HC Deb 27 July 1961 vol 645 cc745-68

Motion made, and Question proposed, That the Surcharge on Revenue Duties Order, 1961 (S.I., 1961, No. 1388), dated 24th July 1961, a copy of which was laid before this House on 25th July, be approved.—[Mr. Barber.]

Mr. H. Wilson

Despite the idolatory indicated by the cheers for the Prime Minister as he left the Chamber, does even this Government think that they can impose £200 million of additional taxation on the nod without an explanation from the Treasury Minister? May we have an explanation?

10.25 p.m.

The Economic Secretary to the Treasury (Mr. Anthony Barber)

Yesterday afternoon the Leader of the Opposition said to Mr. Speaker that, in his view, this Order was clearly associated with the more general matters which we should be discussing in the two-day debate which has just ended. I aim sure that Mr. Speaker, in agreeing to that, was in fact agreeing to something which was for the general convenience of the House. However, the result was that when I wound up yesterday evening's proceedings I dealt with certain aspects of this surcharge and my hon. Friend the Financial Secretary this afternoon clarified certain other aspects of it. I do not wish this evening merely to repeat what has already been said, but I agree with the right hon. Member for Huyton (Mr. H. Wilson) that, perhaps, it would be useful if I made one or two observations on what is undoubtedly a very important measure.

The Order was made under section 9 of the Finance Act and it came into effect on Wednesday this week. As the House well knows, the Order provides for a 10 per cent. surcharge on a wide range of Customs and Excise duties. The House will remember that the principle behind this economic regulator was discussed at considerable length not long ago—during the debate on the Budget, on the Second Reading, during the Committee stage and again on Third Reading of the Finance Bill.

The Opposition, for what I hope they still consider to be sound reasons, did not vote against the Clause in the Bill giving this power, no doubt because they concluded that the principle involved was a good one and that it was right that my right hon. and learned Friend should have power to operate the regulator during this yeas. I say "this year" because the power given by the Finance Bill operates only for a period of 12 months.

The method of calculating the surcharge will be simple. It will be paid along with the duty or tax at the normal time of payment. When an amount of tax or duty has become due and has been calculated in the normal way, 10 per cent. will be added to it. In other words, there will be no change in the rate. As the House has already agreed on the principle involved without a Division, the sole question which remains for consideration is whether the regulator should be used at this time.

The Chancellor of the Exchequer explained in his statement—and other Government spokesmen have since elaborated this—that the pressure of demand on the home market has increased and that if it were not for the measures which my right hon. and learned Friend has announced it would be likely to increase still more in the coming months. There could be no doubt that one significant effect of this would have been to discourage exports, and it was precisely in this sort of circumstance that, as far as my recollection of our debates goes, the House contemplated the use of this regulator.

It has been said that the Chancellor of the Exchequer should have known all about the pressure of demand at the time that he introduced his Budget. By now, however, we have had a good deal of new evidence that demand, both for investment and for consumer goods, is rising and is likely to rise more rapidly than could then have been foreseen. There can certainly be no doubt that personal incomes have continued to rise since the last quarter. As I reminded the House only yesterday, wage rates are up, employment is higher and the number of workers on short time has fallen. At the same time, hire-purchase lending which damped down consumption last year, has started to rise again significantly and the volume of sales for the second quarter as a whole has also risen.

The great advantage of a fiscal regulator of this kind is that it can be brought into operation at any time during the year between Budgets. The right hon. Member for Huyton, if I understood him aright, suggested yesterday that the idea behind the regulator was that it would be used to replace monetary and other weapons. It was, however, made abundantly clear at the time that this was to be an additional means of regulating the economy which in appropriate circumstances might enable us to rely less on other methods.

Mr. H. Wilson

Apart from the fact that there is no time between Budgets these days for the use of any of these things, will the hon. Gentleman explain this? He is trying, not very successfully, to explain how much has changed since April, but will he tell us what has changed since 4th July, when we were on the Report stage of the Finance Bill? If at that time the Chancellor thought that £200 million additional taxation was needed, it was his duty to introduce it at the Report stage and not to use special procedures for getting money which he thought was then needed. What has happened since 4th July? Have things gone really wrong in the last fourteen days?

Mr. Barber

Had my right hon. and learned Friend been ready to declare to the House what his intentions were before the date on which he made his statement, he would have done so, but, as the right hon. Gentleman knows, from month to month and from week to week information comes in, not only about what has been happening in the immediate past, but which enables us to make forecasts for the future. The right hon. Gentleman raised an almost similar point on Report, when he asked my right hon. and learned Friend the Chancellor about the possible use of this economic regulator.

I was about to say that on this occation we have not taken action, for example, concerning hire purchase, but we might well have had to do so if it had not been for having available this means of influencing demand. Unlike hire-purchase restrictions, this means of regulating demand operates over a wide sector and will not, therefore, make its impact felt only on limited sections of industry. I have no doubt that this measure will make a significant contribution in the short term towards alleviating the economic troubles which now face the country.

The annual yield from the 10 per cent. surcharge is estimated to be £210 million, but it can be taken off or reduced at any time. I repeat that when the principle of this regulator was considered, there was no opposition to it. That being the case, I cannot think that any hon. Member who is prepared to face the facts of the present situation can honestly pretend that this is not an appropriate time for it to be used. In those circumstances, I hope that the House will endorse the decision of my right hon. and learned Friend.

10.33 p.m.

Mr. Douglas Jay (Battersea, North)

Despite the speech of the Economic Secretary, and, indeed, that of the Prime Minister an hour earlier, I am rather at a loss to understand the exact nature of the disaster which has befallen the country since the Report stage of the Finance Bill only three weeks ago and, even more, to understand the relevance of this Order to that disaster. Therefore, I ask the Government these few questions.

We are discussing an Order which will add £200 million to the country's taxation without any Committee or Report stage or old-fashioned formalities of that kind, and without even the presence of the Chancellor of the Exchequer in the House. The Government have told us throughout these three days that the aims of their economic policy are to maintain the stability of the currency, to increase productivity and to increase exports. The Order, by imposing higher Purchase Tax and higher taxation on tobacco, beer, petrol and other things, will raise the cost of living by 1½ points directly and immediately. That means that at one fell swoop by this Order we shall reduce the value of the £ by 1 per cent. or rather more. That is going to have these consequences.

Secondly, it is quite certain that as a result of this Order our industrial costs will rise. There are over 3 million workers—I believe, nearly 4 million—whose wage rates are directly linked with the cost of living index. Therefore, it is quite certain that they will rise as a result of the Order we are passing tonight. I also have no doubt that the next effect of the rise in the cost of living will be that after a great deal of industrial conflict provoked by this Government there will be a corresponding rise in other wage rates throughout a very large section of industry. What is going to be the effect of that?

The Financial Secretary told us earlier today that it was all quite simple: he was damping down demand in order to restrain expansion of industry. Of course, if our costs rise on the one hand and we damp down on the other, it is quite certain that the effect of this policy, and this Order in particular, will be to produce stagnant production or even falling production for the next twelve months, and therefore consequently—I do not think the Economic Secretary can dispute this—the effect of these factors will be a rise in the cost of producing our exports in the months ahead.

Therefore, there really is no doubt that this Order and this policy are going to have three consequences. First, it will reduce the value of the currency. Secondly, it will restrain any increase in production. Thirdly, it will hamper our exports even more than they are hampered at the present time. So I just want to ask the Economic Secretary, what good does he think it is going to do to the economic position of this country?

10.37 p.m.

Mr. Ellis Smith (Stoke-on-Trent, South)

Having sat here for two days and heard the whole of the speeches, many of which, on both sides, were constructive and of a reasoned character, I want to place a few observations on record for all those who read HANSARD, particularly those in the north of England and in the industrial areas. I want to make it quite clear that I am not concerned about what is thought within a few yards of this assembly about what I am going to say. I am concerned with those of whom, ever since I came here, I have tried to be worthy.

I am more than ever determined to be worthy of the class to which I belong. I can go back to those I had the privilege to be born amongst and look them straight in the face, straight in the eyes, and say to them the things I say here. In my view it is of the utmost urgency to British democracy, and if the party which they built up is to retain their confidence, that it should have regard more and more to the fact that this is a democratic assembly—it was—and for us to remember that the parties are elected on a democratic basis.

Having said that, I now, at this late house, do not want to attempt to make a long speech, but I want just to place a few observations on record. The observations are made first of all by Mr. Glover, secretary to the North Staffordshire Chamber of Cornmerce. They are about these proposals. He made them on behalf of the Chamber of Commerce. Those people are fundamentally opposed to us in this party politically. I am not complaining of that. If men oppose me openly and honestly, without hitting below the belt, I respect them. Therefore, I am making no complaint that they are opposed to us politically and that since 1931 have done the best they possibly could to keep us out of this place. But we have no need to complain about their activities. This is what they said about these measures: The new measures would do nothing to stimulate a fresh drive in the overseas markets "— and that applies to these proposals— As usual the need for exports is paid lip-service and nothing more … Where are the dynamic measures aimed at healing the economic weakness in this country? That statement is made in an economic and geographical area which relatively has made a greater contribution to the export trade than many other areas. If the people there feel like that about these measures, that is a concrete example of how responsible people feel about proposals of this kind.

My final point is a terrible indictment of the principal Ministers concerned. We on this side of the House who have been in personal touch with the Financial Secretary and the Economic Secretary in different Departments have nothing but the greatest possible respect for them as individuals, but when it comes to their collective policy the position of both hon. Gentlemen is serious when viewed against the contents of a document from which I propose to quote. This is a confidential document issued by the Treasury. I do not normally believe in doing this kind of thing, but this matter is so serious and, I believe, will have such a serious effect in the country that I think that I am entitled to quote from the document so that the words may be placed on the record.

The document is the April, 1961 "Quarterly Bulletin, An Appreciation of the Economic Situation" prepared by the Treasury. It is because of its contents that I cannot understand why the Chancellor did not in his last Budget take action of the kind which he now proposes, if it was justified. Since no action was taken in the Budget, why did the right hon. and learned Gentleman agree to pay out the millions of pounds which he proposes to pay to the country's relatively well-placed people? I shall be brief in my remarks because I believe in playing the game by other people and I understand that it has been agreed that we should have a vote fairly early because that meets the convenience of hon. Members and the staff.

I should like to quote two extracts from the document. The first reads: The reserves rose in 1960, but the increase was only made possible by the inflow of short-term funds. In February there were signs that the inflow had stopped, and the reserves fell for the first time for twelve months. In March there was a much heavier fall. My second quotation follows from that comment and shows how incorrect is the present policy: Basically, however, the situation will only"—

Mr. Deputy-Speaker

I am sorry to interrupt the hon. Member, but we are, of course, dealing with one Order and not the whole economic policy.

Mr. Ellis Smith

I agree. I have thought about that, because I wanted to keep myself in order. The Order is based upon the economic policy. I quoted from the document to emphasise how incorrect it is to make the Order when this Bulletin foreshadowed that it would not be necessary. The quotation reads: Basically, however, the situation will only mend if there is considerable improvement in the balance of trading transactions. It goes on to show how the position then was serious. I wish to ask why no action was taken then. The position has improved in several respects, and therefore I shall oppose this Order.

10.45 p.m.

Mr. J. Grimond (Orkney and Shetland)

The House of Commons originally grew up largely, if not entirely, to control taxation by the Executive. That was always felt to be one of its prime duties. Like many other hon. Members, I see the need for some new method of regulating the economy, but this is a different subject. I am wondering whether we should not at some time distinguish between measures which are taken to regulate the economy and those which are taken purely for fiscal purposes. I have often thought it anomalous that while we debate at some length comparatively minor Orders—

Mr. Deputy-Speaker

Order. We are not dealing with that point at the moment. That has been settled by the Finance Act. We are dealing with this particular Order alone.

Mr. Grimond

I appreciate that, Mr. Deputy-Speaker. But I think that we must be allowed to discuss the background to the Order. When he introduced the powers to make this Order, the Chancellor told the House that it constituted an important change in our fiscal methods, and so it would seem to be in order to make a few remarks about that now.

I have in mind that it is agreed that this Order is introduced purely as a regulator and it is said by the Government that they were unable to see when the Budget was brought in that there would be any need, or any certain need, to mop up the excess purchasing power in July of this year. It seems to me that this admission indicates that if the Government cannot tell this year that there was any certainty about the position in July, they are very unlikely to be able to say anything in any other year. In point of fact, nothing unusual has happened. If anything, economically things have got slightly easier since the Budget was introduced.

We are now faced with a situation in which the Government say that they cannot see ahead at all and cannot foretell for more than a month or two whether their economic and fiscal measures are right or wrong, and so they reserve the right to alter them. I do not intend to elaborate on that, but I think it would be agreed that it is their case that when things are difficult they must have large powers to introduce Orders at the shortest possible notice. That being so, I suggest that we should consider whether we should try to separate the fiscal need to raise money compared with the economical aspect by the introduction of this or further regulators.

In fact this regulator will fall with considerable severity on some industries which in no sense deserve it. They are not industries which are sucking in a great deal of demand in the home market, nor are they using labour which would be better employed elsewhere. It is purely fortuitous that they are having to bear this extra impost. If we are to have this sort of impost, I think that there is a great deal to be said for a general turnover tax rather than the kind of thing which we are now discussing—

Mr. Deputy-Speaker

Order. We cannot discuss that now.

Mr. Grimond

—and the range of Excise duties introduced for quite different purposes over the years with no idea that they would be the basis for this type of economic regulator. I appreciate that this is a narrow debate and I must come to a conclusion. We have this very important departure from the normal methods of dealing with our fiscal and economic policies, and I hope that over the next few months the Government will consider carefully whether this is the best form of regulator or whether they should keep regulators at all and there will be no—

Mr. Deputy-Speaker

Order. We are not now discussing the form of the regulator. That was dealt with by the Finance Act. We are now discussing a particular Order.

Mr. Grimond

I agree. All I wish to impress upon the Government is that if now they cannot see a few months ahead, they will have to find new methods of dealing with their financial problems.

10.50 p.m.

Mr. John Diamond (Gloucester)

I want to make it perfectly clear that I regard the introduction of this Order at this time, having regard to the promises made by the Chancellor and the whole of the Government Front Bench on several occasions during the discussions on the Finance Bill, as a complete breach of faith with the House of Commons.

We were promised time and time again—I do not suppose that you, Mr. Deputy- Speaker, can help us much on this, but I love this place and wish it to be strong and to protect the rights of the people—that under no circumstances would an Order like this come on late at night for the ordinary sort of one and a half hours' discussion. I am prepared to wager a guinea to be given to any hospital that anyone cares to mention that the vote will take place within an hour and a half of the start of this debate at around 10.30 p.m. on a Thursday night. We all understand that the Whips plan it that way on a Thursday night so as to enable hon. Members to get back to their constituencies. There is no justification whatsoever for the Government to attempt to introduce this Order in this way. It is a clear breach of the promise repeatedly given, and I hurl that straight at the Government Front Bench.

Secondly, I wish to ask the Government a simple, straightforward question, if they are capable of giving the answer to it. When did the Chancellor decide to make this surcharge? It certainly could not have been during the early part of July because the right hon. and learned Gentleman told us on Report—around the 4th, 5th or 6th July—that he had not yet reached a decision. So that something less than three weeks ago he had not reached a decision. It is certainly a week ago that the right hon. and learned Gentleman reached a decision, because the whole country was told that he was going to make an announcement and everyone knew that it was going to concern this matter. Therefore, on what date did the Chancellor decide to introduce this Order?

The reason why I ask that question is quite simply to establish whether the Chancellor is a knave or a fool. Was he a knave in misleading the House by saying that he did not know when, in fact, he did, or was he a fool to say that we did not need this extra £200 million at that time but subsequently discovered that we did? I want to have that matter made perfectly clear.

My right hon. Friend the Member for Huyton (Mr. H. Wilson) has made it clear time and time again that he does not accuse the Government or the Chancellor of any lack of good faith; he only accuses them of being hopelessly incompetent.

Mr. H. Wilson

What I really said was that I did not accuse them of bad faith, only of lack of faith.

Mr. Diamond

I am sorry. My right hon. Friend made it clear that he did not accuse the Government of lack of good faith, but merely of gross incompetence. I do not know why my right hon. Friend should be so pernickety. The Chancellor and the Government have shown sufficient evidence of incompetence to make it perfectly clear that they are not worthy to carry on their job.

Mr. Charles A. Howell

I am very grateful to my hon. Friend for giving way, but I am wondering if he has overlooked one other possible aspect of the matter, that this may be another instance of the Conservative Government treating the House with the contempt that they are in the habit of showing towards it.

Mr. Diamond

I am asking the question. There is a simple answer. When was the decision made? We can base our judgment on the answer which is given. Why did the Government think it necessary to give a full week's warning of these arrangements when the whole justification for this kind of power was that it could be put into practice immediately? One of the main purposes for having the kind of power contained in this Order, we were told, was that it could be put into operation immediately. It would not therefore create a selling boom by warning the people that this kind of duty was coming on. The whole country has been warned. To achieve their deflationary purpose the Chancellor has set on foot a very substantial selling boom with everyone going to the shops buying everything from motor cars to bottles of whisky in order to anticipate the increase. Why did the Government think it necessary, against everything they told us, to give at least a week's warning that there would be this increase so that everyone could buy in anticipation of the increased rates of Purchase Tax?

The third thing I ask the Government to explain is the figures. The Chancellor told us, and I am reading exactly what he said: I wish to make it clear that, taking Purchase Tax, for example, the increase is equivalent to 10 per cent. of the existing rates … for goods now chargeable at 5 per rent. the increase would, in effect, raise the rate to 5½ per cent."—[OFFICIAL REPORT. 25th July, 1961; Vol. 645, c. 228.] That seems straightforward and intelligible even to the hon. Member for Kidderminster (Mr. Nabarro).

Mr. Gerald Nabarro (Kidderminster)

One needs a slide rule to do it.

Mr. Diamond

Why does the Economic Secretary say, as he did yesterday, that this is not the effect, that we do not have a 5 per cent. tax? I ask because people have to work this out and have to know where they stand. People collecting the tax on behalf of the Revenue want to know what to do. The Chancellor said that the 5 per cent. is equivalent to 5½ per cent. and that was what we understood, but the Economic Secretary says it is not that but that we leave it at 5 per cent. Then, at the end of the day, instead of moving to 15 per cent., or 12½ per cent., we add 10 per cent. Does this not mean that it is borne in the same way as before? Who is right, the Economic Secretary or the Chancellor?

It is essential that we should have some accurate information on the figures. We have just had an example of the Prime Minister saying that the Chancellor's figures were wrong. The Prime Minister said that we had this balance of payments deficit for two years and the Chancellor said we had it for three years. The Prime Minister made his statement between the two and it would be necessary for the Prime Minister to be right. I do not mind whether the Prime Minister is wrong or right. I want to know whether the Chancellor is right. It is what the Chancellor said in reference to this Order that is essential for us to know tonight. The Economic Secretary told us something very vague and confusing. I invite him to make it clear.

The next thing I ask the Government is why they decided to put 10 per cent. on everything. The answer is not that that was the only power they had, because that is not so. They have power to put 10 per cent. on the whole of Customs and Excise and less than 10 per cent. on different categories of Purchase Tax. [Interruption.] I am glad to see these courtesies between the Economic Secretary and the Financial Secretary. I hope they will not think me discourteous if I repeat the question, because it is important.

Mr. Barber

I heard the hon. Member. It is possible to be courteous and to listen to my hon. Friend at the same time.

Mr. Diamond

I am glad to know that the hon. Gentleman listened to what I said, because I feel sure that we shall have an answer to the question of why the Government are using such a blunt instrument when there is a less blunt instrument available. The Government have chosen an instrument which will cause great hardship in many cases when it would have been possible to use an instrument which would alleviate to some extent, although only a limited extent, that hardship.

I am bound to limit the length of my remarks on such occasions as this because the debate has started late, in spite of the Government's promise that we should not have a late discussion. At this time of the day the normal methods of communication with the public who are affected by this Order are no longer available to us, and it is Thursday night and hon. Members have responsibilities in their constituencies tomorrow.

Mr. Nabarro


Mr. Marcus Lipton (Brixton)

Will the hon. Member for Kidderminster (Mr. Nabarro) be here tomorrow?

Mr. Nabarro


Mr. Diamond

Will the Minister explain why it is necessary to apply the 10 per cent. to all the articles covered and why it is necessary for the figure to be as high as 10 per cent.? He has power under the Finance Act to use a lower figure than 10 per cent. Why has he gone the whole hog and chosen 10 per cent. when a much smaller figure would have been adequate? The figure of 10 per cent. has an inflationary effect of £130 million in the current year and will have an inflationary effect of £210 million in a full year. Much less than 10 per cent. would have been adequate had it not been for the increased inflationary pressure resulting from giving incentives to Surtax payers to spend now a great deal of what they will receive from the Government's promises of Surtax concessions next year.

Mr. Nabarro

On a point of order. Has it not been ruled that Surtax has nothing to do with the Order, and have we not spent two days debating general financial and fiscal matters, and could not the hon. Member for Gloucester (Mr. Diamond) be put into good order?

Mr. Deputy-Speaker

I know of no ruling on the subject, but obviously Surtax has nothing to do with the Order. I thought that the hon. Member for Gloucester (Mr. Diamond) was making only a passing reference to it and I was reluctant to interrupt him.

Mr. Diamond

I had hardly had the opportunity to make a passing reference, Mr. Deputy-Speaker, before you were assisted in the conduct of the business by hon. Members opposite. I have said that 10 per cent. is not necessary. How am I to develop that argument except by pointing out that the Government could have managed with a smaller figure than 10 per cent. had other things not been done—for example, if the incentive to spending by the Surtax payers had not been part of the Budget? We are in the difficulty that we cannot move an Amendment to the Order to reduce the figure to an appropriate figure—one which would be justified if the Surtax remissions were withdrawn. We can only vote against the Order. But we can make the point that the figure in the Order is too high, will cause great hardship and is justified in the Government's philosophy only because this deflationary effect is needed to counter the inflationary effect of the Surtax reliefs. In all these matters the Government have had bad faith. They are unjust in what they are doing. Their action in bringing a matter like this on at half-past ten at night ought to teach any hon. Member on this side who said, as I did, that this was the greatest challenge to the objectivity of an Opposition Member, never to trust the Tories again.

11.5 p.m.

Mr. Marcus Lipton (Brixton)

The House will be somewhat perturbed by the fact that my hon. Friend the Member for Gloucester (Mr. Diamond) has unfortunately had to curtail his remarks because of the way in which the Government have arranged the business. We are all glad that the hon. Member for Kidderminster (Mr. Nabarro) is leaving us, because that will be a very useful contribution to our discussions.

Mr. Nabarro

On the contrary.

Mr. Deputy-Speaker

Let us come back to the Order.

Mr. Nabarro

On the contrary, I came to consult my hon. Friend the Member for The Wrekin (Mr. W. Yates) who is authoritative in these matters.

Mr. Deputy-Speaker

That has nothing to do with the matter before the House.

Mr. Lipton

The country has come to a pretty pass if the hon. Member for Kidderminster has to consult the hon. Member for The Wrekin (Mr. W. Yates). I want to suggest this to the House very seriously. After listening to the eloquent speech of the Prime Minister a little while ago I was almost persuaded that there was no economic crisis at all and that, if there was a crisis, it was due to something or other that my right hon. Friend the Member for Huyton (Mr. H. Wilson) did or said in 1951. Anyhow, it seems necessary from the point of view of the Government, in order to create a condition of solvency and build up our export trade, for the general public to pay 10 per cent. more for spirits, beer, wine, tobacco, hydrocarbon oils, pool betting, and bookmakers' licences. We are told that, if we accept the Order, it will help us to maintain the balance of trade and the welfare of the £.

It is all a lot of eyewash. It has been proved very conclusively in our debates in the last two days that it is a lot of eyewash and makes no contribution whatsoever to the solution of our economic problems. The public will very soon realise that they are being, led up the garden path. As I said on a previous occasion, the people will realise that they have never been had so good. But if the Government want the Order they will steam-roller it through the House. I wish them the best of luck. It will not do them any good, because they will lose the next election anyhow and there will be a Labour Government to take over.

11.8 p.m.

Mr. Donald Chapman (Birmingham, Northfield)

My intervention will be limited to a few sentences. My hon. Friend the Member for Gloucester (Mr. Diamond) asked why the Government are using this power to levy a 10 per cent. increase on all items in the Purchase Tax schedules. The one question I want to ask is: why in heaven's name is this being used against the motor car industry at this moment? We are now in a situation where our exports are the worst for eight years. What the motor car industry needs at the moment and what the Midlands need in order to sustain employment throughout the remainder of the year is no feather-bedding but the chance for the time being not to have to put up its costs and further reduce its export drive by having even shorter runs in its production.

The result of the Order will be that people will postpone buying a new car. The already great disastrous slump in the industry this year will multiply in the remainder of the year. Costs will rise as a result of the fall in production, and exports will become less and less competitive in world markets. The Economic Secretary should explain why when industries which are exporting to their utmost are in difficulty they get, not a helping hand, not even the avoidance of the worst that the Government can offer, but another kick in the teeth.

The hon. Gentleman must explain this. It was perfectly open to the Government to be selective in these matters, and then to have talked to these industries and examined their difficulties in a completely fresh way. Why did they not do this? Why have they chosen, as I say, to create unemployment, rising costs and less exports in one of our greatest exporting industries?

11.12 p.m.

Sir Cyril Osborne (Louth)

The confusion into which the Opposition have got themselves over this matter is exemplified by what the hon. Member for Birmingham, Northfield (Mr. Chapman) has just said; that because of this Order people who otherwise would have bought a motor car will no longer do so, and that will result in unemployment in his constituency. His right hon. Friend the Leader of the Opposition this afternoon said exactly the opposite—[HON. MEMBERS: "No"]—oh, yes, he did. He quoted the motor car costing £850, and asked would not the extra cost cause a person not to buy one. The answer he gave was "No." The confusion opposite is shown clearly, because the hon. Member has just contradicted everything said by his right hon. Friend, who spoke officially for the Opposition. That just exemplifies how utterly confused the Opposition are over this Order, and how useless they would be if fate threw them back on to this side of the House.

11.15 p.m.

Mr. Barber

Perhaps the most convenient way of replying will be to take seriatim, and as quickly and briefly as I can, the points that have been raised. The right hon. Member for Battersea, North (Mr. Jay) referred again to the effect or this Order on the cost of living, which was really the same point as that raised yesterday by his right hon. Friend the Member for Huyton (Mr. H. Wilson).

All I would say is that at the time when we considered the principles behind this Order it was recognised, I think, by everyone who took an intelligent part in that debate that we should be likely to impose a surcharge at a time of excessive demand. Inevitably, if one does it at that time it will cause a rise in prices for the temporary period during which the surcharge operates. It is, however, only a temporary period and, indeed, without legislation it could not go beyond the end of August of next year, although it need not last as long as that.

The right hon. Gentleman's second point was that this would, in some way, raise costs and so hamper exports, but this particular form of taxation will not hurt exports nearly as much as would a general tax, because the tax does not apply directly to exports at all and, as the right hon. Gentleman knows, there are detailed provisions for dealing with matters of drawback.

The hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) said that he wished to get something on the record. Well, he did. He quoted from what he called a confidential document issued by the Treasury. I think that he would be the first to agree that what he quoted was not new but had been given to the House—and, indeed, to the country—at much the same time as the issue of that particular document. At any rate, I know the document well—the quarterly bulletin, which is widely distributed—and I can tell him that I will, on my own responsibility, gladly show to him at any time any particular issue that he may wish to see.

Mr. Ellis Smith

That will be welcomed because many hon. Members have been refused it.

Mr. Barber

If the hon. Gentleman would like to see any particular copy, I will allow him to see it, because I know him well enough to know that he will, in future, treat it as confidential.

I was then asked two questions. Firstly, why was not something done in April in the Budget? All I can say is that a great deal was done. We provided a surplus above the line of £500 million, which was a very considerable surplus, and that was done simply because of the sort of factors which were brought to the attention of the House tonight. The second question was: why did we give the Surtax reliefs? I can only say again—and I do not want to weary the House—that they do not become effective until January, 1963.

The third speaker was the hon. Gentleman the Member for Orkney and Shetland (Mr. Grimond) who made a speech distinguishing between the fiscal and economic reasons for the imposition of taxation. The hon. Gentleman said he thought that since the Budget things had got slightly easier. I suppose that, superficially, when looking at the increasing pressure of demand, one might assume that things have got easier. But that is a very superficial approach and I cannot believe that the hon. Gentleman would refer to things getting easier if he had in mind one of the most serious aspects of our present situation which has been one of the main causes for these measures; the continued pressure on sterling since the time of the Budget. It is inevitable, in the sort of situation in which we are now, that if one takes any measures they will be unpalatable, but they will be widely spread.

The hon. Gentleman the Member for Gloucester (Mr. Diamond) said that there had been a breach of faith, because a full debate was promised. I would only refer the hon. Gentleman to what was said by his right hon. Friend the Leader of the Opposition before the main debate started. It was suggested that it would be useful if we could debate these Orders in the context of the general debate. That arrangement was for the general convenience of the House.

I do not say this in any provocative spirit, because it would be for the general convenience of the House if this debate did not go on for too long— but I am happy to stay here, as is my hon. Friend the Financial Secretary, in order to answer any questions that are put to us.

The hon. Member for Gloucester then said that the Chancellor had said that the Surcharge would, in effect, increase the 5 per cent. rate to 5½ per cent, and that that conflicted with something that I had said last night, when I explained how it would work. If the hon. Gentleman will look at what my right hon. Friend said and what I said, he will see that there is absolutely no justification for saying that what my right hon. Friend said and what I said was inconsistent.

The point is that the trader will not have to bother himself with minute calculations. He will not have to raise the 5 per cent. rate to 5½ per cent. or the 12 per cent. rate to 13¾ per cent. or work out these minute calculations. He does one sum at the end of the day and adds 10 per cent. to the amount of tax due. This is important and I explained it yesterday because I realised that it is a matter of great interest.

Mr. Nabarro

It is so late at night that I will not argue on this point with my hon. Friend. I will just say to him that he is talking the most arrant nonsense.

Mr. Lipton

But the hon. Gentleman the Member for Kidderminster (Mr. Nabarro) will vote for it, just the same.

Mr. Nabarro

On a single invoice comprising a large number of items, it is possible to take the 10 per cent, out. My hon. Friend is forgetting that a retailer sells these items individually, must put price tickets on them individually and must put them in his window. He must calculate and compute what these marginal increases are worth in terms of £s. d., and the dislocation caused by a system of this kind is just appalling.

Mr. Barber

I do not want to get involved with my hon Friend. If he will read again what I said last night—

Mr. Nabarro

I have read it in detail.

Mr. Barber

—if he does so he will find that what he is saying is—I will not say arrant nonsense—but certainly nonsense. I was talking about those people who pay the Purchase Tax, and what I said was absolutely correct and consistent with what my right hon. Friend the Chancellor has said. Of course, it is true that when one comes to consider how the tax should be passed on, this impost must be treated in the same way as any other rise in cost. I think that my hon. Friend will agree—and I am glad that he has got a copy and is reading it again—that what I said was right.

Mr. Nabarro

The hon. Gentleman, or rather my hon. Friend—I have not fallen out so much with him yet—is quite wrong. I was consulting HANSARD for 18th July on a different matter entirely, and not his statement, which I read in bed at eight o'clock this morning. My hon. Friend should apologise for his wrong statement.

Mr. Barber

I have apologised frequently to my hon. Friend, but not on this occasion.

Mr. Diamond

The Economic Secretary was kind enough to reply to a question I asked. This is really a most vital matter. I do not want to be hostile about this, but the commercial world wants to know what it is to do, and what the Economic Secretary said was: The fact is that the rate of tax will be unaffected."— [OFFICIAL REPORT. 26th July, 1961; Vol. 645, c. 554.] Every retailer must know that this is unrealistic. To any retailer an extra 10 per cent. of 50 per cent. is 5 per cent. He would be bankrupt if he did what the hon. Gentleman is saying.

Mr. Barber

If the hon. Gentleman will look at what I said he will see that I was clearly referring not to the retailer but to the person who pays the tax. The reason I was referring to that person was because there had been some misunderstanding as to the way in which he would have to calculate what was payable in respect of the surcharge. I can only say—and obviously I have considered this carefully—that what I said was correct and should be followed.

There was another point which the hon. Member for Gloucester raised which I will answer briefly. He asked why it had to be 10 per cent. all round and not 10 per cent. for some commodities and a lower percentage for others, and why not less than 10 per cent.? On the first point the answer is because there is no power—

Mr. Diamond

There is.

Mr. Barber

The hon. Gentleman says that there is power. I say there is not. Since he and others raised this point previously we have taken legal advice, and what I said on the previous occasion has been stated by those who know better than I do to be absolutely correct. If the hon. Gentleman still disagrees, we must differ. Why have we not chosen a percentage less than 10 per cent.? Here again it is purely a matter of judgment. All that we have been discussing during these past two days bears on this particular matter. In the Chancellor's judgement it was right to place the surcharge at the full rate of 10 per cent.

The hon. Member for Birmingham, Northfield (Mr. Chapman), asked by we could not exclude motor cars from the tax, because of their special position. The answer is that by law the 10 per cent. must apply to all articles subject to Purchase Tax.

Mr. H. Wilson

My hon. Friends have advanced many reasons for opposing this Order both in this debate and in our earlier debate. The Government have the impertinence to come along and ask for £200 million worth of additional taxation, by Order, so soon after the end of the proceedings on the Finance Bill, without even the presence of the Chancellor of the Exchequer to justify such a tremendous levy.

For all the reasons which we have given, for its effect on the cost of living, for its effect on the motor car industry and others, and for its effect on export costs, we intend to contest this Order tonight in the Lobby. I trust we may now come to a decision.

Question put:

The House divided: Ayes 212, Noes 147.

Division No. 216.] AYES [11.25 p.m.
Agnew, Sir Peter Elliot, Capt. Walter (Carshalton) Jenkins, Robert (Dulwich)
Aitken. W. T. Elliott, R. W. (Nwcstie-upon-Tyne, N.) Johnson, Dr. Donald (Carlisle)
Allason, James Emery, Peter Johnson, Eric (Blackley)
Atkins, Humphrey Errington, Sir Eric Johnson Smith, Geoffrey
Barber, Anthony Farey-Jones, F. W. Joseph, Sir Keith
Barter, John Farr, John Kerans, Cdr. J. S.
Batsford, Brian Finlay, Graeme Kerr, Sir Hamilton
Bennett, Dr. Reginald (Gos & Fhm) Fisher, Nigel Kershaw, Anthony
Berkeley, Humphry Fletcher-Cooke, Charles Kimball, Marcus
Biggs-Davison, John Fraser, Ian (Plymouth, Sutton) Kirk, Peter
Bingham, R. M. Gammans, Lady Lancaster, Col. C. G.
Birch, Rt. Hon. Nigel George, J. C. (Pollok) Langford-Holt, J.
Bishop, F. P. Glover, Sir Douglas Leburn, Gilmour
Black, Sir Cyril Glyn, Dr. Alan (Clapham) Legge-Bourke, Sir Harry
Bourne-Arton, A. Glyn, Sir Richard (Dorset, N.) Lewis, Kenneth (Rutland)
Box, Donald Godber, J. B. Lindsay, Martin
Boyd-Carpenter, Rt. Hon. John Goodhart, Philip Linstead, Sir Hugh
Boyle, Sir Edward Goodhew, Victor Litchfield, Capt. John
Braine, Bernard Gower, Raymond Lloyd, Rt. Hon. Selwyn (Wirral)
Brooke, Rt. Hon. Henry Grant, Rt. Hon. William Loveys, Walter H.
Bryan, Paul Grant-Ferris, Wg. Cdr. R. Lucas-Tooth, Sir Hugh
Buck, Antony Green, Alan McLaren, Martin
Bullus, Wing Commander Eric Gresham Cooke, R. McLaughlin, Mrs. Patricia
Butler, Rt. Hn. R. A. (Saffron Walden) Grimston, Sir Robert Maclean, SirFitzroy(Bute&N.Ayrs.)
Carr, Compton (Barons Court) Grosvenor, Lt.-Col. R. G. Macleod, Rt. Hn. Iain (Enfield, W.)
Channon, H. P. G. Hall, John (Wycombe) McMaster, Stanley R.
Chataway, Christopher Hamilton, Michael (Wellingborough) Macmillan, Rt. Hn. Harold(Bromley)
Chichester-Clark, R. Hare, Rt. Hon. John Macmillan, Maurice (Halifax)
Clark, Henry (Antrim, N.) Harris, Frederic (Croydon, N. W.) Macpherson, Niall (Dumfries)
Clark, William (Nottingham, S.) Harris, Reader (Heston) Maddan, Martin
Clark, Brig. Terence (Portsmth, W.) Harrison, Col. Sir Harwood (Eye) Maginnis, John E.
Cleaver, Leonard Harvey, Sir Athur Vere (Macciesf'd) Maitland, Sir John
Cole, Norman Harvey, John (Walthamstow, E.) Manningham-Buller, Rt. Hn. Sir R.
Cooper, A. E. Hastings, Stephen Marten, Neill
Cooper-Key, Sir Neill Hay, John Matthews, Gordon (Meriden)
Cordle, John Heald, Rt. Hon. Sir Lionel Maxwell-Hyslop, R. J.
Corfield, F. V. Hill, Dr. Rt. Hon. Charles (Luton) Maydon, Lt.-Cmdr. S. L. C.
Coulson, J. M. Hinchingbrooke, Viscount Mills, Stratton
Courtney, Cdr. Anthony Hobson, John Montgomery, Fergus
Crowder, F P. Holland, Philip More, Jasper (Ludlow)
Cunningham, Knox Hollingworth, John Morgan, William
Curran, Charles Hopkins, Alan Nabarro, Gerald
Currie, G. B. H. Hornby, R. P. Nicholls, Sir Harmar
Dance, James Hornsby-Smith, Rt. Hon. Patricia Noble, Michael
de Ferranti, Basil Howard, Hon. G. R. (St. Ives) Oakshott, Sir Hendrie
Digby, Simon Wingfield Hughes-Young, Michael Orr, Capt. L. P. S.
Drayson, G. B. Iremonger, T. L. Osborn, John (Hallam)
du Cann, Edward Irvine, Bryant Godman (Rye) Osbome, Sir Cyril (Louth)
Eden, John Jackson, John Page, John (Harrow, West)
Page, Graham (Crosby) Scott-Hopkins, James Wakefield, Edward (Derbyshire, W.)
Pannell, Norman (Kirkdale) Sharpies, Richard Wakefield, Sir Waved (St. M'lebone)
Pearson, Frank (Clitheroe) Skeet, T. H. H. Walder, David
Peel, John Smith, Dudley (Br'ntf'rd & Chiswick) Walker, Peter
Percival, Ian Smlthers, Peter Walker-Smith, Rt. Hon. Sir Derek
Pickthorn, sir Kenneth Spearman, Sir Alexander Wall, Patrick
Pitman, Sir James Stanley, Hon. Richard Ward, Dame Irene
Pitt, Miss Edith Stevens, Geoffrey Whitelaw, William
Pott, Percivall Steward, Harold (Stockport, S.) Williams, Dudley (Exeter)
Prior, J. M. L. Studholme, Sir Henry Williams, Paul (Sunderland, S.)
Pym, Francis Sumner, Donald (Orpington) Wills, Sir Gerald (Bridgwater)
Rawlinson, Peter Talbot, John E. Wilson, Geoffrey (Truro)
Redmayne, Rt. Hon. Martin Tapsell, Peter Wise, A. R.
Rees, Hugh Taylor, Sir Charles (Eastbourne) Wolridge-Gordon, Patrick
Renton, David Temple, John M. Wood, Rt. Hon. Richard
Ridley, Hon. Nicholas Thatcher, Mrs. Margaret Woodnutt, Mark
Ridsdale, Julian Thomas, Peter (Conway) Woollam, John
Rippon, Geoffrey Thompson, Richard (Croydon, S.) Worsley, Marcus
Roberts, Sir Peter (Heeley) Turner, Colin Yates, William (The Wrekin)
Robinson, Sir Roland (Blackpool, S.) van Straubenzee, W. R.
Roots, William Vane, W. M. F. TELLERS FOR THE AYES
Ropner, Col, Sir Leonard Vaughan-Morgan, Rt. Hon. Sir John Mr. Gibson-Watt and
Russell, Ronald Vosper, Rt. Hon. Dennis Mr. J. E. B. Hill.
Abse, Leo Hall, Rt. Hn. Glenvil (Colne Valley) Pearson, Arthur (Pontypridd)
Ainsley, William Hamilton, William (West Fife) Peart, Frederick
Albu, Austen Hannan, William Plummer, Sir Leslie
Allaun, Frank (Salford, E.) Hart, Mrs. Judith Prentice, R. E.
Allen, Scholefield (Crewe) Herblson, Miss Margaret Probert, Arthur
Awbery, Stan Holman, Percy Pursey, Cmdr. Harry
Bacon, Miss Alice Holt, Arthur Randall, Harry
Baxter. William (Stirlingshire, W.) Houghton, Douglas Redhead, E. C.
Bowden, Herbert W. (Leics, S.W.) Howell, Charles A. (Perry Bart) Reynolds, G. W.
Bowen, Roderic (Cardigan) Hughes, Cledwyn (Anglesey) Roberts, Goronwy (Caernarvon)
Bowles, Frank Hughes, Emrys (S. Ayrshire) Robinson, Kenneth (St. Pancras, N.)
Boyden, James Hunter, A. E. Rogers, G. H. R. (Kensington, N.)
Brockway, A. Fenner Hynd, John (Atterdiffe) Silverman, Julius (Aston)
Brown, Rt. Hon. George (Belper) Janner, Sir Barnett Silverman, Sydney (Nelson)
Brown, Thomas (Ince) Jay, Rt. Hon. Douglas Slater, Mrs. Harriet (Stoke, N.)
Callaghan, James Jenkins, Roy (Stechford) Slater, Joseph (Sedgefield)
Chapman, Donald Johnson, Carol (Lewisham, S.) Smith, Ellis (Stoke, S.)
Chetwynd, George Jones. Elwyn (West Ham, S.) Sorensen, R. W.
Cliffe, Michael Kenyon, Clifford Soskice, Rt. Hon. Sir Frank
Corbet, Mrs. Freda King, Dr. Horace Stewart, Michael (Fulham)
Craddock, George (Bradford, S.) Lawson, George Stonehouse, John
Cronin, John Ledger, Ron. Stones, William
Crosland, Anthony Lee, Frederick (Newton) Stross, Dr.Barnett(Stoke-on-Trent,C.)
Crossman, R. H. S. Lee, Miss Jennie (Cannock) Swingler, Stephen
Davies, G. Elfed (Rhondda, E.) Lever, L. M. (Ardwick) Symonds, J. B.
Davies, Harold (Leek) Lewis, Arthur (West Ham, N.) Thomas, George (Cardiff, W.)
Davies, Ifor (Gower) Lipton, Marcus Thomas, Iorwerth (Rhondda, W.)
Delargy, Hugh Loughlin, Charles Thompson, Dr. Alan (Dunfermline)
Diamond, John Mabon, Dr. J. Dickson Thomson, G. M. (Dundee, E.)
Dodds, Norman MacColl, James Ungoed-Thomas, Sir Lynn
Driberg, Tom Mclnnes, James Wainwright, Edwin
Ede, Rt. Hon. C. McKay, John (Wallsend) Warbey, William
Edelman, Maurice Mackie, John (Enfield, East) Watkins, Tudor
Edwards, Rt. Hon, Ness (Caerphilly) Mallalieu, E. L. (Brigg) Weitzman, David
Edwards, Walter (Stepney) Marquand, Rt. Hon. H. A. Wells, William (Walsall, N.)
Evans, Albert Marsh, Richard White, Mrs. Eirene
Finch, Harold Mellish, R. J. Whltlock, William
Fitch, Alan Mendelson, J. J. Wigg, George
Fletcher, Eric Milne, Edward J. Wilcock, Group Capt. C. A. B.
Fool, Dingle (Ipswich) Mitchison, G. R. Wilkins, W. A.
Forman, J. C. Monslow, Walter Willey, Frederick
Gaitskell, Rt. Hon. Hugh Morris, John Williams, Ll. (Abertillery)
George, Lady MeganLloyd (Crmrthn) Mulley, Frederick Williams, W. R. (Openshaw)
Ginsburg, David Neat, Harold Wilson, Rt. Hon. Harold (Huyton)
Gordon Walker, Rt. Hon. P. C. Oram, A. E. Winterbottom, R. E.
Greenwood, Anthony Paget, R. T. Wyatt, Woodrow
Grey, Charles Pannell, Charles (Leeds, W.) Yates, Victor (Ladywood)
Griffiths, David (Rother Valley) Pargiter, G. A.
Grimond, J. Parker, John TELLERS FOR THE NOES:
Hale, Leslie (Oldham, W.) Pavitt, Laurence Mr. Short and Mr. Irving

Resolved, That the Surcharge on Revenue Duties Order. 1961 (S.I., 1961, No. 1388), dated 24th July 1961, a copy of which was laid before this House on 25th July, be approved