SELECTIVE EMPLOYMENT PAYMENTS

HC Deb 17 July 1969 vol 787 cc1047-57

10.45 p.m.

The Chancellor of the Exchequer (Mr. Roy Jenkins)

I beg to move Amendment No. 143, in page 65, line 34, leave out subsection (5).

This Amendment arises from the undertaking given by my hon. and learned Friend the Minister of State during the Committee stage to look again at the effects of this subsection. The Government's reasons for originally inserting the subsection were, first, the reclassification of milk processing as a manufacturing industry in the 1968 Edition of the Standard Industrial Classification which, under Clause 45(3) of the Bill, is adopted for purposes of selective employment tax. That reclassification will, in itself, reduce the yield of S.E.T. by£ 1½ million in a full year and will also cost about £250,000 in R.E.P.

The second reason for putting in this subsection was that it was probable, but not certain, that, as a result of the earlier reclassification, associated transport and distribution establishments owned by processing companies would also be exempt. To avoid this, special provision was needed and was made by the subsection we are seeking to delete.

During the Committee stage, some of my hon. Friends associated with the Cooperative movement and right hon. and hon. Gentlemen opposite opposed this principle on the following grounds: first, that milk was an essential food and its distribution an essential service and that this subsection would make it difficult to maintain this service; and, secondly, that the subsection discriminated against the milk industry by singling it out instead of allowing it to be dealt with in the normal S.E.T. groups.

Bearing in mind the arguments from both sides of the Committee, the Gov- ernment reconsidered the matter. In outlining the various factors in that reconsideration, I need not argue the case for the subsection which was considerable, not least because the cost of the concession is £7 to £8 million a year. Nevertheless, especially in view of the representations put to me by my hon. Friends in the Co-operative group, I accept that it would not be right deliberately to enforce special treatment, which would be involved in this subsection, for milk processors.

It is better to look at the whole problem when we have Professor Reddaway's report. In the meantime, we propose to withdraw the subsection and to treat milk roundsmen in the same way as bread and soft drink salesmen engaged in the distribution of these goods; and an establishment of milk processors including distribution depots will be eligible for refunding of tax, provided that they satisfy the normal tests.

This is intended as a temporary measure until the position can be comprehensively reviewed in the light of the Reddaway report. Accordingly, I must reserve the right to reverse the position, conceivably for all delivery workers, if that should turn out, in the light of the report, to be the best long-term solution. I hope that hon. Members on both sides will agree that the Government, by bringing forward this Amendment, of considerable significance in its revenue effects, have fully carried out my hon. and learned Friend's undertaking in Committee.

Hon. Members, possibly again on both sides, will also be glad to know the decision I announced today in a reply to a Question by my hon. Friend the Member for Dundee, West (Mr. Doig), that electricity and gas board showrooms shall cease to rank for refund of S.E.T.

Mr. Higgins

The Chancellor of the Exchequer has just made an extraordinary statement on this Amendment which seems to be entirely irrelevant, though directly relevant to another Amendment on the Notice Paper. Is it not strange to do that rather than suggest that, perhaps, that other Amendment should have his name added to it and be debated?

Mr. Jenkins

No, it is not necessary. I was hoping that you, Mr. Deputy Speaker, would accept a passing reference to that associated point. It does not require an Amendment to the Bill. It does not require to be legislated upon; it can be done by reclassification Order, which is the best and most convenient way to do it. But, as this is the only Amendment selected on S.E.T., I thought it reasonable to mention the point in passing.

The withdrawal of this subsection gets us over one problem, but there is also the continuing difficulty that those whom are now exempting from S.E.T., like all employers who are exempt—this is a general point—are obliged under the present arrangements to pay the tax and then apply for refund later on. I see no practical way of overcoming that in the immediate future, though the problem should disappear with the introduction of the earnings-related national insurance scheme, when national insurance contributions and S.E.T. will be collected by the Inland Revenue through the P.A.Y.E. machinery.

Mr. Alison

The Chancellor has just kindly announced an Amendment the fiscal effect of which will deprive him in this financial year of £7 to £8 million. He tells us that this is only a temporary measure, and he is doing it so that the Reddaway Committee and other specialist bodies concerned with investigating changes in taxation should have opportunity to consider the matter and make pronouncements.

It will be within the recollection of the House that the many long and agonising hours which we here and others affected outside spent in considering his proposals for the disallowance of interest on borrowing were concerned with exactly that sum of £7 or £8 million in this financial year. [Interruption.] My impression was that the right hon. Gentleman said in his Budget speech that it would yield £7 or £8 million this financial year and £25 million in a full year.

Would it not have saved the Committee and the House an enormous amount of time if the Chancellor of the Exchequer had a great deal earlier made exactly the same announcement about Clauses 18 and 19—

Mr. Deputy Speaker

Order. The hon. Gentleman must not refer to debates on the Bill which have already been concluded.

Mr. Alison

I relate it to the factor of £7 million or £8 million, Mr. Deputy Speaker, which I am sure is in order. We are discussing the possibility of docking the Revenue of that amount at short notice. The Chancellor will not fail to appreciate the significance of that sum in the context of other fiscal measures. Would it not have been more satisfactory if he gave greater priority to a sum such as this affecting other parts of the Budget, which would have made a great difference to people both inside and outside the House and helped the House to consider some of these matters, as the Reddaway Committee is considering S.E.T., to see whether disallowance of interest on borrowed money should be treated in the same way?

Mr. Alfred Morris (Manchester, Wythenshawe)

I declare my interest in this matter as a Co-operative-sponsored Member of Parliament. My right hon. Friend has been kind in his references to the persuasive advocacy of the Co-operative Parliamentary Group. We gratefully acknowledge his tribute to our efforts in this important matter.

The Amendment is welcome to the Co-operative movement. Our view is that taxation of essential foods is taxation of needs, not of means, and is often calculated to harm the interests of the poorer sections of the community.

The Co-operative Parliamentary Group argued strongly the case for this Amendment. We also argued against the inequity of excluding the nationalised industries from the payment of selective employment tax in respect of their showroom staffs. Therefore, we also welcome the decision announced today to remove this inequity. My right hon. Friend is to be congratulated on these two short steps along the road commended to him by the Co-operative movement. But there is still a very long way to go. Those of us in the Co-operative Parliamentary Group very much hope that in the next Finance Bill—

Mr. Deputy Speaker

Order. The hon. Gentleman can only discuss the Amendment. We are not discussing the next Finance Bill.

Mr. Morris

I acknowledge your Ruling, Mr. Deputy Speaker.

I wish to emphasise that I regard these two steps as preliminary steps which, I hope, indicate that we shall soon see the removal of so many other anomalies in the implementation of selective employment tax. I hope that there will be no unavoidable delay in letting us have the Reddaway report.

Mr. Eldon Griffiths (Bury St. Edmunds)

I very much welcome what the Chancellor has said in the spirit of never looking a gift horse in the mouth. But I find it a little odd, to say the least, particularly for those of us who have not had the advantage of sitting on the Committee upstairs, that when these important concessions on S.E.T. are announced they should be made at this hour, at the very end of the Bill. But it would be churlish to do anything other than to welcome what the Chancellor has said.

I note that the right hon. Gentleman says that the concession in respect of the milk roundsmen may be temporary, and that after the publication of the Reddaway report he may be constrained to put the S.E.T. back, or even put it up. For all that, the concession is welcome, but I hope that the right hon. Gentleman is not saying that he has given in to the blandishments of the Co-operative movement solely.

When the matter was discussed earlier I among others argued very strongly for this to be done. I argued as one representing a rural area where the problem is very severe, and instanced a number of cases, as did some of my hon. Friends representing other remote rural constituencies, showing that it is a very real problem for those living in remote villages, whether S.E.T. has resulted in there being no deliveries at all. People have found themselves cut off from milk supplies from, among others in my constituency, the Co-operative movement.

I hope that now that this concession has been made those who felt it necessary to stop delivering milk to rural areas will start delivering again. It would not be enough if as a result of this concession they simply managed not to lose as much money, or perhaps to make a little more. With this concession they owe it to their customers to carry out what I take to be the Chancellor's intention, that they should resume their deliveries to remote rural areas.

I am sure that that is what he has in mind for many country constituencies. and this will be very welcome.

Mr. Michael Shaw (Scarborough and Whitby)

I echo the words of my hon. Friends about the way in which the announcement about the sales staff at the gas and electricity showrooms was made. I find it extraordinary and undesirable that we are debating the subject tonight on the Finance Bill. We have an Amendment that is in order on the Notice Paper. which could have been accepted for debate on the Chancellor's request, and yet that occasion is not chosen to announce this change in the law, but it is done by a Written Answer—

11.0 p.m.

Mr. Deputy Speaker

Order. We have left that aspect. We cannot discuss gas and electricity showrooms on this Amendment. The Chancellor made an incidental reference to them and I will allow other hon. Members to do the same, but not at length.

Mr. Shaw

Incidentally, then, Mr. Deputy Speaker, I voice my displeasure and distress at the way in which this has been done.

Mr. Robert Cooke

I shall not mention gas and electricity show rooms, because that is not the point I wish to raise. I have a serious point which I hope the Chancellor will consider. He said that it would eventually be possible to avoid the situation in which S.E.T. has to be paid by people who are automatically to get it refunded. I hope that he will contemplate this matter, because he might be able to say something helpful to us on the problem.

The right hon. Gentleman referred to the immediate possibility—I am not sure how immediate—under a new system of tax collection whereby it will be possible not to have to pay S.E.T. on employees in respect of whom it will automatically be refunded. The present situation is unsatisfactory.

If one plays the game, one pays S.E.T., thus lending money to the Government for quite a long time before getting it back, such as in the case of agricultural workers. Six months could elapse. When the time comes to claim back the tax, a month or six weeks go by before the money is refunded. But there is a built-in incentive not to play the game.

Mr. Deputy Speaker

Order. The hon. Gentleman is discussing an aspect of S.E.T. that is not in order on this Amendment.

Mr. Cooke

That is why I was about to bring my remarks to a close, Mr. Deputy Speaker, and give the Chancellor another opportunity to refer to it incidentally.

If one does not stick to the rules, one can claim for S.E.T. which one has not paid in order to get money to put the stamps on the card. No one knows whether one has stuck the stamps on or not. The man who plays the game lends the money to the Government; the man who does not play the game does not pay the money but claims a refund. When will it be possible in the case of those who automatically get an exemption—

Mr. Deputy Speaker

Order. The hon. Gentleman is pursuing that argument despite the Ruling of the Chair.

Mr. Cooke

I bring my remarks to a conclusion with an incidental reference and I hope that the Chancellor will be able to clear up the point and tell us when his proposal will be carried out.

Mr. Patrick Jenkin

It is worth making the point that this is the only opportunity we shall have had on Report of even mentioning S.E.T. I make it clear that I make no criticism of the selection of Amendments by Mr. Speaker. I am merely mentioning the fact that this is the only Amendment on which anything has been able to be said about S.E.T. on Report.

On this side and, I have no doubt, on the other side of the House, we continue to get a growing flood of protests following the recent increase in S.E.T. I am sure that those who have voiced these protests will realise that it is not always possible, within the confines of the rules of order, for us to give vent to them immediately across the Floor of the House.

Of course, we welcome the concession on milk roundsmen. I reiterate that it was always a nonsense that they should be regarded as salesmen and not as transport workers, like virtually every other delivery man. When my hon. Friend the Member for Oswestry (Mr. Biffen) moved an Amendment in Committee which would have had exactly the same effect as this one, there was a manifestly strong feeling on both sides that it was high time that a ridiculous anomaly was removed. It is right to express our thanks to the Chancellor for that.

It may be a little jejune of him and slightly naive of the hon. Member for Manchester, Wythenshawe (Mr. Alfred Morris) to claim for the Co-operative movement the whole of the credit for this. Protests have come from far wider afield than that. I would be more impressed if the representatives of the Cooperative movement in the House had used their power to vote as a block with the Opposition to defeat Clause after Clause on S.E.T.

Mr. Alfred Morris

I do not wish to be out of order, but have to say that there has been a great deal of hypocrisy among hon. Members opposite on this matter. They do not attack S.E.T. because they are against indirect taxation. On the contrary, they are asking for the biggest ever increases in indirect taxation by the introduction of the value-added tax. They should stop misleading the electorate.

Mr. Patrick Jenkin

It would be out of order to comment on that, but I have already asked the hon. Member to accept that a value-added tax which excluded food would tax food less than does S.E.T. which taxes the whole of the distribution of food.

Finally, I should like to make a passing reference, but only a passing reference, to the gas and electricity showrooms. We regard it as a very sly manoeuvre that this should have been slipped into the debate, particularly, as my hon. Friend the Member for Scarborough and Whitby (Mr. Michael Shaw) said, when for some days we have had on the Notice Paper an Amendment which would achieve exactly that.

Many people will be dismayed that the Chancellor should have said that the concession may be only temporary and that he may have to reconsider it in the light of Professor Reddaway's report. It will come as no surprise to the Minister of State, although it may to the Chancellor, to hear that there is increasing scepticism in the House and in the country about Professor Reddaway's report. We were told the other day that his report was substantially to cover only the figures of firms embodying the original charge to S.E.T. and that only relatively little account was to be taken of last year's 50 per cent. increase and no account whatever of this year's 28 per cent. increase. The value of anything that Professor Reddaway may produce is correspondingly diminished.

Increasingly, I am forced to the conclusion that this is no more than an excuse to try to put off some of the right hon. Gentleman's more gullible Cooperative hon. Friends from challenging selective employment tax all along the line.

Mr. Eldon Griffiths

Would it not in any event be quite wrong if the Chancellor were to admit that it was the result of pressure from one group? Have we not had far too many examples of the Government giving way to particular interested groups?

Mr. Patrick Jenkin

I entirely take the point. I do not think that I need say more. We recognise that the Chancellor has made a concession for which both sides of the House have pressed for a long time and we welcome it, but we protest at the manner in which the Chancellor slipped in the gas and electricity showrooms.

Mr. Roy Jenkins

I welcome the somewhat varying degrees of graciousness with which the concession has been received. I am grateful to my hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris) and, to a substantial extent, to the hon. Member for Bury St. Edmunds (Mr. Eldon Griffiths), and I endorse what he said at the end of his speech about rural milk distribution.

The hon. Member for Barkston Ash (Mr. Alison) addressed a slightly confused argument to the House, and it was an argument which had doubtful validity for the future. It was that if we made this Amendment, for which he pressed in Committee, why should we not do so in another case at the same amount. It is unwise to advance that argument as it is rather liable to make Governments less anxious to make Amendments that he supports. It is also the case that the demand effect of this Amendment, like that of most of the taxation changes, is somewhat less than the financial effect, whereas the demand effect of the Amendment on bank interest is substantially larger and it would substantially reduce revenue in the forthcoming year.

The hon. Member for Bury St. Edmunds made the rather surprising point as to why I had introduced this Amendment at this late stage on Report. It would have been rather odd if I had tried to introduce it to Clause 5 or Clause 6, and the fact that this subject fell to be debated at a late stage is something which it would have been rather difficult to avoid.

The hon. Member for Scarborough and Whitby (Mr. Michael Shaw), in a brief speech, made a substantial point about gas and electricity salesrooms issue being done in this way, whereas clearly the proper thing to have done would have been to have accented Amendment No. 76. The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) got rather excited about this and talked about "sly manoeuvres". I think that he really does use rather hyperbolic language sometimes. May I tell him that we did not do it by Amendment No. 76 because it would have been out of order, outside the terms of the Resolution, and, therefore, not possible to accept.

The hon. Gentleman does talk rather foolishly. Is he interested in the substance or the shadow of these things? I met the point in Amendment No. 76, and this, I think, commands the support of both sides of the House. It is extremely foolish to argue about the fact that we did it by Section 9 Order and not by accepting an Amendment which would have been out of order.

Mr. Higgins

I thank the Chancellor for giving way. He is quite mistaken in what he has just said about the Amendment being out of order.

Mr. Robert Cooke

May I ask the right hon. Gentleman, before he sits down—

Mr. Deputy Speaker (Mr. Harry Gourlay)

Order. The right hon. Gentleman has resumed his seat. We are on Report stage, not in Committee.

Mr. Cooke

Perhaps with the leave of the House I might just ask the Chancellor this question—

Mr. Deputy Speaker

Order. I have said that the Chancellor has resumed his seat.

Mr. Robert Cooke

rose—

Sir Glover

On a point of order, Mr. Deputy Speaker. Cannot my hon. Friend the Member for Bristol, West (Mr. Robert Cooke) speak again with the leave of the House?

Mr. Deputy Speaker

If the hon. Gentleman is seeking the leave of the House, and leave is granted, by all means. But it is not customary to do so.

Mr. Robert Cooke

On a point of order. Before I get into more trouble, may I say that I did preface my remarks by asking whether I might just put a question to the Chancellor. There is no attempt to cheat, or in any way to get round the rules. I did inquire whether, with the leave of the House, I could ask the Chancellor—

Mr. Deputy Speaker

Order. I understand the Chancellor had resumed his seat, and that, therefore, it would not be in order for the hon. Gentleman to ask the question. He has asked the leave of the House, but as I recollect it, objection was taken.

Mr. Roy Jenkins

If it is of any help, Mr. Deputy Speaker, I am prepared to take the view that I only very tentatively resumed my seat.

Mr. Robert Cooke

Perhaps now, before the Chancellor has finally sat down, I could ask him the question about those people who are bound to get a refund of S.E.T. It is those who stick to the law who are at a disadvantage.

Mr. Jenkins

I do not propose to go into that. What I would propose to do is to say to the hon. Member for Worthing (Mr. Higgins) that I am most firmly informed that Amendment No. 76 is out of order, and was ruled so to be by the authorities of the House.

Amendment agreed to.