SELECTIVE EMPLOYMENT TAX AMENDMENT (Hansard, 17 March 1970)

§ Mr. Stanley R. McMaster (Belfast, East)

I beg to move, That leave be given to bring in a Bill to provide for the amendment of selective employment tax in regions of high unemployment; and for purposes connected therewith. The selective employment tax, introduced in 1966, is a thoroughly bad tax. It was set out in the Budget speech by the then Chancellor of the Exchequer, now the Home Secretary, that men should pay the tax at the rate of 25s. and women and boys at half that rate. The rate was increased in 1968 by some 50 per cent. and was further increased in the 1969 Budget to a rate almost double that of the original imposition, becoming for men 48s., for women and boys 24s., and for girls 16s.

The tax now yields a substantial revenue to the Treasury. The gross yield for the year 1968–69 was some £1,363 million, which, after repayments, gave a net yield of some £430 million. It is estimated that during the current year, 1969–70, the gross yield will have increased to £1,920 million, giving a net yield of £606 million. This is a substantial contribution to the Treasury.

But the main purpose of the tax, as set out in the original White Paper and stated in this House, was that of encouraging a shift of employment from service to manufacturing industries and thus to encourage exports and to stimulate economic growth. It is clear that the tax is biased against the service industries, and, indeed, reflects a bias originally found in Adam Smith and which occurs amongst others in the theories and ideas of Professor Kaldor. However, the effect of the tax on our economy, as is made clear in the report just published by Professor Reddaway, is apparently very marginal. He says that it has perhaps accelerated the changeover to self-service in the retail trade and he remarks, on page 211, that this transfer to self-service and greater productivity in the retail trade was taking place anyway and that all that has happened—and he underlined the qualification—is that this has been speeded up a little. It has led to a reduction in the numbers of certain part-time 218 employees who would have been subject to the tax, but otherwise this long and carefully documented report, which is supported by many tables of statistics, seems to show that it is clearly undesirable that such a tax as S.E.T. should apply in areas of high unemployment.

I should like to mention particular reasons why this Bill has been framed in order to exempt development areas and Northern Ireland from the effects of the tax. First of all, in these areas unempolyment over the past five or six years, has remained alarmingly high. Economic growth has been seriously retarded and, as a result, social reforms, improvements in housing conditions, slum clearance and other welfare work which is long overdue in these areas has been impeded. In Northern Ireland, the tax yielded last year some £37 million and in the coming year it is estimated it will yield some £41 million. Speaking for my own part of the United Kingdom, this economic depression has contributed substantially to the political disturbances and the civil disorder which have filled the headlines of the national Press since last August. This has led to a joint communiqué being issued by the Northern Ireland and United Kingdom Governments, and to statements in this House, whereby the United Kingdom Government pledged themselves to help Northern Ierland meet these social problems which, I submit, are the background which have contributed to the current unrest in Ulster.

I would submit that this tax is unnecessary in such an area. If the tax is still designed, as was stated originally, to assist manufacturing industries by leading to a transfer of employment from service industries, then clearly it is not necessary in an area where already there is heavy unemployment and there is no shortage of labour. The tax, in effect, is counterproductive in that by leading to a reduction of employment in service industries and general stagnation of the economy it increases unemployment in this area. Indeed, S.E.T. bears particularly heavily on remote areas of the United Kingdom because these areas are very dependent on the transport of goods. A tax which falls not only on service but also on transport industries bears more heavily on areas where one would expect it to bear less.

219 I wish to submit, therefore, that S.E.T. might be made truly selective, not perhaps in the sense originally stated by the Government, but in the sense that as between regions of this country the tax should be remitted in order to encourage those areas to develop and share in the general prosperity throughout the country. It is for these reasons that I submit this Bill to the House.