HC Deb 27 May 1952 vol 501 cc1273-7

(1) In addition to the first, second and third rates of purchase tax provided for by section twenty of the Finance Act, 1948 (which are respectively one-third, two-thirds and one hundred per cent. of the wholesale value of the goods), there shall be a first intermediate rate and a second intermediate rate which shall be respectively one quarter and one half of that value; and in Part I of the Eighth Schedule to the said Act the words "First intermediate," and "Second intermediate" shall be construed accordingly.

(2) In the said Part I the word "intermediate" shall be inserted in the second column after the word "First" throughout Groups 1 to 7 and after the word "Second" throughout those Groups and in Group 9.

(3) In paragraph (a) of subsection (1) of section twenty-one of the Finance Act, 1948 (under which the Treasury have power by order to alter the classes of chargeable goods and the rates at which they are chargeable), the reference to the rates of purchase tax provided for by the enactments relating to purchase tax shall include the rates provided for by this section, and subsection (2) of this section shall have effect subject to any order made by the Treasury under the said section twenty-one after the passing of this Act.

(4) This section shall have effect as from the fourteenth day of May, nineteen hundred and fifty-two.—[Mr. R. A. Butler.]

Brought up, and read the First time.

The Chancellor of the Exchequer (Mr. R. A. Butler)

I beg to move, "That the Clause be read a Second time."

This Clause gives effect to the reduction in the rates of tax on all goods covered by the D Scheme from 33½ and 66⅔ to 25 per cent. and 50 per cent. respectively, which I announced a fortnight ago during the Committee stage. The Committee will remember that there was a Ways and Means Resolution which paved the way for this Clause. There was a considerable number of Amendments, as hon. Members will remember, during our long Sitting dealing with the D levels, but we announced that we would consider them later—that consideration would be given them at the next stage.

Apart from that the Government felt that to move in that direction was wrong, and decided the better course was, if we had revenue to spare, to lower the rates on this range, which does not only include textiles, but includes all the different articles in the D Scheme, including the particular difficulties of the boot and shoe industry. I should like to make it clear to the Committee that we are really following the best possible advice in this move, since I hope that we will give the greatest possible assistance we can to the higher qualities in textiles. That was one of the main reasons for suggesting these particular alleviations.

9.15 p.m.

It has been said outside that to make this concession on Purchase Tax was a mistake. I do not think that it has been realised that it has always been in the minds of the Government to consider this particular alleviation in introducing the D scheme. I was only too glad to do it after listening to the views of the Committee, and I, therefore, fulfil my promise by moving this new Clause.

It is based on this opinion. I would like to remind the Committee that the Douglas Committee recognised the difficulty of quality goods in the following terms. They said: These terms of reference are, however, so tightly drawn as to make it virtually impossible to propose any change in the present Purchase Tax Utility arrangements which would significantly reduce the heavy burden of taxation on the products of the industries concerned. and in particular"— and I am still quoting the views of the Douglas Committee— on the better quality goods which are of such importance to our export trade. Therefore, there was much sympathy, strange to relate, in the whole attitude of the Government towards this reduction, and we had particularly in mind the effect on the quality of goods, on the export trade and on the balance of payments which still remain our most pressing problem.

The Report went on to say, in paragraph 130: We are conscious that a D Scheme such as we have proposed…perhaps offers less assistance to the production of high quality goods. The right hon. Gentleman the Member for Farnworth (Mr. Tomlinson), who succeeded me as Minister of Education, and who has sat for a Lancashire seat for many years, although he was referring partly to the needs of the working people in Lancashire for cheaper prices, also referred, most movingly, to the necessity of making high quality goods available not only for export butt also for purchase at home, and to his "one opportunity in life of purchasing some of these high quality goods." So it is with this in mind that we move this new Clause to fulfil our earlier undertaking.

I should have liked, in answer to the representations made, in particular by my right hon. Friend the Member for Blackburn, West (Mr. Assheton) and others representing Lancashire constituencies, to have given even more help to textiles. From the start, however, I took the view that a reduction in Purchase Tax was not the one and only solution of the depression in Lancashire. However, I hope that this small concession will help textiles, just as much as boots and shoes and the other articles in the D Scheme in this list.

I hope that the Committee will be able to accept this new Clause without undue delay, because it fulfils a pledge which we have fully discussed, and which I hope, for the reasons I have given, is in the national interest.

Mr. Gaitskell

I agree with the Chancellor of the Exchequer that we have had already a lengthy discussion of this matter. I do not, of course, agree with the arguments which he repeated this evening as to why this particular method of assisting Lancashire had been chosen, and I still feel that it would have been better, as do a number of other hon. Members, to have removed the Purchase Tax from textiles in the present circumstances.

I am quite sure that if we are to maintain an economy with full employment we must get used to applying fiscal methods, such as Purchase Tax, and varying them from time to time. I quite agree that a lot of people in industry and trade still think of this tax as being mainly a Revenue tax, and because of that the Government have great difficulties about any changes that may be made in it. Yet I believe it can be a very valuable tax from the point of view of maintaining employment and switching demand from time to time, as circumstances require, if only the Government will have the courage to do that.

I am sorry, therefore, that, in these circumstances, which clearly demand the encouragement of the purchase of textiles at home, in contrast with circumstances in the past which called rather for a reduction, at any rate, so far as luxury textiles were concerned, that the Chancellor has not seen fit to remove the tax

I do not propose to repeat all the arguments as to why we think the method that the Chancellor has chosen to give away some £17 million is not the right one. We recognise the point about quality goods, but we do not think it outweighs the important point of equity which arises, and that, in our view, by raising the value of D we should have helped the poorer consumers a good deal more than they will be helped under the Chancellor's new Clause.

We have discussed this at great length, and I do not think there is much point in discussing it further this evening, unless my hon. Friends may feel that they have some further contribution to make. We do not, of course, propose to divide against this new Clause, because it is, as I have said on other occasions, better to have one-fifth of a loaf than no loaf at all.

Clause read a Second time and added to the Bill.