HC Deb 10 April 1951 vol 486 cc858-61

I now come to the difficult and thorny subject of the Purchase Tax, and will begin by referring to one small change concerning photographers. At present the larger portrait photographers are registered for Purchase Tax purposes solely to enable them to buy their materials free of tax. This is not only a waste of revenue and manpower but is unfair to their smaller competitors, who are not eligible for this advantage. I propose, therefore, to impose, from the date of the passing of the Finance Bill, a tax of 66f per cent. on photographs of this kind, if made from materials which have not borne tax. It will thus no longer be in the interest of the photographers concerned to obtain tax free materials and in future they will all, large and small, be treated alike. The saving from this will be about £1 million in a full year, and about £500,000 this year.

I now come to my major Purchase Tax proposals, and will preface them with three comments of a general nature. First, the aim of Purchase Tax is nowadays to a large extent the raising of revenue and the withdrawing of spending power to check inflationary tendencies, in very much the same way as the Excise duties and the non-protective Customs duties. On the face of it, there is no overwhelming reason why we should not raise revenue by taxing certain types of expensive clothing, household equipment and other things subject to Purchase Tax today just as we raise revenue by taxing beer and tobacco. Indeed, the proportion of the price paid in the case of Purchase Tax is, of course, only a fraction of what it is in the case of beer and tobacco. There is no doubt that many people would regard the latter as just as essential to them as many goods bearing Purchase Tax.

But for most of the time the tax has been in existence, there has also been another motive behind it—the discouragement of home consumption. This is of great importance at present when we not only need more revenue but also, as I have several times explained, must export an increasing quantity of consumer goods; and, in so far as it is feasible, must divert to defence production labour, materials and capacity now making consumer goods.

Thirdly, the Purchase Tax is often criticised because it is untidy, because it is not always easy to decide into which category an article falls, or why it should be subject to one rate of tax rather than another, and because, by and large, many people think it falls too heavily upon articles which nowadays are not regarded as luxuries.

In the proposals that I put forward, I have taken into account all three considerations. We need more revenue; that means taxing some articles at higher rates; in choosing the articles we must turn to those whose production for the home market we want to discourage because their production and sale at home is likely to conflict most seriously with the needs of export and defence. Increased taxation for this range of articles is clearly indicated, for so long as these other claims continue. Accordingly, I propose to increase from 33⅓ cent. to 66⅔ the Purchase Tax on motor cars. This will bring in £12 million this year, and £17 million in a full year.

Sir W. Smithers

Will the right hon. Gentleman get it?

Mr. Gaitskell

This is a useful addition to the revenue, and in this field there is no danger of any adverse effect on the industry beyond that which must be faced in any case, because of the needs of defence. Home demand vastly exceeds the supplies available for the home market, and the prices paid for secondhand cars show that those who buy are prepared to pay considerably more than the present selling prices of new cars. In the high-class section of the industry, where this is not so much the case, there is at present particular justification for discouraging production for the home market, since the highly skilled technicians employed are urgently required for the re-armament programme. Generally speaking, then, the tax will bring in revenue and will relieve the pressure of home demand, thus making easier the smooth transition to defence.

For the same reason I propose to increase the Purchase Tax from 33⅓ per cent. to 66⅔ per cent. on wireless and television sets and valves and on gas or electrically operated domestic appliances. This increase does not, of course, apply to those appliances now exempt from tax and it will not apply to wireless batteries and a number of other articles, specified in the White Paper. The new rate will apply to goods delivered by registered wholesalers and manufacturers from tomorrow and will yield in a full year about £14½ million and in 1951–52 about £10 million.

I need hardly say that I much regret having to increase the tax on many appliances which can do so much to make the life of women at home less exacting. But we cannot carry through our defence programme without giving up something, and as I have repeatedly warned the House and country, it is in this field especially—the consumer goods produced by the engineering industry—that the sacrifice must be made. We want to discourage people from buying these things and if they insist on doing so then I think we can reasonably ask them to make a financial contribution to defence. When the period of re-armament is over, it will be possible to look again at the height of the taxes on all these articles.

I hope, too, that what I am now going to propose will be a small compensation. We have often been pressed to grant further exemptions from Purchase Tax for various necessary household articles which are in no sense luxuries. I must confess that having studied the Schedules pretty carefully, I have come to the conclusion that there is no clear-cut distinction between articles which may properly be taxed and those which should not. It is in the last resort a matter of opinion, and, wherever we choose to draw the line, we can be sure that there will be many who will claim that we should have freed still more articles from tax. In any case the need for revenue this year is such that I cannot contemplate going very far.

What I have done, however, is to go through the list and to propose for exemption from tax a fairly large number of the more necessary articles used in every household. These include various kitchen utensils such as pastry boards, rolling pins and pot scourers; a range of dusters and cleaning cloths; wash tubs, ironing boards, and hand-operated wringers; sewing needles, knitting needles, pins, thimbles, and paper patterns; hot water bottles, air cushions and overbed tables; school satchels and shoe laces. Full details of these reliefs will be found in the White Paper. The cost will be £3½ million in a full year and £½ million this year.

Towards the £170 million we have now found £35 million from the Profits Tax and £20 million from these changes in Purchase Tax.

Mr. Keeling (Twickenham) rose—

Mr. Gaitskell

I am sure the hon. Member will have plenty of opportunity before long to discuss these things.

We are left still with £115 million to find. I think we should raise this money in a manner which as far as possible spreads the burden pretty widely and therefore thinly so that the actual increase in particular rates of taxation is not too heavy.