Clause 12.—(VALUATION OF GOODS.)

HC Deb 26 May 1954 vol 528 cc521-74

Mrs. Castle

I beg to move, in page 7, line 9, at the beginning, to insert: that the retail selling price to the public of the goods comprised in the purchase is fixed by the manufacturers or wholesalers or is otherwise controlled by an agreement for price-maintenance and. This Amendment deals with the question of uplift, a problem which has been a preoccupation of mine for some years. I begin by congratulating the Government on facing up in this Clause at last to their obligation to take action on the Grant Report. The Committee will remember that two years ago some of us raised this question of uplift, and the unsatisfactory nature of the present situation.

As the result of our debate, the Grant Committee was appointed, and many of us were disappointed last year that the Chancellor did not feel able to give us his policy on the Grant Committee's recommendations quite as quickly as he was prepared to act on the Hutton Report. At last, after great labour, the Government have produced their policy and it is reflected in Clause 12. It substantially coincides with the majority recommendations of the Grant Committee.

To make my Amendment clear I will remind the Committee what uplift is about. Purchase Tax is levied on the wholesale value of goods. There has been a valuation practice whereby, in the case of goods bought by retailers direct from manufacturers, Customs and Excise has required Purchase Tax to be levied not on the actual sale price to the retailer but on that price uplifted by an arbitrary percentage fixed by Customs and Excise, in order to reach its estimate of the wholesale price in an open market.

The objections to this practice have been that in a large number of cases it has made Purchase Tax based on some purely hypothetical figure. That has meant uncertainty and an unsatisfactory relationship between traders of different kinds. The Clause has one merit, namely, that it bases Purchase Tax from now on, apart from the exemptions listed in the Clause, on the actual price charged to the retailer. This is in conformity with the recommendations of the majority of the Grant Committee, who discovered, as the result of their deliberations, how unsatisfactory the present position is and who laid it down that for the calculation of tax on retailers, purchases from manufacturers the actual price should not be unlifted by the interposition of an imaginary wholesale merchant but that it should, with certain exceptions, be based on the actual price charged.

This Clause takes away a good deal of the arbitrariness of the present situation, whereby Customs and Excise can query the price on which Purchase Tax is levied in almost any transaction. We begin to know where we are and to get some firm basis for the calculation of the tax. The only quarrel I have with the Clause is with the exceptions which are proposed to the new basis of valuation and the new ruling. This Amendment deals with the exceptions in the Clause relating to the so-called "quantity advantage." That is to say, the exception lays down that any quantity advantage enjoyed by a retailer purchasing from a manufacturer shall be taken into account in calculating Purchase Tax—that a reduction in price which he has enjoyed through buying in quantity shall be uplifted so as to offset this advantage.

The argument for uplifting the actual price in this case, as laid down in the Majority Report of the Grant Committee, is based on two grounds. The first is that if the retailer gets this special price as a result of buying in quantity and is dealing in price-maintained goods where the manufacturer fixes the selling price to the public, if uplift is not operated then, as a result of its abolition, the retailer will get an advantage which he will not pass on to the consumer. It is, therefore, said that this makes it essential to operate uplift in these cases.

The second reason for suggesting that uplift should be retained in cases where quantity advantage is enjoyed by the retailer is that it is unfair to the small trader to compel him to pay Purchase Tax on a higher price than the large retailer has to pay for similar goods.

I will take the argument about price maintenance first, because there can be no disagreement among us that the main purpose of abolishing uplift in cases where a retailer gets a price advantage through buying in quantity direct from the manufacturer is that he passes on that advantage to the consumer. That is the argument of those who signed the Minority Report of the Grant Committee. They want this advantage passed on in full to the consumer. They say that the large retailer usually passes on this advantage, it being part of his trading technique to be as competitive as possible and to cut down his selling price as much as possible. Therefore, his advantage should be passed on completely without uplift interfering artificially to alter the price.

Where, of course, the selling price of an article is laid down by the manufacturer, that advantage cannot be passed on, and both the Majority and the Minority Reports of the Grant Committee agreed that in the case of price-maintained goods it was clear that there was an undesirable situation if the advantage was not passed on. The Minority Report admitted that this problem existed, but said that it applied only to the minority of goods affected by uplift, and that we should not base our whole taxation law on these minority cases, because that would be making the tail wag the dog. They said that the advantage to the community of abolishing uplift where quantity advantage exists would far outweigh the disadvantage of retailers getting a certain windfall, as it were, in the case of price-maintained goods.

But, as I said, the Minority Report assumed that we could not separate price-maintained goods from the rest of goods affected by the quantity advantage. They said that even assuming that they still wanted in these cases to abolish uplift. We think that our Amendment provides a watertight formula for separating price-maintained goods and excepting them from the advantage of abolishing uplift. This being so, we are left merely with the second argument to meet.

9.30 p.m.

We are entitled now to ask the Government why they insist on applying uplift in the remaining cases where, as we know, the quantity advantage which a retailer enjoys is passed to the consumer. Judging by the arguments in the Grant Report the Chancellor or the Financial Secretary, when replying, will say that there must be uplift here as otherwise it is unfair to the small trader. The large retailer buys in quantity and gets a cut price, and would not only have that advantage over the small retailer but also that of the cut in Purchase Tax.

This is the argument of the majority. I suggest that it is an argument whose validity is grossly exaggerated. It is wrong in principle. I do not think that the protection of the individual retailer should stand in the way of our passing to the consumer the benefits of fair competition. Apart from that point of principle there is the point of actual practice. If we go into this unemotionally we find that this argument about the small trader has been grossly exaggerated, and that the small trader has his own advantages which offset the advantage of size of the large retailer.

The small trader's advantage is, of course, that of convenience. The man who will be affected by this is largely a man who is running "the shop round the corner," the man who is in the street or who is nearly on the doorstep of the purchaser who thereby save bus fares and other costs involved in going to the big stores. The consumer is thus prepared to pay an extra½d. on an article because of the saving of time and trouble and of costs in other directions.

In attempting to correct this so-called injustice to the small trader—an injustice which has not been proved—the Clause is creating a whole series of new injustices. There is, first, the injustice to the consumer, who pays a price artificially inflated by a higher rate of Purchase Tax than otherwise would be paid. The consumers are contributing a bit more to the Chancellor than, strictly, they would were we to stand by the principle that the basis of the valuation should be the actual price charged to a retailer without any of these arbitrary and notional variations.

I frankly suggest to the Committee that in dealing with this question of uplift the Chancellor of the Exchequer has always had his revenue considerations in mind. He gets a little more tax than he otherwise would because the consumer "forks out" a little more than he otherwise should. That is a consideration which the Chancellor has had in mind in dealing with the problem.

There is, secondly, the injustice to the trader, arising from the uncertainty of his present position as to tax liability. The Minority Report of the Grant Committee says that the trader has a right to know where he is. He has a right to know that if he pays a certain amount of money for certain articles he can calculate for himself what the tax will be before he places any orders.

In the present situation, however, he cannot do that because Customs and Excise argue that somehow the price that he has to pay for the articles has been reduced below some mystical norm because they are bought in bulk. Customs and Excise can alter quite arbitrarily the calculation of what the price ought to be and, therefore, the amount of tax that he has to pay. The trader does not know where he is, because this is quite a notional figure. In many cases nobody can say outright, "If you had not ordered 1,000 of these articles, but only 100, the price would have been so much." It is anybody's guess what the price would be. This applies particularly where a manufacturer may be trying to launch a new type of article and is trying to entice a retailer to give him an order for a new line of goods which is not yet selling in a general way to retailers. In such cases the selling price to the retailer which Customs and Excise accept is again quite arbitrary. There is no real basis of comparison because this is a new line of goods, but Customs and Excise say, "We believe that if those goods had been sold on the open market the price would have been so much, and you must pay tax on this basis."

This creates an element of great uncertainty which holds up the development of business and gives considerable anxiety to traders. Therefore, a fundamental injustice arises out of the existing situation which this Clause seeks to perpetuate—the injustice of making unreal comparisons between articles which are not comparable.

Subsection (2, a) states that uplift shall operate where by reason of the quantity of the goods comprised in the purchase, the price payable there-under is lower than the price which would be paid by retail traders in general for goods of the like description. That opens the door to Customs and Excise to insist on comparing the non-comparable. For example, where a large retailer orders a line of goods which are, in fact, being made for that retailer only and not for the general market, it can say, "The price which You are paying has been reduced in comparison with the price that retailers would have been paying if there had been other retailers buying articles of the like description." We are in the realm of pure speculation. We are not in a real world at all; we are in a world in which Customs and Excise can create arbitrarily.

A very strong point made by the Grant Committee is that it is highly desirable to have a firm basis of calculation for Purchase Tax and to take the hypothetical and arbitrary elements out of the situation as much as possible. I hope the Chancellor will accept this Amendment because it deals with the case of price-maintained goods, and he should exempt them from the application of uplift. We should not be hag-ridden by this idea that a large retailer buying in quantity is on a comparable basis with the small retailer and should have some arbitrary penalty imposed upon him.

Most of the goods concerned under Clause 12 (2, a) and affected by this continuation of uplift are not goods which are sold equally to all retailers and are merely enjoying a straight quantity discount for a large resale. Most of the goods which are sold generally to large and small retailers alike—with the large retailer enjoying a clear-cut quantity discount—are price-maintained goods and, therefore, would be left out of this benefit by our Amendment, but the goods which remain to be penalised by uplift if the Clause stands as at present are the goods which are made to special order by large retailers and, had they not been ordered by a large retailer, would probably not have been produced at all.

We could argue that, out of justice to the small retailer, there is a case for uplifting an identical article which goes in bulk to a large retailer, but there can be no justification for uplifting an article which would not have gone to the small retailer in any case and does not come into the picture. This point is made very strongly by the Minority Report, which, I think, gets to the root of this problem more logically than does the Majority Report. The Minority Report points out that the quantity uplift in these cases is often purely notional. It must be completely unreal to say that there is a quantity element in the price paid by a large retailer where he is buying goods which are specially made for him and for nobody else.

I should like to quote two sentences from the Report, because this is an involved matter and the Report puts it more clearly than I can. They read: These difficulties"— that is, the difficulties of getting away from a notional standard— are present in their most conspicuous form wherever the receipt of a large order by a manufacturer enables him to adopt more economical methods either of production or selling; it may even enable him to produce an altogether cheaper substitute. No quantity discount is ascertainable in these circumstances, for the simple reason that a smaller quantity would not have been produced at all. The price advantage which a large retailer is enjoying in these cases does not arise from the fact, primarily, that he is buying in bulk but arises from the fact that the manufacturer has been able to produce in bulk. The production costs have been reduced rather than the distribution costs. Are we to say that where the production cost of an article is lower in one case than in another, we should uplift in order that the Chancellor shall get his last mite out of the wretched consumer? Of course, I can see it from his point of view, but it is the Committee's duty to try to operate Purchase Tax fairly, and I suggest that as long as this arbitrary uplift is operated in these cases the consumer is not being treated fairly.

I want to give an illustration of how this might work. Take the case of a small exhibitor at a trade fair. He is displaying a new gadget. He has thought out a bright idea, let us say a new line in egg beaters. He exhibits it at a trade fair and his only hope of launching into production is to get some retailer to back him. He is not in a position to put his egg beater on the open market. He is not in a position to produce at all, unless he is reasonably certain of having an assured outlet for a reasonable quantity of his goods from some retailer.

9.45 p.m.

So he shows a prototype of his new egg beater, and hopes that a large retailer will say, "That is a jolly good idea. You can send me so many gross, but I can only sell it if your price is keen. It is only worth-while my buying this if the price is keen, and then I can give you a full order." Then the Customs and Excise may come along and say, "This is an egg beater and the wholesale price of egg beaters in the open market is so and so. Therefore, for the purpose of collecting Purchase Tax we are not going to take the price which you think the retailer will actually pay; we are going to uplift that price to a figure which represents the open market value." So, although it is a good egg beater, it may never be produced at all in that particular form. If that is going to be done that means that the retailer will hesitate, he will not give an order and a good egg beater may never get on the open market.

I suggest that the present position of uplift is quite ridiculous. We are being asked, in this Clause, in order to protect—I think quite wrongfully—shall I say to protect the illusory interest of the small retailer here and there, to perpetuate this whole range of injustices—injustice to the consumer, injustice to the trader and injustice to the chap who has the bright idea and wants to launch it on the market.

All these injustices are to be perpetuated because some people say, "If we allow the large retailer to get a quantity advantage without bringing him back to the level of the small retailer we shall be unfair to the small retailer." I think that is using a number of large injustices to cure a number of small injustices.

Speaking as a shopper and a housewife, the small retailer's attraction to me, and his guarantee of survival, lies in the fact that he is just round the corner and I do not have to take a bus to go to him. I think that as a consumer I am entitled to enjoy the convenience of the small man round the corner, or if I take a bus into the centre of the town, I have the right to get my goods as cheaply as possible with all the advantages that large-scale orders and large-scale retailing provides in the form of lower prices.

I suggest to the Chancellor, who has talked a great deal about the virtue of competition and lectured us on it from time to time that to say, "We must use uplift to protect the small retailer from this unfair competition" is out of all proportion to what he will get. I suggest that the Amendment deals with the main difficulty of price-maintained goods, and I hope that the Chancellor will agree to accept it and give to consumers the benefit of fair competition.

Mr. R. A. Butler

On a point of order. In view of the comprehensive speech of the hon. Lady the Member for Blackburn, East (Mrs. Castle), it would be useful if we had an indication of how we were to take the various Amendments. I have some little knowledge of the majority and minority Reports and of the Amendments, and it would appear that certain of the Amendments have already been mentioned in the hon. Lady's review.

It might be convenient if we could take a small block, not all, of them together—I do not want to suggest anything unreasonable—and then, if necessary, have votes on them. We might, for example, be able to take all except the last two on page 2923 of the Order Paper in one block and then, if hon. Members want to put individual points, they would be able to do so. Mostly, the Amendments have been touched on in the hon. Lady's speech, and therefore my suggestion would not stop debate but would enable us to get a comprehensive review of the subject.

Mr. Jay

I am afraid I cannot agree with the right hon. Gentleman. It seems to us from careful examination that quite different arguments are involved in each of the series of Amendments. I have no desire to prolong the debates, but if the alternative is a series of short, clear debates or one long and confused debate, it seems to us better to keep the debates very clear.

Mr. Butler

I have studied this subject and the Report of the Committee. While I am not such an expert as some other hon. Members, by closely watching the argument I noticed an allusion to the other Amendments. Therefore, I presumed that the case I was putting was already won by the concession which you had made, Wing Commander Hulbert, in allowing the hon. Lady to speak as widely as she did.

The Temporary Chairman (Wing Commander Hulbert)

It would appear that the Amendment moved by the hon. Lady strays on to the following Amendment, in page 7, line 9, to leave out paragraph (a). The hon. Lady was at one time referring to paragraph (a). It would appear that these two Amendments and the Amendment in the name of the right hon. Member for Huyton (Mr. H. Wilson), might be discussed together; they seem very closely allied. I am, however, entirely in the hands of the Committee.

It might be convenient if I say at this stage that the Amendments in the names of the hon. Member for Langstone (Mr. Stevens), in page 7, line 10, at end insert "or higher." and of the hon. Member for Islington, East (Mr. E. Fletcher), in line 11, leave out "would be," and insert "is." have not been selected.

Mr. E. Fletcher

Further to that point of order. May I point out that the first two Amendments are alternatives and that quite different arguments apply in support of the Amendment moved by my hon. Friend the Member for Blackburn, East (Mrs. Castle) than would have to be adduced, if that Amendment should fail or is not accepted, in support of the next Amendment. I should have thought that as my hon. Friend devoted the whole of her speech to her Amendment, it would be convenient if that Amendment were disposed of first.

The Temporary Chairman

As the hon. Member points out, the first two Amendments appear to be alternatives. I should have thought it would have been of convenience to the Committee to discuss those two together.

Mr. Jay

Further to the point of order. I am bound to say that I feel exactly the reverse applies. It is because the two Amendments are alternative ways of dealing with the problem that it is difficult to dicuss them together. Without desiring to lengthen the discussion, it seemed to us that the logical course was to take a decision on the first Amendment, and if the Committee did not accept it we could then discuss the second one.

The Temporary Chairman

I am entirely in the hands of the Committee. But if we follow the right hon. Gentleman's suggestion, I must rule that the debate on the first Amendment must be within very narrow limits and cannot stray on to other points.

Mr. Jay

Certainly.

Mr. Butler

The trouble is that we have already strayed. The hon. Lady is an expert on this subject, and I waited over half an hour to hear what she had to say. I took notes on my knee, and it seemed that at times she was not only mentioning paragraph (a), but made an occasional reference to some of the other Amendments. That is why I imagined we were having a general debate.

The hon. Lady also referred to the minority and majority Reports of the Committee. I thought it would be much better, in the interests of the Committee, to have a more general debate. Then, if hon. Members wish to divide the Committee, they will be in no way inhibited nor will the discussion be any the worse.

Mr. Stevens

Further to that point of order, Wing Commander Hulbert. I was given to understand that although the Amendment in my name and that of my hon. Friends, in page 7, line 10, at the end to insert "or higher" had not been selected, it could be considered in conjunction with the one before it, in line 9, and the one after it, in line 11. Indeed, as I listened to the hon. Lady I wondered if the same rumour had reached her.

The Temporary Chairman

The hon. Member can certainly discuss the substance of his Amendment provided that it is in order on the Amendment under discussion. If, however, the Committee is not in agreement with the suggestion made by the Chancellor of the Exchequer, perhaps we had better proceed with the first Amendment, but in that case the debate will have to be strictly confined to it.

Mr. Butler

May I then claim, Wing Commander Hulbert, that the debates on the other Amendments should be equally restricted? We have had a speech which has already ranged for over half an hour on this subject. We sat listening because it is a complicated subject, we know the merits of the majority and minority Reports, and I thought it would be clearer for hon. Members who have not studied them closely if the arguments were put in a general way. If not, we shall have a much more difficult debate, which must be kept entirely technical, otherwise it will not be in order.

The Temporary Chairman

I agree with the right hon. Gentleman. If the Committee wants these Amendments to be discussed separately, the debate will have to relate to the Amendment under discussion.

Mr. Butler

May I say, for the honour of the Government, that we cannot reply to many of the arguments of the hon. Lady in that case, and that we shall not do so.

The Temporary Chairman

Of course, the Chancellor of the Exchequer will also have to keep his remarks within the confines of the Amendment under discussion. Mr. Eric Fletcher.

Mr. E. Fletcher

I support the Amendment moved by my hon. Friend—[HON. MEMBERS: "Which one?"]—so ably and so persuasively. I intend to confine my remarks strictly to the arguments in support of her Amendment which I hope will commend itself to the Chancellor because, if it does, or if it is accepted by the Committee, it may be unnecessary for us to discuss some of the later Amendments.

It would seem that the only possible answer to the logical case which my hon. Friend has made out in support of this Amendment is its cost. When the Chancellor dealt with these subjects on Second Reading he said, if I understood him correctly, that whereas the cost of implementing the majority Report of the Grant Committee would cost £5 million, to carry out the minority Report would cost £15 million. The Chancellor did not make it quite clear whether he meant an additional £15 million or that the total cost of carrying out the majority and minority Reports would be £15 million.

However that may be, may I point out to the right hon. Gentleman that the cost of carrying the proposal contained in this Amendment would be much less than it would cost to carry out the full recommendations of the minority Report of the Grant Committee. That is one reason why I hope the Amendment will commend itself to the Chancellor. I hope he will appreciate that its virtue is that it is confined to the free-price goods—I am sure I can have the attention of the Chancellor for a moment?

Mr. R. A. Butler

I was trying to calculate the sum for which the hon. Gentleman was asking and I was telling the Financial Secretary.

Mr. Fletcher

The last thing I want to do is to disturb that calculation. but I had imagined that both the Chancellor and his Financial Secretary would have had the figure at their fingertips, because either it is £10 million or £15 million.

10.0 p.m.

Another calculation which will interest the Committee no less will be to know what is the cost of implementing the Amendment. It must be very much less than the full cost of the Minority Report. I hope that the Chancellor will appreciate that the real attraction and merit of the Amendment is that it draws a distinction between uplift on price-maintained goods and uplift on free-price goods. It is most unfortunate that both the Minority and Majority Reports proceeded on the assumption that for the purposes of uplift no distinction could be drawn between price-maintained goods and free-price goods.

It is implicit in the recommendations of the Majority Report that if the majority of the Grant Committee had felt that a distinction could be drawn between price-maintained goods and free-price goods they would have been in favour of removing uplift as regards quantity considerations for free-price goods. Unfortunately, they assumed that it was necessary either to retain uplift or remove uplift both for price-maintained goods and free-price goods. They came to the conclusion that it was no advantage to the consumer to remove uplift in this respect as regards price-maintained goods and that for the purpose of equity the same must be applied to free-price goods.

The Grant Committee do not say why it is impossible to draw a distinction. We concede that there are administrative difficulties in this matter, whatever decision is taken by the Committee, but I do not believe that it is impossible. No reason was given in evidence to the Grant Committee why it would be impossible to draw a dividing line and retain uplift for price-maintained goods, because in that category no benefit goes to the consumer, and remove it in the case of quantity considerations for free-price goods.

In the Majority Report it was considered an instance of the tail wagging the dog and in the Minority Report of hard cases making bad law. The Amendment strikes a mean and provides maximum benefit to the consumer. It will involve much less cost to the Revenue than would the full implementation of the Minority Report and for those reasons I very much hope that the Chancellor will give sympathetic consideration to the Amendment.

Mr. Stevens

On a point of order. May I have your guidance, Sir Charles. as to whether, in discussing the Amendment now before the Committee, we should be in order in discussing the subject matter of the words "or higher" mentioned in my Amendment in page 7, line 10.

The Chairman

No. I gather that at the moment we are only discussing the first Amendment in page 7, line 9.

Mr. Stevens

Do I understand that the second Amendment to line 9 to leave out paragraph (a) and my Amendment, and also that in the name of the hon. Member for Islington, East (Mr. E. Fletcher) to line 11 will be discussed together?

The Chairman

Yes.

Mr. Butler

That is a Ruling, Sir Charles, which adds novelty to the discussion. I had prepared a speech in reply to the hon. Lady, but, in view of the Ruling given by your predecessor in the Chair, I am unable to make it because we must now stick to detail. If we were to discuss the two Amendments together would we be confined to detail arising out of those Amendments?

The Chairman

I think so, on paragraph (a). I am sorry that there has been confusion but, originally, the Amendments were grouped in a certain way and the leaders of the Opposition wanted them to be taken separately. Perhaps that was not indicated to the Treasury.

Mr. Butler

It is very complicated and difficult to discuss the Report if we are to follow the arguments of the hon. Lady and I think that only detailed matters can be dealt with.

The Chairman

I think that was to oblige the Opposition.

Mr. Albu

In spite of what the Chancellor said I do not think the difference between the two Amendments is so small as it appears. The difficulty arises out of the complicated nature of the subsection which makes changes by a passage with two negatives in it. The effect of the Amendment moved by my hon. Friend the Member for Blackburn, East (Mrs. Castle) is to add another consideration to paragraph (a) of subsection (2) without which additional considerations in paragraph (a) uplift will not be charged.

In doing so it provides what I think many of us feel is a better alternative to the second Amendment, which is designed to achieve a rather similar result. In discussing this Amendment one can discuss the fact that its intention is to remove uplift from goods which are purchased in quantity by a retailer if, in addition, those goods are not sold under price-maintained conditions.

It is true that it might have been easier if we had discussed the second Amendment first, but that would be taking them out of the order in which they appear on the Order Paper. But there is no reason why we should not discuss the question now before the Committee. On the whole I prefer this Amendment to the second Amendment—because I think I speak for my hon. Friends—although we are desirous of giving the benefit of the concession of not charging uplift to retailers who purchase in large quantities, we do not wish to give that concession in cases where retailers, by agreement with manufacturers, sell goods under price maintenance arrangements.

The first Amendment provides a way of obviating what might be considered an objectionable feature of the second Amendment by which the only beneficiaries of the Amendment would be the retailers themselves and not the consumers. By accepting the first Amendment the Committee would do two things, and that is why my hon. Friend was in order in asking the question about uplift in the case of quantity sales. In fact, this Amendment provides that two conditions have to be fulfilled if the benefit is not received by the retailer, instead of only one condition as at present. This Amendment would be extremely satisfactory and it is very important that the Committee should understand this. I have no idea where hon. Members opposite stand on this question.

Sir Harold Webbe (Cities of London and Westminster)

Nor have we.

Mr. Albu

I do not think that the hon. Member would have understood if we were discussing the second Amendment. I doubt whether he really understands what it is about.

What we are discussing is whether or not uplift shall be charged on quantity sales to retailers when there is a resale price maintenance. We on this side of the Committee are in favour of not charging uplift in the case of quantity sales to a retailer if there is no resale price maintenance and if the Committee agrees with the argument advanced by my hon. Friend that the way to achieve that is to accept this particular Amendment.

I cannot see why the Chancellor should be in difficulty. It seems a reasonable Amendment and if the Chancellor accepts it we shall not have to discuss the second Amendment at all. I imagine that it is quite in order for the Financial Secretary to give reasons for accepting this Amendment on the ground that he does not wish to discriminate against those retailers who buy in bulk, but who at the same time, are not bound by any resale price maintenance arrangements. I hope that we shall hear from the Finance Secretary that the Chancellor is prepared to accept this Amendment. If not, we shall have to move the second Amendment which is not such a desirable one and which contains some features which will not be of such great benefit to the consumer.

Mr. Coldrick (Bristol, North-East)

If I may intervene to extract this matter from the obscurity which seems to surround it, I would say that I support this Amendment for somewhat different reasons from those stated so persuasively by my hon. Friend the Member for Blackburn, East (Mrs. Castle) on behalf of the consumer.

We are familiar with the case of the wholesaler who buys in bulk from the manufacturer and then sends goods to the retailer. I am concerned not about these large-scale purchases, but about the fact that there is a growing practice in this country for manufacturers to send their goods direct to the retailer and not to incur the expense of the wholesaler. In such cases the Treasury says that because the wholesale charge has not been incurred, they must have some notional artificial figure attached to the manufactured price upon which the tax may be levied.

I think it grossly unfair that the consumer should be called upon to pay that tax upon notional uplift. As it seems to me it has reached ridiculous proportions because, unlike the case stated by my hon. Friend the Member for Blackburn, East, it does not affect merely the large-scale buyer. I can quote cases where relatively small manufacturers in this country are supplying goods directly to the retailer.

10.15 p.m.

The Chairman

Is the hon. Member speaking to paragraph (b)?

Mr. Coldrick

I am giving the reason for removing the uplift. I take it that that is precisely the purpose of the Amendment.

Hon. Members

No. Mrs.

Mrs. Castle

Yes.

Mr. Coldrick

If that is not its purpose, I do not think the Committee know what its purpose is. Anyhow, I wish to draw attention to the fact that the practice is developing of sending goods directly from the factory to the retailer. Small manufacturers are doing that in a larger number of cases now. The result is that the Commissioners are charging these small retailers a notional uplift figure which, in turn, is passed on to the consumer. It is for that reason that I support the Amendment.

Mr. Boyd-Carpenter

As I understand it. under the Rulings which have been given, the Committee is confined on the discussion on this Amendment to the proposal that uplift should continue in respect of price-maintained goods but should not continue, as is proposed in the Clause, in cases where the large retailer has a buying advantage. Therefore, we are on a comparatively narrow point; we are able to discuss not the general merits or otherwise of uplift, but merely whether it should be applied to price-maintained goods but not applied in the case of large purchases.

That proposal, contained as we now know in the Amendment moved by the hon. Lady the Member for Blackburn, East (Mrs. Castle), has the dubious advantage of having been recommended neither by the majority nor by the minority of the Grant Committee, whereas the Clause as it stands embodies broadly the recommendations of the majority of the Grant Committee, recommendations in which, so far as they went, the minority concurred, although the minority would have gone somewhat further. Therefore, we start on the basis that on this rather narrow point on this very difficult question the proposal which the hon. Lady commends to the Committee has not been recommended by either section of the Committee which most carefully investigated the matter.

That does not conclude the matter. It may be that the hon. Lady is right and that every member of the Grant Committee was wrong. I should like, within the limitations, to examine her proposal on its merits. Under her proposal, uplift would continue solely in respect of price-maintained goods. One of the difficulties that would arise from that is that this would involve discrimination against price-maintained goods. It may be—the interventions which I heard from hon. Members opposite seemed to confirm the view—that that is really based on the dislike of hon. Members opposite of the system of price maintenance. I do not propose to get into an argument with them—it would not be in order so to do—on the general merits or demerits of a system of price maintenance, but I must say that a discriminatory Purchase Tax seems to be absolutely the wrong way to tackle the problem, whether one approves of price maintenance or not.

I think I elicited from the Opposition confirmation that at least one of the objects was to discriminate against price-maintained goods, and that seems to amount to one of the major objections to these proposals. We are trying, in a rather difficult sphere of Purchase Tax, to devise a system which will operate fairly. I do not think we are serving that end if we introduce the wholly extraneous element of trying to make the position of price-maintained goods more difficult by the use of taxation measures which have a totally different purpose.

The hon. Member for Islington, East (Mr. E. Fletcher) commended this proposal to my right hon. Friend on the ground that it would be cheaper than the alternative, and he asked for the cost. The cost would be between £7 million and £8 million a year, which is a substantial figure, but I would not like to rest my argument solely or even mainly on the question of cost. Despite what the hon. Lady tried to suggest—that this system was operated by a ruthless Chancellor, concerned to wring the last penny from each and all—in point of fact, the Revenue point of view could equally be met by the adjustment of the rates of tax, which is probably the proper way to secure an adequate revenue. Therefore, though the cost element is very substantial, I would not commend it as being conclusive, because if my right hon. Friend or the Committee took the view that, in principle, this Amendment was justified, it might be necessary to recoup the Revenue in some other direction.

I would address myself to the point that is made on this Amendment—in addition to the discrimination against price-maintained goods—of the effect of abolishing uplift with respect to purchases by a large store or some other retailers who, by reason of their size, have a purchasing advantage in that they can give a very big order, and thus obtain their goods at lower prices.

If we abolish uplift, we add to the advantage which such a trader has already by reason of his ability to secure a smaller price, the further additional benefit of paying less Purchase Tax than will his competitor in respect of the same goods; that is to say, we add to the competitive advantage which he already has a further advantage deriving from a differential rate of Purchase Tax. It is perfectly clear that that would work unfairly towards the smaller trader, and it would work very unfairly towards him since the tax system would then confer a competitive advantage upon a competitor.

The hon. Lady sought to avoid that argument by saying that it was all in aid of the consumer. It is a matter of speculation, on which any of us can form a view, whether or not that advantage would necessarily in all—or in any—cases be passed on to the consumer at all. There is no guarantee contained in this Amendment that it would. All that would happen would be that that advantage under the tax system would go to the purchaser who, by reason of his size, is in a favourable position, and who would be able to retain a larger profit or to pass it on to the consumer as, from the business point of view, happened to suit him.

Whatever else is uncertain, what is certain is that the small trader, as opposed to the large trader, would, from the competitive point of view, be hurt, and I should like to make clear that one of the major justifications for the system of uplift, which was worked in its full rigour by right hon. Gentlemen opposite and which is proposed in this Clause to be operated with somewhat less rigour by my right hon. Friend—and it is a justification which appeals to the present Government as indeed it did to its predecessor—is the fact that it operates to prevent the small trader suffering undue competition resulting, not from competitive efficiency, but from differential taxation.

That is really the argument for it, and that is why, after careful thought on the findings of this very valuable Committee, my right hon. Friend came to this conclusion, which, while abolishing uplift in other directions, retains it both in respect of price-maintained goods and in respect of purchases made by the type of retailer who has a purchasing advantage by reason of his size.

Mr. Roy Jenkins (Birmingham, Stechford)

The Financial Secretary implies that a large retailer may get an advantage, if the Amendment were accepted, entirely independent of any greater efficiency. Surely he will admit that the advantage which could arise under the Amendment, even in a limited number of cases, could only do so if there was a prior advantage because of greater efficiency.

Mr. Boyd-Carpenter

It can only arise if there is a prior advantage, but where I join issue with the hon. Gentleman is when he says, "accruing from greater efficiency." It must be his experience and that of many other Members of the Committee in respect of many classes of goods that if you are a big retailer and place a very large order you can, in many cases, get that order executed at a more favourable price than on a smaller number of articles; and that has nothing to do with efficiency. It may reflect efficiency or size. I hope that the hon. Gentleman is not confusing efficiency with size.

Mr. Jenkins

It automatically makes the trader more efficient from the point of view of the consumer.

Mr. Boyd-Carpenter

It makes him more efficient from the consumer's point of view if he passes the advantage on to the consumer, but as I have pointed out to the Committee, it does not follow from the Amendment, that the trader will. If he is given an advantage by reason of size, the advantage may accrue to his profits and not to the consumer at all. It is misleading to assume, with a naivete which I do not normally attribute to the hon. Member, that all such advantages will be automatically passed on to the consumer.

On this narrow issue therefore, among other things because of its cost, because of its unfairness both with price-maintained goods and to the small retailer, and because this suggestion did not find favour with the impartial committee that reviewed the matter, I am afraid that, having considered the arguments which were put forward, my right hon. Friend finds himself quite unable to agree to the Amendment.

Mr. Hale

All the Financial Secretary's arguments dealt with comparable articles, whereas my hon. Friend the Member for Blackburn, East (Mrs. Castle) raised matters of very great importance to the textile industry. There is a whole lot of woollen and cotton research going on dealing with bleaching, printing, new designs and virtually new materials, which have to be considered in respect of the Purchase Tax treatment they are to receive. All these items are marketed on a large scale, and they are all vital to the success of the textile industry. Nevertheless, they have to carry extra tax.

Mr. Boyd-Carpenter

The hon. Gentleman is suffering from the disadvantage from which we are all suffering at the moment, in having to discuss a very narrow point. If the hon. Gentleman's argument has any force, it is relevant to the whole general question of whether uplift is necessary. We are dealing with an Amendment which says that uplift shall continue in regard to price-maintained goods, but abolishes it in other respects. I disagree with him, but I cannot argue with him on this Amendment the principle of uplift. We are not discussing "uplift or no uplift" but the precise point where uplift shall apply and where it shall not apply.

Mrs. Castle

The whole purpose of my Amendment is that uplift should be abolished in cases where quantity advantage arises, and that was the case to Which my hon. Friend the Member for Oldham, West (Mr. Hale) was referring.

Mr. Boyd-Carpenter

If the hon. Lady takes the view that my compliance with the rules of order is dodging. I must leave it to her.

10.30 p.m.

Mr. Jay

The Financial Secretary quite rightly says that this Amendment seeks to abolish uplift in those cases where quantity rebates are in force but where resale price maintenance is not. He said, quite rightly, that that solution was not commended by either the majority of the minority Report of the Grant Committee. He did not, however, say that the main objection of the majority of the Committee to the solution of abolishing uplift in the case of quantity rebates was precisely because very often in such cases price maintenance was in force.

Our reason for wishing to discuss this issue separately was that that was the main objection the majority had to the solution which the minority wished to adopt. I am sorry it sounds complicated, but there it is. In the opinion of many of us it would be right that where a lower price is paid the benefit should be passed to the consumer. Where, however, resale price maintenance is in force—which is the issue here—the benefit would not be passed to the consumer.

Therefore, as the Financial Secretary said, the whole of the benefit of tax reduction would go into profits. We did not wish that to happen, and followed the perfectly logical procedure of first putting down the Amendment in order to have that point decided. If the Financial Secretary had said that the Amendment was impractical or would not rule out the possibility of price maintenance he would have produced a real objection. Instead, he has left the impression that this is not an impractical solution.

I would point out that it obtains the benefits which the minority Report sought to get, and at the same time meets the main difficulty put forward by the majority of the Committee. I therefore think that the Amendment has a good deal to commend it.

Sir H. Williams

I have been critical of uplift ever since the introduction of Purchase Tax, but we are here really discussing price maintenance—or at least a large part of the present debate is concerned with price maintenance. I should like to know if buying the "Daily Herald" or the "Daily Worker" in the Co-op would be a breach of the price maintenance agreement with regard to those two eminent newspapers—

Mr. Hale

Is there Purchase Tax on newspapers?

Sir H. Williams

The debate has ranged on price maintenance. I did not draft the Amendment. This speaks of price maintenance.

Mr. Hale

On a point of order. Should we be in order, Sir Charles, to cover the whole range of British commodities not affected by either Purchase Tax or uplift?

The Chairman

No.

Sir H. Williams

The hon. Members opposite are very cross because the Co-ops will not sell the "Daily Herald."

Mr. Hale

On a point of order. It is within the recollection of the Committee that just five minutes ago the Financial Secretary insisted on the rules of order and insisted that he had obeyed them with a technicality and care for which he demanded the praise of the Committee—which was readily accorded. I do not know if the hon. Member for Croydon, East (Sir H. Williams) is to be allowed to discuss the very fascinating question of whether the "Daily Worker" contains uplift.

The Chairman

I hope we shall keep to the Amendment, which is quite narrow.

Mr. Burden

It would seem that if this Amendment were carried it would completely deny the recommendations of the Grant Committee. That Committee had certain considerations and certain representations made to it, and I should like to quote two. It was the general view of the trade representatives, which was submitted by the Electric Light Fittings Association, that It follows … that the retailer who purchases in large quantities most likely receives a higher rate of discount than the smaller retailer purchasing a given article by units; it would mean that if the purchase tax was not chargeable on an agreed notional value, the amount of tax per invoice would vary and always be more favourable to the large trade buyer; a system which would completely disturb the present trading structure of our industry. The second extract is from the evidence of the Independent Traders' Alliance of Great Britain: We suggest that purchase tax should be levied on the price at which the wholesaler will sell to his smallest trade account and, where the sale is direct from the manufacturer to retailer, on the price at which a wholesaler dealing in those goods would sell them. The conclusions of the Grant Committee were: Where a retailer pays a specially high price for goods because of the smallness of the quantity which he buys, or for some special reason, there are substantial grounds for the view that the actual price ought to be reduced in order to arrive at the value for tax purposes. For those reasons the Amendment should be withdrawn or resoundingly defeated.

Mr. Albu

The hon. Gentleman was referring to electric bulbs, which are price maintained, and would be excluded by the Amendment.

Mr. Burden

These conclusions were the general conclusions in regard to all merchandise. The Committee's view was that the same merchandise should pay the same rate of tax irrespective whether it was bought from the smaller or, the larger retailer—in other words, equity on tax on the particular article.

Question put, "That those words be there inserted."

The Committee divided: Ayes, 171; Noes, 198.

Division No. 120.]	AYES	[10.37 p.m.
Acland, Sir Richard	Hall, John T. (Gateshead, W.)	Price, Philips (Gloucestershire, W.)
Albu, A. H.	Hamilton, W. W.	Proctor, W. T.
Allen, Arthur (Bosworth)	Hannan, W.	Pryde, D. J.
Allen, Scholefield (Crewe)	Hargreaves, A.	Reid, Thomas (Swindon)
Awbery, S. S.	Hastings, S.	Rhodes, H.
Bacon, Miss Alice	Hayman, F. H.	Roberts, Albert (Normanton)
Benson, G.	Henderson, Rt. Hon. A. (Rowley Regis)	Robinson, Kenneth (St. Pancras, N.)
Beswick, F.	Herbison, Miss M.	Ross, William
Bing, G. H. C.	Hewitson, Capt. M.	Royle, C.
Blackburn, F.	Holman, P.	Shackleton, E. A. A.
Blenkinsop, A.	Holmes, Horace	Shawcross, Rt. Hon. Sir Hartley
Blyton, W. R.	Houghton, Douglas	Short, E. W.
Boardman, H.	Hoy, J. H.	Shurmer, P. L. E.
Braddock, Mrs. Elizabeth	Hudson, James (Ealing, N.)	Silverman, Julius (Erdington)
Brockway, A. F.	Hughes, Hector (Aberdeen, N.)	Simmons, C. J. (Brierley Hill)
Brook, Dryden (Halifax)	Irvine, A. J. (Edge Hill)	Skeffington, A. M.
Broughton, Dr. A. D. D.	Irving, W. J. (Wood Green)	Slater, Mrs. H. (Stoke-on-Trent)
Burke, W. A.	Janner, B.	Slater, J. (Durham, Sedgefield)
Castle, Mrs. B. A.	Jay, Rt. Hon. D. P. T.	Smith, Ellis (Stoke, S.)
Champion, A. J.	Jenkins, R. H. (Stechford)	Snow, J. W.
Chapman, W. D.	Johnson, James (Rugby)	Sorensen, R. W.
Clunie, J.	Jones, David (Hartlepool)	Soskice, Rt. Hon. Sir Frank
Coldrick, W.	Jones, Frederick Elwyn (West Ham, S.)	Strauss, Rt. Hon. George (Vauxhall)
Collick, P. H.	Jones, Jack (Rotherham)	Summerskill, Rt. Hon. E.
Cove, W. G.	Keenan, W.	Sylvester, G. O.
Craddock, George (Bradford, S.)	Kenyon, C.	Taylor, Bernard (Mansfield)
Crosland, C. A. R.	Lawson, G. M.	Taylor, John (West Lothian)
Crossman, R. H. S.	Lee, Frederick (Newton)	Taylor, Rt. Hon. Robert (Morpeth)
Cullen, Mrs. A.	Lewis, Arthur	Thomas, Iorwerth (Rhondda, W.)
Dalton, Rt. Hon. H.	Logan, D. G.	Thomas, Ivor Owen (Wrekin)
Davies, Ernest (Enfield, E.)	McColl, J. E.	Timmons, J.
Davies, Harold (Leek)	McGhee, H. G.	Tomney, F.
Delargy, H. J.	McInnes, J.	Turner-Samuels, M.
Dodds, N. N.	MacMillan, M. K. (Western Isles)	Ungoed-Thomas, Sir Lynn
Ede, Rt. Hon. J. C.	Mallalieu, J. P. W. (Huddersfield, E.)	Usborne, H. C
Edwards, Rt. Hon. John (Brighouse)	Mann, Mrs. Jean	Warbey, W N.
Edwards, Rt. Hon. Ness (Caerphilly)	Manuel, A. C.	Watkins, T. E.
Evans, Stanley (Wednesbury)	Marquand, Rt. Hon. H. A.	Wells, William (Walsall)
Fernyhough, E.	Mason, Roy	West, D. G.
Finch, H. J.	Mikardo, Ian	Wheeldon, W. E.
Fletcher, Eric (Islington, E.)	Mitchison, G. R.	White, Mrs. Eirene (E. Flint)
Foot, M. M.	Moody, A. S.	White, Henry (Derbyshire, N.E.)
Forman, J. C.	Mort, D. L.	Whiteley, Rt. Hon. W.
Fraser, Thomas (Hamilton)	Moyle, A.	Wigg, George
Freeman, Peter (Newport)	Mulley, F. W.	Wilkins, W. A.
Gaitskell, Rt. Hon. H. T. N.	Nally, W.	Willey, F. T.
Gibson, C. W.	Neal, Harold (Bolsover)	Williams, David (Neath)
Glanville, James	Oliver, G. H.	Williams, Rev. Llywelyn (Abertillery)
Gooch, E. G.	Orbach, M.	Williams, Ronald (Wigan)
Gordon-Walker, Rt. Hon. P. C.	Oswald, T.	Williams, W. R. (Droylsden)
Greenwood, Anthony (Rossendale)	Paget, R. T.	Williams, W. T. (Hammersmith, S.)
Grenfell, Rt. Hon. D. R.	Paling, Rt. Hon. W. (Dearne Valley)	Willis, E. G.
Grey, C. F.	Paling, Will T. (Dewsbury)	Wilson, Rt. Hon. Harold (Huyton)
Griffiths, David (Rother Valley)	Palmer, A. M. F.	Woodburn, Rt. Hon. A.
Griffiths, Rt. Hon. James (Llanelly)	Parker, J.	Younger, Rt. Hon. K.
Griffiths, William (Exchange)	Pearson, A.
Hale, Leslie	Porter, G	TELLERS FOR THE AYES:
Hall, Rt. Hon. Glenvil (Colne Valley)	Price, J. T. (Westhoughton)	Mr. Wallace and Mr. Rogers.
NOES
Aitken W. T.	Bishop, F. P.	Butler, Rt. Hon. R. A. (Saffron Walden)
Alpert, C. J. M.	Black, C. W.	Carr, Robert
Anstruther-Gray, Major W. J.	Bowen, E. R.	Channon, H.
Arbuthnot, John	Boyd-Carpenter, Rt. Hon. J. A.	Clarke, Col. Ralph (East Grinstead)
Baldock, Lt.-Cmdr. J. M.	Boyle, Sir Edward	Clarke, Brig. Terence (Portsmouth, W.)
Baldwin, A. E.	Braine, B. R.	Clyde, Rt. Hon. J. L.
Banks, Col. C.	Braithwaite, Sir Gurney	Cole, Norman
Barlow, Sir John	Brooman-White, R. C.	Colegate, W. A.
Baxter, A. B.	Buchan-Hepburn, Rt. Hon. P. G. T.	Conant, Maj. R. J. E.
Beach, Maj. Hicks	Bullard, D. G.	Cooper-Key, E. M.
Bell, Philip (Bolton, E.)	Bullus, Wing Commander E. E.	Craddock, Beresford (Spelthorne)
Bennett, Dr. Reginald (Gosport)	Burden, F. F. A.	Crookshank, Capt. Rt. Hon. H. F. C.
Birch, Nigel	Butcher, Sir Herbert	Crosthwaite-Eyre, Col. O. E.
Crouch, R. F.	Kaberry, D.	Remnant, Hon. P
Crowder, Sir John (Finchley)	Kerby, Capt. H. B	Ridsdale, J. E.
Crowder, Petre (Ruislip—Northwood)	Kerr, H. W.	Roberts, Peter (Heeley)
Darling, Sir William (Edinburgh, S.)	Langford-Holt. J. A	Roper, Sir Harold
Davidson, Viscountess	Leather, E. H. C.	Ropner, Col. Sir Leonard
Deedes, W. F.	Legge-Bourke, Maj. E. A. H.	Russell, R. S.
Donaldson, Cmdr. C. E. McA	Legh, Hon. Peter (Petersfield)	Ryder, Capt. R. E. D.
Doughty, C. J. A	Lindsay, Martin	Schofield, Lt.-Col. W
Douglas-Hamilton, Lord Malcolm	Linstead, Sir H. N	Scott, R. Donald
Drayson, G. B.	Llewellyn, D. T.	Scott-Miller, Cmdr. R.
Duncan, Capt J. A L.	Longden, Gilbert	Shepherd, William
Duthie, W. S.	Lucas, Sir Jocelyn (Portsmouth, S.)	Simon, J. E. S. (Middlesbrough, W)
Erroll, F. J.	Lucas, P. B. (Brentford)	Snadden, W. McN.
Fisher, Nigel	Lucas-Tooth, Sir Hugh	Soames, Capt. C.
Fort, R.	McCallum, Major C.	Spearman, A. C. M.
Foster, John	Macdonald, Sir Peter	Speir, R. M.
Fraser, Hon. Hugh (Stone)	McKibbin, A. J.	Stanley, Capt. Hon. Richard
Fyfe, Rt. Hon. Sir David Maxwell	Mackie, J. H. (Galloway)	Stevens, Geoffrey
Galbraith, Rt. Hon. T. D. (Pollock)	Maclean, Fitzroy	Stewart, Henderson (Fife, E.)
Gamer-Evans, E. H.	Macleod, Rt. Hon. lain (Enfield, W.)	Stoddart-Scott, Col. M.
George, Rt. Hon. Maj. G. Lloyd	MacLeod, John (Ross and Cromarty)	Storey, S.
Glover, D.	Macpherson, Niall (Dumfries)	Strauss, Henry (Norwich, S.)
Godber, J. B.	Maitland, Comdr. J. F. W. (Horncastle)	Studholme, H. G.
Gough, C. F. H.	Maitland, Patrick (Lanark)	Taylor, William (Bradford, N.)
Gower, H. R.	Manningham-Buller, Sir R. E	Teeling, W.
Graham, Sir Fergus	Marshall, Douglas (Bodmin)	Thomas, Rt. Han. J. P. L. (Hereford)
Grimond, J.	Maude, Angus	Thomas, Leslie (Canterbury)
Grimston, Hon. John (St. Albans)	Maudling, R.	Thomas, P. J. M. (Conway)
Grimston, Sir Robert (Westbury)	Medlicott, Brig. F.	Thompson, Lt.-Cdr. R. (Croydon, W)
Hall, John (Wycombe)	Mellor, Sir John	Thornton-Kemsley, Col. C. N
Harden, J. R. E.	Morrison, John (Salisbury)	Tilney, John
Hare, Hon. J. H.	Nabarro, G. D. N.	Touche, Sir Gordon
Harris, Frederic (Croydon, N.)	Neave, Airey	Turner, H. F. L
Harris, Reader (Heston)	Nicholls, Harmar	Turton, R. H.
Harrison, Col. J. H. (Eye)	Nield, Basil (Chester)	Vaughan-Morgan, J. K
Harvey, Air Cdre. A. V. (Macclesfield)	Noble, Comdr. A. H. P	Wakefield, Edward (Derbyshire, W.)
Heald, Flt. Hon. Sir Lionel	Odey, G. W.	Wakefield, Sir Wavell (St. Marylebone)
Heath, Edward	O'Neill, Hon. Phelim (Co. Antrim, N.)	Walker-Smith, D. C.
Higgs, J. M. C.	Ormsby-Gore, Hon. W. D.	Wall, P. H. B.
Hill, Dr. Charles (Luton)	Orr, Capt. L. P. S.	Ward, Hon. George (Worcester)
Hirst, Geoffrey	Orr-Ewing, Charles Ian (Hendon, N.)	Ward, Miss I. (Tynemouth)
Holland-Martin, C. J	Osborne, C.	Waterhouse, Capt. Rt. Hon. C
Holt, A. F.	Page, R. G.	Watkinson, H. A.
Hornsby-Smith, Miss M. P.	Peto, Brig. C. H. M	Webbe, Sir H. (London & Westminster)
Horsbrugh, Rt. Hon. Florence	Peyton, J. W. W.	Wellwood, W.
Howard, Gerald (Cambridgeshire)	Pickthorn, K. W. M	Williams, Gerald (Tonbridge)
Hurd, A. R.	Pilkington, Capt. R. A.	Williams, Sir Herbert (Croydon, E.)
Hutchison, Sir Ian Clark (E'b'rgh, W.)	Pitt, Miss E. M.	Williams, Paul (Sunderland, S.)
Hylton-Foster, H. B. H.	Prior-Palmer, Brig. O. L	Williams, R. Dudley (Exeter)
Iremonger, T. L.	Profumo, J. D.	Wills, G.
Jennings, Sir Roland	Raikes, Sir Victor	Wood, Hon. R.
Johnson, Eric (Blackley)	Rayner, Brig. R.
Jones, A. (Hall Green)	Redmayne, M.	TELLERS FOR THE NOES:
Joynson-Hicks, Hon. L. W.	Rees-Davies, W. R.	Sir Cedric Drewe and Mr. Vosper.

Mr. Jay

I beg to move, in page 7, line 9, to leave out paragraph (a).

Had the Committee accepted the previous Amendment, it would not have been necessary to discuss this one. However, as the Committee has misguidedly rejected that Amendment, I think we have an obligation to turn our minds to this one. Though by the last decision of the Committee it is not intended to exclude cases of resale price maintenance from the field where it is proposed that uplift should be abolished, nevertheless, in our view, there is a strong case for removing uplift where a quantity rebate is given in the purchase by the retailer. That is what this Amendment proposes.

We have to make up our minds whether, in spite of the argument advanced by the majority Report of the Grant Committee about resale price maintenance, and even though we realise that resale price maintenance will continue in these cases, it is not desirable, on balance, that the advantage of a large order should be passed on to the consumer by means of a lower tax. There are two main advantages in removing uplift, so it seems to me, in the case of the large order at a lower price. I will rehearse them very briefly because they are the kernel of the case on this Amendment.

In the first place, of course, the removal of uplift gets rid of an arbitrary and hypothetical element in Purchase Tax. Under the system of uplift, the Customs, instead of imposing tax on the basis of the actual price paid, imposes it on a hypothetical price imagined to be paid in certain circumstances which do not in fact exist. I think we all recognise that normally that is not a very sound or desirable principle of taxation. It is far better to accept an actual price and to know where one is. That is the first clear advantage: the removal of that arbitrary and hypothetical element.

Secondly—this is the most important argument of all—the effect of charging the tax on a price higher than the price which was actually paid by the retailer is inevitably to increase the price to the final consumer. Throughout the whole of this argument we have put the main emphasis on the need to increase efficiency in distribution and to bring down the price to the consumer wherever it can be done.

It is true that resale price maintenance to some extent limits that possibility. Nevertheless, in our view, as we move into rather more competitive conditions and get further from the shortages of the war period, there ought surely to be an increasing measure of competition in the distributive trades, which will operate to bring down the price, at any rate in most cases where the tax has been reduced.

The Financial Secretary himself said earlier that we were operating now in more competitive conditions. In the last Government, when we considered this, it always seemed to us that there was a very strong case for the removal of uplift. To some extent, in conditions of shortage and in wartime and post-war conditions, those advantages were rather academic but as we have got further away from those conditions and into a more competitive world, those advantages become less academic and much more real.

The Financial Secretary said that the large order placed by the large retailer did not necessarily imply greater efficiency. But in so far as the lower price, as a result of competition, is passed on to the consumer, that is clearly greater efficiency from the consumer's point of view. We ought not to get into the position of arguing that though greater efficiency of production and mining and industrial processes generally is desirable, greater efficiency of distribution does not matter. Surely, most Members would agree that in the case of the larger distributive organisations there are elements of real efficiency of organisation which contribute in a real sense to the benefit of the consumer.

We were told by the Financial Secretary that it was quite unfair that when the large retailer already had the advantage of greater size and could place an order at a lower price, the Government should add a further advantage by imposing a lesser tax. But surely it can be argued with just as much force that where by greater efficiency the retailer has contrived to secure a lower price, it is undesirable from the public point of view that the Government should impose what is a higher percentage tax on precisely the same article.

The effect of uplifting the tax in the case of the goods in quantity purchase is, in effect, to impose a higher percentage tax in the case of the goods bought in quantity than in the case of the same goods bought in smaller quantities. Therefore, that argument can be just as effectively used the other way. Uplift is, in fact, a discouragement, a disincentive to efficiency.

The only other argument which is seriously brought against the case that the removal of uplift would benefit the consumer is that, as the Financial Secretary said, it might be unfair to the small shop, which cannot secure the benefits of large purchases. Where the benefits in the hands of the larger distributing organisation are due to efficiency, I do not think it is undesirable that taxation should take that into account.

It does seem to us that the small shop has a great gain in its immediate convenience which outweighs the obvious advantages of large-scale organisation in the bigger retailing groups. The village shop round the corner which is able to serve one, and therefore removes the necessity to take a bus to the large chain store some distance away does, although the price may be very slightly higher than that in the big store, attract those who live near by—those who are attracted by the nearness of the shop and are not deterred by the slightly higher price. So, although the Committee has not accepted what we consider to be the ideal solution contained in the Amendment which has just been rejected, there are strong arguments for adopting the general terms of the minority Report for encouraging, and not for discouraging, greater efficiency in distribution.

Mr. John Arbuthnot (Dover)

I understand that it has been ruled that we should be in order in discussing the Amendment standing in the name of my hon. Friend the Member for Langstone (Mr. Stevens), other honourable Friends and myself, in page 7, line 10, at the end, to insert "or higher."

It is to that Amendment that I address a few brief remarks. We wish to point out that as the Clause is drafted, it—quite rightly in our view—says that no attention should be paid to an invoice value as evidence of the Purchase Tax value, if the price paid by the retailer is lower by reason of a quantity purchase.

As I say, we feel that is quite right, but we also feel that exactly the same argument applies the other way. The purchases of a retailer from a manufacturer may be in quantities smaller than the normal quantities sold, and there may be an additional element in the price to cover factors such as. for instance, breaking bulk.

This recommendation is covered in the Grant Committee's Report. In paragraph 132 of that Report on Purchase Tax, it is said: Where a retailer pays a specially high price for goods because of the smallness of the quantity which he buys, or for some special reason, there are substantial grounds for the view that the actual price ought to be reduced in order to arrive at the value for tax purposes. The Grant Committee recognised the difficulties, but went on to state: … but the Department ought to consider whether there may not be cases in which such a price is in excess of the open market value and, therefore, ought to be reduced in arriving at the 'wholesale value'. We feel that it is logical that the higher price should also be taken into account as well as the lower and I therefore support the Amendment in the name of my hon. Friends.

11.0 p.m.

Mr. Albu

I do not intend to follow the hon. Member for Dover (Mr. Arbuthnot) in his argument because I am not sure what are the cases to which he was referring. It might well be that what he was asking the Commissioners to do was to subsidise or support inefficient retailers. However, that is not the Amendment which we are discussing.

We have had a certain amount of frivolity about these two Amendments, but we are discussing an extremely important point, one about which there was considerable controversy for a number of years, about which there has been an interesting but complicated Report, with an important minority Report. Last year we had a good debate on this matter, when we pressed the Chancellor to take some action. The right hon. Gentleman has taken some action, but the Clause does not seem to us to go far enough.

Behind this Clause is that highly emotional concept the small businessman or the small shopkeeper, and Members of this House and Committee are generally almost incapable of facing these issues in any realistic way. I suppose there are hon. Members who consider that in some way or another their political future will be determined by whether or nor they appear to support the small shopkeeper as against the large one.

At any rate the minority Report has made it fairly clear that the small shopkeeper will not be affected very much one way or the other by removing the uplift from sales made by retailers who are able to buy in large quantities. As my hon. Friend the Member for Blackburn, East (Mrs. Castle) and my right hon. Friend the Member for Battersea, North (Mr. Jay) have pointed out, the small shopkeeper has other advantages. On the other hand, anybody who has watched the trend of retail trade in recent years has seen the enormous growth in the sales of the Co-operative societies and of the chain stores, and that is not surprising to anybody who goes into any of their shops.

I do not suppose that hon. Members opposite often do so, because they frequently display extraordinary ignorance about the ordinary affairs of business, whether manufacturing or retailing. Anybody who makes comparisons of, for instance, the prices of goods being sold in these multiple shops, knows that they are one of the most potent factors at the present time in bringing down the cost of living. The value that is given, the prices that are paid, the ease of the service—all are of enormous benefit to the community.

It seems to us on this side of the Committee that the present system of charging uplift on the class of goods frequently sold by these retailers is to inhibit the movement towards not only more efficient distribution but also more efficient manufacture; and so, in fact, to maintain one of the rigidities in the economic system which hon. Gentlemen opposite so frequently attack. This trend towards new methods of merchandise, new methods of buying, new methods of designing, new methods of purchasing, new methods of achieving quality and new methods of retailing, is not going to stop. Accordingly it seems to be a kind of Ludditism on the part of the Treasury to try to weight the balance against this trend by insisting on maintaining the uplift on goods which are sold in large quantities.

The arguments have been well deployed already, but I make no excuse for continuing the argument because after the speech by my hon. Friend the Member for Blackburn, East we restricted ourselves narrowly on the last Amendment to the point concerned with goods which are free from resale price maintenance. But it is important that we thrash out the basic argument as to whether or not we shall subsidise the more inefficient manufacturer and seller of consumer goods.

The Financial Secretary showed a complete ignorance of the basic reason why some manufacturers are able to supply goods in large quantities at lower prices. They do not do it for love, or merely because the quantities are large per sale. It is because of the large orders that they are able to rationalise their production and are frequently able to reduce their overheads per unit production, maintain regularity of employment and keep down production costs.

On the retail side there are extraordinary advantages in the chain of distribution. Anyone who has examined the figures of large retailers knows the profit margins on which they are able to sell their goods are very much lower than those of other retailers. Is it really the object of this Committee, in present-day society, to assist by a taxation system the maintenance of old and obsolete methods either of manufacture or distribution of consumer goods?

I suggest that hon. Members opposite know little about these things. Few of them are engaged in manufacture at all. Some may have become directors of family concerns but few have engaged in the manufacture of consumer goods. With the exception of the hon. Member for Edinburgh, South (Sir W. Darling), I do not believe that they are engaged in large-scale retail distribution. Certainly the Financial Secretary showed a lamentable ignorance in replying to the previous Amendment.

Our argument is of great substance. Whatever the Committee does this year will not settle the matter. There is no doubt that when the consumers understand the real effects of uplift—not only the increase in prices of goods sold in the shops, but the hampering effect on the extension of this type of trade—they will react very strongly against it. I hope the Financial Secretary will not give us the rather flippant sort of reply which he frequently gives on these occasions.

As is usual when we are discussing extremely important trade matters, there is no representative of the Board of Trade present. This is not merely a question of taxation, because its effects will be felt from manufacture to distribution and are bound to affect the nature of our industry, the system of distribution and the cost of living. I hope therefore that we shall not have a speech from the Financial Secretary as though the matter was one which concerns only the Treasury.

Mr. Burden

I find it difficult to follow the arguments of Members opposite because it appears that they are proposing that there should be an abolition of tax equity. I believe that to be an entirely wrong concept. Where taxation is imposed, whether on merchandise or individuals, it should be imposed in equity.

Hon. Members opposite are proposing that the small retailer should be penalised and forced to pay more tax than the large purchasers. They are not only referring to the small retailer in the village shop—for whom they shed a few crocodile tears, commenting at the same time that customers would come to him rather than go to the large towns because it was more convenient—but the small retailer in the large town who is competing with those big order organisations which are lauded by hon. Members opposite and who, most of us would agree, are very enterprising. It seems to me that the hon. Member for Edmonton (Mr. Albu) destroyed his own argument when he said that, because of their efficiency, they were able to reduce their margins of profit. If they want to reduce their margins of profit and so give better value, there is nothing whatever to stop them, but that is no argument for saying that, in addition to that, they should be placed in a privileged position regarding the levying of Purchase Tax. That is an extremely difficult argument to follow.

The right hon. Member for Battersea, North (Mr. Jay) and the hon. Member for Edmonton implied, perhaps unwittingly, that the Grant Committee dealt only with price-maintained goods when it stated in its conclusions that there should be tax equity. I would refer to the right hon. Gentleman and the hon. Gentleman to page 26 of the Report, where it is stated: Our conclusion is that quantity discounts or lower prices allowed on the grounds of quantity ought to be disregarded so far as price-maintained goods are concerned. That is where the right hon. Gentleman and the hon. Gentleman stopped. If they had read on they would have seen: If there is to be one definition of 'wholesale value' for all goods (as in our opinion there ought to be). it would follow that quantity discounts and lower prices for large quantities should be disregarded in valuation of all goods, whether price-maintained or not.

Mr. Albu

We are supporting the minority view.

Mr. Burden

I am glad that that has now been made perfectly clear. It seemed to me that Members opposite were trying to ride off very lightly the fact that they were supporting the minority Report. It is just as well that the view of the majority should be made known perfectly clearly. I also hope that the many people who buy from the many small traders throughout the country will note that hon. Gentlemen opposite are in favour of increasing their cost of living. I sincerely hope that my right hon. Friend will resist the Amendment.

Mr. Boyd-Carpenter

As has been indicated, the Amendment is really an alternative to the one which the Committee was discussing a little while ago. If I understood the hon. Lady the Member for Blackburn, East (Mrs. Castle) correctly, it is her second choice only. To some extent it is perhaps inevitable that we should cover the same ground, although the Amendments are not the same and in some degree, indeed, where they overlap they are inconsistent. However, to some considerable extent, the same issues arise, and it may be necessary for me for a moment to weary the Committee with much the same arguments as before.

There is the same question of cost involved—some millions of pounds—but this is not an Amendment which I would seek to deal with solely on the question of cost. It is well worth considering whether, if such sums of money were available, they could hest be remitted in this way as opposed to some alteration of the rates. That is a matter on which opinions may well differ, but, as I have said, although we cannot wholly ignore the question of cost, the real point at issue on this Amendment, as on its predecessor, is that to which my hon. Friend the Member for Gillingham (Mr. Burden) has just referred with considerable eloquence, the clash of interests between the big store and the small retailer.

This has been a subject of controversy for many years. There is a very real difference of view and there is a clash of commercial and financial interest on the matter. It was largely in view of that that my right hon. Friend last year appointed the Grant Committee with a view to obtaining the impartial and able advice which he rightly felt that that Committee could give. The Clause embodies the view contained in the majority Report. The hon. Member for Edmonton (Mr. Albu) said, in an interjection in the speech of my hon. Friend the Member for Gillingham (Mr. Burden), that hon. Members opposite are, broadly speaking, in favour of the minority recommendations. We have to consider on this Amendment whether over a large part of the field uplift should be retained or abolished. The Committee will recall by way of background that the Clause provides for reductions in both the sphere and the amount of uplift, the Government having accepted the recommendation to that effect in the majority Report.

11.15 p.m.

The difference between the two sides of the Committee is whether we can go the stage further which this Amendment suggests. We cannot do so, unless we are consciously and deliberately willing to put the small, as opposed to the large, retailers at a severe disadvantage, which would be accentuated by the fact that they would be paying different amounts of tax in respect of the same goods. I should find it difficult to justify that.

The argument, as I understand it, from the benches opposite is that the retail price on which they would justify levying the lower amount of Purchase Tax is the reward for a system which benefits the Consumer. Against that is the point Which I put on the previous Amendment that there would only be a benefit to the consumer if, in point of fact, the retailer concerned passed on the benefit instead of using it to increase his profits.

The Committee might like to reflect that the benefit to the consumer, in so far as it existed, would be shown only in the reduced amount of tax paid, and therefore, in the sacrifice of revenue which my right hon. Friend would have made. That benefit to the consumer would flow equally easily from any remission of tax, or reduction in the rates. When we are discussing this benefit to the consumer it is as well to clear our minds of the idea that it is produced by some manipulation, and without sacrifice of revenue. Once we contemplate loss of revenue we come back to the point whether that sacrifice can be contemplated without some countervailing increase of tax in some other direction.

We ought not to entertain the naive idea that the consumer will benefit automatically from the acceptance of something in the nature of the minority Report. He will only so benefit if the revenue can be sacrificed without a countervailing increase of taxation. The Committee would do well to consider very seriously the recommendations made by the Grant Committee after very careful consideration and review of evidence. I should have thought there was some strong presumption in favour of accepting its views. and I am bound to say that nothing I have heard in the debate has shaken that view.

The issue really comes to this. Are we prepared to go further than the majority of the Grant Committee would go in reducing uplift and thereby quite consciously and deliberately—I think one must face this—inflict some considerable disadvantage and difficulty on the small retailer? It may amuse the Committee if I read two or three lines from a letter about the minority Report which I received from one organisation: The almost loving regard for the small trader expressed by the two ladies signing the Minute of Dissent is so completely contradictory to their recommendation for abolition of uplift that we hope their plea may be rejected. I am bound to say that that has a lot of force.

Mr. Roy Jenkins

Before the right hon. Gentleman sits down I wonder if he will tell us that, as he has based his objection on the ground that one must not discriminate in favour of the large against the small trader, he will withdraw Part IV of the Bill?

Mr. Boyd-Carpenter

It seems to me that there is no inconsistency between the two, because in both cases if there be discrimination it is in favour of the small trader. Nor do I see any relevance in that interjection to this issue.

Mr. Arbuthnot

rose—

Mr. Boyd-Carpenter

My hon. Friend the Member for Dover (Mr. Arbuthnot), by rising, reminds me that I had sat down prematurely. I had not dealt with his interesting point. I did not, of course. intend any discourtesy.

Logically my hon. Friend's proposal has a great deal to be said for it. He would introduce, in contradistinction to uplift, what I think my right hon. Friend two years ago christened "downfall." which would apply in converse circumstances. Though logically there is much to be said for that, the practical administrative difficulties would be very great. On the figures which I have the actual variations in price would really be so small as to make it very doubtful whether it would be worth the trouble to arrange.

There are already powers. I understand, to take account of an unduly high price. I suggest that the point is logical and unanswerable but it is, from the practical point of view, not likely to arise in sufficient degree or in a sufficient number of cases to justify special provisions. There are powers to deal with the extreme case.

Mr. Percy Holman (Bethnal Green)

May I ask the right hon. Gentleman if it is not a fact that, administratively the point raised by his hon. Friend is largely covered by the fact that in many trades Purchase Tax is normally levied on a quantity basis in excess of the quantities normally supplied to the small retailer? There is, therefore, an actual downfall for the small retail buyer.

Mr. Boyd-Carpenter

I think that the hon. Gentleman is saying what I said. The extreme case can be taken care of, but generally speaking that case does not substantially arise.

Question put, "That the words proposed to be left out stand part of the Clause."

The Committee divided: Ayes, 175; Noes, 143.

Division No. 121.]	AYES	[11.25 p.m.
Aitken, W. T.	Harris, Frederic (Croydon, N.)	Page, R. G.
Alpert, C. J. M.	Harris, Reader (Heston)	Pete, Brig. C. H. M.
Anstruther-Gray, Major W. J	Harrison, Col. J. H. (Eye)	Payton, J. W. W.
Arbuthnot, John	Harvey, Air Cdre. A. V. (Macclesfield)	Pilkington, Capt. R. A.
Baldock, Ll.-Cmdr. J. M.	Heald, Rt. Hon. Sir Lionel	Prior-Palmer, Brig. O. L.
Baldwin, A. E.	Heath, Edward	Profumo, J. D.
Banks, Cal. C.	Hill, Dr. Charles (Luton)	Raikes, Sir Victor
Barlow, Sir John	Hirst, Geoffrey	Rayner, Brig. R.
Baxter, A. B.	Holland-Martin, C. J.	Redmayne, M.
Beach, Major Hicks	Holt, A. F.	Rees-Davies, W. R.
Bell, Philip (Bolton, E.)	Hornsby-Smith, Miss M. P	Remnant, Hon. P.
Bennett, F. M. (Reading, N.)	Horsbrugh, Rt. Hon. Florence	Ridsdale, J. E.
Bennett, Dr. Reginald (Gosport)	Howard, Gerald (Cambridgeshire)	Roberts, Peter (Heeley)
Birch, Nigel	Hurd, A. R.	Roper, Sir Harold
Bishop, F. P.	Hutchison, Sir Ian Clark (Eb'rgh, W.)	Ropner, Col. Sir Leonard
Black, C. W.	Hylton-Foster, H. B. H	Russell, R. S.
Bowen, E. R.	Iremonger, T. L.	Ryder, Capt. R. E. D.
Boyd-Carpenter, Rt. Hon. J. A	Johnson, Eric (Blackley)	Schofield, Lt.-Col. W.
Boyle, Sir Edward	Joynson-Hicks, Hon. L. W	Scott, R. Donald
Braine B. R.	Kaberry, D.	Scott-Miller, Cmdr. R.
Buchan-Hepburn, Rt. Hon. P. G. T	Kerby, Capt H. B.	Shepherd, William
Bullard, D. G.	Kerr, H. W.	Simon, J. E. S. (Middlesbrough, W.)
Burden, F. F. A.	Langford-Holt, J. A.	Soames, Capt. C.
Butcher, Sir Herbert	Leather, E. H. C.	Spearman, A. C. M.
Butler, Rt. Hon. R. A. (Saffron Walden)	Legge-Bourke, Maj. E. A. H.	Speir, R. M .
Channon, H.	Legh, Hon. Peter (Petersfield)	Stevens, Geoffrey
Clarke, Col. Ralph (East Grinstead)	Lindsay, Martin	Stoddart-Scott, Col. M.
Clarke, Brig. Terence (Portsmouth, W.)	Linstead, Sir H. N.	Storey, S.
Colegate, W. A.	Llewellyn, D. T.	Strauss, Henry (Norwich, S.)
Cooper-Key, E. M.	Longden, Gilbert	Studholme, H. G.
Craddock, Beresford (Spelthorne)	Lucas, Sir Jocelyn (Portsmouth, S)	Teeling, W.
Crookshank, Capt. Rt. Hon. H. F. C.	Lucas-Tooth, Sir Hugh	Thomas, Leslie (Canterbury)
Crosthwaite-Eyre, Col. O. E.	Macdonald, Sir Peter	Thomas, P. J. M. (Conway)
Crouch, R. F.	Mackeson, Brig. Sir Harry	Thompson, Lt.-Cdr. R. (Croydon, W.)
Crowder, Petre (Ruislip—Northwood)	McKibbin, A. J.	Tilney John
Darling, Sir William (Edinburgh, S.)	Mackie, J. H. (Galloway)	Touche, Sir Gordon
Davidson, Viscountess	Maclean, Fitzroy	Turner, H. F. L.
Deedes, W. F.	Macleod, Rt. Hon. lain (Enfield, W.)	Turton, R. H.
Donaldson, Cmdr. C. E. McA.	MacLeod, John (Ross and Cromarty)	Tweedsmuir, Lady
Doughty, C. J. A.	Macpherson, Niall (Dumfries)	Vaughan-Morgan, J. K.
Douglas-Hamilton, Lord Malcolm	Maitland, Comdr. J. F. W. (Horncastle)	Vosper, D. F.
Duthie, W. S.	Maitland, Patrick (Lanark)	Wakefield, Edward (Derbyshire, W.)
Erroll, F. J.	Manningham-Buller, Sir R. E.	Wakefield, Sir Wavell (St. Marylebone)
Fort, R.	Marples, A. E.	Walker-Smith, D. C.
Foster, John	Marshall, Douglas (Bodmin)	Wall, Major Patrick
Fraser, Hon. Hugh (Stone)	Maude, Angus	Ward, Hon. George (Worcester)
Fyfe, Rt. Hon. Sir David Maxwell	Maudling, R.	Ward, Miss I. (Tynemouth)
Garner-Evans, E. H.	Medlicott, Brig. F.	Waterhouse, Capt. Rt. Hon. C.
George Rt. Hon. Maj. G. Lloyd	Mellor, Sir John	Webbe, Sir H. (London & Westminster)
Glover, D.	Morrison, John (Salisbury)	Millwood, W.
Godber, J. B.	Nabarro, G. D. N.	Williams, Gerald (Tonbridge)
Gough, C. F. H.	Heave, Airey	Williams, Sir Herbert (Croydon, E.)
Gower, H. R.	Nield, Basil (Chester)	Williams, Paul (Sunderland, S.)
Graham, Sir Fergus	Noble, Comdr. A. H. P.	Williams, R. Dudley (Exeter)
Grimond, J.	Odey, G. W.	Wills, G.
Grimston, Hon. John (St. Albans)	O'Neill, Hon. Phelim (Co. Antrim, N.)	Wood, Hon. R.
Grimston, Sir Robert (Westbury)	Ormsby-Gore, Hon. W. D.	TELLERS FOR THE AYES:
Hall, John (Wycombe)	Orr-Ewing, Charles Ian (Hendon, N.)	Sir Cedric Drewe and
Hare, Hon. J. H.	Osborne, C.	Major Conant.
NOES
Acland, Sir Richard	Hall, John T. (Gateshead, W.)	Pryde, D. J.
Albu, A. H.	Hannan, W.	Rhodes, H.
Allen, Arthur (Bosworth)	Hargreaves, A.	Roberts, Albert (Normanton)
Allen, Scholefield (Crewe)	Hayman, F. H.	Robinson, Kenneth (St. Pancras, N.)
Awbery, S. S	Henderson, Rt. Hon. A. (Rowley Regis)	Ross, William
Benson, G.	Herbison, Miss M.	Shackleton, E. A. A.
Beswick, F.	Hewitson, Capt. M.	Shawcross, Rt. Hon. Sir Hartley
Bing, G. H. C.	Holman, P.	Short, E. W.
Blackburn, F.	Houghton, Douglas	Shurmer, P. L. E.
Blenkinsop, A.	Hudson, James (Ealing, N.)	Silverman, Julius (Erdington)
Blyton, W. R.	Irvine, A. J. (Edge Hill)	Simmons, C. J. (Brierley Hill)
Boardman, H.	Jay, Rt. Hon. D. P. T.	Skeffington, A. M.
Braddock, Mrs. Elizabeth	Jenkins, R. H. (Stechford)	Slater, Mrs. H. (Stoke-on-Trent)
Brockway, A. F.	Johnson, James (Rugby)	Slater, J. (Durham, Sedgfield)
Brook, Dryden (Halifax)	Jones, David (Hartlepool)	Smith, Ellis (Stoke, S.)
Broughton, Dr. A. D. D.	Jones, Frederick Elwyn (West Ham, S.)	Snow, J. W.
Castle, Mrs. B. A.	Jones, Jack (Rotherham)	Soskice, Rt. Hon, Sir Frank
Champion, A. J.	Keenan, W.	Stokes, Rt. Hon. R. R.
Coldrick, W.	Kenyon, C.	Strauss, Rt. Hon. George (Vauxhall)
Collick, P. H.	Lawson, G. M.	Summerskill, Rt. Hon. E.
Craddock, George (Bradford, S.)	Lewis, Arthur	Sylvester, G. O.
Crosland, C. A. R.	Logan, D. G.	Taylor, Bernard (Mansfield)
Grossman, R. H. S.	McInnes, J.	Taylor, Rt. Hon. Robert (Morpeth)
Cullen, Mrs. A.	Mallalieu, E. L. (Brigg)	Thomas, Iorwerth (Rhondda, W.)
Dalton, Rt. Hon. H.	Mann, Mrs. Jean	Timmons, J.
Davies, Ernest (Enfield, E.)	Manuel, A. C.	Ungoed-Thomas, Sir Lynn
Davies, Harold (Leek)	Mason, Roy	Usborne, H. C.
Delargy, H. J.	Mikardo, Ian	Warbey, W. N.
Dodds, N. N.	Mitchison, G. R.	Watkins, T. E.
Ede, Rt. Hon. J. C.	Moody, A. S.	Wells, William (Walsall)
Edwards, Rt. Hon. John (Brighouse)	Mort, D. L.	West. D. G.
Edwards, Rt. Hon. Ness (Caerphilly)	Moyle, A.	Wheeldon, W. E.
Evans, Stanley (Wednesbury)	Mulley, F. W.	White, Mrs. Eirene (E. Flint)
Fernyhough, E.	Nally, W.	White, Henry (Derbyshire, N.E.)
Finch, H. J.	Neal, Harold (Bolsover)	Whiteley, Rt. Hon. W.
Fletcher, Eric (Islington, E.)	Noel-Baker, Rt. Hon. P J	Wigg, George
Foot, M. M.	Oliver, G. H	Wilkins, W. A.
Forman, J. C.	Orbach, M.	Willey, F. T.
Fraser, Thomas (Hamilton)	Oswald, T.	Williams, Rev. Llywelyn (Abertillery)
Freeman, Peter (Newport)	Paget, R. T.	Williams, Ronald (Wigan)
Gaitskell, Rt. Hon. H. T. N.	Paling, Rt. Hon. W. (Dearne Valley)	Williams, W. R. (Droylsden)
Gibson, C. W.	Paling, Will T. (Dewsbury)	Williams, W. T. (Hammersmith, S.)
Gordon-Walker, Rt. Hon. P. C.	Palmer, A. M. F.	Willis, E. G.
Greenwood, Anthony (Rossendale)	Parker, J.	Wilson, Rt. Hon. Harold (Huyton)
Grey, C. F.	Pearson, A.	Younger, Rt. Hon. K.
Griffiths, Rt. Hon. James (Llanelly)	Porter, G.
Griffiths, William (Exchange)	Price, J. T. (Westhoughton)	TELLERS FOR THE NOES:
Hale, Leslie	Price, Philips (Gloucestershire, W.)	Mr. Wallace and
Hall, Rt. Hon. Glenvil (Colne Valley)	Proctor, W. T.	Mr. George Rogers.

Question put, and agreed to.

Mr. Jay

I beg to move, in page 7. line 15, to leave out from "merchants." to "or." in line 17.

This Amendment—

The Solicitor-General

On a point of order, Sir Rhys, are we dealing with the correct Amendment? I understood that we were taking this Amendment, and those to lines 17. 19. and 32 together.

The Deputy-Chairman (Sir Rhys Hopkin Morris)

I understand that this is being taken separately, and that the others are being taken together.

Mr. R. A. Butler

On a point of order. I understood that these Amendments were being taken together. This is the second time that the Government has been in a muddle over this. I do not want to question your word, Sir Rhys, but it was understood that this matter was the other way round.

The Deputy-Chairman

I understood that the original arrangement was that this Amendment should be discussed in group four, and that the next group begins with the proposed Amendment, in page 17, line 17. The Amendment with which we are dealing was originally to have been considered with the earlier Amendment, but now it is being called separately.

Mr. Gaitskell

That was certainly my impression. I do not think we need take long over it, but it is a distinct Amendment, and we should like to discuss it.

Mr. Jay

This is a limited Amendment, on which we seek information. We wish to ask the Government what is the meaning and the purpose of the words at the end of Subsection (2, b). The words read as follows: … or otherwise enjoys any purchasing advantage over retail traders in general… The significance of those words is that if a trader otherwise enjoys any purchasing advantage over retail traders in general, then he is deprived of the advantage of the abolition of uplift.

This is rather an obscure and oracular phrase, and what we want to know from the Government is what are those other purchasing advantages which a retail trader might enjoy which would deprive him of the burden of being "disuplifted," if for the sake of brevity I may use that word. [HON. MEMBERS: "Oh."] Very well, deprived of the benefit of uplift, if the Committee prefers the longer phrase.

These advantages cannot in the first place, of course, be the advantages of a large quantity order. They have already been ruled out by Clause 12 (2, a). They are, secondly, not the advantage of performing wholesale functions, since that has already been covered by the first part of Clause 12 (2, b). Nor, finally, can they consist of any advantages due to the transaction between the retailer and the wholesaler not being an arm's length transaction, but being in some sense arranged so that the price is artificially depressed. For, as the Committee will remember, any circumstance of that kind is covered by the Eighth Schedule to the 1940 Finance Act which originally introduced Purchase Tax.

If those other advantages which the Bill implies that the retail trader might enjoy are in none of these three classes, we shall be very anxious to know what they are. The only other form of advantage that I can think of is that the trader should show greater efficiency and ability, which enable him to do his business better and at a lower cost. We want to know from the Government whether the purpose of these words is to lay down that the benefits of greater ability and efficiency are not to be allowed to be reflected in the tax paid; and, if those are not the advantages which the Government have in mind, we shall be glad if they will tell us what they are.

The Solicitor-General

These few words in this subsection which have led the right hon. Gentleman to use a word which I have never heard used before really have not the sinister significance that he sought to attach to them. The phrase "any purchasing advantage" certainly does not connote or take into account greater ability or greater efficiency. The words are put in because, if they were not inserted in that subsection, it might be contended that the big retail shop was not within the ambit of paragraph (b), and the paragraph would then apply only to wholesale merchants.

The right hon. Gentleman raised the point that so far as price is concerned the position of large retail traders was dealt with by paragraph (a). But in order to ensure equality of treatment between the various types of retailers it has been thought necessary to include these words so as to make sure that where a particular retail trader enjoys some purchasing advantage—which is a thing quite distinct from the efficiency or ability of the enterprise—over retail traders in general, then this provision should apply.

Mr. Jay

Can the hon. and learned Gentleman give an indication of the purchasing advantage, other than that of placing a large order, which is covered specifically in paragraph (a)?

The Solicitor-General

There might be some form of association—indefinite, it may be—between the retailer and the wholesaler which secured that even in respect of small orders, that particular retailer had an advantage over other retailers in general.

Mr. Jay

Is the Solicitor-General not aware that any form of association between the purchaser and the seller is covered in the Eighth Schedule of the 1940 Act, which is still in force?

The Solicitor-General

Even if that be so, I think it is desirable for the sake of clarity that this provision should be contained in the subsection.

Mrs. Castle

The Solicitor-General has been very ingenious. I congratulate him on the way he is handling a subject which is obviously rather strange to him. The explanation is that this is another example of the Government simply blindly following the majority Report without having worked out whether the majority Report was always right in its recommendations.

The majority Report of the Grant Committee in its summary of recommendations, said that where the actual price is reduced by reason of any buying advantage which such retailer enjoys …. other than those mentioned in the paragraphs dealing with quantity advantage— such reduction should be disregarded. This is carrying uplift to mad and fantastic lengths, because in page 26 the majority Report itself, in discussing these various advantages which a large retailer has over a small retailer, refers to the main advantages: for example, where a retailer buyer pay less for goods (whether by means of a quantity discount or by means of a lower price) … The Report said that when that happens, the wholesale value should be uplifted to counteract that price advantage.

The Committee went on to say: We do not know of any other buying advantage which the large retailer enjoys, but if there be such in the case of any large retailer we think that its effect on the price which he pays ought also to be counteracted by 'uplift'. In other words, the Grant Committee wanted to make absolutely sure that the large retailer does not get a start in any direction or for any reason over the small retailer. And so we get this hotchpotch coverage. That, I suggest, is the real explanation, and not the one that the Solicitor-General has been asked to give us.

Amendment negatived.

Mr. Albu

I beg to move, in page 7, line 17, to leave out from "general," to the end of line 19.

The Deputy-Chairman

It may be for the convenience of the Committee to discuss, at the same time, the two Amendments to line 18, the first to line 19 and the one to line 32.

Mr. Albu

I do not intend to weary the Committee with a long argument, but two substantial matters arise. First, we should like a little more explanation from the Government as to why the seller who is not a person who mainly sells to retail traders is to be barred from the benefit conferred by subsection (2). I shall not quote my right hon. Friend's horrible words. It seems to us that these benefits should accrue to any seller who sells and satisfies the other conditions. Perhaps the Solicitor-General will explain why the subsection is introduced. Further than that, it appears to me that the words "in general" may have a dangerous effect. Does this mean that a seller who mainly sells to a particular group of retail traders as, for example, a Co-operative society, is excluded from its effects because he is not selling to retail trades in general? If that be the case, then I think we shall have to press this Amendment. We thought the words meant retail traders of every type.

11.45 p.m.

Lieut.-Colonel Wentworth Schofield (Rochdale)

While I do not like subsection (2 c) of the Clause, I must say that I think it is better that it be left in and not deleted from the Bill, as is suggested. My own criticism of paragraph (c) is that it is altogether too vague. It would have been much better if the intention behind it could have been expressed a little more precisely. On Second reading, the Financial Secretary, referring to Purchase Tax and uplift, said: … after the Bill has become law there will necessarily be some discussions between the Customs and the trade associations concerned."—[OFFICIAL REPORT, 3rd May, 1954, c. 29.] Experience has taught me that in discussions of this character, difficulties often arise in connection with the interpretation of words. While those negotiating on behalf of the trade interests may interpret certain words to mean one thing, the Customs authorities may very well interpret them in a different way. Such a difference of view might well occur, in my view, over the interpretation of paragraph (c), which says that the seller is not a person who mainly sells to retail traders in general. What interpretation is to be placed on the word "mainly"? Is it intended to mean more than half, or will the Customs authorities interpret it as meaning a much higher percentage?

I understand that there is a working arrangement between the Customs authorities and trade organisations whereby manufacturers and converters who ordinarily sell to ordinary retailers are exempt from uplift if it is shown that their selling and distribution costs are one-seventh, or more, of their total sales turnover; or where a firm can show 250 or more "live" accounts with ordinary retailers.

These exemptions are not provided for in the Bill and I would have felt much happier if subsection (2, c) had been a little more explicit, and if it had stated that, in determining whether or not a person sells mainly to retail traders, the Commissioners may have regard to the number of his retail accounts or to his selling or distribution expenses. Had this been so, there would have been no doubt in the mind of anybody that reasonable treatment could be given to those firms with genuine organisations for selling to retailers, and, similarly, it would allow the Customs authorities to have regard to those types of firms in the exclusive end of the trade where the cost of handling small quantities of novelty types is so high in relation to the total turnover.

Again, may I ask what is meant by the words "retail traders in general"? Would these retail traders include small makers-up and bespoke tailors who normally buy in retail quantities? This has always been an important point in the textile trade, and hitherto the Customs have always agreed to treat these small garment makers as retail accounts. There is also some disquiet in trading circles that subsection (2, c) in its present form would seem to exclude a firm whose business is mainly export, even if the bulk of its home trade is with retail trade. If this is so, it will be a serious deterrent to exporters and can place any firms which are trying to develop their export trade at a serious disadvantage.

The contention of the trade is that where manufacturing firms have a genuine and substantial trade with a large number of retailers, backed by an adequate sales organisation and stocks. they should be in the same position as wholesalers as regards uplift, and should not be put at a disadvantageous position merely because they also happen to have a large export trade with export markets, or for that matter, with makers-up.

I agree that most of the points which I have raised may be met in the discussions which are likely to be held between the Customs authorities and the trade organisations, but the success of those will depend much upon the individual interpretations which are placed on paragraph (c). I hope, therefore, that the Financial Secretary will be able to give an assurance to the Committee on the points which I have made, and that to help in those discussions he might find it worth while to issue some form of directive to the Customs authorities of what this Clause really means.

Mr. E. Fletcher

I have a great deal of sympathy with what the hon. and gallant Member for Rochdale (Lieut.-Colonel Schofield) has said, and I hope that his observations will appeal to the Government. I support this series of Amendments, but it seems to me that if paragraph (c) is to stay in the Bill, we must have a clear explanation from the Government of what it means and why it is necessary.

It must first be observed that this is extraneous to the recommendations of the Grant Committee. Hitherto, the Government have resisted Amendments that have been put forward on the ground that they were not recommended either by the majority or minority sections of the Grant Committee. This is something which finds no place anywhere in those recommendations. It is something they did not consider necessary. That being so, may we know why the Government think it necessary to retain uplift in view of the circumstances covered by paragraphs (a) and (b); also, as an additional alternative, in circumstances where the seller is not a person who mainly sells to retail traders in general?

What kind of goods is it intended shall be covered by the sentence and what does it mean? Is it intended to cover the goods of a manufacturer who normally sells as a wholesaler, or a large consumer who occasionally supplies a few retailers with small quantities only? If so, I do not think it is particularly specific. It states that … the seller is not a person who mainly sells to retail traders in general. That is a very vague phrase—"who mainly sells," not who merely sells. I could understand if it ended at "traders." One of our Amendments proposes to leave out the last two words, "in general."

Presumably there is a distinction in the minds of the Government between a seller who mainly sells to retail traders—which I can understand—and another person who mainly sells to retail traders in general; because that would exclude someone who mainly sold to a particular kind of retail trader. We are dealing here with a subject in which the number of permutations and combinations of circumstances are so great that it is essential that traders should know where they stand, and that there should be some coherent explanation from the Government as to which cases are covered and which are not.

The Solicitor-General

It is true that this paragraph (c) is not one of the Grant Committee recommendations but it flows from those recommendations because it is primarily necessary to forestall tax avoidance. Surely the Committee will appreciate that without this provision manufacturers who specialise in supplying big stores, for example, might be tempted to make token or dummy sales to ordinary retailers at the same prices. If they did that without the provision of this paragraph they would be able to establish a case for exemption from uplift for their whole trade.

As for the words, "traders in general" which troubled the hon. Member for Islington, East (Mr. E. Fletcher), unless the words "in general" are added "retail traders" might be confined to the big stores and shops. The words make it clear that ordinary retailers are included. This provision is also necessary as a matter of equity.

My hon. and gallant Friend the Member for Rochdale (Lieut.-Colonel Schofield) wanted the subsection to go into greater detail. He feared that it might lead to difficulties in operation. He asked what would be the effect on existing practices. I can answer quite shortly his question about the small buyers in the tailoring trade. The practice would be unchanged.

My hon. and gallant Friend mentioned the question of the export trade. It is customary for the two sides of a business to be kept distinct, namely, the business on the home market and the business on the export side, but there may be a few cases of interlocking, and it is, consequently, desirable that there should be a measure of flexibility here, and, as framed, the subsection provides that flexibility, so that the unusual and difficult cases can be taken into account. I can give my hon. and gallant Friend an assurance that the general practice which has existed heretofore of ignoring export trade in Purchase Tax assessments will be continued unchanged under the provisions of the Bill.

I hope that with those short remarks I have satisfied the hon. Member for Islington, East and my hon. and gallant Friend that the Amendment is necessary for the purpose of preventing tax avoidance.

12 midnight.

Mr. Gaitskell

We feel that the two paragraphs as drafted are too wide and the phraseology seems to us to rule out too many cases.

After listening to the Solicitor-General, I still feel rather unhappy, particularly about paragraph (c). The hon. and learned Gentleman said that the purpose of introducing "in general" was that the paragraph might otherwise refer only to large retailers. Does that mean that a seller who is selling only to large retailers and does not happen to have any business with small ones is caught by paragraph (c)? If so, surely that would be quite unfair. If it does not mean that, what is the purpose of inserting "in general"?

I feel very dissatisfied about it. It seems to me that the people who have drafted the Bill have drawn it so widely that many of the advantages which the Majority Report felt should follow—

The Solicitor-General

On the point of interpretation, the seller who sells mainly to the big retail stores would not come within paragraph (c).

Mr. E. Fletcher

Even if he also sells to an ordinary retailer? May we take the case of somebody who sells both to the stores and to some "retailers in general"? Then we have to draw a distinction between such a person and a person who sells mainly to the stores. What is most confusing about the Clause is that it has two vague, imprecise and indefinite terms "mainly" and "in general."

I could understand the Clause if "in general" was omitted and if "mainly" was omitted, but to retain those two vague terms in a single Clause will lead to confusion piled on confusion. We must have a much fuller explanation of what is intended.

The Solicitor-General

I can only repeat that the words "retail traders in general" are meant to define—I think that they are apt for that purpose—ordinary retail traders, and, therefore, a person who sells mainly to the big stores would not come within paragraph (c).

Mr. Gaitskell

That is surely quite a serious consideration. Here we are concerned with conditions in which the imposition of uplift is to continue. Three such conditions are laid down in subsection (2). We are concerned with the third of those conditions. The Solicitor-General told us that a person who happens not to sell to small retailers merely by virtue of the fact that his custom is with the large retailers will not get the benefit of the Clause, and is, in other words, to be compelled, whatever the circumstances, to continue to pay uplift. I find it difficult to believe that that is the intention of the Government.

Why should this arbitrary line be drawn? What would be the position in the case of a supplier predominantly to a large number of retail stores which were under the same management, but not to the retail trade in general. The Government are supposed to believe in free enterprise, but I cannot think of anything that ties up wholesale and retail traders more than this Clause.

I ask the Chancellor to have another look at these words. We have no desire to keep the Committee late, but we are very unhappy about what we have heard. If the right hon. Gentleman would undertake to look at the words of this little paragraph between now and the Report stage my Friends would be satisfied. It is well understood that he may be able to offer a better explanation, but in the light of what has been said we cannot leave the matter there.

Mrs. Castle

It may be my fault, but it seems to me that the Solicitor-General is not talking sense. He has told us quite seriously that the manufacturer who sells only to the large retailers will not be covered by the paragraph. If so, what is the point of having the paragraph at all?

A few moments earlier he explained, a little uncertainly, that the paragraph was supposed to cover the case of a manufacturer selling to large retailers and also making dummy sales to small retailers so as to give the impression that the price at which they sold to the large retailers was that at which they sold to the small retailers. If that is the purpose of the paragraph, to stop a manufacturer covering up the fact that he largely sells to the large retailers, why not go on to say that the man who only does that will not be included? Cover-up and dummy sales then become unnecessary.

This paragraph is one of the consequences of the Government's passionate and reckless pursuit of uplift, and is quite illogical. The Government are so obsessed with the idea that somebody may get away without paying a bit of uplift that they are prepared to cause injustice all round the place. There are manufacturers who sell direct to retailers but do not sell to retailers in general because they are not large enough men. They are not big manufacturers. They are rather small people. They do not sell to retailers in general, but supply a selected group of retailers. Yet, for purposes which are completely obscure to this Committee, the Government are to penalise them under this subsection. I suggest that the subsection should be taken back so that the wording may be re-examined and that the Government in their pursuit of uplift do not in this way persecute honest and legitimate traders.

Mr. R. A. Butler

I think the Solicitor-General's explanation exactly met the position. Some of the anxiety of hon. Members opposite arises from the fact that this is not a recommendation of the Grant Committee Majority Report. Anxiety and suspicion therefore arise that the subsection has some ulterior motive or something sinister about it. The words "mainly" and "in general" have caused anxiety as to whether the English is correct and whether they really express what is meant. We should like to reexamine it, on the understanding that the Solicitor-General's explanation is not taken as incorrect and that I have an opportunity to look at the matter.

Sir Hartley Shawcross (St. Helens)

I rise on this point because, in a quite serious speech a week or two ago I drew attention to the fact that our taxation legislation is really in a shameful condition, in which those who are affected by it—the ordinary taxpayers—are quite unable to understand what it means. We really should make a serious attempt to frame our legislation in such terms that it is reasonably comprehensible if not to the ordinary taxpayer at any rate to the ordinary lawyer. At present, the great mass of this legislation is quite incomprehensible to the taxpayer and quite in comprehensible to a great many lawyers.

I am not concerned at all with the purpose of this Clause, though I welcome the undertaking of the right hon. Gentleman to take it back to consider its drafting. It seems to me that it is not only not English, but that its meaning is perfectly incomprehensible. Were I speaking in this Committee not as a Member but as a lawyer I should invite the right hon. Gentleman to retain the wording. It would certainly be very good for trade—but I suppose I must disregard my personal interest here. I urge the right hon. Gentleman to suggest to the draftsmen that paragraph (c) which says that … the seller is not a person who mainly sells to retail traders in general, is not only not English but is complete nonsense.

Mr. E. Fletcher

I also welcome the assurance that the matter will be reconsidered. As my right hon. and learned Friend has said, I am quite sure that it is incomprehensible in its present form. In view of the right hon. Gentleman's assurance I am sure that my hon. Friend the Member for Edmonton (Mr. Albu) will wish to withdraw the Amendment.

Mr. Albu

I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause ordered to stand part of the Bill.

Mr. Gaitskell

I beg to move, "That the Chairman do report Progress and ask leave to sit again."

I hope the Chancellor will agree that we should now adjourn.

Mr. R. A. Butler

We have managed to finish Part II of the Bill, and I am quite ready to accept the Motion. In fact, it was about to be put from the Government Front Bench. I hope we can make progress with Clause 13—to which my hon. Friends attach some importance—immediately we resume consideration of the Bill. I am obliged to the Committee for its assistance.

Committee report Progress; to sit again this day.