§ I come now to Purchase Tax. The present rates, inclusive of the Regulator surcharge, are 13¾ per cent. on clothing, furniture, and certain other household goods; 22 per cent. on confectionery, soft drinks, and ice cream; 36¾ per cent. on cars, household durables, and various other goods; and 55 per cent. on a range of luxury or other less essential goods such as furs and jewellery.
§ For all these rates I propose no change. The Regulator surcharge will simply be incorporated into the standard rates. This obviously has the disadvantage of leaving 1023 us with awkward fractions for two of the rates. Had I been able to afford the revenue, I would have rounded them down. But this would have cost £23 million, more than twice the yield of the wine increase, without much noticeable effect in the shops. The alternative would have been to round them up, but this I rejected even more firmly, despite the revenue temptation. This year, we have been mercifully free of anticipatory buying. I wish to fortify this display of good sense on the part of the public. They should not be encouraged to expect an automatic increase as Budget Day approaches. In fact, I was more likely to make a slight reduction of these two rates this year. But, on a balance of all the considerations, I decided to go for rate stability, despite the slight arithmetical inconvenience which this involves.
§ I do not, however, believe that these considerations apply to some broadening of the base of Purchase Tax, particularly as there are at present considerable anomalies in the coverage of the tax. Some goods are not charged which are closely analogous to others which are. Plastic wall covering, the use of which has grown rapidly, is not taxed but wallpaper is. Paradoxically, paper handkerchiefs are not taxed but linen and cotton ones are. To put the point more generally, I do not think that the distinction between floor coverings, mattresses, cushions, furniture and clothing—which are taxed—and household textiles and cloth—which are not taxed—is a valid one. I therefore propose to bring in the latter category, as well as plastic wall-covering, knitting wool and sewing and dressmaking requisites, and paper table-ware and handkerchiefs, at the lowest rate of 13¾ per cent. Full details are given in the Budget Report. The yield will be £30 million in a full year.
§ Household textiles and cloth were exempted from Purchase Tax in 1955 and 1958 in the interests of particular regional industries. But this was at best a crude way of fostering regional development—expensive to the revenue and uncertain in its effects—and we now have more direct and appropriate ways of doing this. It is also the case that much of the benefit has gone to imports.
§ Confectionery, soft drinks and ice cream are now taxed at 22 per cent. I propose 1024 to extend this rate to potato crisps, as well as salted or roasted nuts. I also propose to bring prepared pet foods—widely advertised, no doubt apreciated, but not an essential means of feeding a pet—into tax at the same rate. These two groups, details of which are also set out in the Budget Report, are estimated to bring in an extra £22 million in a full year.
§ For administrative reasons the extensions of coverage will not operate until 27th May. The effect of all these changes in Purchase Tax will be an increase in revenue estimated at £26 million in 1969–70 and £52 million in a full year. I must not disguise from the House that I have been attracted by the revenue and not merely by the prospect of ending some anomalies.