HC Deb 26 May 1954 vol 528 cc507-12
Mr. Harold Wilson (Huyton)

I beg to move, in page 5, line 35, at the end, to insert: Provided that no such order shall have effect as treating as a process of manufacture any alteration or addition to the goods which does not increase their value. This is a small, simple point, but it causes a certain amount of irritation, frustration and annoyance. The Financial Secretary has said that it has caused him a little irritation and annoyance in the past. I can best illustrate it by giving a specific case. An organisation in my constituency—it happened to be my divisional Labour Party, but that is irrelevant to the argument—was having a dance and had tickets printed for a certain night. I have no doubt that Purchase Tax was paid in the ordinary way upon the tickets as printed.

For a reason which I cannot now recollect, it became necessary to hold the dance on a different night. Perhaps the hall was not available; perhaps there was a municipal by-election. The tickets had been printed, and it would have been wasteful to have had new ones printed, and so the existing ones were printed over with the changed date.

It is common practice, and has been for many years, and it is also in accordance with the law for Purchase Tax to be charged on the process of overprinting. I was asked to take the matter up. I wrote to the Financial Secretary, and he sent back a formal letter making it clear that what had been done was in accordance with the law, but he added that he himself had come across the same problem and that it seemed on the face of it to be absurd.

I believe that in his case the problem had arisen through the activities of the Kingston - upon - Thames Conservative Association. This is obviously a matter which cuts across all political parties, and it almost certainly affects a number of other organisations of a non-political character. As long as Purchase Tax is what it is, I suppose it is reasonable that dance tickets should pay Purchase Tax because they are a form of stationery.

The purpose of the Amendment is to deal with the irritation caused by the application of Purchase Tax to a process such as overprinting which does not add to the intrinsic value of the tickets, but merely corrects a mistake. It is not like adding a more expensive gem to a ring. There is no use of materials, unless one can take into account the infinitesimal amount of printers' ink used in the process. No new card or paper is used. It is purely a matter of the application of labour to the tickets. To most reasonable people, it seems wrong that Purchase Tax should have to be paid on such an operation.

We have suggested—there may be a better method of dealing with the problem—that where an operation does not add to the value of the goods, no Purchase Tax should be paid on that operation. I know that a pedantic lawyer, if we had one in the House, or a theoretical Communist, if we had one in the Committee, could, of course, make out a case that these dance tickets had been increased in value by the overprinting. He could argue that they had plainly become valueless by the fact of the hall not being available and that, by the process of overprinting, they have been changed from dud tickets into valuable ones. But I do not think that that argument can be sustained. The intrinsic value of the tickets has not altered.

I am sure that the hon. and learned Gentleman will take into account the irritation which this sort of thing causes. I have had a number of other cases, which have nothing to do with my own division, brought to my notice. This is a very small point, and the revenue involved must be infinitesimal—certainly with regard to the printing of dance tickets. I hope that the Government will tell us, either that they can accept the Amend-men which seems to us to be an estimable one, or, if not, say that they will take the matter in hand and will provide a better way of doing what we want to do by introducing the appropriate Amendment on the Report stage.

The Solicitor-General

The right hon. Member for Huyton (Mr. H. Wilson) has drawn attention to a problem which, I must confess, is a novel one to me. It may be that in my constituency we have always been fortunate enough to hold dances on the dates they have been advertised and not had to postpone them. Obviously, the excellence of the arrangements in my constituency cannot be equalled all through the country. I am certainly grateful to the right hon. Gentleman for drawing my attention to this particular point which I would say at first sight is one of some little difficulty.

One is not unsympathetic, particularly in view of the way in which the right hon. Gentleman has put his argument. I must, however, disappoint him by saying that the Government cannot accept his Amendment to this Bill. I will endeavour to satisfy him that the effect of the acceptance of the Amendment would indeed be serious and would, I think, have a result which he would not like to see brought about. It would have effect in fields far wider than tickets for dances.

First of all, this particular Clause is, again, intended to deal with tax avoidance. I covered part of the ground perhaps in answering the right hon. Gentleman on the previous Clause. Here, of course, we could get a process of manufacture which does produce a more expensive type of vehicle while the rate of tax remains the same—where there is virtually a new vehicle emerging from an operation on second-hand goods. If we are producing a more expensive type of vehicle within the same tax rate, then, clearly, we are getting an increase of value, and so this Amendment would not affect that part of the operation of this Clause.

Where we would get an adverse result, if this Amendment were accepted, is where we bring into existence what is really a new article by an operation on what one might call second-hand goods, and where the test of value may be extremely difficult to apply. I will give a simple illustration by way of jewellery. Let us take the case of a manufacturing jeweller who receives pieces of old jewellery to the value of £500. Suppose he takes parts of these old pieces of jewellery which he estimates to be worth £100 and then does work on them to the value of £20, so that the prima facie value, on his own estimate, would be £120. Of course, a great deal of new jewellery is made out of pieces of old jewellery.

To take that instance, the value criterion would have to be defined so as to confine that criterion to the parts of the old goods actually incorporated in the new ones resulting from the process. That would be a complication. Even if one surmounted that complication, which would not be at all easy, further difficulties might well arise.

8.45 p.m.

The nominal value would then be £120, but suppose that that new piece of jewellery does not sell at all easily at £120 and the jeweller has to reduce his price and ultimately sells it at, say, £90. One might accept £90 as the open market value, but, if so, there does not seem to be any reason for waiving Purchase Tax on that £90, whereas by taking the test of value, which the right hon. Gentleman's Amendment would include, the fact that the article is sold at £90 when it is valued before sale at £120 would mean that no Purchase Tax would be payable.

I hope I have made a rather complicated example, but, I think, a simple one, fairly clear to show the right hon. Gentleman that in taking that test of value in relation to the manufacture of new articles from second-hand goods, one would be getting into a most difficult and complicated field and possibly opening the door to a fairly extensive form of tax avoidance. It is for that reason that we cannot accept the Amendment in this form.

I should certainly like an opportunity of considering the case of the tickets for dance halls which have to be overprinted. Whether that might be regarded merely as an alteration, which is referred to in the Clause, and not as part of a process of manufacture of a dance ticket, is a matter on which I should not at present like to express a considered opinion.

I hope the right hon. Gentleman will give me the opportunity of looking into that, and I hope I have made it clear that the acceptance of the Amendment would have a much wider effect than would appear from what he said and would lead to great difficulties in dealing with operations on what one might call second-hand articles and subjecting them to a process of conversion or adaptation which results in the production of a new article.

Mr. H. Wilson

I am grateful to the hon. and learned Gentleman. I certainly would not like to get into any argument about whether the overprinting of dance tickets represents part of a manufacturing process or some subsequent treatment, although, if such an argument developed, I feel rather more fortified now that my right hon. and learned Friend the Member for Neepsend (Sir F. Soskice) has arrived.

I am quite content with the Solicitor-General's assurance that he will look at this special problem. As I said, it is only a small one, but it is the kind of thing that causes a lot of needless irritation and it may well be not worth the trouble and expense of collecting the tax.

I congratulate the hon. and learned Gentleman about the success of the organisation of dances in his constituency. Obviously, his party owns all the halls, which is not the case in my constituency. It is a sad reflection that the Financial Secretary has not been able to get the same degree of success in the organisation of dances or similar functions in his own constituency. When we put down this Amendment we had no intention of raising all these complications about jewellers dealing with second-hand materials and, to use a phrase more commonly used in dealing with motor cars in Army circles, going in for the cannibalisation of small pieces of secondhand jewellery.

I followed the complicated argument and I would have liked to pursue it further by asking what happens to all the material left over, and how it is valued for tax purposes. I am not satisfied that the law cannot be rigorously invoked even without the Amendment, but I do not want to make the task of the Solicitor-General more difficult by pressing an Amendment which, while designed to help those who have to reprint their dance tickets, might cause complications in the silverware and metalware jewellery industry.

If the hon. and learned Gentleman can find a way round it, I hope he will put an Amendment on the Order Paper at a later stage, when we will support it from this side. In the circumstances, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause ordered to stand part of the Bill.