§ 6.25 p.m.
§ The Financial Secretary to the Treasury (Mr. Douglas Jay)
I beg to move,That the Purchase Tax (No. 7) Order, 1950 (S.I. 1950 No. 561), dated 3rd April, 1950, a copy of which was laid before this House on 5th April, be approved.When we last debated this important subject of greeting cards on 28th March, I promised the House that the Government would very shortly introduce an amending Order embodying what seemed to the trade concerned the most workable solution of the difficulty. That we have now done, and the Order which I am asking the House to approve tonight came into operation—appropriately enough perhaps—on Easter Monday.
The House will remember, if I may very briefly recapitulate the history of this affair, that the Finance Act, 1948, left us with three rates of Purchase Tax—100 per cent., 66⅔ per cent., and 33⅓ per cent.—applying to greeting cards and similar articles. It was agreed last autumn that this was inconvenient for everybody concerned, and after a great deal of consultation between the Customs and Excise and the trade, the 1949 Order was made in December last, simplifying the tax on the basis of 33⅓ and 100 per cent. rates only, and also altering the 93 definition so that only the plainest products attracted the lower rate of tax.
Certain further difficulties then arose which I described in the earlier Debate. The right hon. Member for Blackburn, West (Mr. Assheton), who spoke for the Opposition in the earlier Debate, and who, I regret to see, is absent—I believe he is indisposed—somewhat confused the issue by implying that the 1949 Order which we were then discussing imposed a 100 per cent. rate on greeting cards for the first time and arguing that it had no validity under the Finance Act. That is entirely erroneous. The 100 per cent. rate applies because under group 25 of the Finance Act, 1948, pictures, prints, photographs and similar articles attract that rate.
It has been, of course, a settled principle of Purchase Tax ever since 1942, when the higher rates of tax were introduced, that the higher rate over-rode the lower rate wherever two rates were applicable. That principle is actually enshrined in Section 17 of the Finance Act, 1942, and is repeated in Section 20 (4) of the Finance Act, 1948. Indeed, not merely did that principle date from the Finance Act, 1942, but greeting cards since 1943 have attracted tax at the rate of 100 per cent.
Therefore, the right hon. Member for Blackburn, West, in making an attack on that principle and on that tax, was in fact attacking a principle and a tax which were in force in 1944 when, I think, he was Financial Secretary to the Treasury. Both of them were also in force when the right hon. Member for Leeds, North (Mr. Peake) was Financial Secretary in 1944–45, if I remember rightly. The hon. Member for Holland with Boston (Mr. Butcher) accused us of sharp practice—I think those were his words—in applying the higher tax, but if he presses that charge he will have to press it equally against the two right hon. Gentlemen opposite.
We have adopted a different solution in the new Order—the solution which the trade regard as the most workable and which was, I think, actually suggested by them. I should like again to express our thanks to the trade for the help we have had from them, throughout the discussions on this problem, in seeking a better definition, while making it quite clear that it is the definition and not the tax which they have agreed to accept. I do not 94 think anybody agrees voluntarily to pay a tax.
The new Order does two things. First, it excludes all group 34 articles other than greeting cards from the new definition, thus allowing those articles to revert to their original position under the 1948 Finance Act. That gets rid of the particular difficulty which had arisen over certain business calendars and it removes the 100 per cent. rate from them and from certain other things. Secondly, in the case of greeting cards to which the higher rate applies, it makes that rate apply only to cards with more than two colours, as I would put it, or as the lawyers prefer to say in the Order, "not less than three." That method of definition is, I gather, based on the technical processes of the printing trade and for that reason is regarded by the trade as workable.
The purpose of this new arrangement is to reduce the number of anomalies to a minimum but the new arrangement will not, I fear, remove them altogether. I am afraid it is impossible to remove anomalies from the Purchase Tax altogether while we have several different rates of tax, so that if any hon. Member tells us today that there are some anomalies which still remain, that will not be news to me. What we are seeking here is the best possible solution which will reduce the anomalies to a minimum.
Finally, I should like to make this clear. If the House were to vote against this Order tonight, it would not, of course, be voting against the 100 per cent. Purchase Tax on greeting cards. If this Order were not approved the No. 7 (1949) Order—that is to say, the Order which was made in December last—would come into force again. That Order also applies the 100 per cent. rate but does it in a fashion which I think everybody concerned now agrees to be much less workable than the arrangements we now propose. The practical choice before the House, therefore, is between, on the one hand, passing this Order and applying the two rates in a manner which is now agreed to be workable or, on the other hand, rejecting it and still applying those same two rates but applying them in a way which experience has shown to be much less workable. It is for that reason that I ask the House to adopt the former course and to approve this Order.
§ Mr. Selwyn Lloyd (Wirral)
Before the hon. Gentleman sits down, may I ask him one question? Under this new Order, will certain classes of greeting card, now charged at the lower rate, pay a higher rate, and if so, what kind?
§ 6.34 p.m.
§ Mr. Osbert Peake (Leeds, North)
This matter not only illustrates the faults and vices of the Purchase Tax, as a tax, to the full, but it also exemplifies the incompetent administration of right hon. Gentlemen opposite in the way it has been handled. When the Financial Secretary indulges in some pleasantries about what happened when my right hon. Friend the Member for Blackburn, West (Mr. Assheton), and myself were respectively Financial Secretary to the Treasury, in the years 1943 and 1945, I would inform him that had we sat on the benches opposite during the last five years, the Purchase Tax would long since have been completely abolished, except, possibly, for a tax upon a few articles in the extreme luxury class.
Let us look at the history of this matter since 1948, when Purchase Tax was overhauled by the present Chancellor of the Exchequer. At that time there were placed in Group 34, carrying the 33⅓ per cent. rate:Diaries, calendars, greeting cards and similar articles.On the principle that the greater includes the less, of course greeting cards includes the great class of Christmas cards, which is, indeed, their most common use.
I think anybody reading Group 34 in the year 1948 would have assumed that greeting cards were to be taxed at the rate of 33⅓ per cent., but then, of course, the Financial Secretary refers us to Group 25 in which:Pictures, prints, engravings, photographs, figures, busts, reliefs, vases, and similar articles, of a kind produced in quantity for general sale.are taxed at the rate of 100 per cent. It is said that because a Christmas card, which contains upon it a picture of a 96 robin, or a Father Christmas trudging through the snow is, by virtue of Group 25, a picture, it must therefore be taxed at the rate of 100 per cent. There is a most splendid refinement within Group 25 and it is that where the card is a reproductionwhether plain or coloured, of such pictures, prints, engravings and similar articles as were executed more than one hundred years before the date on which tax becomes duethe rate of tax was reduced to 66⅔ per cent. We all recognise, of course, that articles of furniture and so on, if more than 100 years old, secure certain benefits in the law relating to Estate Duty, but I think it was a most charming refinement where a reproduction of an antique also secured a benefit under Purchase Tax law, provided it was a reproduction of something originally made more than 100 years ago.
When we came, therefore, to consider whether the Christmas card bearing the picture of the robin was to pay tax at the 100 per cent. rate or at the 66⅔ per cent. rate, we had to discover whether the original robin of which it was a copy had been drawn or made on or before the year 1850. I quite agree that that was a refinement of the law from which it is extremely desirable that we should get away. So great was the difficulty in the interpretation of the Schedule relating to greeting cards in the 1948 Finance Act that in December last the Treasury made the Order to which the Financial Secretary has referred. It contained a very long definition which, immediately it came into force, was found by the trade to be virtually unworkable and to lead to chaos in connection with discovering what was the proper rate of tax to be paid upon any particular article. I shall not weary the House with reading the definition because it was referred to in the Debate upon the Order on 28th March.
Now, as a result of that Order being found unworkable, during the Debate on 28th March the Financial Secretary to the Treasury, having admitted that it was unsatisfactory, said that he would bring forward a new Order to take its place as soon as possible, and that is the Order which is before the House tonight. In the preparation of this Order the hon. Gentleman has had, as he acknowledged, the co-operation of the trade, and the effect of the Order, as he stated, really 97 is that where any card contains more than two colours—more than two different colours—then it will be taxed at the 100 per cent. rate, and it will, therefore, only be the simpler forms of Christmas cards and greetings cards which will secure tax at the rate of 33⅓ per cent.
My right hon. Friend the Member for Blackburn, West, declared in the Debate on 28th March last, when this matter came before the House that:When the Order is introduced … we shall oppose it if the rate of tax is raised above 33⅓ per cent. as it is at present, because we on this side of the House are against increasing taxes."—[OFFICIAL REPORT, 28th March, 1950; Vol. 473, c. 366.]That was a clear indication that we on this side of the House would oppose a further Order if it incorporated the 100 per cent. rate. Now, of course, the last thing we on this side of the House want to do is to do anything which is unexpected by the Government or by the Patronage Secretary. We should simply hate to shock the hon. Member for Northfield (Mr. Blackburn), who apparently thinks that the Opposition ought to give due notice of what course it is their intention to follow. At the same time, if we were to be governed only by that consideration, we should, of course, go into the Lobby tonight against this Order.
On the other hand, there are these points which weigh with us, I think, in coming to a decision as to how we shall conduct ourselves in this matter. It is the case, of course, that this Order is incapable of amendment. We should like to amend the Order so as to make all greetings cards taxable only at the lower rate, but it is not open to us to put down an Amendment for that purpose. We have either to accept the Order as a whole or to reject it as a whole.
Of course, if we were successful in opposing it and in securing its defeat in a Division, the position then would be, as the hon. Gentleman has said, that, first of all, as from today we should revert to the even worse Order introduced in December last, which produced chaos in the trade; and, in the second place, we should be left for a period of one month from 5th April last during which the Order at present before the House would remain the law of the land, as I understand the position; and we should in fact, therefore, by rejecting 98 this Order tonight, be making confusion even worse confounded than it is already.
Having weighed these matters with a genuine desire to take a statesmanlike attitude in this matter, and our absolute determination not to indulge in any factious or fractious opposition, we have come finally to the conclusion that we ought to allow the Order to pass, though with a protest—a very strong protest—against the way in which the matter has been handled by the Government, and a firm declaration that it will be our intention at the earliest possible moment after securing power to relieve the people of this country of this very unjust and unfair burden upon the simple means of remembering ourselves to our absent dear ones upon festive occasions.
§ 6.45 p.m.
§ Mr. Keeling (Twickenham)
The Financial Secretary said that my right hon. Friend the Member for Blackburn, West (Mr. Assheton), in criticising the last Order—and I have no doubt he would also criticise this one—was, in fact, condemning himself, because the differentiation between the different kinds of Christmas card was in force when he was Financial Secretary to the Treasury. My right hon. Friend the Member for Leeds, North (Mr. Peake) has dealt with that in part, but I should like to add this, that for the whole of the time when my two right hon. Friends were Financial Secretary to the Treasury we were at war, and surely it was a very good thing to discourage the use of Christmas cards in wartime because it diverted labour and materials from the war effort.
An Explanatory Note is attached to this Order, which is not really an Explanatory Note at all because it explains nothing. It claims to provide a fresh line of demarcation between the varieties chargeable at 33⅓ per cent. and those chargeable at 100 per cent., but it does not say what the line of demarcation is. It also talks about simpler varieties of cards, but it leaves us completely in doubt what the definition of a simpler card is. I have never read an Explanatory Memorandum which was more clearly designed to hide the meaning of a Statutory Instrument.
It appears from a careful study, not really helped very much by what the 99 Financial Secretary said, that this Order introduces two lines of demarcation—two quite separate lines of demarcation. The first is between greeting cards such as Christmas cards, and other cards such as picture postcards. Any picture postcard, even if it is uncoloured, which bears no greeting, will in future pay tax at either 100 per cent. or 66 per cent. according to the date of the picture on the card. Therefore an ordinary picture postcard will pay either double or treble the Purchase Tax levied on a greeting card. But, Mr. Speaker, believe it or not, an ordinary picture postcard can be converted into a greeting card by a very simple device. A picture postcard of Brighton paying 100 per cent. can be converted into one paying 33 per cent. by printing on it the words "Greetings from Brighton." What could be more absurd than that? Why on earth should a picture postcard of Brighton without a greeting pay three times as much Purchase Tax as a picture postcard of Brighton with a greeting? I have three specimens here, which I ask my hon. Friend the Member for Surrey, East (Mr. Astor) to take across to the Government Front Bench to show what I mean.
Places like the British Museum, the Victoria and Albert Museum, the Wallace Collection and the National Trust issue beautiful postcards illustrating their treasures. These cards can be used either as postcards or as Christmas cards. They are certainly far more artistic than most Christmas cards, and many people use them as Christmas cards. But unless a greeting is printed on them they will attract Purchase Tax at a rate of either 66 per cent. or 100 per cent. Now to print greetings on these cards would be to ruin their appearance. Therefore I protest against an Order which compels these beautiful cards to be marred in order to attract a lower rate of tax.
The second line of demarcation which this Order makes is one which has already been referred to: it is the line between Christmas or other greeting cards of two colours and those of more than two colours. Those that have two colours will pay 33⅓ per cent. Purchase Tax and those that have three 100 per cent. This differentiation will hit undeservedly two kinds of Christmas card. First of all, there is the reproduction of a famous picture where more than two colours are 100 employed. These cards, of course, are among the most artistic, and it is quite certain that to charge treble Purchase Tax on them will seriously reduce their manufacture and will discourage exports. I hold in my hand the very first Christmas card printed in this country in 1843, which has three colours. Any reproduction of it will attract 100 per cent. Purchase Tax. The Order will also hit cards reproducing coats of arms or crests in heraldic colours. They, too, will have to pay 100 per cent.
Thus these two lines of demarcation, between the greeting card and the picture postcard and between the two-colour and the three-colour card, are most oppressive. It seems as though the Government were determined to give a slap in the eye to anybody who tries to produce a work of art on a card. As in other matters, the Government seek to drag everybody down to a dull common level. It may be, as has already been suggested, that to reject this Order will cause confusion, but I hope that before the autumn the Government will think again and introduce a uniform rate for all cards which will not penalise artistic work.
§ 6.52 p.m.
§ Mr. Michael Astor (Surrey, East)
I should like to say a few words in support of my hon. Friend the Member for Twickenham (Mr. Keeling). I have been trying to think how the Government have reasoned this matter when considering introducing this Order. If we confine it for the moment to Christmas cards, I suppose they resisted any temptation to carry popularity or to be influenced by sentiment—a laudable move which we would applaud. Then I suppose they said: "A Christmas card is not a necessity. At least one that is highly embellished is an extravagant luxury. But a more simple and plain one is something which as a concession will only pay 33⅓ per cent. tax." Hence the differentiation in classifying Christmas cards.
Now that is all very fine, if for one moment you accept the principle of Purchase Tax to which my right hon. Friend the Member for Leeds, North (Mr. Peake) has already alluded. I ask the Financial Secretary: Is it not a fact that we export to New York and various parts of the United States a very large number of cards at Christmas time? I believe it to be the fact that in America the kind of 101 Christmas cards people like to send are made in England, with traditional English Scenes on them. Last Christmas I received several of these cards from friends in America. I should like the Financial Secretary to tell me specifically what this export market amounts to.
If this is the case, it is a very clear example of this particular tax, the Purchase Tax, on the more embellished forms of Christmas card cutting directly at the export drive. That is what this Order reinforces. That is a very great mistake. In this respect it merely puts these Christmas cards in the same category as a great many other items which have this vicious Purchase Tax attached to them. I believe that on behalf of my hon. Friend I handed the Financial Secretary a card with "Greetings from Invergordon" on it. I have here another card, a very pleasant photograph of "Lairg and Loch Shin, Sutherland," which anybody might buy to send to a friend or to stick in an album, but because it is not defaced by any slogans it carries 100 per cent. Purchase Tax. But nobody, except as a joke, would want this other card with "Greetings from Invergordon" spoiling the whole thing. I think the Financial Secretary must agree that this will, if not immediately at any rate very soon, have an effect on our exports of these things, for which there is a considerable export market in the dollar area.
Finally, I should like to ask the Financial Secretary: What is all the fuss about? Why is he going to proceed with this Order, and what does he reckon is the sum of money involved to the Treasury in this? I think that we should be told this, because it seems to me that the Order is great nonsense. I cannot believe that the Government would get very much support from their own benches for it. The Financial Secretary himself did not appear to speak very enthusiastically but with a certain amount of diffidence about it. Can he now tell us the estimated sum of money involved?
§ 6.57 p.m.
§ Mr. Butcher (Holland-with-Boston)
The history of the Purchase Tax on greeting cards is almost a classic of how things are done under a planned economy. There was the careful definition in the 1948 Finance Act; then there was the Order which was debated in this House on 28th March, in the course of which 102 the Financial Secretary promised us that there should be a new Orderwhich should clear up the uncertainty and provide the best possible definition."—[OFFICIAL REPORT, 28th March. 1950; Vol. 473, c. 362.]He faithfully discharged his promise to bring in a new Order, but when we see it, we are entitled to ask whether it is really the best possible definition. In the Schedule there are seven or eight lines which to the ordinary layman are quite incomprehensible. I, like many others, receive quite a number of Christmas cards and I think that one of the more agreeable pastimes next Christmas would be to sort out the Christmas cards we receive in the light of the definition of this Schedule. Without the advantage of the explanation just given to us, but with merely these few words of legal jargon, let us invite our relations and friends to sort out these cards.
I really think it is time we made a protest about the time of this House being continually taken up with trifling and unnecessary matters of this kind. It is not only the time of this House which is being taken up, but behind that is the time and experience of hard-working and over-pressed civil servants. Equally, on the other side there are businessmen who are eager to be developing the export drive, to which my hon. Friend the Member for Surrey, East (Mr. Astor) has referred. In all these cases, time is being wasted because of these arbitrary decisions. I cannot help feeling that the amount of money which will be collected as a result of having two rates of Purchase Tax for greeting cards——
§ Mr. Keeling
There are three rates. There will be the greeting rate of 33⅓ per cent. or 100 per cent.; and there will be the rate on other cards, such as picture postcards, of 66⅔ or 100 per cent., because we revert to that for other cards.
§ Mr. Butcher
I am grateful to my hon. Friend for the correction. Will the amount secured by having these varying rates of tax be enough to pay for the printing, the time of the civil servants and the time of businessmen needed?
The hon. Member for Surrey, East (Mr. Astor), referred to the export aspect of this matter. I think that he was perfectly right. About a month ago, I had 103 the privilege of entertaining an American printer who was in this country looking for designs for this kind of thing. He told me that he was leaving for Holland and France to continue his search there. Unless we have in this matter, as in others, a stable home market, we shall not be able to engage in the export market as we should. I hope that the hon. Gentleman will decide that this Order is really not worth the money that will be collected.
§ 7.1 p.m.
§ Mr. Woods (Droylsden)
I should like to add my appeal to the Financial Secretary that he should try to persuade his right hon. and learned Friend to reconsider the whole of this matter before the autumn. There is a good deal of truth in the arguments which have been put forward, but I think that this is a much wider issue than has transpired, because it covers the whole question of the prestige of British printing. Some years back, the prestige of this country in printing stood as high as that of any country in the world. That day is passing. Unless there is a very substantial market at home, we cannot give opportunities to our craftsmen or develop the modern technique necessary to maintain our position in the colour printing world.
At the present moment, there is taking place in London an international exhibition where philatelists will assemble to admire the most exquisite colour printing in the world and to compare it with the achievements of the past. Until relatively recent times, a number of countries came to the British printers of postage stamps to get their orders executed. That day is passing, and the modern stamps which will be seen at this exhibition in London—some of the most remarkable achievements in colour printing—will be the products of Switzerland. Many of the smaller countries are going in for exquisite work in their postage stamps—the best work available in the modern world.
I suggest that this is a much wider issue than putting a variation of tax on Christmas cards. It is a question of volume colour printing, and unless there are retained for this work sufficient categories of craftsmanship and machinery, we cannot hope to retain our position. Another argument with which I have a good deal of sympathy is that 104 this kind of legislation gives advantages to the shoddy rather than to the best product of which modern art and technique are capable.
I think it is wrong to view this whole question of greeting cards as though we were dealing with some form of luxury. The human values of sympathy, understanding and remembrance are much too important to be dismissed as mere sentiments, especially in these days when many of us have friends in various parts of the world. When we send them greetings we do not want to send the poorest examples of British art and craftsmanship, but something worthy of this country which will convey the esteem in which we hold them and our desire for international peace.
Many of us in this House happen to be grandfathers, and to send our grandchildren something which is drab and dull would be very unworthy conduct on our part. The children look for greeting cards which are bright and gay in colour. They can be achieved in three colours. They are poor examples in two colours, and black and white cards make no appeal to children. I, therefore, appeal to my hon. Friend to discuss this matter with his right hon. and learned Friend so that we may have a simple and uniform set of regulations before the autumn, which will enable us to send to our friends abroad and our friends and relatives at home something worthy of this country.
§ 7.5 p.m.
§ Mr. Selwyn Lloyd (Wirral)
There are only a few words that I wish to add. It is with great reluctance that I personally refrain from voting against this Order tonight. Some of the absurdities of it have already been pointed out by my hon. Friends. The Order involves, as the Financial Secretary admitted in his answer to me, an increase in taxation so far as certain classes of cards are concerned. I think that the words of the hon. Member for Droysden (Mr. Woods) are wise and should be well pondered by the Government.
The reason that we cannot vote against this Order is that if we do, it will restore a worse Order, and that seems to be a ridiculous situation and one about which a vigorous protest should be made. It seems to me to show up a defect in our procedure for dealing with Purchase Tax. 105 We were denied the opportunity in the last Finance Bill of discussing Purchase Tax at all. In the coming Finance Bill, we shall get a very limited opportunity of discussing it in rather artificial circumstances.
We are constantly told that there is this alternative procedure whereby Purchase Tax can be altered by Orders such as the one we are discussing tonight. That is not really an alternative procedure because, as has been pointed out, if we divide against this Order and defeat the Government, we are making confusion worse confounded by restoring a perfectly ridiculous Order, No. 2443 of 1949, which everyone agrees is unsatisfactory. Even if we were willing to restore that Order, there would be a further absurdity in that No. 561 of 1950 would govern the trade as from 10th April until, presumably, tonight.
It is an absurd situation which makes it quite impossible for the House of Commons to amend taxation of this sort, and it is another illustration of the thoroughly unsatisfactory nature of Purchase Tax and another reason why more appropriate machinery should be devised as was suggested in another Debate a few days ago, for handling the whole matter. Therefore, under protest, I agree with my right hon. Friend that we cannot divide against this Order.
§ 7.9 p.m.
§ Mr. Nigel Birch (Flint, West)
May I say one word in support of what was said by the hon. and learned Member for Wirral (Mr. Selwyn Lloyd) about Parliamentary control and taxation. As I understand the matter, the taxation that is now levied on Christmas cards and greeting cards springs from the Purchase Tax Schedule to the Finance Act, 1948. If we look at group 34 in that Act, we find specifically the words "Greeting cards" mentioned at 33⅓ per cent. I do not believe that when the House passed that Bill they realised that 90 per cent. of the greeting cards are not charged at 33⅓ per cent. but at the higher rate, and, by an administrative order, the Treasury have managed to class them under group 25 with pictures, vases and busts.
§ Mr. Jay
As I told the House before the hon. Gentleman came in, we did not do that by administrative order. That had been in force since the Finance Act of 1942.
§ Mr. Birch
What in fact has happened is that an enormous extra number of cards, owing to the way in which the Treasury administered this order, have attracted higher Purchase Tax rates. When in 1948 the House passed the Finance Bill, they could hardly have appreciated that greeting cards were not going to be classed under group 34, where they were mentioned as greeting cards, but were to be classed with picture, vases and busts. It seems to me to be a highly undesirable thing that taxation should be imposed in this way, and as my hon. and learnd Friend has said, it is one more illustration of how unsatisfactory and deceptive this tax is.
§ Question put, and agreed to.
That the Purchase Tax (No. 7) Order, 1950 (S.I., 1950, No. 561), dated 3rd April, 1950, a copy of which was laid before this House on 5th April, be approved.