HC Deb 28 June 1954 vol 529 cc1024-52

(1) The second rate of purchase tax shall be forty-five per cent. of the wholesale value of the goods instead of fifty per cent. of that value, and Part I of the Eighth Schedule to the Finance Act, 19443 (as amended by subsequent enactments, and by orders of the Treasury under section twenty-one of that Act), shall have effect as if for the words "fifty per cent." wherever these words occur, there be substituted the words "forty-five per cent."

(2) The provisions of this section shall take effect as from the thirtieth day of September, nineteen hundred and fifty-four.—[Mr. Jay.]

Brought up, and read the First time.

9.45 p.m.

Mr. Douglas Jay (Battersea, North)

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

It would be convenient if we might also discuss the new Clause "Amendment of Finance Act, 1948, in respect of first rate of purchase tax at the same time. That would give my hon. Friends an opportunity to put forward claims for some concessions on Purchase Tax and also enable the Government to tell us why they have given no relief of any kind on Purchase Tax in the Budget this year.

At present there are three rates of Purchase Tax—75 per cent., 50 per cent. and 25 per cent. These two Clauses together seek to reduce the 50 per cent. rate to 45 per cent. and the 25 per cent. rate—which of course covers much the largest amount of actual goods—to 16⅔ per cent. It has become customary in recent years in these debates to have a discussion on Purchase Tax, as I think this Committee ought every year to do, on a new Clause of this character, which seeks to reduce the rate, rather than to introduce reductions or exemptions for individual commodities. It would be out of order on this Bill, as it would have been on recent Finance Bills, to do anything else.

Therefore, we have put down these new Clauses in order that, in the course of the debate, my hon. Friends may mention certain individual classes of goods on which we feel that concessions should be made as well as to discuss the actual rates. In the course of these debates the Committee ought to consider the case, for instance, of the textile industries for some relief from Purchase Tax. Do not let us forget that the very wide range of textiles, as well as boots and shoes and many other ordinary articles of consumption which enter widely into the cost of living, are still paying Purchase Tax at 25 per cent. today.

It was the policy of the Labour Government, carried out in successive Budgets, to exempt an increasing number of ordinary household goods from Purchase Tax altogether. That policy has been completely abandoned by the present Government. Not merely textiles, boots and shoes and all sorts of household goods of that kind, are still subject to tax, but the present Chancellor is still imposing Purchase Tax on absolute necessities like soap, cutlery, razor blades and a host of other goods of that kind.

In view of all that was heard from hon. Members opposite about the cost of living and about the alleged onerous effect of Purchase Tax in maintaining the high cost of living during the life of the Labour Government, we are entitled to ask why more exemptions of this kind have not been made and why, in particular, there has been no relief from Purchase Tax this year at all. The Chancellor made a statement in about the first week of January informing the public that there was to be no Purchase Tax concession in the Budget this year. The fact that he made that announcement then is no reason why the Financial Secretary should not explain to us tonight the Government's ground for refusing any concessions this year. I hope that the Financial Secretary will listen carefully to the case put by my hon. Friends in reference to textiles and a number of other individual types of goods, and also explain why there has been no relief from Purchase Tax this year, and what are the intentions of the Government in future years in regard to this tax.

Mr. Frederic Harris (Croydon, North)

Can the right hon. Member explain why 30th September, 1954, is included in these new Clauses? Surely it would stop sales of materials if it became operative.

Mr. Jay

If the hon. Member is going to support the Clause and has suggestions for improving it in detail, I am sure we would be very willing to consider them.

Mr. Ralph Morley (Southampton, Itchen)

I want briefly to raise a question about Purchase Tax, one which I have raised on the four previous Finance Bills. My reason for raising the subject again is based on the principle held by the Jesuits, good educationists, that constant repetition was the secret of good education.

I refer to the Purchase Tax on school requisites. More than 60 requisites used in our schools are now subject to Purchase Tax. It is true that the tax was reduced from 33⅓ per cent. to 25 per cent. last year, but, even with that reduction, it is still a considerable burden when one realises that local education authorities have to pay about £1 million per year in tax on the school requisites which they provide for the use of the children.

The tax on school requisites was first introduced by the present Leader of the House when he was Financial Secretary to the Treasury. When he introduced it he said that he regretted very much indeed having to put a tax on school requisites. The tax on school requisites is very much like the ancient tax on newspapers, which was described at the time as a tax on knowledge. The right hon. Gentleman said that the circumstances compelled him to introduce a tax upon school requisites, but he was sure that it would be of short duration and would be remitted immediately the war ended.

The war has now been over for nearly nine years, but the tax has not yet been remitted. In fact, the burden upon the educational services is much heavier than it was when the tax was first imposed. In the first place, there are one million more children in our schools for whom educational requisites have to be supplied than there were when the tax was first imposed, and, in the second place, apart from the actual Purchase Tax, the cost of the school requisites is two or three times as much as it was when the tax was first imposed.

The peculiar thing about the imposition of the tax on school requisites is that on the money which the local educational authorities spend in meeting the Purchase Tax the Ministry of Education make a grant varying between 40 and 80 per cent. We thus have the curious position that the Treasury takes some of the money with one hand and pays some of it back through the Ministry of Education with the other hand. That does not seem to be very clever finance.

I do not want to weary the Committee by quoting a lot of figures, but hon. Members may be interested to know what the Purchase Tax on some school requisites amounts to. In the case of exercise books, note books and drawing books, things which are used by every child in every class in every school, the Purchase Tax is 22½ per cent. on the selling price. In the case of ruled foolscap and exercise book paper the tax is 27½ per cent. on the selling price. A box of chalks bears 5¼d. Purchase Tax; a dozen inkwells 10d.; a box of school pens 1s.; a gross of lead pencils 5s. 1d.; and a 1 lb. box of school rubbers I ld. Even the little toys used by children in infant schools and kindergartens carry 25 per cent tax. Needlework, if done with materials of a better kind, carries 50 per cent. tax.

Both the National Union of Teachers and the Association of Education Committees have protested against the Purchase Tax on a number of occasions and have asked for it to be remitted. If it cannot be remitted, I should like to ask the Financial Secretary whether it is not possible to arrange some kind of drawback which would enable education authorities to have refunded to them the amount which they have to pay in Purchase Tax on their necessary school requisites.

Finally, in the last Budget, a new tax imposition took place upon all education authorities, and I quote from "The Times Educational Supplement" of 26th March, 1954: It was reported to the Southampton Education Committee that the recent changes in Purchase Tax regulations included a new tax of 25 per cent. on thermoplastic and similar floor tiles: which were commonly used for school floors. In the case of Newlands School, for example, the consequent increases in cost ranged from 3s. 2½d. to 4s. 5d. per square yard. There would be similar increases in other school contracts where the tiles had not been delivered before the operative date. These increased costs would be additional to the contract prices. This additional new tax has added to educational costs in school building.

In conclusion, may I say that I am one of the admirers of the Chancellor of the Exchequer for the extremely skilful way in which he handled the Education Act, 1944, and secured its passage through the House of Commons. I know that the Chancellor is genuinely interested in education, and I hope that he may on this occasion make a slight concession in order to abolish the Purchase Tax on school requisites.

Mr. A. Fenner Brockway (Eton and Slough)

Like my hon. Friend the Member for Southampton, Itchen (Mr. Morley), I have raised this question of the tax on school requisites and educational equipment for four years now, and I begin my plea this evening with some hope, because the Financial Secretary has just asked the Committee to approve, and the Committee has very willingly responded, a proposal in a new Clause that Entertainments Duty should be removed from entertainments provided by education authorities and for educational purposes. I submit to him that, if it is good in principle that the tax should be removed from educational entertainments, it is certainly good in principle that the Purchase Tax should be removed from school requisites' and educational equipment.

I want to emphasise what my hon. Friend has said about the absurdity of applying Purchase Tax to educational requisities and equipment when the community whom we represent must, either through the rates of the local authorities or the contributions to the national Exchequer, make the payment of the tax which we impose. Surely, it is very bad economy when we set up the whole machinery of collecting taxes and all the cost which it involves and when, at the end, the community itself has to meet the extra charges we make. It should not be beyond possibility or beyond the ingenuity of the Treasury to avoid that anomaly in the imposition of this tax.

10.0 p.m.

I have in my hand a statement of the actual Purchase Tax upon the articles in a very comprehensive list of school requisites and equipment. I have compiled the list by consulting local authorities in my constituency and firms who supply educational requisites. I have had great help in so doing from the National Union of Teachers. I am very much inclined, in order to get this list upon the record of the Committee, to read it in detail, but I refrain from doing so because I do not want to weary the Committee or to prolong our proceedings beyond a reasonable extent.

The tax applies, as my hon. Friend has indicated, to exercise books, chalks and other articles. They include loose ruled paper, examination paper, drawing books, attendance registers, school timetables, lecture loose-leaf ring-books, blacklead pencils, pen nibs, penholders, school desk inkwells, erasers, school rulers, scholars' blackboards, wicker wastepaper baskets, playground hand-bells, notice boards, blackboard chalk and report forms.

Mr. Ellis Smith

What about the cane?

Mr. Brockway

In most schools the cane has now been abolished. I think it is called "the tawse" in Scotland. I suffered from it when I was a boy of six in my first Scottish year. It would no doubt have carried Purchase Tax.

My hon. Friend referred to another kind of school requisite associated with the methods used for infants and younger pupils in the primary schools. They include card counters, plastic numerals, 100-peg boards, wooden bead stairs, card-matching boxes, clock faces, question-and-answer cards, word-and-picture matching trays and what are known as "Old Lob stand-up cut-out characters." All these things are used in infant classes, and make education a joy to the children so that they hardly feel that they are learning at all. Taxation on the selling price of those articles varies from 20 per cent. to 25 per cent. I strongly urge that it should be reduced, if not entirely removed, if we are really concerned about education.

I draw the attention of the Minister to certain absurd anomalies. The selling price of the drawing books per gross is 35s. 5d., and 43s. when Purchase Tax is added. If the same sheets as are used in the drawing books are sold separately and loose, there is no Purchase Tax. Merely because they are bound together for the convenience of the children, a Purchase Tax of 8s. 7d. is imposed.

I give another illustration—the hygienic posters which are used to teach children practices of health. If such a poster shows a picture of children cleaning their teeth, the Purchase Tax is imposed. If, on the other hand, the poster shows a set of teeth and then, in another space, a toothbrush without a hand attached to it, no tax is payable. I suggest that if our purpose is to get children to clean their teeth we should adopt the most effective forms of charts possible. It really is absurd to impose a tax in a way which means that the charts are not the most effective for the children.

I want especially to address my argument to what has been said from the Treasury Bench when we have raised this matter before. The argument is that officials would find very great difficulty in differentiating between articles used in the schools for educational purposes and such articles used in the home. I submit that when these articles are used by children in the homes they are of just as great educational value as when used in the classroom. When the paper, the notebooks, the drawing books, the pencils, the pens, the chalks, the teaching aids for the younger children which I have described, are used by the children in their own homes, those children are probably learning as much as do children in the schoolroom.

I have a boy of seven years. One of the advantages I find in being a Member of Parliament is that I receive so many communications on the back of which there is sometimes no print that I am able continually to supply him with the paper which he needs at home for his designs, for his sums and for his other games. I am able to do that without buying that paper. What the cost would be if I had to provide the paper for my young son to engage in all his educational games I hesitate to think. I suggest that those notebooks, that paper, those school games when used in the home are of just as great value to the children there as they are in the classrooms, and that therefore it is absurd to attempt to make this distinction between the two uses.

As an example of rather a different character, I quote the equipment provided in nursery schools—the infants' chairs, infants' tables, the sand trays, and even the swings. Again the excuse is made that Purchase Tax must be imposed, otherwise those articles might be purchased privately for use in the homes. I say to the Minister that it would be very good if they were purchased privately to be used in the homes, and that it is a misfortune that more people are not in the position so to purchase them.

I should like to see the Minister abolish this tax altogether. If he cannot, then I plead with him at least to accept the new Clause and to reduce the tax substantially.

Mr. Frederick Mulley (Sheffield, Park)

While endorsing the plea which has been made by my hon. Friends for the reduc- tion or abolition of Purchase Tax on educational requisites, I think it will be no surprise to the Financial Secretary if I pass from that important subject to another of equal importance, namely, the impact of the tax on the cutlery and silverware industries, in which I have a constituency interest.

I hope that the Financial Secretary will be wiser than the Economic Secretary was when he replied to a similar debate last year, and will admit that knives, forks and spoons are necessary articles, at least in a civilised country. The Economic Secretary, with the great dignity which he shows in office, has apparently not yet realised that in these days knives, forks and spoons are reasonable necessities. He argued that they could not possibly come under the heading of necessary articles and, therefore, be altogether exempt from Purchase Tax.

I believe I am correct in saying that they are the only articles of essentially domestic and kitchen use which are still subject to the Tax. Not only that, but there has never been a Utility scheme, D scheme or any other scheme which has enabled a person to buy a knife, fork or spoon, no matter how simple or inexpensive, without paying some Purchase Tax. On social grounds any tax relief should be made in respect of articles of essential use.

In addition to that aspect of the problem, we should also remember the effect of the tax upon the trades concerned. I do not want to go into a lot of statistics about the difficulties facing the cutlery and silverware industry, but the Financial Secretary will recall that both he and the Chancellor of the Exchequer have been good enough, on previous occasions, to refer to those difficulties and to show sympathy towards the trade in its problems. Quite apart from the advantages which a reduction of tax would have to the ordinary housewife and the ordinary family, it would be a great stimulus to the cutlery and silverware trade.

Various hon. Members have referred to anomalies in the tax, and I think one must concede that one cannot administer a bad tax without such anomalies. I regard Purchase Tax as a bad tax, and, although I do not pretend it is feasible to do away with it altogether, the Parliamentary Secretary ought to look rather more carefully at some of these anomalies. One of the most serious is that when an article which is tax free and another which is taxable at 25 per cent. are put together in a case they bear a tax of 25 per cent. This is a great disincentive to firms who try to display their goods in the most attractive form.

It may be argued that we can do without cases for scissors or cutlery, but it means that the cost of exports is increased, because the firms have to make a different kind of packaging for the export market. Manufacturers have been criticised because their packaging of goods for export has not been up to the very high standards set by some of our competitors, but the Financial Secretary must realise that the very absurd rule of making the whole contents of a box or package bear the tax of the highest ingredient is one of the things which has deterred this industry from presenting its products in the most attractive way.

10.15 p.m.

I think I am in order in referring to the new Clause [Third rate of purchase tax] which stands in my name. I do not wish to detain the Committee for very long, but I want to make a brief reference to the difficulties which Purchase Tax imposes in craft industries, such as the silverware and cutlery industry.

In February, we discussed some reductions which the Chancellor had been able to make on 1st January, including some concessions to the silverware trade. Those concessions have not, however, had any substantial effect on the future of the trade. Employers in the trade still find it difficult to find enough work for their craftsmen, and, because of the uncertain economic circumstances of the trade, they are not able to recruit people prepared to go through the arduous training of a skilled silversmith. Because of the tax it is almost impossible to sell the products of highly skilled craftsmen on the home market, and because of that decline in the trade we shall, in years to come, lose exports of goods whose quality enables them to compete in any market in the world.

I make a special plea for the cutlery and silverware industries because, apart from their export potential, they provide good advertisements for British goods. Their products are used in a prominent way. The sight of cutlery or silverware on a dinner table in America or elsewhere is an advertisement for British goods and enhances the prestige of this country and of its craftsmen. It is important as a prestige factor for many ranges of British goods apart from the products of the cutlery and silverware industries themselves. The association of high quality with the words "Made in Sheffield" is well known.

I would again draw the Financial Secretary's attention to the absurd classification of mother of pearl and ivory in Group 28 bearing 75 per cent. tax. They are included as semi-precious stones. I cannot understand why mother of pearl should be classified as a semi-precious stone. It means that if a pennyworth of mother of pearl is added to a pocket knife, or a few pennyworth of mother of pearl is included a dinner set the articles have to bear tax at 75 per cent. instead of at 25 per cent.

That has a great disincentive effect on business and on the selling of articles that otherwise would be sold at home and abroad. The concession would, I think, cost the Chancellor only a few thousand pounds, and I would ask him to consider again the categories in Group 28 to see whether mother of peal and ivory could be taken out of that group, so that knives, for instance, could be made without having to be almost double in price.

I would stress that we on this side of the Committee would make a first priority for reduction articles in the lowest grade, particularly articles that are necessary in every household. I am glad to see the Economic Secretary here. I hope he will be able to tell us that he has at last discovered that a knife, fork and spoon are necessary articles in most households. I do not know whether he manages to dispense with them in his own home. Perhaps he could give us the benefit of his thoughts on the matter after a year's reflection upon it.

Apart from articles of necessity, there is also a case for special tax consideration where exports are concerned and where craft industries are in a position where, unless something is done for them fairly soon, they may disappear. Not only from the Sheffield point of view but from the nation's point of view as well it would be a great pity if these two great industries, which have brought so much renown to the country, over the years, were allowed to die because of this crippling tax.

Mr. Kenneth Robinson (St. Pancras, North)

In supporting the new Clauses which my right hon. and hon. Friends have put on the Paper, I want to concentrate on the second, which deals with articles in the lowest range of tax, and I want to mention, in particular, one commodity on which I think Purchase Tax ought to be abolished or at least substantially reduced. I refer to the motor-cycle safety helmets, more commonly known as crash helmets.

It has always seemed to me most extraordinary that those article should be subject to Purchase Tax. No one who has gone into the figures of road accidents can doubt that these safety helmets are an important factor in saving life on the roads. Accidents involving motor cyclists who have been wearing a helmet show a very much lower death rate than those involving the more foolhardy motor cyclists who still do not wear them.

It is true that more and more motor cyclists are wearing them. There is a great propaganda in favour of them from the Minister of Transport, the Royal Society for the Prevention of Accidents, and many other bodies, and it seems to me extraordinary that against this propaganda is set the deterrent of Purchase Tax on these articles.

I recently wrote to the Chancellor of the Exchequer on the subject enclosing a petition from about a thousand motor cyclists in my constituency who were very concerned about this situation, and I received from the Chancellor the usual sympathetic letter with the usual excuses. The right hon. Gentleman said there were two main reasons why Purchase Tax could not be taken off crash helmets. My petitioners had pointed out that it had been possible to exempt miners' and quarry men's helmets from Purchase Tax. I believe that was done at the very beginning of Purchase Tax. If it is possible to exclude them, I fail to understand why it is not possible to exclude crash helmets. They are all protective clothing, and it is not good enough for the right hon. Gentleman to say that he cannot find a definition which would exempt protective clothing.

The other reason which he gave was that crash helmets were in the lowest range of Purchase Tax and that the tax was only a few shillings. He thought the additional few shillings could not be a disincentive to anybody who thought of buying a safety helmet. It is not a question of a few shillings being a disincentive. There is every reason why motor cyclists should be encouraged by every means at the Government's command to wear crash helmets, and surely to remove Purchase Tax from these helmets is one of the methods of propaganda which the Government can use. The revenue involved must be very small—far too trivial to worry about at this stage of the Finance Bill.

I am sure that the motor cycling fraternity would welcome a change of attitude. They have been leading propaganda not only in my constituency but throughout the country against what they regard as an injustice and a discrimination against them. I hope the right hon. Gentleman will consider not only the whole range of articles in the lowest Purchase Tax rate, where tax is imposed on necessities, but will give special consideration to this very serious matter for motor cyclists.

Dr. Horace King (Southampton, Test)

I wish to return briefly to the plea which my hon. Friend the Member for Southampton, Itchen (Mr. Morley) has made to the Chancellor to reduce or abolish the Purchase Tax on school stationery. I should not be honest if I did not say that this is not the first occasion on which this plea has been made, not only to this Government but to previous Governments. I think that the time has come when my hon. Friend the Member for Itchen ought to be rewarded for his much-asking, and that some concession ought to be made.

The teaching profession has been consistent and united in its request for a number of years for the removal of Purchase Tax from school stationery. I wish only to underline what my hon. Friend has said about this being a tax on knowledge. The simple position is that local education authorities give the schools an allowance, or grant, for stationery and for books and other equipment. That allowance at present has to cover an ever-increasing number of children.

Progressive authorities may extend the allowance to meet to some extent the increase in numbers, but the incidence of Purchase Tax and the rise in cost of stationery and such things make any increase inadequate. But even the most progressive local authorities have never been able to provide an adequate stationery allowance to meet the needs of the teaching profession and of the children. As for the worst ones—those who responded to the economy circulars—it is in stationery allowance, very often, that economies have to be made.

I speak from considerable experience, because for a number of years I had the task of equating my own demands for equipment with what I was allowed. I used to draw up a list of things which I needed, and from that I narrowed it down to the list of equipment which I had to have. From that list the headmaster provided me with the things which I was allowed to have. That was a much smaller list than either of the other two. It was no consolation, when I became headmaster, to have to inflict the same painful process on the members of my staff.

What has been happening for quite a number of years is that education has been starved of essential equipment and apparatus in classrooms, and one of the contributing factors has been the burden of Purchase Tax. We have the cleverest Treasury officials in the world, and I refuse to believe that it is not within the compass of our clever Treasury to find means by which this exemption could be made for the purposes that we seek for it to be made.

No local education authority is going to buy, exempt from Purchase Tax, stationery for schools and then manipulate it to some other department. No school or local education authority is going to use this exemption for educational purposes to buy stuff for their own private houses. All educational equipment is bought from a few educational supply associations, and it ought to be quite easy for those who supply the stationery and the rest of the equipment to schools to be subject to a complete Treasury scrutiny to ensure that only those educational items bear the exemption which we seek. I plead with the Minister now, after many years, to give the educational folk of this country the concession for which we are asking.

10.30 p.m.

Mrs. Barbara Castle (Blackburn, East)

A number of my hon. Friends have been drawing attention to detailed anomalies in the operation of Purchase Tax and have exposed situations that obviously ought to be dealt with. But I want to glance for a short time at the Government's general policy in relation to Purchase Tax. This is the third Budget of this Government in which we have had an opportunity to consider their attitude to this tax and its use in budgetary planning. It is perhaps a fitting comment on the Government's economic policy that this year we should have drawn a complete blank.

The Government remind me, in their economic planning, of an inebriate swaying from one side of the road to the other. We have had three Budgets. The first was restrictionist which plunged the country into a downward economic spiral. We had falls in production, in investment, in exports and in consumption, and the Government, somewhat horrified at the efficacy of their own activities, approached their second Budget in a diametrically opposite mood.

So we had an expansionist Budget but, unfortunately, we expanded the wrong things for the wrong people. We had a jump, not in the general economic activity of the country, but in the personal consumption of a limited number of people, which gave a spurious air to the economic life of the country but which disguised the fact that we had not stimulated investment, exports and the export industry.

Just before the Government introduced their Budget this year there were some comments from no less a person than Mr. George Pollock, the President of the Employers' Federation, who said: There has been no improvement whatever in the balance between exports and imports … Taking 1953 as a whole, exports were actually 4 per cent. lower than in 1951. On 4th April, the "Observer" warned the Government that we had been living in a fools' paradise, that we had been enjoying the benefit of a windfall due to a fall in import prices, and warned us that we had more than swallowed up the benefit of cheaper imports by higher consumption.

The Temporary Chairman (Colonel Alan Gomme-Duncan)

I must remind the hon. Lady that we are dealing with three new Clauses concerned with Purchase Tax and that she is going very wide.

Mrs. Castle

I only appear to be going wide. I was explaining the 1953 Budget and how we had become expansionist which gave a spurious air of economic health which was recognised to be phoney. I am sure that when we are considering Purchase Tax we must think of it in relation, for example, to the stimulation of exports and its relation to personal consumption generally. The Financial Secretary will be aware that I am within the rules of correct economic relationship.

We have warned the Government that all was not as healthy in the economy as may seem. In this year's Budget we found the Government in a strange state of mind. Having exhausted all the expedients open to them, they decided to follow a policy of "Stay as we are." In their policy on Purchase Tax the Government have been following the same inebriate's course. In the first year, the year of restrictionism, we had the astonishing development, the reversal of all the Labour Government had done in removing the tax from essential articles and getting as wide a range of utility articles as possible tax free for the ordinary consumer's use. The Government came along with the D scheme, and, for the first time, put tax on essentials which had previously been tax free.

In the second year, suddenly feeling bold and daring they gave us a move in the opposite direction. They granted an overall cut in the tax rates, but operated them in such a way—by percentage reduction in each rate of tax—that the biggest saving in the tax came on less essentials. This year we had the Government's gesture in January which gave a further cut of £2 million in the tax, but again it was concentrated on a number of items which at first glance would not have struck anybody as being most essential. The reduction would help jewellery, ornamental walking sticks, garden ornaments, prints, ivory, mother of pearl and other articles. A remarkable list.

Mr. Mulley

Do I understand my hon. Friend to say that ivory and mother of pearl had been exempted?

Mrs. Castle

No, not exempt. They came within the Purchase Tax orders, but none of them was exempted. I am only referring to the changes made in January this year. They were changes on such a remarkable range of articles that the "Manchester Guardian" was inspired to say: It is hard to see expediency, let alone equity, in this curious list. The trade of this country, and the housewives could not believe that this was to be the sum total of the Chancellor's gigantic effort in the current year. Soon afterwards he killed our hopes by telling us it would be just that. That meant that by the time we came to this year's Budget the Government had exhausted their efforts to help the housewives and trade of this country through the manipulation of Purchase Tax.

It really is astonishing that there should be in this Budget, and in this important section of it, no attempt by the Government to operate a planned policy, which would, for example, help to hold the cost of living stable and to stimulate exports, or would have dealt with the large number of anomalies of a serious kind which my hon. Friends have brought to the notice of the Committee.

In January, the Financial Secretary made a speech in which he said he was bringing forward Purchase Tax orders to clear up what he called "marginal anomalies." Only the Financial Secretary could produce such a phrase as "marginal anomalies." The only anomalies he dealt with were on plain elastic fabrics and gold-plated teapots. I should have thought there were more urgent anomalies than gold-plated teapots which dominated our economic life at the moment. It really is outrageous, when we know how many serious anomalies exist, that the Government should evade their responsibility in this Budget to clear up any of these undesirable factors in the Purchase Tax field.

Mr. F. Harris

But has not the hon. Lady said often in the House that it was entirely wrong that Purchase Tax reductions should come at the time of the Budget because it made stocks of manufactured goods stop dead, since the manufacturers expected the changes at the time of the Budget, and it was, therefore, far better for any such adjustments to come at other parts of the year?

Mrs. Castle

No, the hon. Gentleman is wrong. I have frequently moved a new Clause to give a rebate on retailers' stocks where Purchase Tax has been paid, and it is because the Government refuse to operate the rebate scheme for which I asked that they have been driven to the alternative expedient of announcing Purchase Tax changes outside the Budget, which I think is an unsatisfactory substitute.

But even if the hon. Gentleman was right, it does hot justify the particular anomalies which the Government have chosen to deal with this year inside or outside the Budget. I defy them to tell the country that gold-plated teapots are an economic priority. Nor does it justify the type of concessions which the Government chose to make inside or outside the Budget.

What the Government have done is to abandon all attempt, by the planned use of Purchase Tax, to help hold the cost-of-living stable—to say nothing of reducing it, because we have given up all hope of this Government ever trying to reduce the cost of living. That is really asking too much of them. Not only that, but they have abandoned selective and planned stimulus of trade and exports by these means. The trouble is that, unlike their predecessors, this Government do not believe in using the Budget as an instrument of planning.

As the "Manchester Guardian" said in January of this year: There is no sign of a considered policy in these concessions. Therefore, we go on drifting from one betrayal to another, first and foremost, the betrayal of the housewife. It would he unpardonable if we were to allow this opportunity to go by without once again reminding this Government that they got into power committed to a policy of reducing the cost of living. Indeed, so blatant has become the political cynicism of the Government that nobody dreams of reminding them of this promise any more. Yet they would not have been elected to office if housewives had not believed that they would reduce the cost of living.

But what have they done? They have in successive Budgets used public money to increase, first, the cost of living by reducing the food subsidies—

The Temporary Chairman

Order. I must remind the hon. Lady again that she is getting very wide of the three rates of Purchase Tax covered by these proposed new Clauses.

Mrs. Castle

But surely a reduction in the Purchase Tax on essential articles would be a direct way of reducing the cost of living. Indeed, last year the Government gave away £60 million on Purchase Tax. My complaint is that they gave it away in such a form that the highest savings were on the least essential articles, and the policy of overall percentage reduction in Purchase Tax has produced this situation.

That is why the Chancellor tells us that he cannot do anything this year, because he gave away £60 million last year. How did he give it? He cut the Purchase Tax on jewellery, garden ornaments, vanity cases and other unessential articles by 5s. in the £ of the wholesale value. At the other end of the scale, the linoleum, the carpets, the wallpaper, the cutlery, the tooth paste, the brushes and combs were reduced only by 1s. 8d. in the £ of wholesale value.

10.45 p.m.

An opportunity was thrown away of using budgetary planning for the purpose of helping to hold the cost of living. Indeed, the Government began their Purchase Tax career by putting this tax on essential articles of clothing which, under a Labour Government, had been tax free. From the Labour policy under which, in each successive year, we made it a priority to exempt in the Budget additional articles from purchase tax, or else to reduce the rate of the tax, we have seen, under the present Government, this steady and disastrous rise in the cost of living; and the situation is being made worse by the Government's refusal to take action on Purchase Tax even in this Budget.

I have been making a study of retail prices as published in the "London and Cambridge Bulletin" and I have discovered that there has been a rise in retail prices, taking 1938 as 100, from 202 in 1951 to 229 in March of this year. If any hon. Member believes that the main cause—or perhaps the only cause—for this increase has been the steep rise in the cost of food, and everybody knows that that has been bad enough, I would point out that apart from food, which rose from 191 in 1951 to 234 by last March, there has also been a substantial rise in clothing, household and miscellaneous articles. There, the rise has been from 243 in 1951 to 249 in March last.

There is, therefore, still a steady rise in the cost of living which the Government are doing nothing to tackle in this year's Budget. We are allowing the Chancellor to "get away with murder" if we do not object, and I say that if he cannot produce a better policy for the protection of the consumer, then it is time that he gave way to a Labour Chancellor. It is quite obvious that if we are to try to hold the cost of living stable and offset these disastrous rises in the price of food, which are playing havoc with so many personal budgets, we should start in the field of clothing, cloth and domestic textiles. After all, this is the field where the Government refused help last year. Despite protests from the whole of the cotton trade, the Government refused to do anything last year, and Lancashire people thought that this year something would be done.

They were wrong. All we have had this year are the Purchase Tax orders in January; and what do we find? We find that jewellery, garden ornaments, and all sorts of knick-knacks have been helped, while there is nothing for the essential field to which I refer. I want to warn the Chancellor that he is standing idly by while we see the steady diminishing of one of our key industries. It is quite true that we have at the moment no unemployment in Lancashire; I will grant that point straight away. Indeed, we are facing the opposite of that trouble; we are now facing a shortage of labour. Why?

Following the disastrous depression at the beginning of this Government's period of office, there was once again an exodus of labour from the cotton industry. Nothing the Government have done since they came into office has put confidence back into the cotton industry. We have had no help in the matter of Purchase Tax on textiles. On the contrary, we have had the D scheme. We have had no help with exports. On the contrary, we have had the Japanese trade treaty. The result is that the labour force in Lancashire is still well below the 1951 figure—

The Temporary Chairman

Order. I must definitely tell the bon. Lady that she is going far wider now than she has done previously, I must ask her to come back to the Question under discussion.

Mrs. Castle

I have really never been narrower, Colonel Gomme-Duncan. One of the major purposes of the Clauses about which I am speaking is to obtain a Purchase Tax concession to help textiles. I am saying that the textile industry needs that concession because it is shrinking before our eyes through lack of confidence, so that, although world trade shows a sign of recovery, Lancashire is not in a position to take up orders which might come its way because the labour has left the industry which has been robbed of confidence by the Government.

We are entitled to ask that the Government should let Lancashire know, once and for all, where it stands in relation to Purchase Tax by doing what we have asked them to do in successive years, and that is to abolish Purchase Tax on textiles altogether. That would help one of our major industries, and help to check the disastrous rise in the cost of living, which we all know to be a reality.

Never in the House or in Committee have I been more in order than when I ask the Chancellor of the Exchequer to view with concern what is happening to the textile industry in Lancashire and to show in his future dealings with Purchase Tax a desire to help that industry, for if he does that he will, at the same time, be helping British housewives.

Mr. Boyd-Carpenter

This annual debate, which now, under our rules, generally seems to take place on Amendments or new Clauses relating to the main rates of Purchase Tax, is, by tradition, a mixture of observations of a general nature about the tax and some very precise suggestions with respect to particular articles in which hon. Members have interested themselves. It is inevitable, therefore, that my reply will be a little ragged because I have to deal, at the same time, with quite broad and extremely narrow issues, though I will not say, as did the hon. Lady the Member for Blackburn, East (Mrs. Castle), that I have never been narrower.

The right hon. Member for Battersea, North (Mr. Jay), in opening the debate on this subject, ran away from a very pertinent intervention by my hon. Friend the Member for Croydon, North (Mr. F. Harris). The two Clauses in the name of the right hon. Member for Leeds, South (Mr. Gaitskell), relating to the middle and lower rates of Purchase Tax, would, if adopted, provide changes which would come into effect on 30th September. As my hon. Friend the Member for Croydon, North pointed out, that is a very curious proposition inasmuch as, if it were adopted, one clear effect would be a serious interruption of trade between now and 30th September.

It is curious that right hon. Gentlemen opposite have not learned their lesson about this. This was done in respect of import duties by the Labour Government of 1924, when they solemnly announced that the import duties would be reduced from a period some months ahead, with similar disastrous effects on sales. It is, perhaps, pertinent to the wider issues we have to consider on this tax, that proposals of this sort for changes to take place some time ahead, are perfect examples of the best way not to manage this tax and are in very clear contrast to the way they were made by my right hon. Friend the Chancellor of the Exchequer in January of this year.

I thought the right hon. Member for Battersea. North, in his general observations about the tax, was a great deal less than fair to my right hon. Friend over the changes which have been made since the present Government took office, and particularly the general reductions which took place last year. He omitted to mention the further limited, but quite valuable, reductions which were made in January. The right hon. Gentleman necessarily confined himself to the main rates and I should like, if I may, to pass from him to some of the special and particular points that were made.

The hon. Member for Southampton, Itchen (Mr. Morley) and the hon. Member for Southampton, Test (Dr. King) both took the point which, as both of them said, I have heard them talk about a number of times before, with respect to the operation of the tax upon educational requisites, schools' stationery, and so on. I thought both hon. Gentlemen had appreciated that there is a very great difficulty in exempting certain types of articles because they happened to be used in schools.

Hon. Members say "No." Of course, it is a difficulty which appears to have been too difficult for the hon. Member's right hon. Friend when the same point was made to the late Administration, so I hope they will give me credit for the suggestion that there really is a very great difficulty in this. It does cut against the principle of this tax, which is that the tax falls on an article by reason of its nature and not because of the purpose for which it is to be used. That is fundamental to the operation of the tax.

It is the fact, as the hon. Member for Eton and Slough (Mr. Brockway) went out of his way to point out, that articles used in schools are very often precisely the same articles used for all sorts of purposes outside. I was very impressed with the method of the hon. Member for dealing with some parts of his correspondence. It struck me as a most highly satisfactory method. All these articles we are talking about, exercise books and notebooks, are also articles of general stationery and it has been the view of the tax that has been taken by successive Governments that one regards what the article is rather than to what use it is to be put.

Mr. F. Blackburn (Stalybridge and Hyde

): Is it not possible to operate a drawback scheme? I think we would rather have it said that it is not wanted to do this rather than it is not possible. It seems a rather easy matter to arrange.

Mr. Boyd-Carpenter

There are very considerable objections to operating a drawback scheme. In any event, a substantial proportion of the cost is borne by public funds and I should have thought that diminished the desirability of going to all the trouble of setting up an elaborate organisation which anyone who has any experience of operating a drawback scheme knows is inevitably involved in such a scheme.

The hon. Member for Sheffield, Park (Mr. Mulley) seemed to think that my hon. Friend the Economic Secretary had been rather rude to knives and forks and spoons. But the hon. Member knows from the consideration I have given to a good many of the proposals he has put forward that we have followed seriously all the difficulties of the industry with which he is concerned and have made quite a number of adjustments for which, I think, that industry is grateful.

I note his point about mother of pearl. That is a peculiar difficulty on which it is quite possible to take one view rather than another. If the matter has not been adjusted to the hon. Gentleman's liking it is certainly not his fault, because he has taken the point again and again.

I have made inquiries and find that the hon. Member for Sheffield, Park is quite wrong in what he said about the higher rate of tax on cutlery put into a box. In the case of a canteen of cutlery the container may very well attract a higher rate of lax, but the cutlery itself continues to be taxed at 25 per cent.

11.0 p.m.

Mr. Mulley

I had scissors in mind. I think that it is perfectly true that scissors of a certain size may be tax free; a smaller size is taxed at 25 per cent, but if put into a container the value of the things attracts a tax of 50 per cent. It is similar to the case of the electric fire in a fireplace. The fireplace is not taxed, but the fire is; put the two together and the whole value is taxed at 50 per cent.

Mr. Boyd-Carpenter

The case of toilet sets was dealt with in the Treasury order in January. It may well be that to assemble articles in a collection may attract a higher rate, and we have been trying to deal with anomalies.

The hon. Member for St. Pancras, North (Mr. K. Robinson) spoke of crash helmets. The question there is whether it is desirable to pick out one form of protective clothing for exemption. We are here dealing with a matter of a few shillings and I do not think that anyone will thereby be deterred from wearing one of these helmets when riding a motor-cycle. I quite understand, and share, his view that it is important that as many motor-cyclists as possible should wear these helmets, but I do not think that the tax is a potent factor there.

Mr. George Chetwynd (Stockton-on-Tees)

What would such a concession cost the Treasury?

Mr. Boyd-Carpenter

The cost would be very small, but it is really a matter of the administration of the tax itself.

The hon. Lady the Member for Blackburn, East was very general in her criticisms. Among other things, she criticised the reductions made in Purchase Tax on silverware and jewellery in my right hon. Friend's orders of January of this year. I must remind her that those reductions were made in the light of very strong representations made from both sides of this Committee as to the importance of the industries concerned and the effect upon them of the very high rates of tax then ruling.

Mrs. Castle

The right hon. Gentleman has missed the whole point of my complaint. It was that the arguments relating to the jewellery trade's claim for consideration applied even more powerfully to textiles, and that if those arguments were listened to in one case they should have been listened to even more urgently in the case of textiles.

Mr. Boyd-Carpenter

I am afraid that the hon. Lady is wrong in her facts. I have sympathy with her concern for the textile trades but over those trades as a whole the incidence of the tax is about 4½ to 5 per cent. The rate in the jewellery and silverware trades was very many times that, so such arguments as the hon. Lady may be able to adduce as to the ill-effects on textiles must be multiplied many times over in respect of the articles she criticised.

I think the hon. Lady had her facts about the gold-plated teapots all wrong. In point of fact, the case is the other way round. Owing to an error made in 1948—during the time of responsibility of right hon. Gentlemen opposite—the gold-plated teapot was exempted altogether. In the recent Treasury order all we did was to subject it to tax. I think it is a little hard for the hon. Lady now to say that we interested ourselves in exempting the gold-plated teapot.

Mrs. Castle

I cannot allow the Financial Secretary to say that. Having done him the honour of re-reading his speech on introducing the Purchase Tax orders, I said that he was claiming to be dealing with certain marginal anomalies, that my hon. Friends had mentioned far more urgent anomalies and that it was a pity that he had concentrated his attention on the anomaly of the gold-plated teapot. I had my facts quite right.

Mr. Boyd-Carpenter

Therefore, I take it that the hon. Member's plea is that the gold-plated teapots should continue to be exempt, as the late Administration permitted them to be. The major question which arises on these new Clauses is their cost. The tax is an important revenue tax calculated to bring in about £300 million this year. That solid revenue must not be overlooked by hon. Members who suggest that the best thing to do is to abolish the tax.

The proposals in these new Clauses would be singularly costly. That in the name of the hon. Member for Sheffield, Park, which has not been called, is comparatively economical, costing about £2 million. Others would be extremely costly. The first one in the name of the right hon. Member for South Leeds would cost £11 million, and the second one about £44 million. I have no doubt that it is clear to the Committee that the Chancellor could not, in present circumstances, sacrifice the substantial revenue involved.

It would be unfair to leave the matter like that, just as it would be unfair to consider the question of Purchase Tax without bearing in mind the substantial reductions which the Government have made. The present main rates, which the new Clauses propose to reduce, are lower than they have been for many years, and it would be fair to give the Government credit for reducing the rates as far as it has. These substantial reductions go a long way towards meeting the point in which the hon. Member for Blackburn, East was interested; but, as the Chancellor has explained, apart from the adjustments made in January, it has not been possible to sacrifice the amounts of revenue involved.

I do not suppose that in putting forward these new Clauses hon. Members opposite thought that revenue sacrifices of this order were likely to be admitted. I have no doubt that the intention was that the general question of Purchase Tax, and particular anomalies, should be discussed and ventilated. Both the Chancellor and I will note the particular and special points which have been raised. I forgot to say earlier that, with regard to the poster which intrigued the hon. Member for Eton and Slough, there must be some misunderstanding between the two sorts of poster. The matter will be looked into. Regarding the other alleged anomalies, some of which are old friends, they will be considered. On the issue of the main rates, I am sure it will be no surprise to the Committee when I say that this year the Chancellor requires the revenue.

Mr. Ede (South Shields)

The Financial Secretary at least kept one promise which he made on opening his speech. He said it would be a little ragged. It was; and the raggedness of thinking was as bad as the raggedness of form. The form of the debate is a device of the Treasury, irrespective of the Government in power, to ensure that we do not get into what used to be the Dutch auction which took place in the days immediately after the war. Therefore, it is almost impossible for hon. Members who are opposed to continuation of the tax to do other than submit a series of rather disconnected proposals for its alteration.

I shall not speak for long and I shall deal at length only with the point raised by my hon. Friend the Member for Southampton, Itchen (Mr. Morley) and supported by my hon. Friends the Members for Southampton, Test (Dr. King) and Eton and Slough (Mr. Brockway). I cannot accept the right hon. Gentleman's suggestion that the drawback scheme suggested by my hon. Friend the Member for Itchen would involve a system of very elaborate machinery, for every penny which is spent on educational requisites by the local education authority is already subject to a meticulous local government audit. Every penny spent on this purpose already has to be justified in detail by the local education authority when its accounts are audited, and it would not be at all difficult for the right hon. Gentleman and the Treasury officials in this matter to ensure that the information already available could be used to deal with my hon. Friend's proposal.

The continuation of the tax on educational requisites means a considerable reduction in the opportunities of the children in the schools to have the standard of education which, in these matters, was quite common before the war. Although it is true that educational estimates of local education authorities have risen, in this aspect of education they have not risen so as to enable the child of today to have the opportunities which were available to the child of 1938.

This is very largely a book-keeping transaction as my hon. Friend said—and, indeed, the right hon. Gentleman almost brought that into his own line of argument. It is a book-keeping transaction by which the Treasury levies the tax and then provides a varying sum of over half of it by Government grant. That indicates that it is a subject which ought to be considered jointly by the Treasury and local education authorities in an effort to secure that this futile process, of levying the tax and then making a Government grant to cover so substantial a part of it, is abolished.

The reduction in the practical work which can be done in the schools as a result of the continued imposition of this tax on educational requisites is a serious educational loss. Exercise books which I have seen have had to be used in a way which must destroy any child's pride in its work. They have to use every available square inch. It destroys the sense of form and of neatness. Things like that are a serious educational detriment. They could largely be avoided by the adoption of the scheme which my hon. Friend described. I am certain that if this could be done it would be possible for the majority of local education authorities to spend more money on the provision made for the children by using that part of the money which now goes to pay tax, inflates the estimates but secures no additional opportunities for the children.

11.15 p.m.

I thought the speech made by the hon. Member for Blackburn, East (Mrs. Castle) was an indictment of the Government's policy with regard to the particular industry with which the great county, of which she is one of its representatives, is interested, and I regretted very much that the right hon. Gentleman did not feel he could say anything more in reply than what he did. After all, all he told us at the finish was that he would look into the things which he proved in detail he could not deal with. That was an example of not so much raggedness of thinking as impudence of thinking, and I trust that my hon. Friends will press the second of these new Clauses to a Division.

Mr. Jay

I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.