HC Deb 22 June 1949 vol 466 cc283-91

Motion made, and Question proposed, "That the Clause stand part of the Bill."

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

As in the case of tea, this Clause simply provides for a straightforward bookkeeping operation by which we cancel out the duty, on the one hand, and the subsidy, on the other. The Clause gets rid of the duty on imported refined sugar wherever it comes from, by 11s. 8d. per cwt., which is equivalent to 1¼d. a lb., and it reduces the duty on unrefined sugar, molasses and glucose by the corresponding amounts. It also introduces corresponding reductions in the rates of duty on home-produced beet sugar, molasses and glucose. As in the case of tea, the preferential margins remain unchanged.

The effect of the reductions on the Revenue is as follows: the duties on sugar, molasses, glucose and saccharin would, in 1949–50, have yielded, on the pre-Budget basis of calculation, a revenue of £39 million. The cost of the reduction in this year will be £22 million, which therefore brings the net revenue which we shall receive down to £17 million. In the case of tea duties it was suggested that this was not just a straightforward bookkeeping operation, as I suggested, but that there was something sinister behind it. I was asked, as I may be asked in the case of these duties, why we have chosen to do this in this year if there was no argument for doing it.

It was a Government of which the right hon. Gentleman the Member for West Bristol (Mr. Stanley) was a Member which introduced the food subsidies, and which continued them year by year simultaneously with the retention of these duties. The longer that retention went on the stronger the argument became for clearing up the matter by a bookkeeping operation, and bringing to an end a situation in which money was given out with one hand and raised with the other. It could perhaps have been argued in the war years that if we waited for a short period prices would fall and there would no longer be any need for the subsidies, and the rates of duty would again become operative. The Committee will agree that, with every year that went by, that argument became more academic. If we are asked why this has not been done before, the answer is that if one does something one must do it at some time, and whenever one does it it can be asked why it was not done previously. In all the circumstances we thought that this was the right year in which to do it. The only effect is that the subsidies are cancelled out, on the one hand, the duties disappear, on the other, and the preference margin remains the same.

Lieut.-Commander Braithwaite

The Economic Secretary has explained to us the mind of the Government on this matter. He appeared to rest himself with some confidence on the fact that food subsidies were introduced by a previous Administration. It was the Budget introduced by the present Lord Simon in 1940 which first introduced food subsidies in the modified form in which they then operated. Their cost in that financial year was, I believe, £52 million—I speak from memory. That was during the war, and hon. Members who served in the war-time Parliament will remember how, during that period, in concentrating on matters very different from financial niceties, we sought, when Budgets and Finance Bills came before us, to dispose of them as rapidly as possible in order to free Ministers for more important tasks. That is why no effort was made to get a tidier arrangement.

In 1945, the present Administration achieved power, and it has taken them four years to come to this book-keeping arrangement, as it has been called. I ask the Economic Secretary whether, if the time has now come for these adjustments, the time has not come for a much wider and more sweeping adjustment even than this. Does it not really make nonsense to tax and subsidise a commodity at one and the same time? Surely anyone who wants to have a workable and operative system must realise that to tax the consumer of sugar on his consumption and then subsidise the price to him of the sugar to try to relieve him of his troubles can hardly be called straightforward bookkeeping or straightforward common sense.

The Clause would have been discussed with more advantage by the Committee had we had the advantage of the presence of some hon. Members of the Liberal Party. I am sorry to see that their benches have again been evacuated because it was they who always sought to prevent home-grown sugar production by their violent opposition to anything that was done for the sugar beet industry. The Committee would proceed with much greater smoothness were those hon. Members to return, if only temporarily, to their seats of duty. Just as in the case of the last Amendment, when the Chancellor was resisting with such sternness an attempt to remove a very small duty from mead, we should have welcomed the presence and guidance of the Liberals, as it was the late Mr. David Lloyd George as he then was who imposed that duty, so we should like it even more now. Their absence throughout our proceedings, except for seven rather irrelevant minutes, has been lamentable.

To return to the main contention, I ask whether it would not be simpler, at this time of day, if we are going into bookkeeping entries, to do it in a proper manner? Are we to go into the future taxing this commodity and then subsidising it at almost the same moment? That seems to me to make no kind of sense whatever. It is only the sort of operation that can be expected of a dying and damned Government.

Mr. Erroll

I was glad to hear the explanation of the Economic Secretary because it gave us an opportunity of hearing his views on the difference between the subsidy and the duty. The point made in the case of the tea duty is equally applicable in the case of the sugar duty. The duty was intended to be a permanent feature, raising a certain amount for the Treasury each year; on the other hand, the subsidy in the case of sugar, as in the case of tea, was originally intended merely as a temporary measure to stabilise the price of sugar or the price of tea. The book-keeping transaction, as it has been described, seeks to equate the temporary charge—the subsidy—with what should be a permanent aspect of the Revenue. It is a thoroughly false argument to say that it is merely a book-keeping transaction to waive what was a permanent device for collecting revenue merely because at the moment that revenue or some other revenue is used to keep down the price of sugar from its present temporary high level.

The Economic Secretary went on to say that if something had to be done there had to be a time for doing it and that it might as well be done now as at any other time. I query whether it is appropriate to do it at all. If it is only a book-keeping transaction at present why not continue that book-keeping? We may very well see a return to the old low prices of sugar, when we shall be glad that we have the sugar duty as a source of revenue. Book-keeping for another year or two years would surely be a small effort in return for the value of retaining a duty which will not be onerous when sugar returns to its old prices. There is at the present time ample evidence to show that sugar prices are falling along with other commodity prices.

There may have been some case for removing the duty two or three years ago when world prices seemed to be advancing indefinitely, but now that the tide is turning surely that is the one time when we should not start to make changes. Now is not the time to do a job which could be pretty well left undone altogether. I submit that it is quite disingenuous of the Economic Secretary to regard this as a simple book-keeping transaction, and it may well be a source of some embarrassment to some future administration, which having to collect revenue by all the means in its power, would find that this useful source of revenue, because it did not inflict hardship on anyone, has been thrown on one side as a mere book-keeping transaction.

7.30 p.m.

Mr. Birch

The Economic Secretary justified this Clause by an argument, which I should think was only worthy of the Financial Secretary when he said that if we had to do anything we would have to do it at some time. That is one of those profound remarks with which we all agree, but the fact is that if we have to do it at some time, it does not necessarily mean that it is the right thing to do. If one has to commit murder one has to commit it at some time, but it does not necessarily follow that murder is a particularly good thing to do. We were left in some doubt when we were discussing the subject of tea what the real reason for these provisions were. In spite of the speech of the Economic Secretary, I am bound to say that I am still in some considerable doubt.

The Economic Secretary said that it was absurd to raise revenue with one hand and pay it out with the other, and that it was being done to no purpose. He particularly said that what the Government had done was to cut down the duty to the largest possible extent consistent with maintaining Imperial preference. I can see an argument there, but I understand in the case of sugar the duty on the Colonial commodity is not eliminated. There is the duty on both foreign and Colonial sugar, and, therefore, in this case the argument of meeting so much duty does not apply in this case. We are still collecting with one hand and paying out with the other, which the hon. Gentleman said was a very foolish thing to do. I cannot see that that argument really applies here in any way.

Secondly, I should like to raise the question of the savings of subsidies under this Clause. The Economic Secretary said that the saving would be £22 million. I think that I am correct in saying that an answer was given last Autumn to the effect that the sugar subsidy was then running at the rate of £22 million per annum, which indicates either that we are going to buy more sugar now, or under bulk purchase we are paying higher prices for it, because as I understand it, the world price of sugar has fallen. While we are on the question of prices, it is worth recording the Economic Secretary's remark on that when he abandoned hope that prices in this country would ever fall substantially at all. That is what I understood him to mean. If the hon. Gentleman reads tomorrow what he himself said, that is the conclusion to which he will come.

The Committee would be interested to hear upon what is the figure of £22 million savings based. The question of how much sugar is imported into this country is a very burning one, particularly now that hon. Gentlemen opposite are discussing the propriety of the action of the Minister of Food in derationing sweets. Clearly if there were more sugar imported, more molasses, more glucose and more beet sugar produced, his problems would be solved. Therefore, I think the country would be interested to know how that figure of £22 million is arrived at.

Sugar has always been a great trouble in politics. It was Disraeli who remarked in one of his books that it seemed strange that a manufacture that charmed infancy and soothed old age should so frequently occasion political disaster. It may well be that if the Government do not import enough sugar they will produce a political disaster for themselves. I would end by saying that the Economic Secretary has not answered the point put to him by my right hon. Friend the Member for West Bristol (Mr. Stanley), because we are still paying out with the one hand and taking in with the other. I cannot help feeling it is rather a hypocritical—I understand that we can use that term as a general term—effort to reduce simply both sides of the Budget by a stroke of the pen without anything really happening at all, and thereby to represent to the country that expenditure is going down when nothing of the sort has occurred.

Mr. Erroll

I was hoping for an answer to some of the points made in my remarks, especially as one of those points was so inadequately dealt with by the Economic Secretary himself. It would be disappointing if the Clause were to be passed without anything further being said.

Mr. P. Thorneycroft

May I offer a few observations on this Clause before we part from it? The Committee would be very disappointed if we did not have a reply to the points which have been put. As I understand it, the proposal here is part of the general policy of the Chancellor of the Exchequer in dealing with the food subsidies. The object, which the right hon. and learned Gentleman has in mind and of which this Clause forms a part, was to call a halt in the steady rise of the cost of these food subsidies. I my- self suggested from time to time that that was a very proper policy to pursue. I have always understood that food subsidies were part of the great social plan of the party opposite. Then they came to the conclusion that some halt ought to be called, and that if they did nothing about it, the total increase would be somewhere in the neighbourhood of £80 million. In order to meet the position they met two-thirds of the cost by increasing the price of food and one-third by what I now understand are called bookkeeping entries on tea and sugar.

I have never quite understood how this change-over from taxation and the revision of taxation, on the one hand, and the scaling down of subsidies, on the other, really affects the position. It may tidy the ends, but it does not seem to make much difference to the general level of expenditure. The point to which we are entitled to have some answer is, what is the amount and what are the costs involved? I gather the figure is £22 million. Could we have some explanation as to how what appears to be an increase of £2 million has taken place? I dare say there is a perfectly good explanation. It may be we are going to import more sugar or that the costs of sugar are mounting. We ought to have an explanation from the Economic Secretary. It is a fair and proper point to put and one which is within the knowledge of the hon. Gentleman.

The only other thing I wish to say is in regard to the remark of the Economic Secretary that one must dismiss the idea of any diminution in the general cost of sugar as something purely academic. That was rather a startling statement, which he perhaps might care to justify. If we are to regard all reductions in imported commodities of that kind as purely academic, the outlook would appear to be a little bleak. We ought not to come to a decision upon this Clause until we have had some specific answer on the material and substantial point put to the hon. Gentleman about the increased cost of £2 million.

Mr. Jay

I will try to answer the questions that have been asked. First, I was asked why the cost has risen from £20 million, which I think was the figure given some time ago, to £22 million, which is the estimated figure for this year. The answer is that consumption of sugar has risen this year as compared with last year. In the estimates on which we were working, it was expected to run at a higher rate this year. The hon. Member for Flint (Mr. Birch) asked whether we had reduced the duty to the greatest extent compatible with retaining the preference margin. That is substantially true——

Mr. Birch

But the Government have not eliminated the duty on Colonial sugar.

Mr. Jay

I am aware of that, but the Sugar Duty is more complicated than the duty on tea. It comprises a whole scale. Broadly, the reduction by 11s. 8d. a cwt. is the largest convenient round sum by which we can reduce the duty without affecting the preference margin. The hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite) asked why we continued in any respect to levy taxes on the one hand and to pay subsidies on the other. He asked whether that was not a foolish procedure. I thought that largely he was answered by the hon. Member for Altrincham and Sale (Mr. Erroll), who objected to our performing this book-keeping or tidying-up operation. His criticism was that we ought to have continued this double operation on the ground that we might wish to raise revenue later on. On the other hand, I do not agree with his statement that because these duties were originally imposed as revenue duties, therefore there can be no case for reducing them. It may be that at some future date one would wish to raise revenue. Of course, it would be possible to raise the duty again if that were so. We do not wish to do that now because we do not wish to raise the cost of living.

To show that that is perfectly possible, I might remind the hon. Member that it was his right hon. Friend the Leader of the Opposition who, in the case of tea, repealed the duty altogether in April,1929, no doubt in expectation of winning the General Election which followed a month later which expectation was disappointed. It was the Tory Government of 1932 which after a later General Election, reimposed that duty. That shows, amongst other things, that it is possible to remove the duty and impose it if one wishes.

Clause ordered to stand part of the Bill.