HC Deb 11 February 1954 vol 523 cc1367-71
The Chancellor of the Exchequer (Mr. R. A. Butler)

I will, with permission, answer Question No. 52 in the course of this statement.

I have received a great number of representations from trade associations and from hon. Members that uncertainty about the future level of Purchase Tax is causing, or may cause, interference with normal trade. I have carefully reviewed the situation in the light of the burdens which the Exchequer is at present carrying, and in relation to the various businesses and trades affected by the tax. I was able to make considerable concessions in the last two Budgets. These affected a variety of trades and have resulted in the reduction of all rates by a quarter or in some cases by a good deal more. More recently, in the Purchase Tax Orders which the House approved on Tuesday night, I was able to make some small adjustments and to remedy certain defects in the tax. These Orders were made under powers which, as the House is aware, enable me to alter the Purchase Tax rates at any time of year.

As for the rest of the field, I have decided that, subject to any unforeseen developments, I shall make no further changes in the Purchase Tax Schedule in or before the Budget. In the light of the representations I have received, I thought it right to announce this decision forthwith. Hon. Members will have opportunities for debating the rates of Purchase Tax in the course of the passage of the Finance Bill.

Mr. Gaitskell

May I first ask the Chancellor of the Exchequer to elucidate one important point: does he mean that there will be no other change in the Purchase Tax this year, or does he simply mean that there will be no change in individual items but that there might still be changes in the rates of tax?

Mr. Butler

There are two ambiguities in the right hon. Gentleman's question. His expression "this year" should be interpreted in the light of what I said—either "in or before the Budget." That must be interpreted in the terms of my statement. In regard to the other matter, I mean no change whatever in the Purchase Tax Schedule in or before the Budget.

Mr. Gaitskell

I presume, therefore, the right hon. Gentleman means that there will be no change in the rates of Purchase Tax which I think come into the Finance Bill and not into the Schedule itself.

Mr. Butler indicated assent

.

Mr. Gaitskell

In that case, why did the Chancellor wait so long before making this statement? Surely, he must have been aware that manufacturers and traders have been pressing for a statement to be made as soon as possible after Christmas. Is it not a fact that the other changes were announced either at the beginning of January or the end of December? Why should this statement not have been made then? Is the Chancellor also aware that it will be extremely disappointing to industry generally in the light of the half-promises and hints given by the right hon. Gentleman in the Finance Bill debates last year that there would be further reductions?

Mr. Butler

The answer to the first part of the question is that, bearing the responsibility I do, I did not think that I should take this decision before the Budget unless I was quite sure it was the right one to take. I therefore waited to see the reaction of public opinion, and of trades particularly, before I made this decision. I also waited for a debate in the House. I could have announced this on Tuesday night, but I decided to wait and see whether there was a general reaction in the House of Commons in favour of ending the uncertainty. I found that there was such a reaction, and I therefore decided to make the statement in good time before the Budget.

This is an unprecedented step, and, having a great regard for the British Constitution and the practices of this House, I did not want to take an unprecedented step without the utmost care and attention. That is what I have tried to do, and I chose this occasion—a public occasion, when the House would be full of hon. Members—to make it in the most open manner possible.

As for the second part of the right hon. Gentleman's question about disappointment, of course there will be disappointment. I fully realise that, and I took it into account before making the statement. But as I am in a position to know my own mind now, I thought it wiser to make this statement now than to wait until the Budget, with all the uncertainty that might come along. I think that that is a much more honest and honourable way to do it.

As regards the right hon. Gentleman's final remark, I have not misled the country in any way. If my remarks have been in any way misunderstood, it must not be laid at my door. I have always tried to explain the difficulties of the situation and I am glad to say that, in spite of the difficulties, I have been able to introduce a great many reforms.

Dr. King

Is the Chancellor of the Exchequer aware that, whatever the House and the country maythink of the nature of his decisions, the fact that he has ended the period of uncertainty will be regarded as of great benefit to trade and industry, and that our only regret is that he did not make that clear at the beginning of January when he announced his last tax changes?

Mr. Butler

I had regard to the hon. Member's intervention in the debate and his interest in this matter in coming to my decision.

Mr. H. Wilson

In view of the two very grave blows dealt to the textile trade in the past few weeks in relation both to raw cotton buying and to the Japanese Agreement, does not the Chancellor of the Exchequer realise that this decision not to vary the rates of Purchase Tax on textile goods will be regarded as a further grievous blow to our export trade and will be received very hardly in Lancashire? Are we to take the last few words of the right hon. Gentleman's statement about the Finance Bill as giving an assurance that the Government will not draw the Financial Resolution in such a way as to preclude Amendments on this question?

Mr. Butler

The answer to the latter part of the right hon. Gentleman's question is, "Yes, Sir." We would intend to allow normal liberty of debate upon the rates of tax, and in drawing up the Resolution I will bear that in mind.

In answer to the question about Lancashire, the rates of tax were reduced by one-quarter in the Finance Bill, 1952, which reduced the burden for Lancashire by about £17 million. Since then the load has been eased by a further £10 million or more through the original D levels having been left unaltered while prices have been falling, with the result that the total burden of the tax on Lancashire is some £40 million on a wholesale turnover of £1,000 million. I realise that this is a burden, but compared with other trades I do not think it is any more than they have to bear. Of course, I am anxious about the position in Lancashire, but I am thankful that trade is looking up there, as it has been for some time.

Mr. John MacLeod

Will my right hon. Friend realise that the incidence of Purchase Tax will increase with the rise in freight charges, which has been announced and which will affect remote areas in particular if Purchase Tax goes up as a result of these increases?

Mr. Jay

Does this very disappointing statement mean that the Chancellor has given up all hope of removing Purchase Tax on household necessities of any kind, and secondly, has he considered the implication of this procedure in future years? Does he not think that a Chancellor of the Exchequer in a future year will be asked to make a statement such as this, and that, if he declines to do so, that will be taken to be a hint about the future Budget, or is he assuming that he will not be there next year?

Mr. Butler

Discretion in this matter must always be left to the Chancellor of the Exchequer of the day. This tax, which is a peculiarly difficult tax, has led to grave uncertainties and it must be handled in the light of the circumstances as seen by the Chancellor of the Exchequer of the day. I am interpreting my responsibility in a manner calculated to reduce uncertainty to the maximum extent, and that is all I can say.

Mr. Gaitskell

May I press the Chancellor on this point about the future? We all appreciate the difficulty of uncertainty here, but what we want to know is whether he has decided to make this statement this year—as I think rather late, but better late than at the time of the Budget—and do the same thing next year? Are we to take it that he has accepted the proposals of industry on Purchase Tax changes and that these changes are to be announced to fit in adequately with the seasonal movement of trade, with the result that Purchase Tax announcements will be made earlier in the year?

Mr. Butler

Not every trade likes the same months. The situation is that the House has now given the Government full power to vary Purchase Tax at any time in the year. That started with the Administration previous to this one, and it has been carried on by extra powers taken by this Administration. I can give no undertaking how this will be handled in the future, but it will be handled to suit the convenience of the traders concerned in the best possible way.