§ 3.42 p.m.
§ The Chairman
It would probably be for the convenience of the Committee if the first two Amendments, in page 6, line 9, to leave out "twenty-five," and to insert "sixteen and two-thirds," and in page 6, line 9, to leave out "fifty," and to insert "forty-five," were discussed together, with a Division being taken on the second one afterwards, if desired.
§ Mr. Hugh Gaitskell (Leeds, South)
We had originally contemplated, Sir Charles, that there would be two debates, but I can see that there are certain advantages in taking the two Amendments together, in particular so far as the subject of textiles is concerned. Whereas garments carry a 25 per cent. rate of tax, cloth carries a 50 per cent. tax. In the circumstances we have no objection to proceeding as you suggest, although we reserve the right to divide, if we so desire, on either Amendment at the end of the debate.
§ Mr. Anthony Greenwood (Rossendale)
I beg to move, in page 6, line 9, to leave out "twenty-five," and to insert "sixteen and two-thirds."
The Committee will appreciate that the Amendment covers a wide range of goods, and a further wide range is covered by the second Amendment. I want particularly, however, to draw attention to the effect of the Purchase Tax upon the textile industry and I want to give expression to the sense of disappointment and the dull anger which has pervaded the textile areas at what is believed to be the Chancellor's incomprehension of the problems of the textile industry.
To talk about "dull anger" is not the fanciful, colourful expression of a politician. It is rather the apt expression of a very experienced and hard-headed practical man of business in Mr. Ormrod, the managing director of Vantona 232 Textiles, one of the largest firms in the industry. The expression "dull anger" was used by him in a letter to the "Financial Times" which appeared on 22nd April.
I do not want to go over again the arguments which we advanced last year on this problem, nor do I wish to gloat gloomily over the way in which the prophecies which we made on that occasion have been justified by subsequent events, but I notice that the directors of Vantona, Limited, at their annual meeting yesterday, commented on the way in which the prophecies of last year had been justified by experience. The approach that we are making to the problem is not a doctrinaire one. It is the approach of responsible newspapers and also of a number of extremely responsible groups of firms and individuals in the textile industry.
I want to draw attention particularly to the case which has been advanced by two very important groups of textile organisations. On 13th November the Cotton Board, in association with 16 other organisations in the non-wool textile industry, made certain representations to the Chancellor of the Exchequer. The 16 organisations included, for example, the Federation of Master Cotton Spinners, the Manchester Chamber of Commerce, the Rayon Weaving Association and the United Textile Factory Workers' Association, representing all the trade unions in the industry. Because of the lack of response to the representations which they had made, a very strong letter was sent by Sir Raymond Streat to the Chancellor of the Exchequer on 15th April. I doubt very much whether a stronger letter has ever been sent by the representatives of a whole industry to the Chancellor of the Exchequer in the last half century.
But they were not alone in making these representations. On 12th February another organisation, the Branded Textiles Group, made somewhat similar representations to the Chancellor of the Exchequer. The Branded Textiles Group is an organisation of 31 of the leading firms in the textile industry presided over by Lord Hollenden and having as its director Mr. Emrys Roberts who was well known to many hon. Members when he was the Member of Parliament for Merioneth until a short time ago.
The organisation includes the most important firms in the industry. It will give 233 hon. Members some idea of their importance if I tell them that the names of all the firms are household words throughout the world. They include Burberrys, Ltd., the Calico Printers' Association, Ltd., Courtaulds, Ltd.— which is not unknown to the Chancellor of the Exchequer—Horrockses Crewdson and Co., Ltd., the Jaeger Co., Ltd., Tootal Broadhurst Lee Co., Ltd., Wolsey, Ltd., and a large number of other firms in the textile industry. Their representations to the Chancellor of the Exchequer also went virtually unheeded, and Lord Hollenden, on behalf of that group, wrote another strongly-worded letter, to "The Times," which was published on 25th April this year.
In those circumstances it is surely not surprising that the "Manchester Guardian" should have expressed its dismay at the way in which the Chancellor was treating representations from the industry, and in a leading article on 16th April it commented:There is room now for concerted pressure on the Chancellor to change his mind. He is not treating the textile trades fairly.But where is that concerted pressure for which the "Manchester Guardian" asked? It is not coming from hon. or right hon. Gentlemen on the other side of the Committee. Where are the Conservative forces under the hesitant and inhibited leadership of the right hon. Gentleman the Member for Blackburn, West (Mr. Assheton)? They have not turned up on the field of battle. It is true that in the Budget debate the right hon. Gentleman did sound his cracked clarion call to hon. Gentlemen on the other side of the Committee who represent Lancashire constituencies, but that is very different from turning up on the field of battle itself.
I do not think any of us were surprised to read in the "Manchester Guardian" a few days later that, althoughThe Conservative Members are well aware of the effects of the tax on the textile industry and heartily wish it were abolished … they have no wish to embarrass the Chancellor by importunity.In fact, what happened was that these pinchbeck Napoleons ran at the first whiff of grapeshot directed against them by the Government Front Bench. I can assure the right hon. Gentleman the Member for Blackburn, West that his 234 attitude has not gone unnoticed in influential quarters in the county of Lancashire, because on 20th April the chairman of the Calico Printers' Association, Ltd., wrote to the "Manchester Guardian," and began his letter by saying:Mr. Ralph Assheton's speech in the House on the Budget appears to indicate a fairly general approach to Budget matters which is dangerous and outdated.That is a point of view put in a way which even my hon. Friend the Member for Blackburn, East (Mrs. Castle) could not have bettered.
Whatever we may think of the effete and supine attitude of hon. Members on the other side of the Committee, the Chancellor of the Exchequer himself at least is worthy of our respect. This is a most admirably framed Bill. In fact, it is so admirably framed that almost every Amendment we seek to put down appears to be out of order. We have tried to put an Amendment on the Order Paper to raise the D level on certain goods and exclude them from the burden of this tax. That I understand is most unlikely to be called. Many of us would have liked to exclude textiles altogether from the scope of Purchase Tax, and my hon. Friend the Member for Blackburn, East, whose sagacity and power of decision contrast very favourably with the right hon. Gentleman who is her colleague in the representation of the town of Blackburn, tried to put down an Amendment on those lines, but that, too, is unlikely to be called.
Therefore, we had to base our opposition upon the two Amendments which are under discussion at the moment. I appreciate that a tax of 16⅔ per cent. is too high for some commodities; it may well be that it is too low for others. I realise, too, that the suggestion of an all-round reduction of this kind will not be too popular in the case of those industries upon which Purchase Tax bears most heavily. That is the difficulty we are in with regard to the wide range of goods that is covered, and it has not been possible within the terms of the Bill to put down an Amendment which really adequately expresses the point of view which we should like to express.
In spite of the wide range of goods with which we had to deal, I want to speak almost exclusively about the position of the textile industry. I think 235 it would be unfair if I did not at this stage say a little about the present position of the industry. The Chancellor will probably agree with me that the position of the whole of the textile industry is a little obscure at the moment. It is true that the rayon and woollen sides of the industry are going through a period of apparent prosperity, and I think that that is true of the carpet side of the industry, too. Certainly, in the case of carpets and woollen fabrics a slight impetus was given to the industry by the fact that wool prices throughout the world are rising. How long that is going to last is a matter about which I think few of us would wish to be too dogmatic.
On the cotton side of the industry the position is a little bit patchy. Perhaps the most hopeful sign is that the production of yarn is back to about 85 per cent. of the record figure which it reached in 1951. A number of factors have conduced to that fairly satisfactory state of affairs. The ending of the buyers' strike released a good deal of purchasing power, which was of particular advantage to certain sections of the industry, and particularly, of course, to the waste section of the industry.
Government orders which were placed have brought a good deal of help to the industry, but they are already beginning to dry up, and they are not likely to be of any very sustained value during the next two or three years. The Coronation, too, I think, gave some temporary help, but I do not think that anybody would wish to be too positive about the future prosperity of the industry. Cotton people are constantly afraid that if raw cotton prices begin to fall that will have an effect upon the level of prosperity in the industry, and we submit that so long as Purchase Tax exists that, too, will be a detrimental factor working upon the industry.
In exports during the past year we have slipped back to fourth place; America, Germany, and Japan are becoming increasingly dangerous rivals and the ending of the ban on the import of cotton goods into many of our Colonies will tend to aggravate the situation, however inevitable that decision may have been. Already it is becoming difficult to export to many parts of the world the cheaper 236 and medium-priced goods on which we have depended to a large extent in the past.
On the other hand, we are making some slight progress in dollar markets, but there a factor of uncertainty has been introduced by the United States tariff policy and also by the fact that Purchase Tax militates against the production of better-class cloth. I have been fair, I think, in the general picture of the industry. Broadly speaking, I think it is true to say that the position at home is a precarious one and in the overseas markets we have to depend increasingly upon the better quality cloths and garments which we produce, and it is there that Purchase Tax is having a thoroughly unhealthy effect.
I am afraid it is too often assumed that the main argument against Purchase Tax is that it discourages the public from buying. Of course, it does discourage the public in that way, but much more serious is the effect of Purchase Tax upon the retailers, upon whom the even flow of trade largely depends. Retailers are unwilling to lay in stocks of goods upon which they will have to pay heavy taxes, because they know that if there is a substantial reduction in taxation they are left with a serious loss upon their hands. The result is that they tend to place their orders upon a hand-to-mouth basis. In their turn manufacturers are reluctant to develop new lines of cloth or new designs of garments if they feel that the retailers are going to order them only on this hand-to-mouth basis. Unfortunately, this uncertainty continues throughout the year, because, of course, the Chancellor at any time of the year can vary Purchase Tax by an order laid before the House.
It is this uncertainty which is doing the most serious damage to the industry. I have in my hand the current number of the "Drapers' Record" issued on 6th June. The leading article begins in this somewhat alarming way:Although the next Budget is far ahead, one large store has already started a campaign to apprise suppliers of the serious dislocation of business expected early next year in view of the greater uncertainty which will exist regarding possible Purchase Tax changes and seek their help in alleviating the problem. Further, one of the country's biggest store groups has instructed its buyers to adopt a hand-to-mouth policy for spring merchandise carrying tax.237 4.0 p.m.
At a later stage of our discussion in Committee my hon. Friend the Member for Blackburn, East and myself hope to move an Amendment, which I think will be in order, in regard to the payment of some rebate to retailers who are affected by a reduction in Purchase Tax on goods upon which they have already paid the tax. On that occasion, Sir Charles, we shall produce detailed figures in support of our case, particularly relating to representative department stores, to hardware shops, to radio dealers, and to footwear firms. In each of those cases the impact of Purchase Tax and its reduction is extremely serious, but I do not think that in any case it is as serious as the effect upon the textile industry itself.
I say that because we are seeing the result of that at the moment in the fact that the production of lines of textile goods which bear tax is being discouraged. At the same time there is a drive all the time to get the cost of goods down, often by lowering their quality, in order to get them below the D level. There is, therefore, a drift away from quality goods towards the cheaper and medium-priced goods, whereas the export future of the industry depends almost entirely upon the production of better class goods. The Branded Textiles Group has summed up the situation in this way. Referring to the D Scheme, it says:In textiles, it has, in fact, failed to assist home demand for high quality merchandise and has driven that demand down to medium quality lines, the majority of which cannot compete successfully overseas. A further effect has been to compel manufacturers to lower the grades of their output to those at which tax does not apply.In fact, all the things which we warned the Chancellor and the President of the Board of Trade last year would happen have happened during the last 12 months, and one sees evidence of this throughout the cotton industry. I understand that at the moment it is almost impossible to sell garments which are made of sea island cotton, and I hope that my hon. Friend the Member for Salford, West (Mr. Royle) will have an opportunity of enlarging upon that at a later stage of this debate. We are finding, too, that there is a tendency for us to buy more dollar cotton, which is used 238 for coarse spinning, and less Egyptian and Sudan cotton, which is used for finer counts.
There is throughout the industry a lowering of the counts in fine spinning and there is a reduction in the demand for fine single yarns and doubled yarns. The President of the Yarn Spinners' Association, Mr. Winterbottom, rightly drew attention to that in his speech to the annual meeting of the Association in April. In the document which Sir Raymond Streat, on behalf of the Cotton Board and the 16 organisations to which I have referred, sent to the Chancellor, he will find examples of the way in which the D Scheme and Purchase Tax have tended to distort the pattern of the textile industry. Those must be well known to the Chancellor and I hope he will have something to say about them when he replies to the debate today.
There is one further point in this connection. I am afraid that the desire to get goods down below the D level will tend at a later stage, when import restrictions are further eased, to make the importation of cheap foreign cotton considerably greater than it should be in the interests of Lancashire as a whole. The changes which have taken place in home production are, of course, having their effect on the export trade. I have already said that there is no question that the future of the export trade depends to a large extent upon the production of quality goods. It seems to me equally axiomatic that the development of export lines depends upon the existence of a healthy home market which makes a long run of production possible. I think the Chancellor will agree that this was the starting-point of the Douglas Committee.
It is an extremely expensive undertaking to develop a new fabric or a new range of fashion goods. That is why, if we are to have good quality articles available for export, it is vital that we should have a healthy home demand for them. Yet the entire policy of the Government has been to make the sale of these goods at home difficult, and, in consequence, to distort the pattern of our productive activity. The effect of that has been to place an additional burden upon the export trade.
239 In the document which Sir Raymond Streat sent to the Chancellor, he summed it up in this way:Our foreign competitors, notably West Germany, France and Italy, far from discouraging the production of high-quality materials, give velvets and suchlike cloths every encouragement and actually subsidise exports. In Britain the effect of Purchase Tax is to impose a depressing burden on the better end of the trade. Those responsible for fiscal policy must realise that they are adding burdens of a most crippling character when they institute the D line running across the middle ranges, and on the better types a high Purchase Tax.That seems to us to be a fair and reasonable way of summing up what has happened during the past year. In our submission it is a tragic situation because, if we lose export markets this year and next year, we shall probably have lost them for all time.
I wish that hon. Gentlemen opposite would have the courage to come out and support us on the line we are taking in this debate. If only they would do that, we could get this subject clear away from politics and we could get the Government to do something for the textile industry. It may be that hon. Gentlemen opposite prefer to bask in the wintry smiles of the Chief Whip rather than to save a place in the sun for Lancashire's textile industry. If so, I hope their point of view has been noticed and I hope this Committee will be aware of the unanimity of view among the manufacturers in the industry, the workers, the retailers and, I think, large sections of the general public who share the dull anger to which I referred in my opening remarks. I am glad, Sir Charles, to have had the opportunity of moving this Amendment this afternoon.
§ Mr. Ralph Morley (Southampton, Itchen)
I wish to draw the attention of the Committee to another aspect of Purchase Tax than that which has been dealt with by my hon. Friend the Member for Rossendale (Mr. Anthony Greenwood), namely, to its incidence upon the cost of school requisites.
We are discussing this afternoon a form of indirect taxation. In the long-ago days when I used to read books on economics, I was instructed by the writer of those books that indirect taxation was bad taxation because, to use 240 their own jargon, it was regressive taxation whose incidence pressed more heavily upon the poor than upon the well-to-do. For instance, the 'bus conductor pays as much taxation in the purchase of a pint of beer as the millionaire.
There are only two justifications for indirect taxation. One is that it has a sumptuary purpose and is meant to check consumption; the other is that it is convenient politically for the Chancellor to raise revenue without people noticing at the time that he is raising revenue. A man who smokes five ounces of tobacco a week pays 20s. for those five ounces, and of that 20s. probably about 16s. is tax. He is not very keenly aware of that when making his purchases, but if an extra 16s. were deducted from his pay packet at the end of the week for additional Income Tax, he would be very much aware of it and would be deeply resentful.
Neither of these two reasons for indirect taxation—that it has a sumptuary purpose or that it is a convenient method of raising revenue—can possibly apply to taxation upon school requisites. We do not want to discourage the consumption of school requisites. At present it is bound to increase, because we have 500,000 more children in our schools who have to be supplied with school requisites than we had two years ago. Nevertheless, something like 60 articles that are required in school are subject to Purchase Tax at the new rate of 25 per cent. They include copy books, exercise books, writing books of all kinds, needlework material, pictures and diagrams, and even the harmless but necessary chalk. It is estimated that last year something like £1 million was paid in Purchase Tax on school requisites.
The situation is aggravated by two things. First, there was Circular 242, in which the Minister of Education urged local authorities to cut their estimates for this year by 5 per cent.; and in trying to comply with that circular a number of local authorities have reduced their capitation grants; and so there is less per head per child per year to be spent upon supplying them with school requisites in those local authorities where the capitation grants have been cut. That makes the imposition of the Purchase Tax still more onerous.
It cannot be urged that this is a sensible method of raising revenue by the Treasury, because expenditure by local 241 authorities on Purchase Tax attracts grant from the Treasury. Of that £1 million which local authorities spend on Purchase Tax on the various requisites used in schools, from 60 to 70 per cent. is returned in the form of grant from the Treasury to the local authorities. The Treasury takes with the one hand and gives back with the other hand, and this does not seem to be a very clever method of raising revenue. On both those points, therefore, I ask the Chancellor of the Exchequer, not only to reduce the Purchase Tax on school requisites from 33⅓ per cent. to 25 per cent. but whether he can see his way to abolish altogether the tax on these items.
The Chancellor very properly yielded to the importunities of his Parliamentary Private Secretary and abolished the Entertainments Duty on cricket. I point out to the right hon. Gentleman that his Parliamentary Private Secretary is not only a distinguished cricketer, but is, or, at any rate, has been, a distinguished member of a local education authority. I am quite certain that if tradition allowed, he would rise in his place at the end of my speech to support my plea for a further reduction, or for the abolition, of the Purchase Tax on school requisites.
The Purchase Tax on school requisites was introduced by a former Financial Secretary to the Treasury who is now the Leader of the House. In introducing the tax on school requisites, the present Leader of the House said that he regretted very much having to tax such things but that he felt quite sure that very soon after the war had ended the tax would be remitted. It is now eight years since the end of the war and, unfortunately, the tax still remains.
In addition, the right hon. Member for Blackburn, West (Mr. Assheton), who has already been mentioned in this debate and who is generally regarded on both sides as a financial authority, even though we may not always agree with his views, has said upon this subject that a tax upon stationery, including school stationery, is an inflationary tax and a tax upon production, and ought to be abolished. I have, therefore, weighty authority in asking the Chancellor of the Exchequer to consider this request.
242 It was argued on a previous occasion when this matter was raised that it was impossible to reduce the Purchase Tax on school stationery because it could not be differentiated from stationery used for commercial and other purposes. That difficulty could be overcome by removing altogether the tax on stationery. But if the Chancellor is not ready to go to those lengths and to remove altogether the tax on stationery, could he arrange that local education authorities should have a rebate on the money they spend on Purchase Tax?
Administratively, that is quite possible. The accounts of local education authorities are carefully kept and are audited by Government auditors, and it would be a simple matter of administration to arrange the amount of the rebate and for it to be given to the local education authorities. The Association of Education Committees has asked for this course to be pursued, and I hope that the Chancellor of the Exchequer, who must have a very real interest in this matter, will show sympathy towards the view that I am urging.
The right hon. Gentleman was, after all, the author of the greatest Education Act to be passed since 1900. In my opinion, the 1944 Act is the greatest Education Act of this century, and when fully carried out will have the most revolutionary consequences of any Education Act during that time. I regret that it is not yet fully carried out, but I have no doubt that when he introduced it the right hon. Gentleman intended that it should be carried out. I hope, therefore, that the Chancellor of the Exchequer, who must, naturally, have some sympathy with my plea, if he cannot abolish Purchase Tax on school requisites, will at least consider giving some rebate to the education authorities for the money they are forced to spend in this way.
Finally, at the request of the interests concerned, I should like to deal with another aspect of Purchase Tax: that is, the tax charged upon those strange and esoteric machines which are used for the beautification of ladies. I refer to hair-waving and hair-drying machines. I am informed that there is now a 25 per cent. Purchase Tax upon these machines and that the raw materials used in them are subject to a 75 per cent. tax. The hairdressers have written to me and say 243 that these machines are sold only to hairdressers. They are not sold to private households and commerce, and, therefore, are in a similar category to machinery used by manufacturers, which is not subject to Purchase Tax. Therefore, I ask that the remission of Purchase Tax on these machines should be considered. I am quite sure that the Chancellor of the Exchequer would not be ready to do anything which hindered or in any way prevented the glamourisation of the opposite sex, and in that spirit I commend this suggestion to him.
§ Mr. William Shepherd (Cheadle)
I do not know what the hon. Member for Southampton, Itchen (Mr. Morley) knows about the effects of hairwaving machines but, in the interests of the well-being of the women of this country, it might have been a good thing if my right hon. Friend would consider putting a 100 per cent. tax on such machines. I have seen their effects and I hope that my right hon. Friend will not yield to the blandishments of the hon. Member and reduce the tax on them in any way.
I listened, as much as I could, to the speech of the hon. Member for Rossendale (Mr. Anthony Greenwood). I am sorry I was not able to hear it all as the abnormal traffic conditions in central London made me late getting here. I listened, however, to his plea for the textile industry, in which he and I have a mutual interest. I thought that to some extent he was unfair to my right hon. Friend and did not realise sufficiently that, after all, the present Chancellor is the man who has assaulted the Purchase Tax. It was the late Sir Stafford Cripps, let it be known, who really sanctified the Purchase Tax and made statements to the effect that it was here to stay. I think it unreasonable for hon. Members opposite to behave as if we on this side of the Committee and this Chancellor had been inflexible and as though we were really the authors of this tax.
No one dislikes the Purchase Tax more than I do. I think it easily the worst of all taxes, and its influence upon trade, design and quality is damaging to every industry it affects. I want to see its diminution as rapidly as possible and its elimination altogether. If we are to say, however, that there ought to be special revision for the textile industry, we have 244 to concern ourselves with what is to be the future intention of the Chancellor. Do we want the orderly, progressive and swift elimination of the tax? That is what I want. If we want to see the orderly, swift and progressive elimination of the tax it has to be done by broad stages and we cannot admit of any special cases unless those cases can show that they are more hardly hit by the conditions of the tax than other cases of a similar kind. I wish to put before the Committee four considerations which I think ought to be satisfied in our minds before we are able to agree to the idea of the textile industry in particular getting special treatment under Purchase Tax.
First, we have to prove that the textile industry, more than any other industry in its class of tax, is losing export trade through Purchase Tax. The second thing we have to prove is that the textile industry, more than any other industry in its class of tax, is being forced to debase quality. Third, we have to prove that the textile industry, more than any other industry in its class of tax, is losing home trade and, fourthly, that the conditions in the industry are so desperate that there is a real danger of the breakdown of the trade.
If the Committee will accept those propositions as a reasonable basis on which an exception should be made, much as I want to make the case for Lancashire in its strongest possible terms, I do not feel we can honestly and sincerely say that those conditions are fulfilled. Let us not deny for a moment that if there were complete absence of Purchase Tax the export trade would be easier, but it is not true to say that the existence of this tax is the main hindrance to exports of textiles. The main hindrance to exports at present is import restrictions in various markets to which we send goods.
Secondly, it is not true to say that the textile trade is debasing quality more than any other industry. I do not think, for example, that it is debasing quality as much as is the boot and shoe industry. The textile industry is debasing quality and that is an inevitable effect of the tax, but I do not think a case is made out specially so far as the textile trade is concerned. Can we really say, in the light of present sales, that the tax is having a very serious effect on the home trade? The percentage of goods actually sold 245 with tax is getting smaller and smaller. I do not know the current figures, but they must be very small indeed. Certainly, there is no sign of a breakdown in the industry. Indeed, we saw from a report of the Ministry of Labour yesterday that the labour force is growing in this industry. In the wool textile industry there is a demand for the product and labour which cannot be met.
Therefore, I do not think any special case can be made for the textile industry above that of other industries. The substantial recession which took place in the cotton textile industry has had benefits and positive results which we ought not to ignore. It brought about a slight redistribution of the labour force. If Lancashire is to be efficient, and to be driven to be efficient, I should not like to see a state of affairs in which there was an ad lib supply of labour or a frantic demand for labour. What we want is to get Lancashire to use more efficient methods. If we took the tax off I do not think it would be helpful in that way.
When last year we criticised the D levels, I think we were justified to a considerable measure, but the Committee ought to bear in mind that since that time the prices of raw materials of the textile industries, cotton and wool, have dropped substantially—[HON. MEMBERS: "No."] Many, such as Egyptian cotton, have dropped by as much as 20 per cent. and it is no good hon. Members saying that they have not. A D level of a year ago compared with today shows a marked difference. Moreover, through the recession in trade, margins have been cut. A D level of today shows at least plus 30 per cent. compared with the D level of 12 months ago.
Although, naturally, I am sympathetic towards the Lancashire textile industry, I hope the Committee will feel that this industry, with all our good will, cannot have a special case made for it. It is much better if my right hon. Friend is able each year to take progressive steps to reduce this tax so that, ultimately, he does away altogether with what is the worst tax on our industry.
§ Mr. J. Grimond (Orkney and Shetland)
I am very glad to follow the hon. Member for Cheadle (Mr. Shepherd), because I agree with a great deal of what he said. In the strongest possible terms he expressed disapproval of the Purchase 246 Tax in all its forms. That is the main point which should be made in this debate. I suspect that there has been no slackening on either side of the Committee in our general objections to Purchase Tax, which have been stated often enough. It is an indirect tax which can distort industry and a tax which particularly hits high-quality goods on which the future of this country may to a great extent depend.
It is also an unfortunate fact that when the tax has been reduced, so far it has meant a large and quite unmerited loss to traders of all kinds. Although this matter will be debated later, I would point out that we cannot accept that nothing can be done to make good to traders the loss which at present they suffer when the tax is reduced.
The hon. Member for Cheadle was scrupulously fair about the textile industry, in which his constituency has a great interest. It is true that there are many other industries which suffer as severely from Purchase Tax as does the textile industry; but that does not in any way detract from the case that can genuinely be put forward for many branches of the textile industry. I am sure that the hon. Member for Cheadle will agree that it is vital to encourage textile production, and although he played a merited compliment to the Chancellor for having to some extent reduced Purchase Tax, we are nevertheless still under a handicap with the present rate of tax. Also the textile industry is very widespread; I doubt whether any other industry in Britain is so widespread. It is one of the great basic industries of the country.
I should like to be assured that the steps taken this year to make some reduction in Purchase Tax are really a first instalment. There must be taxes to pay for the social services we want, but this is a bad tax. It was introduced as a temporary tax; it is hitting quality goods industries which are vital to this country. I do not feel that we can give the impression that we are content with the reductions so far made. If this is merely a first instalment, and if the Chancellor has good reason for going only so far this year, I hope that he will give us some assurance that if he is spared to present another Budget next year the good work will be continued.
247 I wish to refer briefly to stationery. A plea has been put forward for educational stationery, and I do not think I need go into that matter again. There is the difficulty of distinguishing between stationery for educational and for general purposes. I should like again to put in a word for some general reduction in the tax on stationery. I have some interest rather indirectly in this matter. It is true that paper prices have come down in various ways which may perhaps have to some extent reduced the price of books, school requisites etc., but nevertheless I think that the tax is open to criticism.
It cannot be said that it is desirable to limit the amount of paper used, except perhaps in Government Departments. It is really important for this country that its great tradition and standing in matters connected with books, etc., should be maintained, and it is a fact that the market has become more difficult. If the Chancellor could see his way to make some further reduction in the tax on stationery for educational and other purposes, it would be widely welcomed. I do not think it would cost much, and it would be of assistance to an important trade.
I wish to say a few words on behalf of consumers of the various articles on which Purchase Tax is charged. The manufacturers' view has been put forward in respect of textiles and stationery, and will, no doubt, be put forward in respect of other goods. The Chancellor's whole Budget, however, is founded on the belief that the general atmosphere, the temperature, of economic life has to some extent altered and that it may be necessary to give a slight fillip to consumption. That is one of the main thoughts behind his Budget.
In my view, a reduction of Purchase Tax is a very valuable way of giving such a fillip. We have moved away from the sort of conditions in which Purchase Tax was originally imposed, which was a time when consumption was liable greatly to outrun production. We are finding matters in the export market much more difficult and it may be necessary to stimulate, at all events to some slight extent, home consumption. I should like the Chancellor to bear in mind the point of view of the consumer.
§ Mr. Ralph Assheton (Blackburn, West)
More than one hon. Member on the Opposition side of the Committee has referred to me, so I thought it appropriate to say a few words at this point. I think the whole Committee were glad when they heard the Chancellor's decision to make a general reduction in Purchase Tax. My hon. Friend the Member for Cheadle (Mr. Shepherd) put the case very clearly. He reminded us of the attitude which the present Chancellor is taking to Purchase Tax generally and compared it with the attitude taken to the tax by the late Sir Stafford Cripps and by other hon. Members opposite.
§ Mr. Assheton
No doubt, but my hon. Friend compared the attitude.
We ought to remember that after the war a great many of us felt that Purchase Tax was one of those taxes that ought to be got rid of, but the Government which held power in this country for five years, and held office for another year, piled upon this country an enormous increase of expenditure which had to be sustained and met by some form of taxation; and the £300 million or thereabouts which the Chancellor raises through Purchase Tax is one of the prices which we have to pay for that enormous burden of expenditure, a great deal of which is no doubt of great benefit to the people of this country. It is impossible to have it both ways. If we want these advantages, we have to pay for them in one way or another.
There are many aspects of Purchase Tax which are particularly easy to criticise. The hon. Member for Southampton, Itchen (Mr. Morley) illustrated that in the case of stationery. I have more than once spoken in the House about the extraordinarily tiresome consequences of Purchase Tax on stationery. The hon. Member drew attention to its effect on local government expenditure. I have previously drawn attention to the absurd anomalies that inevitably arise in the imposition of this tax and I hope that one day we shall be able to get rid of it. We on this side of the Committee want to get rid of Purchase Tax—that is our ambition—or at all events bring it down to a very low level. We dislike it intensely.
249 I must remind the Committee that last year the Chancellor was able to reduce Purchase Tax on textiles, to which the hon. Member for Rossendale (Mr. Anthony Greenwood) referred, by a quarter. The justification for singling out the textile industry last year for this special treatment was the fact that the slump in that industry was very severe and was in full swing at that time. As a leading article in "The Times" put it, the case for a stimulant was manifest. I was one of those who did his best to impress upon the Chancellor of the Exchequer and the Government, with the assistance of the hon. Member for Rossendale and the hon. Lady the Member for Blackburn, East (Mrs. Castle), how important it was that we should seek a reduction of this tax in order to help the textile trade out of a great difficulty.
In addition to that, the Chancellor was able to make some arrangement about the placing of orders in Lancashire and he was able to provide in all about £37 million, which had an enormous effect on the course of the textile industry in Lancashire. I am happy to say that the very heavy unemployment which was present a year ago has now very largely disappeared; in fact, in some parts of Lancashire there is a scarcity of weavers.
None the less, I am one of those who believe that Purchase Tax is definitely harmful, particularly to the textile industry. Certainly it is my ambition to see it removed. The Committee will recognise that the case of the textile industry is different from that of other industries because the D Scheme, which was introduced last year, although it was certainly an improvement on the Utility Scheme which it succeeded, has unfortunately had a very bad effect on the quality of textile goods being produced and sold; there is no doubt about that. In the case of most goods the tax is the same whatever the quality; but that is not so in the case of textile goods because the tax depends upon the price and, therefore, upon the quality. That is not a satisfactory situation.
Some people foresaw the weaknesses of the D Scheme last year, and as time has gone on those weaknesses have become more apparent. It has been generally recognised by the whole of the industry that it is not a satisfactory method of raising the tax. There has been constant 250 pressure during the year to reduce quality so that prices can be kept under the D limit. Goods above the D limit are not very much bought for the home market. Wholesalers do not much like stocking them. It is well known that without a sound home market it is very difficult to establish a good export market. Before the D Scheme came into operation, 50 per cent. of our textile exports were above the D level. I believe that the figure now is only 15 per cent., which is just another way of saying that there has been a general debasement of fine cloths——
§ Mr. H. Rhodes (Ashton-under-Lyne) rose——
§ Mr. Assheton
Perhaps the hon. Member will follow me. I am sure he will be interested to speak in this debate later on, being a Member for a Lancashire constituency, but I would rather complete my speech if I may.
I appreciate that the Chancellor feels unable to deal with this problem this year. He has made considerable tax concessions. He made a great concession to the textile industry last year and he does not feel able to do more this year. But I think there is some risk attaching to that decision. In common with other Lancashire Members and representatives of textile constituencies, I have received most serious representations, both from employers and from the trade unions in the industry. I should feel I was lacking in my duty to this Committee and to my constituents in Lancashire if I did not pass on those representations to the Chancellor and put the case strongly to him.
I beg both the Chancellor and the President of the Board of Trade to give most serious thought to this question. Although it may not be possible now to make concessions, I hope they will keep the matter under constant review, because reductions in the Purchase Tax may be made on other occasions than at Budget time, as the Committee is well aware. If at any time the Chancellor feels that the circumstances warrant a special reduction, no doubt he will consider it. I repeat that we in Lancashire are grateful for what the Chancellor did last year. It helped us over a period of great difficulty. But although trade is better and unemployment much less, there is no great confidence in Lancashire today that this situation will 251 remain. There is serious anxiety about the future.
This matter of Purchase Tax illustrates once again our serious financial position. At every turn we find trade and Industry and the general well-being of the community hampered by excessive taxation. It is interesting to hear hon. Members opposite attacking this form of taxation, because it is largely as a result of their activities that such very heavy taxation has been imposed on the country. I am sure the Chancellor agrees that a further reduction in taxation can come about only by further economies in national expenditure.
§ 4.45 p.m.
§ Mr. Coldrick (Bristol, North-East)
It is pleasant to find among hon. Members opposite so many who apparently believe in the complete abolition of the Purchase Tax. I had intended to speak on the second proposed Amendment which we are discussing, namely, to leave out "fifty," and to insert "forty-five," but I wish to draw attention to a number of things which do not come strictly within the definition of "fifty."
I believe that every argument adduced in favour of the textile industry could be advanced on behalf of quite a number of other trades in this country. I am a representative of the largest body of consumers in this country and we have consistently opposed Purchase Tax. I believe that that tax was conceived by a Tory Chancellor in a fit of aberration, and the Treasury have ever since been trying to find reasons why it should be retained.
I believe that the Purchase Tax is disastrous to trade. It may be difficult to calculate the course of supply and demand—though upon such a calculation the success of a business may very often depend—but that is child's play compared with trying to fathom the inscrutability of the Chancellor's mind regarding Purchase Tax. We are in the ridiculous position that even when the right hon. Gentleman grants a concession so many people possess stock on which they have paid tax that they are driven to a state of near bankruptcy by reason of it.
According to the Chancellor this is an incentive Budget. By that I believe the right hon. Gentleman meant a 252 Budget which would induce people to do the best they can for themselves and for the nation. In common parlance, that means working harder in order to get more money to buy better things. I submit that the Purchase Tax has the reverse effect. If a person obtains money by hard work and by disagreeable sacrifice he then discovers that he has to pay out a disproportionate amount in the form of Purchase Tax to obtain anything better for himself.
If we examine items covered by the 50 per cent. tax we see how insidiously this tax works. Take, for example, ladies' handbags. Travelling in the Tube one is inclined to think that a lady's handbag is a kind of miniature boudoir, judging from the number of things extracted from it. I am sure everyone would agree that ladies find their handbags indispensable, yet they have to pay 50 per cent. Purchase Tax on them.
An indication of how far removed is the Treasury from the ordinary conception of things is the 50 per cent. Purchase Tax on attaché cases. If it is imagined that people carry attaché cases about as an adornment one need only go to a railway terminus in the morning and see the thousands of people who are obliged to carry attaché cases. Unless we have a paper bag conception of how people should carry things we should press for the removal or reduction of the tax upon attaché cases.
We welcome the concessions granted by the Chancellor, but we believe that it would have been far more prudent had he made concessions upon things regarded as essential by the great mass of consumers rather than uniform concessions on a large number of things not enjoyed by many people. I suggest that it would be in the public interest as well as in the interest of trade if the tax was reduced, or better still, abolished, on the two articles I have mentioned.
It would seem anomalous, when we have a Conservative Government, with co-ordinating Ministers, that we should reach a situation where sanitary inspectors insist on a permanent supply of hot water in shops and yet Purchase Tax is imposed on water heaters. I think it advisable for the Chancellor either to reduce or to remove the tax on those things.
253 It is archaic to suggest that in these days a wireless set is a luxury. Ruskin said that a room without a book was like a body without a soul. One might also say that a person in a house without a radio is detached from the rest of the community. Yet a tax of 50 per cent. must be paid on a radio.
A number of articles on which there is a tax of 50 per cent. are used in most households. For that reason, from the point of view of the consumer, an overwhelming case can be made out for a reduction or removal of Purchase Tax upon these articles. I could understand that during a period of shortage of leather, and so on, Purchase Tax should be retained on some of the goods I have mentioned, such as attaché cases and leather bags. It was maintained to prevent the consumption of goods deemed essential for more vital purposes. But everyone will agree that there is today a relatively abundant supply of leather. Consequently, there is no reason for trying to justify Purchase Tax on goods of this nature.
My hon. Friend the Member for Rossendale (Mr. Anthony Greenwood) argued that already in certain trades buyers are being told not to buy on a large scale but to act as if they were living from hand to mouth. One can take it for granted that any experienced business man would ensure that buyers were given similar instructions in a large number of trades. One recognises that with large-scale production one must have permanent and large-scale orders. Very few producers of bulky goods have the space in their factories to store their products, and neither have the wholesalers room in the warehouses.
Therefore, one can understand that during the next six months, or at least when we get near to Christmas and people begin to conjecture what the Chancellor will do next year, business men will insist that their buyers buy the smallest possible quantity of goods. Instead of having a free flow of orders to the factories we shall have orders in fits and starts. That will lead to a great deal of under-employment or unemployment in a number of industries.
For those reasons it would be advisable for the Treasury to examine the whole position to try to find a more sensible method of raising the money now 254 raised through this iniquitous form of taxation, and, failing that, to see whether it is possible to introduce some improvement which would give a greater measure of stability. The instability which is characteristic of Purchase Tax makes this one of the taxes which militates most against the successful functioning of business.
Apart from that, let us always remember that a good part of this yield in the form of taxation represents the unpaid labour of a large number of workers. If the Treasury itself had to keep the records now kept by the wholesalers and those in the retail trade there would be a hue and cry for economy in the administration of the service, but so long as we can make the trader do the work that absolves the Treasury of the responsibility and the tax yields a handsome sum.
I sincerely hope that the Chancellor will look into the matter and, if possible, remove the tax completely from some of the articles I have mentioned. If he cannot do that, I hope that at least he will effect a reduction.
§ Mr. F. A. Burden (Gillingham)
I reiterate my unqualified hostility to Purchase Tax as a tax. I shall confine my remarks to the textile industry, in which I should like to declare an interest. I was most concerned at the statement made by my right hon. Friend the Member for Blackburn, West (Mr. Assheton) about the debasement in quality of textiles through the desire of manufacturers to get under the D level. I was particularly distressed because of the ultimate long-term effect that that must have upon our export trade.
Recently I have been constantly in association with large buyers from America and other overseas countries whose obvious intention it is to buy as much merchandise as they can from this country. Almost inevitably the direction of their purchases is toward high-quality merchandise. It is impossible for manufacturers to produce two ranges and to run their looms making one quality of merchandise for export and another—because of the incidence of taxation—for the home market. I ask the Chancellor to consider the long-term effect. Today there exists a greater opportunity for the expansion of high-grade textile exports as well as other exports to the North 255 American market than there has been for some considerable time.
This is all bound up with the question of Purchase Tax and the intention, or the apparent desire, of manufacturers to get under the D level. There is also the question of increasing competition from overseas manufacturers of low-grade textiles who will be able to undercut us in the export market—Japan, Germany and America itself.
The question of exports and the maintenance of high-grade production for the home market are inextricably bound together. I ask the Chancellor to pay special attention to this tendency to debase quality at home and to consider the effect which this must ultimately have upon our textile industry. If we lose some of our exports because of this debasement, ultimately there will be another recession.
If the Chancellor is unable to reduce the tax on textiles now, I hope that he will realise that there is a great opportunity for high-grade clothing exports such as has never before existed. Certain of our high-class model houses have, as a result of the Coronation, received world-wide praise which gives rise to the possibility of exports where that possibility did not exist previously. If the trade is to get the full benefit of the ability to design clothes which appeal, then they must have the high-grade materials to enable them to do their best. Therefore, I ask the Chancellor to give most serious attention to the opportunities which exist and the difficulties which will result if this debasement of textiles is continued any further.
§ 5.0 p.m.
§ Mr. Ernest Thornton (Farnworth)
I am sorry that the Chancellor of the Exchequer has had to leave the Committee, because, in passing, I wanted to make reference to part of his speech in the Second Reading debate. I refer to column 720 of the OFFICIAL REPORT for 7th May, in which the Chancellor is reported as saying:…it was due to the action of this Government that the textile depression was saved and that over 100,000 people were restored to employment by the latter part of this last year."—[OFFICIAL REPORT, 7th May, 1953; Vol. 515, c. 720.]256 In relation to the cotton textile industry, this is more than a slight overstatement, and its sole justification, apparently, was the reduction of the Purchase Tax which was then made and the Government orders which were then placed. The Purchase Tax concessions then made were a quarter of the amount of the Purchase Tax itself, and those concessions were made reluctantly and under pressure, and only after influential representations had been made to the Chancellor by all sections of the industry. The placing of Government orders at that time was welcome and appreciated, but let me put the matter in correct perspective.
The cotton and rayon share of these Government orders was about £10 million. At six yards to the £ sterling, that is 60 million yards, which sounds a lot, but, in fact, in November, 1951, a month after the Government came into office, the average weekly production of the cotton textile industry, including rayon production, in Lancashire was 62.8 million yards. Therefore, the amount of the Government orders was approximately one week's production of the industry as a whole, or 2 per cent. of a year's production, or, in other words, about one-tenth of the fall in output last year. I say that to put the matter into correct perspective.
Later in his speech, the Chancellor also said:.… we inherited, in the textile industry and elsewhere, a situation of declining production which, largely by our own efforts, aided by the more sensible members of the committee, we were able to restore."—[OFFICIAL REPORT, 7th May, 1953; Vol. 515, c. 720.]This is certainly not correct in relation to the cotton and rayon textile industry, because the October-December quarter of 1951 showed the second highest quarterly production in the post-war period, and, in December, 1951, it was well known that the expert opinion of the Cotton Board's statistical staff, which opinion is respected in the textile industry throughout the world, was that, while we were in for a recession, that recession was not going to be wide and would not go deep. Further, in 1951, the movement of Tatter-sail's textile share index number showed very little difference from what happened in 1947–48 and 1948–49, but, instead of the expected recession, we had a great 257 slump, which went wider and far deeper than authoritative opinion expected.
Many people have been wise after the event. I am not suggesting that the Chancellor is one of these, because I have a respect for his judgment and ability. We have, of course, those people who, by forecasting a slump every year, hoped to be right sooner or later, and I think the "Economist" comes into that category. My explanation, for what it is worth, is that the Government's financial and budgetary policy contributed to this anticipated recession becoming a slump, because it had the effect of forcing up food prices and making money scarce for marginal purchases such as textiles largely constitute.
Anyhow, if the Chancellor's statement is logical and correct. I would submit that, if the Government's action at that time in reducing the Purchase Tax by a quarter and placing £10 or £15 million worth of Government orders, resulted in putting back 100,000 workers into employment, then, if the Chancellor had taken notice of our representations made at that time, and abolished the tax completely and placed a few more millions of pounds worth of Government orders he could have avoided the slump altogether.
It has been observed by the right hon. Gentleman the Member for Blackburn, West (Mr. Assheton) that there is widespread apprehension in Lancashire today. I agree completely with the right hon. Gentleman, and I have spent the whole of my life in close association with our textile industries. This apprehension, I believe, arises mainly from two factors. First, the opinions that are expressed from influential sources that cotton manufacture must give way to the production of goods that have an expanding world market; and, secondly, Government reluctance to move when crisis threatens or is upon us. The Government gave way last year only sluggishly and reluctantly and after pressure. They gave way in a half-hearted manner, or perhaps I should say a quarter-hearted manner, seeing that the reduction of the Purchase Tax was a quarter.
The Purchase Tax and the D Scheme are causing loss and damage to the export trade in cotton and other non-wool textiles, and I remind the Committee that, 258 even as recently as 1951, cotton goods alone constituted the third largest group of United Kingdom exports, totalling £209 million, or, by value, 8 per cent. of the total of United Kingdom exports. Indeed, that was not an exceptional year, because for the three years 1949-51, the cotton textile industry's share of the export trade averaged 8 per cent. for those three years. This amount of £209 million for 1951 was exceeded only by the group described as "vehicles" which is a very large group including locomotives, ships and aircraft, and the group described as "machinery and parts." All sections of the non-wool textile industries are profoundly disturbed by the Chancellor's refusal to take any remedial action.
I wish to refer to the statement issued by the 17 trade organisations. It is a very powerful case, as I believe any hon. Member who has read the document will admit. I think the case cannot be refuted if the Government really believe that the cotton textile industry is to remain an important part of the national economy. In considering this statement, with which the trade unions were fully associated, in the summer of last year, it was decided that these representations should be made privately to the Chancellor so that the matter would not become a case for political controversy and apprehension and uncertainty should not be aroused among buyers. The trade unions, who loyally observed the undertaking of the committee of the 17 trade organisations, feel that their restraint has been rather shabbily rewarded.
It is my opinion that the short-term prospects for the cotton textile industry are not good. As has been said, the pattern of production has been seriously disturbed, and though the recent trend of exports show a slightly upward movement, which I believe may continue throughout the rest of this year, the real danger to exports arising out of this distortion of the pattern of production will, I believe, come next year and perhaps the year after. Therein lies the danger of what we are now doing.
If we have a fall in cotton prices later in the year, as is not improbable, we may have another serious recession in the cotton textile industry before the year is out, and that is one of the reasons why in my opinion the cotton textile industry, and the rayon manufacturing industry 259 associated with it, require special consideration such as was given last year. I may be accused of pessimism in this matter, but I am attempting to be realistic and objective.
Perhaps I may be pardoned for saying that last year, when pessimism was rife both inside and outside this House regarding the future of the cotton textile industry, I expressed the guess in speeches which I made throughout Lancashire at that time that by the end of last year or early this year production in the industry would be back to about 90 per cent. of the average production for 1951. That figure, expressed in weight of yarn, was attained in February of this year, and at the present time is running at about 93 per cent. of the average of production for the peak post-war year of 1951. I say that merely to indicate that there may, perhaps, be some realism in my apprehensions today.
Prior to the last war, and for nearly 100 years before that, the home trade was comparatively a mere adjunct to the export trade in cotton textiles; it was a mere by-product of the great quantities and varieties of goods which we exported to the markets of the world. The position now, of course, is reversed. The extent of the contraction in the size of the cotton textile industry at present is not sufficiently realised. In my judgment, its present size is about right, provided the right policies are pursued and the right decisions are taken. As a result of this contraction, the home market has for the first time become the main market, and on it must be based the qualities and the varieties.
If the export trade is to survive as an important element in our national economy, these qualities must be improved and widened, and not contracted as is happening at the present time. In other words, our unsurpassed designers, technicians and scientists must be given full scope instead of being cramped as is the case at the moment. Indigenous cotton industries are springing up and have sprung up in all parts of the world, and are providing the medium and low grade cloths to meet their national requirements.
In my opinion, the future of this great industry rests more than ever before on our 260 producing new type yarns, novel fabrics and higher grade qualities. But, unfortunately, all these come above the D line, and the home market for them is being slowly strangled. Below the D line, as is well known, there is no tax at all. In consequence, we have this debasement of quality to get below the D line, upon which I do not intend to enlarge because so much has already been said about it.
The distortion of the pattern of production is not only damaging the industry's reputation, but is tending to lower productivity. Reference was made by the hon. Member for Cheadle (Mr. Shepherd) to the need for increasing productivity and efficiency. We shall not get increased productivity or increased efficiency during a period when qualities are being debased. Technically, everything is against that being achieved.
A well-known textile producer stated recently—and it is well worth repeating—that:At the present time the wrong cloths are being made for the home market and the right cloths are not being made for export.Like all generalisations, that is probably an over-statement, but, in my opinion, there is a lot of truth in that observation.
A year ago, as the right hon. Member for Blackburn, West indicated, 50 per cent. of the cotton cloth produced was above the D line whereas now only 15 per cent. is above the D line. This is partially explained by the fall in the price of raw cotton and producers margins, but by no means all of it is explained in that way, as I shall attempt to demonstrate. For example, the price of rayon has remained stable throughout the whole of that period whereas the price of raw cotton has fallen.
A year ago, 81 per cent. of the rayon cloths produced were above the D line compared with only 34 per cent. at the present time. Those two factors taken together demonstrate that debasement of quality is substantially responsible for the fall in the production of goods of high quality, i.e., those above the D line. In the long-term, our exports will be jeopardised because exports of cotton textiles lost to us now can never be regained.
The Buxton International Cotton Conference, which I attended as one of the 261 representatives of the British cotton textile industry, proved, I think, fairly conclusively, that world productive capacity was in excess of effective world demand. In 1947 and 1948, we could afford to lose exports because we could regain those markets in 1949, 1950 and 1951 owing to the fact that expanding world production of textiles had not at that time caught up with the demand for those goods. But it is now quite a different story. In their search for world trade, the textile industries of Britain are faced with a handicap imposed by this House, a self-imposed handicap with which no other country has to contend.
I mentioned that we were faced with a serious decline in exports. One of the main causes, I repeat, is distortion of quality production brought about by the D Scheme and by Purchase Tax. The Dutch have recently removed their luxury tax on textiles primarily for export purposes. No other country in the world at present imposes these fetters on its textile industries. We claim that our industry should be put on the same basis as our overseas competitors and, even more important, on the same basis as some of the other main exporting industries of the United Kingdom, such as machinery and shipbuilding. The diversity of the products of the Lancashire cotton textile industry is infinitely greater than that of the relatively standardised production of, for example, motor vehicles. A far better case can be made out for discrimination in industry than for discrimination in sport.
All other countries who export textiles act on the principle that a strong and unfettered home market comes first. If there were any doubt about it the experience of 1951 proved that textiles are marginal purchases. If Purchase Tax is reduced on a wide range of goods and not on textiles there is a great danger of a switch in consumer purchases resulting from the Budget concessions, and it could lead to a further recession before this year is out.
I should like to make reference to some of the special factors which should lead to special consideration being given to this industry, such as its top-heavy age structure, which is similar to that experienced in the coal mining industry at the end of the war and between the 262 two wars, and to the effect on juvenile recruitment. There is little hope of raising productivity so long as this tax is retained.
I might summarise my arguments as follows: The Government's refusal last year to remove Purchase Tax, coupled with their financial and budgetary policy, turned a recession into a slump. I ask the Chancellor very seriously today whether he is going to make the same mistake again. I again, very respectfully, thrown out a warning.
Secondly, it would appear that the Government have written off the cotton industry as an important part of the national economy. If this is correct, it is a great mistake in the national interest, let alone in the interest of the County Palatine of Lancaster. Thirdly, Purchase Tax and the D Scheme are doing irreparable damage to our export trade. Exports lost now cannot be recovered in the textile trade of the world. Fourthly, the forcing of quality debasement is damaging the reputation of the industry and will lower and not raise productivity. The present uncertainty and apprehension are robbing the industry of its younger male labour. This is of vital importance in an industry which has already a top-heavy age structure in its labour force.
Finally—and I am sorry to have taken so long, but I have been associated all my life with this great industry and I feel very keenly about it—I seriously appeal to the Chancellor of the Exchequer to make some gesture even at this late hour which will help to restore hope to a great industry which has known many vicissitudes but which is, and can continue to be, an important element in our national economy.
§ Air Commodore A. V. Harvey (Macclesfield)
The hon. Member for Farnworth (Mr. Thornton) has made—I think the whole Committee will agree—a very thoughtful speech on this tricky problem, about which he is very knowledgeable. I thought he was less than fair in his comments on the steps taken by the President of the Board of Trade and the Chancellor of the Exchequer last year. He referred to the large orders which were placed for over 60 million yards of textiles and said that it only amounted to about a week's work. While that may be true, the hon. Gentleman did not say that the orders were placed where work was most 263 needed, in the areas vitally affected by the recession.
§ Mr. Thornton
I only made that remark in relation to the Chancellor's expression that as the result of his Purchase Tax concession 100,000 people had been put back into employment.
§ Air Commodore Harvey
Obviously, the concession had a tremendous effect in the affected areas. The hon. Gentleman said that the Government budgetary policy had brought about the recession. I do not think he was in the House at the time, but in my constituency the recession started before the Election in the autumn of 1951. A great topic of conversation in Macclesfield was unemployment, and so on.
It is well known that salesmen going to North America from the textile industry of Britain were failing to get orders, as they had done in the previous year. That was in the summer of 1951 and was before the Budget concession. Conditions were the same all over the world. Every country was affected by the recession. It is very difficult to give reasons except to say that far too much had been produced of the wrong quality and that up-to-date methods had not been brought into effect.
I was not going to refer to the remarks made by the hon. Member who spoke before the hon. Member for Farnworth, because I have an interest in the electronics trade myself, but I would say to the Chancellor that in considering radio sets for the home he should bear in mind that they are as much a part of the equipment of the home as a carpet sweeper. To charge the public Purchase Tax on replacement valves for radio sets is wrong when they can buy replacement tyres for motor cars free of Purchase Tax. I would ask my right hon. Friend to look into this anomaly, which affects millions of people.
I would now continue my own remarks about the textile trade. This matter vitally affects my own constituency where something like 80 per cent. of the people are employed in that great industry. The Chancellor has done a tremendous lot for the textile trade as a whole. The mere fact that he gave way reluctantly does not mean anything at all. I am happy that we have a Chancellor with such a flexible outlook that when industry and the House of Commons bring 264 pressure to bear he can see reason and is prepared to climb down. I only wish that some of the Chancellors in previous Governments had acted in the same way. The country would be much better off if that had happened.
Conditions in the industry have improved out of all knowledge in the last 12 months. There is very considerably less unemployment in my constituency. The number is about the same as they were at the Election in October, 1951, under 200. The difficulty is to get good labour. Labour is drifting into other industries because of the uncertainties of the textile trade, and particularly into light engineering.
I would stress the point made by my right hon. Friend the Member for Blackburn, West (Mr. Assheton) about quality goods. Britain has lived for 100 years by making quality goods. If we are going in for making cheapjack goods, whether in textiles or in engineering, we shall have a lower standard of living. Britain has to import a large part of its production in exchange for food, and all our raw materials have to make high quality goods. It is useless our trying to compete with Central European countries and others in producing cheap goods. We want the highest quality goods at the lowest possible price for export and that can be achieved only by having a healthy home market.
In the textile trade, the home market has to support the export side of the business. Trade is seasonal in some countries, like Australia, which imports for three months of the year, and North America. Patterns have to be tried out on the home market to see whether the British public like them or not. If they do, we know we have good export quality fabric.
One cannot do that when one has this pernicious tax. But when hon. Gentlemen opposite talk about what the Conservative Government are doing they should be asked to read the speech made during the war by the Leader of the Opposition when the Purchase Tax was introduced. The right hon. Gentleman said quite clearly that he hoped it would not last a day longer than the duration of the war, but he used it for six years afterwards. That is the old story. Once a tax is imposed it is most difficult to get rid of it. Nevertheless, the Chancellor of the 265 Exchequer is facing this problem. It is clear that he is gradually reducing all taxes. That is Conservative policy. By getting rid of controls and pernicious taxes we shall trade successfully. We shall not trade successfully if we do not do that.
Seventeen different organisations in the non-wool textile industry have protested to the Chancellor about Purchase Tax. These bodies are not irresponsible. Their members have spent mtany years in the industry. They have not been managing directors all the time but they have worked their way right through the business and have achieved high executive positions. Their opinion counts and I ask the Chancellor to take note of it.
The Barracks Printing Mill, in Macclesfield, are doing a fine export trade, but when there is a tax of 6s. a yard and it takes six or seven yards to make a lady's dress it puts £2 on quite a cheap dress before the wholesaler and retailer add their costs. It is obvious that the public cannot afford those prices, with the present high rents and the cost of living, but we have to encourage this home market and that can only be done by reducing the tax.
It has been made clear to the Committee today that quality goods are decreasing. That is clearly because most manufacturers can see that they can sell goods better if they produce goods below the D line. I agree with the hon. Member for Farnworth when he says that we may not have a recession this year, but that it may take place next year or the year after. No doubt the Chancellor will tell us in due course that he finds it very difficult to reduce taxation at the present moment. If he says that, I hope that he will give an undertaking to the Committee that he will watch the situation week by week and that if by the autumn months, or even before that, there is deterioration he will take drastic action to reduce the tax.
This country is up against many problems in trade. The French have placed new import barriers on textiles, and tariffs have been increased in America. Yet we have given open licences to increase the quantity of fabrics which can come into Britain from France, Switzerland and Italy to compete against our high quality goods. Up to a point that is right. We want freer trade and we 266 want to get money circulating in Europe, for that will help us in the long run. But the cost of production has gone up since last year, and if prices are continually rising we shall find it very difficult to compete with our continental friends and with the Americans.
One instance of anomalies in the textile trade concerns handkerchiefs. A handkerchief with coloured borders is subject to tax, but a plain white handkerchief falls below the tax level. It seems quite wrong that a handkerchief should be subject to tax because it has a coloured border. The textile trade is not a very glamorous trade compared with some of our engineering trades, but it is one of the most important. Craftsmanship in the industry has been passed on from family to family for generations and we must retain that craftsmanship.
I hope that the Chancellor will give this whole matter constant consideration in the coming months to ensure that we do not go back to the position which we were in 18 months ago.
§ Mr. F. Blackburn (Stalybridge and Hyde)
I shall confine my remarks to textiles. Like other speakers on that side of the Committee the hon. and gallant Member for Macclesfield (Air Commodore Harvey) seemed to be in difficulty as to whether he should make his main theme the defence of the Chancellor or a plea on behalf of the textile industry. In fact, the right hon. Gentleman the Member for Blackburn, West (Mr. Assheton) added a third aspect to his speech. That was a sort of nostalgia for 19th century finance and economics. But it appears that all hon. and right hon. Members opposite were hoping that the Chancellor would do something for the textile industry, in spite of the fact that the hon. Member for Cheadle (Mr. Shepherd) tried to argue that no special case could be made out for it. I shall try to argue that a special case can be made out.
The two Amendments which we are considering do not go nearly far enough. The position is such that we need a much more drastic reduction in the Purchase Tax on textiles. There are two ways of approaching a problem of this kind. We can say, "Let us not ask too much and perhaps the Chancellor of the Exchequer will be able to grant it." But I should 267 prefer to have the other approach, the Browning approach,…a man's reach should exceed his grasp, Or what's heaven for?I have been surprised by remarks made from hon. Members opposite and particularly surprised during the debate on the Budget, when it was suggested that after all the Chancellor had done something for the textile industry last year and the industry cannot expect anything to be done this year. That is certainly not my opinion, and it is not the opinion of responsible people in the textile industry. The hon. and gallant Member for Macclesfield referred to the publication compiled by representatives of 17 leading organisations in the non-wool textile industry. From that publication I should like to quote to the Committee the beginning of a letter which was sent to the Chancellor on 15th April this year by Sir Raymond Streat. He said: "DEAR MR. CHANCELLOR,At a meeting held today under my chairmanship of representatives of the leading organisations in the non-wool textile industries"—that is, the 17 organisations to which I have referred—consideration was given to the proposals concerning Purchase Tax revealed in your Budget statement. Having regard to the detailed representations made to you last October which brought out the grievous injury inflicted by Purchase Tax and the D Scheme upon our trade activities bitter disappointment was expressed at your failure to take any remedial action.I stress, therefore, that the point of view which I am putting forward is the point of view of responsible leaders in the industry, both industrialists and trade unionists.
What I have to say on these two Amendments in no way argues against any concession made to any other industry. I am delighted that the Chancellor has been able to make certain concessions. I take it that there are two reasons for them. The first is to help the industry and to help workers in the industry. The second is to help the consumers. I should like to consider both from the point of view of the textile industry, taking the second reason first—that is helping the consumers.
I say definitely that if the Chancellor had wanted to reduce the cost of living and to make the greatest contribution to 268 the poorest section of the community a reduction of Purchase Tax on textiles would have been of far more value than the reduction of Purchase Tax upon any other commodity. According to the "Economic Survey, 1952" the purchase of clothing was down by 3 per cent. and the purchase of household goods down by 8 per cent. That is a clear indication of the help that is needed in the industry.
The first reason for the concessions was to help industry and the workers in the industry. We have got to ask whether the industry needs help at the present time. When one thinks of this great industry and the contribution that it has made to the welfare of this country and of the treatment that has been meted out to the workers in this industry over the years, it is sometimes difficult to keep the bitterness out of one's soul.
It has been said that in the last year the Chancellor did a number of things for the textile industry, and it is claimed as a result that there has been an improvement in the industry. What exactly did the Government do last year? Admittedly, they placed certain orders in advance of requirements for the rearmament programme. I think my hon. Friend the Member for Farnworth (Mr. Thornton) in his valuable speech indicated the extent of those orders. But we are grateful for what was done.
Then the right hon. Gentleman reduced Purchase Tax from 33⅓ per cent. to 25 per cent. But the greater part of the value of that was lost because the D level was put far below the old utility level. Then the Government have scheduled North-East Lancashire as a Development Area. That, of course, can only have an effect over a long term. I hope that it does have some effect in that part of Lancashire, but it certainly will be of no advantage to the textile workers in my own constituency in Stalybridge and Hyde, in North Cheshire.
Have the Government really set about helping the industry in the export market? For 18 months we have had this problem of the balances in Brazil, and we are hoping soon that the formal talks to which the Government have referred will take place. We lost £100,000 worth of textile orders in Bolivia because the Government were not prepared to deal on a barter basis. As a result of our failure 269 to have any barter dealings with Bolivia, another country stepped in and got the order.
I am hoping that in time the Government will be able to do something about the great time lag between applications and allocations of shipping space for shipment from this country to East Africa compared with the time taken in shipment from the Continent. The Government could have done a great deal to help the textile and other industries in the export market. When we are discussing what the Government have done, let us be thankful for the small amount they have done, but let us realise that there is still a great need for Government help for this great industry. I am firmly convinced that this industry needs and deserves help.
Let us consider the industry from certain aspects—first of all, the number employed in the industry. At present there are 54,000 fewer people employed in the textile industry than there were two years ago. Does that not indicate that this industry still needs some help? As to unemployed, though there has been a great improvement, there are 15,800 more unemployed than there were two years ago, and if we take together the number of unemployed and the reduction in the numbers employed in the industry, we get a figure of nearly 70,000. Surely, that is an indication that the industry still needs some help.
Consider the matter from the point of view of production. Take cotton yarn, for example. In March of this year the weekly average production of cotton yarn was 4.32 million lb. less than it was in November, 1951. Take woven cloth. In February the weekly average for cotton was 12.4 million linear yards fewer than in November, 1951, and for rayon mixtures 1.3 million linear yards fewer than in November, 1951. Do those figures not indicate that the industry still needs help? From the point of view of raw cotton consumption, in February the weekly average was 2,810 tons less than it was in November, 1951. In February the weekly average of looms running was 60,000 fewer than in November, 1951.
I am quoting these figures because it has been stated that the textile industry cannot make out a special case for help. 270 The figures that I have quoted are quite clear evidence that the industry does need all the help it can get at the present time. Our exports in March of this year were £23½ million less than they were two years ago. Obviously the industry needs help.
I want now to refer to what has already been mentioned several times—the effect that the D scheme and Purchase Tax have had upon our standards. It is quite clear that they are having a detrimental effect upon our exports and they are placing us at a disadvantage vis à vis our competitors. That is not my view alone; it is the view of the experts who are concerned in the industry. I should like to refer to two short quotations from the report to which I have already referred. My first quotation is this:No careful investigator of the present position of the textile industries can escape the conclusion that a purchase tax on their products is a bad tax and should be removed. Removal is called for primarily to place price structure and incentives on a free, economic basis and so enable this country to hold its place in the world's textile trade, and more especially to give the great Dominion markets a service in quality, price and delivery which will justify continuance of the preferences which are now enjoyed. The textile depression is world-wide and no other Government is penalising its industry and checking its recovery by a tax so serious in its effects.The other quotation is this:It has often been urged in recent years that Britain's future lies in the production of goods of good quality and design. Our foreign competitors, notably West Germany, France and Italy, fat from discouraging the production of high-quality materials give velvets and suchlike cloths every encouragement and actually subsidise exports. In Britain, the effect of Purchase Tax is to impose a depressing burden on the better end of the trade. Those responsible for fiscal policy must realise that they are adding burdens of a most crippling character when they institute the D line running across the middle ranges, and on the better types a high Purchase Tax.It is quite clear from the evidence submitted by those 17 organisations who are members of the committee that at the present time the D Scheme and Purchase Tax are having a detrimental effect upon standards. In view of that and the figures that I have already quoted it is important that this Government should make a gesture and should do something further to help this great industry. May I appeal to the Chancellor, who I am glad to see is now back with us, not to look back on 1952 and think, "That was the year 271 when I saved the textile industry" but to look back on 1952 and say, "That was the year in which I did a little for the textile industry and I shall continue the good work in 1953."
I am sure that if this question were left to a free vote the Chancellor would be on the losing side, but he has loyalty behind him on this matter. I ask him not to strain the loyalty of his colleagues too far, but to allow them to think that they, too, have been able to raise their voices on behalf of this great industry and to persuade the Chancellor to do something further for it.
§ Mr. Charles Fletcher-Cooke (Darwen)
When the hon. Member spoke in the Budget debate, I remember very well his saying that the textile industry was now set up with a fair wind—or words to that effect. I quoted his words myself the next day.
§ Mr. Blackburn
When the hon. Member quotes me I wish he would quote the exact words I use. I am quite certain that I never used any phrase about a fair wind. I think I said that there had been an improvement in the textile industry. I have not argued today about an improvement in the industry over the very bad period of May, 1952. I admit there has been an improvement; the figures I have been quoting have been to show that the improvement is not complete.
§ Mr. Fletcher-Cooke
I am not suggesting that the hon. Gentleman said that the improvement was not complete. All I say is that he admitted, very fairly and frankly, that there had been a considerable improvement. Whether or not he used the words "a fair wind" I do not know, and I would not argue.
At any rate, when the Chancellor framed his Budget this year, as opposed to last year, and had to see what industries, trades and activities he had to help as a matter of urgency, it was quite clear to him that there were industries which were very gravely threatened with an immediate withdrawal of purchasing power either at home or abroad, and that the textile industry, temporarily, at any rate, was not so threatened.
His prognosis has proved to be quite correct, because since he introduced his Budget the textile figures have got better. 272 and they are getting better week by week. How long that will last we do not know, but the Chancellor has to find a vast sum of money and he is not able to look very far ahead. If he makes a concession all round, to those whose needs are not so urgent as well as to those whose needs are urgent—such as the motor car industry at the time of the Budget—he will not get that money.
Very little has been said by hon. Members opposite with which my hon. Friends disagree. I was particularly interested to hear from the benches opposite—perhaps for the first time—the great concern for the production and sale of luxury textiles, such as velvets. They were mentioned by the hon. Member for Rossendale (Mr. Anthony Greenwood) and by the hon. Member for Stalybridge and Hyde. In some of the projected programmes of the Labour Party there are suggestions that Purchase Tax is to be removed and that there is to be substituted something called a luxury tax. [HON. MEMBERS: "Hear, hear."] I am glad to hear that confirmed by hon. Members opposite sitting below the Gangway.
I want to ask whoever will be speaking from the Opposition Front Bench whether that is the policy of the Labour Party. Must we wait another week before we know? If it is the policy of the Labour Party to substitute for Purchase Tax a luxury tax, how does that fit in with the desire to relieve velvets—which are presumably a luxury, if anything is—of the effect of Purchase Tax? That is a straight question which I put to hon. Members opposite. I should like to know whether hon. Members opposite—if ever the country has the misfortune to have them back on these benches—intend to produce something called a luxury tax, which will presumably put the whole weight of taxation on luxuries and take it off everything else. No doubt there are ethical arguments for doing so, but it will undoubtedly cripple the export trade which they are so keen to support today.
§ Mr. Sydney Silverman (Nelson and Colne)
The hon. Gentleman will not have overlooked the fact that all Governments, at all times—including the present Government—have had different rates of Purchase Tax and have graded those 273 rates according to the utility or non-utility, semi-luxury or luxury character of the article concerned. What is he complaining about?
§ Mr. Fletcher-Cooke
I am complaining that it is apparently to be the policy of the party opposite, when they return to power, to increase that differential even more than it is today. In reducing this tax it has been our policy as far as possible to iron out the great difference between the weight of taxation upon quality goods and that upon other goods. That policy was followed in the last Budget and in this one, but I gather that the proposal, as mooted in the Press—and we do not know how official it is—is to increase that differential more than it ever was before by imposing a luxury tax and removing Purchase Tax altogether. I should like to know whether that is the policy of the party opposite.
§ Mrs. Barbara Castle (Blackburn, East)
We have had some very remarkable speeches from hon. Members opposite, particularly on this textile point. Their tone, temper and spirit have been in marked contrast to the display we had from them last year. At that time they made a great show of the tremendous fight which they were putting up for Lancashire. We all waited with bated breath for this great revolt to materialise in some dramatic climax. In the event, the Chancellor made a very small concession, and the fuss died down, but even at that time many hon. Members who accepted that small concession did so in the firm belief that it would be merely a first instalment, and that a wider concession would be made this year. The hon. Member for Oldham, East (Mr. Horobin) stated quite definitely, when the Chancellor agreed to reduce Purchase Tax on textiles to 25 per cent.:Next year I hope it will come down to 20 or 15 per cent. …"—[OFFICIAL REPORT, 12th May, 1952; Vol. 500, c. 994.]It was on that tone of hopeful anticipation that the fight was called off.
This year, to the shock and horror of Lancashire, nothing whatsoever has been done for textiles. Hon. Members opposite, instead of again taking up the fight, have told us in varying tones of complacency that there is really nothing to worry about. The hon. Member for Cheadle (Mr. Shepherd) actually told the Committee 274 that Purchase Tax on textiles and the D Scheme are not affecting our export trade in any way.
§ Mr. Shepherd
The hon. Lady should listen to and remember what I said, which was that the chief obstacle to our export trade at the moment was the question of import restrictions.
§ Mrs. Castle
I agree the hon. Member went on to say that, and I was going to mention it, because I took a very careful note of what he said. I do not want to misquote him, but he did say that it was wrong to imagine that the D Scheme and Purchase Tax formed the main problem. He said that the problem was the question of import restrictions.
The tone of his speech was in very marked contrast to the masterly survey we had from the hon. Member for Farnworth (Mr. Thornton). We always listen interestedly to what the right hon. Member for Blackburn, West (Mr. Assheton) has to say on these occasions. I listened with great care to his speech, but in the end I was left in rather more than my usual confusion of thought about what he meant. It is always a little difficult to follow his argument. His words come very smoothly, but at the end one asks oneself, "What is he advocating and what, if anything, is he fighting for?"
This afternoon the right hon. Gentleman began by assuring us that he welcomed the principle of an overall reduction in Purchase Tax rates. Then he went on to tell us, once again indicating the complacency of hon. Members opposite, that this year there was not the same need to give stimulus to our textile trade as there was last year. Then he went on to speak of the very grave damage which is being done to exports and to home trade in textiles by the D Scheme. Finally, he said that he perfectly well understood if the Chancellor did not feel that he could make any concessions.
Last year, the right hon. Gentleman began the Finance Bill debates with a demand for the root and branch abolition of Purchase Tax on textiles and gave the impression that he would go down with the ship rather than abandon those colours. At the end of somewhat protracted debates on the matter, however, 275 he told us, on 13th May last year, that the Chancellorhas given us only a quarter of what we asked for, but we are grateful to him."—[OFFICIAL REPORT, 13th May, 1952; Vol. 500, c. 1122.]This year the Chancellor has given him nothing at all and he is still grateful. This is a real phenomenon of character which is worthy of a Dickens' pen. If "Barkis is always willin'," the right hon. Member for Blackburn, West is always grateful.
I suggest to the right hon. Gentleman that when he ends his speech by telling us that we must have huge cuts in Government expenditure to enable tax reductions to be made he is dodging the issue. What are the principles which are guiding the Chancellor of the Exchequer in the Purchase Tax proposals he is making in the Budget? It is perfectly easy for the Chancellor so to direct his reductions that certain industries or certain sections of the community or certain income groups can benefit as a result of deliberate Government policy, but the Chancellor has not adopted that method of selection.
These Purchase Tax cuts which we are offered this afternoon prove that the Chancellor has abandoned the attempt to use the Budget to plan our national economy and has gone back on the practice of previous Labour Chancellors, who have always regarded the Budget as an instrument of national planning. The Chancellor does not believe in national planning and we cannot, therefore, be surprised if some of the consequences of the financial measures which he has chosen are remarkable. Nor can we be surprised if by this refusal to use the Budget as an instrument of planning, the Chancellor throws away the chance to help the textile industry, and does it quite deliberately.
It was always the policy of Labour Chancellors, when they came to look at this admittedly very difficult question of Purchase Tax, to try to influence the direction of our production or our export trade or our home consumption. All hon. Members can make out very good cases for the reduction of Purchase Tax on this item or that item. We can all make nice, demagogic speeches—and some very demagogic speeches were made by hon. Members opposite, when they were on the Opposition benches, every 276 time the Finance Bill was introduced. There were great demands for cuts in the Purchase Tax, about which they are now remarkably mute.
Labour Chancellors used Purchase Tax deliberately to try to influence the direction of our production or our export trade or our home consumption. I recall that in 1951 the Chancellor of the Exchequer had the political courage quite deliberately to increase Purchase Tax on items such as refrigerators, washing machines, radios and television sets. He wanted to restrict home consumption of these items in order that we might, on the one hand, help the defence programme production and, on the other hand, guide such engineering products into the export market.
At the same time, the same Chancellor of the Exchequer, desiring to lighten the burden on the housewife of Purchase Tax on essential items, went down the list of goods carrying Purchase Tax and looked at the list from the point of view of the ordinary home. He said, "Where I can truly say that Purchase Tax is being levied on essentials which every family must have, I will wipe out that Purchase Tax." He gave us a long list of exemptions from Purchase Tax on domestic, homely articles, which had been quoted with such effect by some hon. Members—such as pastry boards, rolling pins and dusters. We often had dusters waved at us by hon. Members opposite as a symbol of the iniquity of Purchase Tax, as though it were the Purchase Tax on dusters which they cared about when really it was the Purchase Tax on motor cars and fur coats.
The Chancellor of the Exchequer at that time took the duster out of the arena of politics by taking Purchase Tax off it altogether. He gave us a Budget which, on the one hand, sought to help the export trade and the defence programme by increasing Purchase Tax on certain items, and, on the other hand, wiped out Purchase Tax completely on a highly selective list of essential items.
In this Budget the Chancellor of the Exchequer has utterly abandoned the policy of selection. He has taken the easy way out. But, as a result, this House is refusing to itself the powers to direct the national economy in such a way as to help industries which are 277 suffering from imminent depression and an export problem or to help certain sections of the community. The Chancellor has given us a Budget containing concessions of £117 million in Income Tax, which he admitted to the House could not benefit those sections of the community which are worst off because those sections of the community which are really hard up—lower wage earners, men with large families or old age pensioners—cannot be affected by Income Tax cuts because they do not pay Income Tax at all.
Then he says that he will wipe out £60 million of Purchase Tax. Has he used that £60 million to help those people who are most hard up and who were not helped by Income Tax reliefs? Has he said, "I will now use a selective basis for this Purchase Tax relief to help the consumer"? What are the principles which he has followed? Nobody can see, in the pattern of his Purchase Tax reliefs, exactly what economic principles are guiding him. We have the free gift of umbrellas; whether he foresaw the Coronation summer or not, I do not know. Nor do I know the principles behind his other actions.
The Chancellor has given £8 million in relief of tax on luxury grade articles such as furs, perfumes, bird baths, chin-straps, sundials, horse brasses—articles which hardly crown the ordinary home. The weavers of Lancashire get can along without chinstraps or sundials and they do not get much in the way of perfumes and fur coats. When we are searching round for every penny the Chancellor gives away £8 million on items like that. Then he gives away £22 million on less essential articles—not strictly luxuries, but not strictly essentials.
He has given away that sum on gramophones, gramophone records, paper doyleys and cake ornaments, smokers' requisites, bead curtains, book markers, motor cars. Paper doyleys and cake ornaments may be welcome in every home, but they are not strictly necessary to the old age pensioners. The sum adds up to £30 million that the Chancellor has given away, yet there is not a penny in this Budget of tax relief on essential clothing, one of the key essentials in the home.
Food prices are rising, and the ordinary home is very hard hit. Clothing is the 278 second great essential in the home, and yet people are paying at present, under the D Scheme, tax on clothing which, under the old Utility Scheme, was tax free. Here there was a wonderful field in which, quite apart from the arguments about the export trade that were so ably deployed by my hon. Friend the Member for Rossendale, the Chancellor could, on the basis of fair shares, have given help.
Last year, when some of us asked that the D level should be raised to the point at which all the former utility items would be exempt, the Chancellor told us that it would cost from £30 to £40 million, and he said, "I am not able to spare that amount of money." This year he has spared that amount of money. He is sparing £30 million on perfumes, bird baths, chinstraps, sundials, and he could have given us that £30 million to wipe out tax on what was formerly utility clothing, and that would have helped the export drive and got us over all the problems of quality deterioration under the D Scheme, and put the ordinary consumer in the position in which he was before the D Scheme was introduced, so far as taxation on essentials is concerned.
As my hon. Friend the Member for Rossendale has pointed out, by the way that this Finance Bill has been drawn our hands are tied so that we cannot alter the D level. We cannot move an Amendment to that effect. We cannot move Amendments to make selective reductions in the Purchase Tax. We can move an Amendment only in the form in which we have put this one. What we are really asking for tonight is that in the interests of the principle of fair shares as well as in the interests of saving the Lancashire textile trade the Chancellor ought to concentrate as a priority on the textile industry. He ought to do it by the total abolition of the Purchase Tax on textiles; failing that, by the lifting of the D level. We regret that, instead of that, we have had this overall reduction in the rates of Purchase Tax without discrimination.
I think it is a warning to Lancashire that when we have a Tory Chancellor he does not believe in using the Budget for planning, and does not believe in using the instruments that are to his hands to secure full employment. We shall have unemployment in Lancashire; we shall have slumps in Lancashire, and a progressive shrinkage of this great industry of ours. I think Lancashire will note and 279 mark and remember the pathetic failure of hon. Gentlemen opposite today to show any kind of fight on this issue, any attempt to make the Chancellor climb down.
The hon. and gallant Member for Macclesfield (Air Commodore Harvey) was congratulating the Chancellor on having climbed down last year. Where is the pressure to persuade the Chancellor to climb down today? There have been only a few pathetic pleas from the other side of the Committee that the Chancellor might bear this matter in mind and look at it from time to time. Any Chancellor could promise to do that, and that is worth nothing. Lancashire will note the failure on the other side to fight on this issue.
§ 6.15 p.m.
§ Squadron Leader A. E. Cooper (Ilford, South)
I have listened for three years to speeches of the hon. Lady the Member for Blackburn, East (Mrs. Castle) on this subject of Purchase Tax. She has ridden so many horses on this subject in these years that it is difficult to find out what her real position is, so I have taken the trouble to arm myself with a copy of a speech she made on 20th June, 1950. She professed concern for the working classes, but I thought the peroration of her speech smacked of hypocrisy in a big way, because what did she say in winding up her speech of 20th June, 1950? These are her words:My theme tonight is this: when hon. and right hon. Gentlemen opposite talk about this great shadow of Purchase Tax over ordinary working-class homes they are grossly exaggerating the real picture."—[OFFICIAL REPORT, 20th June, 1950; Vol. 476, c. 1214.]
§ Mrs. Castle
The hon. and gallant Gentleman really is badly out of date, because the purpose of that speech which I made in 1950, which I hope to redeliver on the later stages of this debate tonight, because it is highly relevant, was to point out that the only way to help the working-class families was by the selective removal of Purchase Tax. Labour Chancellors did that. My theme tonight has been dictated by the fact that between 1950 and now we have had the D Scheme, and the shadow of Purchase Tax falls now on ordinary homes, because people are now paying Purchase Tax on Utility clothing, and I say that the Chancellor should have lifted that shadow today.
§ Squadron Leader Cooper
At least we have livened up things which were tending to become a little tedious. We all remember the speech the hon. Lady made then. She stood here, we well remember, in a white frock, and the "Daily Herald" the following morning placarded: "Lady in white stands up against Tory jeers." Of course, the story was different then.
§ Squadron Leader Cooper
In those days the Conservative Party were in Opposition and calling for reductions in the Purchase Tax, and it was the hon. Lady, who, we all imagine, was a Treasury stooge in those days, who put the case for the Treasury; and she made that long speech in answer to very forceful arguments put by my right hon. Friend the Member for Aldershot (Mr. Lyttelton) and my right hon. Friend the Member for Chippenham (Sir D. Eccles). We called for very selective reductions in Purchase Tax, but the Labour Government and the hon. Lady opposed them. Let us remember her words again. We were, she said, grossly exaggerating this great shadow of Purchase Tax on the working-class homes.
§ Mrs. Castle rose——
§ Mr. Anthony Greenwood
On a point of order. Is it not quite out of accordance with the traditions of this Committee for an hon. Member opposite to accuse an hon. Member on this side of hypocrisy and then not have the decency himself to give way?
§ The Chairman
It certainly would be out of order, but the hon. and gallant Member did not say that, or I should have stopped him.
§ Mr. Douglas Jay (Battersea, North)
Further to that point of order. I thought I heard the hon. and gallant Member say that the latter sentences of the speech of my hon. Friend the Member for Blackburn, East (Mrs. Castle) smacked of hypocrisy. Surely that is what he said?
§ Squadron Leader Cooper
I did give way before to the hon. Lady, and she herself made no criticism of my observation.
There are only two points I wish to make. The first is to join in the general chorus levelled at the Chancellor today on the iniquities of Purchase Tax as a tax. It is the most stupid and vicious tax ever levied in this country. It puts us back into the position that "The gentlemen in Whitehall know best what is good for us"—a doctrine first promulgated by the right hon. Member for Battersea, North (Mr. Jay). The result of Purchase Tax on industry in this country is disastrous at each Christmas time and in the months up to the Budget, because everybody is speculating on whether there will be any alteration, and the tendency is for business to dry up. We really must get away from this sort of thing.
I say just this to the hon. Lady the Member for Blackburn, East, who criticises many of the reductions which have been made. I am not employed in the bird-bath, chin-strap or bead-curtain industry, but I can well imagine that people who are employed in those industries are very anxious about their employment, and no matter how small the number may be it is important that they should be retained in employment. Many of the so-called luxury industries have provided a considerable amount of income to this country over the last two or three years. Also, we must never lose sight of the fact that it is the development of a successful home market which enables industry to lower its costs, so that greater export possibilities result.
The hon. Lady criticised the reduction of tax on motor cars. I wonder whether she would find support for her criticism amongst Members of her own party who sit for Birmingham or Coventry divisions, which have been seriously affected but are now enjoying some renewed hope as a result of the concessions made by my right hon. Friend.
§ Mr. Frederick Mulley (Sheffield, Park)
Does the hon. and gallant Gentleman not realise that the employment situation in 282 the motor car industry is such that, although Purchase Tax has been reduced, it is impossible to get a popular make of car on immediate delivery, so there is no need to make a reduction in Purchase Tax on export grounds?
§ Squadron Leader Cooper
The hon. Gentleman should read back over HANSARD for the pre-Budget months to see some of the Questions asked by his hon. Friends week after week begging for something to be done about this matter. The fact that it is now impossible to get immediate delivery of a car is surely evidence of the success of my right hon. Friend's policy.
There is one constituency point I should like to make. Within my division is one of the largest manufacturers of electrical components in the country, the Plessey Company, which employs more than 9,000 people. They have been severely hit by the excessive Purchase Tax on radios, television sets and necessary component parts. This great industry, not only in my division but in other divisions, is a vital industry in the defence of our country in time of trouble; it is essential to retain in this industry a proper and adequate supply of skilled workmen.
I hope it will be possible this year, or perhaps next year, to eliminate Purchase Tax altogether and to substitute, if some substitute is necessary, perhaps a general sales tax of a very modest extent, such as is exercised in some other countries without any real difficulty. We really must get away from this penal impost of 25, 50 and 75 per cent. tax on all these various commodities.
§ Mr. S. Silverman
I think the Committee will be extremely grateful to the hon. and gallant Member for Ilford, South (Squadron Leader Cooper) for having intervened in the debate at all. In its administration Purchase Tax is, after all, at least as much the business of the Board of Trade as of the Treasury, and if the President of the Board of Trade felt himself in some way inhibited from taking part in this debate—I am sure he must have views about the incidence of Purchase Tax on the vital export trade in textiles—then I suppose it was an act of political finesse that the Parliamentary Private Secretary to the President of the Board of Trade should intervene where his chief was unable to do so.
§ Squadron Leader Cooper
Let me say quite frankly that the President of the Board of Trade had no idea I was going to speak this afternoon.
§ Mr. Silverman
In that case one can only hope that the hon. and gallant Gentleman, doing his diligent duty as Parliamentary Private Secretary to the President of the Board of Trade, will tomorrow morning draw his chief's attention to the debate we are having this afternoon, and in particular to the important contribution to that debate which he himself has made.
In this debate we are not dealing merely with textiles. We are dealing with the incidence of Purchase Tax as a whole. There is no doubt at all that this is a highly unpopular tax, because in all essentials it is a bad tax. What makes it so bad is that in its origin it was never intended to be a tax for revenue at all. It was introduced in order to restrain consumption at a time when the restraint of consumption was vital unless an unheard-of domestic inflation was to run away with our war-time economy. In the days when Purchase Tax was first adopted reluctantly by the House of Commons, Chancellors of the Exchequer would have been delighted if they had got no revenue out of it.
It may be—and many people have thought so—that there is a certain anomaly in trying to control inflation by a tax which necessarily increases prices. The answer to that anomaly was that it was the only thing to do at a time when the production of consumable commodities was necessarily being reduced while the total purchasing power of the community as a whole was rising as a result of bringing into wage-earning production, and therefore into the consumer market, two million people who for nearly a generation and a half had been excluded from the market altogether. Therefore, anomalous as it sounds, there was some sense during the war in trying to control inflation by increasing prices, because in that way the case for goods that were becoming less and less available was restrained.
§ Mr. Silverman
Many of us in those days—my hon. Friend was one, and I 284 think I may claim to have been another —thought that the same object could have been achieved by a much stricter rationing process than the one adopted.
I am only trying to explain, at least so far as I have always understood it, what happened at the time. But that is not the situation today. All the Budget speeches delivered by the Chancellor of the Exchequer since the last Election have not regarded the question of restraining inflation by reducing consumption as the principal difficulty when attacking Purchase Tax. They have always said, "We need the money." In other words, what began as a tax to restrain inflation by reducing consumption has now become a revenue tax.
It is as a revenue tax that it now falls to be considered. That was what made part of the speech of my hon. Friend the Member for Blackburn, East (Mrs. Castle) so relevant when she talked about what use is made by the Chancellor of the £60 million which he is giving up out of his Purchase Tax revenue. She said that he had abandoned the principle of using the Budget and the manipulation of our revenues—distribution of taxes and the imposition of taxes in some cases—as an instrument of social justice and national planning. She said that in making that abandonment he had gone back to the days before Labour Chancellors. My hon. Friend is not here, but I should like to have said to her that the right hon. Gentleman is going much further back than that.
It was not a Labour Chancellor that first began this process of using the annual Budget as a means of redistributing the national wealth in the interests of social justice. That was done by the late Mr. Lloyd George in the 1910 Budget. What the right hon. Gentleman is doing is going back to the Budget policies, or lack of Budget policies, of the pre-1909 Budget date. How does that apply to the matter with which I wish principally to concern myself, as so many other hon. Members have done—the question of Purchase Tax as it affects the textile trade generally and more particularly the cotton textile trade?
It is, I think, common ground on both sides of the Committee—and it is almost 285 too elementary to be worth saying again —that the people in these islands cannot live without an export trade. I do not think that one need waste argument in trying to persuade hon. Members of that. I think it is also common ground that in today's conditions the textile trade, and particularly the cotton textile trade, is at least one of the principal industries upon which this country must rely for its export trade.
The third thing that is beyond any kind of dispute is that for very many years the cotton textile trade has had the utmost difficulty in keeping its head above water. Something has been said about the improvement in the cotton trade in the last 12 months and the contribution made to that improvement by the proposals or policies of the Chancellor last year. One of my hon. Friends rather exploded that claim when he pointed out that the whole of the contribution was one of production.
Another thing that is not in dispute is that throughout that period and now the competitive world conditions in which the textile trade has continued to maintain its workers and to make its contribution to our balance of payments are hardening against us. Germany is coming rapidly back into the market. Japan is coming rapidly back into the market. In my opinion—although I dare say this will not be so readily accepted—the opportunities of recapturing the Chinese market which were lost 30 years ago and which now we could recapture are being quite unnecessarily neglected.
What is the most serious part of that competition? Lancashire has never had anything to fear from the competition of anybody in the high-class goods which it makes. It has had nothing to fear from America or Germany or Japan or anybody else. The trouble has been that we cannot compete against the unfair labour coditions particularly in the Far Eastern countries in the sale of the cheaper and rougher materials.
What did an hon. Member opposite, who spoke a little while ago, say about what was happening now to the Lancashire cotton trade as a result of the manipulation of these things—first, the D scheme and then Purchase Tax? He said—and there is no reason, so far as I know, to question his figures—that 286 whereas before those things more than 50 per cent. of Lancashire's production was in luxury or high-class goods, it is now reduced to 15 per cent. We have been pushed back from that kind of production in which we are supreme in the world and in which we find it easiest to meet and overcome the competition of other producers into that part of the production in which we find successful competition most difficult. This is the contribution of the Government to Lancashire's textile trade at a moment when we are fighting for our economic lives in difficult world conditions.
Government supporters go about patting themselves and one another on the back about the great contributions they have made in saving the textile trade of this country. It is really fantastic to think that people can be so self-deceived by their mistaken party loyalties as to believe such obvious nonsense which is not accepted anywhere else than in this Committee.
There have been a number of speeches on the Opposition side, and the hon. Member for Cheadle (Mr. Shepherd) was quite open and honest—I cannot think that he knew the facts, because he is too intelligent a person to have said what he said if he had known them—when he said that there is no case at all for the special relief of the textile trade from the incidence of Purchase Tax. Apparently that is what the Government believe too, because they have granted no special relief; but of all the hon. Members who have spoken on (hat side of the Committee, to say nothing of those who have spoken on this side, he was the only one to say that.
The right hon. Gentleman the Member for Blackburn, West (Mr. Assheton) made a speech; he always does; he represents Blackburn, West and, therefore, when we are talking about the cotton trade, its Member must be here; and if the interests of the constituency pull the right hon. Gentleman one way and his loyalty to his party pulls him another, then he is an old skilled Member of the House and he knows how to make exactly the kind of tight-rope balancing effort to which it is a delight to all of us to listen as a debating performance but which will bring very cold comfort to his constituents. The right hon. Gentleman made a speech last year in which he 287 wanted Purchase Tax removed altogether from cotton textiles. Is he still of that opinion?
§ Mr. Silverman
This is really wonderful. The right hon. Gentleman said last year that he was in favour of it and he appealed passionately to the Government to abolish Purchase Tax altogether on textiles. He could have had his way. There was nothing to stop him. The Government's majority is only 17. There are more than 17 Conservative Members for Lancashire cotton towns. I said this to him then. He did not even need to go into the Division Lobby against his Government, though I am sure he will recognise that hon., and certainly right hon., Members would not be afraid to do that in a just and right cause.
After all, this was a matter on which the prosperity, and indeed the solvency, of the most important of our export industries depended. The right hon. Gentleman was convinced then, and is convinced now, that what is really needed is the removal of Purchase Tax altogether. He had only to go to the Chancellor of the Exchequer and say "Purchase Tax must come off. There are 17 good men and true, good loyal Members of the Conservative Party, representing Lancashire constituencies, who say 'We know this industry, and we are conscientiously convinced that this is the only remedy for it, and we are afraid that we shall have to vote for it because honest men do not think and say one thing and then vote against it.'" But the right hon. Gentleman would not do it. He was "very grateful" for having received 25 per cent, of what he thought right.
§ Mr. Silverman
What does the right hon. Gentleman mean by that? Does he really mean that the 25 per cent, of what he demanded has cured the disease that he was trying to cure?
§ Mr. Assheton
What I mean is this. I still want Purchase Tax removed from textiles, and I still hope it will be 288 removed from textiles in due course, but on that occasion the concessions made by the Government, which were worth £37 million, had the effect of restoring employment to the people in my constituency and in the hon. Gentleman's constituency.
§ Mr. Silverman
That seems to be only another form of words designed this time to make vague and confusing what the right hon. Gentleman's previous intervention had made crystal clear. Let us get back to that. It is better that way. What I want to know—I asked the right hon. Gentleman this a long time ago, and he said "Yes"—is whether he still believes that the removal of Purchase Tax altogether from the cotton textile trade is necessary. It would not, of course, be necessary if the disease were already cured. If 25 per cent. of it would do the trick, he was last year asking for four times as much as he needed. If the cure had already been effective, it would be quite unnecessary for him to ask for the removal of Purchase Tax now.
I take it that what he really means—it is no doubt true—is that the little that was done last year was done in the right direction and had some success, that it would have had more success if more had been done, and that if Purchase Tax were now removed altogether there would be more success still. Then, what is he waiting for? Why does he not see that it is done? Last year he expressed his gratitude for having got 25 per cent. of what he thought was necessary, and this year, having got nothing whatever, he is apparently more grateful even than he was last year.
This really is not the way to treat a serious question. I do not want to use hard words like "humbug" and "hypocrisy" and the words which were used by an earlier speaker about my hon. Friend the Member for Blackburn, East, but I must say that nothing could be more unfair than for an hon. Member to make speeches in a constituency, speeches in the House of Commons and speeches in a Committee of the House of Commons designed to make the people listening so anxiously, in West Blackburn and in Lancashire, to what he says believe that he is on their side when he is not really on their side, because he is not 289 willing to exercise the power with which they entrusted him as they wish him to exercise it, and as he knows to be right. Nothing can destroy the prestige of Parliamentary democracy quicker and more effectively than that which gives rise to the assumption that, whereas totalitarian states govern by force, democracies govern by fraud.
The Government have left the Purchase Tax on textiles whose prices it raises, and this has the effect of reducing the income of the workers. I am not concerned with averages; I know that one can so balance things as to make a man who receives less money in his weekly pay packet believe that he is really getting more. When the cotton industry is driven from the higher-class goods to the lower-class goods, this affects the wages of the workers because, in their highly complicated wage systems, their wages depend not merely on the amount of goods which they produce but on the character of the goods they produce. They receive lower rates for producing lower-class goods. Thus, while the high prices remain, the wages of the workers will be reduced.
In these circumstances, what the Chancellor did was to take his £60 million and give it away on the same principle as he gave away his reliefs in Income Tax. What can be more insane economically than to retain Purchase Tax on ordinary clothing but to reduce it on expensive mink coats by more than it is reduced in the case of ordinary clothing, to relieve the consumers of the best luxury goods more than one relieves the trade on which one depends to maintain one's balance of payments in a difficult world? This is the clearest possible indication of the Government's philosophy in these matters.
The Chancellor was criticised a great deal from these benches for the incompetence of his Budget. I think he was unfairly criticised. I think it was a very able Budget. Those who criticised him thought he was concerned with a financial and economic policy. He was not. Judged by those standards, his Budget was all that was complained of it. But he was concerned with a political Budget as a member of a Government with a narrow majority, wondering how they could maintain themselves in power and increase the slender margin of votes which kept them there.
290 The Chancellor quite rightly and quite intelligently came to the conclusion that the thing to do was to go for the marginal voter in the marginal constituency, to deal with the middle wage earner and increase the tax relief for such a man as to leave him with more money in his pocket. In effect, he said, "Let us redistribute the national income in his favour, let us take subsidies off foodstuffs and other things."
§ Mr. Silverman
I do not think so, with great respect. We are discussing the reasons which led the Chancellor to do what he did, and I am relating it to the general problem of the Government, as I have no doubt the Chancellor himself did when he was considering what proposals he would make. However, perhaps I have said enough to indicate the kind of point I have in mind.
What we are now attacking is the Government's general plan for making life easier for the electorate whom they wish to woo at the expense of those whom the Government realise they have no hope whatever of influencing or converting. That is a thoroughly immoral thing to do, and the Government will pay the penalty for it when the time comes.
§ The Economic Secretary to the Treasury (Mr. R. Maudling)
I hope that by rising at this time to put the Government's point of view on this question of the Purchase Tax I shall be assisting the Committee to make progress with the very large amount of work we have yet to do on this Bill. We have already had a substantial debate in which many points of view have been put, and I shall try to cover the various points which have been advanced from both sides of the Committee.
The hon. Member for Nelson and Colne (Mr. S. Silverman), in the course of a most fluent if, I thought at times, somewhat inconsistent speech, dwelt a good deal on the textile trade, and particularly the cotton textile trade. That has been true of the whole debate. A great deal of emphasis has been laid on the position of the cotton textile industry, which is natural in view of its great importance and the importance in our economy of the textile industry generally.
291 As the hon. Member for Nelson and Colne pointed out, these Amendments that we are discussing deal with a pretty wide range of articles except articles at the highest rate of Purchase Tax. Nevertheless, it is to the articles at the highest rate that most reference has been made in the speeches of hon. Members opposite. I want to start by saying one or two general things about Purchase Tax.
As the hon. Member rightly said, there has been a change of emphasis in the attitude of Governments to Purchase Tax. I think the main change of emphasis occurred during the period of the Labour Government from 1945 to 1951. But whenever it took place, it has taken place. This tax started as a war-time device designed to restrain consumption. Now it has become embedded in the fiscal system to such a depth that it is not easy to prise it out.
The amount of money that it yielded last year was over £300 million and in this financial year, even with the reductions, it will be £260 million. That is a large amount of money indeed for any Chancellor to throw away. It is a large item in our fiscal programme, and the tax now covers an extremely wide range of articles. It is, on the whole, true that most of the necessities of life have now been exempted from Purchase Tax. The hon. Member for Blackburn, East (Mrs. Castle) rightly said that Labour Chancellors had removed Purchase Tax from articles of necessity like pots and pans. I do not see how she can now blame my right hon. Friend for not removing the tax from them again.
It is quite true that a number of necessary articles are outside the range of the Purchase Tax. Luxury articles like mink coats and jewellery produce only a tiny amount of income in comparison with the amount which comes from articles in the second or third categories, which could best be described as the amenities of life. We cannot say they are really necessities, and we cannot think of them as luxuries. They are the amenities of life and that is where the Purchase Tax now runs strongest. In considering his Budget proposals this year, my right hon. Friend thought there was some slack in the economy and that it was right and proper to reduce taxation by a substantial 292 amount. Obviously in any reduction of taxation Purchase Tax was an early candidate.
I am not quite certain myself what is the attitude of the party opposite to the Purchase Tax as a tax, because obviously there are arguments both for and against it. I think the arguments for the tax are, on the whole, rather more theoretical than practical, but that does not mean that they are any less attractive in argument. The hon. Member for Itchen (Mr. Morley) pointed out, quite rightly, that a feature of the Purchase Tax is that, though it is an indirect tax, it is not necessarily regressive in its effect. It has the theoretical attraction that it can be used as a means of increasing indirect taxation without the tax falling most heavily on the smallest income group.
Then there is the argument that Purchase Tax is selective. Detailed articles can be selected on which tax is to be placed, categorising them, as the hon. Member for Nelson and Colne said, as luxuries, semi-luxuries, amenities and half-amenities. A whole wide range of articles in the shop can be taxed, and by this process we reach an equation in social justice which makes for perfect economic planning. That is, as I say, an attractive theory, but it is not so good in practice. When the hon. Lady the Member for Blackburn, East said that my right hon. Friend appears to have abandoned economic planning, if she is referring to detailed economic planning and the theory that the State should try to direct the detailed activities of industry, then we have not abandoned that theory. We never held it.
There are, on the other hand, strong practical objections to the Purchase Tax. There are the well-known difficulties of administration; the anomalies that arise between one kind of article and another; the constant difficulties in preventing evasion; the difficulties experienced by traders; the problem of taxed stocks, of which we shall hear a great deal later on; the difficulties created for traders because, as the hon. Member for Bristol, North-East (Mr. Coldrick) said, they are unpaid tax collectors in this matter of Purchase Tax; the difficulties of manufacturers who find the flow of orders in many trades varies very much at the beginning of the year before the Budget; and the effects of Purchase Tax on the 293 cost of living, all of which amount to the fact that this intrinsically is an unsatisfactory tax, and it is for that reason a very unpopular tax.
I must say that I was very interested to find how many hon. Gentlemen on the other side of the Committee now subscribe to the belief that the Purchase Tax is a thoroughly bad tax and should be abolished. I think the hon. Member for Bristol, North-East said that he and those with whom he is associated had constantly objected to Purchase Tax as being a bad tax. Why are those hon. Members now most eloquent in opposing the tax at a time when a Conservative Government has made sweeping reductions in it? They are a little late in introducing their criticisms.
§ 7.0 p.m.
§ Mr. John Rankin (Glasgow, Tradeston)
As one associated with the group to which the hon. Gentleman refers, may I say that we are opposed to the continuance of the tax and that we have always contested it?
§ Mr. Maudling
I wonder if the hon. Gentleman was also opposed to its continuance in 1947, 1948, 1949 and 1950, because he did not register that opposition in the Division Lobby.
If it is agreed that Purchase Tax is in many ways unsatisfactory, then I think the Committee will agree that my right hon. Friend was correct in making substantial reductions in it in his Budget. Their total cost in a full year amounts to £60 million, which I suggest is a large sum. I do not think it would be widely argued that my right hon. Friend would have been justified in going further than he has done in this matter. Indeed, it could not be argued by those critics of the Budget who suggest that it was a soft Budget and was not making sufficient provision for possible economic difficulties in the future. It is impossible for hon. Gentlemen opposite to try to argue simultaneously that there are difficult times ahead for which the Chancellor has not made provision and that he should have further stimulated personal consumption by greater reductions in the Purchase Tax.
The next problem is how to distribute these reductions, given a reduction in total of £60 million, within the various categories which are subject to Purchase Tax. 294 There were two possibilities. One was a general reduction in the main rates of Purchase Tax, the course which my right hon. Friend adopted. The other was a selective reduction of various rates of Purchase Tax, concentrating on reducing those goods at the lower rates at the expense of the goods at the higher rates. I understand the latter course to be the point of view adopted by hon. and right hon. Gentlemen opposite.
Once again, clearly there were arguments in favour of those alternative courses, but I hope I can show that the course which the Government have adopted is, on the balance of the argument, undoubtedly the right course. Certainly the course of making selective reductions and putting all the weight of the reduction on the cheapest article at the lowest rate of tax is politically the most attractive. The fact that we have not done it provides most of the raw material for half of the speeches we have heard from the other side of the Committee. Obviously hon. Gentlemen opposite consider that there is political advantage in leaving a high rate of tax on luxury articles and concentrating reductions on articles of more general consumption.
The political argument in a matter like this is not the decisive argument. The decisive argument is the economic argument. In the first place, it is not easy to proceed with Purchase Tax reductions on a selective basis in present circumstances. I am glad to see that the hon. Lady the Member for Blackburn, East has returned. She pointed out that many of the necessities of life have now, by the acts of previous governments, been eliminated from the Purchase Tax field. That leaves a wide range of articles which we can call amenities, but the hon. Lady referred to radio sets and rather suggested it was wrong to reduce the tax on those because relatively few people buy them; whereas the hon. Gentleman the Member for Bristol, North-East was saying earlier that a radio set is a necessity for every householder.
§ Mrs. Castle
The hon. Gentleman misunderstood that part of my argument. I was merely giving it as an example of where, to fit in the needs of the defence programme with economic needs, a previous Labour Chancellor had the courage to increase the tax.
§ Mr. Maudling
If I misunderstood the hon. Lady, I apologise. It is difficult to choose between articles like attaché cases, gas heating appliances, motor cars, television sets, radio and to say that one is a necessity and one is not. They are all amenities and it is difficult to pick and choose between them without making unjustifiable discriminations. It is also true that if, instead of proceeding by a general 25 per cent. reduction, my right hon. Friend had proceeded by abolishing the tax entirely on certain selected articles, that would have greatly aggravated the problem of the tax-paid stocks. I think I am right in saying that the Hutton Committee in their report referred to the additional difficulty created for retailers if Purchase Tax reductions were made too drastic at any one time.
Then there is another economic objection to the idea that there should be selective reductions which should be concentrated on the goods at the lowest rate of Purchase Tax. It is that the strongest economic case for Purchase Tax reductions is for those articles which bear tax at the highest rate, such as cutlery which the hon. Member for Sheffield, Park (Mr. Mulley) knows so well, silverware to which the hon. Member for Handsworth (Sir E. Boyle) often refers, the fur trade to which my hon. Friend the Member for Billericay (Mr. Braine) refers. All are trades of great importance to this country which are suffering greatly from the prohibitive rate of Purchase Tax.
§ Mr. Mulley
We in Sheffield would also be pleased if the Chancellor would reduce Purchase Tax on spoons, knives and forks, which the hon. Gentleman apparently thinks are amenities but which I think are necessities.
§ Mr. Maudling
I doubt if in strict logic it could be argued that they were necessities, but they are certainly necessities for civilised life.
§ Mr. Percy Shurmer (Birmingham, Sparkbrook)
If we have two more years of Tory rule we shall not want any more knives, forks or spoons.
§ Mr. Maudling
Those trades contribute substantially to our export trade. Our exports of furs last year, for instance, amounted to about £19 million, the export of silverware amounted to £10 million, the export of toilet preparations—to 296 which somewhat disparaging references are sometimes made; I do not know why —amounted to £6 million. All those industries are of great importance. They are traditionally the craft industries of this country, and it is wrong to go on impeding their progress and restricting their activities for the sake of purely party political dogma. It is contrary to the national interest.
Sometimes I get a little tired of hearing the argument about high-quality goods based entirely on exports. Why should we consider it wrong that the products of, say, our silversmiths and jewellers should not be sold and enjoyed in this country? Do hon. Gentlemen opposite look forward to a time when those industries will have been completely wiped off the face of the map or wholly confined to export orders? I do not think that way, and I do not think that my hon. Friends on this side of the Committee think that way.
There are other reasons for a general reduction in Purchase Tax. There is no doubt that the wide differential between the rates was making administration of the tax nearly impossible. Evasion was becoming more widespread. The main reason, however, for reducing Purchase Tax as a whole, like the main reason for reducing the standard rate of Income Tax, is that it is too high, and we believe in making a direct frontal attack as we have done with taxation generally.
The two Amendments we are discussing are those dealing with the lowest rate and the middle rate which, it is suggested, should be further reduced. The first Amendment, which suggests a further reduction in the lowest rate of tax, would cost £30 million a year, which is the total cost of the Government reductions on the top rate and the middle rate; so that if we were not to produce another £30 million for Purchase Tax, if the total amount of Purchase Tax reduction is to be confined to £60 million, we can only proceed with further reductions at the lowest rate by wiping out any reductions in the two top rates.
The fact is that the amount yielded at the top rate is very small. The major yield is on the lowest rate, on motor cars, television sets, and so on. As for the middle rate, I am not certain what is the attitude of right hon. and hon. Gentlemen opposite and perhaps the right hon.
297 Gentleman the Member for Battersea, North (Mr. Jay) will make it clear? The main articles in the middle range are television, radio sets and motor cars. I do not know whether hon. Members opposite think that the tax on these things should go further down or should not have come down at all, because between them they seem to have taken both points of view at one time or another, with considerable variety and often with much eloquence. What is the attitude of hon. Members opposite? Should the tax on motor cars be further reduced, as their Amendment suggests? [An HON. MEMBER: "No."] Then why did they put down the Amendment?
§ Mr. Mulley
Has it not occurred to the hon. Gentleman that it might be possible that some items in the range should go up and others come down?
§ Mr. Maudling
It might be possible, but that is another matter.
I come now to the question of textiles, which has loomed so large in the course of our discussions. The year 1952 was undoubtedly a difficult one for the textile industry. The difficulties had started way back in 1951 with the reduction in the world demand for textiles. All textile exporting countries suffered severely and I think I am right in saying that some countries suffered even more severely than we did. That is why it is a peculiar argument that we heard from the hon. Member for Farnworth (Mr. Thornton), who made such a thoughtful speech but who implied that the depth of the textile recession in this country in 1952 was somehow or other the responsibility of my right hon. Friend in his Budget last year. It would be difficult to state the opposite of the truth with greater clarity.
The reason for the recession in production in 1952 was the falling off in retail sales, which, of course, always precedes by an interval of several months a recession of production and which had taken place in the summer of 1951. In 1952, therefore, my right hon. Friend was faced with a very difficult situation in the textile trades, and he took the measures to which reference has been made several times today: the special Government purchases, the reduction of the Purchase Tax rates on textiles, and the introduction of the D Scheme.
298 No one would claim that those measures alone were responsible for the improvement in the textile trades position in the last year, just as, I should have thought, no fair-minded person would ever have argued that the difficulties in the textile trades were due to the change of Government, although I have heard that suggestion sometimes put forward.
Nevertheless, it is quite clear that the effect of Purchase Tax reductions and Government orders has been to assist in a remarkable recovery in the textile industry. Production for the textile industry as a whole is now about 50 per cent. above the trough which was reached last July, when the recession was at its worst. Unemployment has shown a remarkable improvement. Taking the textile trades as a whole, as against an unemployment figure of 161,000 last May the figure for May this year is only 21,000. That is a dramatic change over the year, and it is only fair that hon. Members opposite should give some credit to my right hon. Friend for the measures he introduced last year.
§ Mr. Anthony Greenwood
Would it not also be equally fair to give the figures of the number of people who have left the industry in the meantime?
§ Mr. Maudling
It is true that the number of people employed in the industry has changed. I am not entirely surprised at that, because the structure of the textile industry is, clearly, changing. As I was about to point out, as between cotton textiles and non-cotton textiles there has been a considerable difference in the rate of recovery, which, again, may well be a reflection of the changing nature of the textile industry, which is being affected nowadays, I imagine, by the introduction, for example, of new fibres. Certainly, unemployment fell to the figure I have given, and in the North-East Lancashire Development Area unemployment, which last May was 17 per cent., is now down to 1.6 per cent., which is roughly the same as the national average.
So far as wool is concerned, production and exports in the first four months of this year have been near their post-war peak. So far as rayon is concerned, in the same four months fibres, spun yarn and mixtures all show record production figures. Cotton, it is true, is still below the peak which it had reached, but it is 299 appreciably up, as is shown by the figures given by the hon. Member for Farnworth and by the 90 per cent. figure which he quoted.
A very significant figure, which has not yet been mentioned, is that sales of clothing—and it is upon sales that the production a few months later depends—in the second half of 1952 were 11 per cent. up in real terms on the same period of 1951; and in the first four months of 1953 sales of clothing are again 11 per cent. up on a similar period in 1952. That should be borne in mind when hon. Members opposite take too gloomy a view of the prospects of the textile trade. It does not help the textile trade for people to take an unnecessarily gloomy view of its prospects.
§ Mr. Blackburn rose——
§ Mr. Maudling
I am sorry, but I have given way too much already and cannot give way again.
Therefore, there are considerable improvements. There has been a remarkable improvement in the position of the textile industries, but we are still faced with the strong representations that are made, and rightly made, by people engaged particularly in the cotton textile industry. As I understand it, the main argument is that, as a result of the Government's policy, there has been a lamentable reduction in the production of top-quality cloth. That seems to me to be a singularly odd argument to come from the hon. Member for Nelson and Colne. In one sentence he says how wrong it is to encourage the production of top-quality fur coats—and we sell a great number of them abroad—and in the next sentence he says how wicked we are to allow the textile trade to produce more top-quality articles and fewer Utility articles.
§ Mr. S. Silverman
If what the hon. Gentleman means by inconsistency is that I advocated that the remedies that are applied to the fur coat trade may not be suitable to the cotton textile trade, I admit the charge of inconsistency. But does the hon. Gentleman or do the Government advocate that there are to be no differences at all, that the same policy with regard to Purchase Tax shall be applied to all industries, irrespective of their domestic or export conditions?
§ Mr. Maudling
The hon. Member knows perfectly well that that suggestion is quite unfounded. He has only to look at the rates of Purchase Tax. What I meant by inconsistency in his speech was the use in succeeding sentences of mutually conflicting arguments——
§ Mr. Maudling
—which at times may be politically convenient. It is, surely, inconsistent to argue at one and the same time that we should stop the production of luxury articles and encourage the production of others.
§ Mr. Maudling
When the D Scheme was introduced last year, one of the criticisms to be made was that it would give too much help to the luxury articles and put too much burden on the Utility articles. Hon. Members opposite cannot get away with these inconsistencies. The fact is that the introduction of the D Scheme and the reduction of Purchase Tax last year were of particular assistance to the top-quality textiles; they get the benefit of the reduced rate of the tax, and they get the benefit of the D Scheme.
It is true that many representations are made by responsible and informed bodies on the question of deteriorating standards. I would never under-estimate the importance of giving very close attention to all that is said by these experienced people, but it is quite right, on the other hand, to point out that it is not necessarily true that because in the last year qualities have fallen, or, it is said, qualities have been to some extent debased, the working of the D Scheme is to blame. This year also market conditions have changed continually, particularly the home market, and have changed to the detriment of the higher-priced and higher-quality article. I do not think the argument can necessarily be sustained that it is the D Scheme that is responsible for the deterioration to which reference has been made.
In its issue of 25th April, the "Economist," a periodical I always like to have the opportunity of quoting when it says the sort of thing I like to quote, said this about the textile question:It is difficult to believe that the D Scheme of itself is to blame if the goods in question are no longer selling as well as they did. 301 … Many retailers report that since the D Scheme was introduced, customers have paid less regard to the tax element in the retail price of textiles and that they themselves pay little attention to the relatively small sums involved in all but a few lines. They argue, moreover, that since the slump in home sales last year, the tendency has been to 'trade up'—to improve rather than to lower the quality of the stock carried.That certainly would be my impression of the result one would expect from the introduction of the D Scheme. Of course, it is not perfect—no scheme of taxation is ever likely to be perfect—but certainly it is a great improvement on any scheme which existed before in getting over the difficulty of a blind spot by letting in the clutch of Purchase Tax progressively—to mix the metaphor—as opposed to the rapid change-over we had under the old Utility Scheme.
§ Mr. Ellis Smith rose——
§ Mr. Maudling
I am sorry, I cannot give way again, as I have given way so often.
Turning to the textile industry as a whole, I think it right to quote this figure. The argument has often been made this afternoon that there is a case for special treatment for the textile industry as compared with other industries subject to Purchase Tax. But the textile industry has already had very special consideration. These figures, I think, are most significant. The Purchase Tax on textiles represents only 5 per cent. of total turnover, while Purchase Tax on the remaining range of goods subject to the tax is 34 per cent.
When one is asked for special treatment for the textile industry, I admit straight away the immense importance of this industry to the life of our country, to the life of Lancashire and to the export trade, but I think it only fair to point out that, as against 34 per cent. incidence of Purchase Tax on goods as a whole, textiles are now paying only 5 per cent. of their turnover.
My right hon. Friend will, of course, watch most closely and constantly—as he does—the performance of the textile industry, but he considers at the moment, on the figures I have given and the arguments we have heard, that there is really not adequate justification for a further reduction in Purchase Tax on textiles this year. Reductions last year cost the Exchequer £17 million, but textiles are still bringing £43 million to Purchase Tax, 302 which is a very large amount of revenue and, if conceded on this head, would have to be made up somewhere else.
From the arguments heard this afternoon it does not seem to me that most of the problems to which hon. Members referred could be overcome without a complete abolition of Purchase Tax. To concede £43 million to this industry, although it is of great importance, whilst other industries are paying much higher rates, does not seem justifiable to my right hon. Friend at this stage. For these reasons, we ask the Committee to reject the Amendment.
§ Mr. Morley
Could the hon. Gentleman make some reference to the question of the abolition of Purchase Tax on school requisites, which was raised earlier in the debate?
§ Mr. Jay
I have listened to the whole of the debate this afternoon and should like to say two things to hon. Members opposite. We have heard a great deal to the effect that this is a bad and vicious tax. Indeed, according to Conservative doctrine, all high taxation is bad. I should point out that our main Amendment proposes to reduce the 25 per cent. rate to 16⅔ per cent. rate. Therefore, the right hon. Member for Blackburn, West (Mr. Assheton) and all who agree with him can at least take one step in that direction by supporting our Amendment.
The second thing I say to hon. Members opposite is this. Several of them, including the hon. Member for Cheadle (Mr. Shepherd) advocated the complete and early abolition of Purchase Tax. I suppose he was acting as a Treasury stooge at that point as he told us he was confident and that it was the intention of the Chancellor to abolish the tax entirely.
I would point out that that is not what the Chancellor said in his Budget speech. Obviously, the right hon. Gentleman does not regard the Purchase Tax as a temporary tax, as he said this about it:I have also to think, in this connection, of the buoyancy of the revenue in the longer term and of the stability of the tax."—[OFFICIAL REPORT, 14th April, 1953; Vol. 514, c. 52.]So the issue between us this afternoon is plainly not whether this tax is temporary or whether it is long-term. The 303 issue between us is, as the Economic Secretary quite fairly said, whether the Purchase Tax should be mainly a tax falling heavily on what he calls the luxuries and amenities and less heavily or not at all on the necessities. We hold that it should fall much less heavily on the necessities and that is the purpose of our main Amendment.
In view of what the Economic Secretary said, I must explain that, under the Budget Resolution, it is impossible for us to suggest the elimination of the tax or the exemption altogether of a number of separate commodities. By the Resolution we can only propose a reduction in the rates. We propose a reduction from 25 per cent. to 16⅔ per cent. We think that that should be carried out in addition to further exemptions, and we also propose to raise the D level by 10 per cent.
That, I understand, is out of order under the present Bill. I must say it is going a little too far to draw the Resolution so tightly as to make it out of order to discuss a further raising of the D level.
§ Mr. Maudling
Is it not true that in 1949 the Government of the right hon. Member eliminated all discussion of Purchase Tax?
§ Mr. Jay
No, what we did was to make it possible to make proposals similar to those the Government were making. This year it is impossible to deal with individual commodities and, therefore, we put down the second Amendment as a token Amendment in order that the articles taxed at 50 per cent. could be discussed, as they have been discussed by my hon. Friends.
I wish to answer the hon. Member for Darwen (Mr. Fletcher-Cooke), who asked what was our policy and whether we were in favour of widening the differential between luxuries and other commodities. I do not think he has to wait for a future party document, but will see the answer in this Amendment. Our policy is to widen the differential by lowering the tax on necessities and near necessities and that can be carried a stage further if that Amendment is approved today.
We have two main criticisms of what the Government have done. First, apart from the taxicabs and pianos, in this Budget they have not exempted any 304 further necessities. Secondly, in our view, they have placed the D level in the case of textiles, boots and shoes and furniture —do not let us forget furniture—at too low a level. That is the burden of our criticism on textiles. After listening to the Economic Secretary, I am still rather uncertain why the Government did not follow the policy of the previous Government of progressively exempting further necessities year by year.
We were always urged to do that when the party opposite were in Opposition. In particular, dusters used to be waved before our eyes in those days, and I remember that the present Colonial Secretary used to be particularly eloquent on the subject of soap. The Economic Secretary was not here, but he may remember that, in 1948, there were many individual Amendments which were wholly within the Rules of Order. He was inclined to argue that it was impracticable to carry on this process and go further. As my hon. Friend the Member for Blackburn, East (Mrs. Castle) said, we did so in 1951 and in several years.
We selected such things as toothbrushes, bootlaces and school satchels and exempted them from the tax entirely. We should have liked to have gone further. The reason we did not go on to soap, cutlery and some of the other things was that in that year it would have cost too much revenue. After all, that was a year in which defence expenditure was increasing and in which, on balance, there was no tax revenue to give away. But this year the situation is quite different. The Chancellor has given away £170 million, and, therefore, he has not, so far as I can see, any substantial reason for not continuing this process of exemption.
The Economic Secretary produced an extraordinary further excuse for that this evening. He said that he recognised that we had done this in the past, and he said that therefore there are now no necessities left to exempt; he said there was nothing left but the amenities and luxuries—I accept his three-fold classification for this purpose. But soap is still taxed. Does he really regard soap as not being a household necessity? I can assure him that it is taxed. Cutlery is taxed—spoons, forks and knives, all those essential household articles. Even if we do not include the handbags which have been 305 discussed this afternoon, it is a fact that razor blades are subject to tax. Would the Economic Secretary not agree that they are a household necessity in a modern community? Is linoleum, or hardware and other things of that kind? I think that the Conservative Party is remarkably out of date if the hon. Gentleman thinks that razor blades, cutlery, soap and linoleum are not ordinary articles of household necessity.
If the Chancellor's difficulty is one of finding things to exempt I can make him a good many suggestions out of the Schedule. Does he know that Christmas stockings are subject to tax at present? I should have thought they might be a possible candidate for exclusion. I notice that Christmas trees of not more than four inches in height are subject to tax, though apparently if they are more than four inches in height they are exempt—a rather curious inverted D line in the case of Christmas trees. It is clear that there are a very large number of household articles which are subject to tax and which could have been eliminated this year.
I think there was a particular reason for doing that this year, namely, that food prices at present are rising so rapidly. The Financial Secretary unwarily said in the Budget debate that the Purchase Tax changes which the Chancellor had made would contribute substantially to lowering the cost of living.
§ The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter)
That statement has been misquoted once already by one of the right hon. Gentleman's hon. Friends. When I referred to the tax reductions I said expressly that I was not saying what effect it would have on the index or the cost of living, and that I did not wish to exaggerate it. If the right hon. Gentleman will quote the whole passage I shall be perfectly content.
§ Mr. Jay
The hon. Member said that it would make a contribution to a steady reduction in prices, helping in particular those with lower incomes. I fully agree that he did not mention the index, but he suggested it would be a major help to those with lower incomes. As he now does not wish to exaggerate, we can agree about that.
§ Mr. Boyd-Carpenter
As the right hon. Gentleman has been good enough to quote from what I have said, perhaps he will allow me to do so. I said:It is not for me to exaggerate—and I have no intention of doing so—what effect they may or may not have on the cost-of-living index or on the cost of living, but it is a fact that this cut is a contribution to a steady reduction in prices, …
§ Mr. Jay
As the hon. Gentleman finished his quotation in the middle of his sentence, I will continue it. He actually said:… a steady reduction in prices, which must be of peculiar and special benefit to those whose incomes are lowest."—[OFFICIAL REPORT, 15th April, 1953; Vol. 514, c. 256.]That being so, and bearing in mind that the food price index has risen by more than 10 per cent. since the beginning of 1952. there was a special case for making reductions on some of these household articles this year. The remarkable thing is that in the whole range of clothes and boots and shoes the only things which have enjoyed any reduction this year are fur coats and other fur garments. That seems an extraordinary result at such a time.
Although a great number of commodities fall under these two Schedules, we have naturally and rightly, discussed textiles for some time this afternoon. Having listened to the Economic Secretary, I was struck by the extraordinary difference between his account of the cotton industry at the present time and that of Sir Raymond Streat in the document which has been quoted. The hon. Member for Cheadle (Mr. Shepherd) said that he did not see why the textile industry should ask for special treatment. I do not think that the textile industry is asking for special treatment. The issue is at what level the D line should stand, and, therefore, what proportion of the textile industry's products should be exempt from tax.
There are many industries whose products are wholly exempt from tax. There is no exactly similar treatment industry by industry for the purpose of Purchase Tax. For instance, in the case of books there is complete exemption and, therefore, the percentage of turnover in that trade which is paying Purchase Tax is nil. Our complaint is that the Chancellor put the D level at too low a point in the first place, and that he has 307 obstinately insisted on keeping it there. We have had in the past year a great deal of evidence of the effects of the introduction of the D Scheme at that level.
The Economic Secretary entirely ignored all the statements which Sir Raymond Streat made in the really formidable memorandum which he sent to the Chancellor and in the letter which he wrote to the Chancellor after the Budget. We had exactly the same statement as that of Sir Raymond Streat from the right hon. Member for Blackburn, West in the second part of his speech this afternoon. We notice that in the first part of his speeches the right hon. Gentleman always praises the Chancellor and in the second part always condemns what the Chancellor has done. It is quite clear that as the D Scheme has worked out there has been a debasement of quality in large sections of the cotton industry. The right hon. Member for Blackburn, West said that there had been general debasement of fine cloths. That is surely a very serious situation in this very important industry. It is rather remarkable that the Economic Secretary passed it by so blithely at the end of his speech.
The Economic Secretary mentioned the "blind spot," but did not mention the fact that, according to what Sir Raymond Streat has also told us, a new and worse blind spot has appeared as a 'result of the operation of the D Scheme. The evidence is, therefore, that there has been a debasement of quality, that exports have been hampered, and that a larger proportion of textile products are now being taxed than was the case under the previous Utility Scheme. That is our complaint, and so far as I can see none of those facts are in serious dispute. They were not seriously disputed by the Economic Secretary, yet he proposes to take no action about them.
I would quote only one further sentence from Sir Raymond Streat's letter to the Chancellor after the Budget. He states:
§ "The denial to textiles of participation in the general concession, apparently on the grounds that something was done a year ago and that uniformity of rates of tax is more important than meeting the actual facts of the case, fills the texile industries with concern and dismay."
§ That is well expressed. The Chancellor's defence was that he had done something a year ago and could not be expected to do it again this year.
§ Apparently, instead of having fair shares between different sections of the community, the Chancellor has evolved a doctrine of fair shares between different Budget years. That seems to us to be an extremely clumsy and unselective way of dealing with Purchase Tax. Surely we ought to look at the actual effects on production, trade, employment, cost of living, and so on, and take our decision on those grounds.
§ I believe if that had been done the Chancellor this year would inevitably have raised the D level in the case of textiles, and added to the number of exemptions in the necessities or near necessities still subject to tax. But this action of doing nothing because something was done last year, regardless of the facts, precisely illustrates the Government's clumsy and non-selective method of administering the Purchase Tax, which is what we particularly complain of.
§ We have mainly debated those commodities falling under the new 25 per cent. rate. We condemn the action of the Chancellor in not giving any further relief at this time. I think it would be open to us to have two separate Divisions on these two Amendments, and for the reasons I have given, because the Chancellor's action is neither fair to the consumer nor good for industry, unless my right hon. Friends wish to continue this debate further—we shall be able to debate the Question, "That the Clause stand part of the Bill" later—I would advise them to carry out support for the first Amendment to a Division.
§ Question put, "That 'twenty-five stand part of the Clause."
§ The Committee divided: Ayes, 267; Noes, 249.311
|Division No 182.]||AYES||[7.40 p.m.|
|Allan, R. A. (Paddington, S.)||Assheton, Rt. Hon. R. (Blackburn, W.)||Barber, Anthony|
|Alport, C. J. M.||Astor, Hon. J. J.||Barlow, Sir John|
|Amory, Heathcoat (Tiverton)||Baldock, Lt.-Comdr. J. M.||Baxter, A. B.|
|Anstruther-Gray, Major, W.||Baldwin, A. E.||Beach, Maj. Hicks|
|Ashton. H. (Chelmsford)||Banks, Col. C.||Beamish, Maj. Tufton|
|Bell, Philip (Bolton, E.)||Higgs, J. M. C.||Orr, Capt. L. P. S.|
|Bell, Ronald (Bucks, S.)||Hill, Dr. Charles (Luton)||Orr-Ewing, Charles Ian (Hendon, N.)|
|Bennett, F. M. (Reading, N.)||Hill, Mrs. E. (Wythenshawe)||Orr-Ewing, Sir Ian (Weston-super-Mare)|
|Bennett, Dr. Reginald (Gosport)||Hinchingbrooke, Viscount||Osborne, C.|
|Bennett, William (Woodside)||Holland-Martin, C. J.||Partridge, E.|
|Bevins, J. R. (Toxteth)||Hollis, M. C.||Peake, Rt. Hon. O.|
|Birch, Nigel||Holmes, Sir Stanley (Harwich)||Perkins, W. R. D.|
|Bishop, F. P.||Hope, Lord John||Peto, Brig. C. H. M.|
|Black, C. W.||Hopkinson, Rt. Hon. Henry||Pickthorn, K. W. M.|
|Boothby, R. J. G.||Hornsby-Smith, Miss M. P.||Pilkington, Capt. R. A.|
|Bossom, A. C.||Horobin, I. M.||Pitman, I. J.|
|Boyd-Carpenter, J. A.||Horsbrugh, Rt. Hon. Florence||Powell, J. Enoch|
|Boyle, Sir Edward||Howard, Gerald (Cambridgeshire)||Price, Henry (Lewisham, W.)|
|Braithwaite, Sir Albert (Harrow, W.)||Howard, Hon. Greville (St. Ives)||Prior-Palmer, Brig. O. L.|
|Braithwaite, Lt.-Cdr. G. (Bristol, N. W.)||Hudson, W. R. A. (Hull, N.)||Raikes, Sir Victor|
|Brooke, Henry (Hampstead)||Hutchinson, Sir Geoffrey (Ilford, N.)||Rayner, Brig. R.|
|Brooman-While, R. C.||Hutchison, Lt.-Com. Clark (E'b'rgh W.)||Redmayne, M.|
|Browne, Jack (Govan)||Hyde, Lt.-Col. H. M.||Rees-Davies, W. R.|
|Buchan-Hepburn, Rt. Hon. P. G. T.||Hylton-Foster, H. B. H.||Remnant, Hon. P.|
|Bullard, D. G.||Jenkins, Robert (Dulwich)||Roberts, Peter (Heeley)|
|Bullus, Wing Commander E. E.||Jennings, R.||Robertson, Sir David|
|Burden, F. F. A.||Johnson, Eric (Blackley)||Robinson, Roland (Blackpool, S.)|
|Butcher, Sir Herbert||Johnson, Howard (Kemptown)||Robson-Brown, W.|
|Butler, Rt. Hon. R. A. (Saffron Walden)||Jones, A. (Hall Green)||Rodgers, John (Sevenoaks)|
|Campbell, Sir David||Joynson-Hicks, Hon. L. W.||Roper, Sir Harold|
|Carr, Robert||Kaberry, D.||Ropner, Col. Sir Leonard|
|Cary, Sir Robert||Keeling, Sir Edward||Russell, R. S.|
|Channon, H.||Kerr, H. W.||Ryder, Capt. R. E. D.|
|Clarke, Col. Ralph (East Grinstead)||Lambert, Hon. G.||Salter, Rt. Hon. Sir Arthur|
|Clarke, Brig. Terence (Portsmouth, W.)||Lambton, Viscount||Savory, Prof. Sir Douglas|
|Clyde, Rt. Hon. J. L.||Lancaster, Col. C. G.||Scott, R. Donald|
|Cole, Norman||Langford-Holt, J. A.||Shepherd, William|
|Colegate, W. A.||Law, Rt. Hon. R. K.||Simon, J. E. S. (Middlesbrough, W.)|
|Conant, Maj. R. J. E.||Legge-Bourke, Maj. E. A. H.||Smithers, Peter (Winchester)|
|Cooper, Sqn. Ldr. Albert||Legh, Hon. Peter (Petersfield)||Smyth, Brig. J. G. (Norwood)|
|Craddock, Beresford (Spelthorne)||Linstead, H. N.||Snadden, W. McN.|
|Crookshank, Capt. Rt. Hon. H. F. C.||Llewellyn, D. T.||Soames, Capt. C.|
|Crosthwaite-Eyre, Col. O. E.||Lloyd, Rt. Hon. G. (King's Norton)||Spearman, A. C. M.|
|Crouch, R. F.||Lloyd, Maj. Sir Guy (Renfrew, E.)||Speir, R. M.|
|Crowder, Petre (Ruislip—Northwood)||Lloyd, Rt. Hon. Selwyn (Wirral)||Spence, H. R. (Aberdeenshire, W.)|
|Darling, Sir William (Edinburgh, S.)||Lockwood, Lt.-Col. J. C.||Spens, Sir Patrick (Kensington, S.)|
|Davidson, Viscountess||Longden, Gilbert||Stanley, Capt. Hon. Richard|
|Deedes, W. F.||Low, A. R. W.||Stevens, G. P.|
|Digby, S. Wingfield||Lucas, Sir Jocelyn (Portsmouth, S.)||Steward, W. A. (Woolwich, W.)|
|Donaldson, Cmdr. C. E. McA.||Lucas, P. B. (Brentford)||Stewart, Henderson (Fife, E.)|
|Donner, P. W.||Lucas-Tooth, Sir Hugh||Stoddart-Scott, Col. M.|
|Doughty, C. J. A.||Lyttelton, Rt. Hon. O.||Storey, S.|
|Douglas-Hamilton, Lord Malcolm||McAdden, S. J.||Strauss, Henry (Norwich, S.)|
|Drayson, G. B.||McCallum, Major D.||Stuart, Rt. Hon. James (Moray)|
|Duncan, Capt. J. A. L.||Macdonald, Sir Peter||Studholme, H. G.|
|Duthie, W. S.||McKibbin, A. J.||Summers, G. S.|
|Eccles, Rt. Hon. D. M.||Mackie, J. H. (Galloway)||Sutcliffe, Sir Harold|
|Elliot, Rt. Hon W. E.||Maclay, Rt. Hon. John||Taylor, William (Bradford, N.)|
|Erroll, F. J.||Maclean, Fitzroy||Thomas, Rt. Hon. J. P. L. (Hereford)|
|Fell, A.||Macleod, Rt. Hon. Iain (Enfield, W.)||Thomas, Leslie (Canterbury)|
|Finlay, Graeme||MacLeod, John (Ross and Cromarty)||Thomas, P. J. M. (Conway)|
|Fisher, Nigel||Macmillan, Rt. Hon. Harold (Bromley)||Thompson, Kenneth (Walton)|
|Fleetwood-Hesketh, R. F.||Macpherson, Niall (Dumfries)||Thompson, Lt.-Cdr. R. (Croydon, W.)|
|Fletcher-Cooke, C.||Maitland, Comdr. J. F. W. (Horncastle)||Thornton-Kemsley, Col. C. N.|
|Ford, Mrs. Patricia||Maitland, Patrick (Lanark)||Tilney, John|
|Fort, R.||Manningham-Buller, Sir R. E.||Touche, Sir Gordon|
|Foster, John||Markham, Major S. F.||Turner, H. F. L.|
|Fraser, Sir Ian (Morecambe & Lonsdale)||Marlowe, A. A. H.||Turton, R. H.|
|Galbraith, Rt. Hon. T. D. (Pollok)||Marples, A. E.||Vane, W. M. F.|
|Galbraith, T. G. D. (Hillhead)||Marshall, Douglas (Bodmin)||Vaughan-Morgan, J. K.|
|Gammans, L. D.||Marshall, Sir Sidney (Sutton)||Vosper, D. F.|
|Garner-Evans, E. H.||Maude, Angus||Wakefield, Edward (Derbyshire, W.)|
|George, Rt. Hon. Maj. G. Lloyd||Maudling, R.||Walker-Smith, D. C.|
|Godber, J. B.||Maydon, Lt.-Comdr. S. L. C.||Ward, Miss I. (Tynemouth)|
|Gomme-Duncan, Col. A.||Medlicott, Brig. F.||Waterhouse, Capt. Rt. Hon. C.|
|Gough, C. F. H.||Mellor, Sir John||Watkinson, H. A.|
|Graham, Sir Fergus||Monckton, Rt. Hon. Sir Walter||Webbe, Sir H. (London & Westminster)|
|Gridley, Sir Arnold||Moore, Lt.-Col. Sir Thomas||Wellwood, W.|
|Grimston, Hon. John (St. Albans)||Morrison, John (Salisbury)||Williams, Rt. Hon. Charles (Torquay)|
|Grimston, Sir Robert (Westbury)||Mott-Radclyffe, C. E.||Williams, Gerald (Tonbridge)|
|Hall, John (Wycombe)||Nabarro, G. D. N.||Williams, Sir Herbert (Croydon, E.)|
|Harden, J. R. E.||Nicholls, Harmar||Williams, Paul (Sunderland, S.)|
|Hare, Hon. J. H.||Nicholson, Godfrey (Farnham)||Williams, R. Dudley (Exeter)|
|Harris, Frederic (Croydon, N.)||Nicolson, Nigel (Bournemouth, E.)||Wills, G.|
|Harris, Reader (Heston)||Nield, Basil (Chester)||Wood, Hon. R.|
|Harrison, Col. J. H. (Eye)||Noble, Cmdr. A. H. P.||York, C.|
|Harvey, Ian (Harrow, E.)||Nugent, G. R. H.|
|Harvie-Watt, Sir George||Nutting, Anthony||TELLERS FOR THE AYES:|
|Hay, John||Odey, G. W.||Sir Cedric Drewe and|
|Heald, Sir Lionel||O'Neill, Phelim (Co. Antrim, N.)||Mr. Oakshott.|
|Heath, Edward||Ormsby-Gore, Hon. W. D.|
|Acland, Sir Richard||Hale, Leslie||Paling, Rt. Hon. W. (Dearne Valley)|
|Adams, Richard||Hall, Rt. Hon. Glenvil (Colne Valley)||Paling, Will T. (Dewsbury)|
|Albu, A. H.||Hall, John T. (Gateshead, W.)||Pannell, Charles|
|Allen, Arthur (Bosworth)||Hamilton, W. W||Paton, J.|
|Allen, Scholefield (Crewe)||Hannan, W.||Pearson, A.|
|Anderson, Alexander (Motherwell)||Hargreaves, A.||Peart, T. F|
|Anderson, Frank (Whitehaven)||Harrison, J. (Nottingham, E.)||Popplewell, E.|
|Attlee, Rt. Hon. C. R.||Hayman, F. H.||Porter, G.|
|Bacon, Miss Alice||Healey, Denis (Leeds, S.E.)||Price, Joseph T. (Westhoughton)|
|Balfour, A.||Henderson, Rt. Hon. A. (Rowley Regis)||Proctor, W. T.|
|Barnes, Rt. Hon. A. J.||Herbison, Miss M.||Pryde, D. J.|
|Bartley, P.||Hewitson, Capt. M.||Rankin, John|
|Bellenger, Rt. Hon. F. J.||Hobson, C. R.||Reeves, J.|
|Bence, C. R.||Holman, P.||Reid, Thomas (Swindon)|
|Benn, Hon. Wedgwood||Holt, A. F.||Reid, William (Camlachie)|
|Bevan, Rt. Hon. A. (Ebbw Vale)||Houghton, Douglas||Richards, R.|
|Bing, G. H. C.||Hoy J. H.||Roberts, Albert (Normanton)|
|Blackburn, F.||Hudson, James (Ealing, N.)||Roberts, Goronwy (Caernarvon)|
|Blenkinsop, A.||Hughes, Cledwyn (Anglesey)||Robinson, Kenneth (St. Pancras, N.)|
|Blyton, W. R||Hughes, Emrys (S. Ayrshire)||Ross, William|
|Boardman, H||Hughes, Hector (Aberdeen, N.)||Royle, C.|
|Bottomley, Rt. Hon. A. G.||Hynd, H. (Accrington)||Shackleton, E. A. A.|
|Bowen, E. R.||Irvine, A. J. (Edge Hill)||Shinwell, Rt. Hon. E.|
|Braddock, Mrs. Elizabeth||Irving, W. J. (Wood Green)||Short, E. W.|
|Brockway, A. F.||Isaacs, Rt. Hon. G. A.||Shurmer, P. L. E.|
|Brook, Dryden (Halifax)||Jay, Rt. Hon. D. P. T.||Silverman, Julius (Erdington)|
|Broughton, Dr. A. D. D.||Jeger, George (Goole)||Silverman, Sydney (Nelson)|
|Brown, Thomas (Ince)||Jeger, Dr. Santo (St. Pancras, S.)||Simmons, C. J. (Brierley Hill)|
|Burke, W. A.||Jenkins, R. H. (Stechford)||Skeffington, Arthur|
|Burton, Miss F. E.||Johnson, James (Rugby)||Slater, Mrs. (Stoke, N.)|
|Butler, Herbert (Hackney, S.)||Johnston, Douglas (Paisley)||Slater, J. (Durham, Sedgefield)|
|Callaghan, L. J.||Jones, David (Hartlepool)||Smith, Ellis (Stoke, S.)|
|Castle, Mrs. B. A.||Jones, Frederick Elwyn (West Ham, S)||Smith, Norman (Nottingham, S.)|
|Champion, A. J.||Jones, Jack (Rotherham)||Snow, J. W.|
|Chapman, W. D.||Jones, T. W. (Merioneth)||Sorenson, R. W.|
|Chetwynd, G. R.||Keenan, W.||Soskice, Rt. Hon Sir Frank|
|Clunie, J.||Kenyon, C.||Sparks, J. A.|
|Coldrick, W.||Key, Rt. Hon. C. W||Steele, T.|
|Collick, P. H.||King, Dr. H. M.||Stokes, R. Hon. R. R.|
|Corbet, Mrs. Freda||Kinley, J.||Strachey, Rt. Hon. J.|
|Cove, W. G.||Lee, Frederick (Newton)||Summerskill, Rt. Hon. E|
|Craddock, George (Bradford, S.)||Lee, Miss Jennie (Cannock)||Swingler, S. T.|
|Crosland, C. A. R.||Lever, Harold (Cheetham)||Sylvester, G. O.|
|Crossman, R. H. S.||Lever, Leslie (Ardwick)||Taylor, Bernard (Mansfield)|
|Cullen, Mrs. A.||Lewis, Arthur||Taylor, John (West Lothian)|
|Daines, P.||Lipton, Lt.-Col. M.||Taylor, Rt. Hon. Robert (Morpeth)|
|Dalton, Rt. Hon. H.||Logan, D. G.||Thomas, David (Aberdare)|
|Darling, George (Hillsborough)||MacColl, J. E.||Thomas, lorwerth (Rhondda, W.)|
|Davies, Ernest (Enfield, E.)||McGhee, H. G.||Thomas, Ivor Owen (Wrekin)|
|Davies, Harold (Leek)||McGovern, J.||Thomson, George (Dundee, E.)|
|Davies, Stephen (Merthyr)||McInnes, J.||Thornton, E.|
|de Freitas, Geoffrey||McKay, John (Wallsend)||Timmons, J|
|Deer, G.||McLeavy, F.||Tomney, F.|
|Delargy, H. J.||MacMillan, M. K. (Western Isles)||Turner-Samuels, M.|
|Dodds, N. N.||MacPherson, Malcolm (Stirling)||Ungoed-Thomas, Sir Lynn|
|Driberg, T. E. N.||Mainwaring, W. H.||Usborne, H. C.|
|Dugdale, Rt. Hon. John (W. Bromwich)||Mallalieu, E. L. (Brigg)||Viant S. P.|
|Ede, Rt. Hon. J. C.||Mallaieu, J. P. W. (Huddersfield, E.)||Wade, D. W|
|Edwards, John (Brighouse)||Mann, Mrs. Jean||Wallace H. W.|
|Edwards, Rt. Hon. Ness (Caerphilly)||Manuel, A. C.||Watkins, T. E.|
|Evans, Albert (Islington, S.W.)||Marquand, Rt. Hon. H. A.||Webb, Rt. Hon. M. (Bradford, C.)|
|Evans, Edward (Lowestoft)||Mason, Roy||Weitzman, D.|
|Evans, Stanley (Wednesbury)||Mayhew, C. P||Wells, William (Walsall)|
|Fernyhough, E.||Mellish, R. J||West, D. G.|
|Fienburgh, W.||Messer, F.||Wheatley, Rt. Hon. John|
|Finch, H. J.||Mikardo, Ian||Wheeldon, W. E.|
|Fletcher, Eric (Islington, E.)||Mitchison, G. R||White, Mrs. Eirene (E. Flint)|
|Follick, M.||Monslow, W.||White, Henry (Derbyshire, N.E.)|
|Foot, M. M.||Moody, A. S.||Whiteley, Rt. Hon. W.|
|Forman, J. C.||Morgan, Dr. H. B. W.||Wilkins, W. A.|
|Fraser, Thomas (Hamilton)||Morley, R.||Wiley, F. T.|
|Freeman, John (Watford)||Morris, Percy (Swansea, W.)||Williams, David (Neath)|
|Gaitskell, Rt. Hon. H. T. N.||Morrison, Rt. Hon. H. (Lewisham, S.)||Williams, Rev. Llywelyn (Abertillery)|
|Gibson, C. W.||Mort, D. L.||Williams, Ronald (Wigan)|
|Glanville, James||Moyle, A.||Williams, Rt. Hon. Thomas (Don V'll'y)|
|Gooch, E. G.||Mulley, F. W.||Williams, W. R. (Droylsden)|
|Gordon-Walker, Rt. Hon P. C.||Murray, J. D.||Wilson, Rt. Hon. Harold (Huyton)|
|Greenwood, Anthony (Rossendale)||Nally, W.||Winterbottom, Richard (Brightside)|
|Grenfell, Rt. Hon. D. R.||Neal, Harold (Bolsover)||Woodburn, Rt. Hon. A.|
|Grey, C. F.||Noel-Baker, Rt. Hon. P. J.||Wyatt, W. L.|
|Griffiths, David (Rother Valley)||Oldfield, W. H.||Yates, V. F.|
|Griffiths, Rt. Hon. James (Llanelly)||Oliver, G H.|
|Griffiths, William (Exchange)||Orbach, M.||TELLERS FOR THE NOES:|
|Grimond, J.||Oswald, T||Mr. Bowden and Mr. Holmes.|
Question put, and agreed to.
§ The Temporary Chairman (Mr. G. H. R. Rogers)
Does the right hon. Gentleman wish to move the Amendment in page 6, line 9, to leave out "fifty," and to insert "forty-five"?
§ Mr. Gaitskell
As my right hon. Friend explained, this was really a token Amendment so that we might discuss the range of articles covered by the 50 per cent. tax. In the circumstances, I do not propose to move it.
§ Sir Edward Boyle (Birmingham, Handsworth)
I beg to move, in page 6, line 9, to leave out "seventy-five." and to insert:sixty-six and two-thirds.It might be for the convenience of the Committee if the corresponding Amendment to line 35 was taken at the same time. The Chancellor in his Budget speech stressed very clearly the evil effects of Purchase Tax at its pre-Budget rates. He went out of his way to mention that this specially applied to goods chargeable at the higher rates of tax. He said:… the fact of the matter is that the present rates are too high, and the margins between rates too wide. The difficulties are most apparent in the case of goods chargeable at the higher rates, where in some cases the tax has proved heavier than the industries concerned can bear, and a danger of redundancy of labour has shown itself. All this is doing damage to home trade, to skill, craftsmanship and tradition and, above all, is reacting adversely on our all-important export trade.Furthermore, my right hon. Friend specifically mentioned the jewellery and silverware trades when he said:… traditional skills must be fostered if they are not to die."—[OFFICIAL REPORT, 14th April, 1953; Vol. 514, c. 52–3.]It may be within the recollection of the Committee that on 20th March I moved a Motion, which was agreed to by the House, calling on the Government to give urgent attention to the problems of the jewellery and silverware industry. I, for my part, was very grateful to the Chancellor for specially mentioning these industries in his Budget speech.
I hope that in moving this Amendment this evening I shall not be accused of looking a gift horse in the mouth or of failing to realise that the reduction that my right hon. Friend has already made of 25 per cent. has certainly proved of real benefit to many businesses. Incidentally, immediately after my right hon. 314 Friend's reference to the jewellery and silverware industries he also mentioned the cosmetic industry. Those of us who watched the television programme last Sunday, "What's My Line?", and saw a lady who called herself a lipstick-polisher may have felt that the range of craft industries was rather wider than we had hitherto supposed.
My hon. Friends and I have tabled this Amendment for two reasons. The first is because in our view the margins between the rates of Purchase Tax are still too high. In saying that I can at least claim the support of the leading article in this morning's edition of "The Times." My right hon. Friend said in his Budget speech that an all round reduction of the rates of Purchase Tax would have the effect of reducing the margins between them. That is perfectly true in a strictly arithmetical sense, but one must remember that if we reduce all the rates of Purchase Tax by the same fractional amount, the proportional difference between the various rates remains exactly the same as before and, in my view, the margin between the various rates is still too high.
Even more important, the 75 per cent. rate of tax is still a far higher rate than the craft industries can bear. I do not want to repeat all the arguments I used when I moved my Motion in March on the jewellery and silverware industries, because I know that the Committee want to make progress. I confine myself to two points in connection with the craft industries. First, a 75 per cent. rate of tax means that cheapness will remain the aim of the producer at the cost of design and finish. Secondly, a 75 per cent. rate of tax will still handicap the home market very considerably and thus injure the export trade by reducing the number of ranges which a manufacturer can offer his customer from stock.
I dare say that it will be said that a reduction from 75 per cent. to 66⅔ per cent. would not by itself make any very great difference. But there are two arguments on the other side. First, if this reduction far which I am asking were made, the margin between the highest rate and the rate immediately below it would be reduced. Secondly, if this reduction in the highest rate of Purchase Tax were made from 75 per cent. to 66⅔ per cent. that would give the Chancellor more 315 elbow room for future action. My right hon. Friend would then be in a position at a later date to reduce the tax on jewellery and silverware to 33⅓ per cent., which I believe to be the highest rate which this industry can bear without serious damage, while, at the same time, he could leave the tax on certain other articles—such as cosmetics—where it is at the moment.
I fully realise the Chancellor's difficulties. There is, first, the revenue aspect. If the reduction were made, on such calculations as I have been able to make, the Chancellor would lose between £3 million and £4 million. I say that on the basis of some figures which my hon. Friend the Financial Secretary kindly gave me in March in answer to a written Question. As one who thinks that, if anything, the Chancellor may slightly have erred in generosity in this year's Budget I certainly would be the last to underrate the importance of the revenue aspect. There is the question, which I certainly do not want to discuss this evening, of retailers' stocks. Those hon. Members who sit for industrial or urban constituencies know very well the problems which the retailers have to face when the Purchase Tax is reduced.
None the less, I cannot help feeling that the Chancellor's Purchase Tax proposals in their present form do not quite carry out the objective which he announced in his Budget speech, and that is why my hon. Friends and I have put down this Amendment. I therefore ask the Government to look at this matter again, and, if they feel that they cannot make an overall reduction such as I have suggested, I would at least ask the Financial Secretary to give the Committee an assurance that the problems of the craft industries will be kept constantly under review.
§ Mr. Bernard Braine (Billericay)
This Amendment seeks to bring much-needed relief to at least two trades which have earned for this country a high reputation for craftsmanship and quality production, but which in the last few years have been slowly taxed out of existence. The fact that my right hon. Friend has seen fit to reduce the 100 per cent. rate of Purchase Tax is in itself a recognition that 316 the burden has become exceedingly heavy. The contention of my hon. Friends and myself is that it is still too heavy.
I am very conscious of the fact that in normal circumstances, in advancing a case of this kind, one is faced with prejudice, but I never thought that I should encounter so much prejudice as was evinced in the earlier stages of this debate. The argument seems to run that little sympathy need be wasted on those who are engaged in the production of fine silverware and jewellery and well-made fur garments because they are engaged in luxury trades which cater for the few, that they ought to be taxed anyway, and that if in the process they are taxed out of existence, it will not matter very much. That is a jaundiced view. It is stupid, too. The craft industries of this country make a contribution to the national economy out of all proportion to the numbers engaged in them.
May I take as an illustration the fur trade, and here let me say at once that I have a small but indirect interest which I must declare. The fur trade of this country employs between 9,000 and 10,000 people. It exports skins and fur garments worth roughly £25 million a year. It earns hard currency. It contributes to our invisible exports. It adds lustre to our reputation for craftsmanship. Whether furs are luxuries or not in the view of hon. Members opposite, the fact is that they help this country to earn its bread and butter. [Interruption.] Yes, indeed; I ask the hon. Gentleman to look at the matter objectively. In fact, those who are engaged in these trades contribute to the Welfare State, and they have a case which should be heard.
The Economic Secretary to the Treasury argued in his winding-up speech in the last debate that it was all very well to call for tax reductions, but how was his right hon. Friend the Chancellor to replace the revenue that would be lost thereby? That is a proper argument. But the position here is that, unless there is a further substantial reduction in the tax, the revenue will melt away. It is already melting away. The Purchase Tax on furs in 1951 yielded £39 million. In the following year the yield fell to £2.7 million, and, though the latest figures have not been published, the downward trend is still continuing. It is continuing because the Purchase Tax at 100 per 317 cent., which has largely killed the home trade in fine silverware, is virtually strangling the fur trade.
I agree with those who think that this is a vicious tax. It is indeed; it is a levy upon skill, upon beauty and upon the rich but not inexhaustible fund of British craftsmanship. I do not believe that the reduction of the tax to 75 per cent. is going to help, but there is a very much more serious aspect of the matter which I invite the Committee to consider. By destroying the home market for silverware or furs, the Purchase Tax is, in effect, undermining our capacity to export, and that is something which concern's every one of us.
Let the figures speak for themselves. In the first quarter of 1952, our exports of furs amounted to £7.2 million; in the first quarter of this year, the figure had fallen to £5.5 million. It may be argued that that is evidence of some recession in trade, but indeed it is not. What is happening is that we are getting a smaller share of the existing market. Our competitors are not saddled with the same tax burden. I wonder if the Board of Trade or the Treasury have studied the figures of West German exports in this particular connection? For the last three years, the value of West German exports has been in the region of £1 million a year, which is not a substantial figure, but in the first three months of this year it has exceeded £1 million, and that trend is continuing. The reason is that, while we are subject to crippling taxation, the Germans are subject only to a turnover tax of 6 per cent. It is the declared object of the Germans to transfer the international fur market from London to Frankfurt, and the Purchase Tax is their most valuable ally in this respect.
The world does not owe this country a living. The overseas buyer is selective. He wants the choicest materials, the best in craftsmanship, the latest in fashion, and if he cannot find these things in this country, he will turn elsewhere for them. Taste is not governed by Board of Trade regulations, and I do not think fashion can be decreed in advance by Financial Secretaries. It is quite impossible to provide overseas purchasers with what they want, or even to keep abreast of our competitors, unless there is a home market providing our craftsmen with the opportunity to experiment in style and design.
318 That is true of both silverware and jewellery, and of the fur industry, but it is particularly true of furs, for this reason. For three centuries, London has been the centre of a great international trade. There is no reason why it should be. It could quite easily depart to Frankfurt, Montreal or New York tomorrow. London will only remain the centre of that international trade so long as our merchants can offer the finest collections and assortments.
Anyone who knows anything about this trade will realise that skins vary considerably. The choicest ones are exported, and those which cannot be sold to overseas buyers have to be sold at home, but precisely because of the difficulty of selling at home, obviously merchants are restricting their imports, and by restricting imports the choice which can be offered to overseas buyers is also restricted. Thus, if imports fall, exports fall too. The trade is highly seasonal, and demand fluctuates violently from month to month. If continuity of employment, to which we all attach the greatest importance, is to be maintained, then a home market is essential.
The object of the reduction from 100 to 75 per cent. was, of course, to breathe new life into these craft industries. But I say quite frankly that I do not think it is enough. There are some firms who have had to close down even since the Budget. I have here an extract from a letter which has been sent to me in which the writer says:After 39 years in business, during which 1, with my family, built up a reputation second to none for a well-made article, produced by well-trained craftsmen, I am now forced to close down … because of the vicious Purchase Tax. I am left at 60 years of age with nothing to show for my life's work. For the sake of my workpeople, the majority of whom have been with me since they left school, I have endeavoured to keep going. Originally, I had 48 workers. Last year this was cut down to 16, and this year that was cut still further to 10. Now these last 10 have had to be discharged.The argument used about luxury industries by hon. Members opposite would not carry much weight or conviction with the workers in this industry who have lost their employment. This is not an isolated case. I have another letter from a business man who tells me:My firm have been in the fur trade for 32 years. They have always carried on a good 319 class business, and have a very fine name for their productions throughout the world.That firm is closing down at the end of the month.
All this has happened since the announcement that the rate of Purchase Tax was to be reduced from 100 to 75 per cent. Is it any wonder that in the silverware trade, where almost identical arguments can be used, the average age of craftsmen today is between 60 and 65. or that for every four youngsters who entered the fur trade before the war, only one is coming in today. Long centuries ago Chaucer reminded us—The lyf so short, the craft so long to lerne.It takes 15 to 20 years to train a good craftsman in the silverware industry, and much about the same time in the fur industry. Unless there is a steady stream of recruits into these industries they are doomed. They are doomed not because the world no longer needs what they produce. On the contrary, the figures I have produced show that others are moving into our markets because we stubbornly refuse to create the conditions in which these industries can pay their way.
I am not an unreasonable man, I trust, nor am I unmindful of the fact that my right hon. Friend the Chancellor has already made a considerable concession, and that, in the larger sense, he is concerned with creating conditions for the expansion of the economy as a whole. I recognise with Burke that "to tax and to please, no more than to love and be wise, is not given to men"—even to the best of Chancellors. Nevertheless I fear that in this case my right hon. Friend may not have gone far enough. I would remind him that the piano industry had to convince him that it was in extremis before any effort was made to come to its aid.
I ask him not to let the other craft industries be brought to that state before help is given, because once skill has been dispersed it may never be recovered. We are already going through a process where men are being cast off or driven into other industries. I suggest that for a country which very largely bases its hopes of recovery upon its rich and varied craftsmanship such a position would be a tragedy.
§ 8.15 p.m.
§ Mr. Emrys Hughes (South Ayrshire)
I do not wish to embarrass the Government, but if there is a revolt from the other side I shall have to vote for the Government. I well remember the debate which took place on a Friday when the hon. Member for Handsworth (Sir E. Boyle) moved his Motion, and I recollect it well because I never heard such a lot of crazy economics stated in such a short time in all my recollection of the House. But the Government gave way and started a policy of appeasement. Now along come the jewellery and the silverware trades, like Oliver Twist, and ask the Chancellor for more.
Where would the Chancellor have got his revenue if we had all presented the special interests of our constituents? I asked this question before, but I got no reasonable answer. We want £1,600 million for armaments and yet here are hon. Gentlemen opposite saying that jewellery, silverware and fur coats come before guns.
§ Mr. Hughes
I should be prepared to endorse that. I am not quite sure where fur coats come in, or whether the hon. Member for Billericay (Mr. Braine) put in a special plea for that industry on the assumption that the people who bought jewellery bought fur coats as well. I merely wish to point out that if we are to have the sort of economy in which we have to find huge sums every year for armaments, then hon. Gentlemen who represent the jewellery and fur industries must be prepared to face the consequences and sacrifice their constituents.
I hope that the Treasury will not follow this policy of appeasement of what is essentially a luxury trade. I believe that the home market for fur coats and jewellery could be fostered by increasing the purchasing power of the wages of the miners in my constituency. That might be a more economically sound way of solving the problem. I should very much like to see all the miners' wives in my constituency wearing fur coats.
§ Mr. Hughes
Yes, why not. I think they are far more entitled to them than the people who have been displaying them in recent weeks. I should like to see a 321 great increase in the wearing of fur coats among miners' wives, and if jewellery is an essential of beauty, I know of no more deserving section of the community who would be entitled to it than the miners' wives.
Hon. Gentlemen opposite cannot have it both ways. They cannot have a Warfare State and a luxury State at the same time. I know that the Financial Secretary to the Treasury will be very grateful to me for my moral support, even if he does not approve of all that I have said.
§ Mr. Shepherd
I have listened with considerable interest and amusement to the intervention of the hon. Member for South Ayrshire (Mr. Emrys Hughes). I do not qualify fox his strictures in the sense that I do not rise to support the mover of the Amendment because of any constituency interest. It is true that I supported the Motion moved by my hon. Friend the Member for Handsworth (Sir E. Boyle) in March of this year.
I rise to support the case of the silverware industry because I think it merits our special consideration. As I said when we were discussing the previous Amendment, I am not in favour of discrimination, and I want to see this tax reduced by successive stages until it is eliminated altogether. In certain instances, however, a case might perhaps be made for discrimination, and I hope that the Committee and the Treasury will look at the position of the silverware industry as distinct from the jewellery industry. I think a case could be made for even more drastic action in the case of the silverware industry than is indicated in the terms of this Amendment.
There is no doubt that the silverware industry of this country is doomed unless some help is given to it. The fur industry is getting a reduced number of apprentices, but the silverware industry is getting none at all. No one wants to go into an industry that is dying. Leaving out the question of prejudice concerning who buys silverware, if we want to keep alive this craft then we must do something to put new life into the industry. I stress those words, because this industry's output is of lasting value. When we produce an article of silverware, it is not transient, but something which will be of vast benefit and will give pleasure to generations of people. I should not like to see 322 this industry die when it could be saved by Government action.
I am grateful for what my right hon. Friend the Chancellor said in his Budget speech and for his Purchase Tax concessions, but it is idle to pretend that a reduction of 10 per cent. in the retail price of silverware articles—that is what the reduction of tax means in practice— will save the industry. If we look at the cost of the articles concerned, we see that we are up against a big differential between the pre-war price and the postwar price. A tea-set which sold for £100 before the war, costs nearer £400 today. It is therefore wrong to think that we can deal with this desperate situation by reducing the retail cost by only 10 per cent.
This industry ought to be taken out of its present Purchase Tax Group 27 and put into Group 11, with electroplate ware. That would make a substantial contribution and would help the export trade. A lot of nonsense is talked about the effect of Purchase Tax on the export trade, but it is not nonsense in the case of silverware. We ought to produce new designs, which is very expensive in a dying industry. We cannot afford to produce new designs, and this has a serious effect upon production in the industry and upon its export potential.
I was concerned, in suggesting that we should take the industry out of Group 27 and put it into Group 11, to have the support of the retailers for such a proposal. So I got into touch with the National Association of Goldsmiths and asked them to approach their members to see whether they would be in favour of it. When I asked the association how far they represented the trade of the country, they replied that they represented 2,480 retail shops, including those of the principal West End jewellers, and 75 or 80 per cent. of the purchasing power of the retail trade.
The association sent letters to their members asking whether they would approve such a reduction, bearing in mind that they might have to stand a good deal of loss in consequence. The Secretary has written to me now and said that, in consequence of this inquiry, he is confident that 90 per cent. of the membership, and may be more, would welcome a further reduction. I give this information to the Committee because 323 it is important for us to realise that if there were a further substantial reduction the retail traders generally would be prepared to meet the consequences financially.
§ Mr. Mulley
I should like to endorse very strongly the excellent case that the hon. Gentleman is making for silverware, seeing that my own inquiries confirm the figures he has given. I understand that there are stocks of silverware in the shops that were actually there before Purchase Tax was introduced, so little buying has there been during the Purchase Tax period. Probably many of the existing stocks have never carried Purchase Tax at all.
§ Mr. Shepherd
I am grateful for the hon. Gentleman's intervention. I think just as strong a case can be made out for silverware as for pianos. The piano can be an instrument of torture, but silverware is always a source of joy, at any rate to me whenever I can afford to buy a piece. Therefore, if my right hon. Friend can see fit to abolish Purchase Tax altogether on pianos, I suggest there is abundantly a case for bringing down the tax on silverware from the present 75 per cent. to 33⅓ per cent.
We cannot wait very much longer. When we have got to a state where most of our craftsmen are engaged upon repairs or jobs outside those strictly for a silversmith and when no more apprentices are coming in, there is not much longer to wait before we reach the end of the industry. To give some idea of what has happened, I will take the figures for Birmingham, where, in 1937, the silverware industry produced 1,200,000 ounces. In 1951, the figure was 400,000 ounces, and in 1952 and 1953 the figures went down substantially again.
Therefore, there is a case for what I do not like in general principle, for discrimination, in order to save this industry. My right hon. Friend said that he would save the piano industry; I believe there is a case for saving the silverware industry. I cannot say there is so strong a case for jewellery, but there is a very strong case indeed for the silverware industry. I hope that between now and further stages of the Bill the Chancellor and the Financial Secretary will be able to give consideration to the suggestions I have made.
§ Mr. David Logan (Liverpool, Scotland Division)
I want to call the attention of the Chancellor to a matter affecting not the export trade but the economy of the domestic household. This week my attention has been called to mirror manufacturers and processors, a body of men in the city of Liverpool. For many years I have had a very intimate knowledge of every class of furnishing, and I am able to speak with a knowledge of the subject although I have not spoken on this matter before.
These gentlemen are carrying on business among the poor and the middle-class, and they feel that their business is being ruined. Anybody who analyses the merits and demerits of the Purhase Tax—we shall go a long way before we find its merits—will know that the tax is not economic in any household. It is the greatest swindle of the day, but we have to accept it and use it to produce revenue. We ought, in matters of taxation, to deal honestly and sincerely, making those pay who are able to do so and relieving those who are getting less money. When I examine what these gentlemen complain about I find that they are justified.
This is only a very small matter. I shall not go into the whole question of the Purchase Tax. For eight years the trade has been trying to get a reduction in the Purchase Tax on the ordinary hanging mirror. Perhaps there are too many of us who do not like to see our faces, so it seems repulsive to make economies in that direction. Be that as it may, the first thing many young girls and fellows getting married think about is getting a mirror to hang over the chimney-piece in what they call the parlour, or in the kitchen. I put it to the Committee—I will not say as businessmen, because most of us are not businessmen, although we must consider the views of businessmen sometimes—that people must be given easier methods of buying, and to impose 5s. on 5s. for a mirror in a poor home, or even £1 on £1, is going beyond reason.
I have received a two-page letter, which I will not read, but perhaps the Committee will take the substance of it from me. It says, in effect, that in 1948 there was a reduction from 100 per cent. to 75 per cent., but they now find that 70 per cent. of the skilled labour which used 325 to be employed in the glass trade has gone. In my humble opinion, industries like this, which give work to many people, ought to be maintained. A mirror in a house is not a luxury, it is a necessity.
With all due respect, I put it to the Financial Secretary that it is time we did away with this Purchase Tax, especially for the hanging mirror. No benefit is derived from it. If it were abolished, more work would be given to people in Liverpool, and it would be better for trade generally more would be spent by people. I put this simple proposition to the Financial Secretary in the hope that he will bring it to the attention of the Chancellor, to see whether he can remove at any rate some of this Purchase Tax.
§ Mr. Stephen McAdden (Southend, East)
I very much hope that my hon. Friend the Financial Secretary will be impressed by the fact that every speaker so far who has addressed his mind to the argument advanced by my hon. Friend the Member for Handsworth (Sir E. Boyle) has supported the Amendment. The only discordant note has been struck by the hon. Member for South Ayrshire (Mr. Emrys Hughes), who did not apply his mind to the argument at all; he merely assumed my hon. Friend's motives as a fit subject for attack instead of applying himself to the arguments advanced. I think it is highly commendable that we should have such unanimity upon this important issue.
§ Mr. McAdden
I was referring to those who had spoken so far.
It is highly commendable that we should have this unanimity upon this important issue, because it is an important issue. The general arguments in favour of the craft industries were deployed at length some time ago and it would be most inopportune to go over the whole ground again, but it is important to disabuse our minds of some of the prejudice which the hon. Member for South Ayrshire sought to import into the debate. It is not true that the only people who wear fur coats are wealthy people. One has only to study some of the papers to which he himself contributes from time to time to find in the pages of those excellent periodicals advertisements for fur coats on hire 326 purchase; not for purchase by wealthy people, but by people of ordinary incomes.
Neither is the hon. Member right in assuming that there is not a miner's wife in the country who has got a fur coat. He really ought to get more up to date. Progressively over the years there has been a continual improvement in the standard of life of the people, and more and more things which used to be regarded as luxuries have now come to be regarded as necessities of life merely because in those early days production was not taxed as so-called luxuries are taxed today.
It is because my hon. Friend and myself are anxious that this range of commodities should be brought within the reach of the workers that we are opposed to this idea of taxation on what the hon. Member for South Ayrshire chooses to call luxury goods. We want more people to have them. For that reason I am delighted to support my hon. Friend in the argument he has advanced, and to express the hope that the Financial Secretary will realise that these industries are of considerable importance to this country from an export point of view. I know that it can be cleverly argued, "What is the use of talking about Purchase Tax in connection with export industries when no tax is paid on that which is exported?", but unless we manage to maintain a respectable amount of home trade we shall not have any exports.
My hon. Friend the Member for Billericay (Mr. Braine) referred to the export value of the fur trade. The fur industry has an export trade of £25 million which is very large for an industry of its size. We should remember that the fur trade was won for this country by the energy of its fur merchants. We won the fur market from Leipzig into this country, and Germany is most anxious to get it back. We shall assist Germany in her endeavours to win the fur market back from this country to Frankfurt unless we do something to try to preserve the industry which is contributing most substantially to our export revenue.
The same applies to the jewellery and silverware trade. I feel that we ought to do all that we can to assist these craft 327 industries not only for the employment which it gives to those engaged in them and whose employment we want to be able to protect and promote but also for the benefit of the export aspect of their trading. I advocate this argument from an impersonal point of view because there is, so far as I know, no silverware industry in my constituency nor any fur industry. I hope that in due time the hon. Member for South Ayrshire will remember that there are Members on both sides of the Committee who are prepared to advocate a cause in which they believe, and if it happens to be a constituency interest as well, so much the better. I hope that he will not in future seek to criticise hon. Members for espousing the cause of their constituents, especially when they happen to believe in it.
§ Mr. Victor Yates (Birmingham, Ladywood)
There is a great deal of nonsense talked about what is luxury and what is not luxury and I think it is time that we had a more clear understanding of the matter. When we were previously debating the question of the jewellery industry in this House, I mentioned that in my judgment anything which brought culture to mankind was a necessity and not a luxury.
There is not an item which has been mentioned in this debate which cannot be proved to be a vital necessity to the nation. Most of the articles coming within this class come within the range of exports, and without a good home trade it is very difficult to have a good export trade. This talk about luxury trades is really absurd. I am surprised at my hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) falling for that sort of thing. As a matter of fact, I thought we had converted him in a previous debate, because I can remember that in Birmingham, when the rearmament programme started, it was pointed out by some of us that this would have a detrimental effect upon the jewellery industry in the city. I should have thought that my hon. Friend would have thought that the less there is available for rearmament the better. I should have thought that he would have accepted the view that, with less Purchase Tax, less money would be available for rearmament.
§ Mr. Yates
In relation not only to jewellery but to all the other items which come within the provisions, what disturbs me is the effect upon craftsmanship and skill. Whenever there have been impartial investigations into the effects of Purchase Tax upon, say, jewellery and silverware, we have had very clear advice about what really ought to be done. The Board of Trade Working Party on the jewellery industry said:… we feel bound to emphasise that, viewed simply from the point of view of its effect on the health of the industry, the Purchase Tax has made a thoroughly bad start in the jewellery trade, especially in its impact upon fine jewellery and fine silverware; we do not see how the evil effects can be avoided except by the abolition of the tax.The Parliamentary Secretary to the Board of Trade heard all the arguments that we brought forward on an earlier occasion. I am surprised that the Board of Trade cannot see the wisdom of the advice which has been tendered and that it continues a tax which is so heavy, so hard and so detrimental to the trade and which involves the risk of loss of craftsmanship and skill. Under the previous Government as well as this Government we have tried to influence the Board of Trade, but we do not seem to have moved it very far. It seems that Governments come and Governments go but the Board of Trade carries on the same as ever.
On an earlier occasion I quoted a letter from a manufacturer living in my constituency. He told me how he went abroad to obtain export orders. In Germany, two years ago, he found that 2,500 people were employed in making fashion-plate jewellery—the cheaper jewellery—and now the German industry has 21,000 workers. Do we not take these facts into consideration? I should have thought that the Board of Trade would have felt that our industry was being challenged in such a manner that notice should be taken of it. The industry which so many of us call a luxury industry is being encouraged in Germany by means of all kinds of incentives.
The craftsmen in this great industry of ours are gradually leaving, and they will not be replaced. Employers have told me about their difficulties. The same 329 sort of thing is happening in the glass industry. A firm of glass merchants and manufacturers in my constituency invited me to visit their factory. I was astonished to find how much was being produced, and I was also surprised by the difficulties under which they were labouring as the result of the heavy Purchase Tax. They have informed me that there has been for many years an apprenticeship scheme for each skilled operation in the trade, that in this way an adequate labour force has been maintained, but that due to recent unemployment the maintenance of this force is in jeopardy.
Then they go on to give me facts about employment in the past year. They say:We have experienced short-time working varying between three and four days per week for over six months out of the last 12 months, and this, of course, does not take into account the kind of underemployment that takes place while men are retained on the premises. We also feel that as almost a part of the furniture industry we should be treated on a comparable basis.
§ 8.45 p.m.
§ Mr. Yates
My hon. Friend the Member for Liverpool, Scotland (Mr. Logan) agrees with that, and it is quite correct. If a dressing table is bought with a fixed mirror there is no Purchase Tax but if, in fact, there is a hanging mirror, which many would find easier for their purposes, there is an enormous Purchase Tax to be paid on it. Surely a mirror is a normal necessity. I support the hon. Member for Handsworth (Sir E. Boyle), who moved the Amendment, because I believe it is necessary that something should be done if this industry is to retain the craftsmen and skill which it now possesses, and not only this industry but others of a similar nature which have not been mentioned.
While I am grateful for what has been given, I think more should be done. My constituency is not wholly concerned with the jewellery trade. There is only a small section of the industry in it. It is spread over a much wider area, and is in the constituency of the hon. Member for Handsworth and also in that of my hon. Friend the Member for Aston (Mr. Wyatt). But I am disappointed that, after all the pressure we tried to exert as to the employment and the future of 330 the trade and the retention of the craftsmen, more was not done by a greater concession than has been given.
I hope that the Financial Secretary to the Treasury will be able to give us an assurance that consideration will be given to these vital facts and that discrimination will be afforded to this industry, so that we can be sure that what is now branded as a luxury will be found to be a vital necessity for our country.
§ Mr. Boyd-Carpenter
My hon. Friend the Member for Handsworth (Sir E. Boyle) is a most pertinacious and effective supporter of the needs of the group of industries with which this Amendment largely deals. Most hon. Members will remember the most effective way in which he raised this issue during the month of March, and I am certain it will not be any fault of his if the interests in particular of the jewellery and silverware industries are overlooked. I find myself in substantial agreement with a great deal of what he said in the course of what we all regarded as an admirable speech.
My hon. Friend indicated that he was not looking a gift horse in the mouth. I must remind him through you, Mr. Hopkin Morris, that this gift horse has the teeth in its mouth nicely reinforced with both gold and silver to the extent of 25 per cent. Therefore, it is a gift horse which it will well repay my hon. Friend to look in the mouth.
I agree entirely with the necessity for protecting the livelihood of those who work in these skilled crafts. Although the hon. Member for South Ayrshire (Mr. Emrys Hughes) was good enough to offer me his moral support, I find myself in difficulty in giving moral support to his arguments by way of reciprocity. I shall certainly not enter into the highly controversial subject as to what is or what is not a luxury. Suffice it to say, as I said on Second Reading, that no product is in that derogatory sense a luxury to the people who earn their living by producing it. Nor indeed, from a broad national point of view, is it possible to ignore the significant contribution to our export trade, and so to our balance of payments, which is made by the group of industries with which we are now concerned.
331 I do not seek in any way to dissent from the argument which was put effectively by my hon. Friend the Member for Billericay (Mr. Braine) to the effect that for such an export business there is a necessity for a sound and substantial home market. I can remind the Committee, however, that I am not merely in the position of agreeing in words with the arguments brought forward, but that those arguments have been met substantially by the proposal put forward by my right hon. Friend for a reduction by 25 per cent. in the rate of tax upon goods in this category. That is a substantial piece of evidence that we appreciate the force of the arguments and the considerations behind them which have been put forward in this debate.
The only issue which arises upon this Amendment is whether that reduction by no less than 25 per cent. of the rate of tax should be further increased by another 8⅓ per cent. reduction. It will perhaps set this debate a little in scale if I remind hon. Members that we have already gone three times the distance of the further step which we are asked to take. So I think it is possible for me to discuss the arguments of my hon. Friend and the arguments from the other side of the Committee on this point not on any broad dispute as to principle, nor indeed on any general considerations. All that this Amendment poses as a question is the precise degree of reduction which should be effective at the present moment. There are one or two considerations which I should like to put before hon. Members to assist them in making up their minds upon this comparatively narrow issue.
It struck me that one or two of the speeches made from the benches opposite —in particular that of the hon. Member for Ladywood (Mr. Yates)—seemed to ignore the fact that in this Finance Bill we are bringing forward proposals for a substantial reduction on these very things and that we have been criticised from their own Front Bench for doing just that. I assure the hon. Gentleman that, so far as we on this side of the Committee are concerned, we are giving what we think is full weight to the considerations which he put forward with so much force.
Now I must come back to the narrow issue which concerns the Committee, the 332 proposal for a further reduction, over and above the 25 per cent., of 8⅓ per cent. In discussing these matters, hon. Members like to know the cost of any proposal. The cost of the proposal of the hon. Baronet would be just under £2 million in the present year and about £3 million in a full year. That cost would, of course, be on top of the cost of £5⅔ million this year and £7 million in a full year which is involved by the 25 per cent. concession to which I have already referred. Therefore, the financial issues are not negligible, particularly in view both of the other demands which are from time to time suggested to my right hon. Friend in the course of our debates in Committee, and by reason also of the very argument which the hon. Baronet himself adduced when indicating that he thought my 'right hon. Friend had gone quite far enough by way of tax remission.
Another consideration which bears on this matter is that my hon. Friend's proposal would change the whole coherent pattern of my right hon. Friend's proposals for the Purchase Tax as a whole. I do not want to weary the Committee by going over the ground traversed during the debate on the previous Amendment, but hon. Members will be aware that, with the exception of one or two small adjustments which are made in the Schedule, the general pattern of my right hon. Friend's proposal is of a reduction of one-quarter in the Purchase Tax in the three main rates.
What the hon. Baronet now suggests is that in the case of the top rate a larger reduction, one of 33⅓ per cent., should be made. No doubt there is force in his argument that the need of industries taxed at a higher rate for relief from tax may be higher than that of industries taxed at a lower rate. His argument as to the difference between the rates was, perhaps, not a particularly strong one. He said that the result of the change proposed in the Bill would be to leave still the same proportionate difference between the rates. That is true, but what concerns the taxpayer is not the proportionate difference, but the absolute amount of tax that he has to pay.
Of course, the effect of my right hon. Friend's proposals taken as a whole is that the difference in tax between the second and the top rates will now be 25 per cent. as opposed to the previous 333 existing difference of 33⅓ per cent. Therefore, from the point of view of the consideration which my hon. Friend quoted from my right hon. Friend's speech—the consideration of the groups of tax not being too far apart—I do not think there is very much force in his ingenious argument as to the proportions. The major consideration which hon. Members will bear in mind is that this is all part and parcel of a coherent set of proposals for dealing with the main structure of this tax; and it would take very powerful considerations indeed to justify departing from them solely in connection with the highest level.
What we must not totally ignore is the position of the retailers. I listened with interest to what my hon. Friend the Member for Cheadle (Mr. Shepherd) said about the inquiries that had been made of the retailers in connection with the silver trade. On the other hand, one must bear in mind the considerations which arise—and which, as hon. Members will recall, the Hutton Committee recommended should, among other things, be dealt with, securing that reductions in Purchase Tax were of a moderate nature—of the repercussions of too large a decrease in tax at one time.
There is this further practical consideration. The tax was reduced as from 15th April, the day after the Budget, to 75 per cent. I do not want to labour the argument, but clearly there would be considerable difficulty if shortly afterwards a further reduction were made. Even accepting as a matter of hypothesis for this argument that 66⅔rds per cent. would originally have been better than 75 per cent. I think hon. Members will see the force of the consideration that two changes so close together are extremely bad, both from a wholesale and from a retail point of view.
§ 9.0 p.m.
§ Mr. R. E. Winterbottom (Sheffield, Brightside)
Would the hon. Gentleman agree that that point of the difference in the reduction from 25 per cent. to 33⅓ per cent. has now been taken into consideration by the retail trader and yet, after taking it into consideration, in almost every case an increase in the reduction has been recommended? In other words, the main consideration of the retailer is as great a reduction in the 334 tax as quickly as possible, irrespective of the loss in so far as the stock is concerned?
§ Mr. Boyd-Carpenter
That is not the view expressed by a great many of the retail organisations, but I do not wish to anticipate a debate which may take place at a later stage. I wish to make clear that not only the size but the rapidity of changes of this sort is a matter which quite clearly my right hon. Friend has to bear in mind in choosing what is the right thing to do in the circumstances.
I was interested in what my hon. Friends said in particular reference to the silver trade. As they rightly said, this is a craft industry with ancient skills and a very high tradition in this country. It is a trade of which all hon. Members are proud. I would suggest to my hon. Friends that the reductions my right hon. Friend has made will be of very real value to that trade, as it will be to other trades. They have been made so recently that it is perhaps a little unsound to argue already that they are insufficient. This, in fact, is the first time since 1943 that the rate of tax on silver has been under 100 per cent. There was an epic period of some months under the regime of hon. Members opposite when it soared to 125 per cent. Since 15th April, for the first time for 10 years, it has been below 100 per cent.
I suggest to my hon. Friends, as well as to hon. Members opposite, that before coming to a hasty conclusion which cannot be founded on sufficient experience of the lower rate, the sensible thing is to watch the effect of this change and see whether the gloomy forecasts which one or two hon. Members were inclined to make may or may not be realised. We have given to this industry, as to the other industries in this sphere, the renewed stimulus of knowing that for the first time for some years their rate of tax has come below the 100 per cent. level. I am sure that will be some considerable encouragement to them psychologically. I hope and believe it will be of some substantial assistance to them from many points of view.
§ Mr. Boyd-Carpenter
I very much appreciate the graceful compliment the hon. Member has paid me, but I must not fall into temptation and be tempted by him into prolixity. I must therefore put the vision of that compliment behind me.
This seems to be the common sense of the matter. We have made the reduction as from 15th April, and I think it has been generously acknowledged to be substantial. Those concerned with the effect of the 100 per cent. rate upon these industries must feel they have reason to appreciate the importance and significance of this change, which is very real and substantial. We believe it will be of assistance.
Of course, at this stage of the Bill I cannot anticipate the future, but those concerned in these industries will appreciate that my right hon. Friend does not accept the view expressed from time to time in other quarters that, because these industries produce so-called luxuries, little or no help should be given them. He has shown, not by words but by deeds, his care and concern for the future of these industries. The wise thing, as this is part and parcel of constructive proposals for reduction of the Purchase Tax, is to allow the matter to remain as proposed in the Bill and see that improvements result from the changes which were effected just under two months ago.
§ Sir E. Boyle
I have listened with close attention to what the Financial Secretary has had to say. In view of the arguments which he has advanced, I beg to ask leave to withdraw the Amendment.
§ Amendment negatived.
§ Motion made, and Question proposed, "That the Clause stand part of the Bill."
§ Mr. Mulley
On this matter, as on many others, the Chancellor of the Exchequer reminds me of King Canute. He sits in a very thoughtful but rather pessimistic way on the Front Bench as though he sees the economic tides coming towards him and feels that there is nothing he can do about it, except, of course, to send up the Financial Secretary, bobbing like a cork on the water. In his last speech the hon. Gentleman was more often under the water than above it, but, generally speaking, he manages to make a brave show against those economic forces.
336 Purchase Tax in the hands of a wise Chancellor could be used to harness the economic tides with which the Chancellor must necessarily contend. I would also point out that while the Chancellor usually tells us that everything is against him, in the terms of trade and one or two other very important matters he has had the advantage of very favourable tides during his period of office.
We have some sympathy with the Chancellor in his task of dealing with the question of Purchase Tax. Clearly, he needs the money for Government expenditure which we on this side of the Committee broadly endorse. If he had come along and said, "I cannot reduce Purchase Tax because I need the money for important and necessary Government expenditure," I think we should have heard him with great sympathy. He has not done that. He has made concessions, rightly in some directions, in taxation.
Our contention is that, in the phrase of Mr. Gladstone, he has squandered a surplus. I am sure that that very distinguished predecessor of the Chancellor has turned in his grave at the way in which the Chancellor has refused to cut the cost of administration by getting rid of a tax when he could have done so and has instead contented himself by reducing taxes by little bits. Purchase Tax has its administrative difficulties. I can best illustrate that point by referring to the industry I know best, the cutlery industry. A pair of scissors over 8 inches in length is tax free; a pair less than 8 inches long attracts tax at the rate of 25 per cent. Both pairs can be put into a box which, empty, is taxed at 50 per cent. and when all three items are together the set is taxed at 75 per cent. of the value of all the articles involved in it.
It is clear that any tax of this sort will present administrative problems. The Chancellor could have eased those problems by removing tax from some articles altogether and compensating himself from the revenue aspect by leaving other items at the rate of tax which they attracted before the Budget.
We should make it clear, when considering this Clause, that there is nothing really wrong in the principle of using Purchase Tax as a weapon of economic planning, used as it was intended to be used by Sir Stafford Cripps and my right 337 hon. Friend the Member for Leeds, South (Mr. Gaitskell). We had an extraordinary version of economic doctrine in an earlier speech by the Economic Secretary. He said, for example, that if anyone ever thought the party opposite was interested in planning so far as planning the details of a particular industry was concerned, they were wrong. The party opposite had not abandoned that principle, they had never held it. That, I think, was his phrase.
Are we to infer that the Government, or the Economic Secretary, or the Chancellor are not interested in the number of cars exported by the motor industry in the present year? How can we expect to achieve economic solvency in the face of that sort of attitude on the part of Treasury Ministers? Surely, it is the most extraordinary economic doctrine which has been ventilated since the war.
Obviously, in certain cases, and I think the motor industry is an excellent example, there is a lot to be said for Purchase Tax to restrict home consumption when a commodity does not easily lend itself to rationing. There are other export articles upon which it would be expedient to put a financial disincentive when physical control is not entirely practicable or effective. That would obtain not only in the field of exports but in regard to investment, and in the field of defence.
Does the Economic Secretary really mean to say, if there was no other means than financial disincentives to prevent resources going into home consumption which he wanted for defence, that there would be no detailed interference with an industry? That is a most astonishing doctrine which I hope the Chancellor will repudiate.
The Chancellor did not say, "I have no Purchase Tax reductions to make because I have no money." He said, "I really do not like Purchase Tax"—that we could infer—"but I cannot do much about it, except to make a 25 per cent. reduction all round." But he did choose to make special exceptions. Both today and on other occasions the Financial Secretary has been busily pointing out the difficulty of making selections. The principle of non-discrimination has been freely ventilated by hon. Members opposite. 338 But that has been denied not by words but by the deeds of the Chancellor himself, because, in the Budget and in the Finance Bill, there are, in fact, these discriminations.
Dry batteries and taxis have been exempted from tax, and we agree that is a very good and proper thing to do. We are not so sure about pianos. Reductions in tax have been made on the same kind of argument which were advanced by hon. Gentlemen on both sides of the Committee in regard to other craft industries. The exemption relating to umbrellas is more surprising. We have not heard the case argued for that. I can only conclude that it is a form of hidden subsidy to bookmakers, because they will be one of the more important beneficiaries.
I hope that we shall be given an explanation of the extraordinary treatment accorded a number of articles in Group 29, called fancy and ornamental articles. I thought this concession was a small one involving very little money. But on putting the question to the Financial Secretary, I was told that it is costing £1,200,000 in a full year. It is difficult for those of us who represent workers in craft industries to explain to the silversmiths and cutlers of Sheffield and other craftsmen why feather haloes are subject to a 50 per cent. reduction in this Budget, whereas their products are subject to only a 25 per cent. reduction.
I do not know why feather haloes were selected. I can only think that the Chancellor had in mind the words of one of his hon. Friends who talked about the straws in the Chancellor's hair. Now that the Chancellor has announced that he is doing away with the Excess Profits Levy perhaps he feels that in the meetings upstairs he should wear a halo. I would point out that in choosing a feather halo he is choosing one that is very easily blown off.
Clearly, one cannot cover the whole range of articles which have been exempted from tax. By reference to cutlery I want to illustrate the point that the Chancellor should have chosen some articles of essential use and exempted them completely, thereby reducing the cost of living and the cost of the administration of the Revenue and the Customs and Excise. We had an extraordinary 339 exposition by the Economic Secretary on the subject of amenities and essentials this afternoon. Perhaps I could best convince him that a knife, fork and spoon are articles of essential use and not merely amenities by telling him that when I was taken prisoner of war my hosts, the Germans, who did not by any means give us a luxurious standard of living, did issue us with a knife, fork and spoon.
In other ways I agree with him that the standard we had was so austere as generally to fit in with his view of what is a necessity. As a small concession to his point of view I would say that the fork was not absolutely necessary when our basic diet was a bowl of soup and one-fifth of a loaf of bread. In the most primitive conditions a knife is essential. If the hon. Gentleman had been required to cut a loaf into five pieces when, by the rules of the game, the man cutting it had the last choice of a piece, he would have wanted a good sharp knife. I hope that he will take back to the Treasury a different view of the character of a knife and fork and spoon than that which apparently is held there.
I ask the Chancellor to see whether he cannot exempt these articles from tax. Employment in the cutlery industry is causing difficulty. Many firms have made cuts amounting to 75 per cent. in their labour force, and this at a time when there is a certain amount of fortuitous additional work through the orders for Coronation souvenirs and the like. When the Coronation special work is over the employment situation in both the cutlery and the silver trades will be most desperate. I hope that the Chancellor will at least undertake to look again at this position.
The argument may be advanced that in putting forward suggestions for a reduction in tax and for the complete exemption of certain articles we are taking a Utopian point of view and that the Treasury must have its Revenue. I would point out to the Chancellor that he could have made all the sensible modifications in Purchase Tax that the economy required by leaving as it was the rate of tax on motor cars and televisions, just to mention the two most obvious items. It can be argued that it is desirable to stimulate production and demand in those industries. The Chancellor could have 340 caused this stimulation much more easily, much more effectively and certainly from the Treasury point of view much more cheaply if he had amended his hire purchase regulations instead of reducing Purchase Tax.
If he had any acquaintance with the ways of working people and those who might be on the margin between buying a motor car or a television set or not, the right hon. Gentleman would know that the initial deposit and the terms of the present hire purchase regulations are much more restrictive than the existing rate of tax. I hope that even at this late stage the right hon. Gentleman might have second thoughts on this matter.
I do not need to go at length into the arguments at the other end of the scale about the special case of the craft industry. That case has already been argued. I am sorry that the Chancellor was not here at the time to listen to the hon. Member for Handsworth (Sir E. Boyle), the hon. Member for Cheadle (Mr. Shepherd) and other hon. Gentlemen opposite as well as some of my hon. Friends on this side of the Committee. Those in the silverware industry in Sheffield are pleased to know that they are always given sympathetic mention by Government spokesmen in discussions on this subject. But I would say frankly that the 25 per cent. reduction from 100 per cent. to 75 per cent. is of absolutely no help at all to the industry. It may be argued that it is too early to know, but I should prefer to take the view of the silversmiths of Sheffield against that of the Treasury expert on the effect of an alteration of tax on their products and whether it will make very much difference or not.
I should also like to say that one of the difficulties about an all-round reduction of tax is that the products of these industries are in the same competitive position with the products of other industries as they were before. If there had been a 25 per cent. cut of the tax on silverware, and not on pianos, radio sets, television receivers and so on, it might have been argued that it would attract additional custom from people in the position of having to buy wedding presents.
They can buy a radiogram and pay only 50 per cent. tax, they can buy a 341 piano and pay no tax at all, but, if they want to buy a silver teapot, a very handsome and appropriate wedding present, they will find that it attracts a 75 per cent. tax. I wish the Chancellor had been able to visit the excellent exhibition held in Sheffield of contemporary silverware alongside the great trophies of the Sheffield Cutlers' Company, because he would have realised the great importance of retaining the skill of these craftsmen.
There is another small point which, in the words of the Financial Secretary in a Written answer, would involve negligible cost, and which concerns the alleviation of the exceptionally hard treatment of mother-of-pearl. The mere addition of a piece of mother-of-pearl, worth perhaps only 4d. or 5d. itself, to an article of silverware—and this is often done, because it is a matter of using up spare or waste products—may mean that something which would otherwise be exempt from tax would be brought within the 75 per cent. rate. While that may not be a matter of very great consequence to the Chancellor, it is of the utmost importance to the skilled craftsmen who work in the industry. There is the further point that, whether it is a good thing or not, it is the fact that the American market is interested in knives and spoons with mother-of-pearl attachments, but, because it is impossible to sell any mother-of-pearl on the home market, the cost is very much higher and the price very much less competitive than would otherwise be the case.
Finally, on the question of the silver and mother-of-pearl industries, I would make a special plea that the Chancellor should look again at this matter. The case has been put by some of his hon. Friends behind him and also by responsible people in the trade, and this is one of the few industries where, perhaps, there would be no special difficulty about a reduction in the tax as far as the retailers are concerned. I agree with hon. Members on both sides of the Committee who have said that some, though not all, of these articles which are subject to the 75 per cent. tax cannot be classed as luxuries, and that we should aim to give ordinary people a greater opportunity to acquire them. In many cases, a few silver spoons or a silver cakestand are the really prized items which one finds in a working-class family, and this industry 342 will not continue unless special consideration is given to it.
I therefore reinforce the arguments advanced that silver articles, and, in particular, silver tableware, should be placed in Clause 11 and not in the Clause under which they will attract the 75 per cent, rate of tax. I have myself put down Amendments to the Schedule for this purpose, but I fear that they will not be in order unless the Chancellor is good enough to add his own name to them, and I hope that, before we discuss the Schedule, the right hon. Gentleman may consider doing that. I am disappointed that the Parliamentary Secretary to the Board of Trade is no longer with us because the Board of Trade have a special responsibility for both the cutlery and silverware industries, and they could, perhaps, give the Chancellor more official information as to employment and other aspects of these industries and thereby provide him with a second opinion about it.
I wish to make a general point about the problems of retailers in regard to Purchase Tax. I agree that this matter will be discussed in greater detail at a later stage, but I would point out to the Chancellor that I do not know of any retailer or any association of retailers that is not against Purchase Tax or in favour of its reduction. Retailers have been bombarding Members of Parliament for years on the subject. I ask the Chancellor to have the courage to say to them, "You have asked me to reduce the tax, and it is no good your screaming now and saying it is too expensive for you." If the retailers want the tax reduced, they must face the temporary difficulties which it may create. Certainly, as regards silver and cutlery, that would be a wise line to take.
Finally, I would ask the Chancellor to make use of subsection (2) of this Clause. It gives the right hon. Gentleman greater power to introduce Amendments, not only in connection with articles, but also as regards rates of tax. Subsection (2) is the most encouraging part of this Clause, and I hope it will be used. I also hope that the Chancellor will disregard that part of the Hutton Committee's Report in which they say that it is a bad thing to alter or vary the rates of Purchase Tax during the financial year. On the contrary, to save everything up to the Budget 343 has a most disastrous effect on the trades concerned because they do practically no business at all from the middle of November till after the Budget, whether or not a reduction in the tax is made.
I am sure that the difficulties which faced the motor industry at the beginning of this year were due not to the rate of tax, but to the probability that some reduction would be made in it. I ask the Chancellor to be bold in making these alterations, and, I hope, exemptions, during the financial year. Subsection (2) of the Clause is the most valuable contribution which the Chancellor has made this year in regard to Purchase Tax.
§ Mr. Frederic Harris (Croydon, North)
I hope that the hon. Member for Sheffield, Park (Mr. Mulley) will not mind if I do not follow him in the specific arguments he has put forward, but he made a brief reference to the subject which I wish to raise, namely, the question of tax relief for tax-paid stocks.
I know that there is a new Clause down in the name of the hon. Lady the Member for Blackburn, East (Mrs. Castle) but I presume that it is not necessarily certain that it will automatically be called. If it were not, I gather that we should not have the opportunity of discussing what to me and to many of my hon. Friends is a very important matter. Therefore, I trust that I shall be in order in referring to this matter on the Motion, "That the Clause stand part of the Bill."
§ The Temporary Chairman (Sir Austin Hudson)
I think the hon. Member had better wait until we come to the new Clause. It does not really arise on this Clause.
§ Mr. Harris
May I respectfully put it to you, Sir Austin, that the question of the reduction of Purchase Tax automatically causes this problem to arise. I have made inquiries in the matter, and there seems to be considerable doubt whether the new Clause will be selected. It would be extremely unfortunate if we were not given the opportunity to raise the matter at a later stage, and, therefore, I presume it is in order to raise it now.
§ The Temporary Chairman
I do not think it could be raised now. I do not know, of course, what Clauses will be selected, but the new Clause to which the 344 hon. Member refers seems to have created a good deal of interest in the country, and I should be very surprised if it were not selected.
§ Mr. Harris
I am very sorry, Sir Austin, to press this point, but, as I have said, I have made inquiries and I understand that it is by no means certain that the new Clause will be selected. In that case, it would seem that the only opportunity of raising the point about the relief of tax on retailers' stocks would arise on Clause 9. How can we be sure that we shall be able to raise it later?
§ 9.30 p.m.
§ Mr. Gaitskell
It seems in order to discuss this matter now. If we knew there was to be a further debate, none of us would wish to raise the matter now, but we do not know that at the moment. The Clause we are discussing involves the reduction in Purchase Tax which gives rise to all this difficulty. I should have thought it was in order for hon. Gentlemen to raise this matter.
§ The Temporary Chairman
I am in some difficulty. If the whole matter is debated now, I should think it extremely unlikely that the Chairman of Ways and Means would select the proposed new Clause on which to debate it all over again, but if the Committee wish to discuss the whole thing now, I could not rule them out of order on the matter.
§ Mr. Harris
My inquiries did not make it absolutely certain that the proposed new Clause would be called, and in that event we would lose every opportunity of raising this matter, which is too vital to my constituents to be allowed to go past. If we discuss the matter now, it may mean that the subsequent debate will be out of order. If I may, I will proceed to speak on this Clause.
§ The Chancellor of the Exchequer (Mr. R. A. Butler)
Experience on the Bill so far has been of a very considerable degree of agreeable and understandable repetition. It is always the case on a Finance Bill, but if we are to have a debate now and a similar debate later, it simply means that the Committee will have to sit very late, and perhaps all night, in order to finish the Bill. The Government do not want to sit late, largely because of the effect upon the servants of the House, and so forth. We 345 ought to be quite clear, Sir Austin, whether this matter is to be raised now or later. We cannot afford a repetition of debate as we had on football, and may have on other subjects.
§ The Temporary Chairman
I am not the Chairman of Ways and Means, but it is extremely unlikely that he would call the proposed new Clause if the subject had already been debated at some length on the Motion now before the Committee.
§ Mr. Gaitskell
I was only drawing attention to the fact that on the face of it a discussion now seemed to be in order. I entirely agree with the Chancellor that if we are to have a debate later on it will be far better to defer this matter until then. In view of what you said, my hon. Friends feel that you gave a broad hint that the proposed new Clause was likely to be called, but if the Chancellor could give us an assurance—supposing that that did not happen—that the Government would somehow or other find time to discuss the matter, we could proceed. I am sure that he will agree with me that it is important that this matter should be discussed.
§ Mr. Harris
I only want to discuss this thing once but my inquiries showed some doubt whether the proposed new Clause would be called. In fairness, even to the hon. Lady the Member for Blackburn, East (Mrs. Castle), we ought to consider the possibility that it will not be selected. If, however, there is a reasonable likelihood that we can debate the matter later, that is a different situation. If there is some doubt, we should proceed with the matter now.
§ The Temporary Chairman
My advice to the Committee would be not to pursue the matter now, although I cannot say that the proposed new Clause would be called. There may also be another opportunity later on. There is another stage, and if a Motion were put down to leave out the Clause in order to discuss it, I cannot see that the Chair could refuse it. Nobody can pledge the Chair in advance, but we have common sense in this Committee and I feel sure that an opportunity will be found to debate the matter at a time other than now.
§ Mr. Percy Shurmer (Birmingham, Sparkbrook)
We have had a debate on the reduction of Purchase Tax on many articles. The matter has been well debated and I agree with some of the proposals that have been put forward. I hope, Sir Austin, you will not rule me out of order, because the Chairman told me I should be in order when I explained to him what I was going to talk about. I have to give some idea of what I wanted to say in order to be sure that I should be in order.
I hope the Chancellor will not think I am taking a very drastic line of action, but I think the time has arrived when some inquiry should be held into the whole method of imposing Purchase Tax. It has got into complete chaos, and I have some examples to show the Chancellor how the position has arisen. The officials at the Customs and Excise office, when they get a list of articles from which they have to choose some on which to impose Purchase Tax, must close their eyes, stick a pin into the list and say, "This shall be 100 per cent. Purchase Tax, this 75 per cent., this 50 per cent., this 25 per cent., and this tax-free."
The number of anomalies in the different groups of Purchase Tax is enormous and is increasing daily. It causes a great deal of dislocation in production, and a lot of time is spent by individuals, by firms, by trade associations and by Purchase Tax officials in correspondence and interviews in a fruitless endeavour to evolve some sort of order out of chaos.
I hold in my hand a figure of a dog with a corkscrew attached to its tail. Strange to say, if the manufacturers were prepared to put that corkscrew on the back of the dog or on the stomach of the dog, the Purchase Tax would be 25 per cent. How ridiculous!
§ Mr. Shurmer
The present rate of Purchase Tax is 75 per cent. because the corkscrew is run out of the tail of the dog.
I also have with me, as hon. Members can see, a chamois leather made by a firm in Birmingham. Pieces are cut off and thread through string, but if it is 347 used on a window or a car for half-a-dozen times the water breaks the string and the thing is of no further use. The Purchase Tax on that is 25 per cent. The same firm can take the pieces of spare chamois leather, stitch them together and make a nice square piece, which can be used for months, and that is subject to no Purchase Tax.
The Purchase Tax on a brush and comb toilet set is 33⅓ per cent., but on a brush and comb with a hand mirror it is 100 per cent. A barometer in the form of a ship's wheel attracts 100 per cent. Purchase Tax, but if the wheel spokes are shorter than their width, it is tax-free. A shopping bag with an open top is tax-free, but exactly the same bag with a cord through the top to prevent the woman upsetting the things out in the street, or to prevent somebody putting his hand in her bag, bears 66⅔ per cent. Purchase Tax. The whole thing is absolutely monstrous and is causing chaos in industry.
Let us for a moment look back at the Coronation period. One of my colleagues and myself had to go to see the Financial Secretary because a whole industry making pencils had been told that instead of imprinting a crown on the article they should make a small brass crown to put on the top, and immediately they did so the article became subject to 100 per cent. Purchase Tax. As a result, the whole industry was in chaos, and had it not been for the intervention of the Chancellor, for which I thank him very much, thousands of pounds' worth of work would have had to be scrapped.
Then there is the question of mirrors. My hon. Friend the Member for Lady-wood (Mr. Yates) and my hon. Friend the Member for Liverpool, Scotland (Mr. Logan) mentioned mirrors. I agree that there are mirrors with fancy frames and that they may be luxuries, but at the present time there is 75 per cent. Purchase Tax on mirrors which are ordinary household articles. It is not my intention to keep the Committee longer, but I say that the whole industry is in chaos owing to the attitude taken by the Customs and Excise officials in the way in which they place this tax, and the sooner the Chancellor has an inquiry into the whole matter to clear up these anomalies, the better.
§ Mr. Fletcher-Cooke
Does the hon. Gentleman agree that, in spite of the examples which he has given, Purchase Tax is an admirable weapon for economic planning?
§ Mr. Shurmer
I am not going to be drawn into that argument. I am arguing about the anomalies of Purchase Tax. At the present time manufacturers have to deal with correspondence and make inquiries of officials in the Customs and Excise office because they do not know whether the products which they are manufacturing are to have 100 per cent., 75 per cent. or no Purchase Tax at all. I appeal to the Chancellor to have an inquiry into the whole of these anomalies so that industry may have a chance of knowing what articles will bear Purchase Tax before they are put into manufacture. The dog with a corkscrew on its tail is an example; it has a 75 per cent, tax, but if the corkscrew is put on its back or its belly, then the tax is 25 per cent.
§ Mr. F. M. Bennett (Reading, North)
I should like to take up one point made by the hon. Member for Sparkbrook (Mr. Shurmer) during his rigorous inquiry into these anomalies. He mentioned the mirror industry. During the preceding debate the Chancellor was not here and it was replied to by the Financial Secretary. Members on both sides of the Committee then broached this matter of mirrors as well as silverware and jewellery. In his reply, the Financial Secretary said that he could not go any further at this stage in considering any further reductions in tax, but he gave a specific assurance that in the case of both the jewellery and silverware craft trades, the position would be carefully looked at in view of certain obvious fears about conditions at the moment in those industries. I should now like to ask the Chancellor whether that assurance which was given also referred to the mirror and glass processing industry. If it did, I am content to accept that assurance.
§ Mr. Charles Royle (Salford, West)
While it is a fact that this Clause deals with the whole incidence of Purchase Tax I hope the Committee will allow me to go back to an earlier debate today and make some further references to the question of textiles. I do not apologise for doing so because in spite of the general 349 debate which took place on the question of textiles I hope, in the course of my remarks, to raise some entirely new points in regard to it.
For the purpose of finding a test for what I want to say in a short time, I would refer the Chancellor of the Exchequer to the Report of the Douglas Committee on Purchase Tax and to paragraph 55 of that Report, which states:The high price of expensive non-utility goods does not necessarily make them any less essential than utility goods. In many cases it is due primarily to better materials and workmanship which may make them better value for money than cheaper and less durable goods. The evidence submitted to the Committee has satisfied us that the effect of the present tax is to make such non-utility goods excessively dear in relation to the best qualities of tax-free utility articles, although we realise that other factors, such as a re-distribution of income, may also have contributed to the fall in the demand for the more expensive grades. We have been told, for example, that home market sales of textiles made from West Indian Sea Island cotton and from silk have fallen to such a low level that the outlook of these industries, if the present taxation arrangements continue, is very serious indeed.9.45 p.m.
We have had some revision of that as a result of the last Budget and Finance Act, but the recommendations of the Douglas Committee brought not relief at all to that type of industry. The hon. Member for Darwen (Mr. Fletcher-Cooke) spoke about the outlook of the Opposition towards high grade textiles; it may surprise him to know that we are very concerned about the future of high grade textiles. We have never regarded velvet as a luxury article. Our aim throughout has been that the lower income groups should have every opportunity of purchasing the best commodities available, just as do those in the higher income groups.
§ Mr. Fletcher-Cooke
I am much obliged to the hon. Member for that reference. Can be explain why velvet is not a luxury whereas fur is?
§ Mr. Royle
I can explain that straightaway. My discrimination would be on the basis of the original value. Velvet is not a high-priced article in the way that fur is. There is real reason to discriminate, at this stage at all events, between the two.
I want to argue in two ways about Sea Island cotton. I do so for two reasons, first, because I represent a textile area, 350 and, secondly, because of a visit which the hon. Member for Bodmin (Mr. D. Marshall) and I paid, as a Parliamentary delegation, to the Leeward Islands this year. From what I have seen of Sea Island cotton in the Lancashire textile works and of the growing of the cotton, I appreciate the tremendous difficulty.
Sea Island cotton is one of our most desirable textiles. It is of the highest possible quality. It is claimed to be the finest cotton produced in the world. Its long wearing quality is well known to everyone. It is unrivalled for length, strength and fineness and it can be spun in the highest counts produced. But it is very dear to buy, and that is largely because of Purchase Tax, for it attracts a rate of 50 per cent. in the present Bill, The Purchase Tax puts it outside the range of pockets which are not very deep. I want this very desirable commodity available to all our people, and it can very largely be done by a reduction in Purchase Tax.
The Committee will remember the last speech of my late right hon. Friend, Mr. George Tomlinson, from the Despatch Box. We were discussing textiles and the price of textiles generally. He reminded us that for very many years he actually worked in a cotton mill in the town in which he was born, and he worked on Sea Island cotton during the whole of that time. Only when he became a Cabinet Minister and, as a representative of His Majesty's Government, paid a visit to New York was he able to afford to purchase Sea Island garments that he had been making all his life. That is the basis of my argument.
Sea Island cottons come under the definition of a B class material under the D Scheme and that rates the Purchase Tax accordingly. At present, the D figure for men's shirts is 17s. 6d., yet Sea Island cotton shirting materials attracts tax at 23d. per yard or upwards. On some other Sea Island fabrics for ladies' dresses the rate of tax is as high as 77d. a yard. If that fabric is to be sold to the makers or to the public, the price must be greatly reduced, and it can only be done by the reduction of Purchase Tax. At this moment the Raw Cotton Commission holds very large stocks of this most valuable commodity. It is estimated that in 1950 the total consumption of this cotton was 1,600 bales against a production of 351 6,000 bales, and since that year the position has steadily deteriorated. There is no reason to doubt that the position could immediately be rectified by some attention to Purchase Tax.
I might anticipate the Treasury's reply to my remarks that they could not possibly afford to abolish Purchase Tax on this fabric or on the clothing made from it by stating here and now that they are not collecting any tax at all. There is actually no sale of Sea Island commodities at this time.
May I refer briefly to the other side of the matter. The hon. Member for Bodmin and I spent many days in the Leeward Islands and we visited the islands of Antigua and Montserrat, where this wonderful cotton is growing. The superfine quality is grown only in St. Vincent and in the Barbados, which is a unique production. I want to stress that the inhabitants of these islands are almost entirely dependent upon this production for their living and are very worried at the present time. Smallholding production predominates over the large estates in those islands, and in every island in the Leewards the population is dependent to a larger or lesser degree upon the production.
There is a real danger of the collapse of the industry, and that would entail assistance from Her Majesty's Government to enable the Colonies to balance their finances and would mean grants-in-aid. It is to the advantage of the Colonies as well as to the Treasury that some aid should be given along the lines I have suggested. I can assure the Chancellor that there is a grave risk of a complete collapse if he fails to do anything about it.
The industry began in 1902 and down to 1920 the demand was good. Then fashions changed and there was a fall in demand, but action was taken to manufacture different goods from the fibre and there was a real recovery. There was a peak year in 1939 with 6,400 bales and during the war all this crop was commandeered for making parachutes and the like, which shows the great value of Sea Island cotton to us. Immediately after the war difficulties were not experienced because the crop was purchased by the Raw Cotton Commission in advance at remunerative 352 prices. Recently, however, the action of the Government in allowing spinners to contract out of obtaining their supplies through the Commission has changed the position and there is now real danger from accumulating stocks. I am, therefore, genuinely appealing for action.
Employment at home is involved as well as employment in the West Indies. It is no exaggeration to say that the entire economy of these West Indian islands is in danger. The living standards of the local people are in grave jeopardy. Years of work in research and planting and development may go. This fabric is also faced with the competition of the new synthetics and needs more encouragement. My appeal to the Chancellor is a dual one: help for the manufacturing side at home and a guarantee of livelihood for the local people in the West Indies.
This is a piece of Colonial policy well worth undertaking and in the name of the Commonwealth I ask the Chancellor to take action so that a most desirable material may become available to many more of our people. I am well aware that we are past the Amendment stage, but there is a further stage in this Bill, and I appeal strongly to the right hon. Gentleman to give serious consideration to the well-being of people in my part of the country as well as to the people in the West Indies before we reach the Report stage.
§ Mr. H. A. Price (Lewisham, West)
I propose to keep the Committee no more than five minutes in pressing the claims of two groups of goods for more consideration from the Chancellor than they have so far received. The first consists of those articles which have become known as "skidlids"—safety helmets for motor cyclists and cyclists.
Quite rightly miners' safety helmets are exempt from Purchase Tax, but motor cyclists' helmets bear that tax. Some hon. Members may have noticed in the Press only two or three days ago that a coroner, presiding over an inquest upon a motor cyclist who had been killed, suggested that the wearing of "skidlids" should be made compulsory. I do not go so far as that because I prefer to avoid compulsion where possible, but I urge upon the Chancellor the advisability of using 353 encouragement. We ought not to discourage the use of life-saving apparatus by imposing Purchase Tax on it. The cost to the Exchequer would be quite small.
My second point deals with a class of goods which has been the subject of correspondence between myself and the Treasury for 12 months. I am not complaining about that. I have learned that one has to fight the Treasury for a long time to gain one's case and I am quite prepared to go on doing so, but here is an opportunity to press my case which I cannot let slip. It is the claim of asbestos clothing. Asbestos is, strangely enough, a woven cloth, and because of that suffers under Purchase Tax and the D Scheme. For example, gloves made of asbestos enjoy a very much less favourable position under the D Scheme than gloves made of rubber or leather. No one would suggest that anybody would wear a pair of asbestos gloves for adornment. They are worn for safety. They are industrial garments and as such are entitled to a favoured position.
When I have submitted this proposal to the Treasury, they have replied that it was not possible to discriminate in favour of asbestos in this way. That argument, however, does not hold water, because the Treasury already discriminate in favour of asbestos as far as aprons are concerned. Aprons of leather, rubber or asbestos enjoy a favoured position as compared with other aprons. I have heard my hon. Friend the Financial Secretary to the Treasury support some very thin arguments with great force and vigour, but I do not think he can do much with this one. At any rate, I invite him to try.
May I submit one other argument. A furnaceman who wears an asbestos finger stall to protect his finger has to pay Purchase Tax. If, as a result, he decides not to buy an asbesos finger stall and burns his finger, he is able to buy a rubber finger stall to cure it without paying Purchase Tax. Surely, it would be very much better to encourage the use of the preventative rather than the use of the curative. I hope that the Treasury will give my suggestions sympathetic consideration.
§ Mr. Anthony Crosland (Gloucestershire, South)
Most of the speeches on this Clause today have, naturally enough, concerned particular items which bear Purchase Tax, and I should like to speak rather more generally on the question of the tax as a whole. With one or two striking exceptions. Purchase Tax has had practically no friends in the Committee today. A number of hon. Members have pointed out numerous anomalies, and so on. and these have been appreciated on both sides. Attention has been drawn to the alleged deterioration in quality that takes place, with its possible bad effect on exports, and to all the well-known problems that arise, and have always arisen, in respect of this tax.
I do not doubt that many of these weaknesses exist and that the problems are serious ones, but it is about time that somebody pointed out that there were positive arguments in favour of Purchase Tax as a method of taxation. The first thing, to which hardly anyone has drawn attention, is that Purchase Tax can be an effective weapon for increasing exports. We have constantly had instances of this over the last few years.
§ Mr. Crosland
Had my hon. Friend given me about 30 seconds more, I should have hoped to have given him one or two examples. I should have thought that in such cases as motor cars, commercial vehicles, refrigerators, washing machines and electrical domestic equipment of that kind, where, in the last few years, the industries concerned have not been able to satisfy the whole of the export demand and the entire demand from the home market, it had been of obvious assistance to our export effort that home sales were somewhat discouraged by a high rate of Purchase Tax. Until just now I did not know that this argument had ever been contravened or suspected in the slightest degree. This, I should have thought, was one positive argument which might be adduced in favour of the tax.
355 A second positive argument is that, as my hon. Friend the Member for Nelson and Colne (Mr. S. Silverman) pointed out, this tax can be a good method of restraining home consumption. Hon. Members on both sides, whether in support of the Government or on the Opposition benches, constantly make impressive speeches pointing to the enormous increase in investment which this country needs. Hon. Members on the back benches opposite are fond of making these speeches. If all this talk of higher investment is to be taken seriously, and is not merely to sound impressive, it carries with it as a corrolary that home consumption must be restrained. There really is no sense whatever in one day making a speech about boosting home investment and next day pleading for the removal of every tax that reduces consumption at home. Given the fact, which is not in dispute on either side, that we need more investment and that consumption must be restrained at home, Purchase Tax has certain obvious advantages.
The third contention which has aroused most amusement on the benches opposite is that the tax can be useful as a method of planning. The Economic Secretary had great fun about planning and said that the Conservative Party have never believed in planning if, by planning, one meant the Government being responsible for allocating resources between different industries. When an hon. Friend of mine was speaking, an hon. Member opposite interrupted to pour scorn on the Purchase Tax as a weapon for planning.
I take it that what is meant by planning when one says that the Purchase Tax can be useful to aid planning is that the Government should make themselves responsible for seeing that fewer of certain goods are sold at home and more of other goods—not exactly how many fewer or how much more, but in broad terms fewer of some things and more of other things. Is that a doctrine of planning which the Economic Secretary to the Treasury really repudiates? Does he take the view that the Government have no responsibility for allocation of resources between industries?
If so, how does he explain the fact that in this Bill, under the Clause on initial allowances, a larger initial allowance is given to certain industries than certain 356 others? How does he explain the fact that the Excess Profits Levy last year gave certain concessions to certain industries and not to others? How does he explain why, under the present Government, as under the last Government, we are constantly having special financial provision made for certain industries such as the cinema and agriculture? It is perfectly clear from these examples that even from the Government Front Bench the notion of trying to influence the size of an industry is not unknown. If they do not disapprove in respect of E.P.L., initial allowances and other things why do they fear the consequences of the use of Purchase Tax?
One can realise the advantages which Purchase Tax can give by the effect that this Clause will have. The Chancellor has chosen the indiscriminate method of reducing Purchase Tax by a more or less disproportionate amount on all goods which will bear the tax, but it is interesting to consider the effects and ask hon. Members whether they think it is wholly irrelevant from the point of view of the economic health of the country. First, we have the tax reduced on electric fires. I wish the hon. Member for Kidderminster (Mr. Nabarro) were here. He has been foremost in pleading its fuel efficiency and that is a very great credit to him.
I do not think that anyone who is interested in fuel efficiency has opposed the view that electric fires as a method of space heating are about the most wasteful method. The hon. Member has constantly said that the Government must intervene as between different methods of space heating to encourage the more efficient and discourage the less efficient. Here we have an example of reduction in tax on what is, by general admission, the most inefficient and wasteful method of space heating we have in the country.
We also have a reduction in the Purchase Tax on motor cars, refrigerators, washing machines, television sets and domestic electrical equipment of that kind. The industries producing those types of equipment, particularly the motor industry, were in a somewhat depressed state six or nine months ago, but it is common experience in all those industries—in particular in the motor industry—today that not only has home demand picked up a great deal in the 357 last few months, but more important, export demand has also greatly increased.
If one believes in planning to that extent is it really wise to choose a moment when export demand for cars and goods of this sort has once more increased to reduce their price to the home consumer and increase the attractions of the home market from the point of view of the manufacturers relative to the attractions of the export market? Hon. Members may deny that this sort of change in price has any effect whatever, although that would be a rather curious position to take up. If they admit that this sort of change has the slightest effect they must agree that the effect must be in a damaging direction. One could give many other examples of the tax being reduced on goods more of which could be exported provided that the home market is not made excessively attractive.
I believe that this point is the most serious one which the Committee ought to be considering. I am not speaking with the slightest disrespect to the many important individual items which have been referred to, and which represent genuine and important constituency interests, but it is the general point to which the Committee should be addressing itself. I venture to suggest to the Chancellor—and I speak with a slightly bad conscience because I said in the Budget debate that I approved his decision to give a considerable boost to consumption this year—that that decision, which I humbly thought at that time was a right one, is in danger already of being too successful.
The figures published by the Ministry of Labour of the movement between consumption industries and the engineering industries were to a high degree alarming—one hon. Member has already referred to them—showing, as they do, that over the last year there has been a steady move towards consumer industries away from the engineering industries, and I believe that we should not take measures which would increase that trend.
A great number of these Purchase Tax reductions are not justified on economic grounds, given the country's present economic situation, and the right way would have been not to reduce Purchase 358 Tax indiscriminately but to have done what the Economic Secretary said was impossible, but which clearly is possible, and to have chosen certain selective reductions and relieved those goods of Purchase Tax altogether.
Whatever the Minister says about amenities, there are a number of essential household articles which still bear tax and which cannot conceivably be classed as amenities. They are genuine necessities and could be relieved of tax without any possible adverse effect on exports or investment or anything else. Surely these are the items which should have been chosen for the maximum concession instead of spreading this concession indiscriminately between goods, whether essential or not and whether they compete or not with exports.
I should like to support very strongly the plea made by my hon. Friend the Member for Southampton, Itchen (Mr. Morley) for exempting school stationery, which could have no possible bad effect on exports and investment but possibly a very good effect on our educational standards. I hope that the Chancellor will refer to that. Brushes have been mentioned, cutlery and a great many other examples. To sum up, I suggest that in all our discussions of Purchase Tax we ought to realise, whether we believe in planning or not, and whatever we say about planning, that changes in Purchase Tax will have a certain influence on exports and investments.
It is vital, if we decide that a certain sum—£30 million or £60 million—can be given away, not to give it away quite regardless of the effect of the concession on exports and investments but to give it away in such a way as to concentrate and canalise it on goods important from a household point of view and innocuous from the point of view of the country's economic life.
§ Mr. Douglas Marshall (Bodmin)
I do not wish to detain the Committee for long, but the hon. Member for Salford, West (Mr. Royle) has spoken about Sea Island cotton. I wish to impress on the Chancellor two points upon this subject. I have no desire to repeat the hon. Member's speech, because in substance and in the design in which he made it I fully agree with everything he said regarding Sea Island cotton.
359 10.15 p.m.
I remember with what delight I listened to the Chancellor's first Budget speech, when he referred to the vital importance of the ultimate development, wherever possible, of the Empire and the British Commonwealth of Nations. I would impress upon him that although hon. Members may think that Sea Island cotton is a luxury, it is in no form a luxury to those who grow it. The islands engaged in this production have a very difficult and tight economy, and the Chancellor should realise that as in some cases these islands are in the red. He still has to meet this obligation through the Secretary of State for the Colonies.
No argument can be maintained by the Treasury that they would be unbalancing the Budget, because nothing is being collected. If this industry in the West Indies is not helped in some way, the present internal economy of those islands producing Sea Island cotton will be wrecked. I use that term because I profoundly believe it to be true. I trust the Chancellor will take notice of what the hon. Member for Salford, West has said, and will realise that I, who had the privilege of being on the Parliamentary delegation with the hon. Member, fully support the case he has made out.
§ Mr. N. H. Lever
It has been said of the philosopher Diogenes that when he was begging for charity and was asked what he was doing he replied that he was practising patience. After listening to the debate today I cannot help feeling that those of us who have been urging the Chancellor to make concessions are engaged in a similar exercise. That is especially so in my case as I am not one of the number of economic experts we have heard from both sides of the Committee, and I dare say I shall be listened to with even less respect.
We tend to lose sight of the fact that Purchase Tax was brought into existence not for the interesting purposes argued by my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) but to strangle the home trade. It was, and very properly, the intention of the Government of the day to strangle home trade so far as possible in order that we might win the war quickly and come back to a pleasanter land in the future. But having overcome the Hitlerite 360 menace we still have the Treasury menace to dispose of and the still more sinister menace of experts in all parts of the Committee.
We are told that this strangler tax is the ideal weapon for economic planning. It is of course a tax which is intended for, and is successfully used, to strangle our home trade. To say it is an ideal weapon for economic planning is like telling a man suffering from anaemia that prussic acid would form a good base for the diet to cure him. It is possible— but improbable.
I do not share the rosy illusions of my hon. Friend the Member for Gloucestershire, South, who has just spoken about Purchase Tax being the means of providing and increasing exports of the products of the engineering or the motor industries. The Purchase Tax has never done anything of the kind. The motor industry has provided the exports. What is more, the industry did not provide them because the unfortunate home consumer was mulcted of a frightening amount of tax every time he bought a new car.
The industry exported because the Government of the day very properly appealed to their patriotic impulses and pointed out the needs of the nation. In addition they possibly reinforced their implorations with the information that, in the event of the motor industry not responding, as it did magnificently and voluntarily, other methods might be employed. At all events, it was not Purchase Tax paid by people in this country that did anything to help the exports of any of the great exporting industries. I could give a catalogue of all the industries. It might be possible to find one or two minor exceptions.
My appeal to the Chancellor is for him to envisage the entire abolition of the tax. It is an evil tax in peace-time. It was never intended as a peace-time tax. It ought to be abolished except in one or two extreme cases of luxuries such as the mink coats we hear so much about at this time of the Parliamentary year. I understand that it has been said by a Frenchman that a mink coat to a woman is what the Legion of Honour is to a man. It is probably prized by her because it is costly and difficult to get. There is a great deal to be said against cheapening this decoration for the fair sex. This is 361 one of those cases where the raising of the price at the same time raises the value in the eyes of the user or the wearer. It would be a pity to cheapen such a valuable article of attraction and decoration.
But I do not see why, because there is a good case for maintaining a high rate of Purchase Tax on mink coats, we should have to pay on mirrors, pencils, toys and babies' rattles if any of us require to buy those commonplace articles. I do not see why we should drag in mink coats or exports to justify the maintenance of crippling taxes on these commonplace articles.
The real truth is that we are still afflicted with this tax because of the exports and the experts. I think that I have dealt with the exports. I should like to say a few words about the experts. If my Scriptural quotations are not always exact, their purpose will be clear to the Committee. I have suggested that we have still a highly intellectual and self-confident group of economic planners nestling in the Treasury. Though the Government changes these gentlemen remain in their positions, from where they inform everybody about the economic state of the nation from time to time in documents of somewhat unattractive prose and somewhat inaccurate estimates. If the hands are the hands of Esau, the voice is the voice of Jacob. Our colleagues on this side of the Committee have passed from the Government Front Bench to the Opposition Front Bench, but the voice remains the same.
We are now getting a justification from the Treasury Bench of Purchase Tax, partly because of the economic benefit which is supposed to flow from it. We all know that the experts have been proved wrong, and we have been threatened over and over again that if we do not follow their advice, this nation of ours will be left to starve. For a number of years now we have been inflated by them, deflated, disinflated and reinflated. The British economy at present is rather in the position of those obese gentlemen who go in for those curiously misnamed nature cures, where they are fasted then fed, over-heated and over-chilled and finally handed over to the remorseless energies of an over-vigorous Swedish masseur, who puts them 362 into the last stage of exhaustion. I fear that the British economy has been subjected to some such treatment by the British Treasury.
I am not against economic planning at all; nor do I fail to recognise that part of economic planning involves a great deal of economic theorising, but it should be done gingerly and humbly. One should look at one's figures, on the one hand, and look out of the window to see the climate, on the other. It is no good looking at a barometer which indicates rain and sitting indoors when there is blazing sunshine outside, and I suspect that some of the complacent economic planners, of whom my hon Friend is not an unworthy example, if they were to find that the clock struck midnight in the middle of a sunny afternoon, would feel tired, put on their pyjamas and go to bed.
If I may come to the great fallacy about this matter it is that these gentlemen keep on refusing to apply their theories to practical reality. This nonsense about the Purchase Tax was referred to in the admirable speech of my hon. Friend the Member for Salford, West (Mr. Royle). I am very glad to be able to follow the hon. Member for Salford, West, because he happens to be my Whip and he has been following me for a number of years. Perhaps, by my intervention tonight, in spite of supporting his views, I may find that he will be less intensive in his efforts in future. My hon. Friend has given us a glaring example. It is the case that this tax has put an island cotton industry out of existence and without putting a penny in the Revenue.
What sort of economic planning follows from this sort of thing? The curious monster produced by my hon. Friend will, if the Chancellor does not relent by next year, presumably arrive with a corkscrew emerging either from his belly or his back. We are told the Revenue will suffer and that we cannot afford to abolish this tax. It appears that we can afford to mutilate old-established industries, cast away ancient skills and strangle trade generally. The fallacy of this argument has been demonstrated in the example given by my hon. Friend the Member for Salford, West, who showed the absurdity of a tax bringing in nothing but only resulting in the strangling of an industry.
363 The Treasury ought to bear in mind that it will not lose by less indirect taxation, but will gain on Surtax and Income Tax. What it has also to bear in mind is that it is no good looking at the economy of the country as if it were static. It is not; it is dynamic, and the motive power of the economy is demand. If we strangle or hamper demand, as we are doing with the Purchase Tax, far from the Treasury even in a narrow sense being the gainer it must be a considerable loser in the long run if our economy stagnates.
If I might conclude with a last Scriptural quotation which I hope may be more accurate than the others, I would remind the Committee of that dealing with the muzzling of the ox that treads the corn. I think the British ox trod out the corn in the post-war period, and I feel that the Chancellor, even if he is not able to complete the unmuzzling process in regard to the Purchase Tax, should realise that this is a purely war-time tax and is not something which ought to be a permanent feature of the economic life of Britain.
§ 10.30 p.m.
§ Mrs. Castle
I would not have intervened in this debate at this late hour, particularly after the scintillating speech of my hon. Friend the Member for Manchester, Cheetham (Mr. N. H. Lever) if I did not think that my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) deserved a little more support for his argument than he has received, and also if I had not earlier in today's debate been accused by the hon. and gallant Member for Ilford, South (Squadron Leader Cooper) of hypocrisy in my attitude towards Purchase Tax.
The hon. and gallant Gentleman quoted a speech which I made in the debate on the Finance Bill of 1950 in an attempt to prove that I was then taking a line which was completely inconsistent with the line I have been taking today. As I have always excelled in the feminine virtue of consistency, I could not let that go unchallenged. Indeed, if the hon. and gallant Gentleman had read the whole of the debate that took place in 1950, instead of merely going into the Reference Library of the House of Commons in an endeavour to find a few debating points, he would have found that ever since I have been in this House I have 364 held the same point of view regarding Purchase Tax, whether in Government or in Opposition. Indeed, if any have been guilty of hypocrisy on the subject, it is hon. Gentlemen opposite.
I agree with my hon. Friend the Member for Gloucestershire, South that there is nothing more intrinsically wicked about Purchase Tax than there is about any other form of tax. Whether it be a tax on beer, tobacco or on anything else, one can always point to anomalies and absurdities. I believe that Purchase Tax on certain articles is not only justifiable, but socially desirable. I am perfectly prepared, for example, to support the levying of Purchase Tax on refrigerators to help to pay for subsidies on food.
The Chancellor—and I think this is a final revelation of the folly of Conservative policy—has given us a Budget in which, while the price of food is rising, he has reduced the Purchase Tax on refrigerators. That is a fine consolation for any housewife, I must say. Or again, I am perfectly prepared to justify the levying of Purchase Tax on face creams in order to subsidise schools meals.
We have to make social choices and social priorities, and I am totally opposed to the idea that Purchase Tax should be regarded as the one form of taxation which should be in a special class, and that we must work towards its complete abolition. I do not believe that, and I certainly think that some of my hon. Friends who have been arguing in that sort of way are in grave danger of finishing up in the same position as the right hon. Member for Blackburn, West (Mr. Assheton), who wants to reduce Government expenditure by half. To end up in the same position as the right hon. Member is not a fate I would wish for any of my hon. Friends
The fact is that the Conservative Party have all along been utterly hypocritical on the question of Purchase Tax. When we were in power, they used it as a stick with which to beat us, particularly on the issue of the cost of living. I remember that in the great debate of 1950 the right hon. Member for Alder-shot (Mr. Lyttelton) led the Opposition benches in pressing an Amendment on the Purchase Tax, and how it was linked with the great outcry on the cost of living.
365 At that time the right hon. Member for Aldershot moved an Amendment in which he called for a reduction of the 100 per cent. rate to 80 per cent., the 66f per cent. rate to 50 per cent., and the 33⅓ per cent. rate to 25 per cent. I opposed that Amendment on the grounds that an overall reduction of Purchase Tax would have a highly antisocial effect; that it would give the biggest relief on the least essential articles, and that at a time when hon. Gentlemen opposite were talking about the miseries of the British housewife. It not only reduced tax on articles which ought to have had no relief at all but reduced it most on those articles.
I pointed out that the effect of that Amendment on the cost of living would be to reduce the wholesale price of essential articles such as lino, carpets, wallpaper, cutlery, stationery, brushes and combs, toothpaste, etc., by 1s. 8d. in the £. It reduced the price of articles like gramophones, gramophone records, paper serviettes, motor-cars and such less essential articles by 3s. 4d. in the £ on the wholesale price. [An HON. MEMBER: "Mink coats."] The mink coats were an even worse case. They were reduced by 4s. in the £ along with jewellery, garden ornaments, gold watches, vanity cases and vanity bags. This was the right hon. Gentleman's great economic and social policy.
The Deputy-Chairman (Mr. Hopkin Morris)
The hon. Lady's speech is running too much upon the speech she made in 1950. It might have been a very excellent speech, but it is hardly relevant to the present Bill.
§ Mrs. Castle
I think, Mr. Hopkin Morris, that you will find that I am just coming to the link between that debate and this.
I am proving the hypocrisy of hon. Gentlemen opposite, because when I attacked the right hon. Member for Aldershot on those lines his reply was that he could do nothing else because of the terms of the Budget Resolution. He could not discriminate or propose selective reductions in taxation because he was bound by the Resolution. I asked why he could not have concentrated all his reduction proposals on the lowest rates, and he had to admit that I was right. To plead the protection of the 366 Resolution was shown to be merely an alibi of hon. Gentlemen opposite. Their policy is not concerned with reducing the cost of living by selective reductions of taxation where the burden is heaviest, but of carrying through overall reductions which have the effect of giving most help where it is least needed.
Time and history have justified the speech I made in 1950. The right hon. Member for Aldershot is now a Member of a Government who have introduced a Finance Bill of their own. Their first reductions of Purchase Tax are exactly upon the lines that we debated then, except that the position is even worse. The 100 per cent. is reduced not merely to 80 per cent. but to 75 per cent., and the reduction on mink coats, jewellery, furs and perfumes goes up to 5s. in the £, compared with 1s. 8d. in the £ on really essential articles. It is absolutely intolerable, in the situation in which we find ourselves—when the cost of living has gone steadily up under the Conservative Government and the price of food is now higher and is driving the housewife to desperation—to be giving 5s. in the £ relief on that sort of luxury article while doing nothing to reduce the price of clothing, which, since the Conservatives came into power, has had tax actually put upon it by the taxation machinery of the D scheme that they have carried through.
This is in complete contrast to their appeal at the Election to the women, when the cost of living was talked about, and the need to bring down the prices of essentials. Since then, the price of food has gone up, as well as the price of clothing by the imposition of taxation upon articles which were formerly free under the Utility Scheme of the Labour Government. Under that scheme, the bulk of domestic textiles like towels, sheets, blankets and personal clothing were completely tax free.
If the Chancellor has any money to give for relief of consumer burdens those are the places where it should be given. Despite Lancashire's appeal he has done nothing towards reduction of tax on textiles in this Budget, although Lancashire's pleas are reinforced by appeals from every housewife in the country. The housewife knows that the real concessions being made by the right hon. Gentleman are to people who can afford luxuries that she cannot even dream of.
§ Mr. R. A. Butler
I think that we might now conveniently come to a decision on Clause 9. We have had a whole day, quite rightly, on the issue of Purchase Tax, and I should be very glad if the Committee could dispose of the Clause now before it, and then take the Schedule concerned with it, before we rise tonight. With the amount of work which would appear to be necessary on that Schedule, I think we might rise at a reasonable hour, and we could then pass to Income Tax and Surtax tomorrow. If that suggestion is acceptable, I hope we shall now be able to pass to a short debate on the Schedule.
Having said that, perhaps I may add that it is not for me to intervene in the Montague and Capulet diversions and discussions of the two representatives from Blackburn—the hon. Lady the Member for Blackburn, East (Mrs. Castle), and my right hon. Friend the Member for Blackburn, West (Mr. Assheton). They have been sparring with each other this afternoon, and the roles of Romeo and Juliet I leave to them; although, I imagine there would be some hesitancy on that score from either side.
The position as regards Purchase Tax has never been revealed with greater clarity than in the speech to which we have just listened, because what strikes me and, I would think, the whole Committee, most forcibly is that when an hon. Member on the Opposition side of the Committee is talking sincerely and seriously on behalf of a constituency interest, then we hear some sense. An example was the speech of the hon. Member for the Park Division of Sheffield (Mr. Mulley) when he was talking of the silverware trade, and the need for wedding presents, and the mother-of-pearl industry. He said we had not reduced the tax enough, but later there came the clap-trap from Transport House, with the hon. Lady telling us that it was a scandal for Purchase Tax to be reduced on luxuries; and then all the nonsense about mink coats and so on. I prefer the remarks from the hon. Member for Sheffield, Park for he, like any hon. Member who has a constituency interest in a luxury trade, knows that I should have reduced the tax on such trade more rather than less.
Why? The decision on the so-called luxury trades was directed by the fact 368 that those trades in the former 100 per cent. tax class were actually withering away, and I am concerned about such old crafts as the silverware trade, referred to by the hon. Member for Sheffield, Park. As to the mink coats or the perfumes, I am aware that a man or woman who works in the fur trade, or in perfumes, or silverware, is just as worthy of his or her job as we are to be Members of this Committee. Such applies to the motor trade, and to any trade whose products fall in the intermediate rate, which I have also reduced.
There have been put forward some general economic reasons, as by the hon. Member for Gloucestershire, South (Mr. Crosland), in relation to a definite reduction of Purchase Tax all round. When I came to examine Purchase Tax, and realised that I had a little money to spare, my first desire was to reduce the tax as much as possible all round because it weighs too heavily on industry and particularly on certain industries; and it is most undesirable for the future of our economy that any product should bear a tax of 100 per cent. I was asked if I was aiming towards a complete abolition of Purchase Tax. That would be very difficult in view of the large revenue I derive from this source. It is about £300 million, and with the present level of defence expenditure, and the cost of social services which, contrary to propaganda, is larger than before and not smaller in many respects, it is quite impossible, with such a burden, for me to sacrifice revenue.
On the other hand, I am equally clear that a tax of this size is not one which we should envisage for ever, and that the move I have made is a move in the right direction. When it is said that I should have moved faster and further, I must draw attention to the effect on the retail dealers' stocks of a bigger reduction than I made on this occasion. We have agreed not to discuss in this debate the Hutton Report on the effect on retail stocks, so I will refrain from developing that subject. The fact is that retailers have lost quite sufficient under this Budget. I fully realise the sacrifices that they have had to put up with, but I am afraid that anybody who is out to reform the Purchase Tax has got to realise that it must be done by degrees; it cannot all be done at the same time.
369 10.45 p.m.
There has been a further reference by the hon. Member for Salford, West (Mr. Royle) to the textile trade. That was dealt with in general by the Economic Secretary and I shall not go into it in great detail. I would only remind the Committee of the main figures which my hon. Friend gave, that the index for textile production is half as high again as it was in the recession last July, and that the unemployment in the textile industry which was 161,000 last May, has now been reduced to a figure of only 22,000. Those are definite achievements, and they derive in part from the policy of Her Majesty's Government.
When the hon. Member for Gloucestershire, South (Mr. Crosland) refers to his own speech in the Budget debate, in which he said that a certain amount of purchasing power should be released, I would remind the Committee that as long as I occupy the position I do it will be, and has been, my desire to maintain the fullest possible employment. The Opposition cannot have it both ways. They cannot criticise me or the Government in these debates when they see a definite improvement in the employment figures and at the same time say that our policy in these difficult and serious matters has been wrong.
§ Mr. Royle
The right hon. Gentleman has referred to the Economic Secretary's reply on the textile question. Whatever truth there may or may not be with regard to the recession in the Lancashire textile industry, the point I raised specifically was that of Sea Island cotton, which is quite different.
§ Mr. Butler
I am just coming to the position of Sea Island cotton, referred to by the hon. Gentleman. The position about that is, unfortunately, somewhat governed by these international agreements in which we are involved. I am informed—and I have made further inquiries this evening after the hon. Gentleman's speech—that to introduce any kind of territorial preference in Purchase Tax, or in other internal taxes of the same type, would offend against our commercial treaty obligations under the General Agreement on Tariffs and Trade.
While, as a result of the hon. Gentleman's speech this evening, I am perfectly ready to make further inquiries into 370 this, I do not think it would be very easy to give to Sea Island cotton the special consideration that he wants. I would further remind him that, if I do give that sort of preference, I have to take into consideration other cloths such as Harris tweed, Malta lace, and so on, so I cannot this evening go further than telling him that in the light of what he said I will look at the matter, but I can give no undertaking. That applies also to my hon. Friend the Member for Bodmin (Mr. D. Marshall) who accompanied him on his tour of the islands where this cotton is grown. I have called for an inquiry into the state of the trade in the islands to which he referred, and I can promise him that the case he put will be very carefully looked into.
I come last to the hon. Member for Sparkbrook (Mr. Shurmer), who produced a dog which had a corkscrew in its tail. This matter has also been carefully investigated since his very striking speech. It appears that the Purchase Tax on these objects is decided not only by Her Majesty's Customs and Excise but by the trades in question and by the trade corporations involved. The unfortunate thing about this dog is that the corkscrew forms an integral part of the body of the dog, the tail. The dog is therefore taxed as a dog, and an ornamental dog. On the other hand, if the corkscrew were moved to the dog's stomach or back, the dog would take the form of a corkscrew and would be taxed at 25 per cent. This illustrates the somewhat ridiculous position into which the Purchase Tax has got in some respects.
I suggest that we should hurry on to the Schedule which comes next, and to which there is an Amendment dealing with fancy goods. The hon. Member was good enough to say that prior to the Coronation Her Majesty's Ministers at the Treasury had revised the specification of fancy goods, especially those relating to the Coronation. We have now taken a decision in the Budget to revise the specification in relation to fancy goods as a whole, and it is our idea gradually to pursue the claim made by the hon. Member for Sparkbrook that we should look into all these anomalies.
The truth of the matter is that in this question of the Purchase Tax the hon. Member for Gloucestershire, South is not so pure and beautiful as he looks. In 371 fact his Government messed up the Purchase Tax in many ways and they messed it up because they did not frankly face the tax properly and squarely. They tried to exempt certain articles from it because they thought they would get political credit by so doing, and they have not faced up to the fact that they left me a tax which I tell the Committee was in danger of breaking down.
I was not able to deal with it fully in my first Budget but I did my best in this one to reduce some of the rates and make them such as can be held and will bring in the revenue. I was not able to adopt the line suggested by hon. Gentlemen opposite to pick out differentially certain items and exempt them because I believed that my duty on this occasion was to reduce the rates to such as could be held by the Customs and Excise and bring in the revenue. I realised when I took the decision that it would be easy to shoot at, and not particularly popular, but I believed it was my duty to act as I did in this Budget. I sincerely trust, therefore, that the Committee will accept my decision in the spirit in which it was made.
§ Mr. Gaitskell
The suggestion of the Chancellor that we should take the Schedule tonight seems to us to be reasonable, and I do not want to delay the Committee for more than a few minutes on the Question "That the Clause stand part of the Bill." However, the Chancellor himself has been a good deal more provocative and controversial than I had expected he would be, and he said certain things presumably in order to extract a speech from me in reply, so I will not disappoint him.
I was interested in the observation that he thought hon. Members spoke with more sense when they represented their constituency interests than when they talked about the interests of the nation at large. He did not take that view very strongly during our debates on the Entertainments Tax. Indeed, he was very scornful of the efforts of all my many hon. Friends on that occasion, speaking on behalf of their various football clubs. It seems, therefore, that the right hon. Gentleman finds they speak with sense when they say things that suit his policy and that they do not do so when they disagree with it.
372 We know there are anomalies in this tax. We have heard about them every year for the past six, seven or 10 years. I thought my hon. Friend the Member for Sparkbrook (Mr. Shurmer) produced an extremely good one this evening. I hope the Chancellor will look into these anomalies and will try to get rid of them. It is fair to say that the trades concerned are not only aware of these anomalies but are also accustomed to having them raised by hon. Members here. I was interested when the Chancellor said that the trade themselves are apparently responsible for the division between the corkscrew and the dog which he described. The question of whether an article is a luxury or a necessity again is an old one.
§ Mr. Gaitskell
The corkscrew would be a luxury to some—perhaps to my hon. Friend, the Member for Ealing, North (Mr. J. Hudson)—but I think a good many other people would regard the corkscrew, though not the dog, as a necessity. [Laughter.] I see that there is general agreement on something at least.
The question of cutlery is another very interesting point. I am reminded of that jingle, which appeared in the Oxford Book of Comic Verse:I always eat peas with honey,I've done it all my life.They do taste rather funny,But it keeps them on the knife.One may say in that case that a knife was a necessity, but a fork was not. There are these difficulties, but when all is said and done, they do not amount to a serious undermining of the tax, a tax which brings in still about £300 million.
The Chancellor seemed to imply tonight that this tax was, in principle, a bad one. I am not clear where he stands, because, on a previous occasion, he used words which implied that he thought the tax should go on. It is an indirect tax, exactly like a tax on beer and tobacco. In principle, there is nothing inherently wrong in having another tax on other commodities. So far as the equity of such a tax is concerned, I think it could easily be held that the very heavy tax on tobacco—I use that example because I do not smoke myself—is a good deal less equitable than the Purchase Tax itself.
373 If it were the case that the trades concerned bore the Purchase Tax with the same goodwill as the liquor and tobacco trades bear their tax, we should probably hear a good deal less about it. One can not get away from the fact that any tax is bound to have, and is intended to have, the effect of reducing consumption in some way or other. The tobacco tax, which brings in £600 million, may not reduce so much now the consumption of tobacco, but I should say it would have some effect. Of course, it reduces the consumption on other things by reason of the amount of money which has to be spent on tobacco.
To my hon. Friend the Member for Cheetham (Mr. N. H. Lever), who was so critical of economic planning, I would say that he seemed to be implying that anything which reduced consumption in any form was wrong. That is a very nice, easy, popular line to take. I hope that no Chancellor of the Exchequer, at a time when there is relatively full employment, will ever take that line. If we had a serious depression, there would be everything to be said for it. At such a time, nobody would deny there would be a very strong case for reducing Purchase Tax and other taxes all along the line.
Our argument is that we want to preserve full employment and if, under conditions of full employment—my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) made an unanswerable, logical, and clear speech on this—one has a given total volume of sales and allows more into the home market, the odds are that one will export less. There is great force in that argument. The Chancellor decided to make some concessions in Purchase Tax to stimulate consumption. I am not going to discuss whether he was right to stimulate consumption, but we will assume that is so, although my hon. Friend, the Member for Gloucestershire, South had some misgivings about it. If the Chancellor was going to stimulate consumption, was it necessary to do so on the luxury goods rather than on the necessary goods? That is the basic issue which we have been raising today.
Despite what the Chancellor has said, we feel there is a very much stronger case for reducing taxation on the more necessary 374 items and very much less of a case for reducing taxation on more expensive luxury items. We do not say there are not cases here and there where some reduction might be proper. But these sweeping reductions do not correspond with the needs of the times. We believe it would have been far better to have had a series of selective reductions concentrated particularly on the things which the broad mass of the people need. That would have been fairer and better for the national economy.
We do not want to delay the proceedings of the Committee and we do not propose to divide on this Question. We are happy to proceed now with the further consideration of the Bill.
§ Clause ordered to stand part of the Bill.
That the consideration of Parts III and IV and of New Clauses be postponed until after the consideration of Schedule 1.—[Mr. R. A. Butler.]