HC Deb 21 June 1967 vol 748 cc1752-87

The Purchase Tax Act 1963 shall be amended by the insertion immediately after section 23 thereof of the following section:—

23A.—(1) Upon application by a charity the Commissioners shall, subject to the provisions of this section and to such conditions as they may impose for the protection of the the revenue, repay to that charity such sums as the Commissioners have received by way of tax upon such quantities of goods as the charity has acquired for the purpose of furthering its objects.

(2) The class of goods to which this section applies consists of the articles of any description known as greetings cards, but the Treasury may by order made by statutory instrument add any other class of goods thereto.

(3) A charity shall not apply to the Commissioners under subsection (1) of this section for repayment of tax paid during one accounting period until after the commencement of the next accounting period at the earliest and no such application shall be entertained by the Commissioners in respect of sums received by them before 6th April 1967 nor more than three years before the date of such commencement.

(4) In this section the word 'charity' has the meaning assigned to it by section 45 of the Charities Act 1960, but includes a charity mentioned in subsection (2) of that section, and the expression 'accounting period' means the period in respect of which the charity is required under section 32 thereof to keep its accounts.—[Mr. Rossi.]

Brought up, and read the First time.

4.30 p.m.

Mr. Hugh Rossi (Hornsey)

I beg to move, That the Clause be read a Second time.

I hope that this Clause will commend itself to the Financial Secretary if for no other reason than that it has the support of hon. Members on both sides of the Committee. In introducing it, I hope to bring into the Chamber a little of the atmosphere of Christmas and of good will, following what has just transpired between hon. Members on both sides.

The broad objective of the Clause is to relieve charities from having to bear Purchase Tax on the Christmas cards which they sell, while, at the same time, ensuring that the giving of such relief does not put them in an unfair position in competition with commercial enterprises. In other words, we seek to ensure that money paid to a charity goes to the charity and not to the taxman.

Hon. Members will be familiar with the growing practice of charities in recent years of raising money through the sale of Christmas cards. In common with most members of the public, they may well have felt that the money which they spent in buying these cards was a form of donation to a good cause at a season of good will and of good causes. They will probably be horrified to realise, however, that a substantial part of the money which they spend is another form of taxation, another impost paid by them direct to the Chancellor of the Exchequer. I am sure that, if that realisation had come home to them at the time when they were making what they regarded as donations to a good cause, their good will might not have overflowed.

These Christmas cards are subject to Purchase Tax of 25 per cent. plus the recent 10 per cent. under the "mini-Budget". Perhaps I should explain how the tax is levied and what has occasioned the putting down of the Clause. Normally, Purchase Tax is paid on the wholesale price or value of goods. Where there is no wholesale price or value, the Commissioners of Inland Revenue or of Customs and Excise settle a notional wholesale value, and it is on that notional wholesale value that the 25 per cent. plus 10 per cent. Purchase Tax is paid. This has been the procedure for charities, because they give their orders direct to the printer and there is no middle wholesaler to give a wholesale figure.

The notional wholesale price has been creeping upwards over the years, and, in December of last year, the addition to the basic price used to arrive at the notional wholesale price was raised from 50 per cent. to 75 per cent. The Customs and Excise took the price paid for the cards by the charity to the printer, added 75 per cent. to it, treating that final figure as the notional wholesale price, and then levied Purchase Tax on it at the rate I have mentioned.

This caused a certain amount of despondency and alarm among charities, particularly the smaller charities, which rely upon sales of Christmas cards as a substantial source of revenue.

Mr. Raymond Gower (Barry)

Can my hon. Friend explain why this was done last December, and under what powers?

Mr. Rossi

They are general powers which, I understand, the Customs and Excise has for settling notional wholesale prices where an actual wholesale price does not exist. It is often a matter of negotiation. In this case, there was an attempt at negotiation, and, in December last, the Commissioners of Customs and Excise were asked to meet a deputation from charities.

The charities asked that the percentage addition to arrive at the notional wholesale price be kept at the figure which it had been for a number of years, but they were told that, in future, Purchase Tax must be paid on the printer's net free-delivered price to the charity plus any cost of production not included in that price—for example, art work, film negatives, pictures, blocks and plates—plus an overall uplift of 75 per cent. on all that cost. On that final gross figure, the 25 per cent. Purchase Tax plus the present 10 per cent. was to be paid by the charity. The matter was not open to negotiation or further argument. The charities were told that this was the basis on which they would have to pay Purchase Tax in future.

The charities have sought ways and means to alleviate the burden. Some hon. Members may know that, for some weeks, there has been a Motion on the Order Paper drawing attention to the matter, that Motion being supported now by nearly 50 hon. Members from both sides. The present new Clause is another attempt to draw attention to the situation and to enlist the assistance of the Committee in giving help to these charities.

First and foremost, it has been a principle respected in our Income Tax legislation over the years that charities do not pay tax on their income. This is a substantial source of income for many charities and we say that the recognised principle should be applied here also, and that no Purchase Tax should be paid on this income of the charities. Its payment is an inconsistency with a generally recognised principle.

I should like the Committee to bear in mind what the tax can mean to one or two charities. I have been given information which is also available to other hon. Members and I know that they will wish to give examples. One that comes to mind immediately is the British Empire Cancer Campaign, which has so far paid £8,500 Purchase Tax on this year's print order. It estimates that there will be a certain amount of reprinting, bringing the total Purchase Tax that the charity will have to pay to about £10,000.

It is a little short-sighted of the Government to take that sum from the charity, because if that money were not being used for cancer research by voluntary organisations of this kind the Exchequer would no doubt have to find money to meet the need. We hope that in time this organisation's work may have a considerable impact on the National Health Service bill.

Another example is the Church of England Children's Society, which expects to pay £3,120 this year. I am told that if left in the society's hands this sum would enable it to feed 100 children for six months or maintain a home for, say, 16 children for five months. If this charity does not do that work a local welfare authority will have to do it at the ratepayer's expense, with assistance from the Exchequer. It is a most short-sighted policy to seek to deprive charities of such funds and to dissipate them in other ways.

One might well ask what would be the effect on the Exchequer if the Clause were accepted. We receive a little assistance in this matter from a Written Answer last 12th December, when the Chief Secretary stated: Receipts of Purchase Tax on all greeting cards and similar articles are estimated at about £7 million a year. Receipts from Christmas cards are not separately recorded but it is known that they represent a substantial part of the total."—[OFFICIAL REPORT, 12th December, 1966; Vol. 738, c. 23–24.] In giving that answer, the Chief Secretary left the House with the impression that if total relief from this Purchase Tax were given to charities it would cost the taxpayer a substantial part of £7 million a year. No doubt that is the information that he received from his Department. But these figures have been examined and I have a little further information to give him on this matter which I trust may be of assistance to him and will help him decide to support the Clause.

The situation for the taxpayer is by no means as serious as that Answer would lead us to suppose. We are informed that the Greetings Card and Calendar Association has ascertained that the number of greetings cards other than Christmas cards sold is one and a half times greater than the Christmas figure. According to the same source, the average price of a Christmas card is between 7d. and 8d., whereas the average price of other cards is about 1s. 6d.

When those two factors are taken together, I am advised that the income from greetings cards other than Christmas cards is three times the Christmas card figure. On that basis it appears that the receipts of Purchase Tax from Christmas cards is not more than £2 million a year—a figure quite different from that of £7 million posited. We would have thought, weighing all the work the charities are doing and what they can do with this money against the insignificance to the Exchequer of a sum of under £2 million, that here is a case where a laudable and necessary concession could be made in the general spirit of Christmas and good will.

4.45 p.m.

Mr. Gower

I am sorry to interrupt my hon. Friend. He gave the figure of £2 million. Does not that apply to all Christmas cards? Should not we have a figure of Christmas cards produced for charity which would conceivably be much smaller than the figure he gave us?

Mr. Rossi

I take my hon. Friend's point. I had merely given the information available to me, but I accept at once my hon. Friend's comment, which adds greater point and force to the argument I have been adducing.

So far, I have been speaking in general terms of the Clause. I should like briefly to refer now to its wording by way of explanation of what it seeks to do. First, it refers to the Purchase Tax Act, 1963. We ask that the Clause should be inserted into that Act, and the Interpretation Section of that Act would, therefore, apply to it.

The first few words of subsection (1) of the Clause state: "Upon application by a charity…". That is to ensure that only the charity can apply for this particular relief—not the printer, the manufacturer or any other third party, which might lead to malpractices. It must be a direct application by the charity. To assist the Treasury in keeping its control we suggest that the application be subject …to such conditions as they"— the Commissioners— may impose for the protection of the revenue …". That would require the production of proper invoices and accounts, so that the Inland Revenue can be completely satisfied that an application is proper.

Mr. Robert Cooke (Bristol, West)

I have much sympathy with what my hon. Friends and other hon. Members are trying to do. Indeed, I came here today to try to support them. But would not it be easier simply to say that if the name of a registered charity is prominently printed on the front of the greetings card concerned it would then bear no Purchase Tax? None of the administrative costs would then be necessary, and if somebody tried to get away with a charity that was not registered he could be prosecuted with the force of the law.

Mr. Rossi

I am grateful for that comment which anticipated the comment which I was about to make on subsection (3). This suggestion has been considered most carefully, but one of the objects of those promoting the Clause is to ensure that the commercial sellers of Christmas cards are not unfairly undercut by charities. If charities were to market Christmas cards which were not carrying Purchase Tax at the time of sale, the cards would go on the market at prices cheaper than those of commercially produced Christmas cards, which would be unfair competition.

In those circumstances, one could expect people relying on the sale of Christmas cards for their livelihoods to object most strenuously to such a proposal. That leads to somewhat complicated administrative machinery, but it has the intention of protecting commercial interests and not competing with them unfairly.

The Clause is, therefore, slanted towards a claim for repayment by the charity of tax already paid. The Purchase Tax would be paid in the ordinary way and card marketed with that tax added, and it would appear on the market price for price competitive with commercial cards. However, a charity would then be able to ask the Revenue for the tax back to use for its own charitable purposes, which is why the money was paid at Christmas by people wishing to make a donation for some charitable reason. That is why we have had to draft subsection (3) in this way. I hope that, rather than putting hon. Members off the Clause, the fact that we have tried to be fair to commercial interests will be an additional recommendation of this proposal.

In subsection (3) there is a reference to a date, 6th April, 1967. This is inserted merely to ensure that the operation of the Clause does not become retrospective under the terms of the 1963 Act. One would be very happy if there could be retrospective relief for charities, but one has to recognise that to make such a request would be chancing one's arm with the Treasury too much.

I hope that I have made out a case on behalf of charities which will recommend itself to the House, and I ask for the sympathy of the Government and their acceptance of the Clause.

Mr. Percy Grieve (Solihull)

I should like briefly to support my hon. Friend the Member for Hornsey (Mr. Rossi) who moved the new Clause so ably, so cogently and with such sympathy. There is little to add to his arguments, but I recall that on the last two Finance Bills the Committee has urged and the Government have accepted concessions aiding charities, notably last year when we debated Selective Employment Tax. Although with some difficulty, in the end the Government were persuaded to accept the arguments of both sides of the Committee. They were persuaded because in this country it is a time-honoured principle that the Government do not seek to make money out of charity; they do not seek to dip their own hands into the pockets of charities. The Government have the greatest possible interest in maining charities and in seeing that charity works and is supported without itself having to make concessions to the Exchequer, because charity saves the State in many respects from having to come to the aid of these whom charity helps.

In my constituency there are many active charitable organisations. I have had numerous representations, particularly from the British Epilepsy Association, pointing out that the Purchase Tax on these greetings cards is about 50 per cent. These figures have already been given by my hon. Friend the Member for Hornsey. Half of what the public pays and thinks that it is paying for charity in fact goes into the pockets of the Exchequer.

The Financial Secretary to the Treasury (Mr. Niall MacDermot)

I am sure that the hon. and learned Gentleman does not want to put that completely misleading figure on the record. The rate of tax is 27½ per cent. on the wholesale value, which, of course, is considerably less than the person purchasing the card pays.

Mr. Grieve

I am happy to have that assurance. I was merely quoting what had ben put before me and which I had not had the opportunity to check. But even the hon. and learned Gentleman's figure shows that a very high proportion of the price paid by the public for these greetings cards finds its way into the pockets of the Treasury.

I hope that the hon. and learned Gentleman will listen to this plea with sympathy, and I am sure that it will find an echo in the hearts of hon. Members opposite. I trust that the Government will find themselves able to accede to the request and make this concession.

Mr. James Allason (Hemel Hempstead)

I am very grateful for the support which has been given by both sides of the Committee to my Motion on the Order Paper dealing with this subject and to the Clause. The Motion is supported by Members of all parties, which is natural, because no one wishes to tax charity if that can be avoided, nor to tax money which is spent with the object of helping charity.

Charity Christmas cards are becoming increasingly popular year by year. As my hon. Friend the Member for Hornsey (Mr. Rossi) said, purchasers of these cards are under the impression that they pay a substantial amount to charity when buying such a card, because they are quite unaware that there is Purchase Tax on the cards. My hon. Friend has described how in future charity Christmas cards will be paying a significant sum in Purchase Tax.

Incidentally, I can explain to my hon. and learned Friend the Member for Solihull (Mr. Grieve) why is it suggested that roughly half the profit is taken in Purchase Tax. If the cost of production of a card is 4d., taking a 75 per cent. mark up, with Purchase Tax at 27½ per cent., tax would be 1.925d. The card would probably be sold for 8d. which leaves a profit of 4d. distributed as to 1.925d. to the Exchequer and 2.075d. to the charity, which is virtually a 50–50 split, or a 49–51 split, between the Exchequer and the charity.

It is not just a simple matter of saying, "Let Purchase Tax be taken off Christmas cards". When I was first approached about this I had a discussion with a representative of a charity with which I am connected. He said, "We want Purchase Tax taken off all Christmas cards". I said, "What would you do if you achieved that?" He said, "We would reduce the selling price of our Christmas cards or improve the quality and sell them at the same price". I said, "This is what is unacceptable. This is intolerable. You must be fair to commercial interests. You must ensure that you continue to sell your cards at the same rate and then you will have a case to ask for Purchase Tax to be taken off."

5.0 p.m.

This led to the proposal on the Order Paper which we believe to be a way of entirely meeting the objections of the Treasury which are genuinely in the interests of commercial Christmas cards and also in the interests of the revenue that it wants to collect from commercial Christmas cards.

The way of doing it described by my hon. Friend the Member for Hornsey is fair. He gave two examples of the value resulting to charities if the Clause is accepted. I want to give one further example, the British Leprosy Relief Association, which paid approximately £5,000 in Purchase Tax on last year's cards. This year, as my hon. Friend has described, there is a mark up in the rate of Purchase Tax resulting from the notional increase from 50 to 75 per cent., which represents a one-sixth increase in the amount of Purchase Tax to be paid. The British Leprosy Relief Association paid £5,000 on last year's cards, so next year it will pay £6,000 on the same number. A sum of £5,000 would provide six mobile leprosy treatment centres for a year or give prophylactic vaccination to 7,000 children or give full hospital treatment to 310 children for one year. This one charity alone would derive tremendous benefit from this relief, and this would be multiplied over all the charities which will be considered.

As my hon. Friend said, many smaller charities rely almost entirely on their profit from Christmas cards. As a result of this increase, the Exchequer will be taking roughly half the profit from Christmas cards. I am sure that no one wishes this, least of all the Treasury, if it can be assured that a satisfactory scheme is proposed. There is no great loss in revenue and it is in accordance with Government policy not to tax charities if it is possible. Therefore, I hope the Government will accept the Clause.

Mrs. Jill Knight (Birmingham, Edgbaston)

The principle of charity Christmas cards is not old. Most of us will remember that it started a handful of years ago; yet it has caught on to a great degree. This is understandable, because most people concede that it is extremely appropriate that at Christmas time they should help charities. It may be that, being a time of excesses when they help themselves, their families and their homes and have a thoroughly good time, they are salving their consciences a little by contributing to charitable causes. It may be merely that they are indulging in a constant urge to be generous, which is a happy urge to have, and we all enjoy indulging in it. For these reasons, the charity Christmas card business has grown very much in recent years and it is an extraordinarily important source of income to the charities which benefit from it.

It is helpful to know some of these charities. There are a great number, and I will mention a few: autistic children—a real Cinderella of a charity—the Cancer Research Fund, blind babies, chest diseases, mentally handicapped children and marriage guidance. All of these are helped by people who buy charity Christmas cards, and there is a very strong case for the Chancellor to help these funds.

My hon. and learned Friend the Member for Solihull (Mr. Grieve) touched briefly on the point that these charities, to a very large degree, do the Government's job for them. Certain very mean and rather meagre grants are forthcoming from the Government to these charities, but in the case of mentally handicapped children it is appalling how little the Government contribute towards alleviating the difficulties of both the children and their families.

The charities do a very great and important job. If they did not, then, with our social conscience, surely the Government would have to step in and take over.

I can think of many cases where charities save the Government very large sums of money—for example, marriage guidance, to which a very small grant is made. Yet there is no doubt that this particular form of social service saves marriages and keeps children out of care, and most of us know how expensive it is to have children in the care of local authorities. Because these charities work as they do, the Government are saved a very great deal. It is bad enough that the Government do not give more to these charities in a straightforward way, but that they should do the opposite and, in fact, rob the poor box is really too much to bear. That the Chancellor should take what others give to charity with an open hand and open heart seems obnoxious. No Scrooge could be meaner or more deserving of our censure.

What will be the effect of this debate? My hon. Friends and I very much hope that it will enable and encourage the Government to repent their evil ways and embrace the Amendment. It will undoubtedly also have the effect of publicising the fact that people contribute to the Exchequer when they buy a charity Christmas card. People do not know this. It comes as a great shock to them when they learn this most unpleasant fact.

I thank heaven that it is June, that people's memories are short, and that perhaps by next November or December when they are buying their Christmas cards they will have forgotten that this debate has taken place. Should the Clause not be accepted and should people's memories not be so short, the sale of Christmas cards will be very adversely affected by the bitter knowledge that people are paying into the Exchequer. They will say, "After all, it is cheaper to buy ordinary Christmas cards." Indeed, in very many cases it is. One does pay a little more for charity Christmas cards, and no one minds doing this for charity. However, even the seasonal good will burning in the public soul will not persuade people to contribute to the Exchequer.

I am sorry to say that that is true. Even at Christmas time, people do not regard the Chancellor of the Exchequer as a person to whom they should make some more money forthcoming. They tend to think that he takes enough already at Christmas time. If they come to know that, by paying extra for Christmas cards, they will contribute even more to the Chancellor's funds, I cannot help thinking that they will keep away from charity cards. The public in general have no intention of buttering the Chancellor's crumpet when they buy charity Christmas cards.

It may be thought that not very much money is involved, but it will have been an interesting experience for people outside to hear how much money is taken from charities. We have heard some examples, and I am anxious that hon. Members should know about all the examples that exist. It is quite appalling that the National Fund for Research into Crippling Disuses, which, above all others, is one which should not have to beg to the public for its funds, estimates that it paid nearly £6,000 in Purchase Tax last year. It so happens that I am very interested in the Save-The-Children Fund. That charity estimates that it pays about £15,000 a year.

Presumably the Chancellor is quite happy about the little bits of a penny which he takes in Purchase Tax. However, those mites add up to a frightening amount of money, and how much those charities could do with the extra money is a matter which we ought to consider, particularly when, if it is looked at in a broad way, what they do is something which the Government should do, anyway.

For those reasons, I hope that we shall have a little sympathy from the Government, and that this Clause will be accepted.

Mr. Leslie Hale (Oldham, West)

My right hon. Friend the Chancellor has an admirable opportunity of doing a great service to some very important charities by imposing a swingeing tax upon the £11 million of tax-free capital profit which Lord Hill dished out last week to some unconnected "odds and sods", and I hope that he will do it. By that means he will make an extensive provision for social work in many fields of activity.

I was touched by the delayed philanthropy which we have heard from hon. Members opposite. It seems to express itself only when they are in opposition. This tax has been imposed for 27 years, and it is a fact that the sale of gift Christmas cards has increased immensely during the whole of that period.

My hon. Friend the Member for Hornsey (Mr. Rossi) put forward some very fair points. I have received representations from people in my constituency, to whom I have written immediately expressing sympathy and virtually promising support on a first glance at the case put forward, saying, "I will look into this and find out the details." However, the more one looks, the more one comes to the conclusion that there are difficulties and anomalies.

In my constituency, there is a substantial firm manufacturing cards, which complains bitterly of the unfair competition which places its business activities in jeopardy. I am bound to say that it is difficult to put forward—

Mr. Nicholas Scott (Paddington, South)

The language which the hon. Gentleman uses is rather strong. Presumably the firm in his constituency prints not only Christmas cards but other types of greetings cards. If he looks at the growth of the greetings card industry, and considers the explosion in the amount of trade which such firms have done in the last 10 years, it is rank nonsense to say that a business would be placed in jeopardy by a concession of this kind.

5.15 p.m.

Mr. Hale

There has been an extension of the rather foolish symbolism which we import from America to celebrate such occasions as Mother's Day, Father's Day, Uncle Arthur's Day and Uncle Sam's Day. More recently, we have seen buttonholes saying "Pop is good for you", "Down with Cassius Clay", and so on. However, it is not an easy industry and, as I say, this tax has been imposed for 27 years.

I dislike the Purchase Tax, and I dislike the idea of taxing Christmas greetings. There is something quite objectionable about the idea. Christmas cards move me emotionally rather in the way that they might have moved Scrooge, but a lot of people like them. A lot of people use them and think that they are an admirable means of sending benevolent and Christian greetings. With their thoughts on the immortal history of Christmas Day and benevolence of the period I doubt whether, at the same moment, they are thinking of my right hon. Friend the Chancellor of the Exchequer or have a special desire to confer a benefit upon him.

There is force in the argument that, if charities alone are relieved from the tax, it becomes a singularly unfair form of competition. If in that way they were able to reduce prices, in addition to the effect which the charity card has, other manufacturers would be put at a disadvantage. If there is to be a concession of this kind, there should be a condition that the card is handled by the British industry and not printed abroad, as some are.

I was driven to rise to my feet mainly by the rather ostentatious oozing of benevolence from people who themselves maintained this tax in their 13 years of office. However, I agree that it is an unpleasant anomaly which should be removed as soon as possible. I should have thought that, in view of the very special significance of Christmas, to make an exception in the case of Christmas cards would not provide any administrative difficulty. The Exchequer would still make gains from the sales of postage stamps, and postage rates have increased substantially over recent years.

I ask my hon. and learned Friend to say that he will apply his mind to it again with care and thought and try to find how much he can, at a reasonable cost, make a gesture which I am certain would be satisfactory to both sides of the Committee and be in accordance with good sense and decent feeling.

Mr. Gower

At the end of his splendid introductory speech, my hon. Friend the Member for Hornsey (Mr. Rossi), expressed the hope that he had put forward a fair and reasonable case for the acceptance of his new Clause. I felt that he had done more, because I thought that he put forward a very striking case.

The Financial Secretary has sometimes rejected Clauses and Amendments out of hand. Sometimes he has rejected their wording but has been inclined to accept their principle. All too rarely has he accepted them in toto. However, I am surprised that he has not displayed some impatience to accept the principle of this splendid Clause. I cannot believe that he can feel any satisfaction about sustaining the present absurdity which has been explained by my hon. Friend. There is a minority opinion, which I hope the Financial Secretary does not share, that all the things done by charities should be done by the State. I do not share that view. I think that whatever the State does, and however far it goes, there will always be some gaps, some imperfections, which charitable organisations will seek to fill.

I think the Financial Secretary and the Government will accept that the work done by some of these charities is of great value, and that the voluntary contributions which people make to charities are better than those which they are forced to pay by edict of the State. They have an enhanced virtue, in the sense that they are made voluntarily. It is wrong that the State should tax research into cancer and the activities of so many other charities which have been mentioned, and I think that whatever else we do today we should ensure that this situation does not continue for much longer.

My hon. Friend said that the Purchase Tax on Christmas greetings cards last year amounted to about £2 million. I do not know, and I hope that the Financial Secretary will be able to tell us, but I imagine that the proportion of that sum which would be payable in respect of Christmas cards sold by charities would be relatively small. Nevertheless, this sum bears heavily on charities, and I congratulate my hon. Friends the Members for Hemel Hempstead (Mr. Allason) and Hornsey for having found a formula which does not have the serious objections which were mentioned earlier. This provision will not give charities some advantage over those who have to earn their livelihood by the production and sale of Christmas cards.

This is a reasonable and fair proposal. I think that it commands the support of both sides of the House, and I hope that the Financial Secretary will at least accept its principle.

Mr. Edwin Brooks (Bebington)

I am sorry that I missed the earlier part of the speech of the hon. Member for Hornsey (Mr. Rossi), but I am in substantial agreement with the remarks which I have heard him and others make. I thought that the hon. Lady the Member for Birmingham, Edgbaston (Mrs. Knight) was a little unfair in calling on the Government to repent, though perhaps she can be more optimistic that the Kingdom of Heaven is at hand at long last, far more so than it was when her colleagues formed the Government. Nevertheless, I do not propose to follow the hon. Lady's technique, which seems to be to prevent the Chancellor, as she put it in her memorable phraseology, "buttering his crumpet" by buttering him up.

We regard this form of taxation as inequitable, and very unfortunate in its effect on many of the better causes in our society. It has often been said, and it has been repeated several times during this debate, that the role of charities tends to vanish as the State takes over various functions of our so-called welfare society. I think that this is so, and that as time goes on, and as the work of charity expands, it is inevitable that the State should come in and assert its own responsibilities.

That the State is able to do this at all is surely because the charities themselves have acted as trail-blazers, that they have been able to define the gaps in the Welfare State in the first instance. They have often courted a good deal of unpopularity, certainly a good deal of public indifference, in the early months and years of their activities. Not all charities automatically meet with public approval, and some charities, which I shall not mention, have certainly courted a good deal of public disfavour in their pioneering years.

But, whatever may be the truth of the State's eventual assertion of responsibility, it is surely true to say that there are still many gaps in our welfare society. Indeed, as society changes new gaps are identified, and what worries me particularly about this sort of taxation is that it is likely to strike at the financial strength and resources of the smaller charities which are not in any sense as prosperous as some of the more well-established of their fellows, but which, nevertheless, are desperately important if we are to help underprivileged sectors of our society.

Many problems which were not known some years ago are now being considered. The problems of the autistic child are now receiving the attention of many good people in all sorts of voluntary activities. I have received a letter from the honorary secretary of the Merseyside branch of the Multiple Sclerosis Society, and I would like to quote briefly from it. He says: We like many charities derive a great deal of financial benefit from the Christmas cards we sell, and are aware that Christmas cards are an accepted and a very appropriate method of raising funds. Some of the smaller charities, and we in this Branch consider ourselves amongst these, rely almost entirely on the sales of Christmas cards for our income. It is the problem of the smaller charities to which I think we should be giving consideration this afternoon.

I do not propose to delay the proceedings of the Committee any further, except to say that until my hon. Friend the Member for Oldham, West (Mr. Hale) spoke a few moments ago I felt that this was going to be a debate contributed to almost entirely by hon. Gentlemen opposite, and that perhaps the only speaker from this side would be the Financial Secretary. I think that if that were to happen it would be very unfortunate, because there is an Early-Day Motion which has been signed by Members of all parties. I take it that when they signed it they were of sound mind. I take it that they still adhere to the views which it expressed. I do, as a signatory, and I hope very much that the Government will consider sympathetically the representations which have been made.

Mr. John Smith (Cities of London and Westminster)

The Financial Secretary will have no difficulty in knocking down this Clause, if he wants to. In spite of what we have heard, he will probably say that relief to charities would be unfair to commercial people who sell Christmas cards; although I doubt whether charities, who want all the money they can get, would undercut ordinary retailers. I think that the cry of unfairness is more apt to go up from the Revenue when it is a question of relieving someone from an existing tax, than when it is a question of imposing a new tax on some one. We had an example of this last year over the Selective Employment Tax.

The hon. and learned Gentleman may also say that the relief of greeting cards would be the thin end of the wedge; that it would open the door; that under subsection (1) it could apply—as indeed it could—even to motor cars; and that it is impossible to draw the line, and so on. In fact, however, the Commissioners of Customs and Excise are well able to draw the line over Purchase Tax. They have had a great deal of practice in doing so. The matter which we are discussing is governed by notice No. 78 of the Customs and Excise, Group 26, which relates to stationery, and, like everything else these days, it is an extremely complex group.

For example, compliment slips are exempt from tax, but taxable if they bear words of greeting or of sympathy. Rubber stamps are exempt as one would expect, but not date stamps; rulers under 24 inches long pay tax, but rulers over 24 inches long do not; laundry lists are taxable, unless they have a hole punched in them; sealing wax for letters is taxable, but sealing wax for parcels is exempt.

The Committee will therefore agree that the Commissioners are quite capable of drawing a line somewhere—too much so, and indeed a little Parkinsonian study of Notice No. 78 is badly needed anyway.

5.30 p.m.

Sir G. Nabarro

Is not my hon. Friend aware that 400 Parliamentary Questions were asked by me over a period of four years for the very reason that the Customs and Excise authorities could not demarcate and define accurately? Every time they attempted to do so—notably in connection with printing and stationery—they added a hundredfold to the anomalies of the position.

Mr. Smith

I was aware that I was venturing towards South Worcestershire in this matter. Nevertheless, I believe that there are bastions yet unstormed in this field and I hope that we may hear even more from my hon. Friend on these topics on other occasions.

I hope that the Financial Secretary will want to accept the new Clause, for the good reason that it affords the Government an opportunity to put right what may well be a misconception on the part of the public, namely, that the Labour Party is anti-charity. There have been the attempts to impose Selective Employment Tax on charities; the imposition of the Land Commission levy on property investments of charities; the refusal to exempt charities from Capital Gains Tax derived from their holdings in investment and unit trusts, and, very serious—and apposite in this case—the current attempt on the part of the Inland Revenue authorities to tax charities on the receipts from sales of Christmas cards —on top of Purchase Tax.

Charities are theoretically liable to tax on trading profits—and they pay it—

The Temporary Chairman (Mr. Harold Gorden)

The hon. Member is dealing with a matter which is outside the terms of Purchase Tax, and is out of order.

Mr. Smith

The Government are apparently pressing the Inland Revenue authorities to extend the tax to Christmas cards. As a result of all this the position of charities is worse now than it was in 1964. Part of this apparent anti-charity bias which the acceptance of the new Clause would reduce is an anti-independent education bias, but the animosity has seemed to spread to charities in general. The public are nettled by this, and charities themselves are deeply interested in this Clause. To accept it would go some way towards repairing the damage which the Government are causing themselves at the moment.

To accept this new Clause would also help to reduce some of the anomalies of the Purchase Tax, which is my second reason for supporting the Clause. These anomalies arise on Group 26, relating to stationery. It would be a small simplification of the tax system but it would be worth doing, and it certainly seems needed.

I have, as usual, a letter from a constituent, saying: The universal opinion within the trade is that this document"— Notice No. 78— cannot be understood. As a result the British Master Printers Federation produced their own book which is a slight advance on the official notice but still involves lengthy discussions with the Customs and Excise. For example—and these are very important in the context of the new Clause—charity appeal leaflets are taxable they suffer Purchase Tax unless the detachable portion which is filled in and returned occupies less than one quarter of the leaflet. Easter and Christmas church service cards are free of tax, provided they bear no words of greeting. If a person is innocent enough to print a greeting such as "Happy Christmas" he pays tax. It is the greeting that pays tax. If one prints "Vote for Smith", there is no tax. If one prints "Happy birthday", there is tax. Charity membership cards suffer tax if there is a space to sign one's name, but not if one writes one's name. The National Trust has had to change its membership cards for this reason.

A lottery ticket with a blank counterfoil is free of tax, but one with a counterfoil which envisages writing a name and address on it is taxable. These are absurd anomalies which we can well do without. I do not believe that the revenue at stake is very large. One large charity with which I am concerned and which spends more than £1 million a year reckons that relief through the new Clause would save it £3,000 a year, but the consumption of human effort and the general attrition of human spirit is enormous.

The Government have a double opportunity here—to reduce complexity and to buff up their image—by accepting the Clause and applying its provisions to all materials used by registered charities which come under Group 26 of Notice No. 78.

Mr. MacDermot

My hon. Friend the Member for Oldham, West (Mr. Hale) asked me to give an undertaking to examine the new Clause with care. I can assure the Committee that I have done that. Long before we reached the Committee stage, and even before the publication of the Bill, I looked with great care into the problem. If there had been any way that I thought was acceptable, within the framework of the tax, to grant an exemption of this kind no one would have been happier than I. But for reasons which I shall explain my efforts were unsuccessful. I must tell the hon. Member for Hornsey (Mr. Rossi) that I find his efforts also unsuccessful in overcoming the objections to the proposal In saying this, I in no way reflect upon the work done by these charities. I agree that however much we develop our Welfare State facilities and social security there will always be important fields of work for charitable organisations.

First, I want to correct a completely false impression, which is gaining widespread currency, that the present Government have suddenly introduced a measure to impose Purchase Tax on Christmas cards. Nobody has said it in the House, but letters written by organisations have been passed on to me, beginning, "I hope that you will oppose the Government's proposal to impose Purchase Tax on charity Christmas cards. Such are the misconceptions that have arisen as a result of the campaign on this subject. The truth is that Christmas cards of all kinds, including those manufactured and sold by charities, have been subjected to Purchase Tax since the origin of the tax in 1940.

Mr. Scott

The misconception arises not from this, but from the new attempt by the Revenue to tax the income on Christmas cards, referred to earlier.

Mr. MacDermot

I was coming to that. I hope that the hon. Member will not intervene to put to me points to which I have been listening patiently for about 1½ hours, and most of which have been made several times

I want to correct another false impression—that the tax on charity Christmas cards is in some way an anomaly It is not. It is in line with the law about indirect taxes that has always existed in respect of charities. The exemptions that exist for charities in the tax field have never extended, with one small exception, to indirect taxes. For example, charities pay Purchase Tax on goods which they purchase to carry out their own charitable activities, such as their stationery and furniture. All these articles are subject to Purchase Tax. If they have been liable to tax on the goods they use themselves in furthering their charitable activities, naturally much more have they been so on any goods they sell by way of trade.

The only exception is in Section 20 of the Purchase Tax Act, 1963, which applies to goods which are given to charities and are used for the purpose of relieving distress. For instance, people giving clothes to Oxfam will not be subject to Purchase Tax—

Mr. Gower

The hon. and learned Gentleman has made a fair point, but would he not be prepared to accept the distinction that when a charity buys a motor car, or something like that, the person who sells the motor car does not intend it to be a donation to the charity, whereas the person why buys a charity Christmas card intends it to be a donation?

Mr. MacDermot

I beseech hon. Members not to intervene, if that is the only kind of intervention they intend to make. That point has been made in the debate and I intend to reply to it. It does not further discussion if every hon. Member again puts points I have not yet reached.

We are not here concerned with the performance by charities of their charitable functions, but with their trading activities in order to raise funds. Charities are not set up to trade, but to do charitable works. They already enjoy very considerable tax exemptions in respect of funds for their charitable works. It was overstated by the hon. Member for Hornsey when he said that they were not subject to Income Tax.

The position is that they are not subject to Income Tax on their investment income, and they can claim back Income Tax on moneys paid to them under covenant. But if they go into business and become a trading organisation they are subject to Income Tax—or Corporation Tax, if they are a corporation—on their trading income. This is another aspect of the matter.

There is nothing new in assessments being made in this respect by the Inland Revenue on charities. In fact, a number of charities have perfectly properly and lawfully arranged matters so that they have set up a trading organisation which then covenants its dividends to the charity, which is then able to claim back Income Tax under the covenant. But the Revenue and the Customs and Excise authorities are properly applying the law as laid down by Parliament, and carrying out the duties we have imposed on them. Tax exemptions are related to the charities' charitable work, and if charities decide to go into business and trade in competition with other traders they must not expect reliefs that will enable them to trade on preferential terms.

I believe that this principle is accepted by supporters of the new Clause, and that they have sought to meet it, but I wish to make the point that the wording of the Early-Day Motion is not fair when it regrets what it calls "the taxation of charity". This is not the taxation of charity, but the taxation of trading. It is not the taxation of cancer research, but the taxation of Christmas cards being sold in the hope of raising funds which can help cancer research.

5.45 p.m.

If people regard their purchases of charity Christmas cards as being in the nature of donations they are deceiving themselves: they are purchasing articles that they want for Christmas—Christmas cards—and are deliberately purchasing the cards so that the profit on them will go to charities. I imagine that most of us do this. I know that I have done it for many years, and, whatever the tax position, I have no intention ever again of buying Christmas cards other than for a charity. But I do not think that I am making a donation to charity in doing that. I would be deceiving myself if I thought that I was.

The hon. Lady the Member for Edgbaston (Mrs. Knight) thought that if the general public realised that they were making a contribution to the Exchequer in this way they would cease to buy charity Christmas cards. I would only say that, if they did, they would be acting on what I would regard as a very feminine reaction, because unless they were to cease buying Christmas cards altogether they would continue to make a contribution to the Exchequer, because they would still pay Purchase Tax on the cards they bought.

Mrs. Knight

What I wanted to make quite clear, and I think I did so, was that that might make people do this, although in very many cases it is less dear to buy cards which are not charity Christmas cards. One does pay more for a charity card, and does so deliberately as a kind of donation to charity.

Mr. MacDermot

Obviously, that must depend on the card. With respect, it is not my experience. There may be some non-charity cards which are cheaper, but, equally, there are some charity cards which are sold very cheaply.

The question has been raised, and it is what has stirred up public interest in the subject recently, of the increase by the Commissioners of Customs and Excise in what is called the uplift in printing costs in arriving at the wholesale value. As the hon. Member for Hornsey pointed out in his very lucid speech, the Commissioners are under a statutory duty to levy this tax on the wholesale value. As there is no wholesaler in the case of charity Christmas cards, one has to arrive at an assessment of what the wholesale value is—what is sometimes called a notional value.

This occurs in a number of other trading fields where there is a similar position, and the normal practice is for the Commissioners to negotiate with the trade body to arrive at a fair figure. Unfortunately, in this case there is no body representing traders with whom the Commissioners could negotiate. They consulted the General Secretary of the Council of Social Services, which exercises, as it were, a watching interest on behalf of charities, and a meeting took place at which the Commissioners explained their proposals. As far as I know, no one has seriously challenged the figure which is now being adopted for uplift as fair and reasonable.

The fact is that the old figure of 50 per cent., which had been fixed as far back as 1959, was out of date, and was the subject of complaints from commerce and trade that they were being subjected to unfair competition because the figure was artificially low. It was as a result of those representations that the Commissioners, as they were bound to do, looked again at the figure.

A lot of figures have been quoted which may give a completely false impression outside as to the amount of the retail price of the charity Christmas card represented by the Purchase Tax. On average, if we take a Christmas card which one would buy for 1s., about 1½d. of the shilling is represented by Purchase Tax—

Mr. Allason

Will the hon. and learned Gentleman give some figures? Would not a charity Christmas card, costing 4d. to produce and bearing virtually 2d. Purchase Tax, sell for about 8d.?

Mr. MacDermot

I have not examined the figures, but I will gladly discuss them with the hon. Gentleman. The advice I have been given is that on a Christmas card costing Is. the Purchase Tax is a little above 1½d., but under 2d. Obviously, it must depend on the way in which the charity prices its card, and what it puts on the wholesale price for its retail price.

Sir G. Nabarro

Is the Financial Secretary suggesting that if the retail price is a Is. and Purchase Tax is 1½d., levied at a rate of 27½ per cent., the notional wholesale price of the charity Christmas card is thereby 6½d., and that the gross profit is as much as 5½d.? if he is, that is twice the figure I have been given.

Mr. MacDermot

I have given the Committee the information I have, and hon. Members know that the Departments are very careful in giving the best estimate they can to the Committee on these matters. I assume that there are further equivalent costs in the retail distribution which charities have to bear. It does not follow that the whole of that addition is in the form of a profit to the charity.

So much for the general objection. As I say, I think that this general objection is accepted by the proposers of the Clause, and they seek to meet it. The way they seek to meet it is by saying that instead of granting exemption from Purchase Tax the tax should be imposed and levied but subsequently repaid to the charity. I can only say to hon. Members that that argument strikes me as being jejeune. If they think that the commercial preference would be overcome in that way I think they are deceiving themselves. Let them imagine themselves as being in trade in this field and being told, "Do not worry. You pay the Purchase Tax, but you will get it back afterwards." Do not they think that would give them a commercial advantage over their competitors?

Compare the betting duty. If a bookmaker were told, "We are going to levy the duty, but in your case we will repay it", would that not enable that bookmaker to offer more favourable odds to his customer than his rival could? It is not a hypothetical suggestion of mine, that this commercial advantage could operate to the benefit of charities and against the commercial trader.

The hon. Gentleman the Member for Hemel Hempstead (Mr. Allason), who put down the new Clause, told us what was the reaction of one of these charities when he asked, "What would you do if you were exempted from Purchase Tax?" The answer, he told the Committee, was, "We will reduce the selling price, or improve the quality." In other words, it would exploit a commercial advantage which the exemption would give it. The mere device of collecting and repaying the tax would only marginally reduce that commercial advantage; it would remain, and the complaint from the ordinary trade which, it is admitted on all sides of the Committee, is legitimate would remain.

Then comes the question of cost which, of course, is linked with it. Hon. Members have referred to the figures which have already been given of about £7 million as the total Purchase Tax on cards at the moment and, it is estimated, about £2 million on Christmas cards. They are not our estimates, but the trade's estimates. Of course, what is our concern here is what would be at risk if we admitted the principle of this new Clause. As has been pointed out by the hon. Member for the Cities of London and Westminster (Mr. John Smith), the principle is not confined to Christmas cards. This is a field in which charities are trading at the moment, but if this principle were accepted surely some charities, at least, would not be slow to exploit the advantage. If, for example, they could sell motor cars—by setting up a charitable garage to sell cars—and by being a charity could recoup Purchase Tax, this would obviously be a very profitable field of trading.

Therefore, apart from immediately putting at risk the Purchase Tax on cards, and the trading advantage it would give charities, it would represent a real threat to the Purchase Tax in very many other fields, and it is for those reasons, I am afraid, that we do not find this an acceptable solution.

Mr. Allason

Would not subsection (2) of the new Clause operate to stop the selling of cars?

Mr. Bryant Godman Irvine (Rye)

I had been hoping, Mr. Gurden, that I could have had the privilege of catching your eye a little earlier this afternoon, but my duties as a member of the Select Committee on Agriculture prevented my being here at the beginning of this debate. I am grateful to have this opportunity of supporting this new Clause and of saying that I am very disappointed by what we have heard from the Financial Secretary. I see the force of a number of arguments he put up, but I am not persuaded that his ingenuity and that of the Chief Secretary—that, indeed, of the whole Treasury —could not find a way to achieve this very desirable object.

The Financial Secretary has said that he purchases Christmas cards from a charity at Christmas time. I was quite unable to understand why he did it, because he said that he was under no illusion that he was not paying some tax, and he knew that it was run as a business, and yet he kept on buying the cards. I believe that the people who buy Christmas cards from charities at Christmas do not do it merely because they want Christmas cards: they do it because they want to support some charity.

I have in my constituency a children's home which is run by the Church of England Children's Society. A number of people buy Christmas cards from the society because they know that home, and the good work it is doing; they do not buy because they regard it as a business transaction, but because they want to see the money going into the coffers of that society.

The society says that it expects to pay £3,120 this year in tax and that that would feed 100 children for six months, or feed and clothe 100 children for four months, or provide a home for 16 children for five months.

When people buy Christmas cards from charities they hope that the money they are laying out in that way will go to the charities. Therefore, I find the arguments put forward by the Financial Secretary entirely unsatisfactory, and I should certainly like to vote in favour of the new Clause.

Mr. Patrick Jenkin (Wanstead and Woodford)

I should like to begin by warmly congratulating my hon. Friend the Member for Hornsey (Mr. Rossi) upon the very cogent way in which he moved this new Clause. The degree of support which he has attracted must have come as a surprise to the hon. and learned Gentleman.

The Clause is supported by all three major parties in the Committee. The hon. Member for Oldham, West (Mr. Hale) asked for the Financial Secretary's sympathy. I had hoped we might have got more than that. The hon. Member for Bebington (Mr. Brooks) has been notable in his support of one charitable object of which we detected echoes in his speech. The hon. Member for Roxburgh, Selkirk and Peebles (Mr. David Steel), from the Liberal benches, has put his name to the new Clause. Therefore, it was very disappointing indeed that the Financial Secretary gave to the Committee what was tantamount to a blank refusal.

First, to take up the whole question of the Labour Party's attitude to charities. The Financial Secretary protested his innocence of any ill will towards charities, but both my hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith) and my hon. and learned Friend the Member for Solihull (Mr. Grieve) adverted to what has now become a well recognised fact, that the Labour Party does not care as much for charities as do other parties in this Committee. I well remember that in the Budget debate on the Selective Employment Tax last year the Chief Secretary tried vainly to defend the Government's imposition of Selective Employment Tax on charities, and he adduced—he will correct me if I am wrong—exactly the same argument we had from the Financial Secretary this afternoon, and said that charities have always paid indirect taxation and that Selective Employment Tax was an indirect tax like any other.

Thank goodness, the pressure was too much for the Government. They realised they could not impose the impost. I would have hoped that the same logic would have swayed the Government today, and that we would have had some relief in this particular case. The Government do not recognise that they have attracted to themselves this odour of disfavour. In the House on 28th February, in reply to a supplementary question by my hon. Friend the Member for Liverpool, Wavertree (Mr. Tilney), the Chief Secretary actually congratulated the Government on their attitude to charities. He said: The Government have been outstanding in their help to charities… But let hon. Members wait to see why he made that claim. He continued: both in removing them from the effects of the Selective Employment Tax and in being the first Government to establish the position of charities in relation to the Corporation Tax."—[OFFICIAL REPORT, 28th February, 1967, Vol. 741, c. 258.] That is what the Government claim they have done for charities and that is why remarks of that kind are greeted with hollow and derisive laughter from this side of the Committee.

There has been a good deal of dispute about figures between the two sides of the Committee. My hon. Friend the Member for Hemel Hempstead (Mr. Allason) quoted some figures which appeared to me to be right. I would point out to the Financial Secretary that it is not the retail price in which the charity is principally interested. The charity is interested in the profit, the money that it will have to carry out its charitable work. My hon. Friend the Member for Hemel Hempstead showed that nearly half the profit is absorbed in Purchase Tax.

Mr. MacDermot

Is the hon. Member suggesting that Purchase Tax is a tax levied on profit?

Mr. Jenkin

No. I know that it is not. I was saying that the charity is concerned about the proceeds, not about the retail price. I did a quick calculation with the help of my hon. Friend the Member for Wycombe (Mr. John Hall). The Financial Secretary offered a figure of 1½d., and this may well be right, on a card costing 1s. But on such a card there has been a substantial uplift, more than most charities feel that they could charge. For a card costing 4d. to print, the figures which the Financial Secretary gave would be right, but, as my hon. Friend the Member for Hemel Hempstead pointed out, if a card costs 4d. to print, a charity is unlikely to be able to sell it for more than about 8d.

Of that difference between printing costs and selling costs, nearly half is Purchase Tax. It is 27½ per cent. on the printing cost uplifted by 75 per cent. The figure is over 48 per cent. of the primary cost. The Financial Secretary shakes his head, but that figure is correct. It is 48 per cent. of the primary cost uplifted by 75 per cent. Thai is what Purchase Tax amounts to, and it represents nearly half of the total profit on the card.

The Financial Secretary voiced some indignation that the Government have been accused of being the first Govern- ment to impose Purchase Tax on Christmas cards. They have earned for themselves such a reputation that people think that that might well be possible. But there is some fire behind the smoke in that under their auspices the Commissioners have increased the uplift to the new figure of 75 per cent. and, as my hon. Friends said, are seeking for the first time to treat this as a trading activity which ought to come within charge to Income Tax or, presumably, in some cases, Corporation Tax and, where appropriate, Profits Tax. The Government cannot get away from the fact that Purchase Tax represents substantial inroads into the assets which are available to charities to meet their objective.

Mr. A. Woodburn (Clackmannan and East Stirlingshire)

I gather that the hon. Member is implying that the Commissioners allow themselves to be influenced by the Government in reaching their decisions.

Mr. Jenkin

I said "under their auspices".

Mr. MacDermot

This is important. Will the hon. Member make clear what he means? What was the insinuation of the phrase "under their auspices"? I have explained to the Committee that there were complaints from the trade to the Commissioners—not to the Government, but to the Commissioners. The Commissioners then carried out their statutory duty of reviewing the wholesale uplift. Is the hon. Member challenging what I said, or is he suggesting that there was something underhand on the part of the Government?

Mr. Jenkin

I recognise entirely—and I do not want to suggest otherwise—that the Inland Revenue and the Commissioners of Customs and Excise preserve a very proper independence from pressures by the Treasury or other Government Departments in carrying out their statutory functions.

The point that I was making was that people were ready to believe that the Government had, for the first time, imposed Purchase Tax because the Government have this reputation of being unfriendly to charities and because this has coincided with the move about uplift. That is the point that I made and why I used the phrase "under their auspices". It was during a period of Labour Government. To suggest that I am implying Government interference with the Commissioners is unworthy, because it is not true.

Let us deal with the extent to which this provision would be unfair to commercial firms producing Christmas cards in the ordinary way. There are two answers. One was given in an intervention by my hon. Friend the Member for Paddington, South (Mr. Scott) who spoke of the enormous increase in the volume of Christmas cards sold every year. As he said, this is an explosive growth. It is a growth trade growing faster than almost any other in the country. If, therefore, some part of this trade is creamed off by charities who may be given a favoured position in relation to Purchase Tax if the Clause is accepted, I find it difficult to believe that the trade could claim that they were being jeopardised—a word used by the hon. Member for Oldham, West—or that they would suffer any severe hardship. In a written Question my hon. Friend the Member for Wycombe in February asked the Chief Secretary what representations he has received either from manufacturers or retailers of Christmas cards that unacceptable hardship would be caused by the abolition of Purchase Tax on Christmas cards sold by charitable organisations". The right hon. Gentleman replied: None"—[OFFICIAL REPORT, 28th February, 1967; Vol. 741, c. 57.] They might claim that they were being unfairly discriminated against, but they could not seriously claim that there was any great hardship.

The other argument is that the price of Christmas cards is set by the price at

which Christmas cards are sold generally in the trade. As one of my hon. Friends pointed out, charities are as anxious as anybody else to maximise the profits which they earn from this activity. Nobody could seriously suggest that they would put this at risk by undercutting the trade and by selling Christmas cards for a lower price than that which the public would pay in the ordinary way, so reducing their profits.

Mr. Woodburn

Does not the hon. Member realise that a manufacturer might promote a charity merely to get orders for Christmas cards although he would be doing it for business purposes?

Mr. Jenkin

The right hon. Gentleman, if I may say so with respect, has not heard the whole debate. His argument has much the same flavour as that which the Financial Secretary produced when he said that charities next would be dealing in motor cars. That is ridiculous.

The fact that the right hon. Gentleman and the Financial Secretary have to descend to ridiculous cases of this sort to justify their opposition to the Clause indicates the weakness of their argument. I have heard nothing from the Financial Secretary this afternoon that persuades me that we should be wrong to divide in favour of the new Clause. I very much hope that my hon. Friend the Member for Hornsey, who moved the new Clause with great cogency, will press it to a Division, and I certainly advise my right hon. and hon. Friends to support him in the Division Lobby.

Question put, That the Clause be read a Second time:—

The House divided: Ayes 137, Noes 183.

Division No. 378.] AYES [6.8 p.m.
Alison, Michael (Barkston Ash) Burden, F. A. Fisher, Nigel
Allason, James (Hemel Hempstead) Campbell, Cordon Fletcher-Cooke, Charles
Alldritt, Walter Cary, Sir Robert Fortescue, Tim
Astor, John Channon, H. P. G. Gibson-Watt, David
Awdry, Daniel Chichester-Clark, R. Goodhart, Philip
Beamish, Col. Sir Tufton Clegg, Walter Gower, Raymond
Bell, Ronald Cunningham, Sir Knox Hall, John (Wycombe)
Bessell, Peter Currie, G. B. H. Hamilton, Michael (Salisbury)
Black, Sir Cyril Dalkeith, Earl of Harris, Frederic (Croydon, N.W.)
Bossom, Sir Clive Davidson,James(Aberdeenshire, W.) Harvey, Sir Arthur Vere
Boyle, Rt. Hn. Sir Edward d'Avigdor-Goldsmid, Sir Henry Hawkins, Paul
Braddock, Mrs. E. M. Deedes, Rt. Hn. W. F. (Ashford) Heald, Rt. Hn. Sir Lionel
Brinton, Sir Tatton Dodds-Parker, Douglas Higgins, Terence L.
Brooks, Edwin Dunn, James A. Hiley, Joseph
Bruce-Gardyne, J. Elliott, R.W. (N'c'tle-upon-Tyne, N.) Hobson, Rt. Hn. Sir John
Buchanan-Smith, Alick(Angus,N&M) Emery, Peter Hogg, Rt. Hn. Quintin
Buck, Antony (Colchester) Eyre, Reginald Holland, Philip
Bullus, Sir Eric Farr, John Hooson, Emlyn
Hornby, Richard Munro-Lucas-Tooth, Sir Hugh Smith, John
Hunt, John Nabarro, Sir Gerald Steel, David (Roxburgh)
Irvine, Bryant Godman (Rye) Nicholls, Sir Harmar Stoddart-Scott, Col. Sir M. (Ripon)
Jenkin, Patrick (Woodford) Noble, Rt. Hn. Michael Taylor, Sir Charles (Eastbourne)
Jennings, J. C. (Burton) Nott, John Taylor, Edward M.(G'gow,Cathcart)
Johnston, Russell (Inverness) Onslow, Cranley Taylor, Frank (Moss Side)
Jopling, Michael Orr-Ewing, Sir Ian Temple, John M.
Kaberry, Sir Donald Osborn, John (Hallam) Thatcher, Mrs. Margaret
Kimball, Marcus Osborne, Sir Cyril (Louth) Thorpe, Rt. Hn. Jeremy
King, Evelyn (Dorset, S.) Page, Graham (Crosby) Tifney, John
Lancaster, Col. C. G. Page, John (Harrow, W.) Turton, Rt. Hn. R. H.
Langford-Holt, Sir John Pearson, Sir Frank (Clitheroe) van Straubenzee, W. R.
Lloyd, Ian (P'tsm'th, Langstone) Peel, John Wainwright, Richard (Come Valley)
Longden, Gilbert Percival, Ian Walters, Dennis
Lubbock, Eric Peyton, John Ward, Dame Irene
McAdden, Sir Stephen Pike, Miss Mervyn Weatherill, Bernard
MacArthur, Ian Pink, R. Bonner Webster, David
Macleod, Rt. Hn. lain Pounder, Rafton Wells, John (Maidstone)
McMaster, Stanley Powell, Rt. Hn. J. Enoch Whitelaw, Rt. Hn. William
Mawby, Ray Prior, J. M. L. Wills, Sir Gerald (Bridgwater)
Maydon, Lt.-Cmdr. S. L. C. Pym, Francis Wilson, Geoffrey (Truro)
Mills, Peter (Torrington) Ridley, Hn. Nicholas Winstanley, Dr. M. P.
Mills, Stratton (Belfast, N.) Ridsdale, Julian Wolrige-Gordon, Patrick
Miscampbell, Norman Rossi, Hugh (Hornsey) Wood, Rt. Hn. Richard
Mitchell, David (Basingstoke) Russell, Sir Ronald Worsley, Marcus
Monro, Hector Scott, Nicholas
Montgomery, Fergus Sharples, Richard TELLERS FOR THE AYES:
Morgan, Geraint (Denbigh) Shaw, Michael (Sc'b'gh & Whitby) Mr. Jasper More and
Morrison, Charles (Devizes) Sinclair, Sir George Mr. Anthony Grant.
Abee, Leo Eadie, Alex Macdonald, A. H.
Allaun, Frank (Salford, E.) Edwards, Rt. Hn. Ness (Caerphilly) McGuire, Michael
Anderson, Donald Ellis, John Mackenzie, Gregor (Rutherglen)
Archer, Peter English, Michael Mackintosh, John P.
Armstrong, Ernest Ennals, David Maclennan, Robert
Ashley, Jack Evans, Ioan L. (Birm'h'm, Yardley) MacMillan, Malcolm (Western Isles)
Atkins, Ronald (Preston, N.) Fernyhough, E. McNamara, J. Kevin
Atkinson, Norman (Tottenham) Finch, Harold MacPherson, Malcolm
Bacon, Rt. Hn. Alice Fitch, Alan (Wigan) Mahon, Peter (Preston, S.)
Bagier, Gordon A. T. Fletcher, Raymond (Ilkeston) Mahon, Simon (Bootle)
Barnett, Joel Foley, Maurice Mallalieu, E. L. (Brigg)
Beaney, Alan Ford, Ben Manuel, Archie
Benee, Cyril Forrester, John Mapp, Charles
Benn, Rt. Hn. Anthony Wedgwood Freeson, Reginald Marquand, David
Bennett, James (G'gow, Bridgeton) Gardner, Tony Marsh, Rt. Hn. Richard
Binns, John Ginsburg, David Mason, Roy
Bishop, E. S. Gourlay, Harry Maxwell, Robert
Blackburn, F. Gray, Dr. Hugh (Yarmouth) Mendelson, J, J.
Blenkinsop, Arthur Grey, Charles (Durham) Millan, Bruce
Booth, Albert Griffiths, David (Rother Valley) Miller, Dr. M. S.
Bowden, Rt. Hn. Herbert Griffiths, Rt. Hn. James (Llanelly) Mitchell, R. C. (S'th'pton, Test)
Brown, Hugh D. (G'gow, Provan) Hale, Leslie (Oldham, W.) Morgan, Elystan (Cardiganshire)
Callaghan, Rt. Hn. James Hamilton, James (Bothwell) Morris, Charles R. (Openshaw)
Cant, R. B. Hamilton, William (Fife, W.) Moyle, Roland
Carmichael, Neil Hannan, William Neal, Harold
Carter-Jones, Lewis Harrison, Walter (Wakefield) Newens, Stan
Castle, Rt. Hn. Barbara Heffer, Eric S. Noel-Baker, Francis (Swindon)
Chapman, Donald Henig, Stanley Noel-Baker, Rt. Hn. Philip (Derby, S.)
Coleman, Donald Hooley, Frank Norwood, Christopher
Concannon, J. D. Houghton, Rt. Hn. Douglas Oakes, Gordon
Conlan Bernard Howarth, Robert (Bolton, E.) Orbach, Maurice
Craddock, George (Bradford, S.) Huckfield, L. Orme, Stanley
Crawshaw, Richard Hughes, Emrys (Ayrshire, S.) Oswald, Thomas
Crosland, Rt. Hn. Anthony Hynd, John Owen, Dr. David (Plymouth, S'tn)
Crossman, Rt. Hn. Richard Jenkins, Hugh (Putney) Palmer, Arthur
Cullen, Mrs. Alice Johnson, James (K'ston-on-Hull, W.) Panned, Rt. Hn. Charles
Dalyell, Tam Jones, Dan (Burnley) Park, Trevor
Davidson, Arthur (Accrington) Jones, J. Idwal (Wrexham) Parkyn, Brian (Bedford)
Davies, Dr. Ernest (Stratford) Jones, T. Alec (Rhondda, West) Pearson, Arthur (Pontypridd)
Davies, G. Elfed (Rhondda, E.) Kerr, Russell (Feltham) Pentland, Norman
Davies, Ednyfed Hudson (Conway) Lawson, George Price, Thomas (Westhoughton)
Davies, Ifor (Gower) Lee, John (Reading) Price, William (Rugby)
Davies, S. O. (Merthyr) Lever, Harold (Cheetham) Rankin, John
de Freitas, Rt. Hn, Sir Geoffrey Lewis, Arthur (W. Ham, N.) Rhodes, Geoffrey
Delargy, Hugh Lipton, Marcus Roberts, Albert (Normanton)
Dell, Edmund Lomas, Kenneth Robertson, John (Paisley)
Dempsey, James Loughlin, Charles Rogers, George (Kensington, N.)
Diamond, Rt. Hn. John Lyons, Edward (Bradford, E.) Ross, Rt. Hn. William
Dickens, James Mahon, Dr. J. Dickson Rowlands, E. (Cardiff, N.)
Dobson, Ray McBride, Neil Shaw, Arnold (Ilford, S.)
Dunwoody, Mrs. Gwyneth (Exeter) MacColl, James Sheldon, Robert
Dunwoody, Dr. John (F'th & C'b'e) MacDermot, Niall Shore, Peter (Stepney)
Short, Rt. Hn. Edward (N'c'tle-u-Tyne) Thornton, Ernest Williams, Alan (Swansea, W.)
Short, Mrs. Renée (W'hampton, N.E.) Tinn, James Williams, Clifford (Abertillery)
Silkin, Rt. Hn. John (Deptford) Tuck, Raphael Wilton, William (Coventry, S.)
Silverman, Julius (Aston) Varley, Eric G. Winterbottom, R. E.
Silverman, Sydney (Nelson) Wainwright Edwin (Dearne Valley) Woodburn, Rt. Hn. A.
Stater, Joseph Walker, Harold (Doncaster) Woof, Robert
Small, William Wallace, George Yates, Victor
Snow, Julian Watkins, Tudor (Brecon & Radnor)
Steele, Thomas (Dunbartonshire, W.) Wellbeloved, James TELLERS FOR THE NOES:
Swain, Thomas Whitlock, William Mr. Joseph Harper and
Mr. Brian O'Malley.