Clause 1.—(TELEVISION ADVERTISEMENT DUTY.)

HC Deb 15 May 1961 vol 640 cc941-1064

Mr. I. J. Pitman (Bath)

I beg to move, in page 1, line 17, after "Britain", to insert: for a period of one year".

The Chairman

For the convenience of hon. Members I have had put in the "No" Lobby a provisional list of the Amendments which have been selected.

I suggest that it will be for the convenience of the Committee to discuss with this Amendment the one in line 18, after "sixty-one" to insert: and before the end of August, nineteen hundred and sixty-two", in the name of the hon. Member for Crosby (Mr. Graham Page).

Mr. Pitman

I have absolutely no interest in the matter to which my Amendment refers. I have not a television share of any kind, and from the point of view of being an advertiser or taking advertisements in any business with which I am connected, it is too small really to matter. I thought it well to make that point to begin with.

I think that there are three aspects to this matter: first, the question whether the duty is a tax on advertising; secondly, whether it is a tax on television company profits; thirdly, how much money my right hon. and learned Friend is likely to get out of it.

Dealing with the last point first, I would point out that with the rate of Income Tax and Profits Tax on companies together working out at considerably over 50 per cent., my right hon. and learned Friend will be receiving less than half of what he announced. It may, however, be that perhaps my right hon. and learned Friend included the tax on the tax in his calculation; I should like to know whether he has. If not the yield of the tax will be considerably less than half of what he has supposed. That point should be borne in mind.

In respect of a tax on advertising, I think that the general opinion of the House, which was clearly shown on both sides in 1947, was that a tax on advertising itself was something bad. At any rate, the Chancellor of the Exchequer, in 1947, the former right hon. Member for Bishop Auckland, now Lord Dalton, brought in such a tax, and it was then decided that it was a bad tax and something which ought not to be done because it was taxation on information and the passing of information was the very essence of civilisation.

If hon. Members opposite really think that advertising and the passing of information is something to be deprecated, then they had better get after some of the nationalised bodies, such as the gas industry, the electricity industry and the transport industry, which are, rightly and essentially, passing on to customers all the information which they think their customers ought to have. Anyhow, that proposal was made in 1947, and it was dropped on the ground that it was a bad thing to tax the passing of information by a tax of that kind. I think we should all agree that anything which slows up the passage of information in a free economy which is based on freedom of choice is bound of itself to be a bad thing, and, therefore, anything which, per contra, improves information is good and ought to be encouraged.

4.15 p.m.

When we come to the question of whether it is a tax on T.V. advertising, we ought to recollect what is called Giffin's law, in respect of which it has been discovered that if the price of bread goes up more bread is actually sold, because the more expensive foods such as meat are so much more expensive that people do not buy meat, but buy more bread to make up for the meat which they cannot afford. In that sense, if one has a particularly good advertising medium and there is a big margin of effectiveness in its utilisation, then, if the cost of it goes up, it is conceivable that one actually has a bigger demand for it and that the economies which have to take place do so at the expense not of the most effective and economical, cost what they may, but of the marginal media right down at the bottom of cost-effectiveness.

I think it is perfectly clear from the facts of this case that this would not be a tax on the television companies, but would be a tax upon local newspapers and other marginal sellers of advertising from whom would be deducted the advertising expenditure which would be diverted from them to expenditure on television advertising. Anyhow, we have already seen that the imposition of this tax has not in any way reduced the waiting list of those who wish to advertise on T.V., which brings out the point that in terms of efficacy per £ expenditure these T.V. advertisements are extremely good value for money, and that it is no secret that it is the other media at the bottom which have suffered by the imposition of this tax.

I hope that my right hon. Friend will recognize the strength of these three points and agree to limit the life of this new tax.

Mr. Graham Page (Crosby)

I am grateful to you, Sir Gordon, for saying that my Amendment may be discussed with that in the name of my hon. Friend the Member for Bath (Mr. Pitman). Both Amendments have the same purpose—to limit the tax to one year so that it may be considered again and its effect may be considered when we deal with the next Finance Bill. I must at once declare an interest as the director of an advertising agency.

In the rubric to Clause 1 this duty is described as "Television advertisement duty". In fact, it is clear, both from the wording of the Clause and from notices which have already been issued from Customs and Excise, that this is a tax which will not fall on the programme companies, but will be passed on to the advertisers. I do not think that anyone on either side of the Committee, or even my right hon. and learned Friend, knows exactly what effect the tax will have or how it will operate. It is indeed a new tax. Its effect may be that an advertiser may cut his time on television by 10 per cent. I should think that doubtful having regard to the demand for time on television. Therefore, I do not think that the programme companies will in any way be the losers through a cutting of advertisement time. Any cutting which an advertiser may do will be quickly taken up by another.

As an alternative, the advertiser may pass the tax on to the consumer, Indeed, in this Clause, he is, as it were, directed to do so. But he can only do that if his product is of sufficient price. It is difficult to pass on fractional amounts on a product like a box of matches or a cotton reel.

The third alternative for the advertiser may be to cut some other expenditure to make up for the 10 per cent. in tax which he will pay on television advertising. If he does so, it is likely to be a cut in the same sector—distribution and sales promotion—probably in advertising. Therefore, one would assume that the advertiser who has to cut advertising expenditure because he has to pay this new tax will cut on the smaller types of advertising, the magazines or provincial newspapers.

At any rate, this is a new tax. No one knows how it will operate—whether as a Profits Tax on the programme companies, or whether it will be passed down the line and become a consumer tax. For that reason, let it be experimental. Let it be placed only for one year, and let us consider it again next year.

There are further reasons for this limitation. Either this is a revenue tax, or it is what one might call a policy tax. If it is intended merely to raise revenue which is easy to collect, one cannot complain about it. It is easy to collect from the very few taxpayers—the programme companies. If it is a policy tax, then it is presumably intended as a curb on television advertising in particular or on advertising in general.

If it is a revenue tax, it may still have effects on the economy which should be considered in a year's time. If it is a policy tax, then one wants to know whether it will be a curb on television advertising. My view is that it will not curb television advertising and that there will still be as much of it because of the demand for an efficient form of sales distribution.

It may perhaps be intended as a curb on advertising in general, however, as it would have been had it been put forward by Members opposite. If it operates in this way, then it will cause the advertisers to shift their expenditure on sales distribution—for example, from advertising to the travelling salesman—with a consequent effect on manpower and the economy. That is something at which we should look again in a year's time. For these reasons, I ask my right hon. and learned Friend to consider the Amendments carefully. Naturally, I think that mine is more the practicable, but I do not mind which of the two he accepts.

Mr. F. P. Bishop (Harrow, Central)

I Wish to support the Amendment moved by my hon. Friend the Member for Bath (Mr. Pitman), but I agree with my hon. Friend the Member for Crosby (Mr. Graham Page) that it is a matter of detail, of the two we are discussing, which is preferred by my right hon. and learned Friend the Chancellor of the Exchequer.

Perhaps the Amendment in the name of my right hon. Friend the Member for Crosby is more practical in giving a slightly longer time, but the principle is that we are asking my right hon. and learned Friend to agree that this tax is experimental. It is designed to meet a special situation which, in its nature, we all know to be temporary, and we hope that he will agree to allow time for the effect of the tax to be seen in practice over a limited period before the idea of what is, in effect, a general tax on advertising is accepted as part of the permanent tax structure.

I do not want to repeat what my hon. Friends have said. It is true that the tax as it has emerged in Clause 1 is rather different in its character and effect from what many people had expected after the Budget statement. At first, it was—quite mistakenly to anyone who had read the statement carefully—taken to mean that there was to be an extra and special tax on the profits of the television programme companies. It was in that sense that it was welcomed by a great many people, including a large section of the Press which did not, I think, take time to consider what the implications of this tax might be upon itself.

I call this an extra tax on the profits of the programme companies, because, in talking about these profits—which everyone knows have been very large in the last few years—it should not be forgotten that already more than half of the net profits of the programme companies are taken by the Chancellor of the Exchequer in Income Tax and Profits Tax. The profits made are very large, and a few people may have made fortunes, but the fact remains that the principal shareholder in commercial television today is the Chancellor of the Exchequer, who, as trustee for the British taxpayer, takes more than half of the net profits.

Of course, the Chancellor is a very privileged type of shareholder, because, while he takes so much of the profits, he has no share in the risks and losses of the business which, as we know, were very considerable in the early days and may be very considerable again, for no one can foresee what may happen when the licences come up for renewal, and I suppose that most hon. Members hope for a greater degree of competition to be brought into television.

That is one of the reasons why I support the Amendment, hoping that my right hon. and learned Friend will limit this new and experimental tax to an experimental period, which will give this Committee time to see how it works in practice. Another reason is that I do not think that, in effect, this is a tax on the profits of programme companies. In spite of appearances, I do not think that it will work out as a specific tax on television advertising as such. I believe that it will work out as a general tax on advertising which has to be collected for the Chancellor by the television programme companies. What I am told is already happening is that the programme companies are passing the tax on, as they must.

Mr. Donald Chapman (Birmingham, Northfield)

Why?

Mr. Bishop

They must. It is a tax on their gross revenues, not on their profits. It must be passed on.

The advertiser will, in many cases, decide to trim his budget accordingly, and it does not by any means follow that it is television advertising that will have to take the cut. I agree with my hon. Friend the Member for Crosby that it is likely to be the marginal advertising media which will, in the end, bear the burden of this tax, not television advertising, because it is very successful and very much in demand, not the great mass circulation newspapers—the Daily Express and the Daily Mirror—but those which are more in the marginal struggling class, for example, almost certainly the Daily Herald and almost certainly some of the weaker provincial newspapers and the specialised magazines about which hon. Members have been so rightly concerned in recent months.

4.30 p.m.

It is as a general tax on advertising that the Committee ought to view this matter and to consider whether such a tax ought not to have a period of probation, as it were, when we can see whether our fears will be realised and when we can judge whether a tax on advertising is a sound feature in our financial system. I realise that there are many hon. Members whose minds on this matter are made up and who will say that such a tax is desirable.

Mr. Gerald Nabarro (Kidderminster)

Hear, hear.

Mr. Bishop

I am sorry to hear my hon. Friend agree. There are those, like the right hon. Member for Huyton (Mr. H. Wilson), for example, who appear to be rather in alliance with my hon. Friend the Member for Kidderminster (Mr. Nabarro).

Mr. Nabarro

Will my hon. Friend the Member for Harrow, Central (Mr. Bishop) at once give examples of when I have been identified in any way with the right hon. Member for Huyton (Mr. Wilson), who is anathema to me politically?

Mr. Bishop

I am speaking from recent observation, but if I am wrong, I will gladly withdraw, although I think that I am right.

Mr. H. Wilson

The only point on which I agree with the hon. Member for Kidderminster (Mr. Nabarro) is in disagreeing with the hon. Member for Harrow, Central (Mr. Bishop) about the monstrous allegation which he has just made. He must not think that the hon. Member for Kidderminster and I are in agreement merely because we go into the Division Lobby in support of speeches made by the hon. Member for Kidderminster, although the hon. Member for Kidderminster does not always join us there.

Mr. Nabarro

The fact is that, realising the wisdom of my words, the right hon. Gentleman unfailingly gets "fell in" behind me and joins me in the Division Lobby.

Mr. Bishop

I am not sure whether my remark has revealed the differences or the agreements between the right hon. Gentleman and my hon. Friend. I apologise to either or both of them, whoever feels himself to be most offended.

I was about to say that hon. Members who hold the view that all advertising, or nearly all advertising, is a drain on our national resources, will welcome the tax, although, like the right hon. Member for Huyton, they might think that it ought to be larger.

However, I do not believe that many people hold such extreme and exaggerated views in these days. If there are some other hon. Members who share such views, I commend to them the recent Fabian pamphlet, A Tax on Advertising? by Mr. Max Corden, which I have recently read with great interest. I do not think that I have ever before found myself in the position of advertising a Fabian pamphlet, especially without a fee. However, it is a serious responsible examination of what advertising does as a feature in our economy, and the possibilities and difficulties of taxing it. Mr. Corden agrees that advertising is an essential element in the process of distribution and points out that when regarded in that way it is a very small element in the overall cost of the distribution of goods and services.

Apparently, there are no figures in this country, but, according to his statement, just before the war it was found in America, where advertising is on a much greater scale than it is here, that the total cost of advertising amounted to no more than 7 per cent. of the total cost of distribution. Costs of distribution have to be met and to that extent the use of advertising reduces other distribution costs and is not then a drain on the economy, but a net economy and a saving to the consumer.

I do not want to pursue that line beyond emphasising that this question of a tax on advertising is a matter of very great importance which deserve serious study and which ought not to be established as part of our tax system by a sort of side wind, as is happening in this case when it was brought in as a means of draining off some of the profits of the television programme companies.

There are other objections to such a tax. It is discriminatory. To a large extent, advertising is an alternative method of selling and distributing goods. Why should a firm, which spends largely on advertising for that purpose, be subject to a special tax burden to which a competitor in the same industry, but relying rather on teams of salesmen, is not subject? I do not propose to say anything more about the discriminatory nature of the tax as between one method of advertising and another because, as I have said, I do not think that in present circumstances the burden of this tax will fall upon television advertising. I think that it will fall elsewhere, but it must be wrong in principle to put a discriminatory tax on one kind of advertising which does not apply to others.

We all recognise the special circumstances which have induced my right hon. and learned Friend to bring forward this tax at this time, and from that point of view I raise no objection. What I am urging is that in their nature the special circumstances are exceptional and temporary. Nobody can say what the circumstances will be in two or three years' time. I am asking my right hon. and learned Friend to agree that a special tax applied to meet special temporary circumstances ought itself to be a special temporary tax limited in such a way that it will have to come up for review year by year.

Of course, a tax can be put on or taken off at any time, but, as we all know, the danger is that the Chancellor's need of money is so great in these days that once he has found a new tax which brings in a sum such as that which my right hon. and learned Friend hopes from this tax—£8 million or £8½ million—it becomes extremely difficult to take it off for that very reason. I hope that my right hon. and learned Friend will be able to agree to limit the tax either to that time proposed by my hon. Friend the Member for Bath, or to the rather extended time proposed by my hon. Friend the Member for Crosby. Which is accepted is a matter of detail, but, at any rate, there should be a limit.

Mr. Chapman

One of the reasons given by the hon. Member for Crosby (Mr. Graham Page) for the Amendment is the confusion surrounding the intention of the tax. Both he and other hon. Members opposite have said that the Chancellor introduced the tax intending it to be a tax on the profits of television contractors. The hon. Member for Harrow, Central (Mr. Bishop) called it draining off some of the profits of the television companies, but the whole of his speech, and the greater part of that of the hon. Member for Crosby, were devoted to discussing the effect on people who advertise. They said that the net result of the tax would be that it would be passed on to the advertiser.

This caused me to look again at what the Chancellor said when he introduced his Budget. I do not want to anticipate a later debate on the way in which this tax will fall, but I think that at this stage we are entitled to hear from the Chancellor what he intended in his Budget speech.

I have re-read that passage of the Chancellor's speech where he mixed his metaphor and made quite a good joke. He said: If I may mix up my metaphor, I am sure that those concerned with the payment of the duty will not mind too much being bitten by the hand which originally fed them. The people who were fed by the right hon. and learned Gentleman's hand were not the advertisers, but the programme contractors. From reading that passage in the Chancellor's speech, I was led to believe, and have since consistently believed, that the right hon. and learned Gentleman—to quote the words of the hon. Member for Harrow, Central—meant to drain off some of the profits being made by the programme contractors. It is indefensible that we are now debating what has, in effect, become a tax on advertisers.

I know that the Chancellor can get away with it if he calls attention to an earlier passage, when he said: …I propose to look at expenditure on television advertising for a modest contribution to the Exchequer."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 817.] What did the right hon. and learned Gentleman mean by "expenditure on television advertising"? We are entitled to know. Did he mean what he said in the passage I quoted first, or did he mean what he said in the second quotation? Or what did he mean? We are confused about the intention of this tax, and to that extent I support the hon. Member for Harrow, Central that we ought to put a limitation to the term of this tax to see what happens, and to see whether the Chancellor's intentions are carried out

My feeling is that neither of those explanations represents the truth. The hon. Gentleman referred to it as something brought in by a side wind. I refer to it as something that came in half-baked. It was not known what would happen with the tax. It was thought that this was a good field for tax. The proposal has been made, and we are left to discover where the burden will fall. That is not the way to help the Committee. During my ten years in the House I do not recall a single occasion when, on the first Amendment to the Finance Bill, we have had to try to find out what the Chancellor meant when he introduced a tax.

For those reasons, it would be a good thing if the Chancellor "came clean" and said what he intended by the tax, and whether he proposed to reconsider it in the light of the fact that most of it will be passed on to the advertisers.

Mr. R. P. Hornby (Tonbridge)

I support the view put forward by my hon. Friends and by the hon. Member for Birmingham, Northfield (Mr. Chapman). In doing so, perhaps I should declare an interest. I work for an advertising agency, and to that extent I am an interested party in this subject.

We are entitled to an explanation of what the Chancellor meant when he imposed this tax. As I understood it, when my right hon. and learned Friend referred to the "hand that fed them" he was intending a tax on the television companies. Certainly, that is an attractive source of revenue at a time when my right hon. and learned Friend is, quite rightly, looking for extra revenue.

During the Second Reading debate, my right hon. and learned Friend appeared to be thinking along different lines. He said. The new duty on television advertisements will become one of the programme companies' costs of operation, and this, together with their other costs, they will recoup from advertisers to such extent as the balance of supply and demand for television advertising time may allow."—[OFFICIAL REPORT, 4th May, 1961; Vol. 639, c. 1623.] That puts a totally different complexion on the tax, and we would like to know what my right hon. and learned Friend has in mind.

4.45 p.m.

There are two points which I would ask my right hon. and learned Friend to consider. The first is a matter of principle, and the second is a matter of timing. As all hon. Members who have spoken have said, this is a selective tax. Many taxes are selective, but this is a selective tax on the distributive system of industry and trade. It is selective in that it is selecting a particular form of salesmanship, namely, advertising, and it is selective in that it is putting an impost on a particular form of advertising, namely, television advertising.

I make only one comment on that. It seems to me that my right hon. and learned Friend is doing a job which is not his in that respect.

The Temporary Chairman (Mr. H. Hynd)

Order. I know that some of the discussion has been along the lines now being pursued by the hon. Member, but the Amendment is to limit the duration of the proposed tax for one year. It is, therefore, not in order to discuss the principle of the tax. That should be done on the Question, "That the Clause stand part of the Bill".

Mr. Hornby

I am obliged, Mr. Hynd.

There is a good case for having an experimental period of one year. Because of the principle involved, and because of the doubts which have been expressed about how this tax will work, and whether it will work in the way intended by my right hon. and learned Friend, there should be this trial period.

My second point is on the question of timing. There are two matters which are directly relevant to this impost. The first concerns television in particular, and the other the Press, which may also be affected by this Clause.

The Pilkington Committee is now studing the question of television, and it is possible that its report will be issued in about twelve months. It would, therefore, be wise for my right hon. and learned Friend to look at this proposal again in twelve months, when this report might be available.

Lord Shawcross and his colleagues are examining the finances of the Press and other advertising media, which may be affected directly or indirectly by this impost, and again my right hon. and learned Friend would be wise to look at this matter again in twelve months to see whether it has fulfilled the purposes he has in mind

With those remarks. I support the Amendments.

Mr. Scholefield Allen (Crewe)

I support what has been said, particularly by my hon. Friend the Member for Birmingham, Northfield (Mr. Chapman), but I carry it a little further. My hon. Friend stopped short when he said that this tax would be paid not by the programme companies, but by the advertisers. However much is passed on to the advertisers, they will pass on to the consumers as much as they possibly can, and we are interested in the consumers.

The programme companies and those who are behind them have made good fortunes, thanks to the minority report of the right hon. and learned Gentleman the Chancellor of the Exchequer, who gave them their first impetus. We were all rather innocent, and may have made a bad mistake some years ago which led to the degeneration of television, but we were cheered when we thought that the right hon. and learned Gentleman was trying to "come clean" and put something on the backs of the great profits which are being made by the programme companies.

However, it is now being freely said by hon. Gentlemen opposite, who are experts in this matter and are part and parcel of the advertising companies and agencies, that this tax will be passed on by the programme companies to the advertisers.

One hon. Member pointed out that if it were passed on to the advertiser it would not be possible for him to pass it on to the consumer, because it would be such a small proportion of the price, say, of a box of matches. It has never been my experience that that principle operates. If an extra ¼d. is imposed by means of taxation the lowest amount which can be put on to the price of the article is ½d., and ½d. is put on—or 1s., as the case may be. The result of this taxation is that the article costs a great deal more to purchase, the profits of the manufacturer are enlarged and, instead of the tax hitting the people we presume the Chancellor to be getting at—the programme companies—it will be the consumer who is hit.

That is why I urge the Chancellor to limit the operation of this provision to a period of twelve months, so that we can see its effect. Let us see whether he has really managed to get at the programme companies, or whether these halfpennies or shillings are coming out of the pockets of the consumers.

Mr. Nabarro

Unlike my hon. Friend the Member for Tonbridge (Mr. Hornby), I have no personal interest to declare in advertising.

Mr. Scholefield Allen

Marvellous.

Mr. Nabarro

This provision represents the application of Purchase Tax to advertising in a limited field, and in my judgment it is long overdue. Because of the by-product advantages which can be derived in the future, I hope that no limitation will be placed upon the length of time during which this provision will operate.

I believe, unashamedly and wholeheartedly, in the application of an appropriate level of Purchase Tax to the whole field of advertising—and permanently. This is a Purchase Tax on a limited field of advertising, as is shown in a document which I received this morning from the Advertising Association. I believe that all hon. Members have seen this document. The second paragraph contains these words: The Association is particularly concerned that what seemed initially to be a levy on the profits of the programme companies has become a direct tax on advertising. This is evident from a study of Notice No. 330 issued by H.M. Customs and Excise. Customs and Excise is the appropriate branch of the Treasury to collect a tax of this kind, as it collects Purchase Tax on behalf of the Treasury. I hope not only that the new tax will be permanent, but that it will represent a precursor to the application in future years, of Purchase Tax on the whole field of advertising which, on account of the large additional revenue available, would have the effect of reducing the already onerous level of Purchase Tax on manufactured goods which, in the opinion of many hon. Members, directly affects the nation's export trade.

Home trade consumer advertising on the television screen, of the kind to be taxed by this provision, cannot have any influence or impact at all upon the nation's export trade, but if the revenue derived from a large-scale general tax on advertising were applied to the relief of Purchase Tax on those manufactured articles which very dangerously affect the nation's export trade I would think it was a good thing.

Mr. Scholefield Allen

Is not the hon. Gentleman straying rather a long way from the terms of the Amendment?

The Temporary Chairman

I understand that the hon. Member for Kidderminster (Mr. Nabarro) is arguing against the Amendment which is now before the Committee.

Mr. John Hall (Wycombe)

As I understand it, my hon. Friend's argument is that the tax on advertising, which he describes as Purchase Tax, will enable Her Majesty's Government to relieve other forms of Purchase Tax, for the benefit of consumers generally in this country.

Mr. Nabarro

No—not for the benefit of consumers in this country so much as to assist the nation's export trade by reducing the onerous level of Purchase Tax on many manufactured goods, as witness the 50 per cent. rate of Purchase Tax on motor cars, cosmetics, radio and television sets.

Mr. John Hall

The manufacture of cosmetics does not affect our export trade, except to the extent that extra tax may reduce the quantity manufactured in this country and to that extent may limit demand. But advertising tends to stimulate demand, and to that extent must make it possible for manufacturers to produce their goods at a lower cost. In the end, will not the manufacturers pass on to consumers any additional tax on advertising?

Mr. Nabarro

No. It would be more appropriate if I argued these general issues on the Question, "That the Clause stand part of the Bill." As for the influence of Purchase Tax on the nation's exports, I would commend to my hon. Friend the speech that I delivered when we were discussing the Finance Bill in Committee on 22nd June, 1960, when I went into the Lobby warmly supported by a number of Members on both sides of the Committee, notably the hon. Member for Birmingham, Northfield (Mr. Chapman).

Mr. John Hall

Will my hon. Friend refer me to any authority on this matter?

Mr. Nabarro

That is an understandable remark from one of my hon. Friends who sits for a town like Wycombe, which is primarily concerned with the production of furniture, on which the Purchase Tax is only 5 per cent. If he sat for the constituency of Birmingham, Northfield, which principally produces motor cars, which are taxed at a rate of 50 per cent., he would understand the economics of Purchase Tax.

I now return to the arguments relating to the Amendment. I will deal with the broader issues, if I am fortunate enough to catch the eye of the Chair, on the Question, "That the Clause stand part of the Bill." The issue in regard to the permanency or otherwise of this levy is that it applies at present only to approximately £72 million of advertising expenditure annually on the television screens.

Mr. Christopher Mayhew (Woolwich, East)

It is £80 million.

Mr. Nabarro

My information is that it is £72 million.

Mr. Mayhew

The hon. Member may be referring to the calendar year. I believe that the figures are £80.7 million gross and £68 million net for the year ending 31st March.

Mr. Nabarro

The figure that I have is for 1960, and it is authoritative in that it has been produced by Dr. Mark Abrams, of the London Press Exchange, and is reproduced in the Economist of 21st March, 1961. It gives the figure as £72 million, and I accept that as authoritative.

My right hon. and learned Friend the Chancellor has said that the yield on the present year, at a rate of 10 per cent., will be approximately £7 million, and that in a full year it will be £8½ million, The £72 million expended annually in advertising on television screens has to be compared with the total national expenditure on advertising, which is at present £455 million. If my calculations are correct, television screen advertising represents only 16 per cent. of the total amount of advertising.

It is to the remaining 84 per cent. that I shall be asking my right hon. and learned Friend to apply himself during the next twelve months, when we debate the Question "That the Clause stand part of the Bill". It is unfair that this tax should be applied only to a small part of general advertising, and only to one of the many media of advertising. If there is to be an advertising tax——

The Temporary Chairman

I would remind the hon. Member of his promise to return to the terms of the Amendment.

Mr. Nabarro

If a tax is applied to television advertising it is discriminatory in character, and I hope that it will act as a precursor to a general advertising tax, and that my right hon. and learned Friend the Chancellor will resist the Amendment, which seeks to limit the period for which the television tax is applicable. When we debate the Question "That the Clause stand part of the Bill", I shall recommend a substantial enlargement of the tax during the years ahead, as part of a general and non-discriminatory overall uniform rate of Purchase Tax.

5.0 p.m.

Mr. Nigel Fisher (Surbiton)

Like my hon. Friend the Member for Kidderminster (Mr. Nabarro), I have no interest to declare. But I wonder whether this is a wise innovation. As yet, it has not found a friend on either side of the Committee, except the hon. Member for Kidderminster—a very unusual ally for a Chancellor of the Exchequer. However, he is the only friend of the Chancellor on this occasion.

This establishes a new tax. It is not necessarily the worse for that, but it is a new principle. It is, in fact, a tax on advertising, long advocated by hon. Member opposite, though never implemented by them. It is a strange tax for a Conservative Chancellor to introduce. Had it been a tax on the programme companies, I think that it would have been much more acceptable to the Committee. The profits of these companies are very large and they were described in one newspaper as a "sitting duck" for taxation of that kind.

Mr. Nabarro

Of course, their profits are very large, but surely my hon. Friend would be fair enough to recognise that 53¾ per cent. of their profits is recovered by the Chancellor in Income Tax and Profits Tax and it should not be higher than that——

The Temporary Chairman

Order. I am trying to confine this discussion to the Amendment and I wish to call the attention of the Committee to that fact.

Mr. Nabarro

It is a good argument for all that.

Mr. Fisher

I recognise the point my hon. Friend has made. I wish to get back to the main question. I do not think that the Chancellor's "hand that fed you bit you" observation was at all relevant to this tax as an introduction to it in the Budget speech. It is not a tax on the programme companies, as has been revealed again and again in speeches from both sides of the Committee today and as was admitted by my right hon. and learned Friend in an Answer to a Question from me last week.

This is a tax on advertising. I wonder what is the object, other than revenue-producing? If it is to damp down the demand and thus reduce I.T.V. revenue, I think it unlikely that it will achieve that objective, because there is plenty of custom for I.T.V. advertising and, broadly, the programme companies will not be affected by this tax at all. It is a tax on a particular form of advertising. It is discriminatory and, therefore, it will become anomalous. It may well be extended next year over other fields of advertising on the basis that this is out on a limb by itself.

If such a tax is introduced from this side of the Committee, I should consider it an open invitation to hon. Members opposite—if it so occurs that they are ever in office again—to take advantage of it. I could not blame them for doing so. It would be a precedent introduced from this side of the Committee and the party opposite might say, "We will accept this and extend it over a wide field of advertising generally". I think it dangerous for my right hon. and learned Friend to present this opportunity to hon. Members opposite who take a different view on these matters. Therefore I urge that, if this tax is to be imposed at all, it should be done experimentally and only for one year.

Mr. Mayhew

I had better begin by disclaiming any interest in the outcome of this debate. May I say how grateful we are to the hon. Member for Kidderminster (Mr. Nabarro) and to the hon. Member for Bath (Mr. Pitman) for their disavowals of any personal interest in this debate, thereby distinguishing themselves from quite a large number of their hon. Friends, some of whom have already taken part in this discussion.

This Amendment is a specific one. I shall not deal with the very broad issues which have been raised by hon. Members opposite. They can be discussed when we deal with later Amendments and on the Question "That the Clause stands part of the Bill". Such issues include whether advertising increases prices, whether the advertiser should pay or whether the programme company should pay and which the Chancellor meant. We shall have plenty of opportunity later to explain that both present good targets for revenue purposes. On the whole, our view is that the programme contractor should pay.

There are a number of other issues which, I think, we may deal with later but about one thing—which all hon. Members have raised, except the hon. Member for Kidderminster—I think it would be appropriate for me to say a word. They all stated that one effect of this tax may well be that, because it raises the cost of television advertising, it may actually draw off advertising revenue from weaker recipients; from magazines, newspapers—the Daily Herald was courteously mentioned by one hon. Member—periodicals and productions of that kind. Because more money is sucked into commercial television, the money spent on advertising through these sources will come to an end.

That is a very interesting argument for hon. Members opposite. It has been put forward by the advertising industry. It has an interesting corollary. What would be the effect of having another television service carrying advertising? If we had another commercial television system, it would achieve what hon. Members opposite maintain. It would be a blow to the provincial Press, to periodicals, to the weaker brethren.

At present, the advertising industry is saying two things at the same time. It is pleading for and shedding crocodile tears over the poor periodicals, the poor provincial newspapers and the wretched weaker brethren among the programme contractors. At the same time, it is calling for another television channel with more advertising to sustain it. The industry must make up its mind which it wants, because, plainly, it cannot advocate both.

We shall not oppose this provision in the Clause. We agree with what was said by the hon. Member for Surbiton (Mr. Fisher). It opens up a favourable prospect. It may be a small and thin end of the wedge, but we do not propose to oppose it. We see no advantage in stopping the tax at the end of the year, certainly not for any of the reasons advanced by hon. Members opposite. We shall have much more to say about this at a later stage, but at the moment I hope that my right hon. and hon. Friends will oppose the Amendment.

Mr. Selwyn Lloyd

Certain questions have been put to me the answers to which may enable hon. Members to decide whether or not to limit this tax to one year. The first question was from my hon. Friend the Member for Bath (Mr. Pitman), who asked whether this was a policy tax or had it some kind of social purpose. The answer is that it has no more social purpose than for example, the petrol tax. I think that advertising fulfils a social purpose and by this tax I am not attempting to influence social development. I shall not go into the wider issues raised by my hon. Friend the Member for Kidderminster (Mr. Nabarro). We are all pleased to see my hon. Friend present again in the Chamber and hope that he has fully recovered from his illness.

The purpose of this tax is to raise money. That is why I imposed it. It is one of the troubles of a Chancellor that no one is in favour of increased taxation and everyone is for increased expenditure. Whenever a Chancellor puts forward proposals to raise money he is told that he is discriminating, and ought to have a sense of guilt, and so on. But the plain answer is that I wanted this year to get the £7 million which will be the yield from this tax.

I am told that it will do damage to advertising. The hon. Member for Woolwich, East (Mr. Mayhew) referred to the damage that it will do to small newspapers and others on the fringe of advertising expenditure. In 1956, the amount spent on television advertising was £11 million. For the last year I think that the expenditure was £77 million. During the time when that expenditure has been increasing we have not heard much about damage to local newspapers, or to those on the fringe of benefit from advertising. I do not think that this modest proposal will have much effect on the advertising revenue of such people. I do not think that the imposition of this tax will make it more likely or less likely that the party opposite, should it have responsibility, would put a tax on advertising.

The point has been raised many times about who will bear this tax, and a reference was made by the hon. Member for Birmingham, Northfield (Mr. Chapman) to my Budget speech. The point which I think is not sufficiently understood is that this tax will be passed on to the extent which the market will permit—according to the law of supply and demand.

Supposing that one had put a tax on the programme companies, and supposing that we had said, "According to your capital or your turnover there will be an ad valorem tax on the programme companies," would not that have been passed on? Of course it would. It would have been passed on to the extent to which the market would bear it, and a tax of this kind will be passed on according to the supply and demand of the particular material which the programme companies have to sell.

We have seen that certain companies have dealt with the matter in different ways. Some have borne half the tax themselves and passed on half the tax, others have devised other ways of doing it and still others have suggested that it would be passed on in toto. With respect to my hon. Friend the Member for Surbiton, however, had I done this it would have been passed on by the programme companies and one could not have got at their profits in a more direct fashion than by Profits Tax and Income Tax.

Mr. Chapman

Had it been covered by a straightforward Profits Tax that would not have been the case, and that it what we all thought it was to be.

Mr. Lloyd

I think that any form of special taxation would have been passed on by way of increased rates. Those concerned would have tested the market and got back as much as they could to make up for any form of taxation.

Mr. John Hall

Does my right hon. and learned Friend say that Profits Tax is likely to be passed on in precisely the same way?

Mr. Lloyd

I think that any form of taxation will be passed on and that we have to accept that fact.

Mr. Nabarro

My right hon. and learned Friend thinks that any form of taxation will be passed on. Can he say how I can pass on my Surtax? I should be delighted to know.

Mr. Lloyd

I have always maintained that high taxation is often inflationary, because it pushes up the demands made on resources for wages and salaries. Any form of taxation is passed on, as far as the market allows, in one form or another.

I have been drawn away slightly from the narrow point of this Amendment. The Amendment deals with the suggestion that the tax shall be put forward for one year only. I cannot accept that proposition. I would say to my hon. Friends that I realise that the Pilkington Committee is sitting and I have no doubt that it will have recommendations to make about this matter. As I understand, that Committee is to survey the whole of the finances of television, of broadcasting and the position of the programme companies. Certainly, when the report of the Committee is at hand I shall reconsider this tax. I am unable to accept the Amendment.

Mr. H. Wilson

We have heard some rather extraordinary remarks during the past five minutes about the ultimate incidence of various forms of taxation. It is rather a crude expression of fiscal economics which, I think, will not have been accepted by half the practical men and most of the theorists who have studied these matters in past years. To follow the Chancellor very far on these very interesting lines would rapidly take me out of order, Mr. Hynd, and encourage your wrath, which I am always loath to do.

On the issue of whether this tax should have a currency of one year, or about one year, there are two different variants of it in the Amendments we are debating. It is, of course, extremely difficult, as the Chancellor found, to go into the issues raised without getting on to the broader subjects which could be more appropriately dealt with on the next Amendment or in the debate on the Question "That the Clause stand part of the Bill".

I had a lot of sympathy with the hon. Member for Kidderminster (Mr. Nabarro) when he was asked some very pertinent questions by the hon. Member for Wycombe (Mr. John Hall). The hon. Member for Kidderminster quite fairly replied that though he would like to go into the matters raised he thought it more appropriate to do so on the Question "That the Clause stand part of the Bill".

The arguments which we have heard this afternoon, and which have already been dealt with very fully by my hon. Friend the Member for Woolwich, East (Mr. Mayhew), have really been, I think, two. One of them has been that we do not know how the tax is going to work out, whether the incidence will be on the programme companies, on the one hand, or whether, on the other, it will be passed on to the advertising industry and, if so, how far it will be passed on by it to consumers.

That is the big issue, and, therefore, hon. Members are saying, "As we do not know how it will work out, let us limit it to one year." That is one argument. It is certainly true that the Chancellor has, perhaps, given expression to some rare thoughts at different times about where he expects the tax to fall. I do not wish to pursue that matter at the moment, even though it was the main argument behind this Amendment, because there is another Amendment on the Notice Paper to which we shall be coming very shortly and on which I think it will be more appropriate to discuss that matter.

The Chancellor, in fact, gave the answer. He wants the money and he can see two fairly lush groups of companies involved. He does not care "two hoots" whether he is taking it out of the programme contractors or out of the advertising industry. I have a lot of sympathy with the right hon. and learned Gentleman. They can both well afford it. The only relevant question is to what extent is it to be passed on to the consumer. Obviously, from what the right hon. and learned Gentleman said, he does not care "two hoots", because he thinks that everything is passed on to everyone else.

Mr. Selwyn Lloyd

Is it not?

5.15 p.m.

Mr. Wilson

The right hon. and learned Gentleman asks, "Is it not?" I must say that the right hon. and learned Gentleman has a very heavy responsibility for this. He was frank enough to admit in the Budget debate that he was responsible as a minority of one on the Beveridge Committee for saying that we should have commercial television. When he went on television on the night of the Budget, and was asked whether this tax would be passed on to the consumer, he said quite blithely that it would. Of course, we know how he reaches this conclusion. Boyle's Law is chicken feed compared with Lloyd's Law.

When it is in order to deal with this matter I shall be glad to respond to the right hon. and learned Gentleman's invitation. We are learning a lot this afternoon, which is one advantage of changing the Chancellor every year or two. What we should be debating is not whether the tax should be changed every year, but whether the Chancellor should be changed every year. My very strong recommendation to the Committee is that we should keep the tax and change the Chancellor. Hon. Members have their priorities wrong. However, I should be out of order if I pursued that matter too far.

Since the point has been raised by the hon. Member for Harrow, Central (Mr. Bishop) that he understood that it was my point of view that all advertising was wasteful of national resources and should, therefore, all be taxed to a penal extent, I want to make it quite plain that I do not think that all advertising is wasteful of national resources but only that we have far too much of it at present. I said on the Second Reading of the Bill that if the rate of advertising expenditure both in terms of money and resources were cut by half, and the amount of industrial research in industry were trebled, the country would be a great deal healthier. So far as that is related to the question of whether this tax should be continued for one year, I think it would be fatal to say that it is going to last only one year. I should like to see it extended because I do not think that it goes far enough.

Were it possible for the right hon. and learned Gentleman, with his ingenuity, to work out a tax which would fall with the present level of severity, or the intended level of severity, on the programme contractors, and then to introduce another tax on the advertising industry, it would be a good thing and would tend to direct more expenditure into such things as scientific research, which, I think, most must agree, is at present being carried out on too low a scale.

When we come to the Question "That the Clause stand part of the Bill" I hope if I catch your eye, Mr. Hynd, to have a few words to say on the broader question of advertising expenditure and its relation to this matter, but before I sit down there is one thing that ought to be said.

What we are debating, on this issue of whether this tax should be for one year or for a longer period, is not merely a question how far this tax is passed on. We are on a much broader issue, and I am surprised that hon. Members opposite have not addressed themselves to this point. They all say that we know that we may have the Pilkington Committee's report in a year's time, and that we can look at the matter again, as the Chancellor said, but this tax ought to have been imposed a year or two ago.

We proposed it a year or two ago, during the currency of the Entertainment Duty on cinemas. We said that this would be a good way of getting rid of that duty. We proposed it again last year, but we did not think that it was going to be done in such a chicken-hearted way as in this Bill.

There is a much stronger argument than any that has been used by the Chancellor or anybody else today. What the House did when it so unwisely listened to the minority Report produced by the Chancellor, a few years ago, was to hand over a franchise, area by area—a monopoly franchise—to a group of businessmen literally to make almost unlimited profits.

The Temporary Chairman

Order. The right hon. Gentleman is getting even nearer the brink now. He must confine himself to the Amendment.

Mr. Wilson

I hope, in one short sentence, Mr. Hynd, to show the relevance of this point to the Amendment we are debating, whether this should be for one year only, because some hon. Members think that this uncertainty about who bears the tax is an argument for limiting it to a single year. I am trying to suggest that when the House of Commons gives a franchise to people to print money for a very long period ahead—because these charges go on until 1964—it is something almost unprecedented in this history of the House that a franchise should be given in this way—it is utter nonsense for hon. Members opposite to suggest that this tax is an experimental tax, and that it ought to disappear, if, at the end of the year, we have more information about who is really bearing it.

The fact is that throughout the history of Parliament—and there is still a Statute of Monopolies and a Resolution of the House on monopoly which has never been rescinded, and is still, in theory, having full currency—whenever a firm or an individual has been given a franchise enabling them to exact monopoly revenue, Parliament, or in more ancient days the King, has always insisted upon it being paid for. Therefore, what the Chancellor is doing in this particular Clause is to claw back, to my mind on a very small scale indeed, some of the revenues granted by this franchise.

I suggest that those who want to limit the Chancellor's power to claw it back on this miserably inadequate 10 per cent. scale, that it should be limited to one year, are, in my view, going right against the whole traditions of the House. Where a franchise is given, which is given without competition, without any system of tendering, and completely contrary to all our traditions, it is obviously nonsense, where this miserably inadequate tax is to be exacted by the Chancellor in return for this concession, that it should be limited to a single year's tax.

Mr. Pitman

I am very grateful to my right hon. and learned Friend the Chancellor for saying that he will have a good look at this matter when the Pilkington Committee has reported, but before I ask the leave of the Committee to withdraw the Amendment I should like to take up two points. One was made by the hon. Member for Woolwich (Mr. Mayhew), and it was one on which either I did not understand him or thought he was making a point that was not very worthy.

I understood the right hon. Gentleman to say that he thought that a number of other people had not disclaimed the fact that they held no television shares. If that was so, I would say that there was no distinction between them and myself. If he was saying that because they were advertising agents they had an interest to declare, I think that there is a misunderstanding, because the advertising agents could not care what medium is used. They are just as happy with one medium as another.

Both the right hon. Gentleman and the Chancellor made the point that if the Pilkington Committee was to authorise a number of new television channels, where would we be in respect of our solicitude for the provincial Press and the marginal medium? Perhaps I might say, on behalf of everybody, that in that case it is a natural efficiency which we welcome and would gladly support. What we are objecting to is that it is the unnatural introduction of an inefficiency which so destroys the specialist paper and the provincial paper. If, as we hope, the Pilkington Committee gives a number of franchises, that would answer entirely the point of the right hon. Member for Huyton. We would then have extra costs which would go in that direction, rather than in the other, but much of those costs would come back to the consumer in a subsidised entertainment for television.

I beg leave to ask to withdraw the Amendment?

Hon. Members

No.

Amendment negatived.

Mr. Martin Maddan (Hitchin)

I beg to move, in page 1, line 17, after "Britain" to insert: from which advertisements had been transmitted before the seventeenth day of April, nineteen hundred and sixty-one". In moving this Amendment in the names of myself and some of my hon. Friends, we have in mind a position to which, or to one facet of which, attention was drawn by the Public Accounts Committee, three years ago. The effect of the amendment is to exclude from the television duty advertisements from stations which have not carried advertisements before the date of the Budget. The Public Accounts Commmittee, three years ago—and I think that the right hon. Member for Huyton (Mr. H. Wilson) had this in mind when talking about monopolies—drew attention to the fact that competitive tendering was not the order of the day in the award by the Independent Television Authority of licences to programme companies. It also drew attention to the fact that the programme companies were making very large profits.

We are concerned here with legislation which will affect programme companies which are not yet on the air, and we do not know whether they will make any profits at all. As I shall show, we may come to a point where we may find that my right hon. and learned Friend is taking steps that will lessen the competition between the television programme companies. He says that this tax is a tax to raise revenue, and that it is no part of social policy, but I suggest that he should recognise the effect which this tax might have on social policy. If it is, as I think it is, the feeling on both sides of the Committee that there should be as much competition as possible between the programme companies, my right hon. and learned Friend certainly ought to consider whether imposing this tax in this way does not limit it.

During the previous debate, we have been declaring our interests, and I must do the same, though it is a rather remote one. I am a director of a company called Television Audience Measurement, Limited, more popularly known as T.A.M., and all the present programme companies are, and I hope the future ones will be, clients of my company. So, also, are all the large advertisers and agencies. This gives me some knowledge of the position, and it is on that basis that I commend this Amendment to the Committee.

5.30 p.m.

If we accept that it is our policy to have competition, this tax on future stations may very well limit that competition. Up to the present, each new area that has opened up has had allotted to it a new programme company, so that, at least between the different areas, there is some form of competition. The position between the programme company in the south of England and that in London, where they both operate throughout most of Kent, provides some measure of competition.

New stations are to open up. The South-West Television Company started operating at the beginning of this month. Grampian Television will open in North-East Scotland in the autumn. We are to have the Border Television Company for the Border Counties, and the tender has been offered for a programme company to operate in West and North Wales.

We have to see what chance there is of companies of reasonable standing and ability coming forward to operate such licences effectively, because, not unnaturally, the smaller these areas are the less profitable they are. Further, the nearer we get to 1964 the less time they have to recoup their initial expenditure and investment. We may find that we have created a situation in which companies do not come forward to serve these prospective areas, or that those that do offer themselves are not of the standard we think those areas deserve.

I shall not weary the Committee with a lot of detail, but it may be of some interest to the Committee to know the total number of homes served in the various areas. In each of the areas of London and the North, there are about 4½ million homes; in the Midland area, about 2¼ million homes; Central Scotland, South Wales and West, and South Wales, about 1¼ million homes each; and in the Tyne-Tees area and East Anglia about ¾ million homes each.

What is the position in future areas? Stations like that in North-East Scotland have less than 300,000 homes, the Border Counties only 170,000, and West and North Wales about 230,000. It is true that there is one very small station, Ulster, operating in an area of not much population—only about 340,000 homes—but that is a very special case. Quite clearly, the imposition of this 10 per cent. duty will to some extent limit the turnover of the television companies; rather less money will be spent on television than before. Some of it may or may not be diverted from elsewhere, but less money will be spent, and the position may arise in which a company that might have been viable without the tax will not be viable with it.

I believe that competition is very important, but under the Television Act we are saddled with the present position until 1964. Things have gone rather differently and more quickly than was foreseen by the authors of that Measure, but as we are saddled with that position until 1964 we should not do anything to make the competitive or non-competitive situation worse.

There is another small point for the future, in which the hon. Member for Woolwich, East (Mr. Mayhew) may be interested. There is at least a theoretical possibility that the B.B.C. may one day carry some paid advertising. Do we want to create a precedent that would automatically tax the British Broadcasting Corporation's revenue as well? I am not certain that we do. The purpose of the Amendment, therefore, is to exempt from this tax those commercial stations that were not on the air at the time of the Budget, and, of course, any other stations such as the B.B.C. that might—I do not know—take advertising in the future.

My right hon. and learned Friend can-not say that this provision will be too difficult to administer. He has to collect the tax from a very small number of bodies. There is only a handful of television companies, and there can be no difficulty at all about collecting the tax from some of them. My right hon. and learned Friend could have raised this £7 million that he needs by a super-Profits Tax. As it is, he is increasing the Profits Tax on all companies by 2½ per cent. If that is not inflationary—and I do not think that he will say it is—it should be possible to have a special Profits Tax on the programme companies.

That would entirely meet my point. If future stations have to be taxed, let them be taxed at special rates along with the others. As I see it, putting a duty on the revenue of these stations and reducing their possible turnover will lead either to a reduction in the number of companies that will tender, or cause a situation in which the I.T.A. will have to give the contracts to existing stations—enfranchise the existing stations—which will do the reverse of increasing competition.

There are many other points that follow from that trend of argument, but I will not pursue them now because they can be better dealt with on the Question "That the Clause stand part of the Bill." If my right hon. and learned Friend were to accept the Amendment he could lose very little or no revenue between now and next year. He would make the task of the I.T.A. much easier, and make certain that the stations not yet on the air at least got off to a fair start. We should then see whether or not they were viable. If we make these small stations unviable, we have no hope at all of letting contracts in the future to even smaller stations.

Mr. Mayhew

I hope that the Chancellor has no intention at all of accepting this Amendment. We have heard before this story of appalling risks and uncertainties that face the new programme companies. We heard it in connection with Granada, with Associated Rediffusion, with A.T.V., and with A.B.C. That argument was used constantly in the early months and years of commercial television to persuade the Independent Television Authority to allow all kinds of concessions to the programme companies—concessions which, in my view and that of many others, were impermissible, and at variance with the Television Act. Those concessions allowed the television companies to advertise for eight, nine or ten minutes in the hour. They allowed all kinds of "natural-break" practices that were totally contrary to the Act.

In their defence, the companies spoke of the great risks and uncertainties that lay ahead of them. Perhaps it might be argued that some risk was taken by the early ones. Perhaps the pioneers of I.T.V. can be considered to have had some uncertainty attached to them. But can anyone really say that the newcomers in the field have run any risk whatever It was about the smaller, newer companies that the phrase "licence to print money" was used, because all the work had been done by the pioneers.

All the programmes, or a lot of them, had been made. Westward Television, for instance, which would be covered by the Amendment and which would thus not be subject to the tax, would have all the programmes already provided in cans, made by the big four companies or imported from the United States. The vast majority of Westward's programmes could be shipped by train or air from London and Manchester to the West Country tomorrow.

Therefore, they have everything laid on—even the Parliamentary lobby—and, I must repeat, these newer companies are not even taking the risks that the older companies took. They have, indeed, a licence to print money. Westward, the major company concerned in the Amendment, was one of 12 syndicates which were scrambling for the licence—the usual ugly scramble that goes on—and the present syndicate was chosen out of twelve eager applicants. Everything was laid on for it and now we are told that Westward cannot pay unless the tax is lifted.

Mr. Maddan

I did not say that it could not pay. I rather excluded Westward from my remarks, since I had to choose an illustration and I pointed out that there were 500,000 homes in Westward's area. I was thinking particularly of territories like Border, which has less than 200,000 homes, which is very small.

Mr. Mayhew

I did not say that Westward could not pay, either. I was referring to a statement made by Mr. Peter Cadbury, Westward's chairman, who is quoted in the Advertisers' Weekly as saying, in reference to the tax, "We just cannot pay it." Undoubtedly, this pleading of poverty is the normal beginning of every programme company, but while I am quoting Mr. Cadbury as saying, "We just cannot pay it", he tells a very different story way down in the West, because he is reported on 5th May, 1961, in the Advertisers' Weekly, as saying: When Westward Television went on the air for the first time last Saturday, the advertising revenue for new bookings for the next four months was 80 per cent. higher than had been estimated. The same man had said, "We just cannot pay it."

In the following seven weeks, Westward's advertising revenue went up from an estimated £70,000 to £120,000. But even allowing for that deduction, £108,000 remains which is £38,000 more than Mr. Cadbury had originally estimated—yet he can say that the company cannot pay the tax. Mr. Cadbury appears in rags and presents himself as such to Parliament and asks to be let off this trivial tax. He no doubt welcomes the spectacle of hon. Gentlemen opposite holding out their collection boxes on behalf of Westward.

I hope that the Committee will give considerable consideration to this matter before agreeing that Westward, or any other company, cannot pay the tax. I doubt very much whether hon. Members would be prepared to lop this tax off these new television companies. On the contrary, I should say that the television tax goes too little way towards lowering the appalling and excessive profits that are being made by the programme companies.

5.45 p.m.

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

My hon. Friend the Member for Hitchin (Mr. Maddan) declared an interest in that he is concerned with Television Audience Measurement. It is not a very direct interest, but it is an interest which gives him every right to speak on this matter. Certainly, in this particular case, my hon. Friend has considerable knowledge about the differences between the various programme contractors.

The effect of the Amendment would be to restrict the new tax to advertisements transmitted from television stations which were in operation before Budget day. My hon. Friend the Member for Hitchin has had come correspondence with the Chancellor about this particular matter and, quite frankly, there is little that I can add to what my hon. Friend already knows. I thought it right to mention that the Amendment relates to television stations, because that gives it a certain consequence which I do not think is really the intention of my hon. Friend.

It would mean that the Amendment would apply to any new station that might be set up in the service area, for example, of an old-established contractor, perhaps improving reception in a particular part of the area, and, in that respect, the Amendment is defective. But it is clear that my hon. Friend is concerned with the new programme contractors and I felt some slight embarrassment while listening to the hon. Gentleman the Member for Woolwich, East (Mr. Mayhew), when he was speaking against the Amendment, which I am also doing, because I would not go quite as far as he went.

My hon. Friend is right, in general, in suggesting that the existing, the pre-Budget, contractors have the most profitable service areas, and, of course, that they have had the greatest length of time in which to exploit that position. Westward Television opened on 29th April and Border and Grampian are both due to open later this year. As my hon. Friend pointed out, these contractors serve, in the main, rural and more isolated areas, which are bound, I should have thought, to be less lucrative than the areas served by the existing companies.

My hon. Friend said that the Chancellor should have considered the effects of the imposition of this new tax, and I can assure him that the Chancellor has done that. I should like to draw the Committee's attention to the way in which this tax will affect the new programme companies. It is admitted that these new companies will be concerned mainly with sparsely populated areas. This fact will have been taken into account by the I.T.A. in fixing the rents for the use of the transmitting stations. There should be no doubt—whatever may be said by the hon. Member for Woolwich, and he gave some figures which I will not dispute—that these new television companies are operating in relatively sparsely populated areas and that this will be reflected in their tariff charges for the insertion of advertisements. These charges will, in many cases, be lower than the tariff charges of the companies serving in the larger centres of population.

This fact would, of course, be irrelevant if this new tax were not related to the amount of revenue received by companies from advertising. But the tax is related to that, because this is an ad valorem duty and, consequently, it takes this into account, insofar as it is possible for indirect taxation to take it into account. I ask the Committee to take the view that it would be impossible to vary the rate of any Excise duty according, for example, to the financial position of the supplier of the excisable commodity or the part of the country where he is carrying on his business or the date when he began to do so. Once this were done, as my right hon. and learned Friend pointed out in the letter which he sent to my hon. Friend the Member for Hitchin, it would be very difficult to know where to draw the line.

This is not merely a hypothetical problem. It has been put forward in the past in relation to other forms of taxation. It has been suggested that new entrants into a trade or industry should be excused from indirect taxation. Claims are made, for example, that some new line of production should be relieved from Purchase Tax. It may be said that if this were done it would help some new line to make headway in the export markets, or that this relief should be given because in the past a great deal of money has been spent on research, but always we have felt it right as a matter of principle to refuse to give treatment of that kind.

I pointed out that the rents payable to the Independent Television Authority will already have taken into account the nature of the particular area concerned. To the extent that the tariff charges will be lower, and because the duty is a duty ad valorem the burden on these com- panies would be less. I repeat that we are only applying in this case the same principle which is already applied in the case of indirect taxation.

I agree entirely with my hon. Friend that this is not a case of administrative difficulty. I believe that this proposal is right in principle, and I hope that my hon. Friend will be influenced by the fact that we are following the invaluable practice which has always applied in the case of indirect taxation. I believe, also, that because it is an ad valorem duty and will work out in the way I have mentioned, it is equitable, and I hope that with these explanations my hon. Friend will realise why the Government do not feel able to accede to his request and, consequently, will withdraw his Amendment.

Mr. Maddan

I am grateful to my hon. Friend the Economic Secretary for his explanation of the difficulties relating to these smaller stations. We shall have to think about stimulating or organising as much competition as possible in the television broadcasting industry, and I fear that this duty does not do anything to bring that about. Nevertheless, I appreciate the points which have been made——

Mr. Marcus Lipton (Brixton)

Divide.

Mr. Maddan

If the hon. Gentleman will allow me to finish my speech he can decide whether he wishes to divide the Committee or not.

Mr. Lipton

It is the hon. Gentleman's Amendment.

Mr. Maddan

If anybody else wishes to divide, he may do so.

I will not press this Amendment. I shall ask leave to withdraw it, but before doing so I wish to address some remarks to the hon. Member for Woolwich, East (Mr. Mayhew). He must not suppose that every time an hon. Member rises from this side of the Committee he is doing so to represent some particular interests who have been briefing him with their own profits in view. Such thoughts are unworthy of the hon. Gentleman. If it is of the slightest interest to him, or, indeed, to any other hon. Members, I would state that there has not been any correspondence or contact or communication whatsoever on this subject between me and any of the programme companies, present or future.

I hope that the hon. Gentleman will understand that some of us, from the knowledge that we happen to have, like to probe and to find out what is in people's minds, and prefer to do so without imputations of the kind that the hon. Gentleman had in mind being made against us.

I beg to ask leave to withdraw the Amendment.

Hon. Members

No.

Amendment negatived.

Mr. Ian MacArthur (Perth and East Perthshire)

I beg to move, in page 2, line 1, to leave out from "him" to the end of line 5.

The Deputy-Chairman (Major Sir William Anstruther-Gray)

It would be convenient to take with this Amendment the Amendments in page 2, line 2, after "contrary", to insert: or unless there was in existence on the seventeenth day of April, nineteen hundred and sixty-one, a contract to provide the programme for a payment fixed by the contract or calculable by reference thereto". and in line 5, at the end to insert: (3) If the person providing the programme shall seek to recover the duty charged on or paid by him from the person liable to him for the payment so made or to be made, then the person so liable shall not be liable to pay in respect of any contract for the provision of television programmes a sum greater than the sum originally fixed by that contract.

Mr. MacArthur

The effect of the Amendment is to remove from the Clause the power which it gives television companies to pass on the television advertisement duty to the advertiser. I must declare my interest as an associate director of an advertising agency.

Mr. Michael Foot (Ebbw Vale)

On a point of order, Sir William. Would it not speed up the proceedings of the Committee if we were to alter the conventions of the House so that hon. Members opposite could declare if they have not an interest?

The Deputy-Chairman

As the hon. Member knows, it is not within my power to alter the conventions of the House.

Mr. MacArthur

I realise that the hon. Gentleman must have his fun. I hope he realises also that some of us think that it is our duty from time to time to discuss this sort of question from our knowledge of advertising.

In our earlier debate a number of hon. Members drew attention to the uncertainty which had existed about the intention which was in my right hon. and learned Friend's mind when he referred to the television advertisement duty proposal in his Budget speech. It was widely thought that this was intended to be a duty on the television companies. I suppose we could argue whether or not it is right to introduce an additional selective tax on companies which happen to make very large profits, but certainly in this instance television companies have enjoyed a near monopoly to which my right hon. and learned Friend referred in an answer a week or two ago. They have unquestionably made very large profits indeed.

As it stands, the Clause will not achieve the end of taxing the television companies. Indeed, this was made very clear on 17th April, Budget Day, by Notice No. 330 issued by the Commissioners of Customs and Excise. Paragraph 4 of the notice stated: …as indicated in the Budget speech, provision will be made in the Finance Bill to enable existing contracts to be amended to take account of the duty. I would say with respect that I was surprised to see a proposal of this kind authorising an amendment to be made to existing business contracts. The notice went on to say: It is expected that this provision will entitle the programme companies to recover the amount of the duty from any person who is contractually liable to the company for the payment for inserting a dutiable advertisement… This is a direct invitation to the companies to pass on the duty. Naturally enough, they were quick to respond, and a few days later the television companies issued a notice saying that the 10 per cent. duty would be passed on to the advertisers. It is true that in three cases the companies at the same time announced various rate reductions which have the effect of absorbing part or the whole of the duty. If this had been a universal and a long-term decision, it would have made the duty the more acceptable and in keeping with what was believed to be in my right hon. and learned Friend's mind. However, it was neither universal nor long-term. Only three out of the ten companies have made an announcement of that kind. It is not long-term because it applies only to the summer months and, in effect, it is no more than a kind of special short-term rate reduction to attract business when commercial television runs through a comparatively difficult period.

6.0 p.m.

I ask the Committee to consider for a moment the action which, so far as we can judge, is being taken or will be taken by advertisers as a result of the proposed duty, in order to make clear that its effect on the television companies will be slight while the main burden will in time fall on other forms of advertising media which, I am sure, my right hon. and learned Friend does not wish to harm.

If an advertiser uses television, he does so because he believes that that medium will reach the market he wants to reach economically and effectively, and I do not think that a duty of 10 per cent. will be sufficient to cause him to reverse that opinion.

Mr. Emrys Hughes (South Ayrshire)

There is a doubt in my mind. Is not the hon. Gentleman connected with some kind of advertising business, and should not he declare an interest?

Mr. MacArthur

If the hon. Gentleman had done me the courtesy of coming in a little earlier, he would have heard me declare my interest at the beginnning of my speech. [HON. MEMBERS: "Withdraw."] I do not want a withdrawal from the hon. Gentleman. He made a mistake.

The bookings which an advertiser makes on television are not, as some may believe, the outcome of a haphazard spending of an arbitrary sum of money; they represent a careful promotion programme based on his selling needs and a long and detailed study of the television bookings necesary to carry his commercial message economically to his market. In addition to its television campaign, a large-scale advertising company, at any rate, will almost certainly run advertising in national and provincial newspapers, the periodical Press, and so on, and here also bookings are made according to a carefully studied programme. The cost of this advertising is met from a budget which is usually fixed from year to year and is determined by considerations such as the sales plan for the year, new product development, and so forth.

I ask the Committee to reflect, against that background, on the position in which the advertiser finds himself today. Somehow, he has to pay for the television duty. In some cases, perhaps, the total advertising budget will be increased accordingly so that the extra money can be found. Then, of course, this becomes an additional cost of the business—ultimately, I suggest, a cost on the consumer. However, from what little I have been able to see of advertisers' decisions in this matter, I believe that the increasing of the total budget will occur in only a minority of cases and in most cases the advertiser will look at his existing budget in order to make the economies he needs to meet the television duty. Three possible ways of doing this come to mind.

The first is that an advertiser may decide to cut his general television expenditure. He may, for example, decide to postpone his entry into the new television stations which have been referred to, the one in North-East Scotland and the one for the Border. Alternatively, he may decide to make a general cut in his television campaign. If he does this, it will weaken the effectiveness of the television bookings which he, in the first place, considered necessary to carry his message economically to the public. If he does make a cut somehow, his next advertising budget will, I suggest, probably be adjusted so that he can reintroduce the full schedule of bookings which he considers necessary. Such adjustments, I believe, would very likely be at the expense of other advertising media.

The second possibility is that the advertiser may use his contingency reserve to make up some of the duty. That is reasonable enough, but it may perhaps be argued—this may be straining the point—that in that way the contingency reserve would not go to other advertising media as might otherwise be the case.

Thirdly, the advertiser may decide—and, according to my knowledge in certain cases, already has decided—to retain his television campaigns and finance the duty by making cuts elsewhere in his advertising programme. As hon. Members know, there are many publications today which have been losing ground. Some have gone completely out of business. It is this sort of publication which is today being cut from advertising schedules because they are often marginal media in the advertising sense. There are several national daily newspapers which come to mind. Many local newspaper are very weak in this respect. There are also the thoughtful periodicals, magazines and the like.

My right hon. and learned Friend said earlier today, if I understood him aright, that this sort of argument had been advanced before and these media and publications have carried on despite tremendous increases in the amount of money spent on advertising. This is so, but it is a fact that the proportion of advertising money spent in this way has decreased considerably and, as we know, several publications have recently gone out of business, not wholly because of lack of advertising revenue, but, in some cases, partly because of that, without question.

I suggest that these media, local newspapers particularly, have a very important rôle to play in our society.

Mr. H. Wilson

We are trying to follow the hon. Gentleman's argument. Will he elucidate the point a little? I think he is telling us that the proportion of the total advertising expenditure devoted to these newspapers, periodicals, thoughtful magazines and the like is falling. Who is gaining? What form of advertising is gaining the increased proportion? If newspaper advertising is falling, where is the increase going?

Mr. MacArthur

It is hard to define the sections of the Press, but I have in mind newspapers like the Daily Sketch, the Daily Herald, and, until recently, the News Chronicle. They have been falling—

Mr. Wilson

What is gaining?

Mr. MacArthur

A great deal of money was and is going to television, certainly. That was the point which my right hon. and learned Friend made. The point I make now is that, as advertisers examine their plans for the current year in order to find the estimated £7 million, without question there will be cuts in the advertising schedules embracing these special media.

Mr. Wilson

If a higher proportion has been going year by year into television advertising, to the detriment of Press advertising, ought not the hon. Gentleman to be pressing his right hon. and learned Friend to make it more expensive to advertise on television and, therefore, at the margin, perhaps, influence more people to advertise in the papers?

Mr. MacArthur

The right hon. Gentleman has missed the point. I am sorry if I did not make myself clear. Perhaps the point will be clear to him when he reads my speech in HANSARD.

Those are some of the results which I expect from the introduction of this selective tax. I find it hard to believe that they were desired originally by my right hon. and learned Friend.

The Amendment is designed to remove from the Clause the words giving power to the television companies to pass on the duty to the advertiser. We have not made any alternative proposal in the Amendment because we want to give my right hon. and learned Friend as much room for manoeuvre as possible, and we shall be very glad to withdraw the Amendment—I hope I speak for my hon. Friends associated with me in this—if he can see his way clear to look at the matter again. If my right hon. and learned Friend considers that some form of duty on television advertising is desirable—I agree that a strong case can be made out for it at this time of near-monopoly—I hope that he will be able to work out a method for raising the duty which will cause it to be met by the companies themselves and not by the advertisers.

Earlier today my right hon. and learned Friend put forward an argument with which, with great respect to him, I am not in complete agreement, namely, that additional duties, taxes, and so on, invariably found their way to the consumer. All that I am asking is that, instead of inviting the companies, as we have done, to pass on this duty, we should leave the matter to the natural commercial balance of the advertising business itself. For example, hon. Members will know that the Independent Television Authority makes annual charges on the television companies for the use of the transmitters. Last year I believe that these charges amounted to £3¾ million. It may be—I put this forward very tentatively—that my right hon. and learned Friend could devise some way, through the Independent Television Authority, of increasing these charges by £8 million, or whatever sum he feels should be levied from television. This tax, which is subject to the usual annual review, could run until such time as the present television companies lose their complete monopoly of commercial television advertising within their areas.

I very much hope that my right hon. and learned Friend will consider the Amendment sympathetically.

Mr. Emrys Hughes

I have no desire to do any injustice to the hon. Member for Perth and East Perthshire (Mr. MacArthur). I apologise to him for not being present at the beginning of his speech. If I had, I should not have interrupted him in the way that I did. However, he has raised the question as to how far an hon. Member is here to represent his constituents and how far he is here to represent certain interests. The advertising interests are very well represented in the House. There is a slight tendency—I put it no higher than that—for hon. Members to forget that they represent constituents. Sometimes they speak as though they were at a board meeting of their advertising companies.

Sir James Duncan (South Angus)

I am a constituent of my hon. Friend the Member for Perth and East Perthshire (Mr. MacArthur), and as such I am perfectly satisfied with his speech. The reason is that he explained in his speech that if the tax fell on advertising it would also fall on the consumer and, therefore, on me.

Mr. Hughes

I quite understand that sometimes there is considerable overlapping among Members of Parliament and that some hon. Members represent other hon. Members. I represent one of the Joint Under-Secretaries of State for Scotland. He is a constituent of mine. I am not sure that I always represent his views in the House to the extent that the views of the hon. Member for South Angus (Sir J. Duncan) are represented by the hon. Member for Perth and East Perthshire.

Mr. MacArthur

I do not wish to labour this point. I am grateful for what my hon. Friend and constituent the Member for South Angus (Sir J. Duncan) said. I think that the point I made was a fair one. I am like many other of my hon. Friends. We speak not as members of the advertising business so much as Members of this House who happen to have a specialised knowledge of the business which we feel should be placed at the disposal of hon. Members.

Mr. Hughes

That point is over.

I did not follow the hon. Gentleman when he came to the conclusion that the local Press would in some way be injured by this tax. I read the local Press of Scotland with great avidity, and I have not seen any tendency for advertising in it to diminish in recent years. I do not think that this proposal will injure the county Press, the city Press or the daily Press of Scotland, as the hon. Member argues. Press and television are closely bound up. In Scotland, the controller of Scottish television happens to be a newspaper proprietor who thinks purely in terms of the commercial possibilities of newspapers and does not hesitate to close them down if he thinks that it would be more profitable to do so.

6.15 p.m.

The real reason why so many local newspapers in Scotland are gradually being transferred to fewer and fewer hands is that that is the tendency of monopoly and it pays the big combines which own the newspapers to buy this or that newspaper. The Dumfries and Inverness newspapers, the Kilmarnock Standard and the Ayrshire Post have gradually gone into the hands of George Outram and Company. All this helps the advertising people.

I have seen the advertising interests grow from quite small numbers. They all seem to be concentrated in the hands of a few monopolies. I do not think that by taxing television advertising the Chancellor of the Exchequer is contributing in any way to the disappearance of local and county newspapers in Scotland.

Mr. Graham Page

I am obliged to you, Sir William, for saying that the Amendment in my name can be discussed with that of my hon. Friend the Member for Perth and East Perthshire (Mr. MacArthur). The point of my Amendment is much narrower than that of my hon. Friend's. It is a fairly narrow legal point.

It has been generally accepted in the debates on the Clause that this duty will be passed down the line to the advertiser and thence to the consumer. The apologies which my right hon. and learned Friend made to the programme companies in his Budget speech have been followed by something of a favour to them in subsection (2), which positively invites them to pass the tax down the line and to shuffle off their own liability. If they can do that legally, undoubtedly they will do so, and therefore there is no need to mention it in the Clause.

However, it goes a great deal further than telling them that in ordinary trading matters they can pass on this tax. It goes to the extent of telling them that they can break an existing contract in order to pass on the tax liability. In fact they can refrain from passing on the liability only if there is an agreement to the contrary. Subsection (2) states that only if there is an "agreement to the contrary" are they prevented from passing the tax on to the advertiser and thence to the consumer. I apprehend that that does not include a contract which is silent on the point and that in order to prevent the passing on the contract must state to the contrary.

He would be a very clever fellow who had made a contract dealing with television advertising duty prior to the Budget. I should not think that such a contract is in existence. However, there are in existence many contracts, which cannot be cancelled, for the forward taking of space on television—that is, contracts under which advertisers have already agreed with the programme companies to take space at a certain rate for the future. The advertiser has agreed to pay for his space at a fee. The programme company has agreed to provide programme time for it at a fee. In law, the programme company would have to pay for an unexpected tax of this sort unless it were let out of it by statute.

The Clause operates retrospectively on existing contracts. It adds a liability to those contracts. It puts into a contract which has been made a statutory obligation on the advertiser to pay an extra 10 per cent. on the service which he has contracted with the programme company shall be supplied to him. It is not putting a tax on a future purchase, as is normally done in the Finance Bill; it is putting a tax on something which a man is already committed to purchase. The advertiser has no chance in an uncancellable contract of this sort to adjust his expenditure or to rescind the contract.

Mr. Julian Snow (Lichfield and Tamworth)

I am not out of sympathy with what the hon. Member is saying. He is talking in the context of television advertising. In the context of Press advertising, is it not a fact that the Newspaper Proprietors' Association insists that the chargeable amount for space taken is the amount in force at the date of publication?

Mr. Page

I should be out of order if I went into the question of contracts for Press advertising. I am dealing purely and simply with what I call the uncancellable contract with the programme contractors. There are such contracts in existence which bind an advertiser to pay for the programme at certain rates.

There is a further consideration why this part of the subsection should be deleted or a proviso should be added in the form which I have put down in my Amendment. This further consideration is that the contract for television advertising is made between the programme company and the advertising agent. It is giving him a wrong name to call him an advertising agent, because he is a principal who enters into the contract as a principal with the programme company. Under subsection (2) the programme company can recover the whole of the money, including the tax, from the person who has contracted with it—that is to say, the advertising agent; but the subsection gives the advertising agent no right to recover it by law from his client, the advertiser.

Undoubtedly a change is required in the drafting. There is a very strong reason for amending the Clause, because it could cause immense hardship to some agencies. I hope that my right hon. and learned Friend will look at the subsection again, bearing in mind the question of the uncancellable existing contract and the nature of the contract as being between the programme company and the advertising agent.

Mr. John Hall

I have a great deal of sympathy with the Amendment moved by my hon. Friend the Member for Perth and East Perthshire (Mr. MacArthur). Like many other hon. Members on both sides of the Committee who have spoken on this subject this afternoon, I was clearly under the impression, after listening with the greatest care to the Budget speech, that the intention was that this tax should be borne by the television companies and should not be passed on. Being one of the comparatively few hon. Members on this side of the Committee who were originally opposed to commercial television, and still to some extent remaining opposed to it, I was not strongly against the idea that television companies might have to meet a 10 per cent. tax. But I was horrified when I discovered that a power was to be given in the Bill to enable them to pass it on, indeed almost forcing the television contractors to pass it on.

My Amendment, which I understand is to be considered with other Amendments now, like the Amendment moved by my hon. Friend the Member for Crosby (Mr. Page), deals with a much narrower point. I shall be happy not to move my Amendment, leaving it in favour of my hon. Friend's Amendment, which has the merit of being shorter, and is therefore presumably easier to understand.

The point which my hon. Friend made is relevant and should command the sympathy of both sides of the Committee. On the one hand, we have almost a statutory obligation, and certainly a statutory right, given in the Clause for the programme contractor to pass on this 10 per cent. to those who are buying the television space or time, and yet, on the other hand, we have no right at all for the advertising agent to vary contracts which may be in existence buying space and television time for several months ahead. The advertising agent, or the principal in this matter, can possibly make arrangements with his clients to pass on that tax in turn to them, but there is no legal right enabling him to do so, and it seems to me wrong that having arrived at a decision after consultation with his clients, the advertising agent should be in a position of having committed himself to a total expenditure greater than that originally envisaged when he made arrangements with his client.

There is a further consideration to be borne in mind. If, as a result of the Amendment, a right is given for an existing contract between an advertising agent and a programme company to be varied so that he is not called upon to carry the extra burden of this tax and is thereby allowed to reduce the total sum which he was prepared to spend on television programmes over a certain period, we should not allow the client to be penalised. If the advertising agent is allowed to vary the arrangements, then the advertiser should also be allowed to vary his advertising budget and the arrangement which he has made with the advertising agent for his advertising programme over the same period.

The main points about the Amendments have been well covered by previous speakers and I need not elaborate them. This seems to me a matter of justice and equity which would command the support of both sides of the Committee. It is a matter, I am certain, which has been overlooked by the Chancellor and the draftsmen, and I am certain that, having listened to the arguments, my right hon. and learned Friend is ready to accept, if not the Amendment, at least the principle enshrined in it. I hope that he is prepared to accept at least the principle of the Amendment.

Mr. Donald Wade (Huddersfield, West)

I think that the Amendment deserves favourable consideration. The discussion has raised a more fundamental problem—namely, if the Chancellor is to raise revenue, is he doing it by the most appropriate method? It is doubtful whether he is.

We have reached an extraordinary state of affairs. The Government have created a number of commercial monopolies, and at first sight it seems not unreasonable to tax some of the benefits created by the Government in permitting these commercial monopolies to flourish. But this Clause will not have that effect. It is clear from what has been said both by the Chancellor and in the course of the debate that the tax will not fall on the television programme companies. They are invited to pass on the burden of the tax to the advertiser, and most of it will fall on the consumer.

I think that I follow the point made by the hon. Member for Perth and East Perthshire (Mr. MacArthur). I can see the difficulty of the advertising agencies if they are allowed an overall figure for expenditure on advertising for particular products. They may have to cut the advertising expenditure on some other media, and it may well be that newspapers will suffer. I do not know whether they will, but it is possible, and I appreciate the point. But, in the main, the tax will fall upon the consumer. Certainly it will not come out of the profits of the television programme companies.

6.30 p.m.

I do not suppose that it will be in order to develop an alternative now; I would merely throw out a suggestion. I should like to see a much more radical proposal. I should like to see the collecting of revenue from advertising dissociated from the arrangement of programmes. The proper function of the programme companies should be to put on the best possible programme. It would be perfectly practicable for the advertising revenue to go to the Independent Television Authority and for the Authority to engage the programme companies to put on the best possible programmes and be paid well for doing so. They would not be expected or tempted to give so much of their attention and thought to raising income from advertising. The programme companies would be adequately paid. There would be ample funds from I.T.A. to pay them. I see no reason why that should not be done. An ample balance would still be held by I.T.A. I have been asked whether there is an alternative, and I say that there is.

On the point dealt with by the Amendment, we are faced with the question whether it is right that the Chancellor should invite the breaking of contracts in this way, because that is in fact what is being done. On balance of principle, it is difficult to justify the contents of the Clause.

Mr. John Hall

The hon. Member should make clear that it is a one-sided breaking of contracts.

Mr. Wade

I entirely agree. It is a one-sided breaking.

Mr. Chapman

We have reached an extraordinary situation. I expressed my protest earlier when I invited the Chancellor to tell the Committee exactly what he had in mind when he introduced the new tax, and he said in his speech that he had faced the inevitable fact that this tax would be passed on. We have the extraordinary situation therefore that here is a Chancellor saying on the one hand, "Here is a good field of monopoly revenue which I ought to tax." One cannot explain his words in his Budget statement in any other way. The right hon. and learned Gentleman made rather a lot of fun out of the situation. He said that nobody could grumble that, having made a lot of money which they had been helped to obtain, they should now have to pay tax on it. But we now find that the tax will be passed on to somebody else. In allowing that to happen, the whole justification for the Clause disappears. The whole justification for the tax has disappeared in the course of our finding that it is to be passed on to other people.

In the end we have a discriminatory tax on one particular form of advertising and not a tax on television profits. I might as well say to the Chancellor that he should introduce a tax on newspaper advertising. It is equivalent to this and could be done. We are now in complete chaos as a result of what has happened since the right hon. and learned Gentleman's opening remarks in his Budget speech. But it does not stop at that. I do not imply that he deliberately misled us, although looking back on it it looks pretty near it, but having connived at the impression that this would be a tax on television profits, the Chancellor reverses it first by means of this Clause, by inviting people to pass the tax on, and then, in the Customs and Excise statement which has been read out in this debate, by telling these people in so many words that that was the right way to do it.

The Committee has been misled. We are debating quite a different tax from the one which we were led to believe was the tax when it was first introduced. The whole justification for it has been cut away by developments since the Budget speech. I feel so strongly about the way in which the Committee has been misled that on a purely non-party basis I will act as Teller with any hon. Member who will come with me to express our strong opinion about the way the Chancellor has misled us and the country.

Mr. Mayhew

I am sure that the speech of my hon. Friend the Member for Birmingham, Northfield (Mr. Chapman) has been listened to with sympathy on both sides of the Committee. Strangely enough, after the speeches of the hon. Member for Perth and East Perthshire (Mr. MacArthur) and the hon. Member for Crosby (Mr. Graham Page), I hope that my hon. Friends will support their Amendments. Indeed, I will go further and suggest that we withdraw our Amendment in favour of theirs. It is perfectly plain that the Chancellor has made an extraordinary muddle over the tax. It is clear that his original intention was to tax the programme companies. It is equally clear that he has now discovered that, as the Finance Bill is drafted he does not do so.

Today the Chancellor went further and asserted that he cannot tax the programme companies without their recouping themselves by passing it on. He said that the programme companies are beyond his powers of taxation. We knew that they were powerful companies indeed. We have always said on this side of the Committee that their powerful monopoly and their link with the newspapers gave them undesirable power. We have said that they were excessively wealthy and that they spent far too much on public relations in this way and that by their control of patronage they were far too powerful. But this time we are told that they cannot be taxed by the Government. Of course they can be taxed if the Chancellor so wishes. A number of suggestions have been put forward on how the £8½ million could be raised from the programme companies.

I ask the Committee which is best for the purpose of the tax—the advertisers or the programme companies? And I ask hon. Members not to suppose that by insisting upon a tax being paid by the programme companies we do not believe that the advertising industry is not also a perfectly fair target for taxation. On the contrary, as has already been said, it is one of the things that we would seriously consider if we were returned to power at the next Election. On the pros and cons of having the tax paid by the advertising industry or by the programme companies, I would point out that there is a great civil war going on at the moment between the two. When times were good they acted together as a united crew but now bitter words are passing between them. As often in the history of buccaneering, when the Revenue cutter hoves in sight civil war breaks out on the pirate ship.

It would be right to suggest that the best way to settle the controversy would be to provide that both should pay 10 per cent. They could both well afford it. It is hard to see how the public interest would be harmed by doubling the tax which the Chancellor has proposed and contributing the revenue to the purpose which my hon. Friends have suggested in the debate.

It would be a curb on extravagance and waste in advertising in general and in television commercials in particular. I am not referring only to the cost of time for broadcasting commercials, which can go as high as £1,125 for 30 seconds. Quite apart from the expenditure on broadcasting time is the actual cost of making these commercials, ranging from £500 to £2,000 for a 30-second commercial, and sometimes more. Sometimes £2,800 has been spent on producing a 30-second film commercial, the equivalent of up to £100,000 or more for a 30-minute documentary.

It is worth comparing the cost of a 30-minute, first-class documentary for public showing, which can cost between £10,000 and £12,000, one-tenth as much, or the cost of an industrial documentary for export purposes. A 30-minute black and white documentary would cost only £6,000 to £8,000. If we go slumming, and consider the cost of the films which the Government produce to sell Britain overseas through the Central Office of Information, there for a 30-minute black and white documentary film a cost of £4,000 or £5,000 is considered perfectly sufficient. What a contrast that is. One minute of film for advertising Britain abroad, £150 or less: one minute of commercial film for selling one detergent rather than another, £2,000 or more. There we have the contrast. Commercial enterprise gets something like 20 to 30 times more money per minute than the business of advertising Britain which, I think, both sides of the Committee would agree is an important thing to go for.

That is one part of the case for the advertiser paying—to try to cut down the extravagance of the commercials—but this is really not only a matter of money but also, of course, a matter of talent. It is a shocking thing to see how much talent in the film world, of the film director, the cameramen, and technicians of all kinds, is sucked away into this sterile process. The production people themselves do not like it. They feel a considerable animosity against the advertising agencies, the amateurs who order them about and interfere in their work and, indeed, pervert their talents. They feel a considerable animosity. But if one is a great, well-known film director, and if one is offered £500 for 24 hours' work, that makes a difference, and that has happened and is happening regularly, and thus it is not only a question of money, but a question of talent. If this tax fell on the advertising industry it would be healthy in as much as it would curb that kind of extravagance.

It is difficult to work out estimates fully of the cost of television commercials themselves, but undoubtedly it is fair to judge that, year after year, I.T.V. is devoting more money and talent to its commercials than to its programmes, and indeed, is spending enough money on the commercials to sustain an entire new television channel. Hon. Members opposite may welcome it. We have heard some argument that this makes trade flow more, but I think that it will be the general feeling of public opinion that this amounts to a wicked waste of money and talent.

Let us consider the case for the programme companies paying the tax. This undoubtedly was the original intention of the Chancellor. It was certainly what the newspapers assumed to be the case after the Budget speech. It was in those terms that the tax was welcomed by The Times and the Guardian. I should have thought that on grounds of equity and from every point of view the programme companies should have their profits taxed. This is a monopoly. Of course, in King James's day we had State monopolies, but they had to pay for the privilege. Today we have a State monopoly which apparently is unable to be taxed by the Chancellor and which seems to have the field to itself. His £8½ million started off as a feeble effort to restore to the public millions of pounds which they paid in the shops for I.T.V. We find from the way this Clause is drawn that we have this extraordinary folly that it does not do anything of the kind. This is not in fact costing the programme companies a penny.

6.45 p.m.

I think it was the hon. Member for Perth and East Perthshire who said that the programme companies have made some statement about their future intentions. As I understand it, two of the companies, Tyne-Tees and Scotland, have stated that they will bear the full cost up to September—for what that is worth: it is only temporary. A.B.C. and Anglia have stated they will bear 50 per cent. of the cost up to September—for what it is worth: it is only temporary. But the rest, including Associated Rediffusion, whose deputy-chairman said a few days ago that his profits were immoral, and all the other programme companies are going to pass the 10 per cent. surcharge on to the advertisers.

I read the Sunday Times yesterday. I read the statement about Mr. Norman Collins: Almost overnight in 1958 his £2,250 investment became worth £501,000 and today he is almost certainly a millionaire. But not only a millionaire; as we know, a millionaire with a social conscience, deploring the immorality of the money he has made.

The profits of the programme companies in general are not easily estimated. The estimate of £20 million is probably a considerable understatement. We were talking of the lesser profitability of the smaller companies and an hon. Member opposite made this plain. Southern Television is not one of the larger companies, but I happened to see this morning that it had declared an interim dividend on its £1 shares of £4 10s. free of tax. This kind of thing, as we all know, can be paralleled throughout the gamut of commercial television.

Are they incapable of paying? Obviously not. Would it be unfair that they should pay? Obviously not. They are the most extravagant and excessively profitable organisations. Even the advertising agencies say that the programme companies are extravagant. Perhaps I should read from a comment by an advertising agency on this point. It is part of the civil war which is going on between the agency advertisers and the programme companies. Here is a letter from the current issue of Advertiser's Weekly from Mr. John Major of the Major Advertising Agency Ltd.: I suggest that if the contractors searched their empires for economies they could afford to pay a large part of this duty without passing it on. One has only to look at the expensive literature with which agencies are bombarding all the television contractors and which do not sell one second more of time to see very considerable economies could be made immediately. One would like to point out to Mr. Major that advertising agencies are not the only people to be bombarded by useless and extravagant advertising matter; also, perhaps, that he as an agency has not been bombarded, of course, by programme contractors: he has been bombarded by programme contractors' advertising agents. Therefore, it ill-behoves him, I think, to talk about the extravagance of advertising methods of programme companies.

The fact is that these companies have themselves described their wealth as immoral, and the country is looking forward to some effort by the Chancellor to take back some of the ill-gotten gain which, as he himself has confessed, he put into their hands; to pay back to the public some of the millions of pounds which they have paid to those companies through the shops in recent years. He made a feeble start. He suggested a mere 10 per cent., a mere £8½ million, and he is not taking it from the people from whom it should primarily come.

All these facts lead me to conclude that he should follow the advice of his hon. Friends below the Gangway. Whether they agree with what I have said about the need of advertisers to pay tax, I am not clear, but at least we can make common cause on this, that the programme companies pay the tax. Why not in a friendly, amicable spirit, have a united front on this proposition? Why not march unitedly through the Division Lobby behind what was the Chancellor's original intention?

Mr. Barber

I rise to deal with some of the points which the hon. Member for Woolwich, East (Mr. Mayhew) has made. First, I would say that I do not understand how he and his hon. Friend the Member for Birmingham, North-field (Mr. Chapman) can say that the House of Commons was misled by what my right hon. and learned Friend said in the course of his Budget statement. I have glanced through it again, and, in so far as it is possible to summarise what one intended to do by means of raising a particular tax, I thought that his criticism was wholly unjustified.

Mr. Douglas Jay (Battersea, North)

Can the hon. Gentleman really think that the impression made on the House of Commons and the public by the Chancellor of the Exchequer's remarks about biting the hand he fed was that he was not going to tax the programme companies? If it did not mean that he was, what did it mean?

Mr. Barber

I suppose that my right hon. and learned Friend should have prefaced that remark by explaining that it was a joke. Since this is bound up with the content of what he said, I will quote my right hon. and learned Friend's statement: I am, therefore, proposing a duty of 10 per cent. on the charges made by the television programme contractors for the insertion of advertisements in programmes broadcast on or after 1st May. He went on to say: Provision will be made to enable existing contracts to be amended to take account of the duty."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 817] I should have thought that that was a fair summary of what is contained in Clause 1.

Mr. Jay

When I asked the Chancellor at the end of the Budget debate why he was selecting this form of advertising for tax, he said that it was because it was a monopoly form of advertising. Is it not obvious that the programme contractors and not the advertisers generally hold the monopoly?

Mr. Barber

That is so. In so far as these Amendments are concerned with the question of whether or not the programme contractors should pass on the tax, which I intend to deal with at some length, I would only say by way of introduction that even if there are no such provision in the Bill as that which is now sought to be deleted, so far as future contracts are concerned, it will always be open, as must be obvious to all in the Committee, to the programme contractors to pass on this duty in the same way as they can pass on increases of wages or any other additional costs. That is not the point which my hon. Friends have in mind in moving their Amendments.

Mr. Chapman

It is not fair to say that the Chancellor gave a proper impression. He must explain why no single newspaper or public commentator differed from us in thinking that this was intended to hit the programme contractors. It is not good enough for the hon. Gentleman to wriggle out of it with a few phrases and to ignore the fact that the whole country had a contrary impression.

Mr. H. Wilson

Will the hon. Gentleman explain the reaction of the Stock Exchange the next day? Their reaction was to take the Chancellor at his word.

Mr. Barber

The shares rose again, so the Stock Exchange appreciated the meaning of what my right hon. and learned Friend said. The words are in black and white, as the hon. Gentleman fairly said. They are there for the hon. Gentleman to read.

Each of these three Amendments raises the question of whether or not it is right to give the programme contractors the power, subject to any agreement to the contrary, to pass on the duty to the advertiser. The first two Amendments in page 2, line 1, and page 2, line 2, are very similar although certainly not identical, and the Amendment in page 2, line 5, in the name of my hon. Friend the Member for Wycombe (Mr. John Hall) deals with the matter in a rather different way. The effect of all these Amendments is to seek to deny to the programme contractors the legal right which is embodied in this Bill to recover the amount of the duty from their customers in respect of contracts made before the Budget for advertisements to be broadcast on or after 1st May.

The first Amendment also removes the essential provision making it clear that the duly is 10 per cent. of the duty-exclusive payment for the insertion of any advertisement and not 10 per cent. of the payment including the duty.

My hon. Friend the Member for Crosby (Mr. Graham Page) said that what we were doing in framing Clause 1 in this way was providing a positive inducement to the programme contractors to pass on the duty. I think that it is right that the Committee should appreciate that for all practical purposes what we are concerned with in these Amendments is the position of existing contractors.

Concerning the future, that, of course, is a matter for agreement between the programme contractors and the advertisers. My hon. Friend the Member for Perth and East Perthshire (Mr. MacArthur) asked whether, in future, we could not find some way of encouraging the programme contractors to shoulder the burden of the duty and not to pass it on. I think that if my hon. Friend will consider his proposal further, he will agree that there is in fact no way in which this can possibly be done in the future I shall return in a few moments to the case of existing contracts Concerning the future, this duty will undoubtedly and inevitably be looked upon by the programme contractors as one of their costs.

As to contracts since the Budget, the programme contractors will obviously be free to pass on the duty. They will be free to do that in just the same way as any merchant can pass on the burden of any indirect tax or duty, if it is commercially feasible, and by that I mean if the conditions of supply and demand in respect of television advertising time will permit him to pass it on. I do not see, even if it were thought by the Committee desirable to do what my hon. Friend has suggested, how that could possibly be done in an Act of Parliament.

In general, as I think the Committee knows, the programme contractors have stated that the duty will be passed on in respect of new contracts, although three or four of them, I am advised, have in effect decided to absorb half or all of it in respect of advertisements broadcast between now and next September. The practical effect of the words which the first Amendment and the others in effect propose to leave out is to give the programme contractor the same freedom to vary his existing contracts to take account of this new liability for duty as he of necessity has to vary the terms on which he would enter into new contracts.

I agree with my hon. Friend the Member for Crosby, being like him a lawyer, that it is a very serious matter when one takes power in an Act of Parliament to vary a contract, a solemn agreement which has been made between two or more people. Therefore, I agree with him that this is something which should be taken very seriously.

I think that I should mention that, although the Clause gives the programme contractors legal right to recover the duty of existing contracts, the same commercial considerations come in here as they do on new contracts, and I am advised that some of the major programme contractors have announced that they are prepared, no doubt in order to retain good will, to allow existing contracts to be cancelled at less than the customary eight weeks' notice, and this gives the customer who is not prepared to pay the duty the opportunity of avoiding doing so and presumably, if he wishes to do so, to transfer his advertising expenditure elsewhere.

7.0 p.m.

My hon. Friend the Member for Crosby raised a point which had not occurred to my right hon. and learned Friend or myself previously. It was that the Clause, so my hon. Friend thought, permits a programme contractor to pass on the duty to the advertising agent but does not in terms permit the agent to pass it on to the advertiser. I should like to consider this. It would be difficult to give any undertaking off the cuff. I might mention that when the representatives of the advertising agents saw some officers from Customs and Excise only last Friday they did not mention this point. However, I will certainly look into it and see whether it is necessary that anything should be done about it.

Mr. Jay

Can the hon. Gentleman say—it has not yet been explained—what is the purpose of having these words in the Clause? What objection is there to leaving them out?

Mr. Barber

That is a point with which I am just about to deal. I was dealing with subsidiary points first. I am going on to deal with the main points, but, first of all, out of courtesy to my hon. Friend the Member for Wycombe, I feel that I should say a word about his Amendment. His Amendment, unlike that in the name of my hon. Friend the Member for Perth and East Perthshire, is not open to the objection that it might be held to increase the incidence of the duty, and, therefore, from the point of view of the Treasury it has a certain advantage. Nevertheless, it is defective. I could give the Committee an example of the way in which it is defective, but suffice it to say, in short, that two subsections of the Clause as it would read if amended on the lines suggested by my hon. Friend the Member for Wycombe would imply different amounts of duty on the same advertisement. If the Committee wishes me to pursue that, I will certainly do so.

I now turn to what I believe by far the most important part of the arguments which have been put forward in support of these Amendments, and that is the statement that we are in this Clause taking power to vary existing contracts. It may be overlooked by the Committee that what we are doing is based, if I may so put it, on solid Victorian precedent. Indeed, we are adopting a principle which has always applied to Excise duties. As this is so important, and as we are considering three Amendments. I should like to draw the attention of the Committee to the provisions in two Acts of Parliament.

The first is Section 20 of the Customs Laws Consolidation Act, 1876, which was concerned with tax on goods or commodities. This is a serious matter and I want to take the Committee through the stages because I know that some of my hon. Friends are concerned about it. The side-note to the Section reads: When contracts have been entered into, amount of increased or decreased duty to be added or deducted. The Section reads: In the event of any increase, decrease, or repeal of duties of Customs chargeable upon any goods or commodities after the making of any contract or agreement for the sale or delivery of such goods duty-paid, it shall be lawful for the seller, in case such increase shall accrue before the clearance and delivery from the warehouse of such goods at such increased duty, and after payment thereof, to add so much money to the contract price as will be equivalent to such increase of duty, and he shall be entitled to be paid and to sue for and recover the same… That was in the 1876 Act and I will not go any further back than that. I would merely tell the Committee that that was a consolidation of earlier laws. It was later amended and extended in Section 8 of the Finance Act, 1900, and was re-enacted in Section 10 of the Finance Act, 1901, which still applies to goods and commodities.

Mr. Graham Page

That Statute gives warning to anybody who enters into a contract for goods that if a tax is applied at a future time it will be taken into account in a certain way. That is not retrospection. It is warning people who may have contracts. In this case it is definitely retrospective legislation affecting existing contracts.

Mr. Barber

Perhaps I may proceed a little further. That Act was concerned, and is still concerned, only with goods and commodities. My hon. Friend the Member for Kidderminster (Mr. Nabarro) rightly said that this is in a sense an application of Purchase Tax to one form of advertising.

So I go on to the next step in my argument, which is that when Purchase Tax was introduced it became necessary to take some similar powers and these powers appear in Section 24 of the Finance Act, 1948. The reason why the Section of the 1876 Act, which I read just now, does not apply to Purchase Tax is that in form Purchase Tax is not a tax on goods but is a tax on transactions. I will not weary the Committee with reading out Section 24 of the 1948 Act, but suffice it to say that, there again, provision is specifically taken for dealing with the question of an increase or a decrease in duty.

In this Bill we are going one stage further in the sense that we have hitherto proceeded from changes in duty on goods to changes in duty on transactions. Now we are dealing with something new—services. It is only because this Clause is concerned with services that it has been necessary to take the specific powers which we have done.

It is part of this traditional method of dealing with existing contracts on a change of duty that when the duty is reduced the seller under the contract must pass on the benefit of the reduction to his purchaser. Clause 1 makes the duty recoverable between the parties as an element distinct from the payment for the insertion. It follows that if in a future Budget the duty were reduced to, say, 7½ per cent. the advertiser who had contracted before that Budget for the advertisement to be broadcast after the date when the duty was reduced would get his advertisement at a lower price than he had expected to pay.

Mr. Nabarro

This form of tax in an Excise duty, and as an Excise duty it is subject to the economic regulator presumably. I should like my hon. Friend to confirm that. Surely it means that every time the economic regulator is applied to this form of duty, this difficult point about a plus or a minus will arise in the form of a contract. Is that the intention?

Mr. Barber

I do not want to anticipate any discussion that we may have on a Schedule, but perhaps I might mention in answer to my hon. Friend that he will see that in paragraph 2 of the First Schedule, which contains supplementary provisions relating to this duty, a distinction is made between the date on which the duty is due and the date on which it is payable. This means that the due date will be the relevant date for any implementation of the economic regulator, and I think that when my hon. Friend appreciates that he will agree with me that there will not be any such practical difficulty as he has at the moment in mind.

The point that I want to make to the Committee is that the power contained in Clause 1 is permissive. There is power for the programme contractor to pass on the duty. It is, and always has been, of the essence of any indirect tax or duty that the manufacturer or merchant who is accountable to the Exchequer may pass it on. The point at which the duty is payable is chosen in all these cases in the main for administrative reasons.

Mr. Jay

The hon. Gentleman has developed a rather tortuous argument to show that there is respectable precedent for adopting this course, but he still does not seem to have told the Committee why the Government have to do it. I again ask him what, even assuming that there are respectable precedents for this, the Government's objection is to leaving out these words.

Mr. Barber

It does not matter at all to the Exchequer. We would get the duty in any event. The only reason why this has been included in the Bill is that we have thought it the fairest way. [HON. MEMBERS: "Oh."] It is for the same reason that a provision was included by the Labour Government in 1948, by a Liberal Government in 1901, and by an earlier Government at the very beginning.

Mr. Jay

But there is a new problem here—whether it is to be a matter of policy that the tax should be paid, even in the first instance, by programme contractors or by other companies.

Mr. Barber

The right hon. Gentleman may have his own views on that. I believe that, if it is fair as a matter of principle to permit the tax to be passed on in the case of goods—transactions on which Purchase Tax is leviable—it is fair that the same principle should apply to taxation on services. All I wanted to do was to point out to my hon. Friends what I am bound to admit I did not appreciate when this matter was first considered—that the proposal was merely to extend a principle which had been applied to indirect taxation for a century or more.

For my part, I do not rely on the fact that this principle has been applied hitherto throughout indirect taxation for many years. I rely in the main on the fact that I believe that this is a fair way of doing it.

Mr. Mayhew

Why?

Mr. Barber

For the same reason that it has always been applied to goods. It has always been applied to transactions. If the hon. Gentleman does not think it fair in this present case, I do not think that he could think it fair in the case of goods on which Purchase Tax is charged.

Mr. Mayhew

The important question is: does the Chancellor want to make it possible for the programme contractors to pass the tax on?

Mr. Barber

There are really two categories of contracts which we are considering. [HON. MEMBERS: "Answer."] This is important. The hon. Member for Woolwich, East (Mr. Mayhew) has not told me which contracts he means. He knows that neither he nor I can prevent, in the future, this duty being passed on. It would be impossible for my right hon. and learned Friend to do so, even if he wanted to. In dealing with transitional provisions we are concerned with existing contracts, where we are following precedent and doing the right thing for the future. It is no good the hon. Member thinking that, in some way or other, my right hon. and learned Friend can prevent the programme contractors from passing on the burden. It is impossible for him to do so.

7.15 p.m.

Mr. H. Wilson

It is obvious that we shall have to hear what the Chancellor of the Exchequer has to say about this matter. The Economic Secretary has merely succeeded in further muddying waters which were already muddy at the start.

Mr. Norman Pannell (Liverpool, Kirkdale)

He was very clear.

Mr. Wilson

Perhaps the hon. Member would care to give us an explanation of what the Economic Secretary failed to explain. The Economic Secretary, at some length, drew a distinction between future contracts, in which, he said, no one can interfere with a contractor passing on the tax—indeed, from passing on more than the tax—on a cost plus basis, if he wishes, and existing contracts with which the Treasury wanted to deal. The only reason he gave for doing this was that Disraeli in 1876 considered it necessary. I must remind him that Disraeli's was not a Liberal Government.

Mr. Nabarro

My hon. Friend said that the Government of 1901 was a Liberal Government.

Mr. Jay

He said 1900.

Mr. Barber

At any rate, there is solid Conservative precedent.

Mr. Wilson

There is all the difference in the world between, on the one hand, the traditional form of passing on indirect taxation, such as arises in the whisky or cigarette duty, where one is dealing with a multiplicity of distribution outlets, and cases like this, on the other hand, where one is dealing with State created monopolies. The Chancellor of the Exchequer said as much in his Budget statement. He has taken the point. That is why I want him to reply to this debate.

Where one has a monopoly of this kind, which has already been charging high rates, it seems wrong that not only should it be utterly free for the future, but that it should also be helped for the past. But that is what the Economic Secretary says will be the position if these Amendments are withdrawn or defeated. The Committee must consider whether these programme contractors should have the right to pass the tax on in this way.

It has been rather interesting to listen to the debates of the last three and a quarter hours. Member after Member opposite has declared an interest. We do not complain about that, for it is in accordance with the convention of the Committee. Only a very small minority of Members opposite, of whom the hon. Member for Kidderminster (Mr. Nabarro) is one——

Mr. Nabarro

A distinguished one.

Mr. Chapman

Was one, at any rate.

Mr. Wilson

—have not had any interest to declare. It would have been a refreshing change if we had heard a few Members opposite rising in their places to represent the consumers. The hon. Member for Kidderminster went wide on the subject, however, and I wish we could have followed him on some of the suggestions he made.

Mr. Nabarro

Wait until a quarter of an hour from now.

Mr. Wilson

In declaring their interest with monotonous regularity, they said, "Oh, no. We are not representing these interests in advertising and commercial television. We are just Members doing our share in bringing to fulfilment our special expert knowledge of this problem."

That attitude has all the vanity and smoothness of the profession which it represents. It suggests that they are just here to help the rest of us laymen who are merely here to represent the consumer. The extraordinary thing is that all of them coming with this expertise gave the same view of the Amendment. Some of us cannot forget that in 1952 the advertising lobby in the House was very powerful and took advantage of the then smaller majority of the Conservative Government to force commercial television on that reluctant Government.

Mr. Maddan

No.

Mr. Wilson

The figures are there, and they are quite plain. The hon. Member for Hitchin (Mr. Maddan) has only to look them up to see the size of the advertising lobby.

Mr. Maddan

If the right hon. Gentleman's argument were carried to a logical conclusion, the hon. Member for Rother-ham (Mr. Jack Jones) should not speak in a debate on steel.

Mr. Wilson

I am not aware that my hon. Friend the Member for Rotherham has a financial interest in the steel industry similar to the interests disclosed by Members opposite in this debate. My hon. Friend has a full knowledge of the steel industry, and has the right to represent the steel workers with whom he has worked for many years. He has not just been found a job in the steel industry, as has happened so much in the advertising industry, which is, to some extent, a mushroom industry.

The Committee must watch with care some of the specious arguments put forward on behalf of so powerful and slick a lobby as the advertising lobby. Having said that, I propose to ask my hon. Friends to support the Amendment, but only as a choice of evils. We have to decide whether this tax—and we agree that it is a good thing that the Chancellor has finally decided to impose it—should be placed on the contractors, who have been given a monopoly franchise by the Government, or whether they should be free to pass it on.

The first question is whether there should be taxation on advertising at all. That is something which we shall be able to debate better when we come to the Motion "That the Clause stand part of the Bill", but I want here and now to say, because it is relevant to this question of apportionment, that there is a great deal of hypocrisy and humbug talked about the way in which advertising expenditure is supposed to lower production costs. To a large extent it does not lower but increases production costs, and I will deploy that argument later. Where it increases demand for production to a point where production economies can be applied, there may be an argument for saying that it reduces costs, but, with advertisements for petrol and so on, where there is no increase in demand, the only result of advertising is to add to the costs which the consumer has to pay.

A great deal of the advertising which we are now discussing is connected with invading or repelling the markets of other products, either trying to invade someone else's market, without increasing total demand for the products, or defending one's own market against someone else who is trying to invade it. No one pretends that more motor cars will be driven further because of the advertising of petrol, so that there are no production economies to be made as a result of such advertising and at the end of the day someone has to pay all those lush costs, and it is obvious that that person is the consumer.

Therefore, we have to consider whether it is right that the programme contractor on the one hand, or the advertiser on the other should pay these costs. One the whole, most hon. Members, certainly on this side of the Committee, feel that it is right that the programme contractor should bear this tax and not be free to pass it on, for the reason, given on a number of occasions, that this is a quasi-monopoly often making very large profits and, as my hon. Friend the Member for Woolwich, East (Mr. Mayhew) pointed out, large capital gains in some of the more spectacular cases. It therefore seems reasonable that the programme contractors should bear the cost.

That does not mean that we think that the advertising industry could not bear its mede of taxation, but that would have to be done in a different way, and to say how it could be done would be to incur your displeasure, Mr. Hynd, as getting out of order, but we have said it many times in the past.

How would it be possible to prevent the passing on of this tax in respect of existing contracts, the point mentioned by the Economic Secretary? Obviously, there would be some protection if any of the Amendments were accepted. That would deal with the past. The Economic Secretary is right when he says that there does not seem to be any way, by means of Amendments to the Finance Bill, of preventing these monopolies from passing on the charges in future contracts. The only way to do it would be by some kind of price freeze for contracts, and that would be an unmanageable provision to put into a Clause of this kind, or even into a Schedule.

However, the Chancellor has already expressed his interest in what may come out of the Pilkington Report, and I hope that he will make it quite clear that he does not want these monopoly programme contractors to pass on these charges. The problem would be solved, if he were to say that, having listened to all the debate, he was quite sure that the general sense of the Committee and of the country was that the monopolies were rich enough to be able to bear this extra burden, and that he was looking to them not to pass on these charges and that, if they did, then before the Finance Bill became law he would consider altering the whole basis, so that instead of it being an excise duty it would become a tax on profits. I am certain that I would be out of order if I suggested, on this Amendment, that what we want is a tax on the profits, although if there were a tax on profits we would not have had to spend one and a half hours debating this problem, as we have done.

Therefore, although it is out of order to suggest this as an alternative, or to move an Amendment to that effect, because it would be outside the Money Resolution, if the Chancellor would murmur those harmless and innocuous words which I have suggested, he would give a great deal of comfort to his hon. Friends and would make clear his intentions about the absorption of this tax by the programme contractors.

Sir Harmar Nicholls (Peterborough)

Is the right hon. Member seriously suggesting that we should move from government by legislation to government by exhortation and threats? Does he think that that would be a healthy trend to follow?

Mr. Wilson

The Government, of which the hon. Member has been a member and which he has supported so solidly over the last ten years, have done nothing but that in many directions. One can think of wage restraint, about which there have been threats, and divided restraint and the Chancellor's own threats and appeals about business expenses in this year's Budget statement. However, to respond to the challenge would mean that I would be getting out of order, which I do not want to do.

Sir Derek Walker-Smith (Hertfordshire, East)

Without getting out of order, can the right hon. Gentleman give any precedents for what would be a discriminatory profits tax, which is what his suggestion would mean?

The Temporary Chairman (Mr. H. Hynd)

I think that this will have to stop. We ought to concentrate on the Amendment.

Mr. Wilson

I will concentrate on the Amendment and keep in order and at the same time give the right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith) some help on this matter by saying, as I have said, that there is all the difference in the world between indirect taxation, or profits taxation, when dealing with a competitive situation and when dealing with a monopoly situation. It would be perfectly appropriate to have a discriminatory profits tax, just as it is perfectly appropriate to have a discriminatory commodity tax, when dealing with a monopoly and not with a competitive situation, which forms the basis of the excise duty quoted by the Economic Secretary. It is true that I myself last year suggested an excise duty on administrative grounds as a means of handling this situation, but it appears, in the light of experience gained since that Budget that the only way to prevent this tax from being passed on is to tax profits.

In order to give himself time to study the situation, I hope that the Chancellor will accept the Amendment and deal with the future by reference to a possible tax on profits. My hon. Friend the Member for Woolwich, East has made it plain that we are in some difficulty in having to arbitrate between the monopoly programme contractors on the one hand and the advertising industry on the other. We regard both as over-inflated and over-prosperous in contrast with other parts of the national economy which are a great deal less prosperous. But if one has to choose between the two, our choice is that the Amendment should be accepted and that the charge should fall on the monopoly programme contractors and that the Chancellor should use his ingenuity and that of his Department to find other means of dealing with the case of advertising and the burden which it places on national resources.

7.30 p.m.

Mr. Selwyn Lloyd

I want to say a few words in reply to the right hon. Member for Huyton (Mr. H. Wilson), and also in reply to the hon. Member for Birmingham, Northfield (Mr. Chapman), who accused me of having misled the Committee in my Budget speech. I want to make the point absolutely clear. I said: First, I propose to look to expenditure on television advertising"— that is not the profits of programme companies, but expenditure on television advertising— for a modest contribution to the Exchequer. I am, therefore, proposing a duty of 10 per cent. on charges made by the television programme contractors for the insertion of advertisements in programmes broadcast on or after 1st May. Provision will be made to enable existing contracts to be amended to take account of the duty."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 817] I said that quite clearly. I referred to expenditure on television, and I gave fair warning that I was going to ask for contracts to be amended. Whether that is right or wrong, as the right hon. Gentleman the Member for Huyton said, it is difficult to discriminate between advertisers and television contractors.

Mr. Chapman

The right hon. and learned Gentleman must read the second paragraph. As is inevitable in a Budget speech, a lot of phrases go through quickly. The impression created when there are a lot of figures and short sentences is not always taken. But what was taken was the impression created by the next paragraph, when the right hon. and learned Gentleman said: …I am sure that those concerned with the payment of the duty will not mind too much being bitten by the hand which originally fed them."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 817.] The right hon. and learned Gentleman did not feed the advertisers when he agreed to commercial television. He fed the programme contractors. We understood that it was the television contractors whom he was biting, and so did the Committee.

Mr. Lloyd

I am not responsible for what the hon. Gentleman understood. What I said is clear, and the frivolous part of my speech dealt with the people who benefited from the introduction of television, and that includes the advertisers who use commercial television. The accusation that I was misleading the Committee was unworthy of the hon. Gentleman.

The right hon. Member for Huyton asked whether we were right to have this proviso with regard to passing on. I think that we were right to follow the precedent, because it outs both ways. If the duty is reduced, it means that the reduction can also be passed on. But, basically, I think that the right hon. Gentleman is right. I think that he agreed with this part of "Lloyd's Law" that indirect taxation will, broadly speaking, be passed on. There may be a squeezing of profit margins and some increased efficiency because of increased taxation, but if the market will take it indirect taxation will be passed on.

I do not think it is feasible or wise to start discriminatory rates of Profits Tax. I assure my hon. Friend that this is not a threat or an exhortation. It is a statement of the obvious. The Pilkington Report will be examined by the Government. The time will come when these franchises will have to be renewed, and what has taken place in the meantime will be carefully considered.

Mr. John Hall

I would be deceiving the Committee if I said that I was not disappointed with those parts of my hon. Friend's speech which referred to the Amendment in the name of my hon. Friend the Member for Crosby (Mr. Page), and the Amendment in my name. I am prepared to agree that my Amendment is not perfect. It may not have quite the effect that I intended, but I said in my opening remarks that I was prepared to have it amended in any way in which it was thought fit to give effect to the principle which we are trying to establish.

The principle is this. On the one hand, there is a duty imposed on the television programme contractors which they have a right to pass on. On the other hand, there are people who will be forced to pay this additional duty but who have no right to vary their contracts, so that over the period of the contracts they are not forced to pay more money than they originally intended to pay.

The advertising agent will undoubtedly pass this on to his clients. His clients will be committed to a programme which they did not originally anticipate. We are asking for simple justice. We are asking that they should be allowed to adjust their contracts so that they do not pay more in a given period than they intended to pay. I hope that my right hon. and learned Friend will have second thoughts about this.

Mr. Graham Page

On a point of order, Sir Norman. I ask for your guidance on the Amendments that we have been discussing and which ones you intend to call because that may assist us in deciding which Amendments to vote on, and which not to vote on should there be a Division.

We have been discussing the Amendment in page 2, line 1, the Amendment in line 2, and the Amendment in line 5. I do not know what my hon. Friends propose to do about the Amendment in line 1. The hon. Member for Woolwich, East (Mr. Mayhew) also mentioned the Amendment in page 2, line 1, leave out from "him" to end of line 13. He said that he would not formally move that Amendment, although I understand that it has been selected.

My hon. Friend the Member for Wycombe (Mr. John Hall) evidently does not intend to move the Amendment in page 2, line 5, which leaves my Amendment to line 2. If we could have some guidance about whether you intend to call the Amendment to line 2—it has been discussed already—it might assist us in considering the first Amendment to line 1.

Mr. H. Wilson

What my hon. Friend was seeking to convey was that he did not intend to move the Amendment to page 2, line 1, leave out from "him" to end of line 13. Although I understand that it has been selected, we do not intend to move it. That leaves us with the Amendments to line 1, to line 2, and to line 5.

The Amendment to line 1 has been moved, and the debate has been on the three Amendments to which I have just referred. Presumably, the Question will be put on the Amendment to line 1, but I join the hon. Member for Crosby (Mr. Graham Page) in asking whether it is your intention to put the Question on the Amendments to line 2, and to line 5, after the Amendment to line 1 has been disposed of.

Mr. John Hall

I have stated that I am willing to withdraw my Amendment in favour of the Amendment in the name of my hon. Friend the Member for Crosby.

The Temporary Chairman (Sir Norman Hulbert)

That Amendment has not been moved. It is my intention to put the Question only on the Amendment to page 2, line 1, leave out from "him" to the end of line 5.

Mr. MacArthur

It would assist me and many of my hon. Friends if we could have the answer to two questions. If they have been answered in the course of the interesting legal discussion which has taken place, I ask for the indulgence of the Committee.

I understand that if the Amendment were accepted it would have the effect of enabling existing contracts to stand, and in effect the television companies would finance the duty represented by those contracts, but that any future contracts would be subject to increased rates, or whatever was the commercial practice of the television companies. If that is so, despite the precedent mentioned by my hon. Friend, I would have thought that that was reasonable in present circumstances, but perhaps I have overlooked some legal implication.

My second point concerns the intention of my right hon. and learned Friend. I am sure that hon. Members on both sides of the Committee are obliged to my right

hon. and learned Friend for explaining what was in his mind in the first part of his Budget statement about the levy of a duty on advertising on television. It might be possible for my right hon. and learned Friend to express the hope that television contractors will find some way themselves of absorbing some part of this duty instead of necessarily passing on to advertisers the full 10 per cent., which most of them are doing at present.

Mr. Barber

I will answer the second point made by my hon. Friend the Member for Perth and East Perthshire (Mr. MacArthur) first. As for my right hon. and learned Friend's intention, I do not think I can go further than to remind my hon. Friend of what the Chancellor said in his Budget speech, and also what he has just said in reply to the right hon. Member for Huyton (Mr. H. Wilson).

My hon. Friend was quite right in his interpretation of the effect of the Amendment upon old contracts, and the effect of the Clause on new ones. The only other point—which the Committee may have lost sight of during the varied discussion we have had—is that which was referred to by my hon. Friend the Member for Crosby (Mr. Graham Page), about the Clause permitting the programme contractor to pass on the duty to the advertising agent without, in terms, permitting the agent to pass it on to the advertiser. I can assure my hon. Friend that the Chancellor will look into the matter and, if necessary, move an Amendment to deal with it at a later stage.

Question put, That the words proposed to be left out stand part of the Clause:—

The Committee divided: Ayes 237, Noes 176.

Division No. 168.]	AYES	[7.42 p.m.
Agnew, Sir Peter	Boyle, Sir Edward	Clarke, Brig. Terence (Portsmth, W.)
Aitken, W. T.	Brewis, John	Cleaver, Leonard
Allason, James	Bromley-Davenport, Lt.-Col. Sir Walter	Cole, Norman
Arbuthnot, John	Brooman-White, R.	Cooke, Robert
Balniel, Lord	Brown, Alan (Tottenham)	Cordle, John
Barber, Anthony	Browne, Percy (Torrington)	Corfield, F. V.
Barlow, Sir John	Bryan, Paul	Costain, A. P.
Baxter, Sir Beverley (Southgate)	Buck, Antony	Crosthwaite-Eyre, Col. O. E.
Beamish, Col. Sir Tufton	Burden, F. A.	Currie, G. B. H.
Bell, Ronald	Butcher, Sir Herbert	Dalkeith, Earl of
Berkeley, Humphry	Campbell, Sir David (Belfast, S.)	Dance, James
Bevins, Rt. Hon. Reginald (Toxteth)	Campbell, Cordon (Moray & Nairn)	d'Avigdor-Goldsmid, Sir Henry
Biggs-Davison, John	Carr, Compton (Barons Court)	Deedes, W. F.
Bingham, R. M.	Carr, Robert (Mitcham)	de Ferranti, Basil
Birch, Rt. Hon. Nigel	Cary, Sir Robert	Digby, Simon Wingfield
Bishop, F. P.	Channon, H. P. G.	Donaldson, Cmdr, C. E. M.
Bossom, Clive	Chataway, Christopher	Doughty, Charles
Box, Donald	Clark, William (Nottingham, S.)	du Cann, Edward
Duncan, Sir James	Kaberry, Sir Donald	Ramsden, James
Eccles, Rt. Hon. Sir David	Kerans, Cdr. J. S.	Rawlinson, Peter
Eden, John	Kerr, Sir Hamilton	Redmayne, Rt. Hon. Martin
Elliot, Capt. Walter (Carshalton)	Kershaw, Anthony	Rees, Hugh
Elliott, R. W.(Nwcstle-upon-Tyne, N.)	Kimball, Marcus	Rees-Davies, W. R.
Emery, Peter	Kitson, Timothy	Renton, David
Emmet, Hon. Mrs. Evelyn	Lagden, Godfrey	Ridley, Hon. Nicholas
Errington, Sir Eric	Langford-Holt, J.	Ridsdale, Julian
Farey-Jones, F. W.	Leburn, Gilmour	Roots, William
Farr, John	Legge-Bourke, Sir Harry	Ropner, Col. Sir Leonard
Finlay, Graeme	Lewis, Kenneth (Rutland)	Russell, Ronald
Fisher, Nigel	Lilley, F. J. P.	Scott-Hopkins, James
Fletcher-Cooke, Charles	Lindsay, Martin	Sharples, Richard
Forrest, George	Lloyd, Rt. Hon. Selwyn (Wirral)	Shaw, M.
Fraser, Ian (Plymouth, Sutton)	Longbottom, Charles	Simon, Rt. Hon. Sir Jocelyn
Freeth, Denzil	Longden, Gilbert	Skeet, T. H. H.
Gammans, Lady	Loveys, Walter H.	Smith, Dudley (Br'ntf'rd Chiswick)
Gardner, Edward	Low, Rt. Hon. Sir Toby	Smithers, Peter
Gibson-Watt, David	Lucas-Tooth, Sir Hugh	Smyth, Brig. Sir John (Norwood)
Glyn, Dr. Alan (Clapham)	McAdden, Stephen	Spearman, Sir Alexander
Goodhart, Philip	McLean, Neil (Inverness)	Speir, Rupert
Gower, Raymond	McMaster, Stanley R.	Stanley, Hon. Richard
Grant, Rt. Hon. William	Macpherson, Niall (Dumfries)	Steward, Harold (Stockport, S.)
Grant-Ferris, Wg Cdr. R.	Maginnis, John E.	Stodart, J. A.
Green, Alan	Maitland, Sir John	Stoddart-Scott, Col. Sir Malcolm
Gresham Cooke, R.	Manningham-Buller, Rt. Hn. Sir R.	Studholme, Sir Henry
Grimston, Sir Robert	Markham, Major Sir Frank	Sumner, Donald (Orpington)
Grosvenor, Lt.-Col. R. G.	Marlowe, Anthony	Talbot, John E.
Gurden, Harold	Marples, Rt. Hon. Ernest	Tapsell, Peter
Hamilton, Michael (Wellingborough)	Marshall, Douglas	Taylor, Sir Charles (Eastbourne)
Harris, Frederic (Croydon, N.W.)	Matthews, Gordon (Meriden)	Taylor, W. J. (Bradford, N.)
Harris, Reader (Heston)	Mawby, Ray	Temple, John M.
Harrison, Brian (Maldon)	Maxwell-Hyslop, R. J.	Thatcher, Mrs. Margaret
Harrison, Col. J. H. (Eye)	Maydon, Lt.-Cmdr. S. L. C.	Thomas, Leslie (Canterbury)
Harvey, Sir Arthur Vere (Macclesf'd)	Mills, Stratton	Thornton-Kemsley, Sir Colin
Harvie Anderson, Miss	More, Jasper (Ludlow)	Tiley, Arthur (Bradford W.)
Hastings, Stephen	Morgan, William	Tilney, John (Wavertree)
Hay, John	Morrison, John	Turner, Colin
Heald, Rt. Hon. Sir Lionel	Nabarro, Gerald	Turton, Rt. Hon. R. H.
Henderson, John (Cathcart)	Nicholls, Sir Harmar	Tweedsmuir, Lady
Henderson-Stewart, Sir James	Nicholson, Sir Godfrey	van Straubenzee, W. R.
Hendry, Forbes	Nugent, Sir Richard	Vane, W. M. F.
Hill, Dr. Rt. Hon. Charles (Luton)	Oakshott, Sir Hendrie	Vickers, Miss Joan
Hill, J. E. B. (S. Norfolk)	Orr-Ewing, C. Ian	Vosper, Rt. Hon. Dennis
Hinchingbrooke, Viscount	Osborn, John (Hallam)	Walder, David
Hirst, Geoffrey	Page, John (Harrow, West)	Walker, Peter
Hobson, John	Pannell, Norman (Kirkdale)	Watts, James
Hocking, Philip N.	Partridge, E.	Webster, David
Holland, Philip	Pearson, Frank (Citheroe)	Whitelaw, William
Hollingworth, John	Peel, John	Wills, Sir Gerald (Bridgwater)
Hopkins, Alan	Percival, Ian	Wilson, Geoffrey (Truro)
Hornsby-Smith, Rt. Hon. Patricia	Peyton, John	Wise, A. R.
Howard, John (Southampton, Test)	Pickthorn, Sir Kenneth	Wolrige-Gordon, Patrick
Hughes Hallett, Vice-Admiral John	Pike, Miss Mervyn	Wood, Rt. Hon. Richard
Hughes-Young, Michael	Pilkington, sir Richard	Woodhouse, C. M.
Hutchison, Michael Clark	Pitman, I. J.	Woodnutt, Mark
Irvine, Bryant Godman (Rye)	Pott, Percival	Woollam, John
Jackson, John	Price, H. A. (Lewisham, W.)	Worsley, Marcus
James, David	Prior, J. M. L.	Yates, William (The Wrekin)
Jenkins, Robert (Dulwich)	Profumo, Rt. Hon. John
Johnson, Eric (Blackley)	Pym, Francis	TELLERS FOR THE AYES:
Johnson Smith, Geoffrey	Quennell, Miss J. M.	Mr. Edward Wakefield and
		Mr. Chichester-Clark.
NOES
Ainsley, William	Craddock, George (Bradford, S.)	Fletcher, Eric
Allaun, Frank (Salford, E.)	Crossman, R. H. S.	Foot, Dingle (Ipswich)
Allen, Scholefield (Crewe)	Cullen, Mrs. Alice	Foot, Michael (Ebbw Vale)
Bacon, Miss Alice	Darling, George	Fraser, Thomas (Hamilton)
Baxter, William (Stirlingshire, W.)	Davies, G. Elfed (Rhondda, E.)	Galpern, Sir Myer
Bence, Cyril (Dunbartonshire, E.)	Davies, Harold (Leek)	George, LalyMeganLloyd (Crmrthn)
Benson, Sir George	Davies, S. O. (Merthyr)	Ginsburg, David
Bowden, Herbert W. (Leics, S.W.)	Deer, George	Gordon Walker, Rt. Hon. P. C.
Bowles, Frank	Delargy, Hugh	Gourlay, Harry
Brockway, A. Fenner	Dempsey, James	Grey, Charles
Broughton, Dr. A. D. D.	Diamond, John	Griffiths, David (Rother Valley)
Brown, Thomas (Ince)	Dodds, Norman	Griffiths, W. (Exchange)
Butler, Herbert (Hackney, C.)	Ede, Rt. Hon. C.	Gunter, Ray
Callaghan, James	Edelman, Maurice	Hale, Leslie (Oldham, W.)
Castle, Mrs. Barbara	Edwards, Robert (Bilston)	Hall, Rt. Hn. Glenvil (Colne Valley)
Chapman, Donald	Edwards, Walter (Stepney)	Hall, John (Wycombe)
Chetwynd, George	Evans, Albert	Hamilton, William (West Fife)
Cliffe, Michael	Fernyhough, E.	Hannan, William
Collick, Percy	Finch, Harold	Hart, Mrs. Judith
Corbet, Mrs. Freda	Fitch, Alan	Henderson, Rt. Hn. Arthur (Rwly Regis)

Herbison, Miss Margaret	Mellish, R. J.	Smith, Ellis (Stoke, S.)
Hill, J. (Midlothian)	Millan, Bruce	Snow, Julian
Hilton, A. V.	Milne, Edward J.	Sorensen, R. W.
Holman, Percy	Mitchison, G. R.	Steele, Thomas
Hornby, R. P.	Moyle, Arthur	Stewart, Michael (Fulham)
Houghton, Douglas	Neal, Harold	Stonehouse, John
Howell, Denis (B'ham, Small Heath)	Noel-Baker, Francis (Swindon)	Stones, William
Hughes, Emrys (S. Ayrshire)	Noel-Baker, Rt. Hn. Philip (Derby, S.)	Strachey, Rt. Hon. John
Hughes, Hector (Aberdeen, N.)	Oliver, G. H.	Stross, Dr. Barnett (Stoke-on-Trent, C.)
Hunter, A. E.	Oram, A. E.	Swingler, Stephen
Janner, Sir Barnett	Oswald, Thomas	Sylvester, George
Jay, Rt. Hon. Douglas	Owen, Will	Symonds, J. B.
Jones, Dan (Burnley)	Padley, W. E.	Taylor, Bernard (Mansfield)
Jones, Elwyn (West Ham, S.)	Page, Graham (Crosby)	Taylor, John (West Lothian)
Jones, Jack (Rotherham)	Paget, R. T.	Thomas, George (Cardiff, W.)
Jones, J. Idwal (Wrexham)	Pannell, Charles (Leeds, W.)	Thomas, Iorwerth (Rhondda, W.)
Jones, T. W. (Merioneth)	Pargiter, G. A.	Thompson, Dr. Alan (Dunfermline)
Kenyon, Clifford	Parker, John	Thorpe, Jeremy
Key, Rt. Hon. C. W.	Pearson, Arthur (Pontypridd)	Tomney, Frank
King, Dr. Horace	Peart, Frederick	Ungoed-Thomas, Sir Lynn
Lawson, George	Pentland, Norman	Wade, Donald
Ledger, Ron	Popplewell, Ernest	Wainwright, Edwin
Lee, Frederick (Newton)	Prentice, R. E.	Warbey, William
Lipton, Marcus	Price, J. T. (Westhoughton)	Weitzman, David
Loughlin, Charles	Probert, Arthur	Wells, Percy (Faversham)
MacArthur, Ian	Redhead, E. C.	Wells, William (Walsall, N.)
McCann, John	Reid, William	White, Mrs. Eirene
McKay, John (Wallsend)	Rhodes, H.	Whitlock, William
Mackie, John	Roberts, Albert (Normanton)	Wigg, George
MacMillan, Malcolm (Western Isles)	Roberts, Goronwy (Caernarvon)	Willey, Frederick
MacPherson, Malcolm (Stirling)	Robertson, John (Paisley)	Williams, W. T. (Warrington)
Maddan, Martin	Rogers, G. H. R. (Kensington, N.)	Willis, E. G. (Edinburgh, E.)
Mallalieu, E. L. (Brigg)	Ross, William	Wilson, Rt. Hon. Harold (Huyton)
Mallalieu, J. P. W. (Huddersfield, E.)	Royle, Charles (Salford, West)	Woof, Robert
Manuel, A. C.	Shinwell, Rt. Hon. E.	Yates, Victor (Ladywood)
Mapp, Charles	Short, Edward
Marquand, Rt. Hon. H. A.	Skeffington, Arthur	TELLERS FOR THE NOES:
Marsh, Richard	Slater, Mrs. Harriet (Stoke, N.)	Mr. Charles A. Howell and
Mason, Roy	Slater, Joseph (Sedgefield)	Mr. Ifor Davies.
Mayhew, Christopher	Small, William

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

Mr. Jay

I begin by declaring that I have no interest whatever either in programme contracting or the advertising industry. One of the remarkable features of this debate has been the high degree of expertise on advertising questions shown by hon. Members opposite, and, curiously enough, the expertise all seems to lie in one direction. I think we have established by this proposal and the debate today that, at any rate, it is practicable to tax advertising.

In the past, there have been many discussions about the desirability or practicability of placing a tax on advertising. Many people have argued that it simply was not a practical course. Now, thanks to the Chancellor, we have learned that it is not so difficult to put a tax on at least certain forms of advertising. We have here what the hon. Member for Kidderminster (Mr. Nabarro) quite reasonably calls a type of Purchase Tax on this form of advertising at the simple rate of 10 per cent.

I know that in the past the Inland Revenue has been inclined to argue that a tax of this kind could be levied by Customs and Excise and Customs and Excise has argued that it could be levied by the Inland Revenue, but neither has been anxious to do it. Now we have at least solved this part of the problem. We know that it is possible in this simple fashion for Customs and Excise to impose a tax on advertising. The next question which the Committee must ask before we leave this Clause is, what good reason is there for selecting this particular form of advertising for a tax and excluding the rest?

I asked that question of the Chancellor in the middle of his speech winding up the Budget debate. The reply which the right hon. and learned Gentleman gave was perfectly clear. He said that there was a justification for this selective tax because here we were dealing with monopolies and monopoly profits. The first comment I make about that is that it opens up interesting possibilities. These are not the only monopolies with which we are faced in the commercial life of this country, or semi-monopolies, either. This argument which the Chancellor has introduced, and which I certainly think has some validity, carries us a long way. If it is justifiable to have discriminating taxes on these monopolies, no doubt it is justifiable to have them on other monopolies. It may be said—as has been said in this case—that it is only justifiable where the Government, by granting a franchise, have themselves created a monopoly.

Mr. Selwyn Lloyd

The hon. Gentleman said that he was quoting me. Will he tell me where in my speech is the quotation? I do not recollect saying it.

Mr. Jay

I will give the right hon. and learned Gentleman the exact line later, but he said it in reply to a question put to him in the middle of his speech. I was merely saying that the argument would carry us a good way further even than the television advertising companies.

The queer fact is that when we come to consider the tax we find, as has been pointed out by several of my hon. Friends, that now, to our surprise, the tax is not to be paid by the programme companies which are in this specially privileged position—if the Chancellor prefers that word. We agree that it is a privileged position which has enabled them, in the oft-quoted expression, actually to "print money" in this country. We find instead that a large part of the tax, at any rate, if not the whole of it, is to be passed on to the general advertising industry.

This is the situation, as is now perfectly clear, and although I do not accuse the Chancellor of deliberately misleading us in his Budget speech, I think he did in fact mislead us and unintentionally misled most members of the public into believing that we were taxing the programme companies. I do not think that the monopoly argument, which I have quoted, could have any other meaning than that it was the programme companies rather than the general advertising industry which was being taxed. However, we now learn that in fact it is advertising generally and not the programme companies which will pay most of the tax. This, I think, makes the whole proposition very much harder to justify.

There might be a case for a tax on all advertising, which I gather is what the hon. Member for Kidderminster proposes to argue. Alternatively, there might be a case for some special discriminating tax on the programme com- panies which have been given this particular privilege. But it is hard to see the justification for a tax which starts with T.V. companies only and spreads out, rather indeterminately, over certain other parts of the advertising field. That is the proposition which the Chancellor is now putting before us and I think it hard to justify.

I believe that what most hon. Members would like to see is a genuinely discriminating tax which would fall on the programme companies, I agree with the Chancellor. I do not suppose that it is possible, by means of an indirect tax levied through the Customs—which the companies would almost certainly regard as a cost—to confine the incidence of the tax to the programme companies. So I think that the case which the Chancellor has really made is a case for a discriminating tax on the profits of the TV programme companies. Despite what the Chancellor has said this afternoon, I do not think there is any serious doubt that although an indirect tax can usually, as to the major part, be passed on, there is not much doubt that a tax on profits, in the normal event, is not passed on. The Chancellor has appeared to run away from it since, but he did enunciate this extraordinary "Lloyd's Law". So far as I recollect it, the right hon. and learned Gentleman said that all taxes are wholly passed on, and that is an extraordinary proposition——

Mr. Selwyn Lloyd indicated dissent.

Mr. Jay

That is what I heard him say, but I shall be very glad if the right hon. and learned Gentleman is already withdrawing from that extraordinary proposition.

Mr. Lloyd

I certainly did not say "wholly passed on".

Mr. Jay

If the Chancellor thinks that some taxes can, to some extent, be passed on, I should not dissent. I hope he will agree that it is far more likely that an indirect tax would be passed on than a tax on income or profit. As the hon. Member for Kidderminster said, if Surtax can be passed on, what is all the fuss about? If a tax on profits can be passed on, why do we hear all these complaints about the terrible burden of taxation on companies? If the Chancellor proposes to start his conduct of our financial affairs by propounding this extraordinary proposition, as he appeared to do earlier today—that almost all, or most taxes can and are being passed on—I think that we shall be in for some very curious financial events and policies in the months ahead. Certainly "Boyle's Law" will be a small affair compared with "Lloyd's Law".

Indeed, if we are to have both Boyle's Law and Lloyd's Law at the same time, I do not know where we shall be getting. It is not surprising that the Government cannot make up their mind about the European market—if these are the sort of doctrines that are going around in the Chancellor's head. Therefore, I think there is a place, although a very dubious one, for the particular form of tax the Chancellor is now introducing.

8.0 p.m.

If hon. Members wish to take account of the privileged position of these programme companies, inevitably the argument leads to some sort of discriminating tax on their profits. But I cannot follow that argument on our discussion on the Clause. On the other hand, I will not advise the Committee to vote against this Clause, because although it is not the ideal form of tax—either on television or on advertising—it appears that it will fall mainly on certain sections of the advertising industry. I think there is quite a respectable case—I do not say that it is as strong as the case for taxing the television programme companies—for a general tax on advertising.

That case rests on the fact that a remarkable proportion of the nation's annual resources, more than £400 million, is devoted to advertising. Since there is a tax on petrol, tobacco, whisky and beer, there is at least as strong a case for having a general tax on advertising. Although, therefore, the Chancellor's whole conduct over this tax—which was introduced in one guise and has now been redressed in another—is peculiar and very misleading, if not intentionally so, there is some case for it, even in its present form, and I advise my hon. Friends not to vote against it.

Mr. Nabarro

There are three great sectors of consumer expenditure which, have, so far, escaped taxation. They are firstly, soft drinks, secondly, sweets and confectionery and, thirdly, advertising. I hope that they will all be brought within the general ambit of reformed indirect taxation in the next two of my right hon. and learned Friend's Budget statements.

I deal this evening with the relatively narrow sector of an incursion in fiscal matters into the field of advertising, for, so far as I am aware, no attempt has previously been made by any Chancellor to tax any part of advertising expenditure.

Mr. Jay

The hon. Gentleman will recall, as has already been observed in this debate, that the then Chancellor in November of 1947 introduced a tax which was to have been collected by the Inland Revenue, but that tax was subsequently withdrawn.

Mr. Nabarro

I should not merely have said "introduce". I should have said "introduced and subsequently statutorily implemented". As the right hon. Gentleman says, the tax to which he refers was withdrawn before it was implemented. We have never had a tax on advertising and it seems to me that advertising is an essential part of consumer expenditure and should attract taxation. But it seems undesirable, ethically, that the Chancellor should have extracted from the very large total expenditure on advertising what is a relatively small part—in the form of television advertising—and have placed a 10 per cent. excise duty on it.

If I wander a little by making passing references to Purchase Tax somewhat generally, I hope that I will not be ruled out of order. [HON. MEMBERS: "Why not?"] If hon. Members had been listening to the Economic Secretary some minutes ago, they would have heard him say that the hon. Member for Kidderminster was exactly correct when he referred to this tax on television advertising as being a Purchase Tax on it. That is exactly what it is.

It might have been brought into the Finance Bill in an alternative, yet equally efficacious way, by adding to the Purchase Tax Schedules. The fact that the Economic Secretary referred to it as a Purchase Tax on advertising is patently clear from the fact that the moment it was announced in the Budget it became the subject of a Customs and Excise Circular.

It has been admitted that it is subject to the economic regulator of a maximum of 10 per cent., up or down. So, there can be no doubt that it is a Purchase Tax on advertising—and I welcome it as such. As this is a tax on one form of advertising, perhaps I shall be permitted to mention advertising generally. In 1960, advertising expenditure in this country amounted to a total of £455 million. Out of that figure, £220 million was in respect of Press advertising, £210 million was in respect of advertising by other media and the residual of £25 million was in respect of advertising expenditure by companies which conduct their own advertising departments.

The source of these figures is the Economist, 25th March, 1961, derived from a survey made by Dr. Mark Abrams for the London Press Exchange. Of that total of £455 million on advertising last year, the Chancellor is proposing to apply a tax of 10 per cent. only in the very narrow sector—he estimates the figure of £77 million—of television advertising. Dr. Abrams estimates that figure as £72 million.

But, in any event, this advertising tax, as the hon. Member for Deptford (Sir L. Plummer) has observed, is slightly selective and will apply to only 17 per cent. of the total advertising expenditure of this country. I want the Chancellor to regard this in his next two Budgets as a precursor for extending advertising taxation.

Advertising, in the context of which I speak, attracts additional demands from domestic consumers, notably; on television, on cinema screens or in newspapers, but it contributes nothing whatever to National exports. How can it be possible that advertising on television, in cinemas or in newspapers of 20 sorts of detergent, all claiming to wash shirts one whiter than the other, is something of which the Chancellor can be proud? I support and defend advertising in a free society. It is an essential ingredient of sale.

But I join with the hon. Member for Huyton (Mr. H. Wilson) in saying that there is nothing wrong with advertising, ethically, but that if it becomes too excessive it should attract a measure of taxation. That can be underlined by reference to exports. Advertising in its present form, on the domestic British market, contributes nothing to exports, yet those industries which contribute most to our exports are taxed the most highly—motor cars, 50 per cent. Purchase Tax; radio sets, 50 per cent.; television sets, 50 per cent.; and cosmetics, 50 per cent. They are all forms of Purchase Tax.

Other manufactured goods which contribute to our national exports are taxed as high as 25 per cent., others at 12½ per cent. and yet others at 5 per cent. If you select a new Clause standing in my name, Sir Norman, I shall deal with all the Purchase Tax troubles. I am making the point that it has been admitted that this form of taxation is a Purchase Tax on advertising.

It is a beginning. I want it applied to all forms of advertising, and I want the additional revenue derived to be applied to a reduction of Purchase Tax on those goods in the 50 per cent. bracket; motor cars, radio sets, television sets and cosmetics, because if that rate of tax can be brought down, exports are indirectly associated. But in order to implement it, it is essential that the Chancellor has an additional source of revenue which I claim he ought to obtain——

The Temporary Chairman

Order. The hon. Member is now getting very far away from the Clause.

Mr. Nabarro

I am sorry if I strayed a little, Sir Norman. This is a very important matter. You will recall, Sir Norman, that the Economic Secretary gave this Clause its proper name—"Purchase Tax on advertising". Those were his words. I did not coin the phrase. I made a passing reference to it on an earlier Amendment, but it was the Economic Secretary who used those words. However, I will not pursue the matter. I have made my point. I expect that from the advertising lobby on the Tory benches—and a very powerful lobby it is, too——

Mr. Graham Page

Would my hon. Friend explain exactly what he means by "lobby"?

Mr. Nabarro

If I may explain in terms which I think my hon. Friend the Member for Crosby (Mr. Graham Page) will well understand, he belongs to the same lobby as I do on the abolition of Schedule A Tax. A very good lobby it is, too. Many of my hon. Friends belong to the same lobby as I do—

The Temporary Chairman

Order. We cannot discuss advertising lobbies.

Mr. Nabarro

As you know, Sir Norman, in these important matters I am normally as snow white as the detergent advertisements to which I have referred—

Mr. Graham Page

Brand X.

Mr. Nabarro

—but I have been led astray by my hon. Friends. The fact is that though my right hon. and learned Friend has said that this new form of taxation is for revenue purposes in Clause 1, it has been widely recognised by the advertising lobby on these benches and in the newspaper world as a first attempt to impose taxation on advertising. For example, that well-known organ of Tory opinion, Aims of Industry, distributed a circular including these words with reference to Clause 1: The Conservative M.P.s see that the proposal has now become the first stage in the general application of a tax on advertising. This, they say, is socialism. It is the policy of Mr. Harold Wilson, 'Shadow Chancellor of the Exchequer.' On the contrary, it is my policy as well. I do not believe that there is any party political content in this matter. It ought to be judged objectively in the context of assisting exports.

There will be powerful forces marshalled against the Treasury in the next twelve months for implementing my suggestion for extending this tax on Clause 1. For example, the president of the London Newspaper Society said, as reported in the Daily Telegraph on 10th May: Mr. H. R. Pratt Boorman, the society's president, said: 'It is a deplorable tax. Oh, yes, it was a sitting duck for the Chancellor, but it won't be television which will pay for it. "I'm all right Jack" may be our outlook today, but that tax will be extended to posters, to outdoor signs and to newspapers'. In other words, a general tax on advertising.

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

So it should be.

Mr. Nabarro

I entirely agree with the hon. Gentleman. I shall have powerful allies next year if it is possible to remain in order by moving an Amendment for an extension of this duty.

All I seek to do is to give succour to my right hon. and learned Friend the Chancellor of the Exchequer and to say to him that I realise that Clause 1 is a Ministerial kite being flown this year in this Committee on the Finance Bill to test reactions. It covers only 17 per cent. of advertising expenditure. I hope that next year it will be converted into a general advertising tax and that I shall command support from both sides of the Committee in what I have said this evening.

8.15 p.m.

Mr. J. T. Price (Westhoughton)

I do not intend to make a long-winded speech at this stage of the debate, but certain revelations have come to light which call for at least a footnote.

To begin with, the hon. Member for Kidderminster (Mr. Nabarro) has just delivered a most powerful plea for the extension of this pilot tax on advertising. This tax has been assailed by a number of hon. Members opposite in a way that rather surprises even myself who has been in the House for some years and who is not easily surprised by what can happen here.

I confess that I have not heard all the the speeches in the debate today, but I have heard enough of them to make me think about this topic for a few minutes, and I must say that I have been more than surprised at some of the attacks that have been launched against the Chancellor for introducing this tax on advertising. If some of these speeches had been delivered in the council chambers of some of our municipalities and the members who had delivered them had then gone into the lobby and voted against this tax, they would have been under a financial penalty imposed by the Local Government Act.

The time has come when it should be said in this Committee without any mealy-mouthed apology that it is quite wrong for hon. Members to come here and nakedly put up a case for something from which they can profit financially. It ought to be condemned. It is entirely against the spirit——

Mr. MacArthur rose—

Mr. Price

I do not wish to give way at the moment. I will do so later on. It should be a point of honour in the House of Commons, with all its great traditions of which we are all proud, and where so many have given their disinterested service without any thought of personal gain, that Members should not make out a case for something from which they get financial benefit. Democracy is being reduced in stature when we hear this naked propaganda for private interests out of which hon. Members stand to profit in hard cash.

Mr. MacArthur

The hon. Gentleman should not make a remark of that kind. It bears no relation to facts. [An HON. MEMBER: "How does the hon. Gentleman know?] I happen to be one of those hon. Members to whom I presume the hon. Member for Westhoughton (Mr. J. T. Price) is referring.

Mr. Price

I do not wish to be tempted to get out of order at this stage of the debate, but we must all answer to our own consciences. If some hon. Members feel at all sensitive about references to some activity in which they are personally interested, it is a matter of personal choice for those hon. Members, but they must not be surprised if people like myself condemn this kind of conduct.

The Temporary Chairman

Order. It would be very much better if the hon. Member were to confine his remarks to the Clause.

Mr. H. Rhodes (Ashton-under-Lyne)

He is dealing with the Clause.

Mr. Price

With great respect, Sir Norman, we are dealing with a Clause to which certain Amendments have been moved. Those Amendments are concerned with resisting the imposition of a tax on a section of the advertising industry with which hon. Members who have spoken are personally identified, and I think that it is bad Parliamentary practice and that the time has come when we ought to amend the, procedure of the House so that no hon. Member shall be free to vote on a matter in which he is interested. I am not directing my remarks personally. They apply as a matter of principle to the whole practice which is developing in the House. The Conservative Party has become so complacent and so arrogant that hon. Members opposite think that they can come here and treat us like a lot of numbskulls.

Mr. Maddan

I am sorry to have to interrupt the hon. and gallant Member again, but—[HON. MEMBERS: "The hon. Member."]—I thought that he must be gallant; he was so ferocious. I voted in the Lobby in a sense which, if it is of the slightest interest to the hon. Member, is contrary, I should judge, to the interests of some of the very biggest clients of the company of which I am a director.

Mr. Price

If the hon. Member has had second thoughts, I give him full credit for that.

Mr. Maddan

I am sorry to interrupt again, but there is no question of second thoughts. That is the position I have always maintained. It was the point we argued from this side, and we voted in that way. The hon. Member does not seem to understand what the Clause is about.

Mr. Price

Perhaps I might be allowed to continue. I do not wish to detain the Committee for long. If my remarks do not apply to the hon. Member for Hitchin (Mr. Maddan), who voted as his conscience led him, I give him all credit for that; but my remarks certainly apply to other speeches which were made. I have been a Member long enough to recall the time when legislation was passed to introduce commercial television, and I remember the scandalous speeches which were made on that side of the Chamber and the personal interests of hon. Members which were plainly apparent then.

The Temporary Chairman

The only matter in order in this debate is what is in the Clause.

Mr. Price

With respect, Sir Norman, I was prepared to let the matter rest. I had already made my comment, but I was interrupted and I had to reply to the interruptions as a matter of common courtesy. I promise hon. Members that, if they interrupt me again, I shall go on for quite a long time. I am not short of ideas on this matter. I did not wish to speak for a long time, but I think that I must be allowed to deal with interruptions.

I am sorry that the Chancellor has gone to have dinner. He has to eat at some time—[An HON. MEMBER: "Why?"] The right hon. and learned Gentleman has worked quite hard, and we give him credit for that. He made some astonishing revelations. I have heard a succession of Chancellors deliver arguments at Budget time, but I never expected to hear a Chancellor declare in such round, unequivocal terms as the right hon. and learned Gentleman used that all taxation is inflationary. It has been said by certain economists and financial experts for a long lime, but the Chancellor said it tonight, and the setting in which he said it is rather interesting.

If all taxation is inflationary and if, as he said, all taxation is passed on to the consumer, we are left with the important question: who bears the burden of taxation in this country? That is a question which I, as a humble Socialist, am entitled to ask. A Chancellor of the Exchequer in Britain has announced, first, that all taxation is inflationary and, second, that those who pay the tax take steps to see that it is passed on.

Mr. Jay

I do not know whether my hon. Friend listened to the Chancellor's later speech when he appeared to have changed his mind. Now, he says that it is only indirect taxation which can be passed on.

Mr. Price

I have to trust my recollection. I was here when the Chancellor made his first speech and I took note of it. I do not wish to be unfair to the right hon. and learned Gentleman and to misquote him; we will look at HANSARD tomorrow. Nevertheless, I recall him saying what I have just quoted. He said it at a time when we have heard other arguments from another Treasury Minister. I have sat here on many occasions and heard the hon. Member for Birmingham, Handsworth (Sir E. Boyle), who, I think, is now in his second reincarnation as Financial Secretary to the Treasury, enunciate a quite different principle. When defending an unpopular tax, the hon. Gentleman has argued in favour of it, saying that it was a tax to mop up surplus purchasing power. He said it in his usual good-natured, avuncular fashion with which we are all familiar. Indeed, it became so notorious that some of the financial journalists outside christened it "Boyle's Law". We all know that Boyle's Law proper applies to physics not finance, but this was the second "Boyle's Law", that taxation is levied by Conservative Chancellors for the purpose of mopping up surplus purchasing power which people ought not to have in their pockets to spend as they wish.

The present situation is remarkable. We have two senior Ministers at the Treasury, the Chancellor of the Exchequer, on the one hand, saying that all taxation is inflationary, and on the other hand, his second in command saying that taxation is levied for a deflationary purpose in the economy, to mop up surplus money. We cannot have it both ways.

People are entitled to know what is the policy of the Treasury on these matters. If the Government are having this kind of—I am not sure whether this is the right word—ambivalent advice given to them by two senior Ministers, it is no wonder that they are in such a hell of a mess. However, I am not concerned about the Government being in a mess. I am sufficiently patriotic to wish that this Government——

The Temporary Chairman

All I am concerned about is Clause 1, which deals with the television advertisement duty.

Mr. Price

I am obliged for the correction. If I have strayed from the path of virtue, I shall return to it as soon as possible. I thought that we were discussing the Question "That the Clause stand part of the Bill", and that does involve the principle behind it. The principle can be properly understood only in conjuction with the explanations give in defence of the Clause by the Ministers responsible for it. Surely, if the Chancellor himself has commented on the merits of the Clause, I am entitled to reply to the comments he made. I put it no higher than that.

Perhaps I had better sit down. I have been out of order several times. I conclude by saying again that the time ought not to be far distant when the House of Commons revises its rules so that no Member is allowed to vote in the Lobbies on any matter in which he has a personal financial interest.

Mr. Geoffrey Hirst (Shipley)

I do not propose to be very difficult about the Clause, but I shall damn it with some very faint praise. I do not like the principle. I agree with those who have said that it is unfortunate to pick out in a discriminatory way one section of advertising for a tax of this character. I do not, however, go as far as my hon. Friend the Member for Kidderminster (Mr. Nabarro) goes. I told my hon. Friend that I should refer to him, and he has asked me to apologise for his absence. He has to see two constituents and has had to leave the Chamber.

I cannot agree with my hon. Friend in his approval of the Opposition's idea that taxing advertising is a good thing in itself. Where I go at least part of the way with him is in taking the view that, if it can be found possible to lower taxation in other directions, for instance, the higher rates of Purchase Tax to which he referred, by means of some form of general, much lower sales tax—which would be very difficult—then I should be prepared to listen to his argument. However, in the absence of that, I cannot favour a tax on advertising as such.

I have no interest to declare. I hope that that encourages the hon. Member for Westhoughton (Mr. J. T. Price). As I sit here, I have the impression that there is a great deal of old-fashioned party feeling about this matter. The Opposition have the idea that advertising is a bad thing in itself. That is the impression that we get from these discussions, of which we have had many.

Less than enough regard is paid to the purpose for which advertising exists, which is to increase demand. It has been proved many times that it is by far the most economical and most efficient method of obtaining what is called mass demand. In turn—and this is something which my hon. Friend the Member for Kidderminster seemed to overlook—it is one of the best methods of securing a sound home market, thereby getting costs down to enable our country to compete competitively overseas.

It is an argument not of theory but of fact.

Mr. Charles Loughlin (Gloucestershire, West)

How does that apply to detergents?

8.30 p.m.

Mr. Hirst

I am speaking in general. To attack advertising in general is bad, and it is the wrong approach.

I do not think it behoves a Conservative Government, pressing as they are for increased production, particularly in the export trade, to start something which has caused a good deal of fear that we are embarking on a new and additional form of tax which would not, in my view, be beneficial to the objects we have in mind.

I realise the position in which the Chancellor finds himself this year, and, in a matter of this kind, I do not propose to put him in difficulty. I have not always argued quite so kindly for the Chancellor, and probably I shall not argue quite so kindly when we come to other Clauses of the Bill. Basically I support his endeavour, but I feel that there should be at least one or two Members on this side saying, "Frankly, we do not like it." There must be some warning that, if this sort of thing is to be carried into much wider fields in another year, there will have to be quite a lot of criticism of a very severe character.

Sir Leslie Plummer (Deptford)

I support the powerful speech of the leader of the Conservative Party, the hon. Member for Kidderminster (Mr. Nabarro). [An HON. MEMBER: "Leader?"] I apologise. I am being a little premature in my thoughts. The hon. Member made clear the view of the left wing of the Tory Party towards advertising. The hon. Member for Shipley (Mr. Hirst) has misinterpreted the view of hon. Members on this side about advertising. We do not think that all advertising is bad. We merely think that certain forms of advertising are bad. We cannot understand why the Chancellor has decided to make a distinction between commercial television advertising and other forms of advertising.

What the Chancellor has said, which is opposed by the hon. Member for Kidderminster, is this: "If you are a detergent manufacturer, and if you make three or four competing brands of detergent solely to keep your competitors out of the market—one may not be any better than another; perhaps they do not wash whiter than white—and if you pour money in to protect your money, you will pay a 10 per cent. tax". The Chancellor says that this is necessary for revenue purposes and that this is either inflationary or not inflationary. He could not make up his mind about it.

If a gentleman, who is unknown outside his family circle and the minute board of directors which he controls, decides to take five columns in The Times and to adorn them with a picture of himself to advertise a company meeting which no one will attend to announce an increase in the dividend which was announced three weeks before in the Daily Telegraph, he is not taxed. He does that at the expense of the Treasury. The Treasury pays for an advertisement of a company meeting which is of a limited interest to everyone but the advertising agent who places the business, the chairman of the board himself and his immediate associates.

Why is it that we are asked to say that a useful function which is performed by television advertising, such as the announcement that a book has been published, that there has been a change in the price of petrol or any of the things which are valuable to the community, should be taxed at 10 per cent. whereas useless advertising should be supported out of pockets at the expense of the Treasury? Day after day we see in the newspapers what is called institutional advertising telling us that some concern makes a bumper for a motor car. Such an advertisement has a very limited appeal. It contains no general information for anyone. This sort of advertising is simply a way of getting rid of excess profits at the expense of the Treasury. There is, therefore, a good argument for saying that this sort of advertising should be treated more seriously by the Treasury than the way in which the Chancellor of the Exchequer proposes to deal with television advertising. There is no question that the advertising profession believes that this is the beginning of a general tax on advertising.

I wonder if the Economic Secretary will reveal the attitude of the Government towards advertising as a whole. If he institutes, as the hon. Member for Kidderminster suggests, an advertising tax, may I recommend that he puts a 200 per cent. tax on outdoor advertising so that we can have a countryside returned to its pristine beauty instead of being spoiled by the sort of nonsense that we have at present. This would be a useful sort of tax. It would be, not only a revenue tax, but a tax for beautifying our country. If the Chancellor of the Exchequer is looking for revenue of such a kind, he could well look in this direction.

Mr. H. Rhodes (Ashton-under-Lyne)

Some of the arguments which have been put up this afternoon reminded me of the two little boys who went home to their Sunday dinner. The smaller boy said to his mother, "Why do you give our Johnny more meat than me?" His mother replied, "Our Johnny is a lot bigger than thee". "Aye", said the little one, "and he always will be if he has more meat than me." That is how the argument has run today.

This subject is in a class of its own. It is big business. Some powerful voices have been raised to put some powerful arguments this afternoon, but I want to bring hon. Members back to what the Chancellor wanted to do when he introduced his Budget last month. He wanted to stimulate exports and productivity. The hon. Member for Kidderminster (Mr. Nabarro) has told us that advertising means nothing in terms of exports. This argument this afternoon means nothing in terms of creating a better attitude towards productivity in this country which means more exports. This is the sort of thing that you do not understand, and——

The Chairman

The hon. Member should bear in mind that he is addressing the Chair.

Mr. Rhodes

Everyone in this country who is patriotic is desperate to bring about better productivity. If people do not agree with that they are not patriotic. There were small elements in the Budget which might have helped, but the argument today has been whether we are unjust in putting a 10 per cent. tax on a section of an industry which has made millions. We have heard the cry about inflationary tendencies. What about the inflationary tendency of the remaining 90 per cent. This is an enormous inflationary factor, because the profits in the large advertising companies have already been discounted on the Stock Exchange, or else some bargains have been missed.

I ask hon. Members opposite not to overdo it. A sincere effort must be made by everybody at some time to buckle to in this country, but some members are doing their level best to divide society by this sort of argument. They may smile. They will understand it sometime.

Mr. MacArthur

Do I understand the argument to be in essence that it is noble to produce but ignoble to try to sell the product?

Mr. Rhodes

If it is a good product one can be proud to advertise and sell it. There should be no shame on anybody's part in doing so, but it should fit in with the community's needs either in terms of keeping costs down or in subscribing to the country's revenue. There must be during the next year or two, whether under the Tories or under Labour, a rejuvenation of our attitude to work. This sort of argument is liable to postpone that day.

Mr. Maddan

I am grateful for the opportunity to follow in the debate the hon. Member for Deptford (Sir L. Plummer) and the hon. Member for Ashton-under-Lyne (Mr. Rhodes), because it is always better to come a little late in the debate when most of the arguments have been deployed. But I found the argument of the hon. Member for Ashton-under-Lyne difficult to follow. He seemed to think that this was a tax on industry which was making millions of pounds, a tax on the television programme companies, but it is not, and that is just what we have been debating all afternoon. It is a tax on expenditure paid by all and sundry, including those who make the valuable products to which the hon. Member referred.

The hon. Member said that we must have a better attitude towards productivity, and particularly towards exports. I am grateful to him for that remark, because it is on that point that I want to concentrate in my comments upon the Clause. This is a tax of a limited form on sales promotion. It is a tax on one form of advertising. As my hon. Friend the Member for Shipley (Mr. Hirst) has said, there has been throughout the debate an undercurrent of thought that advertising in general is a rather poor sort of activity which does not contribute to the standard of living or the well-being of the country. But without a spirit of sales promotion we cannot sell anything abroad. People who return from abroad criticise the intensity and direction of our sales promotion, and if we cannot get people to be sales promotion minded at home, how are we to be sales promotion minded when it comes to exports?

Hon. Members opposite completely undermine the concept that sales promotion is an important and essential activity in our economy. My hon. Friend the Member for Perth and East Perthshire (Mr. MacArthur), who asked whether to sell was ignoble while to produce was noble, put his finger on the whole issue. If the hon. Member for Ashton-under-Lyne in his pæon of praise for hard work had included the salesmen who flog round the country day after day in very disagreeable conditions away from their families I would have had more sympathy with the point he made.

Mr. J. T. Price

Surely we are discussing television advertising. How much is added to the country's export output by looking at television screens three times a night and being told of the importance of putting pink stripes into somebody's toothpaste? How does that increase the country's industrial output overseas?

8.45 p.m.

Mr. Maddan

Of course, this is not a tax on looking at television screens. That tax of £5 is paid by everybody who has a television set. We are talking about one aspect of sales promotion, and unless sales promotion is nurtured and practised and regarded as respectable at home, we shall not get people to undertake it abroad, and television advertising is a pant of sales promotion and, in many cases, a major and important part.

My hon. Friend the Member for Kidderminster (Mr. Nabarro) and others, including, I think, the hon. Member for Deptford suggested that the duty should be the precursor of a wider tax on advertising. There may be something to be said for that, and I want to come to that, but before I do I want to correct the impression that advertising is burgeoning in this country out of all proportion to the growth of the national product. It is worth getting this straight. In 1938 about 2 per cent. of our gross national product was spent on advertising. Today it is the same percentage. Fortunately, our gross national product has risen, but our total advertising has only just kept pace with it. That proportion, 2 per cent., is not far different in the United States. I do not say that that is a recommendation. I just say that it seems to be the percentage of expenditure on advertising which sustains the economy and keeps it running, we hope, with flexibility and at a high level.

If this tax had been, as it was suggested in some of our earlier debates that it should be, a tax on the monopoly position of the programme companies, a lot of what I have to say would have been entirely inapplicable. It might have been much better had it been such a tax. If it could not have been a profits tax perhaps it could have been a special provision giving power to the Independent Television Authority to raise the rentals charged to programme companies for their monopoly position, which has turned out to be, I think we must agree, very much better than was anticipated ten years ago. I think it must be said that ten years ago it did not look anything like as bright as it now does.

Mr. John Diamond (Gloucester)

Would the hon. Gentleman agree, if he were to want to tax—as, I should have thought, most of us would—the monopoly position of these companies, and if their monopoly position is represented by the increased profits which the companies make, that the logical thing is to tax the results of that position, namely, the profits?

Mr. Maddan

Curiously enough, I do agree with the hon. Member exactly on that, but people have said that this would be a terrible burden, to have a special tax at profits level on one type of company and not on another, and so I suggested an alternative way to achieve exactly the same thing without creating this precedent—give power to the television authority to increase its rentals to the programme companies.

That is not what this Clause does. This is not a special tax on the high profits of the programme companies. It is a tax which skews the expenditure on advertising—or is intended to skew it—away from television advertising. Whether it succeeds in doing so or not is open to debate. I think that the initial reception given to this proposal would have been different had it been properly understood. I certainly misunderstood what my right hon. and learned Friend said, but my company's lawyer told me that I had not got a leg to stand on and that my right hon. and learned Friend's phraseology to him was crystal clear and meant exactly what is now embodied in the Bill. It shows one cannot get far in this business without a lawyer.

It is surprising—and this is interesting and makes me wonder whether my right hon. and learned Friend may be producing the thin end of the wedge which hon. Members opposite have asked for—that by having chosen television to start with he has chosen a medium which under the Television Act, 1954, cannot itself, through its publicity means, make known its views. It is precluded from taking sides in a political issue of this kind. The programme companies, as the hon. Member for Nelson and Colne (Mr. S. Silverman) will know, are precluded from taking sides on a political issue. Had my right hon. and learned Friend started with newspapers or posters, or whatever it might be, they could in their editorial columns or by putting up posters have explained and voiced their opposition to what was proposed, but he started with the programme companies, which are statutorily precluded from publicly running a campaign of this sort. An hon. Member says "No", and no doubt if he disagrees he can explain to us how they can do it under the Television Act, 1954.

I suspect that my right hon. and learned Friend may regard this as a pre-curser to a general tax on advertising. If he does so, I think that it is very important that he should make clear the basis on which he does so. If he thinks that there is too much being spent on advertising—that it is all very nice but not very respectable—it is like the attitude that so many people entertain towards salesmen, that they would rather he not them. If that is the case, he will be making a very serious blow at not only free enterprise as a whole but at the inculcation and stimulation of the sales promotion spirit.

If, on the other hand, he has in mind that advertising, being a powerful stimulus to the economy, should be controlled in a Keynesian sense to increase or decrease economic activity, he is on an entirely different wicket, and he should not have started a tax on one form of advertising only. If he wants another regulator——

Sir L. Plummer

I do not think that the Chancellor of the Exchequer is batting on either of those wickets. The Chancellor said: Because of my minority report as a member of the Beveridge Committee on Broadcasting, I feel that I have a certain personal responsibility for the introduction of commercial television. If I may mix up my metaphor, I am sure that those concerned with the payment of the duty will not mind too much being bitten by the hand which originally fed them."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 817.] He was clearly referring to the programme companies and not to the advertisers.

Mr. Maddan

My right hon. and learned Friend has already explained in this Chamber that he had in mind not only the programme companies but also the advertisers who have also benefited from the introduction of this new and powerful medium.

To continue my argument, if he wants the regulator to continue I suppose that as a means of increasing or reducing the amount of advertising it would have quite an effect, but, if so, it needs to be designed in quite a different way from the present tax which we have which is on one advertising medium only. Like my hon. Friend the Member for Shipley, I would prefer a general sales tax which could be moved up or down, taking it through to the end product, as an economic regulator. I would have thought that that would have been very much better.

If we are to have a tax on advertising, I think that my right hon. and learned Friend or the Economic Secretary should make clear to us and to those concerned with advertising, both as users of advertising and as providers of advertising media what is in their minds. But please may we not be given the answer, "It is because we want £7 million." There are many ways of raising £7 million. This particular way, as I think has been agreed by almost every speaker in the Committee, is full of illogicalities. We all advance different ones and do not always agree but I think that all of us, except the Treasury Front Bench, are convinced that this is full of illogicalities.

So I hope that when my hon. Friend replies he will make clear what is the philosophy behind this tax. If he does not do so, I think he will be misleading not only industry and the advertising business but political opinion too. We are entitled to have this made clear.

Mr. Diamond

A good deal of what the hon. Member for Hitchin (Mr. Maddan) has said meets with my approval. I think that a word or two should be said from this side of the Committee, however unpopular it may be, against those who decry advertising hook, line and sinker without thinking precisely what they are referring to. Many hon. Members, like me, know of advertising solely in terms of detergents and so on, and they wish for much less of it, and I share that view. I do not share the view that all advertising is bad and that we ought, therefore, to start off by taxing this kind of advertising and then other kinds of advertising.

It is a dreadful over-simplification to refer to advertising in those terms. Some advertising ought to be not taxed but prohibited; it should be completely prohibited by legislation affecting it physically. But other advertising which brings to the notice of the public facts and information of which they would otherwise be completely unaware ought not to be taxed at all, for such advertising is part of the method of conveying information from one to another without which we should all be lost. Consequently, to generalise in the way that is sometimes done gets us nowhere about advertising. Also, as everybody knows, it is no good just making an article and not making any attempt to sell it; we have to do both.

Unfortunately, as has already been borne out in the debate, it is very difficult to put a tax on advertising without paying for it out of one's own pocket as a consumer. Those who advocate a tax on advertising because they do not like advertising generally Should consider a little more carefully how they are to tax advertising and yet not at the same time tax the consumer to either the same extent or a greater extent. As everybody knows, where one has an item entering into costs, two things happen: first, one adds it on to the selling price; secondly, one adds one's proportion of profit on to the additional cost as well. The tendency, therefore, is to recover not merely the amount of the advertising tax but the amount of the advertising tax and the extra amount from the consumer. For these reasons, I think it is right that one should say, even incurring some unpopularity in doing so, that this matter should be looked at perhaps a little more objectively and a little less emotionally than some of us are inclined to look at it.

When an advertising tax was introduced by the Labour Government, I took whatever steps were open to me to join other hon. Members, including mostly members of the Conservative Opposition of the time, in getting the tax withdrawn because I thought it was a bad tax and that the method by which the then Government chose to tax advertising was thoroughly bad. I am delighted to say that Labour Chancellors have flexibility of mind and understanding of principles, and the tax was withdrawn before it was implemented. I suggest that that would be a wise precedent for the present Treasury Ministers to follow and that they should replace this unfortunate proposal by a tax which really sets out to do what the Chancellor wanted to do and what all those who listened to his speech understood full well that he wanted to do.

That is why the hon. Member for Hitchin and I, listening as laymen, understood what the Chancellor was talking about. That is why any of these who did not hear the Budget statement but read the cold print with an objective mind, paying no attention to the tones which were used, or the enthusiasm, or what was in the mind of the speaker, would say that what the Chancellor said was in the cold print and that he was entitled to bring in a tax of the kind that he has done.

9.0 p.m.

What the right hon. and learned Gentleman wanted to do, and what we all wanted him to do, was the obvious thing of reducing the excess profits which he himself, as a state Minister, by setting up a monopoly, had given to a limited group of people. Such a proposition would have met with approval on both sides of the Committee. It is well known and admitted on both sides that these profits are excessive. The biggest profit maker of the lot describes them as immoral—that is to say, he is willing for them to be reduced.

The only way in which they can be reduced is by the hand that fed them now taking away again. Instead, however, it talks about biting them but actually caresses them. Under the pretext of a tax on the profits of the programme companies we are getting the usual evil cycle. The tax is put on the advertising agent. He puts it on the advertiser, and from the advertiser it goes back to the consumer, and here we are, the "mugginses", paying for the tax. Unfortunately, we are in a position of being unable to vote against this Clause because inherent in it is something which could be turned to good, but the logic of the argument has not been followed up.

Neither the Chancellor nor the Economic Secretary paid any attention whatever to the serious argument advanced about the way in which this could have been followed up. We are dealing with a State-granted monopoly which produces monopoly profits. The way to withdraw part of this grant is to tax the monopoly profits, but all the Chancellor could do was to say a few words about that being discriminatory. But this proposal in Clause 1 is discriminatory against certain advertising. By it, the Chancellor is not taxing all advertising but only a tiny proportion of it.

The right hon. and learned Gentleman is bringing up the whole problem of whether it is right or wrong to tax advertising—the whole problem of how to deal with advertising fiscally—in order to collect a sum of money from a particular group, the owners of these monopolies. It would have been courtesy at least to the Committee if somebody on the Front Bench opposite could have explained why it is not possible to tax the profits.

The Government have given the right to make the profits to these few people. Why should the Government not put upon them a contribution, through taxation on profits, to the revenue of the country? This is a poor and muddled Clause. It is regrettable that we must allow it to pass because we cannot, under the rules of order, do what we should like to do and propose a different kind of taxation, but I hope that even at this late stage the Government will turn their mind to a tax on profits. A tax on profits tends not to be passed on to the consumer.

I hope that the Economic Secretary will at least give some attention to this when he comes to reply, and, for the first time, will turn his mind to the question of why he thinks it to be natural justice that a television programme contractor who is now, under this Clause, being required to pay some tax, should pass it on to the advertiser and, therefore, to the consumer.

What is the philosophy behind that? That is what the Clause contains and that is what we are complaining about. If that part had been left out of the Clause, it is conceivable that a large number of programme contractors would have said, "We are making very large profits; the Government have put this tax on us and it is calculated by reference to advertising revenue, but that is merely how it is calculated and the tax is on us; we are making very large profits and we will carry the can to that extent". At all events some would have said that. Instead of that, not at the open invitation but by the order of the Government, even where the contract has been entered into, they are to break the contract and to pass on the tax to the advertiser and in that way to the consumer.

Mr. Raymond Gower (Barry)

The hon. Member for Gloucester (Mr. Diamond) uses the expression "passing it on". It is feasible that if the tax were raised there would be a point at which the consumer would say, "It is not worth while; I will divert my advertising to some other medium". The consumer in this case is the advertiser and as such he would say, "This medium is becoming too expensive for the results which it produces and I will therefore divert my advertising back to newspapers, or some other form of medium".

Mr. Diamond

That may be so. I was using the word "consumer" in its normal sense. When an article is advertised, the cost of the advertisement forms part of the cost of the article and has to be recovered in the sale price and the person who pays the sale price in the shop is the consumer, the "muggins", as I have called him, who will have to pay this tax because of the obstinacy of the Government.

Mr. Graham Page

The hon. Member for Gloucester (Mr. Diamond) has repeated almost word for word one or two of the arguments which I used earlier, and so I need not go over them again. We have had a number of complaints—they might be called sneers and smears—about those who have spoken from this side of the Committee and who have found themselves financially interested in this subject. Professional men on both sides of the Committee often become involved in commercial matters as part of their professional business, and it would be wrong to preclude them from speaking to the Committee when they have declared their interest. The only concession made by the Treasury Bench this afternoon was on a technical point which I made concerning advertising agents. That shows that those of us who are concerned in the subject can contribute something towards these discussions.

I now propose to go on with some frank special pleading on behalf of one of the parties concerned in the advertising business, the advertising agent. There are three parties in this matter—the television company, the advertising agent, and the advertiser. I want to explain how the Clause will affect the middleman, the advertising agent.

The advertising agent receives 15 per cent. commission out of the money paid by the advertiser for advertising. The advertiser arranges his programme or his schedule a year ahead and it is not likely that he will alter that for this year. The result will be that the advertising agent will get his commission on about 10 per cent. less so that of his 15 per cent. he will lose 1½ per cent. of the whole expended. The advertising agent has no one to whom to pass that on. Unlike the television company or the advertiser, who can pass it on to the consumer, there is no one from whom he can recoup his 1½ per cent.

I ask hon. Members to put out of their minds the Colman Prentis and Varleys of the advertising agency world and to appreciate that out of that 15 per cent. which the advertising agent makes gross—and there are many small agencies doing essential work in the distribution of goods—on average, after paying his overheads, he makes 1¼ to 1½ per cent. net profit.

Some of the small agencies have as much as 50 per cent. to 75 per cent. of their capital in television advertising. If hon. Members care to work that out, the effect of this tax would be to deprive these small agencies entirely of their net profit for a time. Of course they will adjust their business accordingly, but that is how it will affect the middleman.

This is special pleading on behalf of a profession or industry which is affected by the Clause. It is one of three parties who are affected, and it is as it were the middleman who joins together the advertiser and the television company. He is the man who is important in the distributive effort.

Sir L. Plummer

Will the hon. Gentleman explain what he means by the 1¼ per cent. profit which the advertising agent makes? Is it 1¼ per cent. on his capital, or 1¼ per cent. on his client's billing.

Mr. Page

It is 1¼ per cent. to 1½ per cent. of his client's billing.

Sir L. Plummer

Of his client's billing?

Mr. Page

That is his net profit. I want to clear this issue because so much has been said about the millions of pounds which are made by way of profits. That does not apply to the middleman. He is the man who will be hit by this tax.

Sir L. Plummer

But 1¼ per cent. of his client's billing may be 10 per cent. of the agent's capital. It does not mean that because an advertising agency gets only 1¼ per cent. or 1½ per cent. of the amount of money spent for a client that he is therefore a poor man. It may be a considerable percentage of dividend on the capital he employs on his business.

Mr. Page

That is true. If he loses 10 per cent. which is 1½ per cent. of 15 per cent., he may be losing all his net profit for a period until he rearranges his business. I do not say that advertising agencies cannot rearrange their business, but for six or twelve months this may be a great blow to some of the medium-sized advertising agencies.

This is special pleading on behalf of one profession or industry which is affected by Clause 1. I say quite honestly and deliberately that I am concerned in that industry in a small way, and I think that it is right that special pleading of this sort should be put forward when an industry is affected.

Mr. Cyril Bence (Dunbartonshire, East)

I am sure that when our discussions today are reported in the Press there will be some amazing reactions in the country. We have heard several hon. Members, particularly the hon. Member for Kidderminster (Mr. Nabarro), suggesting that the Government should raise more revenue by spreading this form of tax among all forms of advertisements. It is a long time since I heard any hon. Gentleman ask for an increase in taxation, but that has been the theme of the speeches made by hon. Gentlemen opposite on this Clause.

Hon. Gentlemen have suggested that the Chancellor must increase taxation, and that as this form of tax is in part reasonable it should be spread to all forms of advertisement.

Mr. John Hall

Can the hon. Gentleman say who, apart from my hon. Friend the Member for Kidderminster (Mr. Nabarro), made that suggestion?

Mr. R. J. Maxwell-Hyslop (Tiverton)

My recollection of the speech of my hon. Friend the Member for Kidderminster (Mr. Nabarro) was that he wanted to use the extra revenue raised to reduce the overall level of Purchase Tax and not to raise extra revenue as such.

Mr. Bence

The hon. Member for Perth and East Perthshire (Mr. MacArthur) argued that this tax should be spread over general taxation and should not be just a special tax on the television companies. I believe that the hon. Member for Hitchin (Mr. Maddan) also said that this should not be a special tax on television advertisers, but agreed with my hon. Friend the Member for Gloucester (Mr. Diamond) that it would be better to tax the profits of these companies.

Mr. Maddan

That is not precisely what I said. I should like to get the record clear. I said that if the Chancellor thought that dealing with advertising would provide him with an economic regulator his proposal should affect all forms of advertising.

9.15 p.m.

Mr. Bence

I thank the hon. Member for his intervention. Apparently I did not get his argument quite correctly, but I think I have the general idea of what he means. There it is. We have had expressions of opinion favouring the spreading of this tax among all forms of advertising.

I cannot accept that argument. I agree with my hon. Friend the Member for Gloucester that some forms of advertising are a very valuable part of our industrial processes. It is no use producing, in a factory in Scotland or the Midlands, a very fine product—a machine or whatever else it may be—if the world is not told that it is being produced. It is essential that it should be advertised. As an industrial engineer my complaint is that, very often, although factory workers put in a great deal of effort to create a good product our market research and sales promotion is abominable, and far below that of our competitors in other countries. Sales promotion is an important thing.

But do not let anyone try to kid me about some of the advertisements that I have seen on television and in the newspapers. They are not likely to increase our exports. To connect some of these television advertisements with what I call sales promotion is an insult to the sales department of any of our leading companies and to the profession of sales promotion. It would be impossible for anybody to convince me that the commercial television advertisements that I see for soap powders, chocolates and Coco-Cola represent anything of value to this country in the promotion of the sales of our products abroad.

British salesmen often go back to their firms—I suppose this happens in the case of television advertisements, too—and say, "We ought to manufacture this, that or the other". The job of sales promotion advertising is to convince those who read or see the advertisements that the manufactured article advertised is the best thing they can buy. That is what sales promotion is. But to call television advertising sales promotion is to talk a lot of nonsense. It is merely the parrot repetition of quick, cheap phrases, alluding to soap powders or cereals that go pop in the saucer. I have never heard such a lot of nonsense. It has nothing to do with Britain's survival in the export market. These are the stupid commercial trimmings of a society which I sometimes feel is becoming decadent. This nonsensical advertising is merely patronising the public. But large and small manufacturers who advertise in trade and scientific journals, and seek to sell their products by illustrations and photographs and a little detailed material——

Mr. Loughlin

My hon. Friend seems to be conveying the impression that the advertisements which appear infantile are not effective. In fact, they are most effective. Some of the most infantile are the most effective in selling the products with which they are concerned.

Mr. John Hall

Would the hon. Member for Dunbartonshire, East (Mr. Bence) agree that this is an example of the degrading effect of television on the intelligence of the population?

Mr. Bence

I have heard from some people who look at T.V. that their children ask for the T.V. to be switched on in order to see the advertisements with the funny pictures. The children laugh at them and enjoy these advertisements. Whether that increases the sales of the products among the children I do not know, but probably it is infantile in that sense. I object to that kind of thing being linked with serious advertising because I do not think that it is anything of the sort.

We have been told by the Chancellor of the Exchequer that indirect taxation, in the main, can be passed on to the consumer. Here is a tax which the Chancellor instructs or informs the company to pass on to the customer. We have such a structure of indirect taxation in this country that one can hardly go into any shop to buy anyhting without finding that the person selling the product is paying a portion of the indirect taxation. A hundred years ago we were referred to on the Continent as a nation of shopkeepers. At the rate at which we are now going we shall be alluded to as a nation of tax collectors. Everywhere one goes there is indirect taxation. The hon. Member for Kidderminster (Mr. Nabarro) desires this "purchase tax", as he calls it, to be spread over all forms of advertising. The time will come when it will spread into other spheres because the Government are determined to raise more revenue. We shall then become a nation of tax collectors, and we shall be collecting taxes from one another.

I hope that this is not the beginning of a spread of further forms of taxation on profits and services in which the person who has the tax imposed can pass it on to the consumer at the next stage. I should prefer a policy of a straight clear-cut Income Tax and a Profits Tax. I hate this indirect taxation——

The Chairman

Order. I hope that the hon. Member will not pursue that argument too far, as he is getting away from the Motion before the Committee.

Mr. Bence

I was following the point that the Chancellor made about indirect taxation being passed on to the consumer. This is a form of indirect tax and the Chancellor instructs the company to pass it on to the advertiser. During the debate the suggestion has been made, particularly by the hon. Member for Kidderminster, that this tax should be spread over all forms of advertising and I presume that were it to be spread in such a way it would again be passed on to the consumer. Here we are pursuing a course of taxation when we shall be passing the tax from the top down through all ranks of the community. Then, indeed, we shall be a nation of tax collectors. I am sorry that hon. Members on this side of the Committee are not voting against the Clause. In my opinion, it is establishing a very dangerous precedent.

I have little sympathy with what I have seen of advertising on the television screen. How in the name of fortune it can—whether taxed or not—promote productivity and the efforts of this country to export more, is beyond my comprehension. I hope that there will never be a move by any Government to tax genuine international sales promotion and advertising. I consider that to be essential in order to secure good designs, large and efficient production and an entry into the markets of the world, and only by those means can this country survive.

Mr. Barber

There has been a considerable amount of criticism of some of my hon. Friends for speaking in this debate, despite the fact that they had declared a financial interest. I hope that, at any rate, it will not be necessary for me to declare my interest on this occasion, but that it may be taken for granted. We have had a fairly full discussion on this short Clause—more than five hours—and when we discussed, at the outset, the first and third Amendments together, my right hon. and learned Friend the Chancellor was permitted by the Chair to go to considerable lengths in explaining the principles and purposes which lay behind the introduction of this tax. Consequently, there is little more I wish to add to what my right hon. and learned Friend said and to what I said in relation to some of the earlier Amendments.

It is fair to say that the principle in this Clause is generally acceptable to the Committee. I know that there are certain hon. Members on both sides of the Committee who do not quite take that view. There are other hon. Members who take the middle course. My hon. Friend the Member for Shipley (Mr. Hirst) said that he was a little dubious about what the Chancellor was doing, but that he did not feel that he would make it an issue on this occasion, although he was issuing something in the nature of a warning.

This tax will apply only within the limited field of television advertising. I regret that I did not hear the speech of the right hon. Member for Battersea, North (Mr. Jay) who, I gather, spoke of the possibility of a general tax on advertising. This was also a point raised by my hon. Friend the Member for Kidderminster (Mr. Nabarro). It would be out of order for me to go into the merits or demerits of a general tax on advertising, and I remind hon. Members that we are considering a tax on one particular form of advertising.

In answer to my hon. Friend the Member for Hitchin (Mr. Maddan), I would say that this is, of course, not being used as an economic regulator in the sense that it is a tax which the Chancellor intends to increase or decrease from time to time according to the state of the economy. My hon. Friend the Member for Shipley referred to there being a certain social purpose in advertising, as he put it, and he criticised some hon. Gentlemen opposite for what, I think he called, their rather sneering attitude towards advertising in general.

It is apparent from what has been said by some hon. Gentlemen opposite that that is not the universal view of hon. Members on the other side of the Committee. Certainly, whatever one's view may be about advertising in general, or of particular forms of advertising, this much can be said: there is no social objection to the imposition of this tax by the Chancellor. His purpose is solely to raise £7 million of revenue in this year and £8½ million in a full year. Whatever the views the Committee may take about the particular way in which the tax is levied, it is not unreasonable, in view of what has been happening to this industry over the past few years, to impose a tax which, in relation to the amount expended on television advertising, is a fairly modest tax.

Mr. Diamond

The Economic Secretary has referred to what has been happening to this industry in the last few years. May I ask him which industry has profited, and which industry is now being called upon to pay the tax?

Mr. Barber

I thought that my right hon. and learned Friend the Chancellor dealt with that when he said that he thought that both the programme contractors and the advertisers had benefited, and I do not think that anyone would deny that. I intend later to deal with the point about this tax being passed on and perhaps I may, in due course, deal with that particular subject.

9.30 p.m.

My hon. Friend the Member for Hitchin spoke for some time about the merits of advertising. I would say that there is good advertising and bad advertising, but for myself—and it can only be a personal view—I certainly accept the fact that advertising is an essential part of sales promotion in a free society. My hon. Friend the Member for Hitchin is very knowledgeable in these matters. As I said earlier—if I may say this for the benefit of those hon. Members who were not here earlier—although he has an interest in this matter, it is a very remote one. He asked me what is the purpose of the imposition of this tax.

I should like to refer to the OFFICIAL REPORT of 17th April, to a passage in my right hon. and learned Friend's Budget statement which came immediately before his reference to the imposition of the television advertisements duty. He said: The concessions I have announced will cost about £13½ million this year. They will reduce the surplus above the line to £424½ million. Having regard to the economic circumstances of which I have already spoken, I have decided that this surplus is not enough. I consider that I should provide for an above-the-line surplus of about £500 million, involving an overall deficit of under £100 million. I have, therefore, decided to raise an additional £80 million of tax."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 817.] He then referred to the possible use of one or both of the new economic regulators and went on to make his first proposal for raising additional taxation, which was this tax which we are considering tonight.

The hon. Member for Gloucester (Mr. Diamond) quite rightly said that an indirect tax of this kind was to a greater or lesser extent bound to be passed on by the programme contractor. This is certainly true, and this is inherent in all indirect taxation. Bearing in mind the purpose for which this tax was imposed, which my right hon. and learned Friend made clear in his Budget statement, I should have thought that this was something to which the hon. Gentleman would not take exception. Obviously, when my right hon. and learned Friend was considering this matter he appreciated that to some extent it would be passed on. The extent to which it would be passed on depends, of course, on the normal forces of supply and demand.

Mr. Mayhew

The hon. Gentleman will agree that it is clear that after September at least no part of this tax will be paid by the programme companies. It will be all passed on.

Mr. Barber

It is certainly not clear to me that that is so—most certainly not. As I explained earlier—and I do not want to go over the old ground again—ignoring for the moment the position so far as existing contracts are concerned, there is nothing that any of us can do with regard to any form of indirect taxation to prevent it being passed on if the state of the market will stand it. But it may be that certain programme contractors in certain areas at certain times of the day may not be able to pass it on, or, if they do pass it on, they will have to reduce their tariff rates. But, at any rate, whether this is so or not, this is not an aspect over which we, in this Committee, have any control at all.

The hon. Member for Gloucester, I am happy to say, although he described it as a poor and muddled Clause—I thought somewhat reluctantly—added that he was going to give us his support in the Lobby this evening if that should be necessary. If I may correct him on one point, he said that the Government had given the order—it was not merely an invitation—to pass on the tax. This was the same point which was made by the hon. Member for Dunbartonshire, East (Mr. Bence). He said that we were forcing the television contractors to pass it on. I shall not weary the Committee with the details of the Clause, but if those hon. Members will look at the Bill they will see that the Clause is permissive and in that respect applies only to existing contracts. As regards future contracts, as I said, the aspect of passing on will have remarkably little effect.

Mr. Loughlin

Will the hon. Gentleman say categorically on behalf of the Government that it is the desire of the Government that the tax shall not be passed on to the consumer? Such a statement would leave no doubt about the Government's intention.

Mr. Barber

No, Sir. The hon. Member cannot have been in the Committee when my right hon. and learned Friend dealt with it.

Mr. Loughlin

I was here most of the time, and I was here when the Chancellor dealt with it.

Mr. Barber

Then the hon. Member must have missed the point when my right hon. and learned Friend dealt with it.

Mr. Bence

The hon. Gentleman says that I have misread the Clause. The words of the subsection are: shall be recoverable by him from any person liable to him for the payment so made or to be made". The expression is "shall be recoverable". What does that mean?

Mr. Barber

It means that it is recoverable by the programme contractor. He may recover it if he wishes, but I assure the hon. Member that it is not obligatory.

Mr. G. R. Mitchison (Kettering)

It creates a debt which would not otherwise exist. If the programme contractor is a company, it will be bound to recover that debt, will it not, if it is to fulfil its duty to its shareholders or whoever it may be?

Mr. Barber

The point is that the words are "shall be recoverable" and not "shall be recovered". In other words, there is no obligation on the programme contractor to recover the amount of duty from the advertiser.

Mr. John Hall

I think that the confusion arises from the words "shall be recoverable". Would it not be clearer if the word "may" were used?

Mr. Barber

I am sure my right hon. and learned Friend will consider that. At the moment, I am bound to say that I do not think it necessary to change the wording because it will, I think, be clear to anyone wishing to make a decision. However, I will certainly consider it.

Mr. Diamond

The hon. Gentleman has suggested that I misread the Clause. I am not a lawyer and I do not understand these things, but, with the greatest respect, I think that the common sense of the Clause is obvious. The subsection reads shall be charged on and paid by him, but…shall be recoverable by him from somebody else. It is paid by him but it "shall be recoverable" from somebody else. If that does not put upon companies, trustees and all others in a position of trust with regard to other people's money a responsibility for collection, I do not know what does.

Mr. Barber

It really is not so. I think that the Committee ought to be clear about it. If a programme contractor finds that, in order to maintain the goodwill of the advertiser, it does not wish to pass on the duty, it need not do so. Without going into details, I should tell the Committee that I have here a list of the various programme contractors, and some of them are taking action wholly or partially to that effect, presumably because they consider that it is in their best interests so to do; and that is in accordance with the provisions of the Clause.

My hon. Friend the Member for Crosby (Mr. Graham Page) referred to the position of advertising agents, and he made it clear that he had a particular knowledge of their circumstances. It is true that most orders for the insertion of advertisements in television programmes are placed through advertising agents, to whom, as I understand it, the programme contractors allow a commission of 15 per cent. of their normal tariffs. Advertisers who place orders direct with the programme contractors do not receive any equivalent price reduction.

However, I think my hon. Friend will agree that one could not really differentiate between the case where there is an intermediary, an advertising agent, and the case where the contract is made direct with the advertiser. In that event, more duty would be payable when an order was placed direct with the programme contractor than if the same order were placed through an advertising agent. This matter was brought to the attention of my right hon. and learned Friend in an Amendment which appeared on the Notice Paper. I should be out of order if I went into that in any detail. Suffice it to say that we considered the position with care and came to the conclusion, for reasons which I could develop and which I could give my hon. Friend, that the Clause was correctly drawn in its present form.

We have had a very long debate on this Clause, which is an important matter. We have subjected it to considerable and detailed scrutiny. On the first Amendment, my right hon. and learned Friend went into the various policy aspects of the Clause at considerable length with the permission of the Chair. I have tried to deal with some of the points which have been raised. I hope that, as we have a great deal to do, and as, I am sure, it is the Committee's wish that we should make progress during the first two days, perhaps we can now get on to the Schedule and Clause 2.

Mr. Diamond

Will the Economic Secretary be courteous enough to deal with the point which several hon. Members and I have raised? As the hon. Gentleman said, we cannot prevent part or the whole of an indirect tax being passed on. Would he say why he has not sought the obvious alternative of a direct tax on the profits of the programme contractors?

Mr. Barber

I could not on an occasion like this go into the merits of the alternative of a direct tax on advertisers, or indeed on one particular form of advertising. I have tried to be fair, objective and frank with the Committee. I make no party point whatsoever, but the hon. Gentleman will realise that a Labour Government, in exactly the same way as a Conservative Government, for sound economic reasons and in order to maintain a balance in the economy, increased indirect taxation knowing full well that it would be passed on to a greater or lesser extent through the various media to the consumer. There is nothing new in the principle which my right hon. and learned Friend is adopting. All that the Committee has to decide on the Question "That the Clause stand part of the Bill" is whether television advertising is a suitable source from which to obtain the increased revenue which my right hon. and learned Friend desires.

Mr. Edwin Wainwright (Dearne Valley)

Could the hon. Gentleman clear up one point about advertising agents? The hon. Member for Crosby (Mr. Graham Page) said that the agent would not be able to recover the 10 per cent. tax. If the advertising agent could recover the 10 per cent. tax, and assuming that the cost of the advertising was £100 and that the 10 per cent. tax made it £110 and he received 15 per cent. of £110, he would get a commission, not of £15, but of £16 10s. If that is so, he would get a benefit out of the tax of 10 per cent.

Mr. Barber

I said earlier when this point was raised on a specific Amendment that the question of passing on the duty in the way which was mentioned was a matter into which I should like to look.

Mr. Mayhew

I do not know whether the Economic Secretary's reply has satisfied the many critics on his own benches, but I am sure that it has given very little comfort to my hon. Friends. He said that he hoped that we might now get on to the Schedule and Clause 2, but, after listening to this debate, I would say that the Government will be very lucky to get Clause 1. I cannot recall one speech made in favour of the Chancellor's policy as set out in the Clause. I do not know whether the Government underline the policies set forth by the hon. Member for Kidderminster (Mr. Nabarro). I shall be surprised if they object any less to his speech than to some others in the debate. The Government have had no effective supporter in the long debate and it is therefore surely anomalous that we should let the Clause through, as I gather is the intention, without a Division.

Mr. Loughlin

Why?

9.45 p.m.

Mr. Mayhew

I will try to explain the position. Serious objections have been raised to the Clause and to the Government's policy which lies behind it. The Chancellor told us, "I never intended that this should be borne by the programme companies". We must ask ourselves what the Chancellor intended. He must have known that the vast proportion of this tax would be passed on to the advertiser, as will be the case. He must have known that when drafting the Bill. Was it not his intention to tax the programme companies at all—because that is the effect of his policy?

Whatever he intended, does he acknowledge that the tax will have no effect in practice on the programme companies, and that this great commercial monopoly which everyone agrees is making too much profit will not be affected by the provisions of the Bill? He talks about the state of the market, but that is not unpredictable. The simplest assessment of the market position must have told him that the tax would not be borne by the programme companies but by the advertisers. If that is so, we must assume that it was not his intention at any stage effectively to interfere with the huge monopoly profits being made by the programme companies.

We had some frank special pleading, as the hon. Member for Crosby (Mr. Graham Page) described his intercention. He said that agencies make only 1½ per cent. net profit out of the 15 per cent. commission which they receive. The 15 per cent. commission excludes the cost of making a commercial film. Their 1½ per cent. net profit, as my hon. Friend the Member for Deptford (Sir L. Plummer) pointed out, could mean huge percentage dividends and earnings on their capital. After all, 1 per cent. of £82 million is a very large sum, and that could be a very high rate of profit.

We must ask whether there are not economies to be made among the advertising agencies. May I tell the hon. Member for Crosby a story which was told me by a leading member of an advertising agency? He said that when an advertising magazine was broadcast on the Southern television transmitter on the Isle of Wight, if during this magazine an article were held up and few well-chosen words spoken about it on behalf of a client, it was common routine for the advertising agency to dispatch an executive by plane from London to the Isle of Wight to supervise the holding up of the article and the one or two sentences said about it.

If my understanding of the salary scales in the agencies is correct, it would be a well-paid executive, and the expenses of the flight would be fairly considerable, too. Before the 1½ per cent. net profit is reached we have the cost of this expensive executive flying to the Isle of Wight and back to see one item held up for a few seconds and commented upon. This is the kind of expense which the hon. Member for Crosby claims is making it very hard for the poor advertising agencies to make both ends meet. I do not think that money is as scarce among advertising agencies as he made out.

Mr. Graham Page

The hon. Member used perhaps an exaggerated example. I was talking of an average figure for all agencies, carefully worked out, and not solely for agencies such as the hon. Member noted, the big glamorous agencies who send their executives by aeroplane. There are many small agencies which do essential work.

Mr. Mayhew

I would take a great deal of persuading that agencies are in as dire financial straits as the hon. Member made out in his speech. I ask him to recall that 15 per cent. of £80.7 million, which was the gross advertising revenue to 31st March, 1961, comes out at £12 million. This is simply for the service of advising the advertiser about the placing and timing of his commercial.

Mr. Page

No, not only for the placing but for the servicing, the designing, the copy-writing and so on.

Mr. Mayhew

I quite agree. I only ask the hon. Member to remember that the whole cost of B.B.C. television is £23 million and that this £12 million is simply for servicing the commercials of the advertisers. It seems to me a fantastically wasteful thing.

Sir L. Plummer

We ought to get this matter clear. The modern advertising agency handling £80 million of television advertising and drawing from the programme companies 15 per cent. commission on that, returns to the clients a net figure, that is £80 million less 15 per cent. I cannot work out what that is. [An HON. MEMBER: "Sixty-eight million pounds."] On top of that there is the cost of the aeroplane, the cost of the artists, the script writers, the drawings, the films and so on and there is 15 per cent. based on all of that. [HON. MEMBERS: "No."] Yes, that is the way modern advertising works. The agents argue that they cannot live on 15 per cent. of the gross. It must be 15 per cent. not on the amount spent on the media but the amount involved in the whole production for the advertiser. Therefore the figure is considerably more than 15 per cent.

Mr. Mayhew

I am grateful to my hon. Friend, and possibly he has given the hon. Member for Crosby (Mr. Graham Page) some ideas for the future conduct of his business.

I said earlier in the debate, and it is my considered view, that more money and talent is spent by I.T.V. on the production of commercials than on the production of programmes. I am sure that that can be established if access is given to all the costings involved. The heartrending plea for aid from the hon. Member for Crosby on behalf of the advertising agencies has fallen on deaf ears on this side of the Committee.

Mr. John Hall

Could I ask through the hon. Member whether the hon. Member for Deptford (Sir L. Plummer) would let us know the name of the firm that he has in mind so that we can avoid going to it in future?

Mr. Mayhew

That certainly would be a little invidious, but my information came from a leading member of a highly respected firm.

I was grateful to my hon. Friend the Member for Gloucester (Mr. Diamond) who pointed out, as have other hon. Members on this side of the Committee, that our complaint is not against advertising of all kinds, much of which is necessary. Indeed, we demand more and better advertising for British exports overseas but there must be hon. Members opposite who agree with us that there is a mass of useless, wasteful, misleading advertising in this country.

I remember putting out an idea to the B.B.C. for three minutes on "Panorama". All that would happen would be that Mr. Dimbleby, perhaps, would sit in the studio surrounded by 40 newly-washed pillow cases and he would read out the names of the chairmen of the detergent companies and their advertising agencies who had declined his invitation to come to the studio and pick out the pillow cases which had been washed by their detergents.

What would be wrong with this? Merely to state this shows what millions of pounds are wasted in totally useless effort to remove a customer from one identical branded product to another virtually identical branded product—made by the same firm very often. This has become an abuse of the £455 million which are spent on advertising. We know that a very good proportion is useful, necessary, productive, informative, but a very large proportion, perhaps half, as some people have estimated, is utterly wasteful and socially useless if not sometimes socially harmful, and I strongly agree, and I know that many of my hon. Friends agree, with some of the remarks made by the hon. Member for Kidderminster when he says that this whole question of the social and economic value of advertising and its possibilities as a source of tax revenue needs a great deal more investigation.

The debate has gone badly for the Government. It has gone badly for the advertising industry and it has gone badly for what one hon. Member described as the strong advertising lobby in the Committee.

Mr. Loughlin

It will go badly for the housewives who have to buy the products when we go into the Division Lobbies.

Mr. Mayhew

As my hon. Friend says—and many of my hon. Friends have made the point—the hand which the Chancellor is going to bite is, in the last resort, the hand of the housewife. There is no doubt about that.

Mr. Loughlin

Hon. Members opposite criticise, but they will not vote against the Government.

Mr. Mayhew

The reason why the debate has gone particularly badly for for the advertising lobby and the advertising industry is that we have not during this time heard challenged the proposition that advertising adds to the cost of living. That used to be a matter of controversy here. The Chancellor of the Exchequer himself, during his Budget broadcast, came round to the view, so often put forward from these benches, that advertising adds to the cost of the advertised product. Now it has been accepted on both sides of the Committee. [HON. MEMBERS: "No."] I can quote in my support people in the advertising profession itself, if I needed to use quotations. I assure hon. Members opposite that I could do so.

The fact is, as we all know, that this tax may add to the cost of the advertising product. We have heard that several times from Members below the Gangway.

Mr. Hirst

No.

Mr. Mayhew

Hon. Members opposite can argue it among themselves. This tax on the advertiser will be passed on to the consumer. Whether hon. Members opposite will argue, like King Canute, against the tide of growing knowledge and public enlightenment which is starting to illuminate the problem, these facts are becoming clear to public opinion and clear to everybody in the Committee.

Mr. MacArthur

I am sure the hon. Member will not want to present in a wrong light what several hon. Members on this side have said. The point we were making was, on the question of passing on increased costs, that if overnight £100 television time suddenly goes up to £110, because of the imposition of a tax, that £10 excess is necessarily an extra cost carried by the business and possibly ultimately by the consumer.

10.0 p.m.

Mr. Mayhew

I am extremely grateful. I was aware that I was making my case with great lack of clarity, and the hon. Member has stepped in and put it very much better than I could myself. Of course, what the hon. Member sees today hon. Members above the Gangway opposite will see tomorrow. These are facts.

It was only a short while ago, I recall, that one of the television companies was advertising itself on the screen as "Your free television service". I doubt whether it would have the temerity to do that today, because public opinion is beginning to understand that the public itself pays these heavy costs involved in advertising. We pay when we buy a product that has been advertised on television that little extra—a kind of instalment on an invisible television licence. If we add the instalments together, we, of course, pay a much heavier television licence for I.T.V. than for B.B.C. television. That is an important point.

There is another point. We pay for I.T.V. whether we have a television set or not. If one is an old-age pensioner unable to afford a television set, it does not help when one goes to buy a product advertised on television—one pays that little extra. Already these facts are, I believe, becoming clear to public opinion and account for a great deal of the defensive attitude which the advertising profession is at present undoubtedly adopting.

There are a number of other points relative to this Clause which I could go into. In conclusion, I shall mention one. I hope that the Chancellor, now that he is making money out of television commercials, will not aid and abet the work of the Postmaster-General and the Independent Television Authority by allowing the television companies to broadcast a lot more advertisements than they are entitled to under the Television Act. Let him look into this.

I recall only two years ago receiving the permission of the House to introduce a Bill to lay down a maximum of six minutes of commercials in an hour, thereby carrying out the intention of the Television Act and of Parliament. I was told at the time that this was impossible. The television programme companies broadcast 8, 9 or 10 minutes in the hour pretty well whenever they liked. They have, since the inception of commercial television, broadcast more than 100 hours of excess commercials surplus to the six minutes an hour allowable under the Television Act. Now the abuse has been partly stopped. A year ago, a maximum was laid down of 8 minutes in the hour only, a little later it was reduced to 7½ minutes in the hour, and a few months ago it was made 7 minutes in the hour. Why? I do not flatter myself that it was because of my Bill and it was not because of the pressure of Parliament. The reason is that the Pilkington Committee is sitting. That is the cause of the better behaviour of I.T.A. and the programme companies. The programme companies want a second helping. We have been getting serious programmes at peak hours, the Pilkington programmes, as they are called in the trade. Will the Chancellor undertake, now that he has a vested interest in these commercials, not to join the Postmaster-General and the I.T.A. in conniving at this abuse of the Television Act by having too many commercials in an hour in peak periods? We should like that assurance before we pass this Clause.

It is time to make clear the position of the Opposition to this Clause. The Opposition takes the view that it should not oppose the Clause. It deplores the way in which it was introduced. It deplores the fact that the Chancellor undoubtedly gave the impression not only in the House, not only to the Opposition but to a number of leading newspapers that he intended to tax the gross monopoly profits of the programme companies. In fact, as a result of the Clause the programme companies will pay nothing. We deplore that, and we tried to amend the Clause in such a way as to improve the position.

We also feel that the 10 per cent., though a thin end of the wedge, is far too limited in its attack on this considerable problem, and we believe that here, on the advertising side and on the side of the programme companies, is a field of possible revenue for future Chancellors. That is why I hope my hon. Friends, with all these reservations, will nevertheless not oppose the Clause.

Mr. Loughlin

I regret that my hon. Friend the Member for Woolwich, East (Mr. Mayhew) took the line that he did Frankly, many members of the Opposition are really opposed to the Clause. It is true that the Chancellor kidded us all. I think that his attempt to create a wrong impression, if not to mislead, was done either deliberately or because he did not understand the tax at the time. The tax will hit the housewife. It is all right saying that the cost will be passed on to the consumer of television time, but it will in turn be passed on to the housewife.

It is wrong of the Government, in looking at the taxation policy which they are pursuing in the Budget, to introduce a tax of this kind which will hit alike all sections of the community—the old-age pensioner and the housewife running a household on a low income rate and also those who can afford to pay extra money for the commodities involved—while at the same time they are pursuing the rest of their tax policy in other directions.

A lot of television advertising is completely infantile, but it is the most effective medium, and it has produced golden eggs for those who control it; and those are the people who ought to be taxed. The Chancellor conveyed the impression that that was his intention. The Opposition ought to make it perfectly clear that we oppose this form of indirect taxation, and we ought to be prepared to oppose it even in the Division Lobby.

Question put and agreed to.

Clause ordered to stand part of the Bill.