§ 10.8 p.m.
§ The Undersecretary of State for Employment and Productivity (Mr. Roy Hattersley)I beg to move,
That the Selective Employment Payments Variation Order 1968, a draft of which was laid before this House on 30th May, be approved.This is a comparatively simple Order. The Government promised to keep the working of the Selective Employment Tax under review when the tax was introduced in the House two years ago. A number of major modifications in its incidence have already been introduced. This draft Order deals with the activities on which the tax falls as initially defined by the Standard Industrial Classification.178 Under the Standard Industrial Classification, all slaughterhouses are classified under a distributive heading. Most private slaughterhouses have, therefore, borne Selective Employment Tax without refund. Local authority slaughterhouses, however, have been treated like most other local authority services; they always receive payments equivalent to refund of the tax.
My hon. Friend the Member for Willesden, West (Mr. Pavitt), reminding us, as he so often does, of important Co-operative interests, and the hon. Member for Bromsgrove (Mr. Dance) have drawn the attention of the House on many occasions to the anomaly created by this situation. Put simply, it has meant that municipal slaughterhouses have been treated more favourably than those run privately or by Co-operative Societies.
179 The Order provides that licensed private sector slaughterhouses and knackers' yards shall, subject to the usual conditions, be eligible for registration under Section 1 of the Selective Employment Payments Act. As a result, outside the development areas all slaughterhouses, public and private alike, will receive refund of the tax. In development areas, private slaughterhouses will receive the regional employment premium.
The second change made by the Order is intended to remedy another anomaly. Under a decision taken in another place, the testing of goods for manufacturers is eligible, as part of the manufacturing process, for refund of the tax under Section 1 of the Act. However, an earlier decision affecting Lloyd's Testing House ruled that in another context testing designed to ensure that materials conformed with statute laid down by Act of Parliament was not itself manufacture. An industrial tribunal subsequently applied this ruling to Selective Employment Tax. It is clearly right that the two forms of testing should be on the same basis and the Order achieves that result. Both types of testing will be treated as part of the manufacturing process.
The cost of these two changes will be about £650,000 in a full year at the proposed new rate of tax, which comes into effect on 2nd September. The Order is not and cannot be retrospective. My right hon. Friend proposes that these changes should take place at the earliest possible opportunity and, subject to the approval of the House, they will be effective on 5th August.
Article 3 of the Order is designed to simplify the arrangements by which refunds on the tax are made to certain charities and local authorities. Section 2 of the Act makes the Minister of Agriculture responsible for making payments to agricultural charities. From 2nd September, that responsibility will be 180 taken over by my right hon. Friend. Charities will then receive all their refunds from a single source. At the same time, the Department of Employment and Productivity will relinquish its powers to make certain payments relating to activities falling under the Standard Industrial Classification headings listed in Section 2 of the Act to local authorities in Scotland and in England and Wales, and that duty will be taken over by the Minister of Housing and Local Government in England and by the appropriate Secretary of State in Scotland and in Wales. The net effect of this part of the Order is that charities and local authorities will then receive refund from one Government Department rather than two.
Some changes in the Selective Employment Tax classification have, of course, already been made as a result of decisions by industrial tribunals or higher courts. My Department has frequently advised that classification should be tested in this way and there have been numerous occasions on which, the first test having shown the equity of reclassification, the Government have accepted that judgment without mounting the appeal which is open to us. The general question of classification of particular activities for S.E.T. purposes will be kept under review.
§ Mr. SpeakerThe Minister must not widen the debate on his own Order.
§ Mr. HattersleyTonight, I simply ask the House for approval to a specific but important reclassification embodied in the Order.
§ Question put and agreed to.