§ I shall begin with the Purchase Tax. I should like to remind the Committee of the background. In my last Budget I simplified the structure of the tax, reducing the rates from seven to four. In consequence, the tax on some important classes of goods was then sharply reduced. I said then, and I must repeat now, that we must continue to look to this tax for an important contribution to the revenue. I recognised that because of the problem of retail stocks violent and abrupt change—or the anticipation of such change—has a disturbing effect on trade, but I reminded the Committee that anything approaching a major reform of the tax was bound to involve substantial changes in the rates on some goods. That being so, my aim was to get the tax into a form which would not only be fairer and simpler to administer, but would also enable any future changes to be made with the minimum disturbance to trade.
§ I think that it is fair to say that my objective in making the tax a more effective instrument was to a large extent achieved. Certainly, a year's experience has revealed no basic defect in the new structure. It is significant that my hon. Friend the Member for Kidderminster (Mr. Nabarro) only found scope this year for 199 Questions on this tax. I propose, therefore, to leave that general structure unchanged this year.
§ There are, however, two cases which I regard as special ones and exceptions from that. First, I propose to abolish the Purchase Tax on commercial vehicle chassis. When the tax was imposed on commercial vehicles, in 1950, the intention was to damp down investment in this particular form of capital equipment. When, later, the need for restricting the purchase of commercial vehicles disappeared, the substantial revenue yielded by the Purchase Tax on them was an obstacle to its abolition. I now think that I can accept this loss and I am glad to be able to remove this tax on commercial vehicles altogether.
§ Secondly, I propose to free replacement television tubes from tax. This tax has been represented to me as being unduly burdensome, and technical developments in the reconditioning of tubes have made it difficult to administer the tax with equity. I must, of course, take care that 55 this concession does not give an opportunity for tax avoidance on the sets themselves, and a Treasury Order to safeguard this point will be laid before the House tonight.
§ Apart from these two exceptional cases, I propose to lighten the weight of Purchase Tax in general by reducing the three higher rates, by one-sixth each. The 60 per cent. rate will accordingly be reduced to 50 per cent., the 30 per cent. rate to 25 per cent., and the 15 per cent. rate to 12½ per cent. I do not propose any change in the 5 per cent. rate, which is already as low as is consistent with the concept of a tax raised at moderate rates on a wide range of goods in general use.
§ While these reductions will give a material measure of relief to the consumer, they should not give rise to any serious difficulty in regard to tax-paid stocks held by retailers, who will in any case benefit from the improved trade due to the tax reductions proposed in this and other parts of my Budget.
§ The total cost of these Purchase Tax reliefs, which will operate from tomorrow, is £59 million this year and £81£ million in a full year.