Clause 1.—(RATES OF TAX, AND DESCRIP TIONS OF CHARGEABLE GOODS.)

HC Deb 19 May 1958 vol 588 cc894-987

Motion made, and Question proposed, That the Clause stand part of the Bill.

3.38 p.m.

The Chairman

I think it will be for the convenience of the Committee if we have a general discussion on Purchase Tax on Clause 1 and deal with the specific articles when we come to the First Schedule.

Mr. Harold Wilson (Huyton)

I am sure that will be for the convenience of this side of the Committee, Sir Charles. Are we to understand that the debate on the Clause will deal with the principle of the Purchase Tax and the question of whether it is right to have four rates, seven rates, three rates or any other number of rates; in other words, the general question of the points raised by the Chancellor, the method of collecting Purchase Tax, and so on, but that any points on individual items which come up in separate Amendments would be best left until the debate on the First Schedule?

The Chairman

I think that that would be for the convenience of everybody.

Mr. Eric Fletcher (Islington, East)

Before we proceed, Sir Charles, may I draw your attention to the fact that there are the following Amendments down in the names of myself and some of my hon. Friends: in page 1, line 20, to leave out "Accordingly"; in line 21, to leave out from beginning to "shall" in line 24; in page 2, line 10, to leave out "October" and insert "September"; and in line 10, to leave out from "fifty-eight" to the end of line 11?

I understand that those Amendments are not selected, but may I point out that they were put down for a specific purpose? There are a number of Amendments to the First Schedule, but no Amendments on the Notice Paper to the Second Schedule. The reason for that is that in so far as the Amendments to the First Schedule were carried they would involve consequential Amendments to the Second Schedule. I understand that you do not regard it as necessary, Sir Charles, for us to put down Amendments to the Second Schedule, but that you would allow us to put down Amendments if necessary at a later stage.

The Chairman

I do not intend to be very severe, but I think that to put down all the consequential Amendments would make the Notice Paper very heavy. It does not seem to me to make sense.

Mr. Gerald Nabarro (Kidderminster)

On a point of order. Would it not speed our proceedings if it were convenient for us to take the two Amendments to the First Schedule standing in the name of my hon. Friend the Member for Barry (Mr. Gower) and myself on the Question, "That the Clause stand part of the Bill," as the arguments are very substantially the same, namely, in Schedule 1, page 29, line 9, to leave out "60"and insert "15"; and in line 11, to leave out "30"and insert "15"?

The Chairman

Certainly not. Neither of those Amendments has been selected.

The Financial Secretary to the Treasury (Mr. J. E. S. Simon)

Before we begin the debate on Purchase Tax, I think it might be convenient if I said a word or two on the sheer mechanics of this Clause, and on the relationship of the First and Second Schedules, to which the hon. Member for Islington, East (Mr. E. Fletcher) has just referred.

The First Schedule and subsection (1) of this Clause amend the existing Purchase Tax law, and, according to subsection (3), the change comes into effect in accordance with the Budget Resolutions on Budget day, with the single exception which is dealt with in the Schedule—the case of greeting cards—where the change in tax came into effect on 21st April.

The Second Schedule effects no changes in taxation, but it does effect a new layout in the Purchase Tax Schedule, which I think will be for the general convenience of traders. It is a simplification, and, I hope—and I think this has been accepted—an improvement. That comes into effect, according to subsection (3), on 1st October, which is the first and most convenient accounting period for traders after the Finance Bill has been passed, and is also the first date on which the new print of Notice No. 78, which is a simplification of the Second Schedule, can be placed in the hands of traders.

Mr. Douglas Jay (Battersea, North)

I wish to thank the Financial Secretary to the Treasury for that brief explanation, which we shall no doubt examine later, but which, I think, has made the position clear to the Committee. I think it is appropriate that, at the outset of this annual exercise in which the Committee examines in detail quite a number of taxes, we should have a general look at the Purchase Tax, about which there has been a good deal of controversy both in the House and in the country in recent months.

This Clause provides that certain changes in the Purchase Tax shall be made. In forming our opinion whether we welcome these changes, we ought to think for a moment about the general direction in which we all want to see the Purchase Tax move. It is hard to say whether a particular direction is right unless we know the general destination to which we want to go. I say straight away that we accept, at any rate, some of the aspects of the general direction in which the Chancellor is moving this year. At least, he has moved most rates of Purchase Tax, if not all, downwards, and is also moving in the direction of greater simplicity. Both of these objectives we welcome, but we are not nearly so pleased with the way he has done it, nor with some of the arguments which he has advanced for it, nor, even, with the objective to which he says he is moving.

Much nonsense is talked about Purchase Tax, not merely by the hon. Member for Kidderminster (Mr. Nabarro), but by all sorts of people. It seems to me, and, I think, to most of us, that if we are to have indirect taxation at all, there is at least as good a case for the taxation of things like furs and jewellery as for the taxation of tobacco and beer. There is a case for a reasonably simple form of indirect tax which falls mainly on the more luxury type of consumer goods, and perhaps, also, on some of the amenities, while exempting the real necessities.

The Paymaster-General, in one of our earlier debates on Purchase Tax, divided the goods into three classes: first, the luxuries; secondly, the amenities; and, thirdly, the necessities. I think that for purposes of a general discussion that is quite a good classification, and, without going into detail, I will adopt it for the purposes of my argument.

3.45 p.m.

I was struck by an article which appeared a month or two ago in the Spectator by the former hon. Member for Ealing, South, Mr. Maude, who has formally left this House. He was reviewing a book by an American expert, who was arguing that there are some merits in the British Purchase Tax, as compared with the sales tax in a number of American States. The former hon. Member for Ealing, South expressed his amazement that anybody should think that these arguments should be advanced at all. I was rather amazed myself by the naivety of the hon. Gentleman's own amazement, because the argument which the expert was advancing was very similar to that frequently put forward to the House in recent years.

It seems to me that, in this argument in favour of what is called a sales tax, as opposed to the Purchase Tax today, which we hear from some hon. Gentlemen opposite, there are two really quite separate arguments which get mixed up and cause confusion. The first is the purely administrative one. Is it better that this tax should fall at the retail stage or at the wholesale stage, as it does now? The second one is the fundamental social argument whether we want the weight of the tax to fall more heavily on a group of some luxury items, or whether we want a general tax on practically all the consumer goods bought by the ordinary people.

As to the first argument, the purely administrative one whether it should be levied at the retail or the wholesale stage, I agree almost entirely with what the Chancellor said on this topic in his Budget speech. Though perhaps his hon. Friend the Member for Kidderminster would not agree with him, he seemed to me to leave very little to be said on that issue. If we are to have this sort of tax, I should have thought that the complications would have been clearly and immeasurably greater if it was to be imposed on a vastly greater number of retail outlets, as they are called in the trade.

The other issue is entirely separate and far more important. Do we want a general tax falling on all sorts of consumer goods, whether they are necessities, amenities, luxuries or anything else, without regard to the social effects at all? We say that that would be a most reactionary and most undesirable form of tax, and we emphatically do not wish to move in that direction. The hon. Member for Kidderminster, in some of his remarks and Questions on this subject, has, under the guise of arguing for simplicity, been arguing for reaction. He has attempted to convey the impression that we cannot have a simpler tax without a general tax falling on everything.

Mr. Nabarro

Quite wrong.

Mr. Jay

We shall be very interested to hear the hon. Gentleman's arguments later in the afternoon. Perhaps he agrees with us. It seems to me that a tax which falls more heavily on the less necessary things is a perfectly legitimate weapon for securing greater social justice in the tax system. If we stand for social justice in our direct taxes—and on this side of the Committee we certainly do—I do not see why we should not favour that in our indirect taxes, also.

The only reason why this argument for the reactionary general sales tax idea is made to look at all plausible is that it becomes further confused with a third issue, and that is how to get rid of these complicated and often ridiculous demarcation anomalies and make the whole thing simple. One very obvious and plain fact in all this controversy is that if there are to be fewer anomalies and absurdities, there must be fewer rates.

The anomalies all spring from multiplication of the number of rates. It is no good blaming Customs and Excise for all these vast complexities and ingenuities, because if Parliament says, "Let there be seven or eight", Customs and Excise officials are bound to work out how the rates fall and to present us with the extraordinary subtleties and surprises which we find in the famous Notice No. 78, which is presented by Customs and Excise every year.

The direction of fewer rates was that in which we moved during the period of the Labour Government. In 1948, after a great deal of reorganisation and reform, we got down to three rates, plus exemption, three rates plus zero. Then, by all sorts of shifts and expedients and reversals of policy, the Lord Privy Seal worked up again to eight rates, that is to say, seven plus zero. All those changes were supported in the Division Lobby by the hon. Member for Kidderminster, who voted against all our Amendments which would have led to a simpler tax.

Mr. Nabarro

I supported them in the Division Lobby because, with one exception, in the autumn of 1955, all those changes resulted in a lower overall application of the tax, although it is true that it meant a multiplication of the rates, with which I have generally been in disagreement.

Mr. Jay

But even that is not true, because the changes which the hon. Member supported increased the total yield of the tax from £290 million in 1950–51 to £490 million at present.

Mr. F. A. Burden (Gillingham)

The important year of the Labour Government was 1951–52, because in 1951 the Labour Government considerably increased Purchase Tax on a number of goods, so that is the year which should be taken for comparisons.

Mr. Jay

I have given the estimated revenue for the year following the Budget of 1951, in which some rates were lowered and others raised and in which some articles were exempted.

I do not know whether the Committee realises that even after the reductions, for which the Chancellor claimed much credit in his Budget speech, the total yield of the tax will still be £490 million in the coming year, which is only £4 million less than it was in the year which has just ended. Therefore, having raised the total yield of the tax from £290 million to £494 million, the Chancellor is reducing it by a mere £4 million in this Budget.

That appears to suggest, incidentally, that in making his Budget calculations the right hon. Gentleman has assumed that prices will continue to rise during the coming year. He has told us that we cannot assume a general expansion of production and consumption, which is said to be not possible until an indefinite date. He has reduced some rates of Purchase Tax, but he has assumed that the total yield will be almost the same as for last year, and that appears to mean that he expects a number of increases in prices.

We say that it is perfectly possible, within reason, to combine a measure of both simplicity and greater social justice with this tax. If one sets out to have fewer rates, with necessities exempted, it should be possible to get a reasonable social justice and reasonable simplicity at the same time. What worries me most about the Chancellor's remarks is that that does not appear to be the Chancellor's aim. He used one remarkable sentence in his Budget speech when, speaking of Purchase Tax, he said: Ideally, one may say that it ought to apply to all consumer expenditure."—[OFFICIAL REPORT, 15th April, 1958; Vol. 586, c. 70.] That seems a most extraordinary statement and in our view it is the exact reverse of the truth. That would be not an ideal tax, but the worst possible form of an indirect tax.

In saying that, the Chancellor ignored the history of Purchase Tax. It was introduced in the Budget of April, 1940, and in the form in which the then Chancellor, then Sir John Simon, introduced it, it covered all clothes, including children's shoes and clothes, and even things like books and newspapers. It was as a result of opposition and argument, mainly from the Labour side of the House, that it was turned into a far fairer tax which discriminated against less necessary articles of consumption. As the process went on, the great bulk of clothes and boots and shoes and furniture, to mention the main items of house hold expenditure, were altogether exempted, under the Utility scheme.

Even now, when the Chancellor makes a gesture towards greater simplicity and some fall in rates, he includes miners' protective helmets and other items which were not included before—and it is that which makes us uneasy. I do not know why every Chancellor under the present Government has increased the tax on a number of necessities and then retreated a few weeks or months afterwards. Is it true on this occasion, as with the Lord Privy Seal, that the Chancellor did not examine the tax schedules before making his Budget speech?

There is another reason, which may be even more important and which is apart from the pure argument of social justice, why the right way to frame the tax is to discriminate between household necessities and less necessary goods. A tax on necessities inevitably encourages and stimulates wage claims. If the prices of household goods, goods which have to be bought by every man for himself and his family, are raised, claims for higher money wages are encouraged. On the other hand, if there is a tax on other types of goods, such as furs and jewellery and possibly even cosmetics—although I should not put so much emphasis on the tax on cosmetics—that does not have the effect of encouraging wage claims.

It is, therefore, perfectly clear, and should have been clear to everybody all these years after the war, that a tax on household necessities is not merely unfair, but inflationary. So far as Purchase Tax falls on those things and on some of those on which the Chancellor is increasing the tax, it is an inflationary tax. So far as it falls on luxuries and perhaps some amenities, then, so far as it absorbs a certain amount of purchasing power which would otherwise go to less essential expenditure, it can be reasonably claimed to be a disinflationary tax.

The series of Governments since 1951 have never understood that. They have had no principle in all their changes in Purchase Tax from year to year, and that is why we had an increase in the tax on pots and pans and other household goods in the autumn of 1955, and why it was put on a whole range of textile goods, whether they were essentials which everybody had to purchase or less necessary textiles, and subsequently removed. Over the last four or five years we have had a whole series of shifts and changes in the present Government's treatment of this tax.

4.0 p.m.

We say that there should be some principle guiding the framing of the tax in the future. To sum the matter up briefly I would say—and I am sure that the hon. Member for Kidderminster will not agree—that the principle should be, first, that the rates should be fewer in number, so as to achieve much greater simplicity and the absence of all this intolerable demarcation and complication. I should not like to be too dogmatic, because we cannot look forward to future circumstances and cannot say precisely how many rates there might be, but it may be that two rates, plus zero—which would correspond to the Paymaster-General's classification of the necessities, the amenities and the luxuries—would be the right number of rates to reach finally.

At any rate, we should try to reduce the number, and exempt a very large class of the outright necessities. No doubt we can change the tax only gradually; it certainly cannot be done in one fell swoop, but in that way it should be possible to achieve the three objectives which hon. Members on this side of the Committee think that the tax should aim at.

The first is to get rid of the anomalies and complications which the hon. Member for Kidderminster has rightly laid his finger upon, in respect of the tax as it now stands; secondly, by way of the tax to achieve rather greater social justice, by discriminating between the different types of consumer goods; and, thirdly—which the Government have not done at all—to assist in the battle against inflation and the keeping down of the cost of living by sweeping the tax away altogether from household necessities and essential goods.

Mr. Nabarro

The right hon. Gentleman's speech seemed a little incongruous. In the early stages he devoted a good deal of time to castigating me roundly for having the temerity to advocate a single rate of tax on certain consumer goods. He followed by moving in my general direction for a simplification of the purchase tax, for he readily confessed that two rates of tax would be better than four rates, as I formerly confessed that four rates are, no doubt, better than seven rates.

I do not wish to be misunderstood as to my intentions. As always, they are strictly honourable. I said very clearly and precisely, in well-chosen words—[HON. MEMBERS: "Oh."] oh, yes, in very well-chosen words—in the Second Reading debate, that I do not mind whether a tax of this kind is called a purchase tax, a retail sales tax or a turnover tax. The single thing at which I am aiming is that it should be non-discriminatory in character, whereas the right hon. Gentleman who impugned my motives was under a slight misconception in that he seemed to think that I had not realised that Purchase Tax is only another way of extending the collection of tax at the wholesale point. A sales tax, as operated in the United States of America is, in contradistinction, a method of collecting a consumer indirect tax at the point of retail. It has the advantage that retailers do not have to tie up money in tax-paid stocks.

It is important that the right hon. Gentleman should understand exactly what are the differences between us, and I want to quote what I said in the Second Reading debate, because there is a vast body of opinion outside the House which strongly supports my view, and which is to be found in every branch of trade and industry. I said: I am not pleading for a retail sales tax. I am not pleading for a turnover tax. I am not pleading for the Purchase Tax. I am pleading only for one, uniform, non-discriminatory rate of indirect taxation on certain consumer manufactured goods. Call it what one may. It may be a purchase tax levied at the point of wholesale, as at present, at a uniform rate of 20 per cent. on certain articles. It may be a retail sales tax collected over the counter in the American fashion—which means that the retailer does not tie up in his stocks any money in respect of tax—at 15 per cent. It may be a turnover tax, as practised by the West Germans, at a very low level, and recently advocated, I see, in a journal called the Director…"—[OFFICIAL REPORT, 12th May, 1958; Vol. 588, c. 98.] There are three contrasting yet different means of raising the revenue required by the Chancellor. He can adjust the rate of tax under any of those three heads according to the total revenue required by him.

It is preposterous to say that any one of these systems is inefficient, for they are widely practised overseas. Whichever system is selected I do not mind, so long as it is non-discriminatory, uniform and at a single rate.

Mr. Jay

Does the hon. Member include clothes, boots and shoes, and furniture in his general tax?

Mr. Nabarro

I shall cover all those points. Although the right hon. Gentleman may not agree with me, I shall be completely frank about them.

Mr. Roy Jenkins (Birmingham, Stechford)

Will the hon. Member include foods and services in his tax? If not, why does he refer to it as being non-discriminatory?

Mr. Nabarro

I shall deal with that point. I wish to make my own speech.

Mr. Jenkins

It would be convenient if the hon. Member answered now.

Mr. Nabarro

It would not be convenient to me to do so now. Perhaps the hon. Gentleman will allow me to make my speech in a fashion most convenient to myself, and which will no doubt best suit the needs of the Committee.

There is no doubt that the Chancellor of the Exchequer has a great deal of sympathy with my views. I have just reread what he said in the Second Reading debate, and I think the Committee should bear in mind his comments. He said: I hope that I made it clear also in my Budget speech that we ought not to turn our backs on the principle underlying most of these suggestions for a sales tax, the principle of levying indirect taxation at as low a rate as practicable on a wide range of articles."—[OFFICIAL REPORT, 12th May, 1958; Vol. 588, c. 153.] That is generally the direction in which I want this Government to move.

I want to talk about the industrial aspect of the matter for a few moments. In its memorandum of recommendations to the Chancellor of the Exchequer prior to his Budget, the Federation of British Industries asked particularly that there should be some clarification of the intention in regard to Purchase Tax, and also a statement of the criteria which dictate the application of a particular rate of tax to a particular product. At present, we know none of these things, other than the very general statement made by the Chancellor that Purchase Tax is for the purpose of raising revenue.

The Federation of British Industries used words, to which I thought the Committee might want to have some regard this afternoon. It said: If the tax on consumption is to be retained on grounds of revenue and purchase tax now produces about one-tenth of the entire revenue, then the tax should be designed for that purpose and its tendency to be a sumptuary tax should be removed. That is a very real objection to the present arrangement, and it is raised by British industry as a whole.

I have suggested a flat rate of Purchase Tax at 15 per cent. We need not call it Purchase Tax. The phrase is an expression which has grown up with us. It is really the application of the point of collection at the wholesale level. If we keep to the wholesale level and do not switch to the retail level a flat rate of 15 per cent. for Purchase Tax is perfectly practicable. I wish to explain to the Committee, in terms of the simplest arithmetic, why it is practicable.

Mr. Leslie Hale (Oldham, West)

The hon. Member is now suggesting that the colonel's lady and Judy O'Grady are sisters under their Purchase Tax.

Mr. Nabarro

The colonel's lady and Judy O'Grady were born equal and will no doubt die equal. I shall come to that point, which is an important one.

It has often been suggested that it would not be possible to raise the sum of money which the Chancellor requires from Purchase Tax were there a fiat rate. I hope to show this afternoon that it is quite practicable. In fact, under the present arrangements, proposed in the last Budget statement, the 60 per cent. rate of tax will raise £209 million; the 30 per cent. will raise £178 million; the articles at 15 per cent. will raise £45 million, and those at 5 per cent. will raise £58 million, giving a total of £490 million.

If a flat rate of Purchase Tax at 15 per cent. were applied, only to those articles at present taxed—and this is the answer to the point made by the hon. Member for Stechford (Mr. Roy Jenkins)—the yield on those articles which are now at 60 per cent. would be £52 million; the yield on those articles now at 30 per cent. would be £89 million; the yield on the articles remaining at 15 per cent. would be £45 million, and the yield on those currently at 5 per cent. would be £174 million. A total of £360 million.

I readily concede that there must be ups and downs, and that if there is a flat rate of tax people who are paying 5 per cent. at present on a range of articles which some folk may consider to be near necessities may have to pay 15 per cent. On the other hand, the tax on the whole range of articles currently taxed at 60 per cent., many of which are by no means luxuries, and the whole range of articles currently taxed at 30 per cent. would come down to 15 per cent. If this 15 per cent. rate were applied only on articles currently taxed for Purchase Tax, it would yield £360 million.

The Chancellor himself has shown clearly to the Committee that by reducing the rates of Purchase Tax one might expect a modest increase in consumption. That is what he said in his Budget speech and what he repeated when winding up the debate on the Second Reading of the Finance Bill. It would not be unreasonable to say, therefore, that if we levelled off at the 15 per cent. rate of tax, the increase in consumption that would result from it would substantially enhance the aggregate revenue.

In fact, at today's level of consumption, on everything with a flat rate of 15 per cent. it is my estimation that we should raise £400 million and within twelve months that figure would, in my opinion, rise to a figure of £460 million. Thereby, with a single rate of Purchase Tax, we should almost exactly equal the amount raised by the highly discriminatory system which we have today.

Mr. Jay

Is not the hon. Gentleman advocating the tripling of Purchase Tax on a very large range of articles—boots, shoes and furniture—which are now at 5 per cent.?

Mr. Nabarro

If the right hon. Gentleman will allow me to complete my speech, I am also advocating cutting by three-quarters, that is, reducing to one-quarter of their present level the rates of tax, for example, on television sets, radios, motor cars and a wide range of goods, including essential cosmetics.

Mrs. Eirene White (Flint. East)

indicated assent.

Mr. Nabarro

The hon. Lady who is nodding vigorously has an Amendment on the Notice Paper for cutting the Purchase Tax on commercial vehicle chassis from 30 per cent. to 15 per cent. There would be a very wide range of goods which would come down greatly, to offset those goods currently at 5 per cent. which would move up.

Mr. John Hall (Wycombe)

Does my hon. Friend believe that it would be a good thing to decrease the Purchase Tax on television sets, the sales of which, by and large, are increasing, and yet increase quite considerably the Purchase Tax on furniture? The furniture industry is at present going through a rather difficult time.

Mr. Nabarro

I realise my hon. Friend's constituency interest in furniture, but this is much more than a single constituency issue. I could plead, for example, for further relief on carpets, but I have no intention of doing so today.

The issues underlying the raising of this huge sum of money are far wider than a single constituency interest. The right hon. Member for Bishop Auckland (Mr. Dalton), speaking in the Budget debate, emphasised the view which, I think, expresses the view generally subscribed to by the Opposition, when he said, on 16th April: The tax should fall most heavily on luxuries, less heavily on intermediate goods which are neither luxuries nor real necessities, and exempt necessities altogether."—[OFFICIAL REPORT, 16th April, 1958; Vol. 586, c. 206.] 4.15 p.m.

That is a fair statement, I think, of the Opposition view. It is not my view and it is not the view of many others who sit on this side of the Committee, or of industry, for this reason, that it is impossible in peacetime and in an expanding economy to define what is a luxury. For example, is a mink coat a luxury? If anyone in the Committee answers, "Yes"—[An HON. MEMBER: "Yes."] An hon. Gentleman has said, "Yes". May I reply that it seems rather extraordinary that a mink coat should be taxed at 30 per cent. and at the same rate as a commercial vehicle chassis, which is one of the most important single items of capital production equipment for industry. Why should a mink coat, which is generally regarded as an absolute luxury because most of us cannot afford it, be placed on the same level as an article of capital equipment for industry?

Mr. Donald Chapman (Birmingham, Northfield) rose——

Mr. Nabarro

I have given way many times already. This is the Committee stage of the Bill and I do not want my speech to be too long.

I find it almost impossible to decide, and I think that the Chancellor does as well, whether, for example, a bicycle is a luxury. After all, it transports millions of people to and from work, especially in a bus strike, every day, yet it is taxed at 30 per cent. Is a sewing machine for the home regarded as a luxury? It is taxed at 30 per cent. It should not be, in my opinion. It has been taxed at 30 per cent. for many years. A radio set, which I would say is absolutely essential in practically every home today, at least if we are to maintain reasonable living standards, is taxed as the highest luxury rate at 60 per cent. A television set, similarly, is taxed at 60 per cent. I believe that it is impossible in conditions of an expanding economy and in times of peace, to decide what is a luxury and what is not a luxury.

Mr. Chapman

Does the hon. Member realise that if he carries on this argument it would lead him to tax food to the same degree as alcohol and tobacco?

Mr. Nabarro

Really, the hon. Gentleman ought to leave the Committee if he cannot understand simple English words. I said a few moments ago, and I proved it by explaining very carefully all the relevant figures, that an equal sum in revenue could be raised by taxing at a flat rate only the articles which at present attract Purchase Tax. I have said that there is no such a thing as a luxury in times of peace with an expanding economy and I believe that that is the case.

I wish to discuss one or two articles which fall into these schedules. Might we consider three of the groups of manufactured goods which now attract Purchase Tax at the highest rate, therefore declaring them to be luxuries. Are toilet preparations really luxuries? I doubt whether any woman in the country would subscribe to the view that her lipstick or her face powder is a luxury. Even so, a very wide range of absolutely essential toilet preparations—not only those used by women, but some used by men and women—come within this range—[HON. MEMBERS: "Turn round."] I can speak to my right hon. Friend as well as talk to the hon. Gentlemen opposite——

The Chairman

The hon. Gentleman had better talk to me. We are dealing later with the specific articles he mentioned, so I hope that he will not develop his argument too far.

Mr. Nabarro

I shall not develop it in detail, but I will say one word about them—that I do not believe they can genuinely be classified as luxuries, any more than the motor car manufactured so extensively in the constituency of the hon. Member for Northfield (Mr. Chapman), who persists in interrupting me.

Of the motor cars sold on the home market, it is estimated that 75 per cent. are sold for business and professional purposes and many of those vehicles, owned by companies attract a special annual depreciation rate of 25 per cent. per annum. Thus, the Purchase Tax paid on those cars is really an interest-free loan to the Treasury for the length of the life of the car. I will develop that argument when we discuss a special Amendment on the topic which appears later on the Notice Paper in my name.

Having mentioned the 60 per cent. rate, I wish to say a word about the 30 per cent. rate. In our Budget debates last year I laid great emphasis on the fact that there was an extraordinary distinction between all the electrical labour-saving appliances for the home, which were taxed at 60 per cent., and the equivalent manually operated appliances which were taxed at 15 per cent., or not at all. This year, the Chancellor has reduced the figure of 60 per cent. to 30 per cent., and thereby made the position a little better. But he is still putting a premium on drudgery in the home. I can see no reason why he should think it desirable to tax the most modern domestic electrical appliance at 30 per cent., which is twice or more the rate of the tax which he applies to the manually operated equivalent. In my view that is one more reason why we should have an average or mean rate of tax on the manually operated and the electrically operated labour-saving home domestic equipment, by imposing a single rate of tax at 15 per cent.

This is not the time, nor is it the place, to develop arguments about the hordes of anomalies remaining in the Purchase Tax Schedule. Some regard ought to be had to the damage being done to industry, notably the motor car industry, centred in the constituency of the hon. Member for Northfield, whose constituents will not be very pleased with him for opposing my efforts to reduce the Purchase Tax on the vehicles which are made in his constituency. The motor industry as a whole is in no doubt whatever about the urgent need to reduce Purchase Tax on its products.

Mr. Arthur Moyle (Oldbury and Halesowen)

Nor is any other industry. Every industry is keen on having Purchase Tax abolished.

Mr. Nabarro

The hon. Gentleman evidently did not listen to the continuous stream of interruptions about motor cars from his hon. Friend the Member for Northfield.

The motor industry, in the February issue of the "Motor Industry Bulletin", used some very significant words, that home sales are at least 25 per cent. less than would be the case if the tax on purchases of cars in this country were comparable to that in Western Germany and that the resulting adverse effect on our costs must certainly be of the order of at least 10 per cent. Therefore—these are my words—the effect of Purchase Tax on cars is to place the British car manufacturers at a disadvantage to the extent of 10 per cent. compared with the West German equivalent. The hon. Member for Stechford is looking puzzled——

Mr. Roy Jenkins

indicated dissent.

Mr. Nabarro

He is not? I am sorry. I will explain this to the hon. Member gratuitously. In Germany, the home market turnover tax is a 4 per cent. Here, it is 60 per cent. Purchase Tax, and there is some difference indeed between 4 per cent. and 60 per cent.

The "Motor Industry Bulletin" goes on to say that the home market therefore cannot be restricted without restricting, also, the industry's competitive power abroad because of such serious consequential cost increases arising from Purchase Tax.

It was the Chairman of the British Motor Corporation, which is centred in the constituency of the hon. Member for Northfield, who said at the recent annual meeting of his Corporation, when urging that Government policy such as Purchase Tax should be revised to give us parity with foreign competitors: Our policy must be to make trade free to meet free trade. I entirely agree with him.

So long as there are these highly discriminatory rates applied not only to motor cars, radio sets and television sets, but to mink coats and commercial vehicle chassis, or any other articles falling within the 60 per cent. or the 30 per cent. Schedule, it is a grave deterrent to increasing exports and it has a seriously detrimental effect on expanding trade in markets overseas. Though there may well be sectional interests of the kind represented to me by my hon. Friend the Member for Wycombe (Mr. John Hall), which would feel aggrieved if Purchase Tax on furniture went up from 5 per cent. to 15 per cent., surely we must have regard to the fact that the export of furniture is relatively small compared with the export of motor cars, radio sets, television sets—

Sir Arthur Vere Harvey (Macclesfield)

And carpets.

Mr. Nabarro

Yes, and carpets, I am obliged to my hon. Friend. But the tax on carpets would not change. The tax was reduced from 30 per cent. to 15 per cent. in 1957, and under the "Nabarro Scheme" carpets would remain taxed at the flat rate and uniform level of 15 per cent.

My hon. Friend the Member for Wycombe should have some regard to the interests of British industry generally, and the fact that if we are to continue to expand our overseas trade—especially if we are to enter into any sort of free market in Europe—it is absolutely essential that we rid ourselves of a system of which we have rapidly become prisoners during the last few years. It is a hangover from the war years, and the years of Socialism, when the then Government believed that it was possible for some gentlemen in Whitehall, obscure and remote from the manufacturers, wholesalers and retailers, to have the power to decide what is a luxury, what is an amenity, and what is essential.

It is that discrimination to which I object so much, and though I shall support Clause 1—[HON. MEMBERS: "Oh"]—there need be no amazement about that. My right hon. Friend the Chancellor has reduced many of the Purchase Tax rates. He has moved from seven to four rates of tax and I commend him for doing so. As I said during the Second Reading debate, he has taken a short, faltering step in my direction. Next year, I want him to go the whole way and embrace a single 15 per cent. rate of tax. That may offend certain hon. Gentlemen opposite, but after all, they are in the minority. I know that it will commend itself to the majority of hon. Members in this Committee, as well as to the overwhelming majority of manufacturers and wholesalers who, after all, are the persons responsible for the promotion of our trade, and the people afflicted by the highly discriminatory Purchase Tax that we have today.

Dr. Barnett Stross (Stoke-on-Trent, Central)

It is always pleasant—at least, it is for me—to follow the hon. Member for Kidderminster (Mr. Nabarro). No one can doubt that whatever views he holds the hon. Member expresses them in a robust fashion. In this case, he has made it apparent that he has done a great deal of work to bring his right hon. Friend the Chancellor of the Exchequer to understand his point of view.

Obviously, in dealing with this subject we are dealing with the most powerful weapon available to a Chancellor, and the way in which this fiscal weapon is used can, to a great extent, decide the benefits or otherwise accruing to citizens in our country. I should have thought that if we are to move accurately and with forethought, we should have a philosophy behind our actions. The hon. Member for Kidderminster was quite brutal about the fact that he wanted a flat rate tax of 15 per cent. All his arguments showed that he was concerned rather with the amount of money which he would get in than with the question of social justice which might be involved. On that issue I find myself in disagreement with the hon. Gentleman.

May I give an illustration, which I know the Chancellor will agree with? The right hon. Gentleman has reduced Purchase Tax on jewellery and gold watches very considerably. Behind all this, undoubtedly great good will come in a philosophical direction, for a tax that persuades normal men to become dishonest is a bad tax. There is a tendency, I am advised, in this trade, for a lot of goods to be shown for sale as being second-hand which are not second-hand at at all. I am also advised that at a rate of 30 per cent. the inevitable tendency will be that in the whole of this trade the whole of the real tax will be recovered and that the sum total of it will be greater at 30 per cent. than at 90 per cent. That is what I am told.

If this be true, it is a good thing not to tempt people to be dishonest, to encourage people to honesty and, at the same time, to get a larger share of the revenue as a result.

4.30 p.m.

There is, however, a second point. A tax of this description should encourage good habits and penalise bad ones in the community. Of course, I do not agree with the tax itself. If we could do without it, we would all reject it, but we have to find some method of getting money. We need a lot of money. Therefore, I say that it is worth while looking at the good habits of our community and its less good habits. It is difficult to sit in judgment on these matters, but there may be a wide measure of agreement about certain fairly obvious things.

For example, last year the tax on the living theatre was removed. Most of us had been pressing for this for years, because we thought that patronage of the living theatre was a good habit and that we should not be without it. When we found it failing, year after year we pressed the Treasury. The Treasury agreed and there is now no longer any tax on the living theatre. Equally, the fine arts generally obviously should never be taxed, nor any method or means by which the fine arts are offered to people. Indeed, the Chancellor of the Exchequer finds £5 million net for direct patronage of the arts and a total of £6½ million for both direct and indirect patronage. He subsidises the fine arts, but he will find later in our debates, when we discuss the Schedules, that he also taxes the appreciation of them.

Mr. Simon

indicated dissent.

Dr. Stross

I do not want to discuss the question of gramophone records, or Beethoven's Fifth Symphony now, because that would be out of order, but later we will be able to discuss it. If I am wrong, I shall be delighted.

Let me, therefore, turn to our bad habits. Even in bad habits we tend to distinguish. Some of our bad habits are not all as bad as others. For example, it is said that smoking is bad for us and that as a result of it we are dying in increasing numbers from cancer of the lung. But inside the realm of that habit, it is believed that the smoking of cheroots, cigars or a pipe is not as dangerous as the smoking of cigarettes. That is said to be the situation today. That being the case, why has the Chancellor not considered taxing pipe tobacco at a lower rate—although I know that this has no connection with the Purchase Tax—and cigarettes at a higher rate, in other words, to help citizens according to the best scientific knowledge available? If ever that proved to be wrong, we could revert back to the original position.

There is a historical analogy. There was a time in the eighteenth century when there was virtually no taxation on the material from which spirits—gin, in particular—were distilled. A habit had grown up as a result of which all sorts of crude and bad material was ignorantly distilled and sold as gin, sometimes laced and fortified with sulphuric acid and other substances of that type to make it a little more potent. In the public houses in London in those days, such concoctions were advertised in this way. As a result, serious damage was done to the health of the community. Eventually, the Government realised it. They taxed quite heavily the source from which the material was made, forbidding anything except pure corn itself as a source for the distillation of gin or so-called gin. Immediately, there were excellent results among the community as a whole. I offer that only as an illustration.

My last point to the Chancellor is that, of course, there must be discrimination. We must discriminate in favour of certain things in our lives—the home, for example. If ever there was anything of importance, it is the nest, or the home, and so far as is at all possible there should be no taxation on anything that goes into the building of a home or its furnishings.

Viscount Hinchingbrooke (Dorset, South)

Does the hon. Member include mink coats in the furnishings of a home?

Dr. Stross

I would not have thought that mink coats were normally included in the furnishings of a home. If they were mink curtains, I would call them a luxury, as are mink furnishings for the insides of motor cars. I should regard them as a luxury and not a necessity. I spoke of the home and the furnishings of a home. To my mind, everything that is included in the home, whether it is modern or old-fashioned, whether it is the latest electrical appliance to save labour or whether it is a simple table, or the crockery that is made in my constituency, or the bed or the furnishings of a bed, or carpets, or anything else of that description—

Mr. Nabarro

Would the hon. Member not readily admit that all those labour-saving electrical appliances to which he referred, at present taxed at 30 per cent., should be taxed at the same rate as pottery—that is 15 per cent.—or carpets, which are 15 per cent., or furniture, which is 15 per cent.? If they are all essential for the home, surely they should all be on the same rate of tax and that rate should be equal to carpets at 15 per cent.

Dr. Stross

I was pleading for something a little more radical than the hon. Member for Kidderminster has now put to me. I was pleading that there should be no tax at all on anything that is included inside the home. That being the case, there was hardly any need for that intervention. If, however, I could not get those items tax-free, I agree that I would accept them at 15 per cent.

So far as business is concerned, I know that the Chancellor will agree that violent changes should be avoided. We have had some examples of violent changes. In speaking of business, one cannot deal with any enterprise without considering everyone concerned in it—the worker, management, owners, everybody. We had a distressing example in North Staffordshire when a 30 per cent. tax was imposed on pottery a few years ago and all our warnings were disregarded. It is fair to say—I say it modestly—that that which we said would happen did happen, as a result of which the Treasury was persuaded to make a change and to reduce the tax. Harm was, however, done and from that harm there has not been full recovery. I urge the right hon. Gentleman, therefore, to accept that it is worth working out a true philosophy for this tax. It can be levied so as to do as little harm as possible. Carelessly applied, it can do very great harm.

Mr. John Hall

I had not intended to intervene in Committee on this Clause but I am rather stung to my feet by my hon. Friend the Member for Kidderminster (Mr. Nabarro) with his suggestion that there should be a flat rate of Purchase Tax of 15 per cent. covering all goods. It would mean that a number of goods now bearing the lower rate of 5 per cent. would have to bear an increased rate. He suggested that my right hon. Friend the Chancellor had taken a faltering step in his direction. So far as I can make out, he wants the Chancellor in future to fall flat on his face. I cannot see that the suggestion he advanced would be likely to benefit us in the long run.

One of the suggestions put forward by my hon. Friend would put us at a disadvantage in competing abroad. May I remind my hon. Friend that as and when we enter the Free Trade Area the furniture industry of this country will meet a great deal of competition from European countries, Scandinavia in particular, and that it will have to have every possible help that can be given to it to compete. It seems a curious way of helping the industry to raise the Purchase Tax on furniture from 5 per cent. to 15 per cent.

In recent months, certainly in the last twelve months, many furniture firms in constituencies other than my own—I am not speaking only of my constituency—have been going through a very difficult time. Recently, there has been a slight falling off, even in my constituency where the industry has become a little more sensitive to changes in the economic situation. In London, the largest centre of the trade, workers have been on short time. To increase the Purchase Tax from 5 per cent. to 15 per cent. on articles which are necessities, and from which the tax ought to be removed altogether, would be a retrograde step.

If my hon. Friend thinks that by averaging Purchase Tax at a general level of 15 per cent. there would be an increase in the total consumption of goods, and that that would make up the difference between the figures he calculated as the yield for the coming year and the reduced yield, he is mistaken. The greater part of the increased consumption has to come from those goods which at present are bearing the lower rate of 5 per cent. It would be more likely that consumption would be cut down on those than raised.

I wished to make that small intervention to show that as far as I am concerned I would oppose completely the suggestion made by my hon. Friend.

Mr. Victor Collins (Shoreditch and Finsbury)

I entirely agree with the hon. Member for Wycombe (Mr. John Hall) in what he has said. I also say that this is not a matter which has a purely constituency interest, although I have never thought it a bad thing for an hon. Member to talk about something of which he had knowledge, particularly if it happened to come from his constituency.

The hon. Member for Kidderminster (Mr. Nabarro), who has obviously given a great deal of study to this subject, put his case with his customary reticence and pleaded for what he was reluctantly compelled to admit would be one, uniform, non-discriminatory tax on certain classes of consumer goods. When challenged, he was good enough to work out what a 15 per cent. flat rate of tax would produce. I recollect that when dealing with the same topic the Chancellor put the percentage at about 20 per cent. to produce the same revenue. In my view, if such a policy were adopted it would mean over-production in many industries which are—

Mr. Nabarro

I wish to correct the hon. Member at once. I know that my right hon. Friend would concur that the Chancellor's 20 per cent. was related to a retail sales tax and that my 15 per cent. is based on Purchase Tax levied at the point of wholesale value.

Mr. Collins

I am much obliged to the hon. Member. I indicated that I was speaking from recollection and the figure in my mind was 20 per cent.

Mr. Chapman

The hon. Member for Kidderminster is misleading my hon. Friend the Member for Shoreditch and Finsbury (Mr. Collins). The sentence in the speech of the Chancellor referred to a tax on wholesale value, which, he said, would need to be 20 per cent. to yield the present-day level of total taxation.

4.45 p.m.

Mr. Collins

I am always a little reticent about these things, but that indicates that my recollection was very much better than that of the hon. Member for Kidderminster.

The figure given by the Chancellor no doubt was based on the most reliable information, the best available to him I should think, would be more reliable than that of the hon. Member for Kidderminster. The right hon. Gentleman put it at 20 per cent. If the tax on goods now taxed at 60 per cent. of 30 per cent. were reduced to that level it would mean a very big increase in demand and perhaps over-production in many industries which are already doing well in the export market. That might have the result of reducing the exports which we so badly need.

It would also have the effect of actually crippling a number of industries of considerable value if the tax were put up from nil or 5 per cent. to 15 per cent. or 20 per cent. What is most important at present is that it must undoubtedly have the effect of increasing the cost of living, and cause major disruption in wage demands and in every other way. We have to bear in mind that, although Purchase Tax is an important part of any Budget, it is only one section of our finances and that it must be taken in relation to the whole.

I am most unhappy about one point referring to the collection of tax at retail level. In certain industries undoubtedly the public pay far more in tax than the Chancellor collects. That is a defect of our present system of levying the tax on wholesale value. In the furniture industry in which I am interested, there is not much retail price maintenance of fixed prices and it is unfortunately the case that Purchase Tax is added to the price and the profit is added to that. If the mark-up is 40 per cent., 45 per cent., or 50 per cent., when the Chancellor collects 1s. in the £ wholesale value, the customer pays 1s. 6d. in the £. In other words, it is "stuck on." That occurs in a number of industries. As I have already pointed out to the Chancellor in correspondence, this is a matter which needs looking into. It is a defect of the present system.

In the case of motor cars the actual amount of Purchase Tax is known. It is levied on the wholesale value. The customer knows when the car is bought how much tax is being paid, but unfortunately, that is not the case in other industries. That would have been an argument in favour of collecting tax at the retail end, although I appreciate that it would mean far more collecting points and probably far greater cost than at present.

On Second Reading, the Chancellor said that Purchase Tax is a means of raising revenue, not a means for discriminating against particular industries. I heartily agree that that is what it should be. I hope he will bear that in mind continuously in the debates we are to have over the next three days. If he will only bear that in mind and act accordingly, I am sure that we on this side of the Committee will find a lot of points of agreement with him.

As this is a general discussion on Purchase Tax, I should like to put forward from my experience principles which I regard as of some importance and with which I hope the Chancellor will agree. They are not necessarily put in order of importance, but as they occur to me. The class and types of goods liable to tax and the appropriate rates should be clearly stated in a form readily comprehensible to all, whether one has to pay or to collect the tax. In debates in Committee last year I advocated that we should drop the present form of setting out liability to tax in the method which I called the "exclusion method". I suggested that we should build up empirically again.

I must confess, having discussed this with the right hon. Gentleman, that I feel it would cause too great a disruption for too little benefit to adopt the method I suggested. We have had this system for so long and, difficult as it is with nearly 100 pages, it would cause too much trouble to do it the other way round. However, we should be able to go very much further and I welcome the steps the right hon. Gentleman has taken in the simplification of Notice No. 78.

Secondly, I think that the tax ought to be in a form which commands respect by the general public and does not bring this Committee and the law into contempt. In this connection, there should not be different rates of tax for similar articles because they are made from different materials, without substantial reason for different rates. I have taken up this point in correspondence with the right hon. Gentleman and he has been good enough to point out, for example, the situation if we had the same rate of tax on all watches, whether made of gold and other precious metals or of common metals.

With respect, I think that that is a non-starter, because without stretching it too much we could regard gold as a different material from steel or iron. I suggest that the Chancellor should give much more consideration to this point. I welcome what he has done with respect to metal in furniture by bringing it into line with wood furniture for taxation purposes. He should give more consideration to the principle of having an article made from different materials—but otherwise the same article—at the same rate of tax. Unless he does, there are the most ridiculous anomalies.

Thirdly, in my view essential consumer goods in constant use by the whole community should either be exempt from tax or should be subject to tax only at the lowest rate. I do not agree with the hon. Member for Kidderminster that essential goods, which are in daily use in the home or outside, including clothing, should be taxed. They should be free of tax or, if they must be taxed for revenue purposes, it should be at the very lowest rate.

In his argument against a sales tax the Chancellor made a particular point about the taxation of food. I agree with his argument, but if he raises the bogey of possible taxation of food surely the same argument applies equally to taxation of pots and pans and the machinery of everyday domestic commerce. The argument is exactly the same, and if he finds repugnance in suggesting a tax on food it ought to be equally repugnant to him to have a tax on articles in every-day common use.

A fourth consideration, although lesser, which should be given to this subject is that special consideration should be given to those products which provide the main sources of employment for, or are mainly made by, blind and disabled workers. This may be a point of sympathy, but it well deserves the consideration of the Chancellor and the Committee.

Lastly, every effort should be made to avoid unnecessary disruption of industry and unnecessary work to industry in administering the tax. In some respects, the Chancellor has moved substantially in that direction, but in other respects he has failed signally, and I want to draw attention to the first point mentioned by the Financial Secretary when he opened the debate this afternoon. I am sorry to note that the Financial Secretary is to some extent indisposed, and I hope that his indisposition is only temporary and not painful. He said this afternoon that the Second Schedule merely sets out the position and will eventually be incorporated in the revised version of Notice No. 78, but I was very disappointed to hear him say that it was not possible to produce the new notice before 1st October.

My complaint is that whereas the tax changes were operative immediately and persons and firms were obliged to collect the tax at the new rates from 16th April, the revised notice on which they have to rely will not, or, at any rate, need not, be available until 1st October. That is disgraceful. It is an example of the Government's attitude, and particularly the Treasury's attitude, towards manufacturers.

Right hon. Gentlemen opposite are constantly paying lip-service to the efforts of primary producers and manufacturers. They readily agree that this country would be nothing without the efforts of the men in the factories who provide the wherewithal for the social services and all the machinery of government. I am thinking of the manufacturers without whose efforts the whole army of professional men, including parsons, politicians and civil servants, would be on the bread line. Ministers, some of whom have never had a day's experience of industry, constantly lecture industry about efficiency and the need for more markets, but when they have a chance to help in a matter of this kind they immediately fall down on the job.

As the Chancellor said, Purchase Tax is a means of raising revenue, but surely he should see that it is raised with the minimum of inconvenience. The unpaid army of tax collectors should be bluntly told what they have to collect. He should see that they are not constantly subject to doubt and disturbance, frustration and annoyance.

Subsection (2) of the Clause is typical. The manufacturer is bluntly told, "You collect the tax now and you will get the guide book in six months' time. If you go wrong, you will pay." That is not the way to go on, but that is the position under the Clause.

The Financial Secretary looks on this complicated notice of nearly 100 pages, all packed tight—Notice No. 78—as the favourite bedside reading of the hon.

Member for Kidderminster, but, as I told him the other day, to many business men, and they are the people who have to keep the country going, it is a nightmare.

I mention to the Chancellor, in case he is not aware of it, that no Notice No. 78 was published in 1957—none at all. We had to go on with odd slips of paper of the Amendments. We had to look first at the 1956 Notice and then at the Amendments—and there were a number of changes that year. In fact, until two or three weeks ago the Notice published in January, 1956, was the only one available in the Vote Office. Of course, it does not matter much if we on these benches are given extra trouble like that, but it matters when men struggling to run and to expand a business, and their staff, have to spend hours and days unravelling mysteries which ought not to exist.

I am president of a trade association and I am continually receiving inquiries about Purchase Tax throughout the year. I make no complaint about that. After Budget day and continually up to now I have been inundated with telephone calls and letters, despite circulars of general guidance which I have sent out. I am sorry to say that a circular sent out on the day after the Budget contained an error. This is the first time in my recollection. The error arose on a completely unfathomable obscurity in Notice No. 78 N. One of my staff pointed out this obscurity to the Customs and Excise. The point was not made clear so that nobody could possibly misunderstand. The officer said, "You must spare a thought for the person or persons who drafted the notice." Perhaps so, but surely the proper attitude should be, "Spare a thought for the people who have to interpret the notice and put it into practice."

Perhaps the Chancellor might frame a notice of that kind and stick it on the wall in the office, instructing them that they should spare a thought for the people who have to carry out these things, the people whose main job is to produce and sell goods and not to spend anxious hours every day ferretting out which is the right rate of tax. The right hon. Gentleman is a former manufacturer and employer, and a very good one, and I hope that he will bear this point in mind because it is of some importance that consideration should be given to the people who have to do this job. It is his duty to ensure that the changes which he makes are clearly understood and can be implemented with the minimum of inconvenience.

5.0 p.m.

I assure him that it is not only traders who are in doubt and difficulty; his own officers are in trouble, too. Only last Friday I had a letter from the Sheffield Borough Council department which deals with the blind, enclosing a letter from the local officer of Customs and Excise which said: I am directed to inform you that the Commissioners regard fishing baskets as specialist sports requisites and chargeable to Purchase Tax at 30 per cent. under Group 10 (a) of the Schedule. As the hon. Member for Kidderminster knows, Group 10 (a) deals with wallpaper. So the Chancellor has even got his own officers climbing up the wall, and it is not the only example that I could mention. A fishing basket is something in which the angler carries his food, mainly bottled; his bait, mainly canned; and such other accessories as he requires; and when he is angling he sits on it. It is a personal article under Group 23, and the tax is 15 per cent.

Why should I have to keep sending out scores of letters explaining these things simply because the Chancellor has not made plain enough to traders and, apparently, his own officers, exactly what he means? How does the right hon. Gentleman expect ordinary businessmen to know? It is foolish and wrong to ask industry to wait until 1st October for a new explanatory leaflet. By that time we might have had another Budget, and then we shall be off again. Anyone who tried to run a business on those lines would not last long, and it is certainly not the way to run a country.

It would be reasonable for the Chancellor to wait until Wednesday night, by which time I hope we shall have been able to incorporate many improvements. I urge him to consider, after Wednesday night, putting a new Notice 78 into operation immediately so that businessmen will have a guidebook which will enable them to avoid making mistakes and help them to carry out their task of collecting the tax with far less annoyance, frustration and work than is the case now.

Mr. Burden

I find that in these Purchase Tax debates—I have taken part in a number—there is a good deal of common ground between both sides. I find myself in agreement with a considerable amount of what has been said by the hon. Members for Stoke-on-Trent, Central (Dr. Stross) and Shoreditch and Finsbury (Mr. Collins). However, I thought the hon. Member for Shoreditch and Finsbury was rather labouring the point about the difficulties imposed upon traders. I have always found—I, too, have to deal with this tax—that the Purchase Tax officers are most helpful on all occasions, and if they do not have the know-how, they quickly get it from the Purchase Tax Commissioners.

Mr. Collins

I am sorry that I did not say that. Every Customs official with whom I have come in contact has always been extremely helpful. These officers are overworked and underpaid. However, the difficulties exist, and it is no use pretending that they do not.

Mr. Burden

I agree with the hon. Member. I also agreed with him when he drew a distinction between Purchase Tax payable on foodstuffs and Purchase Tax payable on the pots and pans in which they are cooked and said that it was repugnant. I consider the whole tax fundamentally repugnant because it artificially inflates the cost of goods to the public.

Equally, I feel that my right hon. Friend is to be very strongly commended for the action he took in the Budget, for he has simplified the tax and reduced its ranges and rates. The Chancellor has generally shown by his example this year that he, too, views the tax—while it is a very good revenue-raiser and necessary from that point of view at the moment—with aloofness, if not repugnance, and would like to see it reduced as much as possible.

There are some things on which I do not go all the way with right hon. and hon. Gentlemen opposite. For instance, there was the play which was made on the question of social justice in Purchase Tax. It is very difficult to assess where there is social justice, whether an article should be taken out of Purchase Tax and whether another article should be made subject to it. It is very difficult to know whether it is social justice so to tax the article of a certain industry that many of the workers, who are also entitled to social justice, are thrown out of work.

I was rather surprised that the right hon. Member for Battersea, North (Mr. Jay) took this line so very strongly. During Second Reading I quoted a very eminent authority when I said that this was a very difficult problem to assess. The eminent authority was none other than the present Leader of the Opposition, who said in his Budget Speech in 1951: I must confess that, having studied the Schedules pretty carefully, I have come to the conclusion that there is no clear-cut distinction between articles which may properly be taxed and those which should not".—[OFFICIAL REPORT, 10th April, 1951; Vol. 486, c. 860.] I should like to know whether that is still the policy of the Labour Party. It was at least the attitude of the present Leader of the Opposition when he was Chancellor. I was all the more surprised that the right hon. Member for Battersea, North should take the view that he did because at the time in question he was the Financial Secretary for the party opposite and also partly responsible for the Budget.

Mr. H. Wilson

My right hon. Friend the Member for Battersea, North (Mr. Jay) was the Financial Secretary, but not to "the party opposite". While I am on this point, is not the hon. Member aware that when my right hon. Friend the Leader of the Opposition used those words in 1951 he went on to take out of the field of Purchase Tax a very wide range of essentials, many of which were put back into the tax schedule by the Lord Privy Seal in 1955 just after winning the "prosperity" Election—and those items are still subject to Purchase Tax?

Mr. Burden

I am very glad that the right hon. Gentleman has raised that point. The concessions which the Leader of the Opposition made at that time amounted to a total of £2½ million. He removed from Purchase Tax such articles as pastry boards, pins and needles, but in the same Budget he increased the Purchase Tax on cars, wireless sets, television and gas and electrically operated domestic appliances—the latter all articles on which right hon. and hon. Gentlemen opposite have today been claiming that the tax should be taken off—from 33⅓ per cent. to 66⅔ per cent.

Mr. Wilson

The hon. Member should recognise that that Budget, which caused considerable argument at the time, was rendered necessary by the financing of the rearmament programme when we were at war in Korea and that the first element in any rearmament programme must be to release steel and engineering products, articles which need no longer be released now.

Mr. Burden

In the same Budget the Labour Government increased the price of school meals by 1d. and raised the standard rate of Income Tax by 6d. The right hon. Gentleman cannot have it both ways.

Mr. Victor Yates (Birmingham, Ladywood)

On a point of order, Mr. MacPherson. Is it in order for this subject to be discussed on Clause 1?

The Temporary Chairman (Mr. Malcolm MacPherson)

I had been hoping that these comments would soon come to an end and that hon. Members would concentrate on the main subject for discussion.

Mr. Burden

If the hon. Member for Ladywood (Mr. V. Yates) had been present, he would have heard his right hon. Friend raising precisely these points when he opened the debate. I am merely replying to them.

Mr. Yates

I have not been absent from the Committee. I have heard every speech that has been made.

The Temporary Chairman

This also seems to be a matter which is not strictly relevant to the subject which we are discussing.

Mr. Burden

The right hon. Gentleman the Member for Battersea, North said that he would object very strongly to a general sales tax and he quoted the Paymaster-General as saying that it was the policy of the Government in imposing Purchase Tax changes to accept that there were three classes of goods—luxuries, amenities and necessities. That is a very good general rule. However, the right hon. Gentleman went on to say that while he believed that there should be a differentiation between rates of Purchase Tax, he would like to see two rates of Purchase Tax. That is very important and we are entitled to ask the party opposite exactly what is meant by that. I wrote it down very carefully at the time and my hon. Friend the Member for Kidderminster (Mr. Nabarro) said at the time that the right hon. Gentleman was going his way and was more than half way there. What are the two rates of Purchase Tax which the party opposite would like to see?

Mr. John Edwards (Brighouse and Spenborough)

My right hon. Friend did not say that he would like to see two rates. He was discussing simplification and he said that that might take the form of two rates plus zero. The hon. Gentleman takes my right hon. Friend's words beyond what they implied.

Mr. Burden

I am sure that the OFFICIAL REPORT will contain a very accurate report of what was said and if I have taken the right hon. Gentleman's words too far, I sincerely apologise, because the last thing I want to do is to be unfair. Nevertheless, there was a suggestion that there might be only two rates. There was no question of time and we are entitled to ask what it is suggested that those two rates of tax should be.

There was another topic where the right hon. Gentleman nearly put his foot in it, but then shied off. In view of the annoyance of housewives with his comment about Whitehall knowing best, that was understandable. He said that cosmetics should be regarded as a luxury, but then he shied off. I would say that a great many women throughout the country would consider cosmetics not a luxury, but a very desirable ancillary aid to beauty.

My main point, which I do not want to labour, is the need to realise, in simplification of Purchase Tax rates, that any violent fluctuation, up or down, or anything liable to upset trade at this time, is very bad. It has already been stated by industry generally that whenever possible tax changes should be made when stocks are at their lowest, and January is obviously the best time. I made that point very strongly during the Second Reading debate and I reinforce the arguments I used then.

If the changes are made when new stocks are coming into the stores, there is a hold-off in taking delivery and considerable disruption can be brought about, and even the reductions in Purchase Tax which we all desire can create unemployment in many industries because of the apprehension which can be created when it is thought that rates may be reduced.

That is even more the position today than it was when there was a sellers' market and when stocks of consumer goods were always short. That is not now the case. That is accepted, as I pointed out to my right hon. Friend, in Notice 78, which was issued in April by the Commissioners of Customs and Excise. There it is said that goods previously sent out on sale or return or similar terms are liable to the new rates of tax, unless they have been resold or unless the transaction has been adopted by the retailer before 16th April. That accepts that there is concern about the matter in the Department of Customs and Excise and in effect it provides a loophole for evasion of Purchase Tax—at any rate up to a point—because it says that the goods which have been bought on sale or return bear the new rate of tax.

5.15 p.m.

In some trades there is an agreement under which retailers pay the value of the goods on delivery without Purchase Tax, before a Budget has been introduced, and afterwards pay another cheque to make up for the amount of Purchase Tax at the old rate, or at any new rate which may have been introduced. That is not a very good arrangement since it applies only to some industries and to some firms. If it is legal, that should be made perfectly clear to all industries so that this apprehension about the changes can be cushioned by that means.

In principle, however, this is a bad thing and while I hope that the Chancellor will make it clear whether it is legal, if it is legal I hope that his Department will assist in framing the right sort of contract. I hope that the Department will draw up a model contract to ensure the legality of the arrangement. At the same time, that strongly underlines the argument that Purchase Tax changes should not be violent and that Purchase Tax should be used for revenue raising rather than as a medium of economic policy and that wherever possible the changes should be introduced when stocks are lowest, so that the impact on trade is not as disastrous as might otherwise be the case.

Generally speaking, I fully support the Chancellor in all the changes and in his approach to Purchase Tax. I would not go as far as my hon. Friend the Member for Kidderminster in saying that one rate of tax should be introduced, since that would raise to a higher rate Purchase Tax on necessities. Nevertheless, with the Government's policy of cutting expenditure and if there is a possibility of reducing expenditure by a reduction in armaments, I hope that my right hon. Friend will be able to have one rate only and that should be at the lowest rate of 5 per cent. on goods presently bearing tax.

Mr. Chapman

I was glad to hear the hon. Member for Gillingham (Mr. Burden) say that he disagreed with his hon. Friend the Member for Kidderminster (Mr. Nabarro). It is on the sales tax argument that I want to speak this afternoon. We are having a very interesting argument, but it boils down to the fact that we are having the tail-end of the pressure, which grew just before the Budget, for transforming Purchase Tax into something like a sales tax. The hon. Member for Kidderminster took part in this wave of feeling about sales tax which we all witnessed before the Budget.

Mr. Nabarro

I started it.

Mr. Chapman

The hon. Member did not start it, but he helped it along its way and I am willing to give him that much credit. We all remember what it was. At that time it was thought—and I am sure that the hon. Member hoped that everybody would feel it was like this—that we could somehow substitute a sales tax of 1, 2 or 3 per cent. for the present rates of Purchase Tax, that we would all feel it very much less than we feel Purchase Tax today, and that everybody would feel that all there was to do was to have a level rate substituted for the present system. That is what the main pressure was for before the Budget.

Mr. Nabarro

Quite wrong.

Mr. Chapman

No, I am not wrong. I have as much evidence as the hon. Gentleman has. That was the main campaign that was carried on before the Chancellor opened his Budget speech. It is because the right hon. Gentleman had been attracted to those sorts of arguments—I see him nodding his head—that he made his remarks on 15th April, when he said: I want to say a few words about a larger issue of which we have heard a good deal in recent months, namely, the possibility of substituting for the Purchase Tax a general sales or turnover tax imposed at a low rate over a much wider range of expenditure."—[OFFICIAL REPORT, 15th April, 1958; Vol. 586, c. 70.] That is where the main pressure was before the Budget.

Mr. Nabarro

Will the hon. Gentleman give way?

Mr. Chapman

No, I will not give way now. The hon. Gentleman gave way to me once and he can have a go later on. In the meantime I want to get on with my speech.

After we had had this early pressure the right hon. Gentleman demolished the case which had been propagated by people who thought mainly like the hon. Member for Kidderminster. The right hon. Gentleman said. "We have in this country about £14,000 million in consumer expenditure; in that £14,000 million we have £3,800 million on rents and services of various kinds"—the chimney sweep which he mentioned—"and we cannot imagine ourselves taxing that at some new low rate." Secondly he said, "We have £4,500 million spent on food and nobody really expects that we are going into the sales tax on food."

Mr. Hale

That is exactly what the present Government have done. All over the world food prices are falling, and in this country alone prices have been deliberately increased by the Chancellor of the Exchequer as an economic weapon. There is a sales tax on food.

Mr. Chapman

My hon. Friend is quite right. We are talking about taxation in a more literal sense.

I was saying that the right hon. Gentleman split up the £14,000 million of consumer expenditure and said that something like £8,000 million was on items which we would not envisage taxing by means of some new sales tax. We were left then with £4,500 million of expenditure on goods which had been taxed and about £1,000 million on goods which had been deliberately exempted. He said "What is the prospect of some 1 per cent., 2 per cent., or 3 per cent. sales tax?"

Mr. Nabarro

He did not say that.

Mr. Chapman

The prospect of some new low rate of sales tax, he said, was nil. Taking those last two groups together, including the items which have been deliberately exempted over the years, he said that we would still need a 20 per cent. Purchase Tax to bring in today's revenue. What really happened was that this early pressure for some low sales tax evaporated and we were left with a variant on what the Chancellor set out.

What the hon. Member for Kidderminster is embracing today is something which his right hon. Friend set out in the Budget, namely, something in the order of a 20 per cent. Purchase Tax on the goods that were then taxed. We have largely blown away most of the announcements on this issue, thanks to the right hon. Gentleman, but his hon. Friend is left with this tail-end of the sales tax argument. What he is saying is, "We will abandon all this talk about a small sales tax and we will have a 20 per cent. or 15 per cent. tax broadly on the goods which we tax at this moment." He says, "What is the justification for such a tax?" I have never heard such nonsense in all my life.

This is what the hon. Member for Kidderminster said in the Second Reading debate of the Finance Bill: I do not believe that women's cosmetics, or motor cars, or television sets or radio sets, taxed at 60 per cent., are luxuries, any more than a carpet, taxed at 15 per cent.…

Mr. Nabarro

Go on.

Mr. Chapman

—or the other one about which I agree—the question of the motor chassis.

Mr. Nabarro

Will the hon. Gentleman permit me to intervene now? He should not quote just a section of my speech out of its context. These articles which I mentioned were very carefully selected. I went on to say: …or a commercial motor chassis, taxed at 30 per cent., is a luxury. That is the single item of industrial capital equipment which is subject to Purchase Tax. If the hon. Gentleman purports to represent motor car workers in his constituency, he ought to be the first to get on to his hind legs and support what I am trying to do.

Mr. Chapman

The hon. Gentleman will not frighten me with his talk about motor cars. I shall answer him when we reach the debate about motor cars. I shall have a good deal to say about his performance on that issue, which is totally irresponsible, and he knows it. If he wants me to go on quoting, I will quote what he said in the next sentence: Nobody, in the House, when confronted with a series of articles of that kind, could define which one was more essential than another, which was a luxury and which was not."—[OFFICIAL REPORT, 12th May, 1958; Vol. 588, c. 98.]

Mr. Nabarro

Hear, hear.

Mr. Chapman

This is why I interrupted the hon. Gentleman before. The hon. Gentleman says that when we in Parliament come to tax a commodity or to decide principles of taxation, we are unable to decide broadly what is an essential and what is a luxury. What a farago of nonsense. That is why I interrupted him and said that that meant that we might as well tax food as much as alcohol and tobacco. If the hon. Gentleman wants to argue that we cannot distinguish essentials from non-essentials, he must admit that he is saying that everything that everybody wants is an essential and that, therefore, we must not tax it any more than we tax anything else. In other words, if I like beer or whisky it should not be taxed any more than food should be taxed. That is the hon. Gentleman's argument. It only has to be expressed in such terms to expose what nonsense it is.

It is the job of Parliament and of Ministers to make these difficult decisions and differentiations. The hon. Member for Gillingham quoted some remarks of my hon. Friend the Leader of the Opposition when he said that these matters are very difficult. He said that it is not always easy to make up one's mind what is an essential and what is not. Of course, it is not easy, but Parliament is here to do that difficult job, if we want a progressive system of taxation, of distinguishing between what is broadly an essential and what is less of an essential, and what is broadly a luxury and what is less of a luxury. What is wrong with the argument of the hon. Member for Kidderminster is that he is trying to demolish the total case for a progressive system of taxation—[Interruption.] I know the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) does not believe in progressive taxation, but I did not think that he had taken the hon. Member for Kidderminster along with him on that view.

Mr. Burden

What worries me is that some people think one thing one year and another thing the next. For instance, today hon. Members opposite have been stating that all domestic electrical appliances should be treated as necessities. In 1951 the present Leader of the Opposition decided that Purchase Tax on such appliances should be raised from 33⅓ per cent. to 66⅔ per cent.

Mr. Chapman

I am coming to that point. Having demolished the argument of the hon. Gentleman that one can never decide what are essentials—and we do that every day of our lives in framing indirect taxes—when we come to the question of Purchase Tax at differential rates there are several principles which we have to guide us. In the first place, we have, broadly, to make value judgments about what is essential and what is a luxury. We have to do it not as something which is clear cut and easy but as something which is difficult and often hard to decide. Nevertheless, it is essential for those who believe in some progress in our system of taxation to decide these things.

5.30 p.m.

The second principle in determining our rates of tax is that we must bear in mind national needs, not only as regards what is essential but, to take the 1951 example quoted by the hon. Member for Gillingham, in terms of whether, at a particular time, because of some crisis in our economy or some difficult period through which we are passing, we must, unfortunately, use the Purchase Tax as a deliberate weapon to damp down consumption of certain kinds of goods or, as in the particular case mentioned, to free particular commodities or raw materials for a rearmament drive or whatever else may be needed. In other words, the second principle is based upon the day-to-day need of the economy in the levels of consumption of commodities or raw materials.

In the third place, we must remember—and here I remind the Chancellor of what is wrong with the Purchase Tax—that beyond that point we become too rigid in our approach to the question. The hon. Member for Kidderminster tried to taunt me about the Purchase Tax on motor cars. I have always stated my view about the Purchase Tax on motor cars in this way. We cannot, in this country, afford a motor car industry which is largely geared to the home market; it must be primarily an exporting industry. If there has to be a Purchase Tax on motor cars, I am willing to see a high rate of Purchase Tax, much as I dislike it from a constituency point of view, because, first of all, I believe that the motor car is, relatively, a luxury. It cannot be said to be a luxury in black and white, clear-cut terms, but I believe that, in all the decisions we have to make, it is relatively a luxury, for a start. Secondly, I believe that we must keep the industry exporting at a high level and, if we freed it from Purchase Tax, a great many cars would come on the home market, to the disadvantage of our export trade.

Within that general situation which I have outlined, our approach must be flexible. For example, when the motor car industry fell on difficult times and the export trade pretty well dried up, or was drying up to a large extent, with consequent unemployment within the industry, that was a time to make some reduction in the Purchase Tax as a temporary measure. That is the third principle I bring into the discussion of Purchase Tax. Whatever rates we fix, we must be willing to move them as and when occasion demands and the industry concerned may be in difficulties. In this connection, we shall come to the taxation on bicycles a little later. This is a clear-cut case for the application of the principles I have been advancing.

Mr. Frederic Harris (Croydon, North-West)

All the hon. Gentleman's argument has been based upon the assertion that Parliament itself fixes these Purchase tax rates. On that basis, the argument would be very sound; but, of course, it is not so. It is the civil servants of the Treasury who fix these rates, as we all know.

Mr. Chapman

The hon. Member for Croydon, North-West (Mr. F. Harris) had better go away and read the Finance Bill. If he will turn his attention to the First Schedule and the Second Schedule and be prepared to sit here for three days when we discuss those, he will both hear and be able to take part in Parliament's work in deciding these levels and rates of tax. His argument is nonsense. He has been through the Lobby on more than one occasion during his eight years of membership of the House, either to support or reject particular rates of Purchase Tax. It is absolutely true that Parliament decides these things.

Mr. Hale

On a point of order, Sir Gordon. The hon. Member for Croydon, North-West (Mr. F. Harris) said that civil servants fix the rates of taxation. If that is so, the Chancellor having sat silent after listening to that statement and made no correction whatever, has the right hon. Gentleman any right to answer for Her Majesty's Government or to intervene in this discussion or, indeed, to represent that he has any responsibility either to the House or to the Crown?

The Deputy-Chairman (Sir Gordon Touche)

That is not a point of order at all. The accuracy of the hon. Member's remark is not a matter for me.

Mr. Hale

I only said it with deep regret, Sir Gordon.

Mr. Chapman

I will not attempt to intervene in an argument between my hon. Friend the Member for Oldham, West (Mr. Hale) and the hon. Gentleman the Member for Croydon, North-West (Mr. F. Harris), because every hon. Member of the Committee, except the hon. Member for Croydon, North-West, knows that what we are doing in the next few days is deciding upon particular rates of tax.

Primarily—[Interruption]—the hon. Member for Kidderminister (Mr. Nabarro) takes his arrogance a little too far sometimes. There are times when we should like to remind him of some of the courtesies of this Parliament. I would say to him, in measured language, that what he has been doing in the last few weeks and months is to try to tell us in Parliament that we should never, in making decisions about taxation, exercise any judgment about what are essentials and what are not essentials or about whether we should tax one man's pounds or purchases as much as we should tax any other man's, no matter to what extent it may be luxury expenditure and no matter how many pounds different men may have.

Over the years, Parliament has established a tradition of progressive taxation, and we shall not let it go for the sake of the sort of farago of nonsense talked by the hon. Member for Kidderminster during the last few weeks. I am glad that the Chancellor has stood out against his hon. Friend and said that, if we are to have a Purchase Tax—which nobody likes, because nobody likes any tax—we should make it, broadly, as progressive as we can. So long as he does that, and so long as he stands on those grounds against his hon. Friend the Member for Kidderminster, he will have the support of hon. Members on this side of the Committee.

Mr. John Arbuthnot (Dover)

There are two things upon which we are, I think, in complete agreement. The first is in our congratulations to my right hon. Friend on the way he has taken a substantial first step to clear up the general muddle of Purchase Tax, reducing the rates from seven to four. We look upon that as a forerunner of further steps in subsequent Budgets. The second thing upon which there has been general agreement is that individual changes in Purchase Tax are apt to create hardship and, therefore, the changes should be comparatively gradual, as they have been in this Finance Bill.

I wish to refer to one special item in Purchase Tax. I ran across it in the course of my business activities the other day. As the law stands today, there seems to be no provision for Purchase Tax being repaid in cases where it is inequitable that it should have been levied in the first place. A firm which is not registered for Purchase Tax purposes may order goods from some other country in order to send them to a third country. The goods come to this country, where they are assessed for Purchase Tax and the tax is payable upon them. If the goods are not opened in any way and no change is made in them, and they are sent on in exactly the same condition as that in which they come here, the Purchase Tax, nevertheless, cannot be reclaimed. It can be reclaimed only if the goods go into bond. If the goods come by parcel post, there is no bond into which they can be put.

Without some provision for the repayment of Purchase Tax when goods come through this country on their way to a third country, there will be unfairness in the application of the Purchase Tax. I ask my right hon. Friend to look at the matter with a view to making some provision for remission to a firm which is able to prove a bona fide case.

Mr. V. Yates

I think that this interesting discussion has led us to consider what the alternative method of taxation should be rather than to express more forcibly our views about the existing method. I am, and always have been, much opposed to the principle of Purchase Tax. I think that it was first introduced for the purpose of discouraging people from consuming. The purpose of the tax was not to increase revenue, and now that we have such a valuable means of obtaining revenue it is difficult for us to dispense with it. While I do not agree with all the views of the hon. Member for Kidderminster (Mr. Nabarro) on an alternative method, which I think is equally discriminatory as the existing system, it is useful for us in Parliament to consider the suggestion.

My right hon. Friend the Member for Battersea, North (Mr. Jay) said that in considering Purchase Tax we have to distinguish between luxuries, amenities and necessities. I have considered this point carefully in the last few years. It is very difficult to say what is a luxury and what is not. As the Committee knows, I represent a constituency which is the main centre of the production of what many people would call a luxury, namely, jewellery. There is no doubt that in years gone by Birmingham has contributed much to the adornment of palaces and homes, not only here, but throughout the world. It may be said that this is a luxury trade, but for some years now I have been trying to persuade the House of Commons that what it regarded as luxuries were necessities.

Mr. Nabarro

The hon. Gentleman is making my case for me.

Mr. Yates

Then the hon. Gentleman will appreciate what I am saying. I venture to suggest that if he were to present his case to the Committee with a little more courtesy he would get a great deal of support, or more support than he gets at the moment.

The Chancellor of the Exchequer has undoubtedly recognised that jewellery, for instance, is not now to be considered as a luxury. I very much welcome his decision to reduce the tax on jewellery from 60 to 30 per cent., and I am sure that it is a right move. The Chancellor will recollect that I found it necessary to call his attention to a considerable black market in this industry. I know that it is one thing to say that a gold ring is a luxury; but when we consider that gold rings are supplied second-hand by the gross and that they escape Purchase Tax, then it is impossible for a Government to be able to control that sort of traffic.

5.45 p.m.

There is a difference between the manufacture of small articles, like jewellery, and the production of motor cars. It is not so easy to produce a motor car by black market methods as it is to produce some other goods. Therefore, the criterion must be whether the Purchase Tax which is being imposed leads to great difficulties in an industry and affects its trade.

One of the difficulties is that the tax acts so late. Let us take the jewellery industry as an example. Many of its best-skilled artisans have gone. The Chancellor does not recognise that cosmetics should come into the low range of commodities, and a powder bowl, for instance, carried a 90 per cent. tax for a long time because it came under cosmetics. All the firms that manufacture powder bowls and similar goods have really lost their trade. It has gone to France and Germany. Even though a silver powder bowl may be regarded purely as a luxury, it does damage if our trade is affected so that we lose our exports and cannot compete with other countries. That is a principle that we have to consider.

I do not like Purchase Tax. I have been battling on the issue of jewellery, but in Birmingham the cycle industry also presents a great problem. If an industry suddenly falls on difficult times and cannot export and is faced with great competition and unemployment, something has to be done about it.

I should like to see, and I hope to see, the gradual reduction and eventually the elimination of Purchase Tax. I would much rather see it take a different form. I have never been keen on indirect taxation. I realise that the raising of £490 million in revenue is not an easy matter. For that reason I appreciate that a change in the system is not something that can be done quickly or in a revolutionary manner. Nevertheless, I am disturbed by the vast number of anomalies that are still in existence even though the Chancellor has reduced the number of rates.

We shall be debating later whether buttons should carry a tax of 30 per cent. or whether they should be reduced to 5 per cent. like hooks, eyes and zip fasteners. We make buttons for uniforms in Birmingham. Badges that officers wear will either be exempt from tax or the tax will be very low, but the buttons which go on the uniforms will be taxed at 30 per cent. Even though the tax has been reduced in some cases, this is the kind of discrimination that will still exist. If we reduce the rates, and if my hon. and right hon. Friends, when they get into office, as surely they will, reduce the rates still further, it will be very good.

Nevertheless, the Clause puts a principle which I cannot accept and have never accepted. I do not think it a good thing and I do not think that the alternative method proposed would be acceptable in the country. It does not allow room to manoeuvre. If we fix one rate of tax we cannot adapt the tax to meet the difficulties of an industry. Rather than have a uniform tax I should like to see the tax gradually reduced, and an alternative way found of raising the revenue if it be needed.

At the same time, I am glad to be able to say that my constituency appreciates the added incentive now given to it. I have been informed that black marketeers in jewellery have been making a profit of about 25 per cent., but now that the tax is reduced by 30 per cent. it allows them only 5 per cent. margin. [HON. MEMBERS: "Oh."] It still leaves the Chancellor with a little way yet to go, but nevertheless it has been of assistance. I hope that eventually we will be able to extend this incentive beyond the industries making so-called luxuries and I hope that, instead of dividing all things into luxuries and necessities, we shall decide what is essential to the trade of our country, for if it is essential to the trade of our country it adds to the prosperity of the nation.

Mr. Frederick Mulley (Sheffield, Park)

I am very happy to follow my hon. Friend the Member for Birmingham, Ladywood (Mr. V. Yates) because I have followed him on previous occasions when we have debated Purchase Tax. It will be known to the Committee that he has been a steadfast campaigner on behalf of the Birmingham jewellery trade, and that he brings a good deal of knowledge of this matter to our debates.

My hon. Friend has touched on one of the great difficulties, the definition of what is a luxury. The production of what may be a luxury to the purchaser may be the only available means of livelihood to the craftsman. I was a little concerned when I saw the cross-bench alliance developing between my hon. Friend and the hon. Member for Kidderminster (Mr. Nabarro) and I would counsel my hon. Friend that if he pursues this liaison he should ensure that he will be the senior partner in the venture.

What I thought a startling revelation came in an intervention by the hon. Member for Croydon, North-West (Mr. F. Harris) when he suggested that we were rather wasting our time because all these matters were dealt with by civil servants, anyway. I remembered that it was said that the Lord Privy Seal did not know what was in a Schedule, or had the wrong brief. I see that the Chancellor has seen fit to leave the Chamber as I come to this question. I am sure that we can acquit him of not having any idea of what this is all about, but it ill-becomes hon. Gentlemen opposite, after implying that their own leaders do not know what is going on, to complain that the trouble with the Opposition is that the Opposition have no policy for Purchase Tax.

Several hon. Members opposite have asked what, in this situation, the Opposition would do about the rates of Purchase Tax. In a debate on a Finance Bill the Opposition are always in very great difficulty for the rules of order permit us to put down Amendments only for the reduction of taxation. It is impossible for the Opposition to reshape financial, economic and fiscal policy in the way we should like it to be. We do not accept the Government's policy in toto, and it is not merely a question of rearranging the revenue and the finances.

No doubt my right hon. Friend will give the official Opposition view later, but, speaking for myself, I would say that I cannot possibly accept the assumption underlying the question of hon. Members opposite, "What would the Opposition do about Purchase Tax?" I do not accept that the policy of the Government is right. I think that in all the economic circumstances of the day a little more inflation or a little more reflation, call it what we will, a little more spending power, in view of the mounting unemployment, would be highly desirable.

I make that point only because I have no doubt that this question by hon. Gentlemen opposite will be a text on which they will make many speeches during our rather lengthy debates on this and other subjects. I would answer briefly by saying that we should not find ourselves in precisely the same situation as that in which the Government now are, and that, therefore, it is a rhetorical question to ask what the Opposition would do about Purchase Tax and whether we would have three rates of tax, and so on.

I agree with those who have said that Purchase Tax is a very unsatisfactory tax. It is not surprising, because all taxes are to some people, if not most, unsatisfactory. It is the unpleasant part of government to have to find the revenue wherewith to meet expenditure. The only argument for Purchase Tax is that it brings in £490 million a year. To my mind, that is the only justification for it.

It is almost inevitable a tax of this sort, reshape it how we will, will create anomalies. It is true that the worst anomalies may be smoothed out by careful combing of the Schedules, and so on, but with differing rates of Purchase Tax there are bound to be anomalies. With every Finance Bill containing them we shall have from one trade or another letters of the sort we have received today, telling us that eyebrow curlers are at 60 per cent. but that if one goes in for false eyebrows one can have them tax free. We are bound to get a list of these kinds of anomalies.

Dr. Stross

Was it not eyelashes—not eyebrows?

Mr. Mulley

My hon. Friend, with his almost encyclopaedic knowledge of these matters, is almost certainly right.

However, I am sure that we cannot get rid of the anomalies if we have Purchase Tax in this form, and we have to make up our minds about that.

The other extreme, however, put to the Committee by the hon. Member for Kidderminster, is quite absurd. It is quite impossible in indirect taxation to avoid discrimination. I ask anyone worried about the discrimination of Purchase Tax to consider for a moment discrimination against people who enjoy alcohol or tobacco. The smoker pays one and a half times the amount of total yield of Purchase Tax, about £750 million in tax, and the people who like several sorts of alcohol pay nearly as much, about £400 million. That is obviously a very strong discrimination between one citizen and another.

The question of food has been brought up. We on this side would not support any scheme which would bring food into the direct system of Purchase Tax, sales tax or any other kind of tax of the sort. Of course, one can easily argue that already there is discrimination against those who take most of their food from the bottle, as compared with the orthodox sort.

I do not think we can ever get away from the principle of discrimination. I believe most of my hon. Friends would agree that it is much better that the greater part of the revenue of the State should come from direct rather than from indirect taxation, but it would be wrong to suppose that it would be possible to finance a Budget of the present size wholly by direct means, and, therefore, we are bound to have some form of indirect taxation.

6.0 p.m.

Mr. Cyril Osborne (Louth)

May I ask the hon. Gentleman—and this is a serious point that he must face—whether he would agree with the Economist that it is better to tax men's spending than their earnings, since what we want are earnings, and, therefore, greater productivity, and that, on balance, it is better to increase Purchase Tax than Income Tax, which may cause men to work less?

Mr. Mulley

I rarely find myself in agreement with the Economist these days and I could not subscribe to that proposition. The statement that taxation on earnings has a general disincentive effect is, I believe, often overstated, but I would go beyond the bounds of order if I developed the reasons for that point of view.

If we must have some form of indirect taxation, such as Purchase Tax, we are faced with the question: on what ground it should be based? I can illustrate the difficulties to some extent by giving two examples of classes of commodities which are made in my own constituency, Sheffield. I believe that as far as possible necessities should not be taxed and I have often cited in this Chamber cutlery as a necessity—knives, forks and spoons. I do not think it is possible to argue that even on a very low standard of living we could dispense with implements for eating, but since the imposition of Purchase Tax it has been impossible to buy cutlery without paying tax. I will not now argue that the tax should be removed, because I hope that we shall have an opportunity to do so in greater detail at a later stage.

On the other hand, we have in Sheffield the silverware industry, which many people could rightly say makes goods of a luxury character. At the same time, the workers in that industry depend on it for a livelihood and it is a highly skilled craft industry. In my view, as things are, even if Purchase Tax were removed the industry will die because no new entrants to the trade are forthcoming. At least, however, over the years we have been able to remove some of the greater anomalies.

For instance, formerly a knife with a bit of mother of pearl on it attracted a much higher rate of tax. At least that anomaly has been removed and I think that we can get some sort of rough justice as between the workers in an industry and the consumers of its product. So I ask every hon. Member, when he talks rather glibly about luxuries, to remember the circumstances, which differ from trade to trade—whether it is a highly skilled trade or a mass produced trade, and so on.

It seems to me that the only considerations which can really be applied in deciding which articles should be taxed at what rate are the basic economic problems and considerations of the country as a whole. I differ strongly from the hon. Member for Kidderminster when he says that he does not think that tax should be used to stimulate exports. I believe that that is one of the main reasons why the tax should be used and can be justified, namely, if it can produce a deterrent on the home market which can be shown to have an advantage in the export field.

I only wish that the British motor car industry had carried on in the years of the Conservative Government the same percentage of its exports as when we were in power. The fiscal and economic position facing the Chancellor of the Exchequer today would be vastly different if they had done this.

Sir A. V. Harvey

Would the hon. Gentleman not agree that there are times when it is essential, to build an export trade, to have a good home market, that a high rate of Purchase Tax depresses the home market and that, in consequence, it adversely affects the export trade?

Mr. Burden

Would the hon. Gentleman not agree also that, during the period he mentioned, the countries which are now big importers of British motor cars had not recovered from the devastation created by the war and, therefore, were not in a position to buy these luxury articles?

Mr. Mulley

I will try to deal with both hon. Gentlemen one at a time. It is true that an industry needs a sizeable home market, but the requirements vary industry by industry. The remarkable exports achieved by the British motor car industry in the years roughly from 1948 to 1951 were done with a smallish home market. I venture to say that they would not have been done if British motor car manufacturers had not ben kicked into that export drive by my right hon. Friends who were then running the Labour Government.

As to the point made by the hon. Member for Gillingham (Mr. Burden), it is true that competition for motor cars at that time was much less than it is now. What I resent so much is that, having got this flying start, the British motor car industry, encouraged by the Conservative Government, switched their sales over to the home market at the crucial time when they should have been facing the test of foreign competition.

I believe that the British motor car industry, among others, can stand up to this competition. Their representatives should not come here with excuses to the effect that if they paid less Purchase Tax they could sell more abroad. If they had concentrated on the producing side and on servicing, as Volkswagen have done, and ploughed their profits back into the industry, it would have been a very different story.

Mr. Osborne

The hon. Gentleman has said that when the Socialist Party was in power it kicked the motor car manufacturers into selling their cars abroad. May I ask two simple questions? First, who was it who did the kicking, and, secondly, if it gets back into power again does it intend to start kicking again?

Mr. Mulley

I am not likely to be in a position to answer the second question. I would like very much to be in a position to answer it, but it is rather unlikely that I shall.

Mr. H. Wilson

Would it help my hon. Friend in answering the interruption to boar in mind that when the late Stafford Cripps proposed, at the motor manufacturers' dinner, in 1946, that they should export 50 per cent. of their total production, he was howled down by the motor manufacturers, and Conservative spokesmen in the House supported them for howling him down? When I became President of the Board of Trade I went to the motor manufacturers and asked them to export 75 per cent. of their total production, which they did with great success, and their sheet steel allocations were based on their export performance.

Mr. Osborne

If I may say so, the right hon. Gentleman was much more successful in talking persuasively than his right hon. Friend was in kicking.

Mr. Mulley

The hon. Member for Louth (Mr. Osborne) will be giving us the benefit of his observations on these points in due course. I would not like him to suppose that in using the word "kicked" I was doing so literally; I was using it metaphorically. There is no doubt that at least as much of the credit for the exports achieved by the motor car industry goes to my right hon. Friend the Member for Huyton (Mr. H. Wilson), who was then President of the Board of Trade, and the late Stafford Cripps, as it does to the motor industry. I would like very much to see today in the motor car industry some of the competitive spirit which was engendered in those days.

6.15 p.m.

I have got further away than I intended from the point I was making. The point is that I believe it is quite proper to use the Purchase Tax as a means of directing the economy in a broad sense. I believe that, as in 1951, when there was a great shortage of steel and other difficulties in engineering, when we were mounting an enormous rearmament drive, it was quite right that the Chancellor of the Exchequer of the day, the present Leader of the Opposition, thought fit to restrict consumption in a number of ways which reduced the demand on those industries. In the same way, where there is a large export potential, I think it is right to tax certain classes of electrical goods, television sets, and so on. The hard fact is that one always has to judge such matters by the revenue they will produce.

A matter that has not been stressed enough in this debate is that a good deal of thought should be given to the cost of collecting the Purchase Tax. Apart from the general considerations which I have tried to adduce, I should like to suggest that the Chancellor or the Financial Secretary, every time he looks at the Purchase Tax Schedule, should ask himself, "Does that particular item pay for its collection?" I am quite sure that if he went through the list very carefully on that basis, he might well be able to make some further reductions.

That is perhaps an old-fashioned, Gladstonian approach to public finance, but I think it is well worth consideration. I believe that a lot of the 5 per cent. items, for example, could very well be wiped off, and that, in terms of the net national revenue, there would be some saving there.

I make no bones about saying that we must retain Purchase Tax in some form or another, but that I believe that we have to consider it against the economic circumstances of the day, and not relate it particularly to the amount of revenue that must be raised.

Mr. F. Harris (Croydon, North-West)

I intervene only for a few months because I have been taken up on an interjection I made a short while ago. As one who has had the privilege of being a Member for ten years, I have listened to debate after debate, day after day and night after night, on individual problems in regard to Purchase Tax and in regard to individual rates of Purchase Tax. The hon. Member for Ladywood (Mr. V. Yates) has made his case every year on behalf of the jewellery trade, and we have all presented claims in regard to trades which we know something about or on behalf of constituency interests. If hon. Members opposite are fair with themselves, they will recognise that very few alterations have been made as a result of these representations. Alterations may be made when hon. Members get together and make an approach en masse to the Government of the day and constantly plug away with those representations.

I am not privileged to be a Minister, and therefore I can only judge the matter from a business point of view, but I take the view that, quite naturally, the civil servants in the Treasury put forward their recommendations—in fact, I blame them for many of the anomalies from which we all suffer these days—and the Chancellor or the Financial Secretary then decides whether or not to accept them. Certainly, the Government decide the policy; how much they are trying to obtain from Purchase Tax, or whether there will be a general range of reductions. I do not think there was anything to make hon. Members so sensitive in the interjection I made. The hon. Member for Northfield (Mr. Chapman) seemed to be particularly touchy on the subject.

Mr. Chapman

I was not touchy at all, but the hon. Gentleman said that it is not Parliament which fixes the rates of the tax. He said that the civil servants make the recommendation.

Mr. Harris

I think the hon. Gentleman rather suggested that I did not take any interest in this matter. As far as I know, I have never missed an all-night sitting. I have taken every opportunity to take part in these discussions.

Mr. Moyle

The hon. Gentleman seems to be very well informed about the relations between civil servants and the Government. Could he tell us—what I should like to know particularly—which branch of the Civil Service is responsible for recommending to the Chancellor changes in the Purchase Tax Schedule? Is it the Treasury or the Board of Trade, or, if neither, which Department?

Mr. Harris

I should have thought the obvious answer was the Board of Customs and Excise, but I am not privileged to have any specific knowledge. I am only trying to put forward what I consider to be a reasonable business and commonsense view of the matter.

The hon. Member for Northfield makes the point that it is Parliament that decides this matter. We are all as democrats agreed that that is so, but after ten years' experience in the House I think it is a reasonable assumption that the hon. Member for Ladywood has not been particularly successful, whether in the time of the Socialist Government or the Conservative Government. No matter which political party has been in power, the hon. Member has made his case year after year during the past ten years but he still has not got very far with his arguments.

Hon. Members

No, no.

Mr. V. Yates

It is the final issue that counts, and we have been successful to a large extent this year. Is the hon. Gentleman not aware that either the Chancellor of the Exchequer or the Financial Secretary receives deputations from various trades every year? Is he asserting that the Chancellor is quite oblivious to these views and simply takes the view of civil servants, as distinct from those given to him by Members of Parliament or outside trade organisations?

Mr. Harris

The hon. Gentleman could not possibly read that into what I have said. I have said that Ministers are there to be approached and that recommendations and applications are made to them. I am only making the point that there is still too much heat engendered by the sensitiveness of Members of Parliament. There is no doubt about what I said; it was obviously the civil servants, and hon. Members know this to be the fact.

Hon. Members

No.

Mr. E. C. Redhead (Walthamstow, West)

If the hon. Gentleman makes the point in this connection that civil servants make recommendations, as it is their duty to do, to Ministers, leaving the final decision to the Minister, will he say in what respect that differs from any other function of a civil servant in relation to his Minister?

Mr. Harris

The hon. Gentleman has helped me very much indeed. That is exactly what I have been trying to say, despite the excitement engendered by the hon. Member for Northfield, when I made what I think was a very truthful interjection, which hon. Members opposite do not like on occasions.

To pass from that topic, I join with all hon. Members who are against Purchase Tax generally. I am very much against it, because my own feeling has always been that it keeps up the cost of living. I have always felt, and I must be careful not to be ruled out of order, that by the Purchase Tax we add to the problems of the people and that the more we cut down Purchase Tax the better it is for the cost of living and for business generally. That is from the sheer business point of view.

I thought the hon. Member for Sheffield, Park (Mr. Mulley) was talking nonsense when he tried to make the point that Purchase Tax was not really bad for export business. My hon. Friend the Member for Macclesfield (Sir A. Harvey) intervened to suggest that surely nobody in business, as a matter of sheer commonsense, would say that we must not have a solid home market upon which to develop an export market.

Mr. Mulley

I do not disagree with the general proposition and what the hon. Gentleman tried to say. I tried to put a number of instances in which it was possible to foster exports by restricting demand at home. It is a simple proposition that if a manufacturer can sell the whole of his production on the home market he will not take the trouble or run the risks involved to enter the export business, and when the home market had gone it would be too late to go in for exports.

Mr. Harris

If that is the hon. Gentleman's understanding of the business community in this country, considering how much the people in the constituencies of hon. Gentlemen opposite owe to the success of our business community, I think the hon. Member's assumption is a very poor one.

I am only making the point that, although there are exceptions, my experience of business convinces me that business houses must have a solid home trade upon which to build and develop export markets. Hon. Members have made a scandalous attack on the motor trade as a whole. In the main, the motor trade has done a first-class job in exports, and is certainly proving that by its present performance—there cannot be much doubt about that. When that point came up, the hon. Member for Northfield kept very quiet.

Mr. Chapman

The hon. Member will remember that I was one of the foremost critics of the motor industry when it went through a period during which its export record was not good. I frequently took part in debates on the subject, and I strongly criticised those bad performances.

Mr. Harris

It is very easy for individual Members to criticise various industries and trades. It would be much more clever of them if they went into those trades and showed them how to do it. The general answer is that motor manufacturers have put up a first-class performance. They could not have been in that position if they had not had a reasonably healthy home market upon which to build. If the Chancellor overtaxes an industry with Purchase Tax rates which are too high, the task of manufacturers creating a position whereby the country can obtain the maximum export trade is jeopardised.

I am sorry that my interjection engendered so much heat. It was not made to cast reflections on the Chancellor, the Financial Secretary, or the Civil Service. I was merely stating what I believed to be the truth. Unfortunately, I am at the receiving end of many of these anomalies in Purchase Tax which cause so much trouble in business. Hon. Members must often have heard the view that the trouble is caused by civil servants who do not know anything about a business. That view may be wrong, but it is often expressed.

I should like to see a gradual reduction of Purchase Tax. I am completely against it, and the more it can be reduced the better I shall be suited. Purchase Tax has a deterrent effect on the development of an export trade, and the more it can be reduced the better it will be for the country.

Mrs. Jean Mann (Coatbridge and Airdrie)

Listening to the debate, I have sometimes wondered whether we were debating Clause 1 or the Second Reading of the Bill. I confess that I do not know the answers to whether we should impose taxes on luxuries, or whether we should regard the Budget from an economic standpoint. I do know that during the régime of the Labour Government, from 1945 to 1950, we strenuously tried to keep the tax to luxuries and gradually to remove it from necessities, until in our last Budget there were 60 items, including sewing thread and needles and bootlaces, which were removed from the scope of the tax.

The hon. Member for Gillingham (Mr. Burden) said that the tax on cosmetics was high and that he did not regard cosmetics as a luxury. He said that ladies regarded cosmetics as a necessity. I dispute that.

Mr. Burden

If all ladies were beautiful, I would say that it was a luxury, but cosmetics certainly improve the appearance of many women and to many it is a great necessity.

Mr. F. Harris

He is speaking from experience.

Mrs. Mann

There are times when it is necessary, but I cannot think that eyelashes, for instance, are necessary—[Laughter.]—I mean false eyelashes. One might just as well say that false moustaches are necessary.

Mr. Nabarro

Oh. no.

Mrs. Mann

When one looks at the hon. Member for Kidderminster (Mr. Nabarro) one would immediately decide that one was wrong. What about false nails? Surely they are not necessary. [An HON. MEMBER: "False teeth."] Rouge should not be necessary if one has the fine colouring of my hon. Friend the Member for Liverpool, Exchange (Mrs. Braddock). [An HON. MEMBER: "Eye shadow."] Eye shadow is not necessary for any woman who is living under a Tory Government. She has enough shadows under her eyes to last for the rest of her life. Many Tory ladies do not require eye shadow, considering the kind of husbands they have. It is very problematical whether cosmetics are a luxury or not.

The advertisements for cosmetics sometimes show expensive cosmetics which are said to contain lanolin. I can buy lanolin at 8d. for a small bottle. Another advertisement says that a cosmetic contains an astringent. Anyone can buy an astringent, pure witch hazel, at 11d. a bottle. The reduction with cosmetics should not be in Purchase Tax but should be made by the manufacturers who are taking advantage of a great many innocent women.

The changes which I should like to have seen continued in the Budget were those which were begun two years ago, the changes in the attitude of the Government towards home safety devices. The Home Secretary is responsible for home safety, and while the present Financial Secretary was at the Home Office, those of us in the Home Safety Group were delighted. We had never had such a sympathetic M.P. on the Government side as the Financial Secretary. We had never had one who spent the long hours with us trying to understand and grasp our problems, as he did understand our problems. We never had one who went to our conferences and who showed that he knew all about home safety.

Then, lo, he completely disappeared. Now he turns up as Financial Secretary, and I can only say, "Verily, verily, the Lord hath delivered thee into my hands." I asked the hon. and learned Gentleman about a device on a cooker, a device which won a £200 award of the B.B.C. Cookers are tax-free whether they are electric or gas. But one brilliant lad discovered how to prevent youngsters from pulling over pot handles. His device was patented by the Thames Gas Board, and a tax was immediately imposed upon the cooker, yet hospitals are constantly treating burns and scalds caused by youngsters pulling over the pot handles.

6.30 p.m.

This tax was imposed by the Chancellor's predecessor, and I am asking the present Chancellor to remove it. His predecessor, who is now Home Secretary, kept fireguards free of Purchase Tax. It was discovered that the Heating Appliance (Fireguards) Act, which provided that heaters, electric radiators and so on must be guarded, allowed the selling of old unguarded stocks. The electricity authority and the gas boards then said, "We will fix protective netting over these stoves and radiators," and that protective netting was also free of tax.

When I asked for the cooker device to be made free of tax, however, the Parliamentary Secretary said that it would be wrong to discriminate between domestic safety devices which happened to fall within the scope of Purchase Tax. But there is discrimination, in that whenever a new idea comes on to the market it is made subject to Purchase Tax. We cannot read the report of any fire station without noticing the great amount of damage and the number of fires caused by children playing with matches. The Chancellor of the Exchequer himself mentioned this matter when he was Minister of Agriculture. He talked about the number of fires caused on farms because of the careless use of matches. Yet the safety lighter, which is now sold at 5s. 11d., could be sold at 1s. 11d. It carries a duty of 4s. Other types of lighter—the flint and the battery type—which sell at 5s. 11d. and 7s. 11d. are all subject to Purchase Tax.

Perhaps we ought not to expect the Chancellor to be anxious about the matter, but if he took a long-term point of view he would see that these prices were reduced, thereby reducing his own liability, and that of the nation, in connection with home accidents, which are still running at a rate of 1,500 more deaths every year than are caused by accidents on the roads.

I feel very despondent about Purchase Tax. Although Purchase Tax has been rigidly kept off children's clothing, it is most expensive, whether it be their little shoes, at £2 a pair, or their coats, which are no use whatever unless one pays £5 for them. We must therefore conclude that the act of freeing garments from Purchase Tax excites certain people to take advantage of that fact by levelling up.

I have done a good deal of quizzing since 15th April. I find that the utmost confusion exists with regard to Purchase Tax reductions. The last shop I entered, near my home, is run by a thoroughly honest man. He told me that he loses every time. He reduces the price of an article in consequence of Purchase Tax reductions, even though he has paid the tax on it. He always passes on reductions in tax. I said, "Would you rather be a dishonest man or a chump? There is no need for you to reduce the price of an article by the amount of the reduction in the tax when that article is part of your present stock." I asked him to refer to the OFFICIAL REPORT of 24th April, when, in reply to a Question of mine, the President of the Board of Trade said that Purchase Tax was only one factor, and that he hoped that merchants, when their present stocks were sold out, would pass on Purchase Tax relief. He just hoped. He would take no measures whatever to ensure it. So there is complete confusion in this matter. Honest merchants are passing on reductions but the others are not.

I have many letters supporting my contention that some manufacturers have already appropriately increased the prices of their goods.

Mr. Burden

I know that the hon. Lady does not wish to be unfair. If some manufacturers are getting away with it, it means that there is bad buying on the part of the buyers. Most buyers know the incidence of Purchase Tax, and certainly at this time they will not pay an increase in price which would put into the pockets of the manufacturers the amount which the consumer should save by way of a reduction in Purchase Tax.

Mrs. Mann

That is a very nice and reasonable proposition to put to a Sunday school class, but it should hardly be put to Members of Parliament, who know all about monopolies, price fixing and the rest of it. If I want a Frigidaire freezer for my kitchen, how do I get over the fact that the company has already increased its price? If I want a Goblin cleaner or a Hotpoint electric iron there is the same difficulty.

Manufacturers are taking advantage of these reductions. The point is that if they were all doing it the Chancellor would still do nothing about it. When the President was asked, on 24th April, whether he would take action to compel manufacturers to pass on the tax relief, he said, "No," so if all manufacturers act in this way no action will be taken against them.

I find that most housewives and other consumers are befogged about these concessions. Some of them think that because there has been a reduction of 30 per cent. in Purchase Tax there is an automatic rise of 30 per cent. in the retail price. I have been careful in my mental arithmetic in going round the shops. I find that a 60 per cent. reduction in the cost price does not mean the same as a 60 per cent. reduction in the retail price. When I have argued about this with shopkeepers they have become befuddled—and if shopkeepers are befuddled how can we expect consumers to know what prices they should be paying?

There ought to be enforcement. After all, this concession amounts to £41 million in the next year, and one of the things which the Chancellor ought to be able at a time when there are wage demands and threatening strikes is to say, "Well, there you are. I have done my best to keep the cost of living stable, and actually to lower it. I have given concessions to national well-being and price stability amounting to £41 million." But there is nothing at all to give the honest trader any incentive to pass on these reductions. There is nothing that would enable a trade unionist leader to say to his men, "There is a £41 million reduction in the cost of living." Purchase Tax reductions should be used to stabilise the £, wages and prices and so help not only the consumer but also our export trade.

I am sorry that there is no enforcement here. There is not even encouragement. I might sit here until three o'clock in the morning asking for further concessions, but even if they were granted I should not know whether they would really be passed on to the housewife.

This we do know—that increases are passed on. Any tax increases are passed on but concessions are in very grave doubt, and I do not think the Chancellor should allow this to stand. I do not think that he is being fair to the honest trader, and I think that he should seek some method of enforcing the passing on of reductions.

Mr. William Shepherd (Cheadle)

If I thought that there was any possibility of traders generally seeking to benefit themselves at the expense of the consumers, I should think that my right hon. Friend would have some case for doing something. I should say, however, that on this occasion there is less chance of any advantage being retained than possibly at any other time when changes have been made in Purchase Tax, for the simple reason that today we have a fairly competitive economy and that, to sell goods, good value has to be offered. That is a state of affairs which I understand is regrettable to hon. Gentlemen opposite, but which I have no difficulty in commending.

I must say also that the hon. Lady the Member for Coatbridge and Airdrie (Mrs. Mann) is on dangerous ground if she cannot differentiate between a luxury, an amenity or a necessity. In progressive society these things are always changing. Perhaps in the kind of society visualised by hon. Members opposite there would be rigidity. In the progressive society for which we on this side of the Committee stand there is a constant change of articles through these various categories, and I am glad that that is so.

I want to make a few short, general observations on Purchase Tax. I have almost become reconciled to this wretched tax. A distinguished rabbi once said that one thing that could be said about the Jews in Israel was that they had become reconciled to their bondage. I am in a somewhat similar difficulty of becoming reconciled to this tax, which I have hated so much and for so long. I will tell the Committee why I think that we shall have this wretched tax with us for quite a long time.

I had hoped for many years that we should be able to abolish it. I think that there was a time, not many years ago, when that was a possibility. I do not think that it is possible now. I believe that we have to face the fact of Purchase Tax being with us for some considerable time. The main reason is this. There are constantly growing demands by the State, for education or the Health Service, which have to be met whether we like it or not, and to get the necessary revenue we must take advantage of indirect taxation. In fact, I would say that it ought to be our aim, in the long run perhaps, to have more indirect taxation in proportion than we have today.

6.45 p.m.

Many countries get the reputation of being lightly taxed when, in fact, they are not. Germany is a specific example. If one asked a dozen people in the street which is the more heavily taxed nation, the German or the British, there would be a chorus, "Of course, the British". When one looks at the figures, that is, the percentage of national income which is taken by the State in local and national taxation, one finds that it is as low here as it is in Germany. But the difference is this: whereas, in Germany, one-third of the total revenue is raised by a turnover tax, here a very much higher percentage is raised in direct taxation.

There is no doubt, whatever may be said to the contrary, that direct taxation to the extent that we have it in this country is a disincentive and that as an incentive indirect taxation has a great deal to commend it. Therefore, it is with some reluctance that I have come to accept this wretched incidence of Purchase Tax because I feel that in our existing circumstances it is inescapable.

I want to say a word about Purchase Tax as an instrument of planning. I have always disliked it intensely as an instrument of planning because, of course, things change so frequently on the economic front. There is no continuity. What is an effective instrument today is useless tomorrow. One of the great drawbacks to Purchase Tax is the constantly fluctuating rates. It is very undesirable to have constant fluctuation in rates. If we are to use Purchase Tax as an instrument of economic planning to follow the almost constantly changing phases in the economy, we have to keep changing the rates or the things on which we impose the tax.

Therefore, I find Purchase Tax as an instrument of economic planning disagreeable, but I would say to the Committee that I would not regard it as advisable to have it written off as a method of tax. Much as I dislike it in this respect, I cannot take the view that if we took off Purchase Tax from the motor car industry today we should further the exports of that industry. We must be realistic in this matter. The home market is in a sense easy, whereas the selling of any goods overseas is a very hard job indeed. In selling overseas one has to wait a long time for finance. The motor car manufacturer wants to get the money for the car before he has paid for the material he uses in making it, and so far as the home market is concerned he does.

It is difficult to sell cars overseas. I have no doubt at all that if, tomorrow, we took off Purchase Tax from motor cars, a large proportion would flow into the home market and a lesser proportion overseas. Therefore, once again, though I hate this tax, I feel that we must accept it on occasion as an instrument of economic planning, though I should like to see it used as little as possible.

What can we do to make this objectionable tax more agreeable? The hon. Member for Sheffield, Park (Mr. Mulley) said that often Purchase Tax did not justify its collection. That is a mistaken impression, because one of the worst aspects of this Tax, from the point of view of the payer, is that it is easy to collect, and that is one reason why I think we shall have the tax with us for a long time.

Mr. Mulley

The hon. Gentleman is misquoting me. I said that there were items in the Purchase Tax Schedule which did not justify their existence in view of the cost they imposed upon industry and the Civil Service in collecting the tax. I was not referring to the whole of Purchase Tax because, generally speaking, that has worked very well.

Mr. Shepherd

I am sorry if I misunderstood the hon. Gentleman. I thought he was implying that the tax might be expensive to collect, which it is not.

That argument is dangerous, because if we are prepared to say that certain categories are to be dropped because, pro rata, they are taking too high a percentage in expenses and do not pay, we shall be unfair to those who pay continually in that category. I do not think that we can attempt to rationalise Purchase Tax. One must accept the evil that Purchase Tax automatically produces a whole series of anomalies.

I do not condemn the Civil Service. I sympathise with it. I am extremely sorry for the unfortunate people in the Customs and Excise Department who have to try to apply this absurd tax. They know as well as we do that half the things they have to do will not make any sense at all, and the more one tries to make sense of them the greater chance there is of making more nonsense. From that point of view the task is hopeless. But hon. Members must be reasonable about this. We have to accept a certain percentage of anomalies if we wish to raise revenue by indirect taxation in his way. Nothing that we in this Committee can do, none of the skill of the civil servants, will take away the anomalies from this form of taxation. They will always exist.

One thing we can do is to reduce the number of classifications. That ought to be the objective of our policy. We should reduce the number of classifications and make a vow that we are not going to alter them in future. Too many classifications are the evil of Purchase Tax and the frequent changes in rates is another thing which annoys traders very much indeed. If we can reduce the rates to, say, three and make an agreement that, except in the most exceptional circumstances, we will not alter them, then I believe that this tax, objectionable as it is, would be more acceptable to trade and industry.

Dr. Horace King (Southampton, Itchen)

I am sure that the Chancellor must have been as pleased as back bench Members of the Committee were unhappy to hear the hon. Member for Cheadle (Mr. Shepherd) advancing arguments in support of a tax which the hon. Member still regards as objectionable. The Chancellor needs no such support from any hon. Member on either side of the Committee and I am sorry to find that the hon. Member for Cheadle not only——

Mr. Osborne

Can the hon. Member tell me any tax which is not objectionable?

Dr. King

I was coming to that point, although I am certain that whatever I say will not satisfy the hon. Member for Louth (Mr. Osborne).

This has been such a non-party debate that the red lines on the carpet have almost criss-crossed. Had they actually criss-crossed, we should probably find that more Purchase Tax would have to be paid on the carpet than was paid for the present one. The curiosities in the index of the list of items subject to Purchase Tax reveals how all-pervasive is this tax. It is true, as was pointed out by the hon. Member for Cheadle, that one of the attractive features of this tax to a Chancellor is that nobody knows exactly when he is paying it and the British public do not realise how much they are being taxed in this way. The nearest approach to a tiny bit of totalitarianism in our gloriously free democracy is made in the all-inclusive index to the Purchase Tax list.

I do not wish to call attention to the anomalies of Purchase Tax. The hon. Member for Kidderminster (Mr. Nabarro), with whom I disagree violently on almost everything under the sun, has rendered a public service in consistently calling attention to some of the many anomalies. But it is interesting to notice that the all-pervasive eye of the Chancellor extends to watchmen's tell-tale devices—I quote from the index; I think it characteristic that that should now be exempt from Purchase Tax—snoods—there we go back to Chaucer's England; rosaries; mouthwashes; Easter eggs, empty; medicated drink; crucifixes; medicated bunion rings; boudoir caps and, finally, as characteristic of the spirit of Purchase Tax, there is a tax on requisites for amusement.

Up to about two years ago I thought that Purchase Tax was on its way out. Then I noted with alarm a sort of fiscal recession regarding Purchase Tax and new Purchase Tax imposed. I hope that this debate will show the Chancellor that there is now a demand from both sides of the Committee to reduce Purchase Tax more swiftly than it is being reduced at the moment. When it was introduced during the war years the tax had two purposes. One was to discourage spending. We wanted all the goods then being manufactured to be goods which would help the war effort and we wished to discourage the manufacture of consumer goods. The second purpose was to produce revenue for the Treasury. Both reasons were unexceptional and accepted 100 per cent. by the British people during war-time. Unfortunately, although I hope to show that circumstances have changed, so much money is now involved that no Chancellor can lightly dispense with a form of taxation which brings in so much revenue.

Do we wish to discourage spending on consumer goods at this time? In my opinion, I think that most hon. Members on this side of the Committee would agree, the present danger is not that we shall produce too many consumer goods but that there will be unemployment. The present policy of the Government tends to accentuate unemployment. Only yesterday I received a deputation from aircraft designers in my constituency who are alarmed at the shrinkage in the aircraft industry. In southern Hampshire we are seriously concerned, not that mass unemployment may suddenly arise, but about the danger of unemployment figures rising and getting out of control.

If this be so, then this is not the time to retain a tax, one of the basic purposes of which is to act as a disincentive to the manufacture of consumer goods. If Purchase Tax remains on any form of goods and, as a result, the development of industry manufacturing it is hampered, I consider that a bad thing.

Mr. Osborne

The hon. Gentleman has said that he received a deputation of aircraft workers who had cause to fear unemployment. Would the abolition of Purchase Tax affect their employment?

Dr. King

The hon. Gentleman ought not to attempt to make such a point. I merely mentioned that to give a picture of the kind of atmosphere in which we are living.

I repeat that, with threats of unemployment emerging in so many directions, this is not the time when we should add to them by threatening to create unemployment in other industries. But even were it right to discourage spending on consumer goods, this is hardly the cheapest way to do it. It seems to me a crazy paradox that at one and the same time we should have Purchase Tax imposed to stop people from buying, and, as has happened in the last three or four years, expand advertising of all kinds, by television and in other ways, to persuade people to spend.

7.0 p.m.

If we want to dissuade people from spending, a much cheaper and more intelligent way would be to reduce advertising. It would be out of order for a back bencher, in a Finance Bill debate, to propose any new method of taxation, so I will not say anything about the possibility of an advertisment tax. I do, however, say that if we want to create a disincentive to consumer spending we should tackle the problem at the root by discouraging advertising.

Mr. F. Harris

Is it Labour Party policy to propose an advertising tax?

Dr. King

I am expressing my own personal views. I hope that the hon. Member will not take the debate away from the very broad non-party nature that it has had so far.

As a means of raising revenue, I suggest that the Purchase Tax contains an element of the least socially just method of raising taxation. I disagree fundamentally with the hon. Member for Louth, who interrupted one of my hon. Friends who spoke earlier, and, apparently, with the Economist on this question. When anyone buys an article on which there is Purchase Tax, the millionaire pays exactly as much tax on that article as the poorest widow in the land; but if that is true, the relative burden to the millionaire and the poor widow is utterly different.

I believe that all indirect taxation is regressive. The tax on beer and tobacco is regressive. Everybody is paying something that is to some extent in the nature of a poll tax in the tax that he pays on beer and tobacco. But at least one has the social consolation that nobody need buy beer or smoke tobacco if he does not want to. If, then, Purchase Tax is imposed on something which someone does not have to have, perhaps it is more socially defensible than the Purchase Tax which still remains, some of it introduced recently by the predecessors of the present Chancellor of the Exchequer, on goods which are absolute necessities to the housewife. I believe that good government at the present time would be steadily moving away from Purchase Tax in general and as a basic principle would be eliminating Purchase Tax on goods which are necessities.

I suggest to the Chancellor one or two principles to guide him in cutting Purchase Tax during the ensuing debates. I want to make some suggestions in addition to the excellent one put forward by my hon. Friend the Member for Sheffield, Park (Mr. Mulley), who said that we should by all means abolish a Purchase Tax which was not worth collecting. There may be different views about taxation. Nobody can defend a tax, not even the most loyal Treasury official, which is collected merely for the pleasure of collecting; and a 5 per cent. tax which costs 5 per cent. to collect is about the craziest thing that could exist.

I support the principle, put forward so eloquently by my hon. Friend the Member for Coatbridge and Airdrie (Mrs. Mann), that obviously nobody can defend a Purchase Tax which is imposed on something which might save a life, and that the tax on some of the new inventions that my hon. Friend mentioned is, I am sure the Chancellor would agree, most deplorable.

I want to suggest one or two other principles so that the Chancellor of the Exchequer may put his name to some of the Amendments to the Schedules which we shall shortly be debating. Some of them would cost him comparatively little. I suggest, first, as a sound principle, that it is wrong to tax education and that it is wrong to tax welfare. As an illustration, the Hampshire County Council, attendance at whose meeting made me late for this debate, for which I apologise to the right hon. Gentleman, paid last year about £14,000 in Purchase Tax on school stationery and other school materials. This is only one branch of local government expenditure which bears Purchase Tax. I have just come away from a meeting of the council at which it was reported that last year we printed 1½ million duplicated sheets, on every one of which the Chancellor collected a little bit of Purchase Tax.

It is true that the Treasury probably paid some 60 per cent. of the Purchase Tax that Hampshire paid on its school equipment and stationery, but I suggest, again in support of my hon. Friend the Member for Sheffield, Park, that that 60 per cent. which the Treasury pays to the local authority means that for the 60 per cent. that is levied, Purchase Tax goes through all its ramifications, inflating the cost of living as it makes its way steadily around, so that, finally, the Treasury does not get a penny out of it. That 60 per cent. is levied on the local authority by way of Purchase Tax and is paid to the local authority by way of grant.

If the Hampshire case is typical, it would appear from the number of local authorities that about £2 million of educational expenditure is due merely to the incidence of Purchase Tax on school stationery and other school equipment. It may be that one of the side effects of the block grant will be to relieve the Chancellor of his 60 per cent. and impose the 100 per cent. burden entirely on the local authority, which would be a little more logical from the Treasury's viewpoint but certainly much more painful from the point of view of the local authority.

I suggest, therefore, as the first principle, that we should scrap any Purchase Tax which is handicapping the development of our educational services.

Secondly, I would urge the Chancellor to scrap any vestiges of Purchase Tax which remain on British culture. We are living in a time when there is a battle going on between a cheap commercial culture, which may destroy everything that is precious in the culture of the world this century, on the one hand, and the worthwhile heritage of great art from the past and the work of creative artists in our own times.

Shakespeare, if he were born today, would have to pay a tax on the pen and paper he used. He would find that the Torquemadas who prepared the lists would carefully exempt him from Group 26 for his pen, excluding it from the category of articles of personal adornment, so that they could bring it under Group 34, section 6, writing implements and accessories thereto. Worse than that, he would have to pay tax as an infant learning to write with a slate pencil, if such atrocities still survived in a backward school somewhere in the country. This, of course, is a trivial example.

The much more serious example is music, which is still handicapped by the Chancellor. Britain is the only civilised country in the world which taxes the musician on the tools of his trade. Even his music manuscript paper is carefully listed and subject to Purchase Tax. I congratulate the Chancellor on what he has done so far in reducing the tax on musical instruments but I beg him, before the debate on the Finance Bill is over, to go further and scrap entirely the vestigial tax remaining on musical instruments.

It is worth while saying that in spite of Purchase Tax, Britain is a great musical nation both for composers and executants in our time, but that instrumentalists especially have a grim fight to live in an age of the mechanical reproduction of music. Purchase Tax makes their battle for existence much harder and complete exemption would do a very useful service to a struggling profession and to a useful little industry to our export trade.

The third principle that I would put to the Chancellor is that the burden of Purchase Tax on business is a heavy one. The right hon. Gentleman could help to reduce the cost of administration, of servicing and of selling. If he were to do so, he would be helping British business in its effort to win, by salesmanship, by servicing and by commerce, dollars from abroad.

Fourthly, the burden that Purchase Tax imposes on industry is a heavy one. The tremendous list of Amendments to the Schedules show the claims of industry putting themselves before the Chancellor in the next two days. With hon. Members opposite who have spoken in this debate, I believe that Purchase Tax hurts industry in its efforts to manufacture goods and sell them cheaply abroad and at home.

I speak always from my experience in these matters. This is no light matter even in a light industry like the cosmetics industry, to which my hon. Friend the Member for Coatbridge and Airdrie referred. There is in the little town of Eastleigh, in Hampshire, a cosmetics factory which is of real economic importance to the life and well-being of the people of Eastleigh. The concession that the Chancellor has given will be much appreciated by the people of Eastleigh. As is natural, the cosmetics industry is asking for more than he has given.

That industry not only provides employment under ideal conditions for many Eastleigh folk, but it has a good export trade and is earning precious dollars for Britain. I mention this not to plead the special cause of cosmetics, but to say that if that is true of a small factory in a small town, it must, a fortiori, be still more true of great industries like the motor industry. I join with hon. Members opposite in paying tribute to what the motor industry has done to earn very precious dollars for the country.

As a summary of the four principles, I suggest that Purchase Tax might be taken off all goods which are connected with education, all which are connected with culture, all which are connected with commerce and maintenance and extension of worthwhile industries. I suggest that, fundamentally, Purchase Tax ought to be reduced on all goods which are essential because, from the point of view of social justice, a tax on an essential commodity is an inequitable poll tax.

It may be that the four criteria I have mentioned would account for almost the whole of Purchase Tax. I would not be surprised because, unlike the hon. Member for Cheadle, I feel exactly about Purchase Tax as he used to feel until, by constant enduring of this evil tax, he has come to defend it and even to find good in it. I hope to see the day when Purchase Tax will have gone entirely. In the meantime, I suggest that taking the tax off the first two categories, education and culture, could be conceded by the Chancellor at very little cost to himself and that on the other two the line ought to be a much speedier advance than there is in his proposals.

Sir A. V. Harvey

The hon. Member for Southampton, Itchen (Dr. King) can at least say to his constituents—or they will read—that he has covered every trade, business and profession. He will get no complaints on that score.

My purpose in speaking now is to thank the Chancellor of the Exchequer for what he did for the tie industry. We saw his predecessor last year and he recognised that there was an anomaly. Now the tax has been reduced from 30 per cent. to 5 per cent. I know that the industry, especially that part in Macclesfield, is very grateful for what has been done. The reduction will certainly help the trade in its difficulties.

One hon. Member opposite was confused about Purchase Tax in relation to exports. I quite agree that if we took Purchase Tax off motor cars today it would not help the exports of that industry, but I understood the hon. Member to be generalising rather than to be, referring specifically to motor cars. In the textile trade it is a very different story.

Mr. Mulley

I explained, I think at least twice, that I was speaking about particular items. I mentioned cars and television sets. I take very much the same view as that taken by the hon. Member for Cheadle (Mr. Shepherd)—that when we have a waiting list for cars on the home market it would be stupid to take the tax off them.

Sir A. V. Harvey

We shall be able to read what the hon. Member for the Park Division of Sheffield (Mr. Mulley) said. I hope that the Chancellor will consider the effect of Purchase Tax on those industries which are now running into a rough time. There is no doubt that many industries which have traded successfully for twelve years are beginning to find competition most severe. That is where I differ from hon. Members opposite in reference to the motor car industry. They spoke of the industry in 1948, but it must be realised that then, soon after the war, one could sell almost anything, and now the industry has to face severe competition from the Germans, Italians and others. We should remember: A man may well bring a horse to the water; but he cannot make him drink…. In dealing with any great industry, we ought to be gentle in our references to it here. The industry is helping our economy and employing hundreds of thousands of people and we as Members of Parliament ought to encourage it. It has done a tremendous job, and I hope it will continue to do so.

7.15 p.m.

In December, or at the beginning of January, deputations put their case before the Financial Secretary and the buyers hold off because they think there might be a reduction in the tax when the Budget is presented. I should like to see a longer period between these changes. I should like us to have a good reduction and to stick to it for two years. That may not be possible, but I hope my right hon. Friend will consider Purchase Tax in relation to industries which are having difficulties in trading.

In my constituency there is very little unemployment at the moment, but many are on short time and people are finding it increasingly difficult to sell goods, particularly in North America. We may be getting commodities at lower prices than we were, but the countries which supply those commodities will not have the money they previously had with which to buy our goods. I therefore hope that my right hon. Friend will do something for the industries concerned before it is too late. It is more difficult for them when the brake is put on.

I remember reading a speech which a former hon. Member of this House, Earl Attlee, made when Purchase Tax was in- troduced. I recommend all hon. Members to read that speech. He said that this was just a temporary tax which would last for the duration of the war, and he gave very good reasons for it. From his speech, one would have expected that the tax would come off in the 1945–50 period, but that did not happen. Hon. Members say that we are saddled with this tax and that the sum involved is far too great to enable us to abolish it, but I think my right hon. Friend has done his best. He has taken a big chunk this year and reduced the tax. That has helped trade and I hope that in the difficulties which lie ahead—there are many—my right hon. Friend will use the opportunity to help our economy.

The hon. Lady the Member for Coat-bridge and Airdrie. (Mrs. Mann) made some remarks about cosmetics which I was amazed to hear. In the years we have both been in the House I have always thought she brought colour and freshness into the House of Commons and I have admired her. She has never been lacking in other decorations and I am surprised that she does not like the idea of cosmetics. Usually she is well-informed, but on this occasion she must have been completely out of touch, not only with women in her constituency, but in the whole country. I was sorry that the hon. Lady the Member for Blackburn (Mrs. Castle) left the Chamber because I am sure she would have differed from the hon. Member for Coat-bridge and Airdrie on this point. She must bring herself up to date, because the cosmetics industry is thriving and has a very good export trade.

We cannot afford to lose exports; the country must live on them. The hon. Member for Itchen referred to a factory where the industry was thriving and giving employment where it was required. I know of one or two industries which in a similar way are exporting not only to the Commonwealth but even to Northern America.

I cannot see why soaps and shampoos are taxed at 30 per cent. Surely the tax ought to be taken off these things completely.

My right hon. Friend has gone a long way in bringing some sense into the method of progressive Purchase Tax but he has still a long way to go. I have sufficient faith in him. I know that he will do it sensibly, and indeed nobody can complain if the tax is continually reduced. I ask him to pay particular attention to those industries which are obviously affected by Purchase Tax and to alleviate their problems in good time.

Mr. Cyril Bence (Dunbartonshire, East)

This general approach to the problems of Purchase Tax on the basis of either social or economic conditions in the country as represented by the purchasing power in people's pockets and general trading conditions seems all right in the case of the motor-car industry. I have some sympathy with my hon. Friend the Member for Northfield (Mr. Chapman) in the view that the maintenance of Purchase Tax on the motor-car industry may be justified in that it pushes as many cars as possible to the export markets, especially in view of the waiting list, but this does not apply to all industries. There are industries, including one in my constituency, where the maintenance of a good, stable and even expanding home market is essential if they are to expand their export market.

Their economics and their rate of production and expansion are such that if they cannot maintain a very high rate of output from their plant they are in difficulties. It is essential that such an industry should be able to market at a very high rate and as widely as possible on the home market. I am thinking about the sewing machine industry.

Mr. Nabarro

Another Nabarro disciple.

Mr. Burden

This argument has been used before.

Mr. Bence

I have been in the House for eight years, and in every Finance Bill I have stressed this fact because, like the hon. Member for Kidderminster (Mr. Nabarro), I have been in industry and know that for many industries the whole world is their market and often their capacity to market in any country—in South America or the Commonwealth or even the Far East—depends to a great measure on the extent to which they can market their products at home at a reasonable and remunerative price.

I am particularly concerned with the sewing machine industry and the 30 per cent. Purchase Tax on all accessories of sewing machines—the cabinets and the little things which go into them and make the machine an attractive proposition. The British sewing machine industry has been faced with very heavy competition, and any falling away in the buying of its machines will tend to increase the cost of production. The position is not the same as it was forty or fifty years ago, when capital costs were reasonably low, a large amount of labour was employed and the variable factor in costs was very large. Today the variable factor in costs is falling and fixed costs are rising. Anything which tends to cut off the sale of many products, and certainly sewing machines, will have very serious effects upon employment and upon the export of those products.

The Singer Machine Company in Clydebank is facing a sticky period at present. When wastage occurs it is not replacing it with fresh labour because the company is meeting very severe competition all over the world. Its capacity to meet that competition, not only in deliveries but also in price, depends on the capacity to command a good market in the United Kingdom. When the Chancellor imposes a 30 per cent. Purchase Tax on cabinets and the little accessories which help to make a sewing machine attractive to the buyer, he does not realise what damage he does.

I have seen sewing machines being imported into this country with many attractive designs and accessories added to them. These make them very attractive. Yet the Chancellor puts a 30 per cent. tax on the very factors which, added to a perfectly sound sewing machine—probably the best in the world; the Singer sewing machine is made in Clydebank, which is probably why it is the best in the world—make up its attractiveness. When the Chancellor puts a 30 per cent. tax on the accessories he is probably striking the worst blow he can at that product and its capacity to face competition.

It is no use displaying to the housewife an engineering device which is perfectly sound if it is not in an attractive form and a design which appeals to her eye. I am certain that the average housewife judges these appliances by their attractiveness, and in manufacturing for the home market it is always a problem for the industrial producer to incorporate with his efficiency an attractiveness of design. The 30 per cent. tax is a blow at those people who are surrounding their mechanical device with an attractive design.

I hope that the Chancellor will look at the matter again, because the industry has already made a great contribution to our export trade. The Singer sewing machine is known all over the world. The company has been able to export to the United States and to many other countries where the Singer Company of America has failed. We have been able to compete with it and to keep up with it in design, but if the Chancellor persists in this almost punitive tax of 30 per cent. on the accessories of sewing machines, he will not only make the manufacturing very difficult but, worse still, will affect one of the great factors in this industry—the wonderful service provided by the company.

A 30 per cent. tax on all the accessories which go to servicing the machine is an attack on an aspect of British production which in the past has often been criticised both in the House and by people in trade who have said that the British manufacturer fails to provide adequate servicing of his product. Surely a 30 per cent. tax on the accessories is a tax on the servicing costs, because the accessories are supplied by the manufacturer and serviced by his service mechanics, and a charge upon service is a charge which the manufacturer must meet or pass on to his consumer.

With Japanese and German products entering our market, some much cheaper but, from what I have seen, not equal in quality to our own products, I think that the Chancellor should look into this industry, because here is a case where any punitive tax which cuts down the sales on the home market is a tax on the firm's capacity to export to the rest of the world.

7.30 p.m.

Mr. Osborne

I wish to detain the Committee for only a moment or two. The hon. Member for Southampton, Itchen (Dr. King) started by saying that Purchase Tax was an undesirable tax, and I asked him what he thought would be a desirable tax. He said that he would tell me afterwards, but he forgot to do so. In my opinion, no tax is desirable—neither Purchase Tax nor any other. We must remember that the tax raises just short of £500 million. This is spent on what we think are desirable and requisite things.

What used to divide us as parties was the argument about whether it is better to raise the bulk of our financial requirements by direct taxation or by indirect taxation. Of course, it is very popular among hon. Members on both sides to please their constituents by asking for this or that tax to be taken off. We have just heard about Singer sewing machines. Previously, it was something to do with the making of cosmetics in another constituency. In a quite irresponsible manner, we bid for taxes to be taken off things which interest our own constituents irrespective of the effect it would have on the Welfare State, which we all support, or the security of the State, which we all know to make an inevitable call upon our resources.

The Purchase Tax raises almost £500 million. This is really fundamental. The other two principal items of indirect taxation, the duties on tobacco and on drink, raise between them about £1,100 million. By indirect taxation, therefore, we are raising by those three methods just about £1,600 million a year. A shilling on Income Tax produces about £260 million a year. Already, Income Tax and Surtax are up to 18s. 6d., so that room for manœuvre in direct taxation is now relatively very small. Even if everything were taken from the substantial Surtax-payer, it would not fill the gap left if all indirect taxation were removed.

It is very easy to try to please our constituents by pleading that they ought not to be subject to Purchase Tax in one way or another. It is a most popular plea. It catches votes like fury, but it is irresponsible electioneering. The only popular tax is the tax which falls on the other fellow or on the other constituency. Yet we each want the Welfare State for ourselves and for our people. I therefore call this kind of debate unreal, inasmuch as we are—if I may, with great respect, use the expression—playing "silly devils" with the fundamentals of our society.

Mr. Chapman

I am sure the hon. Gentleman is right in general principle, but does he want to go so far as saying that, when an industry is depressed and in grave danger, we should nevertheless keep the tax on?

Mr. Osborne

I am not allowed to discuss this; I should be out of order. We have heard talk of industry being depressed, and the word "unemployment" has been used a number of times. Again, let us be realistic. Unemployment in this country is 2 per cent. In America it is 7 per cent. In Western Germany it is 8 per cent., and in Canada it is 10 per cent. Let us not exaggerate the position. That is all I am saying.

Mrs. Harriet Slater (Stoke-on-Trent, North)

Is not 2 per cent. bad enough?

Mr. Osborne

It is useless to cry "Wolf" when the wolf is not there. That is all I am saying. Hon. Members on both sides who, quite reasonably, plead that Purchase Tax should be reduced or taken off the things which specifically interest themselves or their constituents ought to remember that it produces nearly £500 million a year. Until we find something to put in its place, it is very unwise to talk of taking it off.

Dr. Stross

I should like the hon. Gentleman to answer just one small point. If that is his thesis, does he extend it and say that the revenue contributed by smokers is so large that one must not do anything to diminish it or take it away, in any circumstances?

Mr. J. McGovern (Glasgow, Shettleston)

Increase it.

Mr. Osborne

The hon. Member for Glasgow, Shettleston (Mr. McGovern) says that he would increase it. From a tax point of view I really agree with the Economist, that fundamentally it is better and more desirable from a social point of view to tax a man's spending than to tax his earnings.

Dr. Stross

Now will the hon. Gentleman answer my question?

Mr. Osborne

I am answering it. I would rather tax a man's smoking than tax his earnings. If I had the choice between putting up taxation by P.A.Y.E. and putting up the tax on tobacco I should not choose to put up the P.A.Y.E. tax. What the nation requires above all things is greater and more efficient production. Therefore, let us, for goodness' sake, not say "Take off the Purchase Tax" to please our constituents without being prepared to say what ought to be put in its place. When I asked the hon. Member for Southampton, Itchen, what was a desirable tax, he was wonderfully silent.

Mr. J. Edwards

I am sure that the Chancellor would agree that it has been a very good thing indeed to have this opportunity to discuss the principles of the Purchase Tax before we embark upon the detailed and, perhaps, long-drawn-out business of examining the Schedules. It is a good thing that we should ask ourselves what considerations we ought to bear in mind in deciding what should be taxed and, having decided that, what considerations we should bear in mind in deciding the level of tax which the various things should carry.

Whether we like it or not, we must make certain assumptions for the purpose of this debate. We must assume a certain level of expenditure, which we are not able to talk about here and now. We must assume the need for revenue. We must not overlook the fact, to which our attention has just been drawn, that the Purchase Tax as a whole brings in about £500 million of revenue. This does not mean, however, that we ought not to argue with one another about the details of the Purchase Tax. Nor, indeed, when we come to the Schedules, shall we be found lacking in this respect.

We have agreed, I think, about a certain number of things. We have agreed—I am glad that certain hon. Members have mentioned it—that we ought not to blame the officials of the Board of Customs and Excise. As one hon. Gentleman put it, they deserve our sympathy rather than our blame. The truth is that they are members of a very hard working and conscientious service. We agree, also, that abrupt changes in Purchase Tax make life extremely difficult for the industries affected. I am not sure that life is not made even more difficult for them when the tax is reduced than when the tax is increased, but, in any event, we are agreed on not liking abrupt changes.

I was very interested to hear the Chancellor confess, in his Budget speech, Personally, I have always been attracted by the idea of a general tax at a low rate, as an alternative to the Purchase Tax in its present form."—[OFFICIAL REPORT, 15th April, 1958; Vol. 586, c. 70.] For reasons which he then gave, however, he took the Purchase Tax, modifying and simplifying it in the sense of reducing the number of rates of tax, and he lowered the overall average tax. What he did in the end, of course, was to accept the main principles on which the Purchase Tax is based, that is, that there are some things which one does not tax at all and there are some things one taxes at a very much higher rate than others.

I am sure that the Chancellor would agree that, in deciding the final form of his Schedules, he bore in mind whether certain articles were necessities, as he saw them, or whether they were things which could reasonably be expected to bear some tax, and if so, how much tax. I am sure, also, that he had some regard to the effect of what he was doing on individual industries.

For example, I noted that he took the tax off wool cloth, which pleased me, representing, as I do, a constituency where this is important. But it would be absurd to suggest for one moment that the Chancellor had not had these various considerations in mind. I would go so far as to assert that any Chancellor, faced with the need to raise money on this scale and in a position where he had to maintain Purchase Tax whether he liked it or not, would be driven to apply certain principles to his judgment.

First, he would have to consider whether a particular commodity was a necessity and whether it was right that it should bear tax. He obviously would not put a tax on bread, but he might conceivably think it right to put a tax on television sets. Moreover, he might take the view that, although certain things were not primary necessities, they had become conventional necessities, such as cultural or educational things, which ought not to bear tax.

Secondly, he would have to consider the effect of what he was doing on the economy. That was the fallacy that lay behind so much of what the hon. Member for Gillingham (Mr. Burden) was saying, because he did not ask himself questions about the circumstances in which particular Budgets were introduced. A Chancellor has to consider the effect of what he will do.

Mr. Burden

I certainly did, but I did not compare, which was perfectly legitimate, the fact that all these changes were made in the 1951 Budget during the Korean War. The Korean War was still on when the Conservative Party came into power and we reduced Purchase Tax and taxation generally; and the Korean War was won while the Tory Party was in power.

Mr. Edwards

If I were to develop this comparison it would lead me far afield, but it does not come to grips with the problem.

The second set of principles that any Chancellor must consider is the effect of what he is doing on the economy. For example, if he has a great armament drive on he has to use all the instruments at his disposal to support it. If he is faced with an acute crisis and cannot get enough exports he must not do anything which has the effect of taking goods out of the export market and putting them on the home market. As the hon. Member for Cheadle (Mr. Shepherd) said, it is true that there are limitations to the use to be made of Purchase Tax for economic planning. It is a blunt instrument, if we like, but no Chancellor can afford to ignore the consequences of what he does, first, on the economy as a whole, and, secondly, on particular industries. There must be few hon. Members who, at some time or other, have not campaigned on behalf of an industry to secure a reduction in Purchase Tax.

The third thing that the Chancellor has to consider, in my opinion, is the effect of what he is doing on industrial relations. He has to remember what the consequences of movements of Purchase Tax will have on the official index and what that will mean in terms of wage claims, and so on.

I have said this because in what I wanted to bring to bear on the hon. Member for Kidderminster (Mr. Nabarro) I wanted the approval not only of my hon. Friends, but also the approval of the Chancellor. What the hon. Member for Kidderminster did was to ignore completely every one of these considerations. There is not one of which he took any notice.

Mr. Nabarro

May I correct the right hon. Gentleman at once? As I understood his speech, the first consideration is that the Chancellor must have a substantial volume of revenue. In the course of my speech, I was at great pains to say that the formula that I was advocating for a single rate of tax at 15 per cent. could raise an equivalent sum in revenue and, therefore, is absolutely sound.

7.45 p.m.

Mr. Edwards

The hon. Gentleman, as I rather supposed, was not listening to what I said. I set out three sets of principles and he conveniently does not refer to one of them, but refers to something that I said in an entirely different context very much earlier in my speech. My hon. Friend the Member for Flint, East (Mrs. White) and I were wondering whether, under the Paymaster-General's classifications, we had to regard the hon. Gentleman as a necessity, an amenity, or a luxury. We reluctantly concluded that we had to grade him as a luxury. I even found a heading for him in view of his lovable and endearing characteristic of preening himself. I came to the conclusion that he could be found under Group 32, "Plumage improving preparations".

Mr. Nabarro

Very poor stuff.

Mr. Edwards

Well, perhaps the hon. Gentleman will now pay attention to what I shall say about his position.

In the speech that the hon. Gentleman made on 12th May—and he told us today that his words were well chosen—he said: I am not pleading for a retail sales tax. I am not pleading for a turnover tax. I am not pleading for the Purchase Tax. I am pleading only for one, uniform, non-discriminatory rate of indirect taxation on certain consumer manufactured goods"—

Mr. Nabarro

Call it what one may.

Mr. Edwards

Call it what one may. It may be a Purchase Tax…. It may be a turnover tax."—[OFFICIAL REPORT, 12th May, 1958; Vol. 424, c. 98.] According to the hon. Gentleman, the important thing—and he emphasised this in his speech today—was that there should be one, uniform, non-discriminatory rate of indirect taxation. Then he said, in effect, "Call it what we may, it does not matter which of these things you do". Today, however, he has brought forward the idea of a 15 per cent. tax on the goods that at present have to bear Purchase Tax.

Mr. Nabarro

Would the right hon. Gentleman permit me to interrupt him once more? I am sorry to do so. He has used the word "today". If he reads my speech of 12th May he will find that I made specific reference to the fact that if the Chancellor wished to raise an equivalent sum in revenue at a flat rate of Purchase Tax it would have to be at 15 per cent. I have not suddenly advocated it today.

Mr. Edwards

The hon. Gentleman is misunderstanding me. The point I am making is that whereas, on 12th May, he did not care what it was—it could be a turnover tax, a retail sales tax, and so on—today he has moved from that position, if I understand him aright, and is saying that he wants a flat rate Purchase Tax of 15 per cent.

The Chancellor, on 15th April, said: …Purchase Tax is for practical purposes something of a mirage. And the same is true of a turnover tax."—[OFFICIAL REPORT, 15th April, 1958; Vol. 586, c. 71.] The Chancellor could very well have gone on and said that the same would be true of a flat rate Purchase Tax.

Mr. Nabarro

But he did not say that.

Mr. Edwards

No, but he could just as well have said it, for, after all, what would be the effect of a flat rate tax? It would be to flout every one of the principles that I contend any Chancellor of the Exchequer must follow if he has Purchase Tax at all.

Let us ask ourselves what the effect would be. I was interested in the exchange that took place between the hon. Member for Kidderminster and his hon. Friend the Member for Wycombe (Mr. John Hall), who was very quick to point out the effect of what the hon. Gentleman was proposing would be on the furniture industry. But the hon. Member is not concerned with the impact of what he does on particular industries. Nor is he concerned with the effect of what he proposes on industrial relations.

What is the hon. Gentleman proposing? He is proposing to put up the tax on all clothes and boots and shoes to 15 per cent. I remind the Committee that those commodities, between them, account for 106 out of 1,000 in the weighting system of the Index of Retail Prices. Moreover, the hon. Member does not have any regard to whether it is fair or not.

For all these reasons I am sure that I shall carry the Chancellor with me when I say that whatever alternative we may seek the one propounded by the hon. Member is not a starter. It is not a starter because if we were to try to do what he suggests we should find it impossible or impracticable; and even if we overcame all the difficulties it would be grossly unfair.

For our part—I want to make this perfectly clear—as long as we have a Purchase Tax we shall always seek to discriminate in its use so that we may see that burdens do not fall on shoulders which cannot bear those burdens. We shall always discriminate in the sense that we shall try to see it does not have an adverse effect on industrial relations, and we shall always discriminate in the sense that we shall try, not adversely in doing what has to be done, to affect those industries which are in particular difficulties.

I imagine that what I have said is not all that controversial, and I would hope to carry the Chancellor with me. I am sure that any comment he may care to make will be received by the Committee with very great interest. We commend what he has done in simplifying the Schedules, we commend what he has done in reducing the rates for certain classes, but we must tell him that we shall apply to the Schedules, in the most searching manner, the considerations which I have been advancing.

The Chancellor of the Exchequer (Mr. Derick Heathcoat Amory)

I believe it is on record that in a previous Ministerial existence I once said in an unguarded moment that I thought Purchase Tax was a tax which fell slightly short of perfection. During the last three or four months I have learned a good deal and now I would hesitate to acknowledge that any tax which brings in £450 million could contain a substantial component of imperfection.

We have had two aims in the proposals I have made this year for Purchase Tax: first of all, to reform the tax, to try to simplify it and to streamline it and to get rid of at any rate some of the anomalies there have been in it; and to make a move in the direction of a reasonable degree of uniformity.

When this tax was first imposed there were three rates, 16⅔ per cent., 33⅓ per cent. and 100 per cent. At the end of the period of the Government of the hon. and right hon. Gentlemen opposite the rates were 33⅓ per cent., 66⅔ per cent. and 100 per cent. Since then there have been various changes made in the direction of removing anomalies and securing some measure of uniformity. This is the third reform which has been made since 1951.

I have on this occasion reduced hardly at all the coverage of the tax because I believe that it should be spread widely. I believe that if one has an indirect tax of this importance it should cover a pretty wide field and be levied at moderate rates. I have this year reduced the number of rates from seven to four, and I think that that has been generally welcomed. The rates as they will exist when this Bill becomes an Act will be—at least, I hope so, if all goes well—a standard rate of 30 per cent., and a higher rate in the case of a number of articles where I have not found it possible to reduce the rate for Revenue reasons. That is the reason in the main why I have not proposed to reduce the rate there, not because I regard those articles as luxuries——

Mr. Chapman

It does not mean anything.

Mr. Amory

I think it does. Perhaps the hon. Member will wait a moment and see.

Then we shall have a range of articles which enter particularly into the cost of living and come into the category of necessities or near necessities and which for social and economic reasons I think should bear less than the standard rate.

My hon. Friend the Member for Kidderminster (Mr. Nabarro) asked me what were the criteria we adopted for putting articles on to a rate. I think my answer to him would be that the standard rate ought to apply unless there are some substantial reasons to the contrary, in which case the articles fall either into the lower or higher rates to which I referred just now.

Hon. Gentlemen have talked a good deal about anomalies, and I acknowledge that in a tax of this kind it is too much to hope that we can remove all anomalies. We must just do our best. What we must be careful about is that in an attempt to remove some anomaly we do not create another and worse one. I am glad to have the acknowledgment of that from both sides of the Committee.

In some cases where hon. Members proposed to remove an anomaly I have had to come to the harsh conclusion that if I were to do so the way to do so would be by putting back the tax on some articles and not by relieving other articles. In cases of this kind one often comes to the conclusion that it is best to accept the existing anomalies. I would ask hon. Gentlemen, when later in our debates they, no doubt rightly, put forward arguments for a concession on this or that article, to remember the argument that we must be sure that if we remove an anomaly in one direction we do not create others and make matters worse.

My hon. Friend the Member for Kidderminster has estimated that with a 15 per cent. flat rate over the existing field I should not be losing Revenue. I would only say that I think that he is far too optimistic in his calculation. The 20 per cent. figure which I mentioned in my Budget speech was not, or course, only over the existing field but it covered, too, a part of the field on which tax is exempted at the present time. My hon. Friend said that he did not mind whether it was Purchase Tax or turnover tax or sales tax provided it was at a flat, uniform rate. I would remind him that a turnover tax, if it were applied at the same rate on all turnover, would not be a uniform flat rate because articles pass through a number of stages between manufacture and the consumer.

Having said that, I go a long way with my hon. Friend in desiring a substantial measure of uniformity anyhow, provided that it is, as I say, fair and reasonable to all concerned. I do not think that an absolutely uniform rate would fulfil that requirement.

Mr. Nabarro

Will my right hon. Friend allow me one intervention only? Will not he agree that the probable merit of a uniform rate of tax of any of the types to which he has referred and to which I referred earlier is that it is a distinct boost to the export trade?

Mr. Amory

I am not sure that I agree entirely with my hon. Friend there, about thinking it would be a boost to the export trade. I think that every Government have tried to ensure that the impact of Purchase Tax does not discourage exports. That is most important.

I rather agree with what the hon. Member for Birmingham, Ladywood (Mr. V. Yates) said about the difficulty of defining what is a luxury, and where that category starts and stops.

8.0 p.m.

I listened with care to the speech made by the right hon. Gentleman the Member for Brighouse and Spenborough (Mr. J. Edwards). Whenever the right hon. Gentleman speaks I find I do not agree with everything he has said, but I find generally that where we differ, we differ with moderation. This must be due to the fact that both he and I have served at the Board of Trade and in the Treasury.

The hon. Member for Stoke-on-Trent, Central (Dr. Stross) mentioned that Purchase Tax is a powerful instrument. I agree with him. He also said that he would be pleased if we could do without it. I, too, would be pleased if we could do without it. He said that philosophy came into this. I agree, but I do not think his philosophy on this is exactly the same as mine. I agree that there is room for a difference of opinion. It is a question of how far one is justified in discriminating, and I do not think one is justified in discriminating very far. Also I do not believe that one is justified in interfering more than is necessary with the free choice of an individual to spend his money as he likes. I agreed with what he said, that if one were justified in discriminating at all to encourage anything, it would be to encourage the home and the influence of the home. I must say that in my view the purpose of the Purchase Tax—and I want to emphasise this—must be to raise revenue and not to interfere with the individual's choice to spend his money as he thinks best.

The hon. Gentleman the Member for Shoreditch and Finsbury (Mr. Collins) raised a number of practical points. I agree with him that in drafting the provisions for this tax we ought to give the fullest consideration to the convenience of the trader. I was a trader myself and I have suffered at times from confusion in these matters. I, and I am sure all my officials too, wish to make the thing as simple as possible for those who have to use it.

The hon. Gentleman mentioned that retailers of furniture took profit on the Purchase Tax, as well as the wholesale value of the goods, in their subsequent sale. I would be surprised to know that retailers of furniture are taking an unreasonable profit today, because I have regarded this as a very competitive trade. However, the hon. Gentleman probably knows more about the trade than I do. There again I found in him an ally, I think, in the view that this tax should be non-discriminatory as far as possible between trades. If the need arises, I hope the hon. Gentleman will accompany me later on into the right Lobby on this point.

Mr. Collins

May I ask the right hon. Gentleman if he can give me a similar assurance that, where I can point out to him examples of unfair discrimination, he will come into the Lobby with me?

Mr. Amory

I am not sure I can give him that assurance, but I can assure him that I am open to conviction on any point he raises. I welcome the suggestions he has made to me from time to time for matters of simplification, and I shall continue to do so in any further suggestions he cares to make to me. I agree with the hon. Gentleman, too, that it is important to do what we can to make sure that the public generally understand as far as possible what is the impact of this complicated tax on all the goods they buy.

The hon. Gentleman also mentioned that, as regards materials, we were discriminating between gold and base metals in watches. I do not think he is right there. We are treating them precisely the same. In the same context he referred to furniture made of wood or metal, which will be treated the same under this Bill.

Mr. Collins

I agree that the right hon. Gentleman has removed one discrimination in wood and metal furniture, but the example of gold and non-precious metals was precisely his own example in telling me in a letter that it was impossible to lump together watches of different metals and make them subject to one tax.

Mr. Amory

If that is so I must write the hon. Gentleman another letter. He then raised the question of the timetable of Notice No. 78. My hon. and learned Friend the Financial Secretary looked into that point carefully but he found it was not possible to advance the date any further. I wish we could but, as the hon. Gentleman knows, a list of Amendments brought about by this Bill was published the day after the Budget.

The second object on Purchase Tax which I have set out to accomplish in this Budget is to bring about some reduction in the burden falling on the taxpayer. To the best of my judgment I considered that the reduction of £30 million this year and £41 million in a full year was as much as would be right in the present economic circumstances. That £41 million reduction was made up of a gross reduction of £43½ million and an increase of £2½ million on some items.

About 100 Amendments have been put down. I am glad to say they are not all likely to be called, Mr. Duthie. If they had been, and if the Committee had agreed to them all, then I should have been the most melancholy Chancellor that ever existed, because I should have lost a revenue of £340 million. I again ask hon. Members to realise the background of this Budget. We must be practical. If they find me obdurate and hard-hearted in considering any major change, I am sure that when they consider the situation they will understand that anyone else in my position would have had to adopt the same attitude.

The right hon. Gentleman the Member for Battersea, North (Mr. Jay) mentioned the yield of £490 million as being not less than the yield would have been had there not been a reduction of £30 million. He implied that this must mean that I anticipated a further rise in costs. That is not necessarily so. There is a bigger and bigger volume of articles going into consumption as the standard of living of people generally has been rising.

The hon. Gentleman the Member for Northfield (Mr. Chapman) outlined his philosophy very clearly. I did not agree with all his views but I thought he put them very lucidly, if I may respectfully say so. My hon. Friend the Member for Dover (Mr. Arbuthnot) mentioned the difficulty he had found with goods coming into this county being charged Purchase Tax and then being re-exported without recovery of the tax. As he knows, in general there is provision for goods for export being relieved of tax. I believe he has put down an Amendment on this point, so we shall be able to discuss it later.

The hon. Gentleman the Member for Sheffield, Park (Mr. Mulley) mentioned the cost of collection. I agree with him that this is a point we must always look at. Also my hon. Friend the Member for Cheadle (Mr. Shepherd) made a point when he said that in considering whether or not a particular item should be specially treated we must look at it to ensure that we do not do something unfair to competitive traders producing similar articles.

The hon. Lady the Member for Coatbridge and Airdrie (Mrs. Mann) raised the question of safety equipment. I will not reply to that point in detail today, but one naturally finds oneself in great sympathy with her view. I would only say today, as I think she has been told in previous debates, that this raises very difficult considerations indeed, because of the difficulty of discriminating between one article and another. During the course of our debate, I dare say that we shall find some opportunity to discuss that point again.

On cosmetics and whether they are a necessity or not, that is a very difficult question, and it may be an important question, too, but somehow, I think I see a red light ahead of me here, and I shall be silent on that point. I would only say to the hon. Lady the Member for Coatbridge and Airdrie that I do not know whether she does or does not use cosmetics, but she certainly looks very charming to us from this side of the Committee. I have heard it said that if men prefer beauty to brains, it is because most men see more clearly than they think. I do not know whether that is true or not.

The hon. Lady spoke about not passing on the reduction. I think I said something to her about this the other day, but I cannot believe that a distributor who seeks to exploit his position unfairly will find that he does so to his long-term advantage.

Mrs. Slater

It is not the retailer who is not passing on the reduction in Purchase Tax, but the manufacturer. That is the whole point. The retailer is in the hands of the manufacturer, and there are firms that are not doing it.

Mr. Amory

I do not quite understand what the hon. Lady says, because the tax is not collected until after the manufacturer stage—at the wholesaler level.

Mrs. Slater

The point is that the day after the Purchase Tax was reduced, the manufacturers put up their cost price, and so the consumers did not get what they thought they would get in the way of benefit from the reduction of the Purchase Tax.

Mr. Amory

I can only say again that what I said holds good, because there is competition amongst manufacturers. Very few manufacturers are fortunate enough to have a monopoly in the sale of their products, and the answer is competition, combined with discriminating buying on the part of the public.

The hon. Member for Itchen, Southampton (Dr. King) mentioned the impact of Purchase Tax on school equipment. He and I share an interest in education, and so he touches me on a soft spot there. My answer would be that it is very difficult to administer the Purchase Tax on the basis of the end use of the product. We should get into the most appalling complications. If an article is solely used, for instance, for educational purposes, then we do discriminate, as in the case of school desks, for example, which are treated differently and are exempted and not subject to the ordinary tax on furniture.

The hon. Member brought Shakespeare into the debate, and I was not ready for that at all. I had not thought of Shakespeare in connection with Purchase Tax, but I think that Shakespeare must have been looking well forward when he put into the mouth of Celia in "As You Like It" these words: You'll be whipp'd for taxation, one of these days. The hon. Member for Dunbartonshire, East (Mr. Bence) spoke about accessoriees to sewing machines. I notice that he has an Amendment on the Notice Paper which will enable that point to be discussed later.

8.15 p.m.

One or two hon. Members have recommended flexibility in the administration of this tax. I agree that Purchase Tax, in the aggregate yield, could legitimately be adjusted from time to time, but not frequently, according to whether one wants to stimulate or discourage the purchasing power of the community. That is because we must not allow, even in the aggregate, frequent changes in the total rate. What would not be a good plan would be to vary the individual rates often for any short-term change in circumstances. That idea would lead to chaos in administration.

I would finish by saying that, in spite of having been Chancellor for four months. I still will not claim that Purchase Tax is perfect. However, as I believe that in the future there will be opportunities to make some further progress in the direction of achieving a tax which, while spread over a wide field, is only at a moderate rate, I claim that the changes I am proposing this year for a reform of this tax will leave the way open, without any harsh changes or distortions in the framework of the tax, for any further progress in that direction that may be found possible in the future.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Consideration of Clauses 2 to 34 and of new Clauses postponed till after Schedules 1 and 2.—[Mr. Amory.]