HC Deb 18 June 1941 vol 372 cc717-41

So much of Part V of the Finance (No. 2) Act, 1940 (relating to Purchase Tax), which provides for certain goods being chargeable at the reduced rate shall be repealed and the Seventh Schedule to that Act shall have effect as if—

  1. (a) the second column were deleted;
  2. (b) the words in paragraph 1, third column "Garments or footwear of a kind suitable for young children's wear, except as specified in the first column. Protective boots designed for use by miners, or quarry-men, or moulders. Clogs," were deleted;
  3. (c)after the words "Sanitary ware" in paragraph 4, third column, there were inserted the words "Articles of china, porcelain, earthenware, stoneware or other pottery ware, of a kind used in the preparation or serving of food or drink;"
  4. (d)in paragraph 5, third column, there were inserted the words "Glassware of a kind used in the preparation of serving of food or drink, not being cut glass."
  5. (e)in paragraph 9, third column, there were inserted the words "Enamelled hollow- ware and other iron and steel hollow-ware of a kind used for domestic purposes."
  6. (f) paragraph 19 were deleted. —[Mr. Barnes.]

Brought up, and read the First time.

Mr. Barnes (East Ham, South)

I beg to move, "That the Clause be read a Second time."

I understand that there is some little dispute among draftsmen as to whether paragraph (b) is correctly worded. I should like to make it clear to the Committee that it in no way destroys the main purpose of the proposed amendment of the law. If I am able to persuade the Chancellor of the Exchequer and the Committee to accept my point of view we can leave it to the Chancellor to put the matter into correct order later: The main purpose of the proposal is to delete the articles subject to Purchase Tax and liable to 16⅔ per cent. tax. I would ask the Committee to review the circumstances which have arisen since the Purchase Tax was introduced. Apart from the merits or demerits of the tax as a method of raising money at its inception, my contention is that subsequent events have entirely destroyed its desirability or advantages. I would appeal to the patience of the Committee while I endeavour to make the position clear. It is probably not fully understood.

I am naturally opposed to the Purchase Tax, but this Clause only really deletes one column, which, I think, would cause the Chancellor to lose about half the revenue from it. I am really giving him the opportunity, if he is disposed to take it, of getting out of this difficulty in two stages instead of "going the whole hog" at once. The reasons given for the introduction of the Purchase Tax were quite specific and clear. The Chancellor stated that he sought to raise revenue and discourage expenditure by this tax. He estimated to receive a revenue of £110,000,000, but the development of those other circumstances connected with the war to which I have referred reduced that yield in the" first year from £110,000,000 to £70,000,000, and subsequent developments may make further inroads on that figure. This Clause would probably deprive the Chancellor of revenue to the amount of approximately £40,000,000 in the year.

Let me make out my case. My contention is that the sum of £40,000,000 obtained from the operation of the Purchase Tax is not in fact net revenue to the State. That is my first main contention. I base it on the fact that approximately half of the nation's income is now being spent, in one form or another, on Government account, and therefore any factor which leads to an increase in the cost of production, either in wages or material, on a vast expenditure of that description must be set off against the revenue derived from the tax itself. I claim that the Purchase Tax has substantially increased prices over a wide range of goods. It leads to the stimulation of the demand for higher wages and therefore increases production costs. What are to-day the factors.that influence a demand for higher wages? They are not the basic foodstuffs, because the Government in that direction have consistently followed the policy that they laid down at the outbreak of war, namely, that they would endeavour to control prices to avoid the vicious spiral which, during the last war, led to inflation. In the "field of basic foodstuffs the Government have been successful in their stabilisation policy. Therefore, the only other two ranges of goods left as factors intervening to compel wage demands from the wage-earners of this country are those ranges of foodstuffs which the Government have not controlled and in respect of which they have allowed excessive profiteering to take place, and those ranges of goods in which the Purchase Tax has deliberately- increased prices substantially.

Let us test it by means of the Ministry of Labour index figures. Taking the figure of 100 per cent, to represent the level at 1st September, 1939, by October, 1940, food prices had risen to 122. In May, 1941, food prices were still at 124, that is, a rise of 2 per cent, from October to May and a rise of only 24 per cent. from 1st September, 1939. But coming to clothing and goods of that description, on 1st October, 1940, they stood at 144 and on 1st May, 1941, at 175. Therefore, during the period of the operation of the Purchase Tax food prices, despite the uncontrolled elements, advanced only 2 per cent., whereas the price of clothing advanced 31 per cent. Taking points instead of percentage, it was 200 points and has gone up to 250 points, a very substantial increase.

Another reason advanced was that we were faced with the alternatives of the Purchase Tax or inflation. No one wishes to see inflation, but it is grotesque to present to the House of Commons in dealing with matters of this kind that inflation is the alternative to the Purchase Tax, when the Purchase Tax has been the instrument of securing the most substantial rise in prices over the whole field of commodities that has taken place during the war. It is entirely beside the point to use the argument that the Purchase Tax is justified on the plea of inflation. I will go on to prove later that that contention of mine is supported by other measures which the Government have been compelled to introduce for the purpose of safeguarding the nation against inflation; it is those measures which are material in that direction, and not the Purchase Tax. Let me take one or two items. Footwear prices are now 55 to 60 per cent. above those of 1939, flannelette 87 per cent., furniture 134 per cent., galvanised buckets 87 per cent. I have just taken one or two items here and there to show what a difference there is in the prices of these commodities compared with 1939. I contend that the Treasury has lost more through this tax than it has gained in revenue.

May I now turn to the second range of reasons, namely, that the purpose of this tax is to discourage expenditure? No more stupid argument has ever been submitted to the House of Commons to justify a tax than that. All who are connected with trade and industry know very well that instead of having reduced consumption the Purchase Tax was the one factor which led to enormous advance buying prior to its coming into operation. It was estimated that something like£200,000,000 went in advance buying. It was encouraged by all the traders, naturally, for the purpose of anticipating the tax, and instead of interfering with the consumption of goods it was a very important factor in stimulating it, which was entirely contrary to the argument advanced in support of the tax. What have been the subsequent effects? It has been harmful in many ways. The Committee now see the logical consequences of a stupid tax of this kind, which forces artificial buying instead of preventing it, in the scheme for the rationing of clothes. I will deal with that again later on.

While I am dealing with the rationing of clothes, let us see the repercussions of the Purchase Tax on the present position. Those who had the cash available, as I indicated, bought very largely and substantially ahead, stocked their wardrobes very well indeed and, of course, escaped the Purchase Tax by that method. But that section of the community who could not afford it, who never had the current cash to spend a year or two years ahead on their clothing, footwear, hardware and domestic supplies, were unable to take advantage of this buying ahead. Now they are faced with the rationing of clothes and have to pay the Purchase Tax on the rationed clothes when they buy them, whereas those who bought ahead not only escaped the Purchase Tax, but are in a very favourable position with regard to the rationing of clothes. However, my contention concerns the indefensible injustice which this particular tax causes. The rationing of clothes is not the only subsequent measure which the Government were compelled to adopt to deal with the reduction of expenditure which they urged that the Purchase Tax was going to accomplish, but which, of course, it failed to do. Prior to the rationing of clothes, which represented the final and severe form of dealing with this problem, the Government had attempted to deal with this question by the limitation of supplies. The Limitation of Supplies Order, under which traders were rationed on their pre-war trade, was a severe curtailment of the amount of supplies that they were able to sell to the community. It is a much more effective method of reducing consumption than the Purchase Tax.

Then, the Government have been compelled following this policy of economy in production, to introduce the Concentration of Industries Bill. If you take the limitation of supplies, the Concentration of Industries Bill, and the rationing of clothes, you have a much more effective and drastic measure, which shows how completely falsified was the argument about the Purchase Tax. Finally, the Chancellor is being driven to that position which I ventured to suggest when this matter was first debated in the first Budget of the war—that eventually we should be driven to establish the relationship between the Treasury and the individual citizen, that there was a certain figure which we needed to carry through this war, a certain amount of finance each year for the purpose of avoiding inflation, an objective which we are all determined to back up. There is no dispute in this Committee with regard to the main objective of Treasury policy. It is foolish to try to dismiss an argument on a matter such as this we are discussing under a smokescreen of that kind. We face the situation, when that figure is determined each year by the Chancellor of the Exchequer of how much he must collect in direct taxation from each individual, and it is significant that he has not had the resistance to the raising even of Income Tax that he has had on many other items.

The Government, secondly, must determine the amount of income, or the amount of food and goods, which the individual can consume, and the sooner we place that on a fair equitable rationing system instead of the irrational method we have followed so far, the better it will be for all concerned. The third point is to determine how much of the spending power of the community—or residue of the income of the community—shall go into investment. Until we get that position, inflation will always hover as the bogey in the background. In the last Budget the Chancellor was compelled to take a very substantial step in that direction. I very much welcome his last Budget as an indication of movement along those lines. That being the case, I would urge the Chancellor, as he is now being compelled to increase his policy of the control and stabilisation of prices—he mentioned that in his Budget statement and we shall shortly be considering the Goods and Services (Price Control) Bill, which will be a further step in the right direction—that the Purchase Tax is out of step and contradictory to the other items in Government policy. In that £40,000,000 is involved; we should be well advised to put that point right, so that the Goods and Services (Price Control) Bill and the other Measures the Government are taking for stabilisation can now be put into the proper logical category. It is out of the question for the Chancellor to come forward with his price control and stabilisation when he has been the biggest offender in pushing up the prices of a vast range of goods. He should clothe himself in a white sheet and not have dirty patches on it.

The Purchase Tax also contradicts the main pressure which the Government have exercised on the whole community. The problem of man-power to-day is becoming; exceedingly acute in every business organisation, and to maintain the efficiency of your administration, as everybody knows now, is one of the most serious problems of management. It is really difficult for the 40,000 businesses that are the charging points of the Purchase Tax to meet all the Government pressure with regard to man-power and then find that the Government, because of this£40,000,000, insisting that they should retain personnel in their establishments which represents all the complexity of charging this account to their undertaking. Those who have had direct experience of the administration of the Treasury have had a continuous flow of instructions, modifications and requirements from the Inland Revenue Department, representing to-day a fairly substantial booklet of instructions and modifications in dealing with items under the Purchase Tax. I venture to suggest that we could start one or two munitions factories by the labour employed in wholesale businesses on this particular administrative side of the Purchase Tax. It appears to me that in whatever way I examine this proposal it can in no way be argued that it helps to win the war or assist the nation's effort. If I have taken rather a long time, I must apologise to the Committee. I think it is necessary that they should face these facts.

Mr. Woods (Finsbury)

I think my hon. Friend the Member for East Ham, South (Mr. Barnes), has covered most of the points. I would like to emphasise the relationship which Government expenditure is increasingly assuming towards the community as a whole. My hon. Friend mentioned 50 per cent. I think that, directly and indirectly, that figure will soon be vastly exceeded, because this tax does not merely affect the rank and file consumer in respect to his relationship to the Government. It also affects Servicemen. One of the things which has increased Government expenditure recently —and quite obviously and necessarily increased it—is with regard to officers' uniform allowance. An increase has had to be made by the Government, and this is really an illustration of what takes place. The Government, by their action, increase costs, and then have to increase an allowance to cover that cost. Another illustration of how it works is provided by that section of the community such as old-age pensioners and recipients of relief. The Government have had to increase their allowances.

But, while they have increased the allowances, they have at the same time substantially increased the cost of living. These people are in a more unsatisfactory position, although our expenditure upon them is increased. The Clause relates to items which are just as necessary as food itself. In relation to food, the Government have adopted the absolutely sound policy of stabilising costs, even although it involves considerable expense. Then, for a mere £40,000,000, they upset the whole balance, and cause grievances which may be ignored by many of us here because we are in a favoured position and can buy in advance, but which will be felt by others who cannot do that.

Then there is the position of the trader himself. In the blitzed areas traders may lose the whole of their stocks. Then they have to go into the market, and the entire replacement of their stocks carries the Purchase Tax. Setting up in business again, they find themselves at a hopeless disadvantage compared to their fortunate competitors who have escaped the blitz. That is not just an item here and there; it is something which has happened in the great majority of our big cities. I appeal to the Chancellor to do something which will put him right not only in regard to his white sheet, which has become so soiled, but also in the eyes of posterity. Some of the greatest political mistakes of the past have been in regard to taxation. We see windows still bricked up in old buildings. One asks for an explanation, and is told that once we had a Chancellor of the Exchequer in this country who was such a fathead that he did not recognise the value of light and fresh air, and so he taxed window space. We look upon that as a classical example of stupidity. Take the tax on newspapers. Sometimes, in going through old newspaper files, we may find a little rag of a newspaper, containing outstanding contributions, which are classics of English literature. Yet the circulation of the finest thought of that day was circumscribed by the stupidity of a Chancellor of the Exchequer, who said, "Here is a new thing; we will tax the Press" The most remarkable example of all is that of the riots because of the wheat tax. Now we are taxing the necessities of life: clothing, boots, bedding. These things are being put outside the purchasing power of a considerable number of our citizens because we want a few millions of pounds. Going through the expenditure of the Services with a fine-tooth comb, the Chancellor could save in a few months the £.40,000,000 which we are asking him to forego in the interests of decent treatment for a large section of the population of this country.

Mr. Broad (Edmonton)

I wish to add my voice to the able speeches which have been made on this subject in an attempt to induce the Chancellor to modify this taxation, which is so drastic in its incidence upon those least able to bear it. The Clause does not relate to the Purchase Tax as a whole. There may be a good reason for applying the tax to luxury articles, which cannot very well be rationed and for which heavy prices are paid. The Clause proposes to remove from this form of taxation those articles which are necessary to the person or to the home if anything like a reasonable standard of health and decency is to exist. I remember what the Chancellor said when he adopted that ill-conceived proposal of his predecessor and then sought to apply it, without, I am afraid, giving it full consideration. He said that he would apply it to goods which were luxury articles, or which, in the circumstances of war, we could either do without, or at least postpone replacing. It is true that the replacement of some of the goods in this list might be postponed for days or weeks, but, bearing in mind that only inferior kinds of domestic articles and clothing are within the reach of the masses of the people, such postponements cannot be continued for many months, and certainly not for years. These things are absolute necessities.

In this list we find remarkable items, such as the baby's feeding bottle, having to pay the tax. The Government take care that the children of poorer people can get milk either free or at a cheap rate, and then they put a tax on the bottle from which it is drawn. I know that the Chancellor said something about providing substitutes. I suppose he would suggest that perhaps a half-pint beer bottle or gin bottle with a teat should take the place of a proper feeding bottle. That would be quite in line with the lectures we have had in the past about how the poor mother can make a cradle for her baby from a banana crate. I heard it said yesterday, "It may be that blankets, or something to take the place of blankets, are a necessity." The Purchase Tax has increased the price of blankets by something like 12s. a pair. I well recollect that in those days, when anything was supposed to do for the poor, they were told that if they would only put their old clothes on the bed and a sheet of brown paper, they would find that they would be as warm as they would be if they had blankets. Are these the kind of substitutes that the Chancellor of the Exchequer has in mind? It is the same if you take these things right the way through. There are galvanised pails in the buying of which so many good citizens have indulged in order to place them outside their door full of water in case there should be any incendiary bombs about. And so one can go on through these things, every one of which is an absolute necessity in the homes of the people. Crockery, plates, cups and saucers, especially when there are small children about, are bound to get broken. Perhaps they will be expected to eat their fish and chips from off the paper in which it has been wrapped rather than have a plate, thus putting off buying a plate until after the war. This may sound rather absurd. but all this is possible owing to the taxation at the moment.

As to the contention of the Chancellor of the Exchequer that this would lead to a necessary reduction in consumption of everything, surely this has now all been achieved by the rationing of clothing, the limitation of supplies, and, in some respects, by the fixation of prices. Mostly, however, these prices are fixed after a considerable rise has taken place, so as to make the goods easily accessible to people who have a sufficient margin of income but inaccessible to those on the lowest strata of wages. I think that it can be claimed that, as far as restricting consumption is concerned, an alternative and better method has been taken by the Government through other Departments such as the Board of Trade and the Ministry of Food. Attention has been drawn to the increase in the cost-of-food index of the Ministry of Labour, which in May of this year was 71 per cent. above that for the standard year of 1914. The cost-of-food index is also included in the cost-of-living index, which in May of this year was more than 100 per cent. above that for 1914. This very great increase has not wholly taken place in food, but a very large proportion of the increase is due to the taxation imposed by the Chancellor of the Exchequer. The cost-of-living index, badly weighted as it is against the interests of the wage-earner, is the basis of negotiations or the standard by which wage adjustments are made in many instances. Wages have had to go up largely as a result of the action of the Chancellor of the Exchequer in putting these unnecessary taxes upon the necessities of the people. As wages go up, the Government and the employers have to pay more for their labour. The Government themselves, I believe, have lost considerably more by what they have had to pay out in labour costs for food, commodities and munitions than has been made by this tax.

People realise that they have to suffer during war-time from a shortage of goods, but they very much object to anything in the way of profiteering. If there is anything that is likely to create unrest— and it is creating unrest—it is the enormous increase in prices of a great many commodities which are not price- controlled because they are seasonal and so on, and which are now placed beyond the reach of ordinary people. They know full well that these increases in price are not due to the increased costs of production. Plenty of capitalists are already shaking their hands and objecting to paying excess taxation, and are saying, "What is the use of having a war unless you can get a profit out of it?" The leader in the game of profiteering is the Chancellor of the Exchequer, because by his Purchase Tax he has imposed on the price a charge which is not justified either by the cost of production or a reasonable amount of profit. Wherever there is an artificial price charged to the consumer and whether the result goes in excess profits of which the Chancellor of the Exchequer will take 80 per cent. or whether the whole of the excess goes to the Chancellor of the Exchequer, it is still profiteering and an unnecessary and unjustifiable raising of prices against the people. This sort of thing is bound to have its reactions in the demands which we are already seeing in industry, despite all the influence and advice and the urging of the leaders of various trade unions for a rise in wages as a result of the rise in the cost of living.

The Deputy-Chairman (Colonel Clifton Brown)

I am sorry to have to interrupt the hon. Member, but he seems to be getting a little wide of the proposal which is now before the Committee.

Mr. Broad

I am endeavouring to show that by removing this tax on the necessaries of life the Chancellor would remove one of the great factors contributing to increased prices and leading to inflation. I will leave that for the time being. I think I have said it well enough. Increased prices for necessary articles of clothing and household usage will mean a lower standard of life for the poorer paid workers at a time of great stress and strain and arduous toil. That is bound to have its effect upon the point of view of the worker. I recall the story of the apprentice boy who was maintained by his employer and who was being goaded for working in a very lackadaisical way. The boy said, "It is like this, guv'nor: bread and cheese, you go as you please". The next day there was roast beef and plum pudding for dinner, and his "guv'nor" asked, "What have you to say this time?" He said, "Bread and cheese, you go as you please. Roast beef and plum pudden, and you work like a goodun" And so with the Chancellor of the Exchequer, he is obtaining this kind of revenue for the Slate at the expense, in the main, of the poorer paid workers. The increase of prices, no matter whether it comes as a result of profiteering because of transport or whether it comes out of unfair taxation, has exactly the same effect as a fall in wages. When we know what a big proportion of people have been below a proper standard of existence economically we can realise what it means further to reduce their wages. If these people have any pluck, they will not put up with it, and, despite all the urges about equality of sacrifice, if they see what is going on at the other end of the scale, they will say, "We are not going to be the only ones to be sacrificed; we are going to have an increase of wages to meet the increased cost of living which is the result of the deliberate action of the Government through their Budget." The Chancellor of the Exchequer seems to be working in a watertight compartment.

Sir K. Wood

In a white sheet?

Mr. Broad

He is concerned only with income. He has no idea of relating his work to that done by other Departments. No matter how much you increase your income, if your expenditure as a result of that increased income goes up at a greater rate than ever, then bankruptcy stares you in the face. That bankruptcy will be measured by inflation, and the turning point in this inflation, which is bound to occur to a greater or lesser degree, will be recorded in history as the application of the Purchase Tax to the necessities of the life of the people. Immediately the war is over if the £ instead of looking the dollar in the face at the certain old-time ratio is at anything like parity or even 50 percent. of the dollar value, I shall be very much surprised, especially if the Government go on with the financial arrangements which were started with this wicked tax which was introduced last year. I must register my protest against this tax. I opposed it at the time. I know it was opposed by my friends of the then Opposition and was reluctantly accepted by them in the days when the Coalition was brought about. But I do not think its full implications have been understood, and I am sure that if we had a free vote of the Committee to-day, without any fear of creating difficulty for the Government in their conduct of the war, there would not only be a unanimous vote on this side of the House, but a large number of Members on the other side of the House would join us in the Division Lobby.

Major Vyvyan Adams (Leeds, West)

It was interesting to hear the last speaker advance reasons for keeping down the standards of prices and at the same time give excuses for not raising the level of wages, so avoiding inflation. With that, I think, a great many Members of my own party will profoundly agree. I certainly agree with the hon. Member that there is the greatest danger of inflation before this country. I understand it is not to be the practice of the Government to discourage purchases so far as purchase is consistent with our gallant attempts at national solvency, which will get more and more difficult as the war proceeds. The number of coupons allowed to the individual for the purchase of clothes in every 12 months seems to me to prove that. It is not an extravagant or over-generous quantity, but I think that with a little sane management it will be found to be perfectly adequate.

The garments we have to wear may be deemed to be necessities, and before the Chancellor rejects this Clause I think he will have to prove to the Committee that there are no means available to him of making up the £40,000,000 which, I understand, he is likely to lose if he drops this tax on necessities. For my own part, I confess that I see a great deal of virtue in this Clause, because we are now dealing with the economics of siege warfare, and we have to put primary necessities first in our consideration of what is to be available for general purchase. Already it has been said, I understand, that the Purchase Tax yields in a financial year about £70,000,000 and that my right hon. Friend would be likely to lose about £40,000,000 if he dropped this tax on necessities—that is, if we accept the definition which is comprised in this new Clause. My right hon. Friend will have carefully to consider, if he is honestly to reject this Clause, whether he cannot recoup himself by raising the level of the Purchase Tax on other goods which can- not be classified as necessities. I hope he will So that when he considers his reply. I think that a priori and prima facie there is a great deal to be said for this new Clause, when we consider the straits to which we shall all be put before long. Necessities must come first, and clearly that is wisely contemplated in this new Clause. On the other hand, if the Chancellor can show beyond any question that his financial stringencies are such that he cannot recoup himself, I should be the last to support this Clause to any length.

Sir Patrick Hannon (Birmingham, Moseley)

I hesitate to intervene at this point, but I think I must tell the Chancellor that there is some substance in the appeal which has been made to him from the other side of the House. Co-operative societies throughout the country have made continuous appeals to Members of this House to deal with the question of the incidence of the Purchase Tax in raising the price of the necessities of life. We Birmingham Members of Parliament, having a wide, statesmanlike outlook on public questions, invited representatives of the Co-operative societies to a meeting in Birmingham last week, at which quite a number of my hon. Friends of this House, including myself, representing Midland constituencies, met their representatives —

Mr. Hannah (Bilston)

We are not all Birmingham Members.

Sir P. Hannon

I know; I was including my hon. Friend, who is a distinguished Midland representative. The representatives of the Co-operative societies submitted to us information, with regard to the Purchase Tax raising the cost of articles essential in the domestic life of working people, that made a profound impression upon us. We were bound to pay attention to their figures, because the Birmingham Co-operative Society embraces a membership of 235,000 people. We have another large Co-operative society with a large membership, and, of course, the ordinary retail trade comes within the same category so far as the cost of living is concerned. If it be the fact that in the case of wool blankets the price to the consumer, with the Purchase Tax attached, has been raised since August, 1939, by 137 per cent. then I think a case has been established for consideration by the Chancellor. No doubt the tables of figures handed to us at Birmingham have been submitted to the Chancellor, but on a series of items concerned with the domestic life of working-class people in the Midlands the increases through the Purchase Tax, have in my view, inflicted a considerably increased burden on some of the poorest in the land.

Mr. Barnes

Not the whole of that 137 per cent. increase is due to the Purchase Tax. The Purchase Tax has aggravated the increase and represents 12s. 6d. per pair of blankets.

Sir P. Hannon

I said it was due to the Purchase Tax plus the increased price of the commodity. Although I was an old agricultural co-operator in the golden days gone by, this does not merely affect Co-operative societies; it affects consumers as well. If it be the fact that the working-class population, who have enough difficulties to face from day to day and to whom we are appealing to make a supreme effort in the production of the munitions that will save us from disaster, are penalised in their household budgets to the extent of the figures that were submitted to my colleagues and me at the conference in Birmingham, then I appeal to the Chancellor to find some way of relieving them of the increased burden. It has been our great tradition in the House of Commons to administer equality and fair play to every interest in the land, and particularly we ought not to be a party to placing a heavy burden on the maintenance of domestic life and the bringing up of the families of the poorest people in the country. Let me give the Committee one case that was submitted to us. Twill sheets, which form part of the domestic equipment of every humble household, have been increased in price by 135 per cent., according to the figures that were given to us. If these increases, with the rising prices of commodities and the dangers of inflation, which have been referred to, are incidents in our present economic system, the sooner some measure is introduced to deal with them effectively and so relieve the mass of the people, the better it will be for the country. The last thing I want to do is to vote against my right hon. Friend the Chancellor of the Exchequer. He is the most amiable statesman of modern times. He listens sympathetically to every representation that is made to him, he is always accessible, he is always kind; and if any body asked me to name some statesman of my acquaintance who was the embodiment of human charity, I would say it was the Chancellor. Let me give the Committee another illustration of the in crease that has taken place. Alarum clocks, which every workman in the country requires—

Mr. Magnay (Gateshead)

They are quite unnecessary.

Sir P. Hannon

I suppose that on the Tyneside people are called in the morning. Alarum clocks have increased in price by no per cent. Why should a poor man who wants an alarum clock in order that he may get to work at the right time in the morning, have to pay such an increased price? The general principle involved is that, although we know the Chancellor's difficulties and sympathise with him in his supreme effort to get the necessary finance to carry us through our present terrible trial, so that we may put an end to barbarism and establish Christianity and the rule of law and order, we cannot at the same time place such a burden upon the poorest people in the land as is being placed upon them by this tax. I make this appeal to my right hon. Friend. I know that he will be kindly and gentle in his response, and if he refuses, we will take it kindly from him, although at the same time we shall feel in our hearts that he ought to have done something better for the mass of the people.

Mr. Salt (Birmingham, Yardley)

I want to add one point to that which was made by my hon. Friend the Member for Moseley (Sir P. Hannon). When the Purchase Tax was introduced, I think that most of us thought the higher rate would be imposed on luxury articles, but when we examined the particulars given to us by the Co-operative Society, it was obvious that clothing and other necessary articles were included in the 33⅓ per cent. tax. Does not the Chancellor consider that such things as blankets are absolute necessities which ought to be taxed on the lower level?

Sir K. Wood

I am very much indebted to hon. Members in all parts of the Committee for their personal concern for me. I gather that I stand here in a white sheet and in a separate water-tight compartment, and in those grim circumstances I will do my best to reply to the Debate. I was surprised when my hon. Friend the Member for Yardley (Mr. Salt) revealed to us that he has not followed the previous proceedings on the Purchase Tax and has apparently heard now for the first time what are the provisions of the tax, which was the subject of considerable debate in the House. I am very surprised, knowing so well the complete attention which he gives to his Parliamentary duties, that he has forgotten those former proceedings.

I make that observation because I want to recall to the Committee all that I have endeavoured to do to meet hon. Members in the difficult situation which confronted me. The Committee will remember that when I came to my present office, I had under consideration the question of the Purchase Tax and the Bill which, I think, had already been presented to the House. Hon. Members opposite came to me, and at that time I endeavoured to make a number of concessions, at considerable expense to the Revenue, in order to meet the situation as it then was. Those con cessions, which represented a considerable sacrifice, amounted to very many million pounds. With the assent of the House, I exempted from the Purchase Tax foot wear and clothing for children, and similar articles, and I also made a very substantial alteration by putting the tax in two categories. By these means I endeavoured to mitigate the effects of the tax and as far as possible to meet hon. Members opposite. The result was that the House approved of the Bill by considerable majorities. Hon. Members opposite who belong to the Co-operative societies stated that opposition then, as they have done to-day, and I say again that I understand their special position in this matter, and the reasons which animate them to state their points. Of course, I cannot for one moment object to any of the statements that have been made, particularly by the hon. Member opposite, who has so often, in the course of the discussions on this matter, made very able and considered statements on the whole position. I do not quarrel with what he has said from his point of view —

Captain Strickland

Will my right hon. Friend indicate to the Committee the concessions he has made under the Purchase Tax with regard to special household commodities such as sheets, and will he also tell the Committee what are his views regarding this matter—a Purchase Tax of 33⅓s Per cent. is placed on goods in one year, and in the course of three years, as the price of the goods rises, the Purchase Tax goes up three-fold, with the result that it is really a tax of 100 per cent. on the original price?

Sir K. Wood

I had better reply to what my hon. and gallant Friend has said by referring him to the discussions which have taken place. Hon. Members will have good memories on this matter, and I know that they will do me the justice of remembering that I deleted from the Bill a considerable number of articles to which they objected. It is true—and we have to face this fact—that a number of items were left in, and are subject to the tax; and nothing that I can say today will remove those articles from the tax at the present time. My position is plain. It was not for the fun of the thing, or because I like imposing taxation on people, that the Purchase Tax came into being. Anyone who recalls the Debates on this subject will remember the reasons I gave for imposing this taxation, as I have to impose any other taxation. I am amazed at some of the statements that have been made in this Debate. Anybody would think that we are in a happy position as far as our financial affairs are concerned; anybody would think that everything in the garden is lovely. The financial position of this country must give everybody, myself included, a considerable amount of anxiety.

I must ask hon. Members to have regard to the whole position and not to get up and say, as they have done today, that they would very much like this, that and the other thing to be done. I wish it were possible to do these things. But how can I possibly give up a considerable sum of revenue at the present time? I should be doing the greatest disservice to the very people for whom my hon. Friends purport to speak. Those who would suffer the most if we allowed our finances to run riot would be the humblest people, and, for the want of a better phrase, those in the lowest walks of life.

I am bound to maintain every possible item of revenue I can, in view of the position I revealed to the House in my Budget statement. No one would endeavour to prophesy, but from the financial point of view, and from the point of view of wisdom and foresight, I have to contemplate that we are engaged in a long war. How can anyone ask me to give up what has been referred to to-day as the sum of £40,000,000 of revenue? If I had £40,000,000 in hand it could be used in very many ways, not only for war purposes, but for many other purposes. But I have not got it, and anyone can see from my Budget statement that I have had to look around and impose the heaviest taxation on rich and poor alike. I am certainly not in a position to-day to make a sacrifice of this kind. One of the difficulties which may confront me in the future when I again have to look around is where I am to look for further financial assistance. That is going to be the difficulty of the future. My hon. Friends should put themselves in my place with the thought that the war may last for a considerable period. Let them think when they go home from which direction any further financial aid might come. It is under these circumstances, and on these grounds alone, that I cannot, however much I should like to do so—and I feel the weight of the criticisms that have been made—give up this source of revenue.

Mr. Lipson (Cheltenham)

Has the Chancellor made an estimate of the effect of this tax on wages? In view of the fact that the Government are the chief spenders, and therefore chiefly affected, if it is resulting in an increase in wages, does that not tend to bring that inflationary movement, which the Chancellor naturally dreads, and which, as he said, if it gets out of control would inflict great hardship on the poorest section of the community?

Sir K. Wood

If that has taken place, there are ways of dealing with it, not by giving up the tax, but by other means. So far as the merits of the Clause are concerned, hon. Members will realise that if it was carried, it would not mean remitting the tax only on the cheaper types of clothing, but also on other clothing which may well be described as luxuries. It is not the fault of the Mover of the Clause, because he cannot alter it—it is dealt with in the Bill in this form. However, I take my stand broadly on what I have just said to the Committee. I hope they will not think I am discourteous if I do not answer all the points which have been raised, but I feel that what I have said ought to be said. I quite understand the special case of the hon. Members opposite, but I must look to Members of this House to support me in the difficult financial position which faces us to-day.

Mr. Pethick-Lawrence

I have a considerable sympathy with my hon. Friends who put down this Clause. The origin of this tax was far from above suspicion. For some time before it was introduced there was a large body of opinion in the country, represented by some Members— and I will put it no higher than that—who wanted what they called a broadening of the basis of taxation, and by that means to transfer the burden from those who had plenty to those who had very little. The Chancellor's predecessor, Lord Simon, showed his support of that idea at the beginning by imposing an extra tax on sugar. That imposition was bitterly resented on these benches, and it was realised by some of us as being a thoroughly bad policy as well as fin unsocial action. The Purchase Tax, as it was originally produced by Lord Simon, was, in my view, a thoroughly bad tax. In the first place, it was on a flat rate, and in the second place it flouted the House of Commons by not allowing the House to decide what the amount should be. In the third place—and this appealed very much to me and to many of my hon. Friends—it was not accompanied by any large increase in direct taxation. It was a purely one-sided burden thrown mainly upon the poorer section of the population, and it seemed to me to offend against my ideas of what war-time taxation ought to be.

The tax, having started off in that way, was strongly opposed on these benches, and I made strong speeches against it. I have no doubt that if we were living in ordinary times and acting under the ordinary conditions of party warfare, we should still be fighting against this tax in every form and demanding its repeal. The repeal of this tax is the effect of this Clause. I expect that in other quarters of the Committee there would be an equally strong demand for a repeal of the heaviest forms of Surtax and the other burdens which fall on the direct taxpayer. We all know that we are not living in ordinary times. We are living in the stringent times of war, and we are also living at a time when the thoughts of people are not for party but for State. We are living at a time when every section of the community is making some sacrifice, and some of them are very severe sacrifices, in order to further our common end. It is in the light of these facts that the Chancellor has acted and we have acted in this regard. We have to consider this Purchase Tax not as an isolated item of taxation which inflicts harm upon those people who have to meet it, but as part of the general finances of the country.

Let us consider first of all how the Chancellor acted after he came into office. In the first place, he very considerably modified the character of the Purchase Tax itself. He decided that Parliament should have the say as to what the rate of tax should be and he made the step in the tax which brought about the two columns which are referred to in the proposed new Clause, endeavouring thereby, as far as is possible in a tax of this kind, to reduce the tax upon necessaries. I know it has not been done completely, and I think the Chancellor would agree with that view but, in so far as it was possible, he aimed at that and to a large extent he succeeded. Further, he cut out altogether the things which it seemed to some of us would press hardest on the poorest of the population. But that was not all. At the same time that he brought forward the tax in its amended form he brought forward a considerable increase in direct taxation, and thereby restored the balance which I thought at the time his predecessor had departed from in his original proposal in the Budget of April, 1940. Those two things induced the majority of us on these benches, rather reluctantly, but definitely, to give the Chancellor support in his Budget of, I think, July, 1940. But my hon. Friends who are asking for this Clause are objecting to the tax on the ground that it does exactly what the Government's policy is designed not to do, to raise the cost of living, and thereby to start a vicious spiral of rising prices and costs which, as we know from the experience of the last war, was a thoroughly bad thing to do. The Government's policy of finance consists partly in taxation and partly in subsidising the necessaries of life. I think the Chancellor has done far more on the side of keeping down a rise in the cost of living than the Purchase Tax has done on the other side.

Mr. Barnes

Will my right hon. Friend address his mind to the point that the President of the Board of Trade fixed the £3 a week family as a kind of standard and that the Purchase Tax put 2s. 6d. a week on the expenses of such a family?

Mr. Pethick-Lawrence

I cannot say "Yes" or "No" to a statistical statement of that kind. I should have thought that it was a very great exaggeration, but I cannot obviously check it or refute it in the course of a speech. But the relief which the Chancellor gives at present to the standard of living by subsidies is of far greater importance to the poorer sections of the community than what I should have thought is the comparatively small injury which is effected by the Purchase Tax. I have to bear that in mind. If you were to say the Chancellor of the Exchequer ought not to interfere in the matter of the cost of articles, and he were to respond and say, "I will take off the Purchase Tax and take off all the subsidies which I am giving to keep down the cost of living," I am sure there is not a

Division No. 19.] AYES.
Broad, F. A. Maclean, N. Smith, E. (Stoke)
Chater, D. Maxton, J. Watson, W. McL.
Daggar, G. Morrison, R. C. (Tottenham, N.) Wilson, C. H. (Attercliffe)
Dugdale, Captain John (W. Bromwich) Ritson, J.
Gallacher, W. Silverman, S. S. TELLERS FOR THE AYES.—
Leonard, W. Sloan, A. Mr. Barnes and Mr. Woods
NOES.
Adams, Major S. V. T. (Leeds, W.) Crookshank, Capt. Rt. Hon. H. F. C. Griffiths, J. (Llanelly)
Adamson, W. M. (Cannock) Crowder, J. F. E. Grimston, R. V.
Albery, Sir Irving Culverwell, C. T. Hambro, A. V.
Aske, Sir R. W. Davidson, Viscountess (H'm'l H'mst'd) Hannon, Sir P. J. H.
Balfour, G. (Hampstead) Davies, Clement (Montgomery) Harland, H. P.
Beamish, Rear-Admiral T. P. Davies, Major Sir G. F. (Yeovil) Harris, Rt. Hon. Sir P. A.
Bellenger, F. J. De la Bère, R. Hewlett, T. H.
Benson, G. Denville, Alfred Holdsworth, H.
Berry, Capt. Hon. J. S. Dobbie, W. Hollins, A. (Hanley)
Bird, Sir R. B. Doland, G. F. Holmes, J. S.
Blair, Sir R. Duckworth, Arthur (Shrewsbury) Howitt, Dr. A. B.
Boulton, W. W. Dugdale, Major T. L. (Richmond) Hudson, Rt. Hon. R. S. (Southport)
Bower, Comdr. R. T. Ellis, Sir G. Hughes, Moelwyn
Brabner, R. A. Elliston, Captain G. S. Hume, Sir G. H.
Brocklebank, Sir C. E. R. Emery, J. F. Hurd, Sir P. A.
Brooke, H. Emrys-Evans, P. V. James, Wing-Comdr. A. W. H.
Cadogan, Major Sir E. Erskine Hill, A. G. Jarvis, Sir J. J.
Campbell, Sir E. T. Evans, Colonel A. (Cardiff, S.) Jeffreys, Gen. Sir G. D.
Carver, Major W. H. Evans, E. (Univ. of Wales) Jenkins, Sir W. (Neath)
Cary, R. A. Fildes, Sir H. Jennings, R.
Cazalet, Thelma (Islington, E.) Fremantle, Sir F. E. Jewson, P. W.
Channon, H. Gammans, L. D. John, W.
Clarry, Sir Reginald Gates, Lieut. E. E. Jones, Sir G. W. H. (S'k Newington)
Cluse, W. S. Goldie, N. B. Jowitt, Rt. Hon. Sir W. A.
Cobb, Captain E. C. Graham, Captain A. C. (Wirral) Keeling, E. H.
Colman, N. C. D. Greenwood, Rt. Hon. A. Kerr, Sir John Graham (Scottish U's)
Cooke, J. D. (Hammersmith, S.) Gretton, Col. Rt Hon. J. King-Hall, Commander W. S. R.
Craven-Ellis, W. Gridley, Sir A. B. Kirby, B. V.

Member who is concerned with the life of the poorer sections of our population who would exchange for a moment the present position for the position which that alteration would bring about. Therefore, looking at the Purchase Tax, not by itself, but in conjunction with the whole financial picture which the Government are concerned in painting for us since the war began, if the Chancellor says, "In view of the financial position I cannot take this tax off at present," I do not feel that we ought to go against that position. I am authorised by those who sit behind me to say that, much as we dislike the principle of the Purchase Tax, and though we hold ourselves entirely free when the war comes to an end to demand its immediate repeal, so that what has been introduced as a purely war-time measure shall not go forward into the peace world after that, as the Chancellor finds himself unable to meet this Clause, they, with me, will support the Government if the matter is pressed to a Division.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 15; Noes, 162.

Lamb, Sir J. Q. Radford, E. A. Stuart, Rt. Hn. J. (Moray and Nairn)
Liddall, W. S. Rankin, Sir R. Sutcliffe, H.
Lipson, D. L. Rathbone, Beatrice F. (Bodmin) Tate, Mavis C.
Little, Dr. J. (Down) Rathbone, Eleanor (English Univ's.) Thomas, J. P. L. (Hereford)
Lloyd, Major E. G. R. (Renfrew, E.) Reed, Sir H. S. (Aylesbury) Thomas, Dr. W. S. Russell (S'th'm'tn)
Locker-Lampson, Commander O. S. Reid, W. Allan (Derby) Tomlinson, G.
Loftus, P. C. Rickards, Q. W. Touche, G. C.
Macdonald, G. (Ince) Ridley, G. Tufnell, Lieut.-Comdr. R. L.
McEwen, Capt. J. H. F. Robertson, D. (Streatham) Wakefield, W. W.
McKie, J. H. Ross Taylor, W. (Woodbridge) Walker, J.
Magnay, T. Rowlands, G Ward, Col. Sir A. L. (Hill)
Maitland, Sir A. Royds, Admiral Sir P. M. R. Ward, Irene M. B. (Wallsend)
Makins, Brig.-Gen. Sir E. Russell, Sir A. (Tynemouth) Wardlaw-Milne, Sir J. S.
Mayhew, LI.-Col. J. Salt, E. W. Webbe, Sir W. Harold
Mellor, Sir J. S. P. (Tamworth) Samuel, M. R. A. Wells, Sir S. Richard
Moors, Lieut.-Col. Sir T. C. R. Sanderson, Sir F. B. Whiteley, W. (Blaydon)
Naylor, T. E. Savory, Professor D. L. Wickham, Lt.-Col. E. T. R.
Nunn, W. Scott, Donald (Wansbeck) Williams, C. (Torquay)
O'Neill, Rt. Hon. Sir H. Scott, Lord William (Ro'b'h&Selk'k) Williams, Sir H. G. (Croydon, S.)
Owen, Major G. Silkin, L. Williams, T. (Don Valley)
Peters, Dr. S. J. Simmonds, O. E. Windsor-dive, Lt.-Col. G.
Pethick-Lawrence, Rt. Hon. F. W. Smith, Bon (Rotherhithe) Wood, Rt. Hon. Sir K. (W'lwich, W.)
Peto, Captain B. A. J. Smith, Rt. Hon. H. 6. Lees- (K'ly) Wootton-Davies, J. H.
Pickthern, K. W. M. Smith, T. (Normanton) Young, A. S. L. (Partick)
Price, M. P. Southby, Comd. Sir A. R. J.
Profumo, J. D. Spens, W. P. TELLERS FOR THE NOES.—
Pym, L. R. Strickland, Capt. W. F. Mr. Munro and Major Sir
Quibell, D. J. K. Stuart, Lord C. Crichton- (Northwich) James Edmondson.