Selective Employment Tax

HC Deb 27 July 1966 vol 732 cc1691-703

6. Mr. Edward M. Taylor

asked the Secretary of State for Scotland what alterations he has made in the Scottish National Plan to take account of the effect of the Selective Employment Tax.

27. Mr. Buchanan-Smith

asked the Secretary of State for Scotland whether he will amend the figures in his White Paper on the Scottish Economy published in January, 1965 to take into account the effects of a Selective Employment Tax.

48. Mr. Monro

asked the Secretary of State for Scotland what re-assessment he has made of the projected expansion of service industries in Command Paper No. 2864.

59. Mr. MacArthur

asked the Secretary of State for Scotland what revision he has made to the employment targets for manufacturing and service industries set out in the first paragraph of the Scottish Economy, 1965–1970, Command Paper No. 2864, in view of the effect of the Selective Employment Tax on service industries.

Mr. Ross

I do not at the moment foresee any need to make alterations to the White Paper to take account of the effects of the Selective Employment Tax.

Mr. Taylor

As the Plan states clearly that service industries have a major rôle to play in building up modern manufacturing industry and the reduction of emigration, bearing in mind that emigration this year has been higher than ever before, does not the Secretary of State feel that something should be done to alter the Plan drastically?

Mr. Ross

The hon. Gentleman mentioned emigration this year. We have not got the figures for this year, so I do not know how he manages to reach that conclusion. I do not share his gloomy predictions about the effect of the Selective Employment Tax.

Mr. Buchanan-Smith

Does the right hon. Gentleman recall that, in the White Paper, the service industries were described as generators of economic growth? Will he acknowledge that this tax strikes directly against the development of industry in Scotland and makes nonsense of his claims to expand the economy of Scotland?

Mr. Ross

That is quite wrong. As a right hon. Friend of mine rightly interjects, industry in Scotland, including service industries, is expanding, and I am satisfied that it will continue to do so.

Mr. Monro

Is the right hon. Gentleman aware that in my constituency over 50 per cent. of the employment is in service industries? How can he expect them to expand with the Selective Employment Tax?

Mr. Ross

I expect them to expand because I expect they will meet the new demands made on them as a result of the stabilising effects of the overall system of manufacturing industry.

Mr. MacArthur

Is the right hon. Gentleman aware that the target for employment by 1960 in his own plan was an increase of 130,000 in service industries and 80,000 in manufacturing industries? Is he now saying that there will be no change and pretending that the Selective Employment Tax will have no effect?

Mr. Ross

I am not saying that it will have no effect. I am saying that the gloomy predictions of hon. Gentlemen opposite may well be wrong as they have been wrong in the past, and at this moment I do not think that I should be justified in making any change.

Mr. Noble

Does the Secretary of State not realise that the gloomy predictions are not confined to hon. Members on this; side of the House but are made to us in representations from almost every branch of industry in our constituencies? Does he imply by his Answer that the hotels, to take one example, should put their prices up sharply to meet this? Is this what the Secretary of State wants?

Mr. Ross

The right hon. Gentleman knows well that we have debated this over a number of months now and he has had the answers to all these questions. [HON. MEMBERS: "No."] It may well be that the answers were unsatisfactory to hon. Gentlemen, but I do not know who would produce an answer that would be satisfactory to them. I can assure hon. Gentlemen opposite that I do not share the predictions. The tourist industry in Scotland is expanding because the demand on it is expanding, and it will continue to expand.

Mr. Manuel

Is my right hon. Friend aware that there is no doubt in Central Ayrshire about the expansion of industry, coupled with the massive help that it gets from relief of taxation? Will he do what he can to obtain more land so that I can get more factories to come to Central Ayrshire?

Mr. Ross

As my hon. Friend knows, there is a Question on the Order Paper about this subject, and it is a very satisfactory Answer that he is getting in regard to administrative action. The more industry that we get in Central Scotland, the more people will be able to afford holidays and to go and see the part of Scotland where hon. Gentlemen opposite say there is gloom and despondency and everything that is denied by the facts.

Mr. Monro

In view of the unsatisfactory nature of the reply, I give notice that I shall raise the subject on the Adjournment at the earliest possible moment.

13. Mr. Clark Hutchison

asked the Secretary of State for Scotland what estimate he has made of the extra cost to the school building programme that will be caused by the Selective Employment Tax; and what steps he will take to prevent any such rise from further slowing down his programme.

The Under-Secretary of State for Scotland (Mr. Bruce Millan)

No reliable estimate can be made. It is too early to assess the effect of offsetting factors and the extent to which contractors are able to absorb the cost of the tax. As regards the latter part of the Question, I would refer the hon. Gentleman to the reply given to my hon. Friend the Member for Edinburgh, Central (Mr. Oswald) on 12th July by my right hon. Friend.

Mr. Hutchison

Yes, but does the Under-Secretary of State realise that the figure as published is about 2 per cent., and how does he think this ridiculous tax is going to help the school-building programme or the modernisation of schools in Scotland?

Mr. Milan

I do not accept that the net effect of the Selective Employment Tax will be 2 per cent., but I would draw the hon. Member's attention to the fact that the school-building programmes has been recently increased both in the current year and for the following three years. So the new level in 1967–68 onwards will be £26 million compared with the previous figure, itself a record, of £24 million.

14. Mr. Clark Hutchison

asked the Secretary of State for Scotland what percentage increase in the cost of a house in Scotland he estimates will result from the Selective Employment Tax.

47. Mr. Monro

asked the Secretary of State for Scotland what is his estimate of the increase in cost due to the Selective Employment Tax of the total Scottish housebuilding programme in 1967, on the basis of 40,000 houses being completed in that year.

Mr. Ross

I cannot add to the reply which I gave to the hon. Member for Glasgow, Hilihead (Mr. Galbraith) on 15th June.

Mr. Hutchison

I think this figure was 2 per cent. Will the Secretary of State explain how this is going to help young people to buy their houses, which was one of the main planks in Labour's manifesto?

Mr. Ross

I can assure the hon. Member that if the building industry of Scotland shows that efficiency which we recognise it can achieve, it will be able to offset the considerable increase in relation to this particular part of the costs.

Mr. Mono

In the unlikely event of the Secretary of State building 40,000 houses next year, does he realise that 2 per cent. is now equal to £2½ million on building costs?

Mr. Ross

I think the hon. Member will know that no one has said, apart from himself, that we are going to build 40,000 houses—[HON. MEMBERS: "Yes. Election manifesto."] No, we did not. We do not go by his estimates. In relation to his 2 per cent., the same thing is equally true. If we get savings in manpower in the building industry—which can be achieved, particularly now it has the benefit of the incentive scheme in relation to its equipment—then it may well be that houses instead of being dearer will be cheaper.

Mr. David Steel

In view of the indications we had from the Chancellor during the passage of the Finance Bill and the Selective Employment Payments Bill that the application of the tax may be very flexible in future years, will the Secretary of State give us an undertaking that he will press very strongly within the Government for regional and sub-regional variation in the application of the tax in this next year?

Mr. Ross

A statement was made by the Chief Secretary of the possibilities—and I am certainly very interested in the possibilities—of a changed use of this tax as the years develop. The first thing, in this first year, is to have the tax established.

15. Mr. Brewis

asked the Secretary of State for Scotland what is his estimate of the increase in cost of the Scottish road programme in the financial year 1967–68 resulting from the Selective Employment Tax.

Dr. Dickson Mabon

I expect that some of the increase will be absorbed by the contractors and some offset by higher productivity. I am therefore unable to make an estimate.

Mr. Brewis

Is it not ridiculous for the Government to try to pretend that this tax will not add considerably to the cost of road building? Will the Under-Secretary tell me whether the road programme is going to be increased to offset the extra expenditure or whether we are merely going to have the cuts made after 1964 restored?

Dr. Mabon

I cannot make any estimate either way, up or down, because I do not know to what extent the tax will secure its main object of having increased efficiency in the use of labour—[HON. MEMBERS: "What?"]—but there are also the benefits involved of the lifting of the import surcharge, the extension of investment grants to the building industry, and the effect on the price of components of the enhanced refund of Selective Employment Tax to industry. As such, it is difficult to make an estimate.

Mr. Noble

Can the Under-Secretary of State explain to the House why it is in all these questions he is expecting some increase in productivity when all the evidence of the last nine months shows this is not happening in the country?

Dr. Mahon

I cannot accept the premise in the last part of the right hon. Gentleman's supplementary question. Surely he is agreeable to our trying to make great efforts to increase productivity by fiscal means as well as other means? As I say, without accepting the premise in his question, I would have thought that he would have supported this aim if not this method.

16. Mr. Brewis

asked the Secretary of State for Scotland what action he will take to offset the burden of the Selective Employment Tax, the loss of investment allowances and the ineligibility for investment grants suffered by the tourist industry in Scotland.

Dr. Dickson Mabon

My right hon. Friend the Prime Minister announced on 20th July the Government's intention of introducing a new loans scheme to assist hotel developments, and yesterday my right. hon. Friend the President of the Board of Trade made an announcement about the scheme.

Mr. Brewis

Is the hon. Gentleman aware that this particular scheme is very unlikely to help the small country hotels? Is he further aware that this is another hammer blow upon the small six to eight-bed-roomed hotels, following revaluation which is revaluing some of these hotels higher than palaces? Will he see whether he can help these hotels with their revaluation figures?

Dr. Mahon

That question was really in two parts. As to the first part, I do not see how an announcement as generous as the one made by the President of the Board of Trade yesterday and his promise to consult the representatives of the industry about the working of the scheme can mean that we are not helping small hotels. I hope they will be included in the discussion. As regards the second part of the question, the revaluation costs were creations of his own Government. There is a process of appeal open to small hotels and others if they find they have been unjustly assessed by the assessor. I hope they will take full advantage of it.

Mr. Noble

Does not the Under-Secretary of State realise that this scheme, which will include the big hotels such as Gleneagles and so on, is only part of the answer? It is the smaller hotels which need improvements before they attract dollars and which, as far as we can see from the scheme, will not be helped at all.

Dr. Mabon

I would not dissent from what the right hon. Gentleman has said, but it is a matter to the credit of the Government that we have gone thus far, which the right hon. Gentleman did not go when he was in office. [HON. MEMBERS: "Oh."] That is a perfectly fair comment. The right hon. Gentleman intended to impose a tax through a Bill which failed before the House—if he remembers correctly. There was to be 6d. per bed per night, I think, from that tax—£2 10s. a year, my right hon. Friend reminds me. The point I make to the right hon. Gentleman is that these discussions are beginning with the industry and I have no doubt that the representatives of the industry will bear in mind the needs of these hotels and insist that under the principles of this scheme they are covered.

Mr. Brewis

I give notice that I shall take the earliest possible opportunity of raising this matter on the Adjournment.

20. Mr. Noble

asked the Secretary of State for Scotland what representations he has now had from the Highlands and Islands Development Board on the Selective Employment Tax; and if he will publish their views.

Mr. Ross

In informal discussion with me, the Board has stressed the need for vigorous prosecution of positive measures to strengthen the economy of its area, and I have assured the Board that I shall consider carefully any suggestions or proposals it may put forward. I do not think any question of publication arises.

Mr. Noble

Would the right hon. Gentleman now please answer my Question?

Mr. Ross

I have answered the Question. I have had no formal representations from the Board. I have had informal discussions with the Chairman and Secretary of the Board.

Mr. G. Campbell

How can the Secretary of State reconcile the opinion he gave earlier this afternoon about the tax with Treasury estimates that its effects will be severe in the Highlands because there is only 10 per cent. of employment in manufacturing industry there?

Mr. Ross

It is quite easy to reconcile it. Meantime, in relation to this Question, the information which I gave stands, and it was related entirely to the Question which was asked.

Mr. Noble

Will the Secretary of State please read the Question which I put down, which asks what representations he has now had from the Highlands and Islands Development Board on the Selective Employment Tax. He never mentioned formal or informal decisions on it at all.

Mr. Ross

I did not mention decisions, because no decisions were taken and no decisions were inquired about. The right hon. Gentleman asked what representations I have received. I have not received any formal representations. I have had informal discussions with the Chairman and Secretary of the Board which covered a wide order of subjects.

21. Mr. Bruce-Gardyne

asked the Secretary of State for Scotland if he will ask the Scottish Economic Planning Board to undertake an investigation of the extent to which the impact of the Selective Employment Tax on development areas in Scotland would be offset by reinstatement of free depreciation in these areas.

Mr. Ross

No, Sir.

Mr. Bruce-Gardyne

Is the Secretary of State aware that the Minister of State of the Board of Trade told us that he would be prepared to investigate the possibility of reinstating free depreciation in areas like the Highlands which are particularly hard hit by the Selective Employment Tax? Will he take steps to see that he is involved in those investigations on behalf of his Department?

Mr. Ross

I find it very difficult to understand what the hon. Gentleman is talking about. On the question of reinstatement, in the first case, as he knows, we have a very much wider area than we had before, so we could not be reinstating where people did not have it before. On his second point, free depreciation did not arise in relation to the kind of industry in which he is interested. Free depreciation was related to manufacturing industries and not to service industries.

Mr. MacArthur

Will the right hon. Gentleman not try to treat this question seriously? Is he not aware that, instead of splitting hairs as he has been doing, he should recognise that the Selective Employment Tax and its impact on Scotland flies in the face of everything that he and his hon. Friends have said about the future of Scotland? Will he treat us seriously this afternoon, instead of giving a string of evasive and ignorant answers?

Mr. Ross

If hon. Gentlemen would phrase their questions properly it would be very much easier. If people talk about reinstatement when the question of reinstatement is quite irrelevant, they make nonsense of their own Questions.

Mr. Bruce-Gardyne

In view of the unsatisfactory nature of that reply, I beg to give notice that I shall seek the earliest opportunity to raise the matter on the Adjournment.

26. Mr. G. Campbell

asked the Secretary of State for Scotland whether the anticipated rise in the general cost of living resulting from the Selective Employment Tax will be taken into account when the total of the new rate support grant is decided by the Government for the period 1967–68.

Mr. Ross

Any net increases in costs arising out of the Selective Employment Tax will be taken into account when the total of rate support grant is under consideration.

Mr. Campbell

Will the further rise in the cost of living resulting from the measures announced last week also be taken into account?

Mr. Ross

I think that I should advise the hon. Gentleman to read the Bill. He will then know what should and should not be taken into account. [HON. MEMBERS: "Answer the question.] I answered the first Question.

29. Mr. Wolrige-Gordon

asked the Secretary of State for Scotland what consultations he has had with representatives of the fishing industry in Scotland with a view to offsetting the effect of the Selective Employment Tax in an acceptable way.

Mr. Willis

None, as the tax will be refunded in respect of fishing.

Mr. Wolrige-Gordon

I am aware of no consultations at all. Is the hon. Gentleman not aware that even now the fishermen's associations have only the vaguest information about the effect on their industry of this tax? Is it not a fact that from September to February of next year, when repayment commences, the sum to be found will be £28 for each member of the crew of each boat? How does the hon. Gentleman think that the owners of the inshore and herring boats will meet this additional burden?

Mr. Willis

If we assume that there are ten men per vessel, the sum involved will be about £275. This has to be considered against the annual turnover of the boat of about £10,000 or £20,000. That puts the matter into perspective.

31. Mr. Younger

asked the Secretary of State for Scotland what estimate the Scottish Economic Planning Board has made of the percentage of Selective Employment Tax collected which will be returned in premiums and refunds in the South-West and Border regions, respectively.

34. Mr. Baker

asked the Secretary of State for Scotland whether he will instruct the Scottish Economic Planing Board to estimate the impact of the Selective Employment Tax, in particular the percentage of tax collected which will be returned in premiums and refunds in the Highlands and Islands, and in the North-East, respectively.

Mr. Ross

I regret that, on the statistical information which is available, precise calculations of this kind are not possible.

Mr. Younger

Can the right hon. Gentleman try a little harder to produce this information? Does he not recall that we were rather alarmed some months ago to learn that whereas England would get 68 per cent. of the S.E.T., the Highlands would get only 18 per cent.? If the figures are being concealed for the Borders and the South-West, are they worse than those?

Mr. Ross

The figures are not being concealed. The fact is that it is impossible to sort out these figures. If the hon. Gentleman is not satisfied with my answers, let him write to the bishop again. The fact is that the further down one goes in relation to regions, sub-regions and areas, the more difficult it is to sort out these figures because of the categorisation in relation to employment. The hon. Gentleman can take it from me that one cannot sort out and get precise figures in this respect.

Mr. Baker

If these figures are not available, can the right hon. Gentleman tell the House how the Scottish Economic Planning Council will work?

Mr. Ross

I assure the hon. Gentleman that we will quickly get from the areas—and as he knows in his area we have set up a group—an indication of the impact of the tax, and it will be very much more accurate than some of the suggestions which are being made at the present time.

32. Mr. Younger

asked the Secretary of State for Scotland what representations he has had from the Highland Transport Board on the Selective Employment Tax and the abolition of investment allowances on road vehicles; and if he will publish these representations.

Mr. Willis

The Board has not given me any advice on these matters.

Mr. Younger

Will the hon. Gentleman ask the Board to look into this matter urgently? Is he aware that more than 80 per cent. of the goods carried around Scotland are transported in C-licence vehicles which will get no refund from the S.E.T.? Will he ask the Highland Development Board to make an estimate of the effect that this will have on the price of goods in the Highlands?

Mr. Willis

I am sure that the Board is aware of the various factors affecting transport costs, and I am sure that it will take these into account when giving advice on the most effective and most economic means of meeting the transport needs of the Highlands.

Mr. Steele

In view of the previous supplementary question, does not my hon. Friend think that it may be a good idea to abolish C-licences altogether?

Mr. Willis

That is rather a different question.

33. Mr. Baker

asked the Secretary of State for Scotland what proposals he has for offsetting the Selective Employment Tax as a result of the Minister of State's meeting with the Scottish Woodland Owners' Association on 20th May.

Mr. Willis

The Selective Employment Payments Bill provides for the refund of the tax to forestry employers.

Mr. Baker

Is the hon. Gentleman aware that the disproportion in this country between private forestry and state forestry will be further widened by the effect of this tax on private foresters? There is a gap which has to be closed, even in forestry, between September and the repayment of this tax, which is in effect an interest-free loan from the forestry industry.

Mr. Willis

I do not think that this will stop the private owners from contributing to the forestry plan, as we expect they will.