STATIONERY (PURCHASE TAX) (Hansard, 14 February 1951)

§ The Financial Secretary to the Treasury (Mr. Jay)
I beg to move, That the Purchase Tax (No. 1) Order, 1951 (S.I., 1951, No. 60), dated 15th January, 1951, a copy of which was laid before this House on 17th January, be approved. This Order, which came into force on 12th February, is designed to stop a loophole by which avoidance of Purchase Tax on stationery has been increased. Various commercial and other organisations have found that they can get tax-free the stationery they require by the simple method, which is perfectly legal as the law stands, of buying the paper in untaxed form and having it later cut up and printed. This Order stops this process by applying to stationery the provisions of the Finance Act, 1946. Sections 16–21, which are specifically designed to prevent evasion of Purchase Tax by the conversion of untaxed materials into final products which would normally bear a tax.
Representations have been made to us from time to time in the last few years that it was unfair that some users of stationery—in many cases the larger ones—should not be bearing tax, while the great majority of users were doing so. The hon. Member for Bethnal Green (Mr. Holman), who is an expert on this trade, in an Adjournment debate in May, 1949, raised this matter and urged us to take action similar to that which we are now taking. The right hon. Member for Epsom (Mr. McCorquodale), from the opposite side of the House, said he endorsed wholeheartedly what my hon. Friend then said.
We took note of the representations then made and I stated that we would watch this matter very carefully to see whether this avoidance grew to a scale where something would have to be done. We were very anxious, if we could, to avoid putting both users of stationery and the Customs and Excise to unnecessary work and trouble. Later, in January last year, the two hon. Members I have mentioned, together with representatives of the stationery and printing trades, had a discussion with me on this point and, indeed, repeated the representations which had been made in the earlier debate.
552 In their view, this form of evasion was increasing steadily and they argued that the time had come when we should take some step to end it. We had hoped that since, in point of fact, the practice of large organisations manufacturing stationery in this way for their own use actually began before Purchase Tax was born or thought of, this avoidance might not have grown to a point at which legislation would be necessary. We have now been convinced, however, that the fears expressed by the hon. Members I have mentioned and by representatives of the trade have proved right and that there is now substantial evidence of serious avoidance which compels us to act. We hoped that we might have found a way of avoiding having to take legislative action of this kind.

§ Mr. Erroll (Altrincham and Sale)
What trade made representations?

§ Mr. Jay
The stationery and allied trades. I will give the hon. Member the name. The stationery and printing trades have a committee known as the Purchase Tax Joint Standing Committee of the Paper, Printing, and Allied Trades.

§ Mr. Ian L. Orr-Ewing (Weston-super-Mare)
Will the hon. Member make this quite clear because it is important to do so. I think the trades he has mentioned did not include any users. They only include printers. Am I right? I think they are only the printing trade and not the using trade at all.

§ Mr. Jay
Representations were mainly made to us by the printing and allied trades.

§ Mr. Orr-Ewing
Mainly, or only?

§ Mr. Jay
Mainly.

§ Mr. Holman (Bethnal Green)
Would the hon. Gentleman also mention that in this general committee the printing and allied trades were represented?

§ Mr. Jay
Yes, that is so. The present Order applies of course only to goods already subject to Purchase Tax. It does not make anything chargeable which is not chargeable already. What it does is, by bringing stationery as defined in the Order under Sections 16 to 21 of the 1946 Finance Act, first, to ensure that 553 anybody who to use the exact words of the Notice (No. 77D) which explains the Order, in the course of, or for the purpose of his business, carries out a process of manufacture of which the products are stationery, will be liable to registration and to payment of tax thereupon.
This will in fact affect mainly large businesses such as banks, insurance companies, public halls, football pools, local authorities and some others who have up to now been escaping payment of the tax. If the organisation, firm or public authority has paid the tax in the past, it still pays. If a printer does so on its behalf he will pay. Secondly, the normal £500 exemption limit will now cease to apply since this is involved in the application of the relative provisions of the 1946 Finance Act, and printers and others producing stationery who have hitherto been exempt will now have to apply for registration.
We propose, in order to ease the administrative burdens for everybody concerned that firms who produce chargeable stationery for their own use and not for sale from cut paper that has already borne tax, will in the normal case not be required to register. That, we think, will very considerably ease the work involved for all concerned. The reason for that is, and this was one of the grounds which led us to hesitate in taking action earlier, despite the representations made, that it would hardly be practicable to register and control thousands of firms who produce some chargeable stationery by use of duplicating or office printing machinery for cut paper.

§ Mr. William Shepherd (Cheadle)
Is this limit the minimum in respect of the exemption which the hon. Gentleman has mentioned?

§ Mr. Jay
It is one of the details which has to be fulfilled in order to get the exemption. I do not think the House will dispute that so long as we have a tax on stationery it should fall fairly on all concerned. The hon. Member for Bethnal Green said in an earlier debate that it was not fair or equitable that one type of user should be able to avoid the tax, but that another should be subject to it. The responsible organisations representing the trade have been consulted about the practical measures necessary to apply the 554 change, and I am informed that they support them fully, though no doubt they would prefer, as indeed we all should, to get rid of the Purchase Tax on stationery, like many other taxes, which could be got rid of if we lived in an ideal world where none of these things were necessary.
I think the present Order represents the most straightforward method of dealing with this matter, and leaves the administrative burden at a minimum, though to some extent the burden cannot be avoided. It is not easy to estimate just how much revenue we shall regain by stopping the loophole because naturally we do not know precisely the extent of the evasion, but it will probably amount to several million pounds. On these grounds I would ask the House to approve the Order.

§ Mr. Reader Harris (Heston and Isleworth)
The effect of this Order appears to be that a lot of people who are going to pay tax have not done so before. In as far as this Order is designed to catch the "wanglers" I would not oppose it, but my main purpose in opposing it is that it appears to catch a lot of people who are not "wanglers." I understand there are a number of printing firms in this country who have not been paying tax up to the moment who will have to in future.
Many of them have escaped because of some "wangle." The firm, for instance, may have been split up into a lot of little firms in the names of relatives so that they can all keep within the £500 limit. It is right that they should pay in future, but I do not think that it is right that this Order should now catch a whole lot of firms who have been doing their own printing for years, and often doing printing not for re-sale.
The Financial Secretary said that there has been consultation with the stationery and allied trades. It seems to me as though there has been some sort of unholy alliance between the printing trade and the Exchequer. Surely it is not wrong for someone to try and make their own goods in their own offices or homes instead of buying them. The printing trade is entitled to get business fairly, but surely it does not need the Exchequer to come to its aid to force people to get their printing done in a printing house.
555 The fact is that the makers of duplicating machines and other printing machinery have been going round the country advising firms to install their own machinery and escape Purchase Tax at the rate of 33⅓ per cent. There is nothing illegal about that. Every man is entitled to do it. A judge of the High Court laid it down many years ago that it was legal. Most firms who have their own printing machinery installed it because they want work done quickly and in a particular way. Many of them have had their own machinery for years.
I have been trying to find out who will be hit by this Order, and I hope that the Financial Secretary will correct me if I am wrong. I find it an extremely difficult thing to ascertain because the explanatory memorandum to the Statutory Instrument is very brief. But it appears that any firm, office, shop, local authority, charity, which does more than £250 worth of printing in a year, including duplicating, will be hit by the Order. Am I right in thinking, from what the Financial Secretary said, that that will only apply now if they buy their paper uncut, and that if they buy paper on which tax has already been paid they will not have to pay again?

§ Mr. Jay
If they buy the paper which is already paying tax then, for the most part, they will not have to pay.

§ Mr. Harris
The phrase "for the most part" is important. Does that mean that if they are going to do more than £250 worth of printing, even if for their own use, they have to pay? If that is so, it is going to have tremendous repercussions on large hotels printing their own menus, on stockbroking offices circulating list prices twice a day every working day in the year, on every factory which prints its own letter headings, internal forms and notices, and its P.A.Y.E. forms. There is a large factory in my constituency which had a Customs and Excise inspector with them yesterday morning on this subject. None of these things are sold or re-sold, and they are purely for internal use.
Not only, apparently, are these firms going to have to pay Purchase Tax on the cost of the paper, but they will have to add to the cost of the paper the cost of the job of cutting the paper to the right 556 size, the cost of the labour, the setting-up of the type, or the cutting of the stencil, then adding 12½ per cent. to the notional wholesale figure to arrive at a total on which tax has to be paid. For a firm such as those in my constituency on the Great West Road, employing a hundred or so, it will mean a special staff for costing also. How on earth is this Order going to be enforced in practice?
The Financial Secretary said that local authorities would be caught by the Order. What in earth is a county council going to do when it buys uncut paper in bulk? That paper is used not only in its headquarters building but distributed to the education department which parcels it out to the schools; and it is also handed on to the fire brigade headquarters which then despatches it to the fire stations. Every time a headmaster wants to run off a circular or examination paper he has, apparently, got to cost the job, and then send a return in to the local authority headquarters who will add up all the thousands of jobs and then pay the tax. Those local authorities will have to employ a good many to keep those records alone. It seems to me that the Order is a fantastic imposition on industry and local government.
Where paper is purchased, and, because it is cut, tax has already been paid, I understand from the Financial Secretary that no tax will be payable on those jobs. This will not help the printers because people can still buy paper with no tax. Surely it is reasonable that a large organisation should buy paper which is uncut, and yet they are not going to escape any Purchase Tax at all. They pay not only on the paper but also on the further items of the cost of labour. I hope that the Financial Secretary will answer that point because it seems to me that some people are still going to pay more Purchase Tax than others.
The Financial Secretary should reconsider the application of this Order on three grounds. One, it is a terrific added imposition, an inflationary tendency on industry at a time of rising costs of living. Secondly, it is impossible to check the application of the Order. Thirdly, there has been no consultation with the Federation of British Industries or the Associated Chambers of Commerce.

§ Mr. Erroll (Altrincham and Sale)
I do think that the Financial Secretary adopted very extravagant language in introducing this Order by making such loose charges of wholesale avoidance and evasion. There has been no wholesale avoidance or evasion.

§ Mr. Jay
May I correct the hon. Gentleman? I did not use the word evasion. I said avoidance. I most carefully stated that what these organisations were doing was perfectly legal and natural in the existing state of the law.

§ Mr. Erroll
The record will show tomorrow whether the word "evasion" was used or not. I think it was used. There has been no wholesale escape from tax, as the Financial Secretary himself admitted. A number of firms were in the habit of printing their own internal stationery long before Purchase Tax came into existence. I hope it will go out from this House tonight that we are not condemning business firms and others for adopting a practice which is perfectly legal and perfectly right and sensible.
The Financial Secretary has introduced the Order singularly badly. It has been slipped in with a minimum of notice and a minimum of consultation. The hon. Gentleman referred to consultation with the printing trade who are interested parties, because they claim, I think quite unjustly, that they are losing business through firms who make their own internal stationery. The hon. Gentleman would have done better if he had consulted the users, the people who have to get their stationery, if they can, from printers who have suffered a great deal in the past through the restrictive practices of workpeople and others in the industry. For those and many other reasons, many firms have turned to making their own internal stationery.
One can hardly tell from the Order that this is the purpose for which it is intended. There is a note which is rather euphemistically called "Explanatory Note." The note is a masterpiece of evasion. It is a wholesale escape from reality. It is indeed an avoidance of explanation altogether. I shall quote a single sentence from the Explanatory Note. It states that the provisions referred to are in effect supplementary to the general purchase tax provisions regarding the charge of tax and apply in the case of certain 558 transactions where goods of the relevant classes do not attract tax under the general provisions. Which means that you must not print your own stationery without paying Purchase Tax on it. I could not refrain from putting down a question to the Chancellor on why this Explanatory Note was not explanatory and the Chancellor was good enough to say: I must however admit that these explanations are by no means easy to understand and I shall ask those concerned to take special care to make these notes somewhat clearer in future. I hope it will be done in future.
The whole question of Purchase Tax is bedevilled by the fact that we have been unable to discuss the question fully in the House during the last two financial debates. We were specifically prohibited from discussing Purchase Tax and the whole subject has been left very much in abeyance. I hope that one of the results of this debate tonight will be to convince the Chancellor of the urgent importance of so arranging the forthcoming Budget debates that we shall be able to discuss Purchase Tax and its whole implications and ramifications.
I think all of us, including the Chancellor, are agreed that the taxation of business stationery is inflationary. It is a direct cost to industry. I know that last year the Financial Secretary and his colleagues denied that taxation was a contributory factor in inflation, but of course it is quite plainly so in the case of business stationery. Some £23,000,000 a year is added to the total cost of making industry function. And the purpose of this 'Order, as explained by the Financial Secretary, is to raise costs to industry still further. There may be a case for levying Purchase Tax on goods which are bought and sold, but what just case can there be for levying Purchase Tax on articles which are not bought and sold and are merely part of the tools of the trade of the firm which produces them?
I am not seeking to defend the case of what I might describe as the genuine evader of tax. We are here concerned with the firm which for good reasons desires to print its own internal forms. The Order affects those who want to have their own stock records, their own copies of forms which are required of them by Government Departments. There is no question of the forms being 559 bought and sold. This is entirely an internal transaction, within the company itself. There are many complicated forms dealing with exports—forms which are required by Government Departments themselves—and there is no good reason why the firms using them should not print them for their own use without attracting Purchase Tax at all.
It may be argued that the principle of the chargeable process applies in this case. As we all remember, a number of ingenious people found that by processing certain goods instead of carrying out the complete manufacture they could escape Purchase Tax on the finished article. But, of course, the principle of the chargeable process applies only where the person carrying out the process is selling the finished goods. In this case, the articles produced—namely, the printed forms—are not sold by the firms producing them, but are simply used by the firms for their own purposes. It is, therefore, not established that the principle applies here.
In any case, I suggest that it is wrong to say that work which you do yourself in connection with another process, the second process being the one in which you make your business, should be charged. If the Financial Secretary were to continue the application of such a principle we should see him accusing the housewives of Britain of carrying on chargeable processes whenever they make some clothes for their children or run up a printed cotton frock for themselves. I doubt whether they would be able to make the frock to utility specifications because it is so difficult for anybody to understand those specifications; nor, for that matter, would it be convenient to wear the frock if they did. I suggest that this is an unsatisfactory and unworthy principle.
There are many other similar examples to which the ingenuity of the Customs and Excise could be applied if the Minister cared. There is no principle here, but merely a matter of expediency. It is clear from what the Financial Secretary said that the Treasury are not trying to apply a principle uniformly throughout the country but merely trying to collect a little more tax where they can most conveniently gather it. They specifically exclude the small firms. The Financial Secretary has said that only the large firms 560 will be caught—firms doing more than £250 or £500 worth of work a year. Local authorities will be caught, Transport House will be caught, the nationalised industries will be caught—and it is significant that they are amongst the biggest tax avoiders of all—and the Co-operative Wholesale Society will be caught. No doubt the Co-op has received a special exemption already.
We have here no principle but merely a matter of expediency whereby additional tax is gathered from the big organisations in order to satisfy the claims of one particular trade whose views have held sway without any others being consulted. The order is an attempt to stop a practice which is desirable and even essential in many branches of industry. It will create more anomalies and add still further to inflation and industrial costs, and nothing less than a full discussion of the subject in the next Budget debates will adequately meet the situation.

§ Mr. Holman (Bethnal Green)
I am delighted that this order has been introduced in this form. In 1949 the Treasury felt that any alleviation of what was a growing unfairness as between one user and another would be administratively impossible, but I am glad that in conjunction with those most intimately associated with the stationery, printing and paper trades, a suitable formula and a suitable set of exemptions have been found.
The two hon. Members who have spoken from the benches opposite have, judging by their remarks, clearly failed to appreciate the position that has been developing. First, let me remind the House that there was such a thing in operation as Paper Control which only finally ceased in July, 1950, although it had been easing for some months prior to that. During the war when Purchase Tax on stationery was introduced, no serious problem was arising because the flow of paper was regulated and was passing through what would be called the "normal channels" of supply, and the opportunity for avoidance by large users was therefore non-existent. For that reason, until about 1948 any appreciable increase of avoidance was impossible, because the tonnage of paper was not available for new buyers to obtain.
561 My interest in this matter is very remote. I have a small interest because I have a duplicator, and I am exempted under the £250 limit provided I buy cut paper of a size, I think, under 227½ sq. in., which would be subject to Purchase Tax.

§ Mr. I. L. Orr-Ewing
I do not want to embarrass the hon. Member, but I happen to see in one of the documents with which the House is very familiar that he is recorded as a paper manufacturer, which he might be interested to know. I am not imputing anything whatsoever when I say that.

§ Mr. Holman
I think I am registered as a paper merchant—

§ Mr. Orr-Ewing
I beg the hon. Member's pardon.

§ Mr. Holman
—and a paper merchant for wrapping paper. I engage only in the wrapping paper section of the trade. Of course I take a great interest in other sections of the trade and their problems—naturally, a somewhat intimate interest—but I am not affected financially or in any way by the Order, except, as I say, that I can carry on, as hitherto, using a duplicator without tax provided I buy my duplicating paper in a certain size.
I want to point out to the hon. Member for Heston and Isleworth (Mr. R. Harris) that a quite considerable number of the factories which have been referred to are registered for Purchase Tax, and that anyone who is registered for Purchase Tax cannot avoid it, even in this respect. To the hon. Member for Altrincham and Sale (Mr. Erroll) I would point out that the normal practice in connection with Purchase Tax is that on goods subject to Purchase Tax which are bought for one's own use, Purchase Tax has to be paid to the supplier even if the buyer is registered for Purchase Tax. One can only avoid tax on those goods at that point if he is registered for Purchase Tax and collects that tax from the person to whom he supplies those goods.

§ Mr. R. Harris
Where, of course, the goods which are manufactured by the factory are not themselves subject to tax, it is almost certain that the factory will not be registered for tax purposes. Take MacFarlane Lang & Co.—tax is not payable on biscuits. Tyres are not subject to tax, so they would not be registered.

§ Mr. Holman
Factories producing certain types of metal goods are subject to tax, and such factories would have to pay tax on all taxable commodities that they buy for their own use. The whole argument used by the hon. Member for Altrincham and Sale, falls to the ground on the very basis of Purchase Tax that the war-time Government introduced and which has been carried on until the present day.
We are told that some printers avoid Purchase Tax. It is a very small one-man business that does less than about £10 worth of turnover a week, and therefore the number is negligible. I have also disposed of the argument—why pay Purchase Tax on goods you produce for your own use? That was the normal practice up to 1948. In 1948 and onwards certain sections of users, who themselves were not registered for Purchase Tax, saw a way of avoiding a considerable amount of taxation. We estimated that in 1949 avoidance amounted to some £3 million a year gross. I use the expression "gross" because the on. Member for Bath (Mr. Pitman) is always pointing out we had to allow for Income Tax and Profits Tax, so that the net amount was considerably less. I agree with that general proposition.
In the Adjournment debate in May, 1949, the Financial Secretary to the Treasury promised that if there were any considerable evidence of increasing avoidance the Treasury would do something about it. The right hon. Member for Epsom (Mr. McCorquodale), on that occasion supported every word I said.

§ Mr. L L. Orr-Ewing
As a printer.

§ Mr. Holman
Yes, from his personal knowledge of the growing avoidance—that was the motive behind it. There may have been some personal interest concerned, because if customers buy the paper and a printer does not, naturally the volume of his orders diminishes, and every other consumer has to pay a little bit more. That may have been a contributory factor. I am talking, I hope, to business men who know something about general business and who know very well that if a printer can place an order for 50 tons he buys more cheaply than if he places an order for 5 cwt. If that is not understood on the benches opposite, then nothing in the way of busi- 563 ness can be understood on those benches at all.

§ Mr. Erroll
Does the hon. Member agree that the restrictive practices of compositors are one of the biggest costs in printing today?

§ Mr. Holman
Does the hon. Member think that compositors, especially in London, are overpaid in comparison with workers in the rest of the country? They are highly skilled men. I myself went through the mill in that respect. I had more than two years' printing experience and therefore I can speak with some knowledge of compositors, with their seven years' apprenticeship, as they had in my early days—I think it is still six. Some hon. Members would look very poor beside them, with their knowledge of the English language, spelling of words, and general knowledge.
I must not be diverted by these asides. The present position, as the hon. Member who has interrupted me said, is thoroughly unsatisfactory. He was using phrase with a slightly different significance from that with which I use it. It means today that one large user has to pay the tax and his neighbour can avoid it. Only large users find this avoidance worth while. The small users—the firms which buy a few thousand envelopes—must pay the tax. It would not pay them to buy a few reams of paper, have them sent to a convertor, and take it back again. They would not save anything like 33⅓ per cent. by that method. But the large users, whose orders run into tens of millions of envelopes, can avoid, in practice, practically the whole of this tax.
After my Adjournment debate, two of the big banks said they would not be concerned with what they considered to be an immoral position, but I am not sure whether subsequently they were converted to the idea of avoidance. I know there is much new office machinery that has been bought in the last two or three years since paper has been available to these users. Avoidance has been increasing very rapidly. That means that the Treasury forgo about £5,000,000 compared to £18,000,000 received in tax on stationery.
As the Financial Secretary said, we should all be delighted to get rid of what 564 was at one time the only case of Purchase Tax, that on articles mainly used in commerce, industry, administration, with only about five per cent. used for private use. Since motor cars have been brought under the tax and some of those are used for commercial purposes, we cannot say this is now the only article of that kind so charged.
The Co-operative Wholesale Society, mentioned by an hon. Member opposite, are registered for Purchase Tax. Therefore, all their factories have to pay the Purchase Tax and anyone who is a loyal co-operator of the local societies and who gives a complete order to the Co-operative Wholesale Society, who manufactures it in their printing works, has to pay the full Purchase Tax. It is only if the Society is disloyal and goes outside, that it may avoid some Purchase Tax by adopting the method used by a certain number of the larger users.
It is only the large users who themselves are not registered for Purchase Tax who can avoid it in this respect. This Order brings a greater equality and a greater fairness, and not only will it be pleasing to the trades concerned, but it will, as a second best, I admit—the best being no tax at all naturally—avoid further diversion of the normal channels of trade. It will avoid large numbers of people doing printing work who are not associated with their appropriate trade union and who are not getting the trade union wage. It will avoid the sense of unfairness between one user and another and between one manufacturer and another by bringing in all the larger users and producers of stationery and various printing products. Administratively, it would be impossible to bring in all the small users of office machines. It is highly undesirable and would cost far more than the revenue it would produce.
The additional revenue to the Exchequer today, as the Financial Secretary said, will be several millions. It is computed in some directions that the avoidance amounts to £3,000,000 to £4,000,000 at least. I do feel that in the existing situation when we cannot accept the best—that is the foregoing' by the Treasury of £20,000,000—we should all sympathetically support this proposal for additional revenue which will be so urgently needed in the coming two or three years.

§ Mr. Ian L. Orr-Ewing (Weston-super-Mare)
I think we must all agree to be impressed hypothetically by the hypothetical appeal of the hon. Member for Bethnal Green (Mr. Holman). But I think the entire case he put forward was based on the assumption which really did not exist at all. He mentioned the Co-operative societies—

§ Mr. Holman
rose—

§ Mr. Orr-Ewing
I apologise to the hon. Member. I think he referred to the taxation on what the Co-operative societies sell. The whole question is not what the Co-operative societies or any individual may sell, but what they use for themselves. I would refer him to the actual Order: Notice by the Commissioners of Customs and Excise: Purchase Tax on Paper Stationery dated January 1951:
Paragraph 8 is headed: Persons producing Stationery for their own use. I ask him to consider whether the Cooperative society, as distinct from other people, do not come under this very impressive heading.
Under the new Order any person, who in the course of, or for the purposes of, their business make stationery, e.g., by cutting, printing or processing paper, will be liable to registration and to payment of tax on any such stationery which they appropriate to their own use, e.g., in their offices, workrooms, etc., on or after 12th February, 1951 … I ask the hon. Gentleman to look at this Order from that particular view. Is it or is it not right that people who have found it a good thing to do printing and processing stationery from their own machinery should be subject to this sort of Order? Secondly, I would ask the Financial Secretary whether it is possible to "police" this Order if it comes into full effect. Does he propose to examine every works and every office to see whether they use a duplicator or any form of machine that processes paper and puts printing matter or colouring matter on it?
I must confess a personal interest. I do not think I would come within the scope of this Order, but I do process paper through a Massely machine in the works with which I am concerned to a 566 very small degree, and I suppose under the most restricted reading of this Order I would be liable to be examined as to whether what I do comes under this Order. Surely a lot of time is to be wasted seeing whether I do come within the scope of this Order or not.
I should have thought a great many important things can be found for people to do in the existing circumstances other than going around and seeing whether a certain limited quantity or unlimited quantity of stationery is so printed for a firm's own internal use. This is the gist of the whole matter. I object to this Order because I feel that certain interests, established printing interests—the bigger ones and possibly the paper manufacturers and paper merchants in this country—have been persuading the hon. Gentleman to bring this Order into effect in order that they should, so to speak, continue to make use of "closed shop" processes of manufacture. That is what I suspect.
I agree with the right hon. Gentleman completely that I would do everything I could to see that where a tax was imposed improper methods were not used to evade it. But is it really improper for somebody to print their own stationery in their own works if they find it more convenient, or for somebody to print their own circulars in their own works if they find it more convenient? I cannot believe that is what is in his mind, but I believe that he has been forced into that unfortunate position by the pressure of those outside the House.

§ Mr. Holman
May I draw attention to the fact that if a firm is subject to Purchase Tax and is registered accordingly, theoretically—I do not say always, in practice—if they use some of their own product they ought to pay tax on it, according to the law, at the present time?

§ Mr. Orr-Ewing
I am afraid the hon. Gentleman has rather contradicted the terms of the Order. I would refer him to page 3, paragraph 8, where it is made clear that this Order brings into effect an entirely new imposition of tax. That is my point. The effect of this Order could have been achieved by an entirely different method. If one refers to the Finance Act, 1946. on which this Order is really based, one finds that Section 17 (2) gives a simple and clear definition which would 567 have got over the Financial Secretary's trouble in a decent, fair and reasonable manner. It says: (2) A person shall not become accountable for tax under subsection (1) of this section by reason of the application of a chargeable process— that is, printing on paper— where the resulting goods are his property at the time of the completion of the process … and are therefore not for sale outside. I should have thought that was a simple method of dealing with this problem.
In opposing this Order and asking for its withdrawal, I am not suggesting that we should encourage any evasion of tax, large or small. Far from it. Everybody who comes under the general purview of this class of taxation should bear their own responsibility. But surely the right hon. Gentleman must equally agree with me when I say there is a wide difference between imposing, a tax on a commodity which is likely or liable or designed to be re-sold, and imposing a tax on a commodity not likely to be re-sold, and which remains the property of those who have processed it and who have no intention of deriving any revenue from having so processed it.
There is one other point. I invite the House to examine the Fourth Schedule, to which this new Order would be attached for the purposes of the tax. It is a new tax, and, I think that the hon. Gentleman must agree, new in principle. If we examine the Fourth Schedule to the Act of 1946 we can see how foreign the whole of the subject matter covered by this Order is to the general purpose of the Schedule. There are only four items in the original Schedule which is headed: Purchase Tax. Chargeable processes: Relevant classes of goods.

1. Apparel and rugs made wholly or partly of fur skin other than of rabbit (including any skin with fur, hair, or wool attached).

2. Fur skins other than of rabbit (including any skin with fur, hair, or wool attached) dressed.

3. Jewellery, imitation jewellery and other goldsmiths' and silversmiths' wares.

4. Road vehicles and cycles (whether mechanicaly propelled or not)."

I invite the House to consider whether the subjection to tax of anyone who is 568 insolent enough to print his own note paper and his own notices in his own works, relates to the items in the Schedule in any way. When we examine the history of this particular provision we can see how mistaken the hon. Gentleman and his friends are. They are extending the scope of the tax into a field for which it was never designed. The right hon. Gentleman's answer to my intervention earlier revealed that certain trade interests quite honestly—for I am not accusing them of anything—have persuaded the hon. Gentleman that this tax should be imposed on certain commodities because they wished to see all the work necessary on those commodities coming from their hands and no one else's.
I ask the hon. Gentleman to re-examine this matter, and withdraw this Order. He should hear the evidence of the users because I do not think he has ever done so. At no time more than at present has it been important to cut down the costs of production, or to remove any tax on the raw materials of industry. This is in a minor way a raw material of industry, and I ask him to take the necessary steps to remove the tax.

§ Sir William Darling (Edinburgh, South)
I must declare my interest in this matter. It is rather less than the Financial Secretary's. His interest is to grab this tax, and he cares not one jot or tittle for equity. I am engaged in a wholesale and retail stationery business, and I have been a victim of this Purchase Tax swindle inadvertently. Some 20 years ago a large store, anxious to distribute its business over four distant firms, arranged that the first would supply the paper, the second would cut it, the third would print it, and the fourth pack and distribute it to their customers. This was an intentional device to give trade to the largest number of persons.
That was 20 years ago. When the right hon. Gentleman's party came into power they pinned down the unhappy distributor, who was only getting 5 per cent.. and £480 in Purchase Tax was imposed because an imagined scheme to defraud the Revenue was put into operation 20 years ago when James Keir Hardie entered this House. I would tell the hon. Member for Bethnal Green (Mr. Holman) that Benjamin Franklin said: 569 This is a printing house, this is a sacred place; and anyone who interferes with the liberty of printing, interferes with human freedom. Whether the Financial Secretary likes it or not—I am sure the hon. Member for Bethnal Green does not like it—I say that this is interfering with the liberty of printing. No other engine of man's discovery has done more to alleviate his lot or promote his happiness than printing. That is an inescapable fact.
I wonder what the history of this business is and how it began? I do not think the Financial Secretary, innocent and intellectual young man as he is, goes about looking for opportunities of fresh taxation. He is absorbed in nobler things, but he is the victim of many persuasive advocates who are at him, pulling at his coat tails or his ear or any other projection, saying to him, "Here is an opportunity for more taxation; here is an opportunity for skinning the louse."
These interested parties who have. I regret to say, the support of the hon. Member for Bethnal Green have the ear of the Financial Secretary, or whatever means of approach there is to the intellect of the hon. Gentleman, and have told him that something has to be done. Who are these interested parties? I will say who they are. They are the printing trades, who fear that a considerable business has been taken from them. I am sorry to see the Minister of Pensions is not here—hon. Gentlemen opposite know what he has to do with this. He was arch-organiser of the restrictive practices in the printing trade, of which this is the outcome.
The printing trade for many years has been a restricted occupation. The number of apprentices to every firm has been strictly limited. A man who lives at Luton came to me last night and told me that when the employment officer of the Ministry of Labour came round the school asking the boys and girls what they wanted to be, his boy stood up and said, "Please, sir, I would like to be a printer." The employment officer said, "You can't be a printer. You can be A, B or C, but you can't be a printer." Why did he say that? Because there is an agreement with the masters which has made it a closed shop, and it is easier to become Financial 570 Secretary to the Treasury than to become a printer.
The number of impediments and difficulties are incalculable and innumerable. That is why the printing trade, with greedy, clutching hands, want more and more jobs for their boys, but do not want new entrants into the trade. This difficulty has existed for many years and business firms have been driven to some shift to meet it. Large firms have listened to clever salesmen for devices that may substitute for printing—Roneo, Multigraph, Gestetner—these are advertisements of the fact that the printing trade has driven industry to alternatives.
But, of course, the printing unions, like the hon. Member for Bethnal Green, say they do not regard this—[HON. MEMBERS: "And the hon. Member for Epsom."] I have not forgotten that Messrs. McCorquodale are among the largest printers and are interested parties. Perhaps the right hon. Gentleman has had the good sense to remain away—probably he is in Scotland attending to his business. He has as much interest in this matter as the Minister of Pensions, who, of course, has stayed away, and no one denies that he knows more about this than even I do.
This attempt to collect taxation is a conspiracy between the master printers and, more important, the printing trade unions, who are really their masters and who want a closed shop. If I have no Roneo, no method of duplication, I have to go to the already over-burdened printing works which, in the City of Edinburgh, cannot take in work for three months. They have far more work in the printing trade than they can do for at least three months and perhaps longer. Even His Majesty's Stationery Office came to me and offered me a contract if I would deliver in three months' time.

§ Mr. Holman
Is the hon. Gentleman suggesting that these people have all put in a complete printing and book-binding plant for their own use?

§ Sir W. Darling
I am not suggesting that all have done it, but it has been done extensively. The Midland Bank have done it, Barclays Bank have done it, the Commercial Bank of Scotland have done it. Enterprising businesses which had a considerable quantity of job printing to do and wanted to get it done quickly could not afford the time—it was not a question 571 of the money—to go to the ordinary printing trade and they were compelled to introduce some form of rough printing. It was not educational printing; it was business efficiency forms and the like.
I am the chairman of an engineering company, and I believe we shall be caught by this tax. We are engaged in re-armament. We spend more than £250 a year upon paper and internal office statistics. We have a productivity committee and a very elaborate costing system. We do not write costing systems on slates; they are printed on paper and sent round. Now, apparently, the hon. Gentleman wants to tax our productivity.
I have been approached by a local authority on this subject. I hope the hon. Member for Clapham (Mr. Gibson), my friend of the London County Council, will have something to say on this. The L.C.C.—an efficient body—produce reams of cyclo-styled, Gestetner and printed material. It is true that they may already pay Purchase Tax upon the paper but, even so, they will still come within the special scope of this order. Will the efficiency and ability of the L.C.C. to serve the ratepayers of London be aided in any way by this fantastic impost made upon them by the Financial Secretary? Is it not the unkindest cut of all that the Financial Secretary, representing Battersea, North, should lay upon the already heavily burdened back of the London County Council this additional charge? If the L.C.C. do not resist it, Edinburgh Town Council will resist it and kick against it. They are strongly opposed to it. They have to use Roneo, cyclo-style and other methods of printing in the interests of public efficiency. Their rates are 8s. 6d. in the pound—the lowest of any of the cities of the United Kingdom That is done by efficient methods.
The implications of this order are various and remote. They spring from the printers being desirous to canalise into a trade already over-burdened with demand, all the printing business they can get. Secondly, the order is an attack upon the inventors of the many devices which substitute repetition printing for compositor printing. It is an attack on efficiency through the whole range of industry. Finally, there is the necessity of the Financial Secretary to get money at all costs. He will not tell me that 572 the order is equitable and just or that it promotes efficiency in any direction. I am sure the House would be glad if he would speak again, but he will say nothing to justify the order except this—that the cupboard is bare, that his colleagues have been profligate and extravagant, that the times are hard and that there is this desire of these trade unions. Those are the inspirations of this Purchase Tax, which cannot be justified in any other way.
I feel that there will be a time, as there was in the middle of the 19th century, when all these fantastic taxes will be blown away, when the philosophy of Adam Smith will once again triumph in a free Britain. One of these days this Order will be blown away and the arguments of the hon. Member for Bethnal Green and even of the Financial Secretary will be looked upon as ridiculous observations made by persons trying to stop the reasonable flow of progress and practical efficiency in an ineffectual and utterly useless way.

§ Mr. Shepherd (Cheadle)
I listened with considerable interest to the speech of my hon. Friend the Member for Edinburgh, South (Sir W. Darling) and, indeed, to the speeches of all my hon. Friends, and I agree with none of them. I want for a moment or two to put the case in support of the Order, which I think is inescapable if it is looked at fairly. A considerable number of wider have been bowled tonight by those who have concentrated on putting the case against Purchase Tax and all the evils which it involves, and to which I subscribe wholeheartedly, but they have not addressed themselves to the question of whether the Order is or is not equitable.
It does not really matter whether a person prints his own stationery or whether someone else prints it. The real issue is whether the Order we are discussing is equitable. It does not matter whether the organisation which is known as the Joint Standing Committee of the Printing, Allied and Stationery Trades has been responsible for it. It does not matter if two or three organisations connected with the printing trade have been responsible for instigating the Order. What matters is whether the Order is just, and it is quite improper to say that 573 certain people should not pay their share of the tax.
I have listened to a number of arguments which seemed to say that because a number of people do their own printing, they are justified in not paying the tax which other people have to pay on similar goods. I really cannot see why the Midland Bank, or other banks or any organisation, for that matter, can say that they are justified in evading or avoiding tax simply because they happen to be printing the stationery themselves.
It really is not an argument to say that those people were doing that kind of printing a long time ago, because the printers also, in the ordinary way, were printing at the same time. Their customers have to pay the tax, despite the fact that these printing firms may have been going on for 100 or even 200 years. Therefore, I really do not think that there is an argument in equity against the Order, although I have one or two objections to it which I should like to put forward.

§ Sir W. Darling
Would my hon. Friend distinguish between printing for use and printing for profit?

§ Mr. Shepherd
My hon. Friend is on the wrong line, because what really matters, if one is distinguishing between printing, is not whether it is for use or for profit; but I will not follow my hon. Friend on that Marxian line.
What matters is whether, by definition, the printing attracts tax. If I am using an item of stationery which attracts tax, it does not matter whether I print it myself or buy it. I ought, in fairness, to pay tax upon it if it is taxable.

§ Mr. Erroll
My hon. Friend is under a misapprehension. It cannot attract Purchase Tax if it is not purchased. It attracts tax only when it is purchased or sold.

§ Mr. Shepherd
That is a technical question. Whether it attracts Purchase Tax because one happens to process it in some way oneself is an academic argument into which I will not enter at this very late, or early, hour.

Mr. I. L. On-Ewing
My hon. Friend is going rather far when he says that the argument is entirely academic, since he has already accepted—I dare say, under duress—the Finance Act, 1946, in Section 17 (2) of which that very point 574 is made perfectly clear. It says that where something is produced for the use of the producer, and not for sale, it should not be subject to the same class of tax as something which was produced only for sale. My hon. Friend must accept that as being rather beyond the academic stage.

§ Mr. Shepherd
Also in the 1946 Act is a section to which reference is made in this Order and which, of course, does what we now propose to do. I see no objection in equity to this. My hon. Friend may tell me the printing presses will stop tomorrow because of this Order. My hon. Friend below the Gangway may say this is only because of the evil efforts of the printing trade organisation. But it is quite wrong for one set of commercial organisations not to pay Purchase Tax on items of stationery which other similar firms have to pay.
Purchase tax is a very heavy imposition; it is full of vicious anomalies that none can iron out—and I sympathise with the Department concerned. If we want to reduce the general level of the tax it is right and proper that everybody should pay his share of the tax when it is due. There is no serious case against this Order. I welcome the elimination of the £500 limit. That limit was only instituted because of the inability of the Inland Revenue to check the smaller-operating firms, but it has been the subject of gross abuse and most tradesmen will be glad to see that it has gone at last.
I have, however, one criticism of this Order—the manner in which it has been introduced. We see that it became operative on 12th February. It is quite unnecessary to make an Order of this kind operative before it receives the affirmative resolution of the House. There may be an occasion where anticipation would be damaging to the national interest or to the Treasury and this procedure should be used, but I see no justification for it in this case. I hope the House will support the Order and that they will appreciate that sharing the burden fairly is, in the long run, the right policy.

§ Mr. Assheton (Blackburn, West)
The speeches which we have heard from my hon. Friends on this side of the House' prove quite conclusively that here is 575 another muddle. I warn the Financial Secretary that there will be a storm in the country when the full effects of this Order become known to local authorities and businesses throughout the country. The Order involves a very wide field of additional taxation and it involves an immensely greater number of persons directly concerned with the levying of this tax. Can we be told how many thousands of additional taxpayers there will be as a result of this Order? The Order came into effect on Monday and we are discussing it tonight—Wednesday. There is no reason for that and I say that the Government have treated the House very shabbily.
The Order was only available in the Vote Office on Thursday, although it was made on 15th January. Moreover, when my hon. Friend the Member for Altrincham and Sale (Mr. Erroll) put a Question to the Chancellor of the Exchequer on this subject yesterday, the right hon. Gentleman said: …I must admit, however, that this Explanatory Note is by no means easy to understand and I have asked those concerned to take special care to make those notes clearer in future. …"—[OFFICIAL REPORT, 13th February, 1951; Vol. 484, c. 36.] This shows that the Government itself is aware of the muddle into which it has got.
Since the war, more important since paper has been freed from control, we on this side of the House have consistently urged the removal of Purchase Tax on commercial and educational stationery. We submit again tonight that there are both economic and administrative considerations that justify the removal of Purchase Tax from stationery. As long ago as December, 1948, it was pointed out to the Treasury that at least 1,200 persons were employed full-time in noting tax rates on orders, noting the extension of tax on additional invoicing, and so on. So, before this Order comes in. 1,200 people are already wasting their time on this particular tax apart from the Customs officials who, I have no doubt. View this tax and Order with the greatest concern.
Apart from that fact and the fact that it is a great waste of manpower this tax is undoubtedly inflationary in its effect and is a direct tax on production. I would like to say a few words from the administrative point of view. My hon.
576 friend who spoke last raised two points on the Order. The first was: Was it equitable? The second was: Was it administratively reasonable? There have been arguments on both sides but, on the administrative problem, I do not think there has been very much argument to support this new tax. Tremendous difficulties arise in this very large field of taxable productions, and from the application of the tax to a class of goods which is so varied and comprehensive as to be quite incapable of definition within the limits of practical commercial administration.
If I may—I do not know whether hon. Gentlemen below the Gangway opposite are interested in this Order. If they are not, I wish they would go away. They have not been paying attention. Apart from the fact it is very bad manners—[HoN. MEMBERS: "Oh."] I am only suggesting there might be better manners. I was trying to point out some of the administrative difficulties and hoping that possibly the Commissioners of Customs, who no doubt will have the opportunity of giving some consideration to this debate, will recognise some of them.
A very complicated notice has been issued called 77 (D) in which Customs officials seek to explain how this tax works. In paragraph (7), there is a statement to say that over-printing which merely corrects wrong particulars is not regarded as a process of manufacture for the purpose of this Order. They have also given to the trade some illustrations of the sort of things they are not going to consider as taxable. If one prints on one's note-paper the addition of a partner's name or strikes out the name of a deceased or retired partner, or over-prints a new firm name with or without the addition of partners, or over-prints with the words "Commissioner for Oaths,' or adds a telephone number or alters a telephone number, or strikes through an address of an additional office—all these things are going to be disregared by the Customs and by their authority are considered to free the particular printing from the obligation of this tax. When one comes to administration of that sort, it shows how absolutely ludicrous it is.
I am aware that the printing industry has made representations to the Government and that they seek amelioration of 577 the chaos of the present position by abolishing this Purchase Tax altogether.
I know that they have asked that this tax should be made what in their view is more equitable. It is no solution if in order to make it more equitable it is made quite unworkable. It is merely giving to the Government and to the Customs and Excise a great deal of difficulty and trouble. It is going to cause enormous trouble and anxiety to thousands of firms all over the country. It is going to give additional work to the Customs officials and it is going to be a nuisance to the hon. Gentleman the Financial Secretary and to the Chancellor of the Exchequer during the coming months. I honestly suggest that the Government would be very wise to consider this whole problem a great deal more carefully.
We on this side of the House believe this Purchase Tax, which the Order is extending—

§ Mr. Gibson (Clapham)
The right hon. Gentleman should vote against it.

§ Mr. Assheton
I was discussing Purchase Tax on stationery and there is no opportunity to vote against that tonight as the hon. Member knows perfectly well. We believe this particular Purchase Tax is a bad tax and that it should be removed. We do not believe it is possible to administer it reasonably or economically and we give notice of our intention to press for its complete removal at the appropriate time.

§ Mr. Jay
I can heartily endorse what the right hon. Gentleman said about muddle existing on the other side of the House.

§ Mr. Orr-Ewing
On a point of order. The Financial Secretary has already addressed the House once. He has not obtained leave to address it a second time.

§ Mr. Deputy-Speaker (Major Milner)
That does not apply in the case of a Motion of this kind.

§ Mr. Orr-Ewing
rose—

§ Mr. Deputy-Speaker
The hon. Member must not challenge me. I know what I am talking about.

§ Mr. Jay
I was asked a number of questions and I thought I might be 578 allowed to reply. I was going to give a brief reply to the hon. Member for Heston and Isleworth (Mr. R. Harris), but the hon. Member for Cheadle (Mr. Shepherd) said every word I was going to say myself on that point. The simple issue before us is not whether there should be a tax on stationery, but simply whether one small section of the users of stationery should be exempt from the tax when everyone else pays it. There is really no reason why the right hon. Gentleman and I, when we buy stationery, have to pay tax and the Midland Bank, for example, or the National Coal Board, because they have facilities for manufacturing stationery, should be exempt. This is the simple issue and I submit that there can be no question that the equitable and right thing is that everybody pays equally.