HC Deb 09 December 1955 vol 547 cc783-92

Motion made, and Question proposed, That this House do now adjourn.—[Mr. R. Allan.]

4.9 p.m.

Mr. I. J. Pitman (Bath)

I hope that the Economic Secretary to the Treasury will agree to the setting up of a committee of inquiry into Purchase Tax on stationery. I wish to put before the House a number of reasons which lead me to suppose that such an inquiry would reveal a great many highly important and relevant facts and that, therefore, it would be beneficial all round.

Industrial, commercial and educational stationery accounts for between 90 and 95 per cent. of the whole of stationery upon which Purchase Tax is paid. We who have such a big postbag and who pay such large bills to the Serjeant at Arms for our own notepaper may find it incredible that the amount of stationery which is used by the remainder of the population for personal correspondence is in such a very small relation to the stationery which is used for what might be called productive and business purposes If that is conceded, there are three further considerations to bear in mind: and if it is not conceded, then it is the sort of thing which an inquiry would most properly reveal.

It seems to me that in so far as Purchase Tax is paid on that 90 to 95 per cent. of stationery, it must have one of two effects. Either it puts up the price of goods for which the stationery is required, in which case it is purely inflationary and is an additional Purchase Tax or, one might say, a sales tax, because it covers everything from bread to fur coats, from necessities to luxuries; or, if it does not put up the price, then it is what I call a case of the swings and the roundabouts, because pro tanto it reduces the profit and, as a result, although the Chancellor may think that he gets a certain amount of revenue out of the Purchase Tax on stationery, he loses half of it back through reductions in payments of Income Tax and Profits Tax. Thirdly, ill so far as local government and education authorities use stationery, the Purchase Tax increases the grant which the central finances have to give to local finances. The Chancellor is pro tanto paying his own tax.

I understand that the yield from Purchase Tax on stationery was about £25 million before the last Budget and that it has now risen by £5 million to a total of £30 million. I submit to the House that, in view of the surplus for which the Chancellor is budgeting for the end of the year, there is good cause for an inquiry to see whether that £30 million, which by my previous argument can be reduced to a very small sum as it reaches the Exchequer coffers, ought not to be removed, as a tax, altogether. It is not needed for revenue purposes or for budgetary purposes, but it causes a great deal of dislocation.

At this point, I want to mention my second cause for an inquiry. I think that the Customs and Excise and the Exchequer ought to be aware of the immensely disturbing effect which the tax has upon the normal channels of trade. May I take, first, its effects on the printers? It has what might be called a general effect on printers, because the small trader—that is to say, the customer of the printer—and the man in the street has to pay more Purchase Tax on printed stationery than the big organisation which can afford the plant to produce its own stationery. This is because these organisations are not obliged to register for tax purposes, whereas the small man's supplier, the commercial printer, must always register.

Although registration is a disadvantage with a big organisation producing its own stationery, it can have advantages where the organisation does a substantial amount of other printing of a non-taxable kind. If it pays such organisations to become registered, they may do so. They are thus in the privileged position of being able to choose for themselves the course which offers the more favourable tax position. The small man's supplier, the commercial printer, has no such choice. He has no option but to register and charge for that amount of Purchase Tax on every bit of stationery which his customer needs.

As well as the general effect there is the effect reflected by the attitude of the British Master Printers' Federation, which is very greatly disturbed at the way in which the small jobbing printer, in particular, is being squeezed out of existence in the printing of stationery because the big users, and now even the small users of stationery are setting up their own office printing machines to do the job free of tax. Further, there is the whole weight of the printing trade unions in opposition to the disturbance thus caused by this tax. I think that by this committee of inquiry the Chancellor of the Exchequer ought to make himself aware of the extent of the dislocation caused to the printing industry, which is well reflected in the unanimous rejection by the Joint Industrial Council for the printing industry.

It is also dislocating for the stationers. I think that the Financial Secretary to the Treasury in a previous Administration, who kindly saw a deputation of which I was a member, was astonished to find that the stationers were quite anxious that this tax should be taken off at one go. The Financial Secretary had had so many experiences of traders not wishing the tax to be taken off when it came to the rub, or taken off only in small stages, that he was astonished to find that the stationers would welcome taking the whole tax off at a single rush. That was because of the great dislocation it had caused, and is still causing, to the trade, the retail stationer, the wholesale stationer and the manufacturer supplying direct.

My third point in favour of an inquiry is that it will find out to what extent it is unfair to the small buyer of stationery and, in some cases, favouritism to the big buyer of stationery. I know that the Economic Secretary is likely to say that the big buyer has to pay Purchase Tax on all the cut paper he buys in compensation for the fact that he does not pay Purchase Tax on the processing which he then does on his own office machine. I can assure the Economic Secretary that inquiries will show that they do not buy any more cut paper than they use for stationery purposes. Therefore, that argument does not apply.

For instance, let us suppose that a big education authority is buying such paper. Suppose it is sending round a notice to, all secondary schools with a form to be filled in giving a return of the number of students taking meals. It will very likely get a commercial printer to print the notice on paper which the printer buys and cuts because that is not subject to tax, but it will print the form on its own office machinery because, while that is stationery and, therefore, taxable, it is taxable on the low rate levied on cut paper.

I am quite convinced that an inquiry would show that there is not the ground for complacency that the big man is paying tax on paper which he uses for non-stationery purposes. He is paying no such tax on such paper. He is paying tax only on the cut paper used as stationery and not on the processing, and this applies to all the stationery he requires.

Finally, there is in the administration of the Purchase Tax on stationery a big set of anomalies, a bigger set of anomalies than in any other application of Purchase Tax. I say that without fear of any contradiction. I know that wherever a line is drawn there must be anomalies on either side of that line. I can quite believe that wherever it is drawn there may be as many anomalies, but, seeing that the yield is so small, that the anomalies are so great, the inequities as between one taxpayer and another so vast and that there is dislocation in a very honourable trade and a very effective industry, a committee of inquiry should be set up with a view to ascertaining the facts which will, I am sure, show convincing reasons for the abolition of the tax on stationery altogether.

4.20 p.m.

Mr. Percy Holman (Bethnal Green)

I am a fairly old hand at trying to influence the Government Front Bench in regard to this iniquitous tax on stationery. Some eight years ago I declared that I had a historical interest in the matter. More recently, I am beginning to wonder whether I have an unconscious interest in it, because, as the hon. Member for Bath (Mr. Pitman) has pointed out, a great deal of paper is now taxed as such and in some cases it is taxed even though it will not be used for stationery purposes.

The unfortunate merchants who have guillotines are becoming more and more uncertain as to their position. From the point of view of the tax, what is a wrapping paper and what is stationery? I have with me a sheet of paper measuring 13 in. by 10 in. Is this stationery? Is it taxable, or is it not? The same piece of paper may be sold to a manufacturer for small wrappings or it may go to a firm in, for example, Fleet Street, when one has a great suspicion that it will be used as a postal wrapper.

The trouble today is that the Customs and Excise themselves do not know where they stand. People get varying dicta from different offices. One could go around the country and put in one sample here and another there, getting a division of opinion that was fifty-fifty each way.

I have with me a transparent bag. No doubt the Economic Secretary can see my hand through it. It is used by a very large concern for various purposes. When I submitted the matter to the Financial Secretary some months ago, he replied that because it had a little bit of printing on the corner it came within the scope of Section 4 and must be used for a certain purpose: that was, the sorting of cheques which are sent out from banks. Therefore, the right hon. Gentleman said, it was subject to Purchase Tax. This bag was supplied by a big Lancashire manufacturing firm which had been supplying bags for many years but was suddenly told that they were subject to tax. The firm had no Purchase Tax certificate and accordingly told its customer that it was unable to continue to supply. That arose from the decision of a local office in Lancashire.

Another concern, which used precisely the same bags for the same purpose, recently received a five years' rebate of Purchase Tax on both the printed and the unprinted bags. As to whether the unprinted ones are subject to tax, I do not know, but my reading of the Regulations, as I have told the Financial Secretary in a letter, leads me to believe that the transparent bags are free of tax.

It is becoming more and more clear that Purchase Tax is charged on these types of articles according to their use rather than to their nature. I am afraid that the tentacles of the Customs and Excise, backed by the Treasury, are gradually extending outwards, no doubt in accordance with the policy of the Chancellor of the Exchequer to widen the scope of taxation. There are wrappings which are essential for wrapping foodstuffs and so on. This piece of paper I have here is greaseproof, and can be used, as it has frequently been used, for wrapping foodstuffs, and there is a danger that the tentacles of taxation will reach out to clutch these articles also.

The Economic Secretary is rather new to this aspect of things, and I sympathise with him in the difficult and invidious position in which he is placed, but I would ask him to be a bit courageous. Two leaders of his party who opposed Purchase Tax very strongly have been elevated to another place, and a third who opposed taxation on stationery, both commercial and educational, is now a member of the Cabinet.

So, if the hon. Gentleman's ambitions are in either of those directions, let him he indiscreet, and let him, on behalf of the Chancellor, say that they will have a committee of inquiry. I know well what the Committee will say—that Purchase Tax on these things is not Purchase Tax for the purpose for which it was originally imposed. This is a tax on industry, a tax on commerce, a tax on education. It is hardly a tax on the consumer. It is a cost on industry, and it is inflationary in character, and the sooner it goes the better. In accordance with the Chancellor's policy of recent years, the Economic Secretary can suggest having the committee of inquiry and that the end of January is the appropriate time for the necessary action.

4.27 p.m.

The Economic Secretary to the Treasury (Sir Edward Boyle)

The hon. Member for Bethnal Green (Mr. Holman) has been kind enough to suggest that as two of my right hon. Friends who are strongly opposed to Purchase Tax have been elevated to another place I may wish to follow their example, but I personally am very happy indeed as a Member of this House and have no desire at all to change my location now or, I am sure, for a very long time to come. I know that these questions of anomalies and of definitions are very difficult, and I have taken note of what the hon. Gentleman has said, and if he would like me to write to him later, after I have consulted the Financial Secretary, I will very gladly do so, about the points he has raised.

In answer to my hon. Friend the Member for Bath (Mr. Pitman), I would say at the outset that the Purchase Tax Joint Standing Committee of the Paper, Printing and Stationery Trades has been in close touch with the Customs and Excise for a number of years, and my advisers have particularly asked me today to express the very great indebtedness we feel to that Committee, and, indeed, to individual trade associations, for the way their advice and assistance has always been available to the Department for the purpose of making the tax on stationery work as smoothly as possible.

I will now say a word in reply to my hon. Friend's point about the problems of the commercial firm which produces its own printed circulars and forms on its own office printing machines. Having looked into this carefully and consulted the Financial Secretary, I do not think that there is anything to warrant a special inquiry into the operation of the tax on stationery. It is true that there are certain special complications which affect the stationery trade, but I would assure my hon. Friend that we know all about those complications, and they are not really significantly different in kind or in degree from the complications which affect other trades which pay Purchase Tax. In other words, the problem here is not that of knowing the facts but that of the decisions Ministers must make in view of the facts.

Mr. Holman

Would the hon. Gentle man define "stationery"? If that definition could be obtained it might simplify matters.

Sir E. Boyle

From the very beginning of the Purchase Tax, or, as my advisers prefer to say, the inception of the tax, the term "stationer" has been regarded as meaning writing materials in general. This interpretation is supported by standard dictionary definitions, and the hon. Gentleman will be interested to know that it has also been upheld by independent counsel who have determined disputes between traders and the Department on particular articles under the informal procedure which, as the hon. Gentleman may remember, was introduced some years ago by the authority of the late Sir Stafford Cripps when he was Chancellor of the Exchequer.

Mr. Pitman

Punched cards used in office machinery are stationery, but punched cards used in railway stations for operating train indicators, although their functions are identical, are not stationery.

Sir E. Boyle

I will gladly look into that matter.

On the subject of anomalies, I know that considerable anxiety is felt about cut paper. This is mainly typewriting and duplicating paper. It is sold by mills, paper merchants, manufacturing stationers and printers, at prices which vary with quantity, to all kinds of customers, such as retailers, industrial users, small jobbing printers and so on. Furthermore, for some kinds of paper the mills charge prices which differ from those charged by the merchants for the same quantities. The result is that retailers buying from merchants, generally in the smaller quantities, pay more tax than the larger buyers who deal direct with the mills and obtain lower prices.

Customs and Excise have tried hard to get tax uniformity, but their proposals for standard values were unacceptable to the paper makers. The counter-proposals put forward by the manufacturers some three years ago would not have removed the main anomaly which is now the subject of complaint. The discussions lasted about a year and finally broke down. Nevertheless, the Customs have continued to examine the problem and have collected considerable information in attempting, as they have done, to achieve an equitable basis for tax assessment.

Earlier this year the trade associations were informed of the results of the Customs inquiries, and the matter is now being considered by the association representing the paper makers. Two meetings have been held recently at the Customs, and I very much hope that the discussions now in progress will turn out satisfactorily.

I should like to say a few words about the special problem, which my hon. Friend the Member for Bath raised, of the small commercial firm. This applies, for example, to almost every estate agency in the country which produces its own circulars and forms on its own office printing machine and is left unregistered provided that it obtains its blank paper in chargeable sizes. This was not simply an arrangement evolved by the Customs "in mitigation of an injustice," but a factor to be taken into account in considering the practicability of the process Order.

When the former Financial Secretary to the Treasury, the right hon. Member for Battersea, North (Mr. Jay) spoke in the House on 14th February, 1951, he explained the point of what was then done. I quote the right hon. Gentleman's words: We propose, in order to ease the administrative burdens for everybody concerned, that firms who produce chargeable stationery for their own use and not for sale from cut paper that has already borne tax, will in the normal case not be required to register. That, we think, will very considerably ease the work involved for all concerned. The reason for that is, and this was one of the grounds which led us to hesitate in taking action earlier, despite the representations made, that it would hardly be practicable to register and control thousands of firms who produce some chargeable stationery by use of duplicating or office printing machinery from cut paper."—[OFFICIAL REPORT, 14th February, 1951; Vol. 484, c. 553.) This working arrangement applies only where the stationery is for the person's own use, so it is not therefore a case of ensuring that every article bears its correct tax so that it may be passed on to the individual purchaser, but a matter of ensuring that the firm pays a certain amount of tax because it uses a certain amount of stationery.

We believe that although this method cannot be proved to be completely accurate, none the less, it is not completely inaccurate either. I should like to assure my hon. Friend that the Customs are closely watching the position, as they have continued to do since 1951. Quite honestly, they are not satisfied, and my right hon. Friend the Financial Secretary is not satisfied, from the information available at present that there is a case to justify a change in the present arrangements, but my right hon. Friend is always ready to consider any particular instances which the trade may wish to bring to his notice.

Those are a few of the points which my hon. Friend raised. I am sorry that I have not been able to give him the answer which he would have liked, but I hope he will realise that Her Majesty's Customs and Excise are watching this question carefully and so are the Junior Ministers at the Treasury. I am sorry that there is no time this afternoon for me to take up with my hon. Friend the general point whether the Purchase Tax is inflationary or not, but I think the House will agree that I have perhaps wearied it quite sufficiently on that general subject during the last few weeks.

Mr. Holman

Will not the hon. Gentleman agree that raising the tax in the last Budget has improved the favourable position of the producer of his own stationery in his office on the basis of tax-paid paper, as against the printer and the trade in general? Will he not also agree that nearly every municipality in the London area, including the London County Council, is doing this very thing?

Sir E. Boyle

I will agree that it is all the more important that we should watch this carefully, in the light of what was said by the right hon. Member for Battersea, North in 1951.

Adjourned accordingly at twenty-three minutes to Five o'clock.