§ (1) The Treasury may by regulations provide for mitigating the financial loss to persons who own goods for the purpose of resale where purchase tax has become chargeable in respect of those goods prior to, and of an amount exceeding the tax (if any) chargeable in respect of goods of the same description and whole sale value by reason of effect being given to any changed provisions whereby—
- (a) goods of that description cease to be chargeable goods; or
- (b) the rate at which tax is chargeable in respect of goods of that description is reduced; or
- (c) goods of that description become included in a prescribed list for goods of that class; or
- (d) the amount specified in such list in relation to goods of that description is increased.
§ (2) Regulations under this section may contain incidental and supplementary provisions and may in particular provide—
- (a) for defining the classes of persons qualifying for payments;
- (b) for computing the quantity of goods of any description or wholesale value in respect of which payments are to be made;
- (c) for paying, to those persons and in respect of those goods, out of moneys received by the Commissioners of Customs and Excise on account of purchase tax, sums not exceeding the amount of tax which was chargeable in respect of those goods less the amount of tax, if any, chargeable in respect of goods of the same description and wholesale value under the said changed provisions;
- (d) for requiring, as a condition precedent to receiving payment in respect of any goods, an undertaking from the recipient that he has reduced the price at which he offers for sale goods of the same description and wholesale value by an amount not
1590 less than that by which the tax chargeable in respect of goods of that description and wholesale value has been reduced;
- (e) for the imposition of penalties in respect of any contravention of or failure to comply with the regulations, so, however, that no person shall by virtue of this paragraph be liable for any offence to imprisonment for a term exceeding twelve months or to a fine exceeding five hundred pounds.
§ Brought up, and read the First time.
§ Mrs. Barbara Castle (Blackburn, East)
I beg to move, "That the Clause be read a Second time."
This Clause, or one like it, has appeared on the Order Paper during consideration of the Finance Bill for a number of years. It was, in fact, tabled as the official Opposition new Clause in 1950 in even more emphatic terms than those in the Clause which is tabled today. Indeed, the powers given to the Treasury in the Clause in 1950 were mandatory and not permissive. The Clause appeared again in 1951. Some of us pointed out last year that the Clause taken in 1951 by the Opposition of that day appeared with no fewer than five names of members of the present Government, including the present Financial Secretary to the Treasury.
When the hon. Member for Louth (Mr. Osborne) and I raised this matter last year, we merely became the foster-parents of the child of a number of distinguished occupants of the Government Front Bench, who looked extremely uneasy on being reminded of the parentage of a 1591 child who, as a result of their going up in the world, they were anxious to disown. The Financial Secretary, in particular, looked acutely embarrassed during last year's debate, and with the idea of postponing the evil day he fell back on the time-honoured expedient of referring the subject matter of the Clause to a Committee.
The Hutton Committee duly reported in March of this year and to the obvious relief of the Government advised them to wash their hands of the child of the days less reputable when they were sowing their wild oats in Opposition. There is something rather indecent in the uncritical haste with which the Government took the advice of the Hutton Committee. Although the report was available only in March of this year already in his Budget speech the Chancellor of the Exchequer was making it clear that he accepted it outright.
§ 9.0 p.m.
§ Mr. Boyd-Carpenter
I am sure the hon. Lady does not want to get the facts wrong. The report is dated 4th February and was in the hands of my right hon. Friend on that date.
§ Mrs. Castle
I am afraid that the hon. Gentleman is obliquely embarrassing the President of the Board of Trade who refuses to take the date of the acceptance of a report, as witness the report of the Monopolies Commission on the match cartel, as any measure of the date on which Government consideration should be given. Therefore, what is sauce for the goose is sauce for the gander and I shall be happy to remind the President of the Board of Trade of the remark of the Financial Secretary.
I think the hon. Gentleman will agree, however, that it was only within a brief period of the publication of the Hutton Committee Report that the Chancellor was making it clear in his Budget speech that he accepted the recommendations outright, and he has not at any time made any pretence to the House of having considered their recommendations with care or felt it necessary to explain to the House why he has adopted those recommendations.
This has been in marked contrast to the attitude of the Chancellor to the Report of the Grant Committee, which 1592 was published several weeks ago and on which we are still waiting to learn his attitude. Indeed, there would have been no opportunity for this Committee to discuss the Hutton Report at all if my colleagues and I had not tabled this Clause. It is rather saddening that hon. Members opposite, who used to express such an interest in this matter, should have been so intimidated by the scowls and embarrassment of the Financial Secretary that they failed to support on the Order Paper our attempt to get this report considered seriously by this Committee before the Chancellor dealt with the matter in the summary way that he has done.
In the first place, it is obvious that the Government would never have set up this Committee of important and busy men if the point at issue had not been a substantial one. That point is the financial effect on retailers of a reduction in Purchase Tax. The problem arises from the fact that the retailer has to pay the Purchase Tax when he buys the goods and can only recoup the tax when he sells them. If, during that period between buying and selling, there is a reduction in Purchase Tax the retailer has found, particularly in the buyers' market of today, that he stands to suffer the loss of the amount of tax which he has paid on the stocks he holds when a reduction of Purchase Tax is announced in the Budget.
Hon. Members on both sides of this Committee have on many occasions testified to the extent of the loss which retailers suffer and to the unfair burden which is placed upon them. Indeed, the Hutton Committee does not deny that this loss takes place although they argue that the loss is less serious on some goods than on others. Hon. Members who have read the report will know that the Committee went to a great deal of trouble to examine possible methods of making a rebate of tax to retailers in order to mitigate or to remove this loss. Clearly, they would not have gone to all this trouble of examining alternative methods put to them if the loss had not been a real one.
We can get some idea of the amount of money involved from the Committee's own estimate that there are half a million traders who carry stocks on which Purchase Tax is paid, and that the amount of tax they have paid on the stocks they carry at any given time is in the neighbourhood of £75 million.
1593 This ethical point of whether it is right that the retailer should carry this burden as a result of Purchase Tax reductions is not the one with which I am primarily concerned tonight. I believe it is an unfair burden to put on the retailer. I argued that last year and stand by it this year. What I am primarily concerned with tonight is the consequences of this unfair burden on the economy of the country. Quite clearly, if a retailer is to suffer financially quite heavily from changes in the Budget he will take evasive action to avoid the loss.
He would not be a good businessman if he did not do that. Obviously, he has done it and will continue to do it. The evasive action which he takes is, within the three months prior to the Budget, to reduce the stocks he carries to as low a point as possible so that—if the tax he has paid on those stocks is reduced—his loss consequent upon his having to sell the goods at the new lower level of prices is reduced to the minimum.
The effect will be very disturbing not only on the trade of the retailer—it will not only reduce the stocks in the shop—but a disturbance of trade will go further back. It will go right back to the manufacturers. If in January, February and March the retailer is lying low and saying he will not buy he has failed to place orders earlier which the manufacturer would be busy meeting in the autumn, from October onwards.
The Hutton Committee considered this point very seriously and were obviously concerned about it. They quote in some detail representations made to them by manufacturers and producers in which it is pointed out very clearly that present arrangements under which no rebate scheme operates have a clearly dislocating effect upon the flow of production. For example, there is the Federation of British Carpet Manufacturers and I am expecting a very passionate intervention from the hon. Member for Kidderminster (Mr. Nabarro) during the course of this debate. The Federation told the Hutton Committee that:In the past year or so and particularly during the recent recession in trade, some manufacturers have been seriously embarrassed by the fact that towards Budget time there is almost a complete cessation of orders in the home market.1594 Similar complaints came from the footwear trade, which told the Committee thatretailers restrict their purchases of footwear prior to each Budget. This, in turn, causes wholesalers to reduce their orders to the factories, with the result that the productive efficiency of manufacturers is severely effected.The Cotton Board made a very strong point of the effect on the textile trades. They said that the retailers' desire to avoid lossdistorts the buying habits of retailers, causing them to hold a minimum of taxed stocks, and it will postpone or restrict buying for a long period before every Budget day in anticipation of possible tax changes. This seriously interferes with production programmes and interrupts the normal flow at a most important time of the year. The fact that Budget day falls at the height of the spring season for textile goods means that interference with production prior to that day is likely to cause regular conditions of recession just at the time when the season's business is at stake. This has been an important contributory factor in the abnormal conditions in the textile trade during the past nine months.That, of course, is a matter of grave concern to every hon. Member who represents a textile constituency and who knows that the textile industry of this country can ill afford additional disturbance and the tendencies to depression which the present situation involves. I could quote other examples such as that of the toilet preparation manufacturers who all gave evidence for the same purpose.
The fact that the retailer suffers a loss is therefore established, because if there were no loss there would be less of this disturbance. We can take it as a fact that there is a loss and that this has been established more effectively than the Hutton Committee are prepared to admit, because the contents of their own report, in my view, invalidate some of its conclusions about the extent of the loss.
The Hutton Committee, therefore, came to the point of examining whether there was an practical method whereby the retailer could be reimbursed for this loss which he was liable to incur and could be encouraged to maintain the normal flow of orders, which, in turn, would maintain the normal flow of production in the factories and give us more efficient and economical production. After examining these methods, in my view not very exhaustively, the Hutton Committee dismissed them as impracticable, but it is very interesting to note that, quite clearly, the Committee considered 1595 the situation to be serious, because they went on to make a recommendation of very important Budgetary effect to meet that situation.
What they recommend is that, because this dislocation takes place, and in order to avoid it, and because the Hutton Committee cannot satisfy itself that there is any 100 per cent. water-tight rebate scheme, then any future Chancellor of the Exchequer should renounce the use of Purchase Tax as an instrument of national planning. [HON. MEMBERS: "Hear, hear."] Hon. Members opposite obviously agree with that, but we on this side of the Committee do not.
This is what the Hutton Committee go on to recommend. They say that this burden falls on the retailer and this consequent dislocation of trade takes place, which is a bad thing, and therefore, to obviate it, Purchase Tax changes in future should be small in amount and reductions should be small and regular rather than large and selective and liable to fluctuation. What that means is that to protect the retailer and manufacturer from the consequences of the Treasury's failure to produce a workable rebate scheme, any future Chancellor of the Exchequer is to be inhibited from radical and selective changes in Purchase Tax— changes which he might consider necessary to meet some urgent economic need in the country.
He might, for instance, want to wipe Purchase Tax out altogether on some articles to meet an acute unemployment situation. He might want to increase Purchase Tax for very good and sufficient reasons of economic planning. It is very interesting to see the opinion of the "Financial Times" on the fact that the Chancellor of the Exchequer hastened to adopt this attitude of the Hutton Committee.
The Chancellor of the Exchequer, in his Budget speech, made it clear that in his Purchase Tax proposals he had adopted the recommendations of the Hutton Committee. He adopted those recommendations because he does not believe in using the Budget as an instrument of economic planning, and does not look upon Purchase Tax, as we do, as an instrument for guiding demand or helping employment policy.
1596 It is, therefore, interesting to find the "Financial Times" severely criticising him for having told the House that in this Budget he was going to make a small overall reduction in Purchase Tax at an equal percentage over the whole range of goods. He said, in effect, "It is no use anyone saying Purchase Tax ought to be reduced more on this item or that, for the perfectly good reason that I cannot do it, because the Hutton Committee said it would be a bad thing to do." The "Financial Times "called this "an admission of gross administrative incompetence" by the Chancellor. In a leading article of 17th April, it comments that we have come to the quite ludicrous situation in which the Chancellor cannot make the taxation changes he considers desirable in the economic interests of the country because he has failed to find some 100 per cent. watertight method of meeting the loss to retailers.
The Hutton Committee admit that this problem is serious. Therefore we have the position that if we allow the present situation to go on the results will be quite serious for our production and our trade and for the efficiency of our economy. We are told that the only way to offset the serious disadvantages of the present situation is for the Chancellor of the Exchequer to adopt, in regard to Purchase Tax, a policy of small and regular changes.
I suggest to the Committee that in accepting the recommendations of the Hutton Committee the Chancellor, far from solving the problem, has made it a good deal worse. In this Budget we have the first substantial overall reduction in Purchase Tax which we have had since the tax was introduced—[HON. MEMBERS: "Hear, hear.]—yes, I give hon. Members opposite that. I do not think that necessarily there is any merit in it. That reduction has been accomplished at the cost of other socially desirable things. Of course, anybody who does not mind destroying the social and economic fabric of the country can always produce facts and figures in favour of such a reduction.
What the Chancellor has done is to accept what the Committee have said, that the only way of getting rid of the rebate problem is to make progressive small reductions in Purchase Tax until this very naughty tax is wiped out. 1597 [HON. MEMBERS: "Hear, hear."] The shortsightedness of hon. Members opposite is remarkable. What does it mean in terms of the problem we are attempting to deal with tonight? It means that every industry making goods which carry Purchase Tax has been given a warning that so long as there is a Conservative Government in this country every year we can expect a further percentage reduction in Purchase Tax.
The "Financial Times," in the same leader to which I have already referred, makes that quite clear. This is what it says:Taken in the context of the Budget speech, the Chancellor's statement almost reads like a fair warning to retailers that he proposes to spread their capital losses on tax-paid stocks over four years, in order to allow a twelve months interval to recuperate from each 25 per cent. cut.The cost to the retailers this year has been estimated by the Chancellor himself as running at about £13 million, and that is probably a modest estimate. If the retailers are now being warned that, if the right hon. Gentleman is Chancellor in the coming year, there may well be a further loss of £13 million, £14 million or even £18 million on their shoulders, what in effect the right hon. Gentleman has done is to stimulate them to take even more effective evasive action.
Clearly the uncertainty about Purchase Tax has gone and in its place we have the certainty of progressive reductions. Every retailer will gamble that next year there will be another overall percentage reduction. In other words, if they are foolish enough to buy in any stocks they will be asking for a loss. We can expect very profound repercussions on a wide range of our manufacturing industry as a result of this situation, because from October this year onwards we shall begin to find an outcry among manufacturers of radio and television sets, toilet preparations, textile goods, carpets, footwear and so on, that orders from retailers have practically dried up. I think the Chancellor is asking for a very serious dislocation of production over a very wide front.
What has happened is that, far from having met this problem by the adoption of the Hutton Committee recommendation on Purchase Tax, the Chancellor of the Exchequer has made the situation a great deal worse, and the problem will be 1598 intensified because the Hutton Committee and the Treasury have not been prepared to go into alternatives with sufficient care and thoroughness. On reading this report, I am not satisfied that all the possible methods of working out a rebate scheme have been examined. It is not good enough for the Government just to accept this situation. It is, as the "Financial Times" said, an admission of gross administrative incompetence to wash their hands of the problem and to say that nothing can be done.
The Chancellor will be aware that the Hutton Committee suggested that the situation might be met by an extension of the sale-or-return scheme, and the Committee pointed out that, to be effective, this might need some amendment of the law and that the whole problem ought to be further examined by Customs and Excise and the trades concerned. Has that been done? Is the Chancellor going to give any answer on this tonight? Is he in favour of legislative changes to make possible an extension of the sale-or-return scheme?
If he rejects that, what about other proposals which have been put forward— for instance, making Purchase Tax changes by Treasury order instead of making them at the most crucial moment, in the spring, in the Budget itself? What are his views on that? Failing that, can he tell us what his views are on other proposals which have been strongly pressed—the ante-dating scheme, for example, which, in my view, merits a good deal more consideration than it receives in the Hutton Committee Report? In fact, it receives no specific consideration by name at all in the Hutton Committee Report.
All that the Hutton Committee says about these schemes is not that they are unworkable or impracticable but that they are rough and ready. One thing certain is that the continuation of the present system is very rough on retailers and manufacturers. What the Chancellor has done by the present Purchase Tax proposals is to make the situation a great deal worse than it was before. We can now absolutely rely on the fact that there will be a drying up of trade from this autumn over a wide range of consumer goods until the next Purchase Tax reduction has been made in the Chancellor's next Budget.
1599 I should have thought that, in the economic situation in which we now find ourselves, that was an intolerable prospect, and, certainly, an intolerable prospect for the textile trade. As the Chancellor of the Exchequer has created the problem, perhaps the Financial Secretary will tell us what he is going to do about it, because it cannot be allowed to remain as it is. Having created the problem, it is up to the administrative minds of the Treasury and the Government Front Bench to work out a rebate scheme which will remedy all the production evils of the present situation.
§ Mr. Cyril Osborne (Louth)
Last year, I had the privilege of submitting a Clause similar to the one the Second Reading of which the hon. Lady the Member for Blackburn, East (Mrs. Castle) has just moved. Indeed, she said that we were the foster parents of the scheme which was really proposed by my hon. Friend who is to reply to the debate.
There is one point which I think the hon. Lady overstressed and thereby rather weakened her case. She accused us on this side of the Committee of destroying the social and economic structure of the country by agreeing to a reduction of the Purchase Tax. Coming from the hon. Lady, who believes very sincerely and deeply that the whole of the retail trade and the people who are affected by this proposal should be driven out of business——
§ Mr. Osborne
Oh, yes, the hon. Lady really believes that distribution and exchange should be nationalised, and that would be a social and economic change in the country that would be a great deal more violent than what is proposed here, and the hon. Lady should face it.
May I say, as one responsible for the similar Clause last year, that I was very disappointed with the Hutton Report? I had hoped that something would be done for the small shopkeeper for whom I spoke last year. These small traders have told me that they realised that the difficulties were enormous, but they thought that the Excise people were the niggers in the woodpile. They thought that the Treasury should be able to find a way round these difficulties. Having had the report, and having discussed it with my constituents 1600 and with many of my friends in the trade, I came to one or two conclusions upon it.
The first thing I learned from the traders came from the electrical side of the retail industry, which was very much affected by it. One of the shopkeepers told me that, in the first place, they thought something was going to happen in this year's Budget proposals, and therefore, they deliberately reduced their stocks. Consequently, the loss to them is not nearly as great as if they had had normal stocks. Secondly, they said that some manufacturers, though not all, and some of their principal suppliers, had given them a rebate on the stocks ordered between February and April, so that the manufacturers themselves shared in the loss which the retailer now faces. Thirdly——
§ Mr. Anthony Greenwood (Rossendale) rose——
§ Mr. Osborne
The third point was that, as a result of the reduction in Purchase Tax, trade was considerably better, and it was suggested to me that traders would like the whole of the Purchase Tax to come off, and they would take the risk of losses on stocks, because they would regain it in the profit on the extra trade which they would have.
There is one other point which was put to me by another group of traders. A letter was sent to the Chancellor on 23rd March from six of the biggest distributors in the City of London, in which they said:The suggestion of the Hutton Committee that in the normal buyer's market retailers can sell existing stocks without mark downs is, in our opinion, with minor exceptions, utterly unrealistic.I think that the Treasury ought to face that fact, and I do not think that the Hutton Committee did its work well on that point.
The letter went on to say:For these reasons, we feel that, despite the difficulties, with which we feel sympathy, of devising a practicable rebate scheme, it is the responsibility of the Government to take steps to safeguard retailers from the risk of loss.1601 I do not know what reply my right hon. Friend made to that letter, but I hope that my hon. Friend will make some observations on the two extracts I have read to the Committee. What was said in the letter is still true, and even if my right hon. Friend cannot do it now I hope that he will not give up, but will have another try next year.
I must say that I was bitterly disappointed with the report of the Hutton Committee. I thought that they would have done considerably more than they did for the small trader. Finally, Item 4 on page 43 of the recommendations—and this is something which really the Treasury could look at—says:Official assistance should be given to schemes formulated by retailers and their suppliers.I think that something should be done, and I ask the Treasury to look at that point in particular, because if they would help to that extent we should be grateful. Even if we cannot have another Hutton Report, I hope that between now and next year's Budget we shall have a Departmental report which will give us greater hope than we received from the Hutton Report.
§ Mr. Anthony Greenwood
I rose in the course of the speech of the hon. Member for Louth (Mr. Osborne) in the hope of elucidating one of the points he made. I realised, however, that that was a vain hope, and, therefore, I did not persist in trying to persuade the hon. Gentleman to afford me the usual courtesy of giving way when an hon. Member on the other side of the Committee rises to make a point.
I was sorry that the hon. Gentleman went out of his way to criticise my hon. Friend the Member for Blackburn, East (Mrs. Castle), with whom, on this subject, he worked so closely a year ago. Indeed, while the hon. Gentleman was speaking, I checked up the OFFICIAL REPORT for that occasion, when the right hon. Member for Blackburn, West (Mr. Assheton) said:I rise to congratulate my hon. Friend the Member for Louth (Mr. Osborne) on bringing forward this admirable new Clause, and I should like to congratulate the hon. Lady the Member for Blackburn, East (Mrs. Castle) for having the wisdom and good sense to add her name …"—[OFFICIAL REPORT, 27th May, 1952; Vol. 501, c. 1295–6.]1602 I can only wish that the hon. Member for Louth had had the good sense to add his name to the Clause moved by my hon. Friend this year, and, indeed, as my hon. Friend the Member for Blackburn, East points out, that the right hon. Member for Blackburn, West who, I am sorry to see is not with us on this occasion, had likewise added his name to it. I had hoped that the hon. Member for Louth would have spoken in some support of his right hon. Friend the Chancellor, but all we had from him was a series of regrets for the action which the Government have taken and for the contents of the Hutton Report. On that, I have a great deal of sympathy with the hon. Gentleman.
My hon. Friend the Member for Blackburn, East referred to what she regarded as the indecent haste with which the Chancellor accepted the Hutton Report compared, shall we say, with the coyness with which he is approaching the Grant Report which also deals with Purchase Tax. My hon. Friend was, perhaps, more charitable than I am, but it seemed to me when I heard the Chancellor's Budget speech that the reason for his ready acceptance of the Hutton Report was quite apparent. On that occasion, he pointed out that he could not very well reduce Purchase Tax further because of the injustice that would be done to the retailers. I do not think there has ever been such an unconvincing display of regret since the Walrus and another Carpenter ate the oysters, until, of course, we had the speech of the hon. Member for Louth a few moments ago.
The hon. Member for Louth has been making researches into the reactions of traders to the Government's proposals. I should like to add, for the enlightenment of the Committee, the reactions of retailers on a rather wider scale. The National Chamber of Trade has recently been having a conference, and at that conference Mr. Bradshaw, who is Past President of the National Chamber of Trade and Deputy-Chairman of the Chamber of Trade's Board of Management, made a speech which was extremely critical of the Chancellor of the Exchequer and his policy. I should like to quote to the Committee what Mr. Bradshaw had to say.
It was quite clear that he had Conservative Members in mind, as will be 1603 apparent to the Committee in a few minutes. He said:We seek the same co-operation and sympathy from all M.P.s who stand for the British way of fair play and common justice to its citizens.He went on to say that he knew now why the Chancellor of the Exchequer accepted the report so readily. He said:We know now why. Mr. Butler was planning further cuts in Purchase Tax rates to support his incentive Budget. These cuts cost thousands of loyal subjects an aggregate loss of some £10 million. It is another case of smash and grab—grab as much as you can from the big people and smash the little trader to bits. This report, Hutton's folly, has become Butler's folly. Parliament must see that it does not become the nation's folly.That is the former chairman of the National Chamber of Trade referring to the party which is the party of the little man, the party of the people who support the little shop around the corner. The Deputy-Chairman of the National Chamber of Trade accuses them of smash and grab—smash the little man and do something only to help the big man. I do not think that my hon. Friend the Member for Blackburn, East was unfair in what she said, for the truth of the matter is that Mr. Bradshaw has clearly "rumbled" the Chancellor of the Exchequer.
My hon. Friend referred to the unfair burden, which she believes the retailers are unwilling to bear. I believe she was right in what she said. I think the retailers are being unfairly treated, but I do not think it is particularly relevant to this problem whether they are being treated fairly or not. The important thing is that they are absolutely convinced that they are bearing an unfair burden. An important aspect of the matter is that so long as they feel like that there will be an interruption in the flow of production. I want the Committee to consider what that effect will be upon the industry of the country. It is upon that that we substantially base the case that we are putting forward tonight.
In the Hutton Report there is a paragraph 129. I would like to read out the first sentence of that paragraph. The Committee are talking about the allegation that reductions in Purchase Tax, and even the possibility of them, interrupt the flow of trade. The paragraph begins:Our impression, based on a careful study of all these figures, was that they tended to 1604 suggest that, in general, the argument about dislocation of trade had been somewhat overstated by trade associations.I do not think it would be possible to devise one fairly short sentence which contained more words of qualification than the framers of the Hutton Report introduced into that one sentence. "Impression, tended, suggest, in general, somewhat": even a Minister of the Crown, faced with a difficult situation in Parliament, could not have devised a more equivocal way of expressing himself. The Committee were quite specific later in the paragraph, when they say, in spite of everything that appeared at the beginning of the paragraph:Nevertheless, we have no doubt that from time to time anticipation of a change in tax exerts considerable influence on the public's willingness to buy and the retailer's willingness to hold stock; and the statistics we examined were not inconsistent with the possibility of severe dislocation to trade from these causes in particular instances.The Hutton Committee were in no doubt about that; nor am I.
I want to give the Committee some figures dealing with the interruption in trade which has taken place this year. That interruption is an important factor in the argument which we are adducing. Mr. Bentall, the chairman of one of the largest stores in the suburbs of London, said in his report to the annual meeting of his company in April that this year his firm had lost £12,000 as a result of the reductions in Purchase Tax. A department store in Yorkshire lost £1,725. A small radio shop in one of the London suburbs lost £400.
In the case of a department store on the south coast the radio department alone lost £800 and the whole store £2,877. In another department store on the south coast the carpet department this year lost £300. A suburban department store lost £1,900 on carpets alone and last year lost £1,150 on footwear alone. A small hardware store in the West End of London lost between £100 and £150 this year purely on account of reductions in Purchase Tax.
There are certain categories of traders who have been especially badly hit. I have a list of radio firms up and down the country and of the amounts which they have lost through a reduction in taxation. Other forms of enterprise which have been particularly badly hit are those 1605 dealing with leather goods and domestic appliances of one kind or another. One of the difficulties which we have to face in obtaining statistics of this kind is that not sufficient time has elapsed since the Budget proposals were announced for a large number of retailers to have obtained really up-to-date figures.
That is particularly the case in respect of textiles and footwear and other things which are not resale price maintained, because when the reduction of tax takes place, the retailer, perfectly naturally, still hopes to sell as much of his stock as he can at the old price in order to protect himself against the loss which otherwise he would suffer.
In the case of textiles and footwear it is difficult to obtain absolutely reliable retail figures, but I have obtained figures from manufacturers of boots and shoes outside my own constituency of Rossendale. I find that, generally speaking, the amount at risk under Purchase Tax in relation to the profits made by a company before taxation averages between 10 per cent. and 15 per cent. in the case of most footwear manufacturers. In the case of manufacturers producing the highest quality goods it may be as much as 33 per cent.
When one has sums of money of that kind involved, it is quite obvious that every retailer will be reluctant to lay in stocks of goods which, when the Budget comes along, he may have to sell at a price considerably less than that which would cover the amount he paid in taxation. An article in the "Financial Times" of 5th June, on the sale of domestic appliances, said:Under present budgetary conditions February and March tend to become dead months, and any cuts in Purchase Tax that then arise have to be borne on subsequent sales, which, in past experience, can mean that profitable sales are reduced to those achieved in seven or eight months of the year.It seems to me not unnatural that in these circumstances retailers should be reluctant to lay in stocks which are subject to taxation.
As my hon. Friend the Member for Blackburn, East rightly pointed out, that tendency will be increased from now on. In the past, in most years, there was very little likelihood of substantial reductions in taxation. But this year hon. and right hon. Members opposite have made such 1606 a reduction in taxation and, however justified it may be, there is certainly a general expectation among the commercial community that it is part of a four-year plan for abolishing Purchase Tax. I should like to think that that was the case, except that to do it in that particular way would introduce uncertainty every year, with the consequences to which my hon. Friend has referred.
Already we are finding the effect of the possibility of a further reduction next year. On 5th June the "Financial Times" had an article on carpets. As did my hon. Friend, I expected that the hon. Member for Kidderminster would be in his place in a debate of this importance and I did not think it necessary to point out that I was going to raise the subject of carpets. The "Financial Times" said:It is generally expected that next year there will be hesitation in the weeks immediately preceding the Budget in case Purchase Tax is again reduced.On the following day the "Drapers' Record" had a leading article based on the instructions that have been issued by one of the largest department stores in the West End of London. I have quoted this in an earlier debate, but I quote it again tonight because it has particular reference to the situation under discussion. It says: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.That is an extremely serious situation, as many hon. Members opposite know perfectly well, and it is one which the Government and the Hutton Committee have refused to face. That is not good enough. Here we have these two proposals which the traders have put forward —First, the extension of the "sale or return" scheme, which has been turned down by the Hutton Committee, but which the retailers still believe it is possible to put into operation——
§ Sir Harold Webbe (Cities of London and Westminster)
The Hutton Committee supported the "sale or return" 1607 scheme. They did not turn it down. Only those who cannot work it have turned it down.
§ Mr. Greenwood
I am sorry. The hon. Member is perfectly right. The Hutton Committee expressed the hope that the "sale or return" scheme would be extended, but the Chancellor of the Exchequer has done nothing about it.
The other proposal is the "antedating" scheme, to which the Hutton Committee do not refer by name, but appear to dismiss on what I think are completely inadequate grounds, that it would not do perfect justice to all the individuals concerned. It would certainly go a long way towards doing a great deal of justice to many of the people concerned. The hon. Member for Louth (Mr. Osborne) was perfectly right, last year, when he told the Committee that the "ante-dating" scheme was, in his opinion, perfectly workable. Certainly, the retailers' organisations are strongly in favour of it.
I want to hear from the Government why they are not prepared to undertake further negotiations with the trade to see whether this proposal cannot be put into effect. I believe that the objections raised by all sections of the Committee in the corresponding debate last year were sound. I do not think they have all been adequately considered by the Government or the Hutton Committee, and I should like an assurance tonight from the Chancellor of the Exchequer or the Financial Secretary that their minds are not closed upon this problem, and that we may have an undertaking that they will give sympathetic consideration to this question and will be able to make a helpful statement on the subject on the Report stage.
§ Sir H. Webbe
I have listened with very close attention to the speech of the hon. Member for Blackburn, East (Mrs. Castle), and I listened to a great deal of it with sympathy. I venture to say that there is no Member of the Committee—and I include my right hon. Friend the Chancellor—who would not like, if he could, to remedy what is undoubtedly an injustice and, in many cases, a serious hardship. It is beyond argument that the reduction of Purchase Tax involves retailers holding stocks of Purchase Tax 1608 goods in the loss of the tax which has been overpaid on those goods. I am quite certain that the Chancellor will certainly see to it that the Treasury will continue to consider finding a reasonable and proper solution, but let us be quite clear that any solution must fulfil certain minimum conditions. In the first place, it must be administratively possible. In the second place the basis on which tax is to be refunded must be not, as the hon. Lady said, watertight, but sufficiently precise to ensure that the refund of tax is fair to the Exchequer as the representative of the taxpayers as a whole and reasonably fair as between one trader and another.
I have given a great deal of thought to this matter because from the very nature of my constituency I have had more opportunities, perhaps, than I sought of discussing all these proposals with the trade associations, with the officers of those associations and with individual traders in many walks of life. I have some little experience of the manufacturers' end of this business, too. I must say quite frankly to my right hon. Friend that I am not satisfied that any one of the schemes that have been suggested fulfils the conditions that I have suggested are the minimum as a basis for a proper scheme for refund of Purchase Tax.
Clearly, the refund of tax must be related, or should be related, reasonably closely to the stocks in the hands of dealers on which they have suffered loss. To ascertain those stocks precisely, which was, of course, the first and obvious suggestion, is clearly impossible. It involves taking stock in some half a million separate establishments at the same date and producing certificate stocks on which the Treasury will be justified in refunding tax. I do not believe that that is a physically possible thing today.
§ Mrs. Castle
The hon. Gentleman, of course, realises that such will not be necessary under the ante-dating proposal.
§ Sir H. Webbe
I am going to deal with the ante-dating and the two other suggestions that have been made, but, first, I suggest to the Committee that the precise ascertainment of stocks is physically impossible. We cannot get half a million people who are capable of certifying stocks as they are on one particular day in the year. Then there has been the 1609 suggestion of refunding tax, not by ascertaining precise stocks but by finding some reasonable basis on which to estimate stocks. Superficially, the most attractive is the one referred to as the ante-dating scheme, under which we take a whole year's purchase of goods and divide by the factor which is dependent on the rate at which those goods normally turn over.
§ Sir H. Webbe
Perhaps I have given it the wrong name, but it is the second suggestion, that we take a fraction of the year's purchase of goods related to the speed of turnover. That, in my view, is impracticable, too. On the surface it appears to be an attractive and sensible way of dealing with the problem, but the rate of turnover varies almost from days to months as betwen one group of goods and another; it varies very widely as between one lot of goods within a group and another lot in the same group; it even varies very widely as between one locality and another; and it is administratively quite impossible to arrive at any reliable figure of rate of turnover so as to make a graded assessment of the likely stocks.
Then there is the pure ante-dating scheme, which I described wrongly, which entails remitting taxation on goods purchased within two months of the reduction in the tax. That scheme would lead to injustice and inequality in comparison with which any of the present arrangements are simplicity itself. The rate of turnover of stock in a dealer's hands may well be once in 12 months, but in the case of another man it may be twice a week. If we decide upon a two months' remission of tax we shall be giving one man a sixth of what he is entitled to and the other man eight times his entitlement.
The variation would be so absurdly wide that I cannot believe that, in practice, the scheme would lead to other than the most bitter recrimination as between one trader and another and a flow of demands and criticisms to the Chancellor which would be never-ending.
§ Mrs. Castle
If the hon. Gentleman is right in saying that it would lead to bitter recrimination, why is it that the trade is pressing it so strongly?
§ Sir H. Webbe
I assure the hon. Lady that I have discussed the scheme with those who have put it forward, and they 1610 themselves have to admit that it would be impossible to arrive at what even the most optimistic of us call rough justice by that method. It is the best method that they can suggest, but no one of them will maintain that it would produce a just and reasonable settlement.
That may be a matter of argument, and I do not want to enter into an argument as to whether they are right or not; I believe that it is not a practicable suggestion. I am driven to the conclusion that at the moment the problem is completely insoluble and that it is not possible for the Chancellor to do what the Clause calls upon him to do. Consequently, I could not think of supporting the Clause.
However, I want to follow the hon. Lady in the other part of her argument which seemed to me to be even more important.
§ Mr. Anthony Greenwood
Before the hon. Member passes to another point, might I point out that he is being very unfair to the various organisations of retailers in saying that they think what he has said. I believe he is really putting his own point of view. The view of the organisations of retailers is that it is impossible to find a perfect scheme but, on the whole, they think that the ante-dating scheme is a good deal better than that which operates at present.
§ Sir H. Webbe
Each set of traders is prepared to think that its own scheme affords a rough and ready solution, but I have not found a single group of traders which approves anybody else's suggestion. There is no unanimity on this matter. There is a wide diversity of view because of the obvious and reasonable desire of everyone to find an answer.
The hon. Lady referred to what I regard as a much more important point, the grave dislocation which occurs not only in the retailers' trade but, even more important, in industry because changes in Purchase Tax are associated with the annual Budget. It is not the uncertainty of tax or the weight of tax which causes the dislocation; it is the uncertainty about what is going to happen on a fixed date in the future. There is no shadow of doubt that that dislocation of trade was most grave last year, and I agree with the hon. Lady that it is likely to be very much more serious this year. There is anticipation of a further reduction in Purchase Tax, and it is inevitable that that 1611 will lead to a complete hold-up in industry towards the end of the autumn.
I join issue with the hon. Lady because I believe she has given the wrong cause for the dislocation. It is not the evasive action of the retailers in failing to build up stocks which causes the dislocation; it is the evasive action of the general public who will not buy. I assure the hon. Lady that it would not help the manufacturers substantially if all their dealers maintained their full stock. Manufacturers do not live on selling goods to dealers; they live on the dealers selling goods to the public. Even if the dealers maintained their stocks, the evasive action taken by the buying public would be bound to have its reflection in a serious set-back not only in retail trade but, much more serious, in industry itself.
§ Mrs. Castle
Surely the hon. Gentleman will agree that, from the point of view of getting a smooth flow of production, what is important to the manufacturer is that the retailer should be prepared to go on buying and holding stocks. If he does not think he is going to suffer a financial loss, he will do that, because, whereas the consumer will hold off buying immediately before the Budget, he will immediately rush to take advantage of the stocks if they are there when the Budget announcement is made.
§ 10.0 p.m.
§ Sir H. Webbe
I am sorry to have to disagree with the hon. Lady. I have considerable experience of that particular aspect of the problem, and I can assure her that although the fact that dealers are reluctant to hold more than a minimum trading stock is a contributory feature it is only a very small fraction of the problem. It would not help the manufacturer of goods which are subject to high Purchase Tax if all the dealers continued to hold their normal working stocks throughout the year. It makes very little difference indeed. Only a very small percentage of the turnover is represented by stocks in dealers' hands. I am quite certain that it is so in a wide variety of trades.
But the effect on industry of this evasive action by the buying public is serious and I join wholeheartedly with her on that. I am convinced that unless something can be done to level out 1612 the flow of business we shall experience, next winter and early spring, a most serious setback in many manufacturing industries. I want to make a suggestion to my right hon. Friend. I do not expect him to accept it warmly tonight, but it is a suggestion which must be thought over very seriously. I am convinced that there is no way of avoiding all these losses which fall on the retailer, but I should like to try to temper the loss and the hardship on both the retailer and, more particularly, on the manufacturer.
I would ask my right hon. Friend to consider whether it is absolutely essential that changes of Purchase Tax should invariably be associated in toto with the Budget. Is it not possible for him to watch the out-turn of his Budget, as I am sure he does day by day and week by week, and, if he sees that things are going reasonably well, to make a small overall reduction in Purchase Tax unannounced and not at any definite date? It could be a small amount like a 5 per cent. all round reduction and a little later he could make another 5 per cent., so that we do not find the buying public waiting for that date in April when they will know their fate and keeping off the market in the meantime.
If that element of complete uncertainty could be introduced into the Purchase Tax changes by Order or by administrative action in very small doses in this way, not only would the immediate hardship to the retailer be removed by spreading the burden but a much more regular flow of business to the retailer would be assured. That is a constructive suggestion which I ask the Chancellor to consider. I appreciate the difficulties, but I am quite convinced that unless something is done to avoid what happened last year we shall have a still greater dislocation in industry and trade in the first three months of next year.
§ Mr. James Hudson (Ealing, North)
As I listen to hon. Gentlemen opposite I find I have more sympathy than I usually feel about the difficulties in which they are placed. I feared that in this discussion they would have taken a line of escape that might have been open to them, namely, that the reason why they have run away from supporting the same Clause as they themselves brought before the Committee last year was because the Chancellor had done something effective 1613 to meet the point of view of their own new Clause of a year ago.
They have not taken that line. I admire the hon. Gentleman the Member for Louth (Mr. Osborne), who still stands by his convictions and bitterly complains at the inadequacy of the proposals of the Government. He knows that the problem of the small businessman who came to him in what he called his political surgery last year, who was already in debt to the bank to the extent of £5,000 and had to find another £2,000 to cover the purchase of articles that he was going to sell in his retail business, has not been faced adequately by what has been done.
The hon. Gentleman speaks quite rightly tonight in terms of resentment at the proposals of the Hutton Committee and at the use by the Chancellor of those proposals. The same thing applies to other hon. Gentlemen. The right hon. Member for Blackburn, West (Mr. Assheton) said that the Clause to which the names of his hon. Friends were placed last year was a sound Conservative Clause, that it was non-mandatory, that it gave the Government an opportunity to look for something better if they could find it, but that it called upon them to act.
As hon. Gentlemen opposite still think that the Hutton Committee have not faced, and the Government have not applied, the practical proposals that came before the Hutton Committee from the retail traders, I should think they are bound tonight to support the hon. Lady the Member for Blackburn, East (Mrs. Castle), and hon. Members on this side of the Committee who have put down the same non-mandatory new Clause as was put forward last year.
As I inferred by a slight interjection in the debate last year, I speak on behalf of a considerable body of co-operators who share with retailers generally the great disability imposed by this unwillingness to deal with an effective grievance. They lose many thousands of pounds. I speak not only on their behalf. I have had a great sheaf of correspondence, as I expect hon. Members generally have had from their own local traders.
Reference has been made to the complaint by Mr. Bentall of the £12,000 he loses by the neglect of the Chancellor to 1614 face up to this position. Mr. Bentall is not only a prominent constituent of the Financial Secretary in Kingston, but has a great emporium in Ealing as well. At the last Election I learned of his great anxiety to keep me out of Parliament, which led to substantial efforts to back up that purpose by the people who were sent into my constituency and the neighbouring constituency. I do not know what Mr. Bentall thinks about his Financial Secretary now, but I am hoping that he will modify his opinion about me in view of the speech I am making on his behalf as well as on behalf of the Cooperative movement, and will decide that I was, after all, not so inimical to his purposes as he had imagined.
I find among the electrical and other industries—of which there are many in my Division in Greenford, Perivale and so on—the greatest resentment at the unwillingness of the Hutton Committee to face the practical suggestions put before them. I agree with those industries that it was quite wrong of the Hutton Committee to suggest that there was a sort of compensation to traders at the time when the tax was put on or increased. The British buying public are a very hard taskmaster. When they hear that a tax has been put on, knowing that the articles to be sold have been in the possession of the trader and obtained by him at a lower price than that which prevails after the tax, they look for a continuance of an advantage in the price of the article for a week or two, or even a month or two. Indeed, the forces of competition, acting on the trader anxious to snatch at what advantage he can obtain, prevent at the time the tax is put on anything of that compensation implied by the Hutton Committee.
This is a problem that stands by itself and the traders are right. The Co-operative movement are right when they say that in order to meet the problem now placed upon the retail trader the Chancellor should have found—if the Hutton Committee could not find it for him— a better conclusion than that which he has put before us. I agree with my hon. Friend the Member for Blackburn, East, despite what was said by the hon. Member for the Cities of London and Westminster (Sir H. Webbe) about the way in which the buying public settle this issue rather than the Chancellor. I do not think 1615 that the great firm with which the hon. Member is associated always take that attitude. The Chancellor settles a great many issues for his firm and that is not to be placed at the doors of the buying public. I do not think this issue can be placed at their doors. If they see an advantage, the buying public take it whereever they can. It is the duty of the Chancellor of the Exchequer to face that problem and to meet the disabilities that traders feel in this matter.
Although various figures have been given about the losses, I cannot estimate how much loss retail traders will suffer. I know that in the Co-operative movement the losses run into tens of thousands of pounds, taking the movement as a whole. Some estimates have been made that the total cost to what the hon. Member for Louth said were 425,000 local traders affected by this proposal. Those people really ought to be a preoccupation of every hon. Member, particularly hon. Members opposite who make so many promises to them. The cost added up to millions of pounds; how many millions I am not prepared to say. We ought to get tonight from hon. Members opposite a greater willingness than they have yet indicated to support this new Clause.
It is all very well saying that the Chancellor is now left to think it over again. It is all very well for the hon. Member for the Cities of London and Westminster to say to the Chancellor that he hopes he will do this or that during the coming year. What can be expected of the Chancellor of the Exchequer, if, after putting their names to a new Clause on the issue last year and seeing the matter come to a head this year in such a way that everybody realises the necessity for action, hon. Members opposite fail to register in any way their objection to what is taking place. What is the hon. Member for Kidderminster (Mr. Nabarro) going to say? I compliment him; he has found his way into the Committee at last. I hope he will find his way into the Division Lobby. At any rate, some good reason—a better reason than any I have heard—will have to be provided for him if a satisfactory story is to be told to his constituents. I have no doubt that he is pretty good in telling a long story, but it will have to be a pretty long one this time.
The Conservative Party have to face this issue at the present time as they have 1616 not had to face it before; and they do so after all the professions they have made and challenges they have thrown out in the past about the defence of the little man, about setting the little man free, about putting him in a position so that he can fight effectively with the great and powerful trader who tends to crush him out of existence. There is a very special case for the Conservative Party accepting their duty and supporting us in this proposition. At any rate, I am very glad I have had this opportunity to speak, and I will see this matter through with my hon. Friend the Member for Blackburn, East, who moved the new Clause.
§ 10.15 p.m.
§ Mr. Charles Fletcher-Cooke (Darwen)
I do not think anybody on this side of the Committee disagrees for one moment about the seriousness of the situation and if I am brief I am sure the Committee will not take that to mean that we do not think it is serious.
The reasons which have led hon. Members opposite to attack the Hutton Committee have scarcely done justice to that Committee. One might have gathered from some of the remarks that the Hutton Committee had approached its difficult task in the spirit of not trying to find a solution whereas it is perfectly clear, and indeed it breathes from every sentence of their report, that they were desperately anxious to find a solution. The fact that they have failed seems to me to be no reason for casting at them the stones which have been cast by hon. Members opposite in the course of this debate.
On the other hand, the fact that they have failed is no reason why we should not try to succeed in the future. I am sure my right hon. Friend will not take the Hutton Committee's Report as the last word on this subject. For my part, I am desperately anxious that some solution should be found because I wish to see Purchase Tax reduced not in this easy-stage manner which the hon. Member for Blackburn, East (Mrs. Castle) anticipates but by one great big shock reduction, because I do not believe that in no other way shall we, at least in the textile industry, get back to the proper conditions in which quality counts.
This gradual reduction will not produce the necessary concentration on quality because it will merely mean that people 1617 will still try to avoid the tax by debasing their quality. However small the amount of tax they have to pay, that will be their attitude; rightly or wrongly, their attitude will be that as long as there is any tax at all, they will try to get underneath the D line by debasing their quality.
It is, therefore, vital that we should administer a psychological shock by removing this tax altogether at some time; and, of course, that cannot be done —at least so the Chancellor suggested in his speech—because of the complaints of the retailers, who, if the tax were taken off by one fell swoop, would have to suffer a very great deal unless some rebate device were produced.
I ask my right hon. Friend to look again not at the ante-dating scheme nor the stock-turn scheme nor any of those schemes which the Hutton Committee have, to my mind rather convincingly, turned down, but at another scheme which they describe on page 34 of their report as a scheme for part of the field only.
As I understand, they suggest that so far as identifiable goods are concerned, it would not be difficult to work a scheme of rebates for goods with serial numbers. They suggest it would be feasible to operate a scheme of rebates, but fear that if that were done the system of identifying goods by serial numbers would spread. I suggest that that is not so much something to fear as something we should hope for, not merely on the grounds of more rebates for honest retailers, but that it is generally a good thing that goods may be identifiable and any defects in quality traceable all the way back so that the people responsible for bad quality may be made to suffer. The more things are identifiable the better for the quality of goods in this country.
They suggest, more implicitly than explicitly, that another disadvantage is that most retailers do not keep sufficient records to enable such a scheme to be operated. It may well be that at present retailers do not keep very good records. The reason for that is because it is not particularly in their advantage to do so. For other tax purposes it is not always a good thing to be very careful about keeping records. But if it were necessary in order to get a rebate, we may be fairly sure that retailers would be induced to keep records.
1618 No one would doubt their competence to do so if they wanted to. The number of people who keep very complicated records of their football pools week by week is evidence of that. If they can keep such complicated arithmetical transactions they are perfectly capable of keeping records. I am sure that our educational system is equal to that.
The only real objection to this partial system is that referred to in paragraph 190 of the report, that because there cannot be justice for all retailers —obviously all retail goods cannot be identified by means of serial numbers— we should not have justice for anyone. I regard that as equality of misery gone mad. It means that because there cannot be justice for all, there shall not be justice for some. I suggest that that is egalitarianism turned on its head. It is quite ridiculous and should be dismissed.
Let us, if we can, start with a system of rebates for identified goods and I think we shall find that identification will spread very rapidly. It may not cover the whole field, but it would cover a substantial part and give retailers the impression that at least this matter was being tackled with the seriousness it deserves.
§ Mr. Percy Holman (Bethnal Green)
How can the hon. Gentleman say that textile goods may be identifiable? That is utterly impossible and he ought to know it.
§ Mr. Fletcher-Cooke
The hon. Member says that, but I would refer him to paragraph 189 of the Hutton Committee's Report where they go into the question of numbered tags which could be sewn on numerous textile articles. The hon. Member may think he knows better, but the Hutton Report is quite sure it can be done. If he has the opportunity of speaking I hope the hon. Member will explain why it cannot be done in the way that the Hutton Report says it can be done.
§ Dr. Horace King (Southampton, Test)
I am sure that the traders of the country will be grateful to my hon. Friend the Member for Blackburn, East (Mrs. Castle) for raising this problem again this year, and I count it a privilege to support the new Clause this year, as I did last year, for I am keenly interested in this question; I was even when the Labour Government were in power.
1619 The hon. Member for the Cities of London and Westminster (Sir H. Webbe) stated with superb clarity the difficulties which confront us in this matter; he gave a very frightening description of the complexity of the problem, but he went on with equally superb clarity to state the economic gravity of the problem so far as it affects the trade of this country and the need to do something about it. His speech contained the nub and heart of this matter.
I want to tackle the question from another point of view. This new Clause seeks to remove an injustice, and to me the fact that it is an injustice is one that weighs more than the fact that it is also a hardship. It is an injustice against the little shopkeepers of this country. It is a fact that every society of retailers has consistently protested against the injustice. It is also a fact that every chamber of commerce in the country is unanimous about the need for the Government to do something about it.
I support the claim of my own chamber of commerce and the little shopkeepers in the constituency which I represent, not because I have any hope of winning their votes, for the bulk of the chamber of commerce and the little shopkeepers in my constituency are ill-advised enough to vote Tory with monotonous regularity. I support them in this matter because I think their case is morally right.
The extent to which the retailers of this country are acting as unpaid tax collectors needs emphasising. The Hutton Committee Report shows that about 75 per cent. of the money taken by tobacconists is on behalf of the Government. I think we may dismiss tobacconists and brewers from our consideration because we understand from the Hutton Report that these trades, at any rate, feel that they do not need any special treatment from the Government, although the report underlines that retail tobacconists find themselves faced to some extent with the general retailers' problems.
Of the money that the retailers in this country handle, 25 per cent. is collected on behalf of Her Majesty's Government. I do not want to indulge in mere denunciations of the Hutton Committee or of their report, but I do want to make 1620 some serious criticisms of it. It is fair to say, first, that the Hutton Committee claim that the grievances which the retailers feel were more strongly expressed than is really warranted. They say that the advocates of their case stated it too strongly.
Yet the Hutton Committee Report, again reminding me of the weeping of the Walrus and the Carpenter, says in paragraph 204:We have a great deal of sympathy with those who have to tie up large sums of money in heavily tax-laden stocks in order to be able to carry on their business. They are liable to hazards arising out of changes in the rates of tax which are outside their own control, and against which their ability to protect themselves may be limited and uncertain.The Hutton Committee even admit that a trader may be forced out of business through tax reductions.
Surely no stronger moral case can be made out than the Hutton Committee themselves make in that paragraph. They suggest that if a trader is in danger of being forced out of business because he has to meet commitments that he should not morally have to meet, it might be possible to save him by some postponement of Income Tax, but not by foregoing the payments that he has to make for Income Tax purposes. The Hutton Committee also admit that traders who did not profit by Purchase Tax increases but sold their stocks at the old prices were doing what the Government during the war asked them to do, and what was not only their moral duty but their patriotic duty. Yet the Committee suggest in their report that there are compensatory gains; swings and roundabouts.
On the whole, the Hutton Committee tend to minimise the grievances and injustices inflicted on the retailers of this country. They think that a good deal of feeling is due to confusion in the minds of traders over price control and they assume that gains in increased trade on the one hand when Purchase Tax is reduced, and on the other what the traders made—according to their Committee's own argument dishonestly—in selling at high prices when Purchase Tax was imposed, should roughly compensate the traders of this country. The Hutton Committee argue that in equity there ought to be a rebate when Purchase Tax 1621 is reduced just as there ought to be a surcharge when Purchase Tax is increased, but because they cannot work out a scheme which will introduce surcharge and rebate, they decide to recommend neither.
This Committee of the House of Commons should remember, and so should the country, that when Purchase Tax was on the increase the decent business community of the country played the game by their customers, on the whole. I speak only of my own experience of little shopkeepers, who sold goods to their customers at the old price after Purchase Tax was increased. I am certain that I am not alone in that experience. Lots of traders have developed their businesses extensively since the war, and all businesses are now conducted in a period when we can expect not a rise in Purchase Tax but a fall. It is generally agreed all over the country to be a period of falling Purchase Tax. Nobody visualises, short of a national crisis, any return to a period in which there would be a dramatic rise in Purchase Tax from which traders might recoup themselves; so that they have no hope whatever of regaining what they are losing by the present Budgetary reductions in Purchase Tax.
In answer to a Question which I put to him earlier this month the Chancellor estimated the loss which traders will suffer because of the reduction of Purchase Tax as about £13 million this year. It is true that that will be offset by various compensatory gains mentioned in the Hutton Report, but the sum must approach the total estimated by the Chancellor. In common justice we are in honour bound to attempt to meet some of these obligations.
We appreciate too little the fact that shopkeepers are unpaid tax collectors, and that the burden of collecting money for the Government means a lot of extra book-keeping. For the little man it means tying up his small capital in highly expensive stock—highly expensive because he carries the expense of the tax that he is hoping to recoup from the customer when he sells. That is service enough, but if, on top of that, we are going to charge British citizens—not pay them but charge them—for carrying out the onerous duties of tax collectors, I say 1622 quite seriously that the position becomes fantastically unjust.
The Hutton Committee Report states that, on the whole, manufacturers and wholesalers can safeguard themselves to some extent, although they bear a burden. The real problem is the tax which has been paid by the retailer, which he is waiting to collect and which is on the stock he carries in his shop. The Hutton Committee have certain suggestions which they think might alleviate the burden. I do not wish to remind the Committee of them in detail. Some are suggestions for the business interests—of which I am certain the business interests will take notice—for mutual arrangements between wholesaler and retailer. Some of them are fiscal, such as the recommendation that alterations in Purchase Tax be regular and moderate, but they do not meet the moral case which I am arguing tonight.
The main headache remains so far as the trader is concerned. This year the amount involved is £13 million; next year it may be very much more. I realise the Treasury's difficulty. I realise that this matter has been bandied about between the Treasury and the business interests not merely this year and during the sittings of the Hutton Committee but over quite a number of years, as businessmen and the Treasury have looked forward to a reduction in Purchase Tax. Each side is inclined to place too much responsibility for finding a suitable scheme on the shoulders of the other.
I suggest that if the Treasury cannot devise a scheme which will satisfy the business interests it ought to be able to promise to undertake, in this Finance Bill, to set aside a certain sum of money—inside the Budget—which will be placed at the disposal of the business interests, on the undertaking that they work out a scheme which is satisfactory to the Treasury and themselves. If the Treasury could guarantee the money to the business interests, saying, "You do not get it unless you work out a scheme," the retailers and traders would, I believe, finally produce a workable scheme.
Despite the Hutton Committee's luke-warmness about the views put before them by all the trading associations, I believe that right-minded folk will accept the contention of those associations that what 1623 they are asking for is not compensation but the return of their own money. It is money paid in advance for their customers, on the assumption that the taxes were to be a certain amount, and lost because the taxes have been reduced. I admit that this is a complicated and difficult matter, but its complexity should not be used as an excuse to leave this injustice and the mulcting of a small group of citizens where it is today.
I have received a letter from the Pharmaceutical Society, who protest not only against the fact that they cannot recoup themselves for the present reduction in Purchase Tax but also against any reduction of Purchase Tax taking place in future, unless this problem can be solved. They say—as every group of traders say— that it is fantastic to imagine that a position will ever arrive again in which they can recoup themselves for their losses. I would urge the Chancellor to accept this new Clause or, if he cannot, then to indicate to the Committee that, like the Hutton Committee, he is aware of the gravity of the problem, and that he is aware of the injustice suffered by traders; and that, unlike the Hutton Committee, he proposes even now to do something about it.
§ Mr. Charles Ian Orr-Ewing (Hendon, North)
In discussing this new Clause, two points are prominent. The first is that hon. Members opposite take some two-and-a-half times as long to express themselves than do my hon. Friends; and the second is that hon. Members in all parts of the Committee are anxious to see the injustice of Purchase Tax lessened. Yet, nobody seems able to put forward a watertight proposal for all classes of goods.
I shall not try to cover every aspect, but I do add my support to what has been said by my hon. Friend the Member for Darwen (Mr. Fletcher-Cooke), and say that if we cannot have justice over the whole field, then let us look to see if, before next year, we cannot do something for positively identifiable goods. It would be a good thing if that class of goods was extended, but I appreciate that the administrative machine would break down at some stage. Perhaps one could rule that positively identifiable goods are those in respect of which the tax exceeds £3 or £5, or some arbitrary sum.
1624 That would at least lessen the injustice for a wide range of domestic appliances, and it is in this range that the retailer finds himself hardest hit. The Hutton Report also suggested a considerable expansion of the sale-or-return scheme, although the disadvantage of that, as I see it, is that it would throw a financial burden, not on the stores or the retailers, but back on the manufacturers. In some ways, hon. Members may say, that would be less of an injustice; but the small manufacturer may well have to carry an enormous financial burden in respect of goods in the pipeline all over the country which are not paid for, while he has had to pay for raw materials, labour, and distribution.
If we are to extend the sale-or-return scheme, ought not some instruction to be issued to the banks to advance money against the requirements of the manufacturing industries for this purpose? I understand that the banks may not provide finance except for defence or export orders, but it would seem that we cannot extend the sale-or-return scheme unless there is some sort of instruction such as I suggest. Unless we do that, we shall be favouring the very big manufacturers who have considerable financial resources, and at the same time handicapping the smaller manufacturers who play such an important part as sub-contractors.
§ Mr. W. T. Proctor (Eccles)
This is a very serious matter for every trader throughout the country. It is also a serious matter for the House of Commons, because the tax, and the method of gathering it, are unjust. It is for us to find a solution, because it was this House which imposed the injustice. Almost every chamber of trade has passed resolutions against this injustice. My hon. Friend the Member for Southampton, Test (Dr. King) said that most members of chambers of trade vote Conservative. I do not go so far as that myself. Many traders have become more enlightened.
The Financial Secretary made this problem his own when he was in opposition. He has a moral responsibility, now that he is in a position of power, to find a solution or to apologise to the people whom he deceived when he was in opposition. I am pleased to see the right hon. Member for Blackburn, West (Mr. Assheton) in his place. We had the pleasure of his support on the previous 1625 occasion. I have no doubt that what was described as "intimidation" in the Trade Disputes and Trade Unions Act, 1927, has been applied to him about this matter, but I hope that he will derive from our presence opposite to him the courage to stand up to his Front Bench and say that some solution such as this should be found.
It rests upon hon. Members of the House of Commons to find a solution. When we consider the disabilities under which the traders labour, we find that they are tax gatherers without pay, that they have to pay the tax before they collect it, and then they are in danger of being penalised for the whole of the amount. It is certainly up to us to find a solution. If it were a question of tax evasion, the Treasury would be moving much more swiftly than it is doing on this matter.
The new Clause which we are considering is permissive. Hon. Members opposite ought to give it full support so that we might have the whole matter thoroughly considered and so that the Treasury might be able to do something about it between now and the next Budget. I am certain that large parts of the problem could be removed, even if the whole problem cannot be solved. It is wrong to say that we will do nothing because we cannot do everything.
I hope that the Financial Secretary will tell us that he will use all the brain-power of the Treasury, which is very great, to try to find a solution which will cover the main parts of the problem. The suggestion by one of his hon. Friends for setting up a reserve fund for remedying the rest merits further consideration. The trading community, the Government and the House of Commons must find a means of dealing with this very great hardship which presses upon all those who deal in Purchase Tax goods.
§ Mr. Assheton
Lest the hon. Member for Eccles (Mr. Proctor) should think that I have been picketed this evening, I intervene to say how much I agree, rather exceptionally, with a good deal of what the hon. Lady the Member for Blackburn, East (Mrs. Castle) said in her speech. I believe the whole Committee was disappointed to read the Hutton Report, but we should not be deterred by 1626 one unsatisfactory report. We made 13 efforts to ascend to the top of Mount Everest, and I see no reason why we should not continue to make efforts to solve this problem. I know that the Chancellor of the Exchequer and the Financial Secretary would be very glad indeed to see it solved.
I believe that if the Chancellor were to give instructions to a very small committee, consisting, say, of three members —Sir Maurice Hutton, who has learned a great deal about the problem; a certain gentleman in the Board of Customs and Excise, who shall be nameless, who knows a great deal about these things and can find solutions for almost every problem if he wants to; and a certain distinguished member of the retail trade, whose name I shall not mention—with instructions to find the best solution to the problem within two months, we should be provided with a very much better solution than anything that we have had up to now. The terms of reference should merely be to find the best solution that they can; that is all. If the Chancellor accepted that suggestion, we should soon get a solution of some sort which might not be perfect but would do something to solve the problem.
The present position is one of great hardship for all retailers. We have all had representations from chambers of trade, and we all want to do what we can to help them. I do not believe that the proposals in the hon. Lady's proposed new Clause are effective and could be put into practice, and I do not believe that it is any use voting for the Clause, but I believe that we can still find some means of solving the problem in due course, and I suggest that the Government be asked to try once again.
§ Mr. Holman
I should not have intervened in this debate but for the speeches made by the hon. Member for the Cities of London and Westminster (Sir Harold Webbe) and the hon. Member for Darwen (Mr. Fletcher-Cooke). The solution of this matter appears to me to depend on two entirely different factors. In the first place there is the problem of the recession of trade which took place in the three months before the Budget. The second problem is the moral one of whether the retail trade of this country should bear the reductions 1627 and the losses arising from the reduction of Purchase Tax in the subsequent stages, with a view to its ultimate abolition.
Speaking as a member of the Co-operative Party, I would say we have always opposed in toto as a peace-time measure the imposition of Purchase Tax on necessities. We do not mind how high it remains on certain luxury goods. Therefore, we as a House, and as a Committee, have to face this problem: on whose shoulders shall the burden fall as Purchase Tax disappears? In prospect we are telling the retailers of this country that they will have to face a further loss of anything from £40 million to £50 million during the abolition period, or whatever it may be, of Purchase Tax. That is a pretty gloomy and desperate outlook for these many valuable little traders, including, in my own constituency, many in the back streets who are my personal supporters. Their customers of the working class include my supporters—and if any Tory laughs let him remember that my constituency is the only one in this country where the Tory forfeits his deposit.
The main point is, who is to bear that loss? Now, the hon. Member for the Cities of London and Westminster says that if we give them homeopathic doses, and if the Chancellor could introduce at times through the year some small reduction such as 5 per cent., it would be better than the uncertainty which faces the country prior to a Budget. Well, certainly the consumer would never know what was going to happen, so he would not withhold his purchasing at any specific time through uncertainty. That, at least, would be eliminated, and thereby the steadiness of production and distribution would be considerably helped. It is an idea from one aspect which is worth looking at.
On the other hand, there are many trades in this country which would rather be thoroughly stunned, once and for all, than be given a series of blows that leave them at least in a very unhappy and unsteady position. As the Financial Secretary knows, one of those trades is the stationery trade, in which I have a very impartial interest—not a financial interest in any way, but a considerable personal interest—through having once, at a 1628 rather remote stage in my life, been associated with it. There are other trades which would prefer one knock-out blow rather than a series of minor or lesser injuries.
So we have the problem of trying to separate reductions or of abolitions of Purchase Tax from a Budgetary date unless we are prepared to face up to a solution such as the ante-dating solution. Theorists may say that that is no measure of justice, but I say definitely that the bulk of the goods that are subject to Purchase Tax, outside the range of luxuries such as the jewellery trade, the expensive fur trade and so on, have a turnover of between one to four months. In other words retailers of them turn over their capital three or four times a year. If one takes an average of, say, three months' trading, and if the Chancellor would announce on 1st February that any goods on which Purchase Tax was to be reduced would not be subject to tax if supplied after, say, 15th February, that would have an extremely steadying effect on the morale of the retail trade. From what they gained after 15th February in a price including Purchase Tax which might not have to bear tax would compensate them for stocks prior to that date and would, in effect, be a fair three months' average in helping out their stock position.
That may seem very rough and ready but it is a far more just gesture for, say, the retail trade in hardware and non-perishable goods than a continuation of the present position. In fact it would cover most of the goods that are subject to Purchase Tax in the retail shops of this country. Of course when goods are easily or positively identifiable, special arrangements could and should be made, but the range of such goods must of necessity be goods of considerable value, such as motor-cars, gramophones, wireless sets, etc.; goods that can bear specific letters or numbers, where one item can be picked out from another. Goods that can be bought by the gross can never come under that category.
That was why I intervened to say that for the bulk of textiles it is not practicable because, for instance, every pair of socks cannot be numbered. The bulk of textiles are of relatively small value as units and therefore are bought by the dozen or gross. Even if they could bear a specific 1629 range of numbers it would still be necessary to undertake what the hon. Member for the Cities of London and Westminster admitted was impracticable, that is to say, an independent check would have to be made on the last day of the financial year of that class of goods. But, because of their enormous number and miscellaneous character in an ordinary drapery store, it would be impracticable to make such an investigation as such goods are not easily identifiable.
Therefore I plead for either a better solution or for the solution of ante-dating. If there be a better solution, I shall be the keenest supporter of it, from whatever source it may come because we have now reached the stage where it is absolutely vital that we should not say to the retail trade, "In the next few years you will have to bear further losses of £40 or £50 million." That would be cruelty and destructive of enterprise. It would be enough to make the individual ask, "Is it worth while? All our profits for the next three years will probably go west unless we can have a bigger percentage on our turnover." That would be highly undesirable. In other words, why should the insecurity they feel be forced upon the consumer through what I would call an insurance policy against loss— excessively high profits? But that is the sort of thing that must come into the minds of retailers.
I was disappointed to hear the hon. Member for the Cities of London and Westminster suggest that the spokesmen and those who had taken part in formulating the policy of these retail organisations had expressed different views individually. I think that the collective view should be supported because it represents the best possible compromise.
I should say God-speed to the Treasury Bench if they can find a better solution than that put forward by the retail trade organisations. I support this new Clause as a gesture that the Committee intend that something shall be done quickly.
§ Mr. Frederic Harris (Croydon, North)
I agree with much that the hon. Member for Blackburn, East (Mrs. Castle) has said, but she was a little unfair when she inferred that we on this side of the Committee were not interested in this matter. I endeavoured to discuss it on the Motion 1630 that Clause 9 stand part of the Bill. It was only when the point was made that this new Clause would be called that the discussion was delayed until now. I can assure the hon. Member that we are deeply interested in this matter.
I hold the same view as I have expressed on previous occasions. Many forget that we should congratulate the Chancellor of the Exchequer on tackling this Purchase Tax problem and on the way in which he did it, which was quite a brilliant move. That is supported by the fact that this year hon. Members have not had nearly so many requests from constituents for reductions on certain products which suffer from Purchase Tax. The problem which follows is the one we are discussing this evening. Everyone agrees that retailers are suffering considerably. Small retailers are suffering as much as £25 to £50 a time which is a burden they cannot afford to bear. There is the prospect that in the years to come they will be called on two or three times to bear similar burdens. A round figure has been mentioned of £13 million.
Interference with trade during January and March has been mentioned. We know that must come about, although I cannot agree with my hon. Friend the Member for the Cities of London and Westminster (Sir H. Webbe) who suggested that even if relief were given it would not do away with the interference. Small traders who knew they would get relief in due course would be prepared to buy their stocks in the normal way so that there would be plenty of stocks for the public to buy quickly.
It is difficult for any hon. Member to accept the present position and it is blatantly unfair to retailers to ask them to stand these tremendous losses. In many ways it can be termed dishonest, because the Treasury are taking tax which the retailers have no chance of collecting. It has been suggested that the retailer should be able to keep up his prices with the Purchase Tax and not reduce them when the Budget proposals are announced. That is a practical trading impossibility.
The Treasury find the answers quickly when they have to collect tax, but they are not so keen to find the answer when tax has to be given back. Clear-cut instructions should be given to the 1631 Treasury to get busy and find the answer. A number of references have been made to the Hutton Report. Many of us were disturbed about the delay in the production of that report and most of us are dissatisfied with it. The National Chambers of Trade have put forward their proposals, and if there was more time one could detail those proposals.
I should like to ask why these proposals were turned down. Auditors' certificates are always used for tax collection and they have been brought into play always when the question of allocations have been queried with traders and manufacturers. If they can be used in those cases, why cannot they be used in such cases as these? Why is this particular problem insurmountable? I suggest that instructions should be given to the Treasury, through the formation of a small committee, to find the answer, I certainly feel the whole position is extremely unsatisfactory and I should like to know what the Government intend to do about it.
I have heard many suggestions from other hon. Members on how this matter could be tackled. The proposition I favour is that proposing that the Chancellor should give rebate on invoices for goods affected by Purchase Tax and purchased two months prior to the Budget date. If traders were in a position, as I feel certain they would be, to provide evidence of purchase two months prior to Budget day of goods affected by Budget tax adjustment, supporting that with an auditor's certificate, I cannot see why the Treasury should not foe called upon to give proper repayment in response to the demands which would be made to them.
I think that the Financial Secretary well knows that most of us in this Committee feel that an answer should be found, and we sincerely hope he will give some words of comfort in this respect.
§ Mr. Boyd-Carpenter
I well realise that this is a subject in which most of us, at any rate, on this side of the Committee, take a very deep interest, and it is valuable that we should have this debate, apart from the narrow points of the new Clause which the hon. Lady the Member for Blackburn, East (Mrs. Castle) moved. We have certainly had 1632 the opportunity to hear a variety of opinions upon what, as no one who has studied it would dispute, is a very difficult and serious matter. The new Clause itself, as the hon. Lady herself has said, is permissive and not mandatory and it would not necessarily have any effect.
But, I think hon. Members on both sides of the Committee will agree, that it would not be fair to the Committee to accept the gift of powers of this sort unless one thought one had available the means of making use of them. That would not be playing fair with the Committee. I am not clear what is the attitude of the Opposition. The hon. Lady, in moving this new Clause, said, to use her own phraseology, that it was not good enough to accept the present position and added, somewhat curiously, that we, on this side, had created the problem. Whether it be "good enough" or not, the present state of affairs is one in which hon. Members opposite acquiesced during their six years in office. It is not good enough for her, with that background, to use this argument.
But, I am not certain where the Opposition stands today. The lead in this matter, at an earlier stage in the debate, was taken, not by the hon. Lady, the Member for Blackburn, East, but by the right hon. Member for Bishop Auckland (Mr. Dalton). Let me remind the Committee—and particularly hon. Members opposite—what the right hon. Gentleman said on the last day of the Budget debate on this topic:Then there are all the traders who sell Purchase Tax articles. We have all read the Hutton Report—at any rate, I expect we have. I entirely agree with their main conclusion— it is what I always said when I was at the Treasury—and I hardly thought it necessary to appoint a Committee. I thought it quite clear that they would end by saying that there is no possible administrative means by which we could give a rebate to traders in respect of tax-paid stocks when the level of Purchase Tax on those stocks was reduced. There is no way of doing it and the Hutton Committee Report develops that argument.Then there is an interruption, and the right hon. Gentleman continues:The Government have accepted it, and we accept it, and we are all agreed, except the one hon. Member opposite who interrupted. I am convinced that the Committee are right." —[OFFICIAL REPORT, 20th April 1953; Vol. 514, c. 659.]As far as I know, that is the official view, expressed from the Opposition. 1633 Front Bench by the right hon. Gentleman, who speaks in these debates for the Opposition, and I am bound to say, if I may adopt the language of the hon. Lady, it is just not good enough for hon. Gentlemen opposite to come forward with a great show of indignation in this matter, indignation against the Government for having accepted the Hutton Report, when the right hon. Gentleman who spoke for them in the Budget debate went out of his way not merely to say that the Report was right but to say even that it was a waste of time to appoint a committee, for the matter hardly required investigation.
That is why I made the distinction at the beginning of my speech, for I feel there is really a considerable difference in this matter between the two sides of the Committee. We all realise that this is a problem which has given difficulty and given rise to anxiety for as long as the Purchase Tax itself, that is since 1940. It is a problem which in some degree even before that had been a matter of difficulty in connection with other forms of indirect taxation. It is certainly not a new problem, and it is certainly one which we have taken very seriously. It was because we were concerned with the matter that last summer my right hon. Friend decided to make a further attempt to find a solution and for that reason appointed Sir Maurice Hutton and his colleagues.
I take note of the fact that the right hon. Gentleman did not think it worth pursuing that matter, but we did, in order to have the advantage of an expert and independent investigation into this very thorny problem. For that purpose a Committee was appointed which, whatever hon. Gentlemen may say about its findings, was not only wholly independent but was composed of men with very considerable experience of all aspects of business. The Chairman was a man of great distinction, with very considerable experience in industry, as well as having held responsible positions under the Government during the war and since. The Committee also included a retailer, a wholesaler, a manufacturer, an accountant and an economist. It was, in fact, not only independent, but deliberately composed of people with considerable practical business experience.
1634 That Committee went most exhaustively into the whole subject. They heard evidence from 149 individuals or trade bodies. They had evidence submitted in writing, and they spent some months in investigating the matter. Indeed, they took their duties so thoroughly and seriously that my hon. Friend the Member for Croydon, North (Mr. Frederic Harris) was getting a little worried about when they would report. There is no doubt that this experienced and independent body did go into this question thoroughly, and came to the conclusion which we know.
I am not arguing that the findings of any committee, however authoritative or independent, are conclusive. I have never adopted the view that anybody is infallible—not even a committee—but the fact that after these years a body of this sort after such prolonged consideration, came to these conclusions, is a fact that cannot very easily be brushed aside. Whether it is conclusive or not, it is a fact and a factor to which sensible people must give weight in making up their minds about what is right in this matter. That is the first factor—the new factor since we last discussed the matter last year.
Let me deal, in passing, with the suggestion which was made only, I think, by the hon. Lady the Member for Blackburn, East that my right hon. Friend had made up his mind on this subject with excessive rapidity. I think the hon. Lady was genuinely misled by the fact that the report was presented to Parliament in March. In fact, as she was good enough to give way to allow me to point out in the course of her speech, the Report was completed and signed on 4th February and was in my right hon. Friend's hands on that day. There was a matter, therefore, of some weeks before the announcement of its acceptance was made, and I hope that I do not need to assure the Committee that serious and sincere consideration was given to it. I mention that because it is quite easy to misunderstand, as the hon. Lady manifestly did, the relevant dates and accuse the Government of undue precipitancy in making up their minds. If I may add, that is a somewhat unusual charge from the benches opposite.
1635 The essence of the report as my hon. Friend the Member for Hendon, North (Mr. C. I. Orr-Ewing) pointed out in his very clear observations, is that a scheme of rebates, though workable in respect of a few easily identifiable articles, is not workable generally, and the Committee mobilised in paragraph 189 of the report very clear arguments as to the difficulties which would follow from applying a system of rebates to that category of goods and not to a large number of goods not in that category.
I do not want to go over the ground at undue length because my hon. Friend the Member for the Cities of London and Westminster (Sir H. Webbe) dealt, I thought with extreme clarity, with the difficulties that arise on the different schemes. But the point that does emerge from the report is the attitude of the Committee itself. It is perfectly clear, as one of my hon. Friends said, that the Committee not only fully understood the difficulties for the trading community in regard to Purchase Tax but were extremely anxious to help by way of rebates.
It is not without significance that, notwithstanding that clear predisposition, they found, for the reasons set out at length in paragraph 189 and elsewhere, that a system of rebates applicable only to a limited number of goods would be inequitable between trader and trader and wrong in its application. They make the further point, which was, I must confess, a new point to me when I read the report, that there was some argument, if a system of rebates was applied, when tax was decreased, for having a system of surcharge when tax was increased, and if such a balanced proposal were operated the difficulty of applying it over part of the field was even greater.
At any rate, we start with the Committee—which apparently, if it had any bias, was a bias in favour of these schemes—being forced by the logic of the facts to take the view that to operate such schemes was not possible. But even then the Committee did evince its concern about this matter by the recommendations which they have made for at least mitigating the weight of the injury which can be done in these circumstances.
In the first place there is the recommendation that Purchase Tax changes 1636 should be moderate and that violent fluctuations should not be made. A clear indication of the Government's concern is our acceptance of the Recommendation to keep within that limit the trouble which can be effected. In last year's debates, the hon. Lady the Member for Blackburn, East referred to the duty of the Government to take steps in the direction of rebates. She complained that we should not "play about" with Purchase Tax, by which I understood her to mean raising it and lowering it in a somewhat haphazard manner.
Whether or not that be a correct description of the way Purchase Tax was operated under the late Administration, it is clear, from our acceptance of the Hutton Committee's recommendation, that playing about with Purchase Tax is no part of the proposals of the present Administration. Indeed on more than one occasion during the debates on Purchase Tax it was remarked that certain proposals had to be considered in the light of our acceptance of the Hutton Committee's recommendation that changes in Purchase Tax should be moderate.
I do not want to enter into the thorny and difficult subject of the exact extent of the trouble which arises when Purchase Tax is reduced. While it is a matter of simple mathematical calculation that the reduction of Purchase Tax imposes a loss upon the holders of tax-paid stocks, so far as that transaction can be taken by itself, goods as a result of that reduction can be replaced at lower cost and generally the turnover is increased, to the benefit, among others, of the retailer. I am not going to make calculations in any particular case as to whether the benefit countervails the injury, but it is right that we should realise that it is part and parcel of the transaction of reducing Purchase Tax that there should be some contribution to the well being of the retailer and of other people.
Indeed, that view is accepted to a very large extent by some sections of retailers. When I received a deputation a little time ago from the stationery trade, who are pressing for the complete abolition of Purchase Tax, I asked the representative of the stationery retailers whether, in view of the Government's acceptance of the Hutton Report, he still pressed for total abolition. He replied that even with no rebates his trade would still welcome 1637 complete abolition. I understand that similar views are held by some representatives of the jewellery trade. It is as well to reflect upon the views of experienced traders that the benefit to be gained by a reduction in the rates of tax can in certain circumstances, countervail the loss that they suffer when the rate of tax is reduced. That is the problem as we see it. I must now deal with one or two specific matters that were raised.
My hon. Friend the Member for the Cities of London and Westminster raised the extremely interesting question of the possibility of alterations of Purchase Tax by statutory instrument other than in the Budget. As he is no doubt aware, power to effect such alteration exists in the Finance Act, 1948. Hon. Members who have studied the present Bill will see that further powers in that direction are being sought in Clause 9 (2). This question of making major changes outside the Budget involves a very difficult balance of considerations. If it is done there is a risk that instead of uncertainty in the earlier part of the year there will be uncertainty throughout the whole year, and that is not a particularly desirable state of affairs.
There is also the consideration that if some of the Purchase Tax agitation arose in a non-Budget season expectations might be raised of an early change, with unfortunate consequences to the trade concerned. On the other hand, there is a great deal to be said for the very clear and moderate way in which my hon. Friend stated the difficulties that arise, under the present system, in the early part of the year, and Her Majesty's Government are very much concerned with the effect on industrial production during the earlier months as a result of the natural reluctance of retailers to carry more than minimum stocks in present circumstances. That is a very real problem, of which I can assure the Committee we are only too well aware.
§ Mr. Boyd-Carpenter
The hon. Member for Ealing, North (Mr. J. Hudson) supported his Government for six years, so his question comes from the heart.
The position has been made in one sense more clear and in one sense more difficult by the fact to which I have 1638 referred, that after a number of years independent and expert investigation has found a real difficulty in every proposal. That is a factor which we are all bound to face frankly. Ministers will certainly still be prepared to consider suggestions or proposals and will themselves try to seek solutions if solutions can be found, but it would be misleading the Committee to suggest that in the light of the investigation we have just had it is going to be easy to find such a solution. The facts of the problem are clearly in our minds. I can assure my hon. Friends that our minds are not closed and that we are quite prepared to consider frankly and honestly such proposals as from time to time may be put to us, and to apply our own capacities to this extremely difficult problem.
I hope that what I have said indicates that my right hon. Friend realises not only the difficulties which arise from the present system but the strong, genuine, sincere and understandable feelings to which those facts give rise. I would equally suggest that this is not a matter that can be resolved only by strength of feeling; it can only be resolved, if at all, by strength of thought, and I would commend to my hon. Friends who feel—as some of them have expressed in clear and forceful language—that more could still be done, that whenever they think fit they should put to my right hon. Friend such suggestions as they may have. I repeat the assurance that my right hon. Friend's mind is not closed and that, as is always the case with him, honest suggestions will be honestly and carefully considered; but it would be failing in frankness to the Committee, in view of what I have said about the facts of the matter, if we were to take the easy course and accept the suggestions made in the hon. Lady's new Clause.
I do not think any hon. Member could commend or support the suggestion that we should accept powers when we have indicated that, as at present advised, we have no proper use to which to put them. That would not be a right solution. I do not know what is the attitude of the Opposition in this matter. The right hon. Member for Bishop Auckland (Mr. Dalton), whose speech I have quoted, is apparently not with us. Whether the leadership is now in the hands of the hon. Lady I do not know, but I hope that hon. Members from all sections of 1639 the Committee will appreciate that this is not a matter to be resolved by forceful controversy in one direction or another. It is a matter which calls for the most careful thought, and that is what we on this side of the Committee propose to give it.
§ 11.30 p.m.
§ Mr. Jay
I think that this debate has made perfectly clear that this is a subject which gives the Committee, and the public outside, a great deal of real anxiety; and it is a pity that the Financial Secretary should have introduced party feeling into the beginning and end of his speech. There are genuine differences of opinion all over the Committee; there are differences between front and back benches, and this debate has made clear that we are divided on the question of whether any broad scheme for solving this problem is practical. But what we are united on is that the Government should make some further effort, with all the resources at their disposal, to find a solution.
There is a particular responsibility on the present Government to make that effort, because in some respects, as was said by my hon. Friend the Member for Blackburn, East (Mrs. Castle), the Government have actually made the situation worse. The Chancellor has accepted the Hutton Report, and so far as industry knows, there will be no compensation next year. Secondly, he has done what we never did, in that, since the Budget debate, he has given a broad hint to industry that there will be further reductions in Purchase Tax in next year's Budget. The right hon. Gentleman hinted at it a fortnight ago in this Committee, and surely it is clear that if one tells the traders that there is to be no compensation, and broadly hints that there will be more reductions in Purchase Tax, the dislocation in trade during the months immediately before the Budget will be at the maximum, and worse than ever before.
I suggest that it is unwise to give this broad hint about what one is going to do in the next Budget, and it is all the worse when this problem about stocks exists. It is for the Government to continue to hunt round for a solution. Admittedly, the Financial Secretary offered a chink of light at the end of his remarks when he said the Government were to go on 1640 thinking about it. But I would make a slightly more ambitious proposal than that. If the Chancellor does not like the suggestion put forward by his right hon. Friend the Member for Blackburn, West (Mr. Assheton) may I suggest this? Are the Government willing to undertake that they will invite the retail trade organisations to put forward new proposals, taking into account what the Hutton Report has said, with the promise that the Government will carefully examine any proposals and, if necessary, have discussions with traders' organisations about them? The Government should at least be willing to do that, and, if they are so willing, we shall have made some little progress.
§ Mr. Jay
I know that the traders' organisations have put forward proposals, but what I suggest is that the Government should invite new suggestions, based on the findings of the Hutton Committee. In view of the obvious desire of everybody to find some solution, we shall reserve the right to raise the matter again on Report stage, and urge the Government to do all that they possibly can.
§ Question put, and negatived.
§ Mr. Gaitskell
I beg to move, "That the Chairman do report Progress, and ask leave to sit again."
At this hour we ought to have a clear understanding from the Chancellor as to how far we are going tonight. I realise that he may feel that, as we have taken only two new Clauses, it is not a great deal of progress in one day, but, on the other hand, both Clauses have been concerned with matters of great importance and of great concern to many hon. Members. Therefore, he should not deduce that exactly the same average time will be taken on all the other new Clauses which you select, Sir Charles.
Since it appears likely that we shall have to go fairly late tomorrow night anyhow as the Chancellor intends, as he has told us, to finish the new Clauses, I urge that it might be better to wait until tomorrow before we approach the next new Clause so that we can discuss it at a more reasonable hour. One can see from the number of names attached to it that it is one of considerable interest 1641 to many hon. Members. It raises matters of taxation which concern not only the hon. Members who are particularly closely associated with it but a number of others as well. It illustrates a problem which is a very real one. In all the circumstances, I hope that the Chancellor will agree that we should adjourn the debate this evening on the understanding, which I fully realise, that it will almost certainly be necessary to go rather late tomorrow night.
§ Mr. R. A. Butler
I agree with the right hon. Gentleman that we have obtained the two main debates on the new Clauses, namely, those dealing with cinemas and retail stocks. In the circumstances, I do not think we need keep the Committee late tonight. But the right hon. Gentleman is on record, and I am on record, as saying that we must finish the new Clauses and the Committee stage of the Bill tomorrow, whatever hour we may have to sit to. On that understanding we need not sit later tonight.
If some hon. Gentlemen are as brief as they are sweet tomorrow, I do not think we need sit too late. It all depends on the length of the interventions of hon. Members. If we are short, I believe that we can finish at a reasonable hour. In the circumstances, I do not oppose the right hon. Gentleman's Motion.
§ Committee report Progress; to sit again Tomorrow.