IMPORT DUTIES (FOODSTUFFS) (Hansard, 4 July 1963)

§ Mr. Douglas Jay (Battersea, North)
The Order concerns duties on a number of important foodstuffs—chicory, coffee, cocoa, glucose, sugar, tea and other commodities—and since this is a question of not imposing for the first time the maintenance of certain taxes on foodstuffs, we should have an explanation from the Government of what it is they are asking us to do.
I realise that this is the transforming of duties from one guise into another and not imposing them anew, but it is continuing them. As I understand it, under Section 3 of last year's Finance Bill there was a reduction made in these 714 duties and it was provided that they should be transformed from Revenue to protective duties. I do not understand why, if this was primarily enacted by last year's Finance Bill, it should be reaching final legislative fruition now.
I do not think that my hon. Friends and I have any objection to transforming these from the form of Revenue duties to protective ones. We have no complaint about the name, unless it has some further significance that has escaped us. However, one naturally asks why, apart from sugar, for tea, coffee, cocoa and chicory, we impose protective duties. The difference between a protective and a Revenue duty usually is that a protective duty falls on the imported but not on the home-produced commodity. Presumably there is no home-produced tea, coffee or cocoa, so the name seems at first sight odd. If it is a protection in the sense of a duty which falls on non-Commonwealth and not on Commonwealth products, in that sense it is a preference and not a protective duty.
I have always found that tea and sugar duties remain somewhat of a mystery. They always seem to be abolished in successive Budgets while we find, a few years later, that they are still in existence. I remember that a substantial reduction was made in the Budget of 1949, at the 715 time of a Labour Government, in the tea and sugar duties. I thought that we bad abolished them altogether, I know that £11 million was taken off tea and £22 million off sugar. These are substantial sums. However, we found in last year's Finance Bill that these duties were still there both on sugar and tea.
We were then told by the present Home Secretary, then the Chief Secretary to the Treasury, that the Government were freeing all home-produced and Commonwealth tea, sugar and the other commodities I have mentioned. However, they are apparently still with us because they are now being transformed into yet another form.
We are, therefore, given an opportunity tonight to discover the facts. How substantial are these remaining taxes, which I take to be purely there not for Revenue or protection—apart from the special case of sugar, which is a highly complicated matter—but for a somewhat symbolic preference for Commonwealth producers? Is any substantial revenue raised? If it is, is it not a tax on the consumers of a staple food? Is there good reason for continuing these taxes in existence? If the revenue is negligible, what purpose are they achieving and why should we not get rid of them? The sugar aspect of the matter is highly complex, and I will not enter into it now—there is a subsidy on home-produced beet sugar, there is the Commonwealth Sugar Agreement, and so on—but the same complications do not arise in relation to tea, coffee and cocoa, and I wonder whether any useful purpose is served by continuing those duties.
I presume that it will be said that the sole purpose is to maintain a form of preference in favour of the Commonwealth product. I presume that tea from India and Ceylon is tax-free, while tea from China is subject to tax. I suppose that coffee from Kenya, and in British territories in East Africa is tax-free, and that from, other African territories and Brazil is subject to tax. Does that really achieve anything useful? Is there any reason why we should not follow the general policy of making all these food imports, from the Commonwealth and elsewhere, duty-free? That, after all, is the position with wheat, and I wonder whether there is good ground for having 716 a quite different system for tea, coffee and cocoa.
Does the Minister of State think that it is of any practical value to the tea producers of India and Ceylon, to the coffee and cocoa producers of British territories in Africa, to have this tax on the non-Commonwealth product entering the United Kingdom? I should have thought that the Indian and Ceylon tea producers could compete perfectly well against any producers in China without any tax at all. However, that may not be so.
I should have thought that, broadly speaking, the right principle for staple foodstuffs of this kind, and particularly for tropical foodstuffs, would be to have free entry for the product wherever it might come from, and whereas with regard to sugar and in other cases there is need to support home agriculture, I should have thought it would have been better to do it by way of subsidy or deficiency payment. I think that should be the broad principle—

§ Mr. Speaker
I am not sure that I am following this. Would there not be a duty whether or no the House approved the Order? Does it make any difference?

§ Mr. Jay
As a matter of fact, Mr. Speaker, I had just come to the end of my remarks, but this Order certainly removes one set of duties while imposing another, so we are not merely removing the duties in one form but imposing them in another. I therefore presume that it is in order to discuss whether we should reimpose them, and I hope the Minister will be able, both in terms of his knowledge and the rules of order, to answer some of my questions.

§ The Minister of State, Board of Trade (Mr. Alan Green)
The first question, which I hope is in order, is: how substantial are these taxes? The right hon. Gentleman is quite right in saying that this is essentially a transference from revenue to import duty, and it follows the pledge given by my right hon. Friend in his 1962 Budget. Before dealing with how substantial these taxes are, I should like to answer the direct question about the delay.
Many of the duties previously in force on composite goods, that is goods containing sugar or cocoa, or both—made-up manufactured goods—were over-elaborate. These have been simplified 717 wherever possible, which is a good further product of this Order. Working out simplified rates, in some cases in consultation with the trades affected, together with the need to work out new drawback schemes under Section 9 of the Import Duties Act, 1958, accounts mainly for the delay from the passing of the Finance Act, 1962, to the introduction of this Order. We had to consult some trades that were marginally or directly affected in order to be sure that we were not affecting them in a way we had not intended. That is the reason for the delay.
How substantial are these decreases? In 1961–62, before the rates were reduced, the yield to the Revenue was about £17 million. As a consequence of the action of my right hon. Friend in 1962–63 the yield was a good deal less than half of that. This is where we pass into the kind of mystery that the right hon. Gentleman mentioned and under which he laboured when he was in power.
The effect of this Order in terms of revenue will be negligible, but I should like the right hon. Gentleman to know that it is substantially less than half the £17 million.

§ Mr. Jay
Is that £8 million, or whatever it now is, in sugar and tea?

§ Mr. Green
A substantial part of it will be sugar. There is, I agree, therefore this extra complication. The right hon. Gentleman very fairly excluded sugar from the argument, because there is a home-protected element in that as well. He went on to ask whether I thought that the remaining Customs element was of real value to the Commonwealth. This was his key question. I can only give the facts in the case.
On tea there is a 2d. per lb. duty and it is guaranteed to Commonwealth suppliers. On coffee there is a 9s. 4d. per cwt. duty which is guaranteed to India and Rhodesia. It is a fact that under the Ottawa Agreement we have given these guarantees and we cannot unilaterally get rid of them. This, therefore, is the reason why in the transference from revenue to protective duty we have retained what we guaranteed. I hope that with these words the right hon. Gentleman and the House will accept the Order.

§ Mr. Eric Lubbock (Orpington)
The hon. Gentleman said that the effects of 718 the Order in terms of revenue would be negligible, but I believe that it is true that under this Order some of the commitments which we have undertaken under the E.F.T.A. Agreement, which would have taken effect on 1st March, 1965, have been anticipated. Therefore, to that extent there must have been some reduction in the revenue that will be received from these duties.
Secondly, the hon. Gentleman says that the duty of 2d. per lb. on tea and 9s. 4d. a cwt. on coffee have been guaranteed under the Ottawa Agreement. Does he say, therefore, that in these circumstances, whatever a future Government might decide, we are never entitled to revoke these duties?

§ Mr. Green
With the leave of the House I would say to the hon. Member that, first, on E.F.T.A. he is quite right. We are acting within our E.F.T.A. obligations. The hon. Member and the House may recall that we can either remove any protective elements in revenue duties in instalments, in step with the normal E.F.T.A. timetable for the removal of duties, or take single action by 1st January, 1965. We chose the second alternative, and in view of the acceleration of the E.F.T.A. timetables we proceeded to take this step at an early date. We are acting completely within our E.F.T.A. obligations.
The hon. Member asked whether the E.F.T.A. obligations made any difference to the revenue-bearing effect on the consumer of these commodities. The plain answer is that practically all our supplies of these commodities come from the Commonwealth and are duty-free. We retain the preferential margin for the reason I gave—because this is guaranteed I hope that the hon. Member would not ask me to make a hypothetical case as to what a future Government might or might not do in consultation with the Commonwealth. All I am saying is that we are doing this in line with E.F.T.A. obligations previously undertaken and we are not rescinding guarantees given to our Commonwealth friends.