he regretted that this country's Parliament should have fallen so low as to resort to a device of this kind. It is a fact that France, Belgium, Germany, Hungary, Rumania, Russia, Italy, Norway, Holland, Switzerland, the former Poland, the former Austria, the former Czecho-Slovakia, Bolivia, Brazil, the Argentine, Canada, Australia and New Zealand—all these countries have adopted and worked in some way or another a form of sales tax. The last two have schemes very much on the lines of that outlined by my right hon. Friend the Chancellor of the Exchequer. While, of course, as Englishmen we are rightly proud of the high position of this country, it may be going a little too far to sweep all these countries, including the Dominions, into the category of those who have sunk so low that we should not in any circumstances follow their example. I hope, therefore, we shall not look at this problem from any prejudiced point of view. After all, I can always throw it back at hon. Gentlemen opposite that New Zealand, which they are usually only too pleased to quote to us, has adopted an almost identical form of tax to that which we propose; and one exists in practically the same form in Australia—so there is nothing undemocratic about it.

It therefore falls to me to consider the Purchase Tax on its merits and in the light of the circumstances in which it is introduced. I think that my hon. Friend the Member for Blackburn (Sir W. Smiles) was quite right in saying that a Chancellor of the Exchequer is so often criticised on Budget days for being unimaginative and for suggesting nothing more than a penny here and two pence there. But when my right hon. Friend the Chancellor of the Exchequer does come down with something completely startling which no one has suggested for years and years, then we find he is blamed for it. The position of a Chancellor of the Exchequer must be very difficult. There have been few comments on the speech to which my right hon. Friend asked the House to direct its attention. My right hon. Friend asked us to consider which of the four different kinds of taxes which exist in one or other of other countries would be the most suitable and useful for us to adopt, and very few speeches were addressed to trying to answer that particular question. The hon. and gallant Member for North-West Hull (Sir A. Lambert Ward) thought a retail sales tax would be better, and I think the right hon. Member for Hillsborough rather took that view, because he said the only reason it was not being suggested was some political imaginations which he got somehow out of his own head. Of course, without wishing to be disrespectful to any of the countries which have adopted that particular form of tax, I think they would be the first to admit that administratively it is by no means easy and that it lends itself to evasion on the vastest scale. I believe that many hon. Members who have visited these countries have found quite often that the bills presented to them were not exactly the same as the amount of money with which the purchases were made. It is because of these and many other reasons that we are not introducing anything of that sort.

The one which my right hon. Friend has thought wise to put forward is to be imposed at a different stage—at the wholesaler-retailer stage. That is one of the points where, in spite of the right hon. Gentleman's fears—

Mr. Jagger (Manchester, Clayton)

Is is assumed that a retailer would be dishonest and that a wholesaler would not be?

Captain Crookshank

I am not making any such accusation about anyone. I am merely saying that the experience in foreign countries is that it is an easy tax to evade. Nor is it so easy to work where there is not a decimal system of coinage. We have decided to impose the tax at the wholesaler-retailer stage provided we can get a right definition, and I do not think it is beyond the wit of the draftsmen, and, failing them, the united wisdom of the House to make the dividing line quite clear. The hon. Gentleman who made the interruption will appreciate that it is fundamental to the machinery of the proposal that there should be a register of wholesalers. That is a very different proposition from the alternative which would have to be introduced if the tax were imposed at the retailer stage, for that would necessitate some control of retailers. As my right hon. Friend pointed out, there is not only an enormous number of very small shopkeepers with small turnovers, but there are something like 50,000 itinerant retailers, men and women who sell at markets and so on and the complicated form of machinery which would be necessary to deal with them would be out of the question, apart from the other difficulties I have mentioned.

The right hon. Gentleman said that it would be difficult to get a proper definition in legislative form of a wholesaler. He may be right, but it will not be for want of trying if we do not get an adequate one. My right hon. Friend pointed out, in opening the discussion, that one of the reasons for the method in which this Bill was being introduced was to give us an opportunity of inviting various organisations—and I have an idea the right hon. Gentleman knew that—to help us to try and make certain that we get a right sort of definition. The right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) asked me what was meant by the words in the Resolution: and in respect of such other transactions relating to goods as may be provided by any Act of the present Session. These are covering words which will enable us to deal with such a question as that of direct sales by manufacturers to consumers. They will have to come in at the proper stage, even though they are direct sales. The second class of transaction which these words are intended to cover, and for which some machinery will have to be worked out, is the sale of goods on the hire-purchase system. This may not constitute a sale; it is technically a hiring by purchase, and it is in order that we may deal with that category that some general form of words was necessary to the Resolution.

Mr. Jagger

There is a larger class of man who is both wholesaler and retailer.

Captain Crookshank

My right hon. Friend dealt with that in his speech today, and it would be out of Order for me to say exactly the same things again, although I have alluded to some of the points he so clearly made. My view of the Debate is that on the great issue of the Purchase Tax itself the views of hon. Members are not yet completely formed; it may be because they themselves are not completely informed, through the circumstances of the case; but, generally speaking, I think the House is prepared to reserve its opinion upon the tax while giving us this Resolution to-night, because, after all, the passage of the Resolution is necessary to do what the hon. Member for East Ham, South, wants to see done, and that is to enable us to produce the Bill. Because the House passes a Resolution of this kind, it is not mandatory that anything should flow from it; the Resolution merely consists of enabling words, when all is said and done, and the House retains full control over subsequent stages. The hon. Member for Burslem (Mr. MacLaren) implied that if we passed this Resolution, all was over and done with, that the House would never have another chance of expressing its opinion. Nothing could be further from the facts. It shows how far the hon. Member is carried away by his own oratory.

Mr. MacLaren

I know the House can over-rule what we are doing now, but it has been my experience that whenever a Resolution like this is passed the House loses all capacity for criticising or doing anything. Once the Resolution has gone, the spirit of debate seems to leave the House.

Captain Crookshank

If that be true, it is the fault of the House and not my fault, but I should not have thought that it was true. I have recollections of many Bills which were the subject of considerable controversy even after the Money Resolution had been passed—for example, the National Defence Contribution (No. 1) Bill. I should like to deal with a point which has been raised in various speeches that this is a novel procedure because it does envisage the possibility of there being a Bill on the Statute Book and of the date of the introduction of the tax and its rate being settled by another procedure than that of a Finance Bill. The precedent, such as it is, or at any rate the analogy, is found in the procedure under the Import Duties Act whereby Customs Duties are imposed by an affirmative Order passed in this House. There, again, I think the fact that we pass this Resolution does not prevent the House from adopting another or more normal way of proceeding. It only makes it clear that if this is what is decided upon, the House has given its authority in a Resolution arising in Committee of Ways and Means; it does not follow that we have to do it in that way. Of course, in practice, it is clear that we are entering upon a novel scheme, and so far it has been difficult to see—though the united wisdom of the House still has an opportunity for finding another and better way—howone could introduce a Bill and go through all the stages of that Bill, which obviously will not be passed in five minutes and will require a good deal of detailed consideration, and is the sort of Bill on which a good many Amendments have to be made one way or another—it is difficult to see how we could introduce a Bill of that kind and put in it the exact date on which the tax is to come into effect, and the rate of it, and then have it hanging over the whole commercial community for weeks or even a couple of months, with all the difficulties which would inevitably flow in the way of forestalling and so on. Up to now we have not envisaged any other way than by adopting some form of novel procedure. There are probably disadvantages in almost everything one does, and some things are worse than others, and we shall see before the Debates go much further.

Finally, the hon. Member for Nelson and Colne (Mr. Silverman) found great difficulty in something said by my right hon. Friend in regard to our objective. Let us not forget that all this is being done in time of war and with the tremendous background of war, and that we are being forced to introduce Measures of a kind which would probably never see the light of day in ordinary times. You have, against that background, the objective that you want to get as much money as you can, and at the same time you do not mind reducing—in fact, you are quite pleased the more you can reduce—the consumption of civilian goods. "So," says the hon. Gentleman, "you are in a complete dilemma and anomaly." He says the same sort of thing as was argued about before my time—I suppose it was in his time, as he mentioned it—on the subject of Free Trade and Protection. [Laughter.]

Mr. MacLaren

You are not as young as that.

Captain Crookshank

The hon. Gentleman said we always found that those who discussed the matter were impaled on the dilemma that you could not get both the revenue and the protection as well. Whatever may have been said in those days, I think that since we have introduced our present fiscal system, we have been quite pleased with the fact that we have actually got them both. We are getting a very nice revenue. [An Hon. Member: "No."] The hon. Gentleman has only to look at the balance-sheet to see that we are getting a very nice revenue—and that we have received a measure of protection in recent years. I am not talking about that now, because trade is regulated in present conditions on a system of import licences and so on. Up to the time of the war it is clear, whatever the arguments may have been, that we were getting a very nice bit of both. That may very well be the case in regard to the proposed tax.

It has been clearly shown that in either case, whether in order to get a lot of money or to get an effective reduction of consumption, you have to cover the widest possible field. That is why it is obviously difficult to exclude from this scheme this long list or that long list of commodities, apart from the basic things which my right hon. Friend mentioned in his Budget speech; that is to say, food, fuel, rent, light and services. It is the generality beyond that particular point which is so important, whether we are to have a tax at all, whether the House will approve of it, and whether we are to get money or a reduction in the demand for civilian goods. When hon. Members tell us that we shall depress the standard of living, we must remember that these excluded categories of goods represent a very large proportion of the expenditure of the bulk of the people of this country, and they are included to a very large extent in the cost-of-living index. The right hon. Gentleman says that it does not look as though we are going to succeed; but this is a very early stage, and we have to try to make the proposal succeed by excluding big blocks of expenditure which fall heavily upon everyone, rich and poor alike. Perhaps the country up to this moment has not yet fully realised how far it will be necessary to restrict the consumption of civilian goods in war time. One is sometimes led to the conclusion that that point has not been sufficiently emphasised. Perhaps some of us on the Front Bench have not said enough on that aspect, and it will be clear when one reflects, as was announced in this House, that restrictions in articles like linen and cotton goods—

Mr. Alexander

If I may interrupt, I would like the Government to keep in mind the point which some of us have argued ever since the war started, namely, that the method to adopt was not one of raising prices, but of rationing.

Captain Crookshank

That is a little off the point with which I was dealing. What I was trying to indicate, no doubt very feebly, was that perhaps the problem itself had not been sufficiently stressed. In the nature of things, as munition production increases and as there are increasing difficulties in getting certain

things from some parts of the world, there will inevitably be a restriction in consumption, and we must face up to that. In spite of the fact that the right hon. Gentleman and his friends do not care about this Measure at their first look at it, and in spite of their fear that it may lead to exploitation, I would point out that it can probably be dealt with along the lines of the Prices of Goods Act. The question which the right hon. Gentleman raised was that if there was this tax at the wholesale level, there might be a tendency for an excess price to be charged by the retailer, but, of course, the Prices of Goods Act is there for the very purpose of ensuring that prices are not unfairly increased. As the House knows, the Parliamentary Secretary to the Board of Trade said to-day and a week ago that consideration was being given to an extension of the scope and effect of that Act. We must not, therefore, overlook the fact that we have already on the Statute Book a safeguard tending in that direction.

Taking everything into account, the House would be well advised to pass this Resolution now, in order that a Bill may be introduced, when it will be possible to discuss all these details of a tax which, in the end, the House will agree is a very wise one to introduce at this particular stage of the war.

Question put, "That this House doth agree with the Committee in the said Resolution."

The House divided: Ayes, 145; Noes, 86.

Division No. 60.]	AYES.	[10.5 p.m.
Acland-Troyte, Lt.-Col. G. J.	Conant, Captain R. J. E.	Harbord, Sir A.
Albery, Sir Irving	Cooke, J. D. (Hammersmith, S.)	Harland, H. P.
Anderson, Rt. Hn. Sir J. (Sc'h Univ's)	Court hope, Col. Rt. Hon. Sir G. L.	Haslam, H. C. (Horncastle)
Anstruther-Gray, W. J.	Craven-Ellis, W.	Hely-Hutchinson, M. R.
Beamish, Rear-Admiral T. P. H.	Crooke, Sir J. Smedley	Henderson, J. J. Craik (Leeds, N.E.)
Beauchamp, Sir B. C.	Crookshank, Capt. Rt. Hon. H. F. C.	Heneage, Lieut.-Colonel A. P.
Beechman, N. A.	Crowder, J. F. E.	Hepworth, J.
Bennett, Sir E. N.	Cruddas, Col. B.	Horsbrugh, Florence
Bernays, R. H.	Culverwell, C. T.	Howitt, Dr. A. B.
Bird, Sir R. B.	Davidson, Viscountess	Hudson, Capt. A. U. M. (Hack., N.)
Blair, Sir R.	Denman, Hon. R. D.	Hudson, Rt. Hon. R. S. (Southport)
Blaker, Sir R.	Drewe, C.	Hume, Sir G. H.
Bossom, A. C.	Ellis, Sir G.	Jennings, R.
Boulton, W. W.	Elliston, Capt. G. S.	Jones, Sir G. W. H. (S'k N'w'gt'n)
Briscoe, Capt. R. G.	Emery, J. F.	Jones, L. (Swansea W.)
Broadbridge, Sir G. T.	Erskine-Hill, A. G.	Kerr, Lt.-Col. Charles (Montrose)
Brocklebank, Sir Edmund	Etherton, Ralph	Kerr, Sir John Graham (Sco'sh Univs.)
Brown, Brig.-Gen. H. C. (Newbury)	Everard, Sir William Lindsay	King-Hall, Commander W. S. R.
Campbell, Sir E. T.	Fremantle, Sir F. E.	Lamb, Sir J. Q.
Carver, Major W. H.	Fyfe, D. P. M.	Leech, Sir J. W.
Cary, R. A.	George, Major G. Lloyd (Pembroke)	Leighton, Major B. E. P.
Chapman, A. (Rutherglen)	Glyn, Major Sir R. G. C.	Levy, T.
Christie, J. A.	Gridley, Sir A. B.	Little, Sir E. Graham-
Cobb, Captain E. C. (Preston)	Grimston, R. V.	Lucas, Major Sir J. M.
Colville, Rt. Hon. John	Hannon, Sir P. J. H.	Mabane, W. (Huddersfield)
McCallum, Major D.	Raikes, H. V. A. M.	Strauss, H. G. (Norwich)
McCorquodale, M. S.	Ramsbotham, Rt. Hon. H.	Strickland, Captain W. F.
McEwen, Capt. J. H. F.	Reed, A. C. (Exeter)	Stuart, Rt. Hon. J. (Moray and Nairn)
Magnay, T.	Reed, Sir H. S. (Aylesbury)	Taylor, Vice-Adm. E. A. (Padd., S.)
Makins, Brigadier-General Sir Ernest	Reid, W. Allan (Derby)	Thomson, Sir J. D. W.
Manningham-Buller, Sir M.	Rickards, G. W. (Skipton)	Titchfield, Marquess of
Margesson, Capt. Rt. Hon. H. D. R.	Robertson, D.	Wakefield, W. W.
Mayhew, Lt.-Col. J.	Robinson, J. R. (Blackpool)	Wallace, Capt. Rt. Hon. Euan
Medlicott, Captain F.	Ross Taylor, W. (Woodbridge)	Ward, Lieut.-Col. Sir A. L. (Hull)
Mills, Major J. D. (New Forest)	Rowlands, G.	Ward, Irene M. B. (Wallsend)
Mitcheson, Sir G. G.	Royds, Admiral Sir P. M. R.	Warrender, Sir V.
Moore-Brabazon, Lt.-Col. J. T. C.	Salt, E. W.	Wayland, Sir W. A.
Morgan, R. H. (Worcester, Stourbridge)	Samuel, M. R. A.	Webbe, Sir W. Harold
Morrison, G. A. (Scottish Univ's.)	Schuster, Sir G. E.	White, Sir Dymoke (Fareham)
Munro, P.	Shaw, Major P. S. (Wavertree)	Williams, C. (Torquay)
Nall, Sir J.	Shepperson, Sir E. W.	Windsor-Clive, Lieut. Colonel G.
Neven-Spence, Major B. H. H.	Simon, Rt. Hon. Sir J. A.	Winterton, Rt. Hon. Earl
O'Neill, Rt. Hon. Sir Hugh	Smiles, Lieut-Colonel Sir W. D.	Womersley, Sir W. J.
Orr-Ewing, I. L.	Smith, Sir R. W. (Aberdeen)	Wright, Wing-Commander J. A. C.
Peake, O.	Snadden, W. McN.	Young, A. S. L. (Partick)
Pickthorn, K. W. M.	Somervell, Rt. Hon. Sir Donald
Ponsonby, Col. C. E.	Somerville, Sir A. A. (Windsor)	TELLERS FOR THE AYES.—
Procter, Major H. A.	Southby, Commander Sir A. R. J.	Major Sir James Edmondson and Mr. Buchan-Hepburn.
Pym, L. R.	Spens, W. P.
Radford, E. A.	Storey, S.
NOES.
Adams, D. M. (Poplar, S.)	Green, W. H. (Deptford)	Muff, G.
Adamson, Jennie L. (Dartford)	Greenwood, Rt. Hon. A.	Noel-Baker, P. J.
Alexander, Rt. Hon. A. V. (H'lsbr.)	Griffiths, G. A. (Hemsworth)	Paling, W.
Anderson, F. (Whitehaven)	Griffiths, J. (Llanelly)	Pethick-Lawrence, Rt. Hon. F. W.
Attlee, Rt. Hon. C. R.	Groves, T. E.	Price, M. P.
Barnes, A. J.	Hall, G. H. (Aberdare)	Riley, B.
Barr, J.	Hall, J. H. (Whitechapel)	Ritson, J.
Bartlett, C. V. O.	Hardie, Agnes	Roberts, W. (Cumberland, N.)
Benson, G.	Harris, Sir P. A.	Robinson, W. A. (St. Helens)
Bevan, A.	Harvey, T. E.	Sexton, T. M.
Brown, C. (Mansfield)	Henderson, T. (Tradeston)	Shinwell, E.
Buchanan, G.	Hills, A. (Pontefract)	Silverman, S. S.
Burke, W. A.	Horabin, T. L.	Smith, Ben (Rotherhithe)
Cocks, F. S.	Jagger, J.	Smith, Rt. Hon. H. B. Lees-(K'ly)
Collindridge, F.	Jenkins, A. (Pontypool)	Smith, T. (Normanton)
Cove, W. G.	John, W.	Stewart, W. J. (H'ght'n-le-Sp'ng)
Daggar, G.	Jowitt, Rt. Hon. Sir W. A.	Stokes, R. R.
Dalton, H.	Kennedy, Rt. Hon. T.	Taylor, R. J. (Morpeth)
Davies, R. J. (Westhoughton)	Lathan, G.	Tomlinson, G.
Dobbie, W.	Lawson, J. J.	Viant, S. P.
Douglas, F. C. R.	Leonard, W.	Watson, W. McL.
Ede, J. C.	Lipson, D. L.	Westwood, J.
Edwards, Sir C. (Bedwellty)	Lunn, W.	Whiteley, W. (Blaydon)
Edwards, N. (Caerphilly)	MacLaren, A.	Windsor, W. (Hull, C.)
Evans, D. O. (Cardigan)	Maclean, N.	Woodburn, A.
Foot, D. M.	Marshall, F.	Woods, G. S. (Finsbury)
Frankel, D.	Milner, Major J.
Garro Jones, G. M.	Montague, F.	TELLERS FOR THE NOES.—
Gibbins, J.	Morrison, Rt. Hon. H. (Hackney, S.)	Mr. Charleton and Mr. Adamson.
Gibson, R. (Greenock)	Mort, D. L.

Question, "That this House do now Adjourn," put, and agreed to.

Bill ordered to be brought in upon the said Resolution by the Chairman of Ways and Means, the Chancellor of the Exchequer, and Captain Crookshank.