§ I am satisfied, however, that some direct restraint on consumption is also required. For this purpose there is one revenue measure which lies ready to hand and is immediate in its effect—an increase in the Purchase Tax. I therefore propose a general increase in the existing rates of Purchase Tax. These are at present 25 per cent., 50 per cent. and 75 per cent.; and I propose that they should be 30 per cent., 60 per cent. and 90 per cent. respectively—an increase of one-fifth—subject to certain exceptions which I shall mention in a moment. I am also taking the opportunity to modify the tax, bringing into its ambit certain goods which at present lie outside and reducing its impact in some cases where industry is undoubtedly suffering from its effects. Two of the changes are major.
§ The first affects a range of kitchenware, tableware and other household goods which were, for the most part, at one time subject to tax but have for some years been exempt. The general case for an increase in Purchase Tax applies equally to these goods; moreover, the exemptions are abitrary in their nature, and give rise to a number of anomalies 222 which are a source of frequent friction with the trades concerned. This range of articles will now be brought within the Purchase Tax field, and made subject to the lowest rate of 30 per cent.
§ The second major change relates to the D allowance schemes, which now apply to clothing and footwear, textiles, furs and furniture. The levels at which the D figures now stand have for some time been too high, and have resulted in a far larger range of items becoming exempt from tax than was the intention when the levels were fixed. This situation was thus, in any case, overdue for revision. Moreover, with the D levels in mind, manufacturers at present tend to concentrate design and production on lower quality goods for the home market. The Government have, therefore, decided to abolish the D schemes, in order to open up the home market in quality goods, and so provide a better base for the export market. We shall, therefore, be encouraging exports and thereby assisting the balance of payments. I believe that traders in general will welcome this change.
§ While abolishing the D schemes, however, I am not proposing to apply the full rigour of the new rates of Purchase Tax to the articles affected. Apart from fur garments, which will remain chargeable at 50 per cent. but with no D allowance, the whole range of articles now affected by the D schemes will be made liable to tax at rates of 5 per cent. or 10 per cent., corresponding broadly to the previous rates of 25 per cent. or 50 per cent. with D allowances. For example, headgear—that is, hats—will be charged at 10 per cent. This and other details will be found set out at length in the White Paper. These low rates cannot be held to constitute any serious burden on the industry or on the consumer, and the general financial effect of the changes will be that the yield from textiles and clothing will not be significantly increased.
§ The other adjustments of Purchase Tax which I propose to make—these are important adjustments—will give some help to the silverware and cut glass industries, by reducing the amount of tax paid on most of these craft products. The results of all these alterations in Purchase Tax will be a simplification which will give much more freedom to the designer and 223 much more opportunity to the exporter. They therefore fit into the general pattern of the needs of the moment, and I recommend them to the Committee. They will come into effect as from tomorrow, and should produce in a full year additional revenue of approximately £75 million. Their yield in this year will be £15 million. Their effect on the cost of living index will be an increase of a little under 1 point.