§ 3.0 p.m.
§ The Minister of State, Treasury (Mr. Terence Higgins)
I beg to move,That the Purchase Tax (No. 2) Order 1970 (S.I. 1970, No. 1544), dated 19th October 1970, a copy of which was laid before this House on 23rd October, be approved.The effect of this Order is to introduce seven minor adjustments of the purchase tax coverage with a view to removing particular anomalies which have become apparent in recent months. Of these seven, five take the form of new reliefs, while two involve increasing the scope of the tax to a minor extent. It is, therefore, right that this Motion should come before the House. It is not desirable to delay miscellaneous items such as these until the next Finance Bill, and the Treasury Order procedure, provided under the Purchase Tax Act 1963, enables us to deal with them as and when action is needed.
Taking the alterations in the order in which they are set out in the Statutory Instrument, the first four items are in the textile field. The House will recall that this was the subject of some adjustment in the Purchase Tax (No. 1) Order 1969, which we debated earlier this year, and further adjustment has since proved necessary.
As regards the first item, abrasive cloth was first exempted with the intention of benefiting material of the kind used in industry. Recently the exemption has been of benefit to the domestic field, so this development has had to be checked. Pot scourers of tax-free abrasive cloth have been sold on the retail market in competition with taxable pot scourers of more traditional materials such as steel wool. The situation parallels that obtaining before the last Purchase Tax Order, when a certain sort of bonded fibre fabric, originally intended for industrial use, was being made into domestic dusters. In that case the solution put forward by the previous Government was to insert the wordsnot put up for retail salein the exemption, and that is what we have done with the exemption for abrasive cloth. I have no reason to suppose that the alteration will cause these domestic articles to lose their 1663 attractiveness for the public. But I am sure the House will agree that we should in all fairness make the alteration so that they compete on an equal footing with the traditional materials. I do not think I need to say more on this point, because it is not a matter of controversy.
The other three alterations to the textile field are reliefs from the tax. The Adhesive Tape Manufacturers Association has made representations that the existing exemption for adhesive cloth tape of the sort used in industry does not cover tape used in the printing industry for the application of rubber stereos to the rollers of rotary printing machines and for the repair of stereos. It is not intended that the tax should bite upon this sort of industrial equipment and we have accordingly made an addition to the exemption, as hon. Members will see from the Order, with a limitation as to the minimum length, which will ensure that the exempt tape is used only for industrial purposes. I understand that the association has welcomed the exemption.
The second relief in the textile field affects acrylic fibre netting. This is a question of treating a technologically improved article on the same basis as the original. I suppose it is true to say that throughout the purchase tax legislation we must keep up with the times in this way. Containers for wrapping round the roots of trees during transportation were originally made of hessian cut into squares. Hessian is exempt from purchase tax as industrial material. A new, longer lasting-material made of 75 per cent. acrylic fibre and 25 per cent. jute was developed, and the acrylic fibre became taxed under the Finance Act, 1969, while the hessian remained exempt. This was clearly a peculiar situation, and the House will recall that these "rootainers" were referred to in the debate on the Purchase Tax (No. 1) Order 1969 which I mentioned a moment or two ago, when the then Financial Secretary gave an undertaking to consider the matter. We have since decided that these hessian-acrylic "rootainers" should be treated on the same basis as the plain hessian ones, and I hope the House will agree that this is an equitable solution.
The third relief in the textile field concerns elastic netting for meat packing. 1664 As in the case of the "rootainers" of hessian and acrylic fibre, we are dealing here with a newly-developed industrial product competing with an older one, in this case it is mutton cloth, which is exempt from the tax under Group 7(2). In these circumstances, again it is clearly right to put the two items on an equal footing, the new article with the traditional one, with a safeguard in the dimensions requirement so that it will not be used for domestic use which it is not intended to exempt.
Perhaps I may now refer to the additional exemption in Group 24, which provides for 70 mm. film projectors. The hon. Gentleman will recall that in a lengthy debate in 1968 in Committee upstairs—I think that it extended from 10.30 a.m. to 8.30 the next morning—we discussed this range of purchase tax coverage at some length. I do not wish to detain the House at this stage in the proceedings on the same scale. Purchase tax was extended to projectors by the 1968 Budget, but 16 mm. projectors were excluded from its scope because they were found to be almost wholly used for instructional purposes This year a 70 mm. film projector which is the core of an instructional scheme has made its appearance, and it is for the benefit of this scheme and potential future development of this kind that we have introduced this additional exemption. I am sure that this will be welcomed by the House, as it removes an anomaly whereby an educational aid was being taxed merely because its technical specification was different from those in use a few years ago.
I now turn to some of the other items. The sixth item affects certain office recording media, and again this was debated at great length on the occasion to which I have referred. The items covered are belts, discs and sheets used in those office recording machines which do not use tape. Tape recorders and prerecorded tapes were brought into the purchase tax net in 1968 as Group 19A. Office instruments are excluded from the tax, and the tapes with them, not being pre-recorded, are also tax-free. Other recording media for tax-free office dictating machines are chargeable under Group 26 as office requisites.
The Business Equipment Trade Association has made representations to us, 1665 and to Customs and Excise, that there are many office recording machines of this type, so that a substantial area of business is being adversely affected. Clearly this is unfair to the systems which use media other than tape, and we have therefore attempted to regularise the position by the new statutory exclusion putting the other media on an equal footing with tape, which will benefit the sale of the machines themselves.
I now come to the second item which involves a minor extension of the scope of the tax, and I believe the House will be right in thinking that we should spell this out a little. This is the removal of the exemption for certain printed paper envelopes. The Post Office printed paper rate was effectively abolished in 1968—only a small residual category remains—and the basis of the purchase tax exemption has therefore disappeared, because the system of printed paper envelopes and rates has itself changed.
The envelope manufacturers have long known that the exemption must in due course disappear, so they have had an opportunity to adjust product and run down stocks. But I understand that, as the precise timing of the change could not be made public in advance of the laying of the Order before the House, there is a problem in disposing of residual stocks. The situation is unique, because the special non-adhesive closure envelopes which were used for the purpose I have mentioned are more expensive to produce than the ordinary sort, and it is not expected that anyone would want to continue to buy them on a tax-paid basis. We have a problem there, and in a sense the withdrawal of the exemption is to signal their disappearance, not, as it would usually be, to impose tax on a new class of goods. On the one hand, there is a string of technological innovations which we seek to cover in the Order, and, on the other hand, there are changes in respect of things which have become obsolete which we are also trying to cover.
Given the timing problem, after consultations with the trade representatives, we have made arrangements to allow the residual stocks to be sold tax free on the understanding that the arrangements will terminate in any case on 1st February, 1971, which is the month in which the 1666 small remaining postal provision which was linked with the paper rate is, I understand, due to disappear. This is an exceptional concession which we have felt it right to make to avoid waste of material which would otherwise occur and impose an unintended financial penalty on the manufacturers.
As is frequently the case with purchase tax matters, these are detailed points, but they are of considerable interest to the industries or firms affected. I shall be happy to deal with any other points raised in the debate, have tried briefly to explain why we feel that the Order should be approved by the House, and I hope that for the reasons I have given the House will approve it.
§ 3.12 p.m.
§ Mr. Joel Barnett (Heywood and Royton)
I am sure that the House will have been fascinated by the Minister of State's explanation. On behalf of the Opposition, I welcome the exemptions and removal of some of the anomalies to which the hon. Gentleman referred. It is a pity that the hon. Member for Worcestershire, South (Sir G. Nabarro) was not present to hear about the removal of some of the anomalies which he has chased for so long. The only trouble is that, although some anomalies have been removed, quite a few others have been created. For example, we are exempting tubular fabric netting for casing sausages provided the lengths are not less than 50 yards. I am not sure why netting of that length should be exempted. I am not clear about the reason for creating this anomaly and the other anomalies in the Order.
I wish to raise one particular point. Is there any significance in the fact that the hon. Gentleman thought it necessary to introduce an Order removing purchase tax anomalies when we understand that it is at least likely that there will be a value-added tax in place of purchase tax in the not too distant future?
§ Mr. Speaker
Order. The hon. Gentleman must resist the temptation to deal with that matter. He was in order about the sausages. He must keep to the Order.
§ Mr. Barnett
I am sure that the Minister knows what I mean, Mr. Speaker.
Is there any significance in the introduction of this Order at this time in the 1667 light of any measures which the Government may have in mind which might affect the Order? As I cannot go into the matter more widely, I will leave it there and simply welcome the exemptions and the removal of some anomalies, even if we have created a few more.
§ Mr. Higgins
I do not think that we are creating further anomalies. I am sure that the hon. Member for Heywood and Royton (Mr. Barnett) will agree that we are right to try to avoid the creation of further anomalies by making the kind of changes which I described.
The minimum length of netting to which the hon. Gentleman referred is exempted to avoid the material being offered separately for domestic use. The intrinsic point is that some of these materials, while being intended for industrial use, can be extended in certain circumstances to domestic use. The abrasive cloth to which I referred is a case in point. It is normally necessary to impose a limitation of this kind because otherwise the tax will not bite where everyone agrees it should bite, and may not give the exemptions which we feel, from an industrial point of view, should be given.
I gather from your intervention, Mr. Speaker, that I should be out of order if I were to attempt to reply to the other point which the hon. Gentleman made.
§ Question put and agreed to.
That the Purchase Tax (No. 2) Order, 1970 (S.I., 1970 No. 1544), dated 19th October, 1970, a copy of which was laid before this House on 23rd October, be approved.