HC Deb 23 April 1951 vol 487 cc157-70

10.14 p.m.

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

I beg to move, That the Purchase Tax (No. 4) Order, 1951 (S.I., 1951, No. 459), dated 16th March, 1951, a copy of which was laid before this House on 19th March, be approved. The purpose of this Purchase Tax Order is, first, to stop avoidance of Purchase Tax on certain hairdressing goods, and, second, to remove some anomalies which have resulted from a decision by independent counsel. The Purchase Tax Schedule in the 1948 Finance Act sought to make two broad distinctions in the treatment of hair-dressing goods. First, it taxed at the lower rate of 33⅓ per cent. what in effect were the tools of trade of the hairdressers, while leaving at 100 per cent. corresponding equipment used by the individual in the home. Second, various common necessities, such as brushes, combs, hairpins, etc., were taxed at only 33⅓ per cent., while more luxury toilet preparations and perfumery were taxed at the higher rate of 100 per cent.

These distinctions, in their original form, have become unworkable, for two reasons. First, the hairdressing trade has been avoiding tax on permanent waving lotions, and other beauty preparations, which should pay at 100 per cent. On the one hand, some of the basic chemicals for these lotions have been sold ready mixed, leaving the hairdresser to add one common chemical, which, of course, was free of tax, with the result that the tax was avoided altogether. At the same time, complete lotions have been sold with a few curlers as a permanent waving outfit for professional use—with the result that the whole outfit was taxed only at 33⅓ per cent and the lotions thereby escaped the 100 per cent. tax.

Second, an anomaly has sprung up between home permanent waving outfits, which are known, I believe, as "home perms," and other types of beauty aids used for the hair.

All these were supposed, under the 1948 Act, to be taxed, as, indeed, would appear logical, at the 100 per cent. rate. In the summer of 1950, however, a dispute about the rate for these "home perms" was submitted to independent counsel, under the usual procedure, and it was held that they were not toilet goods, and must be charged at the same rate as the professional hairdressers' outfits, namely 33⅓ per cent. That, in turn, raised a new, and rather glaring anomaly between "home perms" and the other toilet preparations used in the home, which, of course, remained at 100 per cent.

What we are seeking to do by the present Order is to remove that anomaly by raising the tax on all cold waving outfits from 33⅓ per cent. to 100 per cent., thereby accepting counsel's opinion that the distinction between the home and the professional outfit is untenable in practice, and also putting all the less essential types of home toilet goods, that is to say, things other than brushes, combs, etc., at 100 per cent. as was originally intended.

Secondly, the chemical "bases" used for mixture into hairdressing lotions are being raised from being untaxed, as they were before, to the 100 per cent. rate, so as to stop avoidance of the tax by the process of mixing to which I have referred. Thirdly, equipment necessary for hot permanent wave processes—as being distinguishable as tools of trade and not used in the home—are left at the 33⅓ per cent. rate.

In effect, therefore, we simply seek by the Order, while stopping the present avoidance which is, I think, unsettling to everyone, and while taking account of counsel's view that the home and professional cold waving equipment cannot be distinguished for tax purposes, to preserve the two original distinctions intended by the 1948 Schedule. On the one hand, the hairdresser's tools of trade, so far as they can be defined, are kept at 33⅓ per cent. On the other hand, the home outfits, such as toilet preparations, cosmetics and so on, are left at 100 per cent., while brushes, combs, hairpins, etc., stay at 33⅓ per cent. That, within the present structure of the Purchase Tax, seems to us to be the most straightforward and effective way out of the difficulty.

Sir John Mellor (Sutton Coldfield)

Why is all this not in the Finance Bill?

10.21 p.m.

Mr. P. B. Lucas (Brentford and Chiswick)

I wish to intervene for a moment to record my protest against this Order. I am specially concerned, as are some of my hon. Friends, with its effect upon those who use home permanent wave outfits. I consider that the increase to 100 per cent. discriminates particularly against this type of waving device. I do not think it is sufficiently widely appreciated that these kits have been sold in quantities in this country only since 1948. Since then, I believe, their popularity has greatly increased, and it is now true to say that hundreds of thousands of women are using them.

It may be said that they are a luxury, but I consider they are a necessary luxury. I take the view that in these days a good appearance is necessary to boost a woman's morale. Nowadays women lay great store by their hair styles and I am sure all hon. Members are agreed that a pretty head of hair has many attractions. Some women are by nature more fortunate than others and do not have to have recourse to any home or professional treatment. But there are those who are not so fortunate who are compelled to employ these artificial aids.

Many women cannot afford either the time or the money to use a professional hairdresser, as indeed they would like to. Two or three guineas a time every few months is too much for many of them. It is for this reason that women are, in increasing numbers, turning to these home permanent waving kits. The majority are in the lower income groups, and this increase of 66⅔ per cent. is going to represent a very real burden indeed upon them. These are the women to whom a few shillings increase in price makes the most difference, and they are the people whom we wish to hurt the least. They have very little leisure. They are in many cases housewives who are kept fully occupied at home and have not the time to go to the hairdresser, even if they have the money to spend. They are compelled, therefore, to resort to these artificial aids, which they use in their homes while doing their work.

I wonder if it is appreciated what effect this increase has upon the price of these kits. I should like to quote an instance of a manufacturer in my constituency. The present retail price of the outfit manufactured by this firm is 12s. 7d. without tax, and with the 100 per cent. Purchase Tax the price becomes £1 1s. Thus the woman who purchases this outfit pays the Exchequer 8s. 5d. by way of Purchase Tax for the privilege of using it. The present retail price of a refill is 5s. 8d. without tax, and the increase in price imposed by this Order brings it to 9s. 6d. This means that a complete outfit now costs 30s. 6d., of which 12s. 3d. is Purchase Tax. I say this is too much.

It seems to be curious in these days when we are exhorted to save fuel that the burden of this tax should fall upon the cold waving process rather than upon that which relies on heat. It is quite true that the hot waving process uses little fuel but it uses something, while the cold wave uses nothing. It is surprising that this tax should discriminate against a device designed to save fuel.

Hon. Members on both sides of the House are concerned with the preservation of feminine beauty, and I hope that it will be appreciated that by imposing this additional tax the Government are placing an unnecessary burden upon those who are least able to bear it, namely, the hard-pressed, harassed British housewife. I hope that it will also be appreciated that this tax will act as a deterrent to the manufacturers who are providing such service to the public in producing these outfits.

In view of these considerations I trust the hon. Gentleman will reconsider this matter, and see whether the tax on home permanent waving sets cannot be left at 33⅓ per cent. instead of being increased to this prohibitive figure.

10.28 p.m.

Mr. Ian Harvey (Harrow, East)

It is only right for me to declare my interest in this particular matter. I am not a user of the cold permanent waving set, nor, I regret to say, have I ever been able to persuade my wife to use it, though it would achieve a considerable saving in the home budget. I have a close relationship with one of the organisations responsible for the production of what is known as a "Toni" permanent waving set. The Financial Secretary, in moving this order, made it clear that the main object was to clarify a so-called anomaly, but I have failed to detect in what has been said by him any very clear anomaly.

I associate myself with the remarks of my hon. Friend the Member for Brentford and Chiswick (Mr. Lucas) that here is a new social habit, and it will not be altogether unwelcome to hon. Members opposite, who are continuously declaring themselves for revolutionary customs, even if this one was brought to us by the United States of America, which were not altogether popular in our discussions today. This habit has enabled many women in straitened circumstances, due to the impositions of the hon. Gentleman and his advisers, to do what they regard as an essential task in their normal life.

The Financial Secretary referred to a judicial opinion. That judicial opinion was very clear in slating that the use of these cold permanent waving sets was not a luxury but a reasonable habit in which people could be expected to indulge. Therefore, I am bound to ask what is the real purpose of the Order. The hon. Gentleman has told us that it is to clear up an anomaly, but when a new habit is brought into effect, anything which is connected with it does not constitute an anomaly. The argument about anomalies is nothing more nor less than a desire on the part of the bureaucratic mind, of which we have had rather too much recently, to put things into compartments into which they would not normally fit.

If the tax is to be introduced at this rate, it must be justified either because it is disinflationary—because it is intended to stop people spending what they would normally save—or because it is revenue producing. We have heard absolutely nothing from the hon. Gentleman as to the disinflationary effect of the tax, and there is no evidence from what he has said that any material used in the kit or in its production could reasonably be used for other and better purposes, and that imposing the increased tax will stop a luxury habit.

As my hon. Friend the Member for Brentford and Chiswick very clearly said, this is not a luxury habit but a normal habit. What the hon. Gentleman is doing is taxing a normal habit. Whose normal habit is it? It is clearly the habit of ladies who cannot spend time or money on more expensive waves. The hon. Gentleman, who spends a great deal of time talking about fair shares for all, is bringing in a tax which is entirely contrary in principle to that attitude. As it is not a disinflationary tax, it must be intended as a revenue-producing one.

Mr. Brendan Bracken (Bournemouth East, and Christchurch)

Or a hair-raising one.

Mr. Harvey

My right hon. Friend is a far greater authority on that subject than I am. If it is a revenue-producing tax, it appears to me to be levelled in the wrong direction.

I feel that the hon. Gentleman has produced the Order on a purely theoretical basis. He has not proved—certainly not to the satisfaction of my hon. Friends—that this is a fair tax and that it is required by the economic situation at present, and he has not proved that it is a tax which will not fall heavily upon the very people with whom he and his party have spent a great deal of time in the past and will no doubt have to spend a great deal of time in the near future—trying to convince them that they should give him their support. I ask that the matter be reviewed, because I believe that the imposition has been made without proper regard to what has been a very definite new development, and if the hon. Gentleman and his party are now proposing to close their minds to new developments, I feel that justification for many of their actions has ceased to exist.

10.35 p.m.

Mr. Erroll (Altrincham and Sale)

I thought that the Financial Secretary had a very difficult task tonight in trying to justify this Order. He evidenced his lack of ease by glossing over what this Order is really for. He sought ingeniously, as one would expect, to introduce a number of side issues of relatively minor tax changes which are brought about by the operation of this Order, and failed altogether to bring out the main point at issue, namely, whether a home permanent waving outfit should be charged at 33⅓ per cent. or at 100 per cent.

We see here the familiar reaction of Socialists towards anything new. The plain fact of the matter is that toilet requisites were taxed with 100 per cent. Purchase Tax, and permanent waving outfits supplied to hairdressers were taxed at 33⅓ per cent. Along came some enterprising manufacturers and produced a new idea. So immediately a tussle began. Should home permanent waving outfits be taxed 100 per cent. or 33⅓ per cent.? Naturally the officials of Customs and Excise, acting in accordance with instructions received from the heads of the Department concerned, stuck out for 100 per cent. tax. Having failed in their long tussle, they returned to the political head of their Department and said, "We will still get you your 100 per cent. if you will put this Order through."

There is no justification for charging 100 per cent. tax on an article used at home when only 33⅓ per cent. is charged for the corresponding machinery when used in a shop. It is just what we find in Socialist planning throughout the country. If you go to a restaurant you can have meat off the ration, but if you want it at home you can hardly have any. If you want eggs, you can get them off the ration in a restaurant, but you cannot get them at home. [HON. MEMBERS: "Nonsense!"] If you want your hair permanently waved, you can get it done at a hairdresser——

Mr. Mitchison (Kettering)

Can the hon. Gentleman explain this point about eggs? I find no difficulty in getting quite a number of eggs at home. I was not aware that they were in any way rationed or controlled. And while he is at it, will the hon. Gentleman enlighten me on something else? What is the significance of the word "permanent" in regard to a permanent wave. Does it mean permanent?

Mr. Erroll

As the hon. and learned Member for Kettering (Mr. Mitchison) wishes a technical explanation, the fact, as I understand it, is that the wave is permanent as long as the hair remains, but, due to the growth of the hair, the wave ultimately grows out. I hope that explanation will satisfy my hon. and learned interrupter.

Mr. Turner-Samuels (Gloucester)

What about eggs?

Mr. Erroll

It is important to make it quite clear that there is no question of tax evasion on the lotions supplied with the kits. The home permanent waving sets were supplied as complete sets as a novelty, and a very welcome novelty, and it was right that they should be taxed at 33⅓ per cent. Admittedly the lotions were more dilute than those supplied to hairdressing establishments, but that was to avoid use which might be harmful to members of the public not fully accustomed to stronger lotions. But there was no question of evasion or avoidance—two words which are apt to get confused in discussions in this House. I hope that the Financial Secretary, if he replies, will make it plain that there was never any question of avoidance or evasion of tax when the goods were originally introduced and as they are now being put across to the public.

It is most important that we should realise the very serious effect of this Order on these kits as regards the prices to be charged. One brand has been quoted. I should like to quote another brand because the price increases are of a rather different order. The normal price of the "Pin Up" home perm, in a complete set, is 9s. With tax at 100 per cent. that goes up to 15s., a considerable and substantial increase. The refill for the kit goes up from 7s. 6d. to 13s. 6d. again a substantial increase. The company marketing the "Pin-Up" also manufacture what they call a "Junior Kit," for what I believe to be end perms, priced at 4s. without tax and 6s. 8d. with tax.

As my hon. Friends on this side have already pointed out, a permanent wave is as essential a part of the female toilet as brushing one's teeth in the morning or wearing lipstick or any other form of personal embellishment or adornment, and it is regarded as particularly important among those who have the least time to spend on their adornment—those who work during the daytime in factory or in office.

Any new device or accessory which can enable people who must work all day to look after their toilet in their spare time is surely to be welcomed. It reduces the time lost from factory bench or office desk, lowers costs for the individuals concerned, and I should have thought it would have been welcomed by any Government, Socialist or Conservative. Therefore, is it wise or sound to increase Purchase Tax on such a simple article at the present time? I grant that it is not an essential, but it is certainly a desirable article; and if we can keep down the cost of living in this small but important way, it is worth doing.

May I turn to another important aspect of this matter? It is surely quite intolerable that the selling price of an article which is to be sold in thousands, if not in millions, should be suddenly and arbitrarily altered by the decision of some back-room official in the Customs and Excise. An enterprising manufacturer—and it is very difficult to be enterprising these days—sets out to market a new product which he believes will be popular. He initiates a sales promotion policy—whether we agree with the methods or not is another matter—at considerable financial risk to himself and to the future of the company as a whole. He bases his sales promotion policy on a selling price which he has worked out accurately on the cost of production at the time.

All of a sudden, by some arbitrary decision, he finds the price is raised out of one level into another level altogether—from 9s. to 15s.—so that where he might have hoped to sell in millions, he now sells only in tens of thousands. All the money is lost on a sales promotion policy which is no longer applicable, all because, as I say, some back-room official decides that in this war against free enterprise the officials must always win. I know it may be a small campaign, but it is all part of this constant battle which is going on against enterprising firms.

I suggest that the attitude of the Customs and Excise in this matter has been typical and at its very worst. They asked for representations and when those representations were sent, they ignored them. Their sole reply to the representations which they themselves asked for was the curt printing of this Order. I suggest that the Government's policy has been wrong in this matter, as it is in much greater matters; but they have a chance here, as this is an Order of their own introduction and requires an affirmative Resolution, to take it away and think again.

10.45 p.m.

Mr. Redmayne (Rushcliffe)

I want to make only one point. The Financial Secretary said at the end of his remarks that this was the best way to deal with these anomalies within the present structure of the Purchase Tax. Those words seem to be most significant. I should like to ask the Financial Secretary whether, in fact, any change in the structure of the Purchase Tax is contemplated, and if indeed this Order is, therefore, temporary. That seems to me to be a most important point.

The Chancellor of the Exchequer has seen the recommendations of the Federation of British Industries in regard to Purchase Tax. Are we to assume that these recommendations are having more notice taken of them than we might have hoped? If that is so, it is a great mistake to put anything into the 100 per cent. class which is acknowledged by everyone in commerce and industry to be most damaging to the future of British industry and to these particular items especially. Before we leave this matter, can it be explained whether this Order is temporary, and whether we may look forward to some relaxation of the tax on luxuries in the near future, or whether what the Financial Secretary said was simply meant to raise our hopes in order to dash them to the ground later.

10.47 p.m.

Sir John Mellor (Sutton Coldfield)

I only want to ask the Financial Secretary why this method is adopted, and why the purpose of this Order could not have been achieved by putting this increase of tax into the Finance Bill. This Order was made on 16th March when, presumably the Finance Bill was regarded as fairly imminent. It may not be regarded as being quite so imminent now—I do not know. I can hardly think that there was any desperate urgency about the making of this Order. It could just as well have been left to be dealt with in the Finance Bill, which is a form of legislation which. I think, is very much preferred by this House.

I recognise that power is given to the Treasury in the Act of 1948 to legislate by Order, and that this is perfectly lawful; but I think that probably the intention of Parliament when it gave that power to legislate by Order was that it should only be done when it was not convenient to do it by a Bill. This having been done, I should like to ask this question. The Order was made on 16th March and was laid on the 9th March. It came into operation on 31st March. Why has there been this long delay before the Motion to approve the Order was brought before the House? One would have thought that, on an Order which apparently is of some appreciable importance in view of what my hon. Friends have said, this House should have had an earlier opportunity of saying whether or not the Order should be approved. I think that these things should be brought before the House as early as possible, and it seems to me that the Treasury has delayed as long as possible in this matter.

10.49 p.m.

Mrs. Corbet (Camberwell, Peckham)

Without keeping the House very long, I should like to say that I regard "perms" not as a luxury but as a necessity. I ask the Financial Secretary to the Treasury whether it would be possible for him to have another look at this matter. Perhaps he does not know the sad state into which the ladies get in between their "perms." It is a nice comfortable, tight "perm" for a month or two, and then the wretched old hair will grow out. The "perm" is a little expensive, and one has to think carefully whether one can afford another for many months. During that period, one's hair is in a nasty state of ends and bits and pieces—as mine was last night until my mother did it with a "Toni perm." Now it is nice, but it has not been set.

Personally, I do not like spending a lot of money on hairdressing too often. It seems an extravagance, although I am supposed to be able to afford it. But it is everything to be able to keep oneself tidy by occasionally having recourse to these home "perms" and tidying up the ends of hair which do get into a messy state between times. Since this is a thing to which people with rather slender means are likely to have recourse, as opposed to those who can visit the hairdresser once a week in order to keep the hair nice, might I ask the Financial Secretary to have another look at the Order? A weekly visit to the hairdresser is a splendid thing for the woman who can afford it, but for those who cannot, will not my hon. Friend keep the tax as before?

10.51 p.m.

Mr. Assheton (Blackburn, West)

I am sure that the House is glad to have heard one hon. Member from the other side put in a word about this matter. My hon. Friends have spoken and, I think, put the case very well; but let me say that if the hon. Gentleman hopes to remove the anomalies which exist throughout the Purchase Tax Regulations by Order, he is going to be very busy indeed because he will have to bring in so many.

There are many instances of the tax which need attention, and those of us who study the Regulations realise, that there are many really remarkable anomalies. The argument which the Financial Secretary is making that this Order is to cure an anomaly is certainly not sufficient to justify it.

I agree with the hon. Lady who has just spoken that this is really not a luxury at all. The use of the things to which the Order refers means, I suggest, a more economical use of time and money. Furthermore, these constant changes are disturbing to trade; it is difficult for factories and works to make arrangements if they are to be subject to these constant changes. That is another point which should merit attention: this Order has some real effect on the cost of living because a rise from 9s. 0d. to 15s. 0d. is a very substantial difference, especially for the woman of slender means, as the hon. Lady has just said. I think that we ought to bear in mind that it is the woman with the least money who will suffer most; those who are better off are able to make much more use of the hairdresser's services; and for these reasons I do ask the Fnancial Secretary to reconsider this matter.

I agree with my hon. Friends on this side in regretting this Order; it is not, perhaps, a matter of the first consequence, but it is another result of the Budget, imposing itself upon the ordinary woman who wants to keep herself looking nice. There is the permanent wave costing several guineas; and there is no increase in tax for the people who can fortunately take advantage of that; but for the woman who uses this cheaper sort of treatment, the Government raises the tax.

10.54 p.m.

Mr. Jay

I will say only these few words. There seems to have been a misconception that we are raising the tax to 100 per cent. on the home "perms" for the first time; but that is not so. What we are doing is really to put the tax back to where it stood before last summer and where it was always intended it should stand.

The hon. Member for Rushcliffe (Mr. Redmayne) asked me if we had other changes in Purchase Tax in view. The answer is that we have no such proposals in view, apart from those included in the Budget speech. The hon. Member for Sutton Coldfield (Sir J. Mellor) asked why we introduced this change in the form of an Order and did not include it in the Finance Bill. The reason is that this represents not a change in taxation policy but the correction of an anomaly, which arose from the difficulty about definition as a result of counsel's opinion. We have, as I think he would recognise, normally used Orders as the most convenient form of correcting anomalies. That was why we did it in this form; and the only reason it has not come before the House earlier is that, first of all, the Easter Recess intervened, and second, that other business pushed it out of the way until this evening.

Mr. Ian Harvey

The hon. Gentleman said that the anomaly arose from counsel's opinion; while I agree that the hon. Gentleman has the right to introduce this Order tonight, will he tell us in specific terms why it should be necessary to set aside an opinion that must have been based on reasoned argument.

Mr. Jay

Counsel's opinion is taken on the question of definition, but the question of policy on what should be taxed is clearly for this House, and not counsel, to decide.

Question put, and agreed to.

Resolved: That the Purchase Tax (No. 4) Order, 1951 (S.I., 1951, No. 459), dated 16th March, 1951, a copy of which was laid before this House on 19th March, be approved.