PURCHASE TAX (EXEMPTIONS) (HABERDASHERY, ETC.) (Hansard, 18 May 1943)

§ The Parliamentary Secretary to the Board of Trade (Captain Waterhouse)
beg to move, That the Purchase Tax (Exemptions) (No. 1) Order, 1943, dated 28th April, 1943, made by the Treasury under Section 20 of the Finance (No. 2) Act, 1940, a copy of which was presented to this House on 11th May, be approved. This Order is designed to remove the Purchase Tax from three categories of utility goods: household textiles, such things as towels, sheets, blankets; bedding, that is, mattresses, pillow cases, bolsters; and haberdashery, such as handkerchiefs, collars and cuffs. This is in line with the general policy which the Chancellor has adopted of freeing utility goods from Purchase Tax. War experience has proved that simplification of design has saved both labour and materials. The nation as a whole is definitely advantaged by the switch to utility. It is therefore the object of the Government to do what they can to encourage the purchase of utility goods. The best way to encourage purchase is to reduce price. It is with this object that he asks the House to agree so to remove the tax.

§ Sir Herbert Williams (Croydon, South)
I quite realise that the Motion which has just been made by the hon. and gallant Member the Parliamentary Secretary to the Board of Trade is for the purpose of carrying out what was stated by the Chancellor in his Budget speech, but I want quite briefly—Members do not want to stay long—just to record this view. I wonder whether the policy of the Government with regard to this class of taxation is really quite coherent. In the part of the Chancellor's speech in which he dealt with this matter he pointed out that the State was expending £180,000,000 a year to keep down the cost of living. Then the Chancellor proceeded to increase the Purchase Tax on certain goods and announced its abolition on certain other goods. It is said that these utility goods save a lot of labour and material. Let us assume that that is true. Therefore, they cost less to produce for a start. Because of their ugliness they have the advantage of cheapness, if I may so put it. People who buy these things are to be exempt from taxation, whereas those who buy other classes 1077 of goods for the same purpose are to pay tax. To a very large extent if you buy goods already in stock, which have already been made, they are taxed. If you buy goods that are to be made and involve future consumption of labour and material, such goods are not going to be taxed. From the point of view of general economy that is not sound. The Board Trade ought to encourage the use of existing stocks in warehouse and shops rather than encourage people to buy stuff which will make a new demand upon labour and material. But the Board of Trade is anxious to advertise its wares. It has all sorts of professors, designing utility studs, utility cuff links and utility "reach me downs" and the rest of it It has to advertise them and the best way is to tax all competitors' goods under the Purchase Tax.
Are we not spending £180,000,000 to reduce the cost of living? The cost of those selected groups of goods which the Minister of Labour includes in his calculations for the purposes of the monthly index figure is subsidised. To the same extent the miscellaneous items which the Minister of Labour takes into account include goods in the piece. Take the Purchase fax off some of these things, and you influence to some extent the cost-of-living index figure. We have had reference to commodities which I am delighted to find are essential, such as beer and tobacco, which are heavily taxed but not included. The bulk of the items on which the Purchase Tax is imposed are not included, and such items are usually included in the cost of living. That list was drawn up in 1904, and it still remains very accurate, but another lot of goods of which the public are large buyers have been automatically inflated in price. The Government are spending £80,000,000 to reduce the cost of living, and at the same time the Purchase Tax, to which I have always been opposed in principle and which affects every canon of good taxation, is used at the same time to increase the cost of living. If you wiped out all 1078 the immense subsidies and the Purchase Tax, you would arrive at very much the same result. I would ask the Government to reconsider their whole attitude with regard to subsidies on the one hand and Purchase Tax on the other.

§ Captain Waterhouse
My hon. Friend is wrong in what he says about piece goods. The piece goods referred to ale only black-out cloth, and I do not think that he or anybody else would wish to retain the tax on black-out material.

§ Sir H. Williams
I am not opposing the Order but merely pointing out that in the calculation of the cost-of-living index, the Board of Trade has to take into account certain classes of piece goods which persons of the working class are in the habit of purchasing, and therefore to some extent it may have the effect of bringing about a small reduction in the index figure of the cost of living without effecting them at all.

§ Captain Waterhouse
That is the very point on which I was going to correct my hon. Friend. This does not in any way affect the cost of living, and on the general principle he does not seem to have any cause for complaint. We are removing the Purchase Tax and therefore reducing the cost of certain goods and making it easier for people to live on their incomes, and therefore doing something to stabilise the position, which my hon. Friend wishes to do.