Selective Employment Tax (Hansard, 18 December 1967)

§ 1 and 2. Mr. Blaker
asked the Minister of Labour (1) whether he will make an order under Section 9(1) of the Selective Employment Payments Act, 1966, making the hotel and catering industries eligible for refund of selective employment tax;

§ The Joint Parliamentary Secretary to the Ministry of Labour (Mr. Roy Hattersley)
My right hon. Friend has asked me to apologise for his unavoidable absence. He is taking part in urgent discussions elsewhere.

§ Mr. Blaker
Is it not rather odd that the hon. Gentleman should take these two Questions together, since they deal with different industries. With regard to Question No. 1, is it not clear that the Government have seriously underestimated the potential of the hotel and catering industries for saving and earning foreign currency? Is it not time to relieve them of the burdens of S.E.T.?
Does the hon. Gentleman recall that the imposition of the tax on the distributive trades was justified on the grounds that it would redress the balance of taxation between manufacturing and Service industries? Is not Purchase Tax at least as heavy a burden on the retail and distributive trades as on manufacturing? Should not they be relieved of this burden?

§ Mr. Hattersley
Questions numbers 1 and 2 were answered together because they both ask for fundamental and unacceptable alterations to the principles of Selective Employment Tax. Clearly, the Government accept the importance of the hotel and catering industry, and they provide many incentives to its expansion. Specific Questions about them should be referred to my right hon. Friend the President of the Board of Trade. I 889 remind the hon. Gentleman that he outlined only one of the fundamental purposes of S.E.T. It has many purposes, and they are being successfully carried out.

§ Mr. Hugh Jenkins
Is my hon. Friend reconsidering the application of the tax at all? If so, will he reconsider its application to the theatres, for example?

§ Mr. Hattersley
The House will know that, in answer to previous Questions, I have said that we are looking at the incidence of the tax, but that I could not give individual assurances about what alterations there might be.

§ Mr. John Hall
Does the hon. Gentleman remember that the main purpose of the tax was to encourage the movement of labour from the service industries to manufacturing? Has it had such an effect?

§ Mr. Hattersley
There is a Question on the Order Paper later about that purpose. If the hon. Gentleman reads again the Budget speech of my right hon. Friend the then Chancellor of the Exchequer, he will find that the purpose the hon. Gentleman outlined is only one—and a subsidiary purpose—of the tax.

§ Dr. John Dunwoody
When my hon. Friend is looking at the tax and taking into consideration the catering and hotel trades, will he look at the special Problems of that industry in the development areas, where there are higher unemployment rates?

§ Mr. Hattersley
When we are looking at the incidence of the tax, we look at all these points.

§ Mr. Blaker
In view of the unsatisfactory nature of the reply, I beg to give notice that I shall raise the matter on the Adjournment.

§ 6. Mr. Boyd-Carpenter
asked the Minister of Labour what have been the changes in the number of workers employed by the service industries and in manufacturing industry between the introduction of the Selective Employment Tax and the latest convenient date.

§ Mr. Hattersley
Provisional estimates of employees in employment in manufacturing industries in Great Britain show a decrease of about 395,000 between 890 September, 1966 and October, 1967. Comparable estimates are not available for the service industries. Final estimates for each industry and service in the Standard Industrial Classification are made in respect of June each year; June, 1967 estimates will become available early in 1968.

§ Mr. Boyd-Carpenter
If when the Minister of Labour emerges from the Cabinet he is still a member of it, will the hon. Gentleman advise him to drop the argument that S.E.T. assists the redeployment of labour and suggest to him that the tax should be argued solely as a revenue raiser?

§ Mr. Hattersley
Several times already today I have reminded the House that the shift between service and manufacturing employment is only one of the purposes of the tax. I believe that that purpose is being served, as are the other purposes.

§ Mr. R. Carr
Is the Minister now expecting a change in the pattern of redeployment following the removal of the premium from manufacturing industry? If so, what change?

§ Mr. Hattersley
One of the changes I would certainly expect is that the new incentive in the development areas will be even greater because of the difference between the regional employment premium and the general employment taxation, with the result that there will be a move of work opportunities into development areas—a very necessary move.

§ 11. Mr. G. Campbell
asked the Minister of Labour if he will introduce legislation to provide for the repayment of all the Selective Employment Tax collected in Scotland over the period of this winter.

§ Mr. Hattersley
No, Sir.

§ Mr. Campbell
Is not the hon. Gentleman aware that this would be one of the most effective ways of helping Scotland immediately through this winter?

§ Mr. Hattersley
I hope that another way which results from the existence of the S.E.T. and the regional employment premium, will provide Scotland with £40 million of assistance during the winter.

§ Mr. John Page
Does the hon. Gentleman recall the Answer he gave on 5th December, showing that in Scotland nearly twice as many people are employed in non-manufacturing industry as in manufacturing industry? Does this not prove the discriminatory way in which the S.E.T. acts in Scotland?

§ Mr. Hattersley
I have never accepted that the premium would only bring benefits to manufacturing industry. One of its functions is to increase demand generated by manufacturing industry, which will produce greater demand for Services in these areas.