HC Deb 22 June 1949 vol 466 cc213-7

Motion made, and Question proposed, "That the Clause stand part of the Bill."—[Sir S. Cripps.]

3.45 p.m.

Captain Crookshank (Gainsborough)

I do not think that we can let this Clause go without explanation. The Committee will recollect that under our new procedure, and because of the way that the Resolutions on the Budget have to be passed by the House without any discussion, this is the first opportunity on any Clause to amplify in any way the obviously brief statement which the Chancellor of the Exchequer deems it his duty to make on Budget day. While I understand the purpose of the Clause—I hope that I am not misrepresenting anything that the Chancellor said, because that is the last thing I want to do—to be simply a book-keeping entry, that explanation does not take us very far. I hope that we may get some explanation of what is to be the effect of it.

As I read the Clause, its effect is that the duty upon Empire tea is entirely abolished, whereas the duty on foreign tea remains. To that extent, therefore, the principle of Empire preference is, I take it, still enshrined in our taxation system. That point is, of course, very important. My hon. Friends and I would like a little further information as to what sort of money is involved in this transaction, because of the difficulty that we all have in dealing with the finances of anything to do with food. In this context, tea comes under the heading of food. With the food subsidy arrangements and the buying arrangements of the Minister of Food, and all the rest of it, we are not where we were in the old days when it was a perfectly clear proposition: so much was the duty, so much was the Imperial preference rate, and that was all there was to it. The position is now, I will not say confused, but complicated, owing to the issue of subsidies on foodstuffs and the difficulty that we have of knowing what they amount to. I hope that one or other of the Treasury Ministers will not mind taking notice of the fact that I am asking for a further explanation on this Clause.

Mr. Nigel Birch (Flint)

I should like to back up what has been said by my right hon. and gallant Friend the Member for Gainsborough (Captain Crook-shank) and to ask what the real point is of what we are told is a book-keeping transaction. I could understand our doing something of this sort if it had one of two effects, either eliminating the duties altogether and therefore taking away administrative work, or eliminating the subsidy altogether and, presumably, taking away other administrative work. As far as I can see, this Clause does neither. As my right hon. and gallant Friend has said, there is apparently still to be a duty on foreign tea.

As I understand the Clause, its effect will be to reduce the subsidy by £11 million. The subsidy last year was a total of £70 million. We cannot tell what will happen under the new tea contracts but it does not appear likely that the subsidy will be eliminated. Therefore, all that we are doing by the book-keeping transaction is artificially to cut down on both sides of the Budget. Frankly, I cannot see any good reason for doing so. We appear to be reducing the food subsidies, but we are not actually doing so. That appears to cause more confusion than it ends. In addition, there is the great difficulty, if we eliminate or largely reduce the duty on imported tea, of what happens if and when the price of imported tea goes down and we want to get the old revenue from tea without raising the price. That seems an additional reason for not doing what is now proposed. The main point is: What is the point of going a long way round to do something which makes no real change in the economic position of the country?

The Economic Secretary to the Treasury (Mr. Douglas Jay)

As my right hon. and learned Friend has said, this Clause contains a perfectly straight-forward and simple book-keeping operation. The duty on tea was 8d. per lb. on foreign tea, and 6d. on Empire tea. What we are doing is to remove as far as possible the duty on tea without abolishing the preference. The situation now will be that the duty of foreign tea is reduced to 2d. and the duty on Empire tea is removed altogether. The effect is that we lose £10.8 million in the present financial year on the tea duty, and that we save that amount on the subsidy. In a full year the book-keeping transfer amounts to £11 million.

I was asked by the hon. Member for Flint (Mr. Birch) the purpose of making this transfer. The answer is that there is no point in raising money on the one hand and paying it away on the other. That seems to us a needless operation, and therefore, providing that we can maintain the preference for Empire tea, it seems better to make this change.

Mr. Dodds-Parker (Banbury)

I may be rather slow on this, but perhaps the Economic Secretary could be a bit clearer in giving the figures and say how much he now expects to collect on foreign tea and how much was collected in the past. This appears to the producers to be a Crippso-Schachtian economy. With export taxes in some of the producing territories and import subsidies in this country, it is increasingly difficult for the producers to see the real value of some of their products. It would be of great assistance to all concerned if the Economic Secretary could give us the figures for which I have asked.

Mr. Jay

Over 99 per cent. of the revenue collected in the past has come from Empire tea. In future on the small remaining duty we expect to collect a small amount of about £250,000.

Mr. Erroll (Altrincham and Sale)

The Economic Secretary is being disingenuous when he calls this a simple book-keeping transaction. It certainly is not a simple book-keeping transaction. What is happening is that we are witnessing a permanent loss of revenue to the Treasury by the abolition of the duty. Subsidies are related to the current price of tea, and, as most commodities are now falling in price, one would have expected that the subsidies would be required to be reduced as the months went past. However, we are seeing the total extinction of the duty on Empire tea when it may not really be necessary so far to reduce the price of it.

It would be much fairer to say that the Government were contemplating a permanent reduction in the cost of tea to the consumer by removing the Tea Duty, except for 2d. per lb. on foreign teas, than to call this merely a book-keeping transaction when the amount required for subsidies is a transit matter. It is fallacious to imagine that tea prices will remain for ever at their present level and that tea will always necessarily require the same amount of subsidy to maintain the same price to the consumer in this country. It is easy to appreciate, and perhaps to sympathise with, the motives which have animated the Treasury, but surely it is unsound to call this simply a book-keeping transaction. It may well lead to a certain amount of difficulty in the future when it is wished to recoup revenue in times of stringency and when one would very much like to have the duty still in being.

Mr. Oliver Stanley (Bristol, West)

I am sure that the hon. Gentleman will pardon us for being a little suspicious and wishing to know whether there is anything more in this than the simple bookkeeping transaction to which we have been referred. If that is all and if this was so obviously an unnecessary complication which is now being removed, we are tempted to ask why it has not been done before. Year after year in the Finance Bill we have passed arrangements of this kind. Why is it that it is only this year that it has suddenly been discovered that the method we have been adopting has been clumsy and unnecessary and ought to be changed?

I do not hold anything against the Economic Secretary—he is a comparatively new arrival—but there is the Financial Secretary to the Treasury who has sat through all the Budgets of this Parliament. Therefore, year after year he has been persuading us that in what we were doing we were adopting the proper financial course. If I might distract his attention from what appears by the look on the Chancellor's face to be one of his rare jokes which he is whispering in his right hon. Friend's ear, may I say that I am sure that the right hon. Gentleman himself would never have advised the House to adopt this form unless he had believed that it was the proper form.

Could not we be told what has suddenly brought light to the Treasury Bench and what has suddenly brought home to the Government that—I admit that there is some cogency in it—this is an otiose procedure? Until that is ex- plained we shall be tempted to think that there is something more in this than a pure book-keeping transaction. As my hon. Friend the Member for Altrincham and Sale (Mr. Erroll) said, if at some future time, owing to the state of our finances, the Chancellor of the Exchequer feels that the revenue needs still further strengthening, he will find that this change has been far from a simple bookkeeping transaction and that it has weakened the revenue at this moment and may force him at a most unpopular time and a difficult moment to reimpose the duty which he is now removing. I hope that one of the—I was about to say, one of the three representatives of the Treasury on the Front Bench, but I shall say "One of the two" because the Chancellor has not been listening and therefore I would not ask him to reply—could tell us what has suddenly made this change a necessity.

Question put, and agreed to.

Clause ordered to stand part of the Bill.