HC Deb 26 April 1944 vol 399 cc885-93

Motion made, and Question proposed, That the Purchase Tax (Exemptions) (No. a) Order, 1944, dated 1st April, 1944, made by the Treasury under Section 20 of the Finance (No. a) Act, 1940, a copy of which Order was presented on 4th April, be approved."—[Captain Waterhouse,]

Mr. Barnes (East Ham, South)

I should like to express my support for these recommendations, because, as the Financial Secretary knows, we feel that this tax should be lifted from the purchasers as quickly as possible. But that is not really the point that I desire to make. There are two points for the consideration of which I should like to ask, and as I notice that the Parliamentary Secretary to the Board of Trade is also present, perhaps he will take note of them. The Government are proposing to take off the Purchase Tax on wooden-soled shoes and picture frames, but I wish to take this opportunity to submit that this will impose a very definite and direct injustice upon retailers. The wholesaler is used by the Government as the means of collecting the tax, and as, under the process of removing these taxes stage by stage, we shall cover larger quantities of goods, this Motion appears to raise an issue of very great substance. It is the decision of the Government that a certain type of commodity shall be produced and the retailer finds himself compelled to stock such commodity, and his judgment as to the goods he purchases does not enter into the arrangement at all. The Board of Trade may find that they have ordered, and arranged for, the production of a commodity which the consumer will not purchase and eventually they come along and remove the tax, and the only person who is likely to suffer is the retailer left: in possession of the goods. The Treasury and the Board of Trade ought to arrange to make some refund of the tax to the retailer. It is an entirely different issue from that of a trader purchasing goods in the open market when he himself must bear the responsibility if there is a decline in price.

Here the decline in the price of the commodity is determined by Government policy and it is the tax which is at issue. Is it desirable or just that the retailer should be used to collect the tax, which the Treasury receives, and that when a cut in price takes place the retailer should be the one who suffers? While welcoming a reduction in the price which the removal of the Purchase Tax will make, the trade feel that the removal of the Purchase Tax will not of itself result in the sale of wooden-soled shoes. As far as I have been able to gather from a very wide circle of experience in the trade, women, in particular, place almost as much value on coupons to-day as they do on price, because they are the means whereby they actually get the commodity. We wish to bring to the notice of the Board of Trade the fact that the removal of the Purchase Tax will not of itself result in the selling of wooden-soled shoes, although there is to be a drop in the number of coupons from seven to four. We urge upon the President of the Board of Trade to remove the need for coupons altogether, along with the Purchase Tax, and then we can visualise the goods being cleared out of the shops. In the meantime I particularly want the Financial Secretary to the Treasury to take note of that other point and to avoid the injustice on retailers by first of all taking the tax in the price and then coming along and removing it and leaving them with the burden. Otherwise I am delighted to support the Order.

Sir Herbert Williams (Croydon, South)

I want to raise rather a different issue from that of my hon. Friend, who is naturally perturbed about the effect of this Order on the Co-operative movement, but I am not primarily concerned with that. I always thought the Purchase Tax was the worst tax we have ever invented. I cannot imagine any justification for it as a form of collecting revenue. Now we find the Government engaged in getting rid of odd bits of it, and what worries me is the odd bits of which they are getting rid. This proposal before us might be called a subsidy on junk. When the President of the Board of Trade, or his satellites, invent what they call utility garments—I was not thinking of my hon. and gallant Friend but of the lower orders which pervade his DepaiLinent—and find they are not very saleable, then they want to advertis2 them by reducing the price, and they indulge in the feast of reducing the tax. Shoes enable us to keep the wet out; they also enable us to walk about in comfort. They are a necessity of life. I cannot understand why, if I buy a pair of shoes with leather soles I am taxed, and, if I buy some of my right hon. and gallant Friend's up-to-date clogs I am freed of tax. It is really most unjustifiable to try to subsidise and encourage the sale of these so-called utility goods, to try to persuade the public that they are really very much better value for money because the good article contains in it a concealed tax—the purchaser never knows whether he is really being charged the right tax—and I do not understand the theory behind it.

The Chancellor of the Exchequer stood at that Box yesterday and told us with great satisfaction that, in order to keep down the cost of living, he is subsidising food to the tune of £190,000,000 per annum, I think it was, and then we have his deputy associated with the Board of Trade engaged, in most cases, in keeping a tax on essential necessities.

The Financial Secretary to the Treasury (Mr. Assheton)

Reducing.

Sir H. Williams

Yes, this particular one, but I am taking the cases which they are not reducing, in other words, keeping up the cost of living by a tax on necessities. I really think this tax wants reexamining. Obviously, Mr. Deputy-Speaker, if I wander too far you will say I am making a Second Reading speech on a Bill not yet before the House, but I think I am entitled to draw the attention of the House to the theoretical principle behind the Order before us. It will be carried, because I am in favour of the abolition of this tax wherever I can bring about its reduction. I do not know whether, in the case of this footwear, before this tax was taken off, it was subjected to that mysterious, immoral process which bears the title of "Uplift" in the Board of Customs and Excise, and I do not know whether hon. Members realise what happens. When wooden-soled footwear was sold by the wholesaler to a retailer, tax was charged at a certain percentage, but if, by any chance, I bought some of this wooden-soled footwear direct from a wholesaler, my right hon. Friend's deputies in the Board of Customs and Excise would increase the tax by 10 per cent. on the ground of what they call "Uplift." I hope my right hon. Friend will tell me whether, before this Order was introduced, the principle of uplift was applied to wooden-soled footwear, because it is really a most discreditable thing the Customs are doing. I am perfectly certain that if someone would seek an injunction against them—I have not enough money for these pursuits—they would be put in a great difficulty, because they have persistently misinterpreted the valuation Section contained in the pertinent Finance Act. I do hope my right hon. Friend will look into this point.

Mr. Woods (Finsbury)

I rise to welcome the hon. Member for South Croydon (Sir H. Williams) into the ranks of those who realise that the Purchase Tax is an altogether bad thing, which, I hope, will be progressively removed by the Chancellor of the Exchequer. Some of us mentioned this in the Debate when this tax was first introduced. It is vitally important that there should be no injustice to those tradesmen who have been, and are, responding to the encouragement of the Board of Trade to handle these commodities. Many have made great displays and have encouraged their customers to help the national effort by buying these goods. It is a poor way of showing gratitude to leave tradesmen with stocks for which they have already paid the wholesalers and are now being faced with losses. I therefore hope that the Board will devise some process whereby those who have taken stocks of the various goods will be able to assess their losses and have their claims met by the Board.

The Parliamentary Secretary to the Board of Trade (Captain Waterhouse)

The House may like to know the past history of this Order, which has been welcomed and criticised almost in the same breath and from the same mouths. In the middle of last year we were faced with a world shortage of leather, and especially of bend leather for soling footwear. As we know only too well, the year before, supplies of rubber had been cut off completely. Thus, we were in a difficulty to know how to keep the people of this country shod, because at that time it looked as if leather supplies were becoming increasingly scarce. So, with our usual ingenuity in the Board of Trade, we thought of getting wooden soles made to take the place of the absent leather. With their usual collaboration manufacturers worked with us on this problem with great ingenuity, with the result that between 150,000 and 200,000 pairs of women's wooden-soled shoes have been produced each month, which is a very considerable contribution to this emergency.

In the middle of last August coupons for leather footwear were increased because we wanted to be sure that only those who needed boots and shoes would buy them. Women's footwear was increased from five to seven coupons. No alteration was made at this time in wooden-soled footwear but—and this point partially meets the question raised by the hon. Member for East Ham, South (Mr. Barnes)—in November they were downpointed from five coupons to four. [An HON. MEMBER: "Not sufficient."] Well, in our view it is as much as we ought now to afford, because we do not want to push these shoes on to the market: we want to have them there, because we are shorter of footwear than any other article of clothing, and it is a great safeguard to the country to know that there is a stock of wooden-soled shoes to meet an emergency if leather supplies again become much worse.

Mr. Barnes

The right hon. and gallant Gentleman's statement now is that the purpose really is to hold these as reserve stock. It is unfair that the tradesmen should have their capital locked up and lose their margin of profit.

Captain Waterhouse

We have to hold a balance in these things. We do not want them all to be held as stock or all to be thrown on to a market which does not need them. We want to fix the pointing at: a level which will enable people who need shoes to afford them out of their ration, but not to encourage those who do not need them to buy them unnecessarily. We think that with the present pointing the balance is about right. At present that is our view. It may be that as the years roll by an alteration will take place, but I hope the hon. Gentleman will not unduly press me on that.

On the other point, utility footwear was always free of Purchase Tax, and quite clearly the obvious way to deal with these shoes which are essentially utility shoes would have been to include them in the utility schedule, and that is what my right hon. Friend advocated and what we endeavoured to do, but there are certain reasons why it is impossible. You need a fairly precise specification before you can make utility garments and it was difficult to get a precise specification in the early stage of the manufacture of these shoes. Each manufacturer was really an inventor. They were experimenting, and we were asking them to make the best job they could in their own way, and we did not find it possible to make precise specifications. Furthermore, before one can have a utility commodity one has to fix a price and it was, for the reasons that I have stated, impossible to fix a price with any accuracy. Therefore, we came rather reluctantly to the conclusion that these shoes could not be dealt with by the ordinary process, and we have come to the House to ask for this Order. Its effect will be to decrease the price by something between 2S. and 5s. The price of the shoes is something between 21s. and 55s. a pair. I appreciate the hon. Gentleman's argument on hardship grounds. There is always a hardship when a tax is removed, but I can see no way of obviating it. After all the retailer is in no way forced to reduce his price, although competition may make it necessary for him to do so. Furthermore, if he had to reduce his price on a pair of shoes sold at 21s. the margin of profit would be something like 6s. 6d. and the amount of tax he would lose would be something like 2s. I realise that it is some hardship to him, which we would avoid if we could, but we cannot as yet find a way to do so.

Mr. Woods

Has the right hon. and gallant Gentleman considered the possibility of empowering the wholesalers to supply replacement with rubber or other material soles which are still subject to the tax so as to compensate?

Captain Waterhouse

I do not quite take the hon. Member's point. The whole point is that we are so short of shoes that we can hardly keep the market covered either with substitute rubber or leather shoes; therefore the wholesalers would be unable to replace wooden soled with leather shoes.

Mr. Woods

I am not asking them to replace straight away. It is the wholesaler who pays the Purchase Tax, and if he holds the credit for so many under some licence by the Board of Trade there should be no difficulty.

Captain Waterhouse

I think there would be material administrative difficulties in asking retailers—

Mr. Woods

There need Abe no difficulties, as they take sufficient supplies in the normal course of business. They would have supplies and they would be treated for the time being as utility or non-Purchase Tax commodities. They all have to be classified and there would be no difficulties.

Captain Waterhouse

No difficulties are insuperable, but I can see many administrative difficulties. The wholesaler would have to go to the Treasury and ask for the tax to be returned. I will examine what my hon. Friend has said and if it provides any possibility of a solution of the difficulty we will discuss it, but I do not think it will because we have looked at this matter from all angles. My hon. Friend the Member for South Croydon (Sir H. Williams) raised the matter from a rather different angle. He obviously is not a great advocate of uplift in this connection,. though in many other directions he is one of the greatest advocates of it in this House. His main point was that we were keeping up the cost of living by a tax on necessities, but I assure him that he has got the thing completely the wrong way round, which is very unusual for him. On all these utility articles we have taken the tax off with the very object of keeping the price of necessities down.

Sir H. Williams

My right hon. and gallant Friend has missed the point. If an article is a necessity and is not designed by the Board of Trade you put the tax on, but if it is designed by the Board of Trade you take the tax off. I do not see why necessities like shoes should be taxed at all.

Captain Waterhouse

The Purchase Tax was not imposed as a luxury tax but as a revenue tax, and as such it has and is fulfilling a useful function. The Chancellor of the Exchequer is a many-sided man. On one side he has to raise revenue, and on the other side he has to look after the cost of living. Therefore, be very properly puts the Purchase Tax on many things in order to raise revenue and takes it off certain other necessities in order to keep down the cost of living. Again, it is a question of balance, and I think that on the whole even my hon. Friend will agree the balance is not an unhappy one.

Mr. Woods

I would like to remind the right hon. and gallant Gentleman that the Purchase Tax on motor car tyres was removed. A person can go about in a motor car on rubber tyres which have not paid Purchase Tax, but if he walks about on rubber soled shoes which are not made to the Board of Trade specification he has to pay tax. I do not see where the equity comes in in an arrangement of that kind. The tax should be removed from footwear altogether.

Captain Waterhouse

Tyres are happily not the responsibility of the Board of Trade. It is not possible for anybody to buy a motor car and drive about in one. I do not think, therefore, that there is any parallel between motor cars and footwear.

Question put, and agreed to.

Resolved: That the Purchase Tax (Exemptions) (No. 2) Order, 1944, dated 1st April, 1944, made by the Treasury under Section 20 of the Finance (No. 2) Act, 1940, a copy of which Order was presented on 4.th April, be approved.