HC Deb 13 June 1967 vol 748 cc288-91
29. Mr. Shinwell

asked the Chancellor of the Exchequer what is his policy regarding the continuance of Selective Employment Tax as a permanent feature of the tax system.

Mr. Callaghan

The Selective Employment Tax is an important addition to the tax structure. It helps to redress the balance of taxation between goods and services and should have valuable long run effects on the performance of the economy.

Mr. Shinwell

Is my right hon. Friend not concerned at the limited success achieved in the transfer of labour from service to manufacturing industry, and also at the resentment caused in the country because of increased prices due to the tax? Is not he going to amend the tax in some way in order to remove the anomalies?

Mr. Callaghan

The first important effect is that the tax raises £200 million approximately that would have to have been raised in some other way. As for the shift of labour, I certainly never expected, nor did I indicate, that it would take place in a period of 12 months. This is a long-run change. It is bound to take some time to have its effect because the balance of taxation is adjusted. As for the anomalies, my right hon. Friend will have seen that a substantial change has been made in relation to the payment of tax by part-time workers, and this has now had a valuable effect and has lessened a great deal of the criticism.

Mr. Costain

How many years does the Chancellor expect will go by before he realises what a stupid tax this is?

Mr. Callaghan

I do not think that any tax which collects £200 million as cheaply as this can be described as stupid.

Mr. Woodburn

Can my right hon. Friend ask his Treasury experts if they can devise a tax which does not take money from the general public? If this does not prove possible, will he investigate the offers of alternative forms of contribution which will eliminate the necessity for this tax?

Mr. Callaghan

I am much obliged. If any Select Committee of the House went to work on this problem, I should be glad to lend my assistance.

Sir Harmar Nicholls

Is the Chancellor aware that it dangerously weakens confidence in Treasury statements when he gives such an obvious example of changing ground? This tax was supposed to move people from the distributive trades to the manufacturing trades. It has not done so. Is it to be a permanent tax, or only temporary?

Mr. Callaghan

This is a permanent tax. If the hon. Member would refer to the White Paper published on Budget day, 1966, he would see that the statement I have made today is in line with the statement made in that White Paper.

Mr. Arthur Lewis

Is it not a ludicrous situation when those supplying milk, bread and the basic necessities of life have to pay this tax while those who manufacture juke boxes, one-armed bandits and the like receive a rebate? Is this the sort of society we want to see.

Mr. Callaghan

The selection of grotesque illustrations of that sort on the extremities of a tax can always be construed to make it look as though the general body is not working properly, but in fact, as is well known in the House, the tax on manufacturing goods from which we derive most of our exports has been relatively much heavier than the tax on services for many years.

Mr. Iain Macleod

Will the Chancellor accept that this tax is permanent only so long as we have a Socialist Administratration? Secondly, does he realise that this is the worst piece of folly that has come out of the Treasury, even in recent years, and that a Conservative Administration will abolish it?

Mr. Callaghan

It was precisely because I recognised that it would need a Conservative victory to change the tax that I was so confident in saying that it was permanent.

Mr. Bellenger

Can my right hon. Friend say whether there is not some simpler way of collecting this tax on part-time workers? Why not reduce it to half-price straight away, instead of paying the full amount and at some later date this year claiming it back?

Mr. Callaghan

Because part of the simplicity and cheapness of the Tax is that it is related to the National Insurance stamp. This is why it is the cheapest of all possible taxes to collect. Therefore it would be administratively more complicated and costly to do it the way my right hon. Friend suggests. I have no doubt that as the years progress and as this Socialist Administration waxes in strength further adaptations will be made in it.

Mr. Stratton Mills

Has the Chancellor of the Exchequer any evidence of the effect of the tax on the cost of living?

Mr. Callaghan

Yes, but I do not carry it in my head at the moment.

Mr. Speaker

Mr. Biggs-Davison, to ask Question No. 30.

Mr. Biggs-Davison

On a point of order. As Question 45 is on all fours with this Question, may I ask a supplementary question?

Mr. Speaker

The Minister did not decide to answer them together.