RATES OF PURCHASE TAX

HC Deb 20 May 1971 vol 817 cc1607-53

Purchase tax shall in future be charged at 10 per cent., 15 per cent., 30 per cent. and 50 per cent., respectively, on all goods to which the present rate of l3i per cent., 22 per cent., 36 per cent. and 55 per cent. apply.—[Mr. Roy Jenkins.]

Brought up, and read the First time.

Mr. Roy Jenkins (Birmingham, Stechford)

I beg to move, That the Clause be read a Second time.

The Temporary Chairman (Mrs. Lena Jeger)

With this Clause we may discuss new Clause 1—Purchase tax (22 per cent. rate) and new Clause 2—Purchase tax (36⅔ per cent. rate).

Sir G. Nabarro

On a point of order, Mrs. Jeger. Will you be good enough to answer this point of order now? There is some contradistinction between new Clause 1, new Clause 2 and new Clause 4. Is it permissible to have separate Divisions on each of them?

The Temporary Chairman

No. New Clause 4 has been selected for a Division. There will not be Divisions on the other new Clauses.

Mr. Leslie Spriggs (St. Helens)

On a point of order, Mrs. Jeger. I have tabled an Amendment to new Clause 4. Am I to understand that you will call my Amendment?

The Temporary Chairman

I am sorry to inform the hon. Gentleman that his Amendment has not been selected.

Sir G. Nabarro

Further to that point of order. Although the hon. Gentleman's Amendment is not selected, is not it the fact, in deference to the wishes of the hon. Gentleman, that my new Clause which seeks to reduce purchase tax from 22 per cent. to 20 per cent. also covers pet foods, which at present stand at 22 per cent.? Therefore, will not the hon. Gentleman be able to make his speech on my new Clause?

The Temporay Chairman

The Chair is not concerned with the wishes of either hon. Gentlemen. These are matters for debate.

Sir G. Nabarro

I simply wanted to put you right.

Mr. Jenkins

The effect of the Clause would be to reduce all purchase tax rates: that which at present stands at 13¾ per cent. to 10 per cent., that which at present stands at 22 per cent. to 15 per cent., that which at present stands at 36⅔ per cent. to 30 per cent., and that which at present stands at 55 per cent. to 50 per cent.

I have calculated that the direct cost of these reductions, if it were assumed that there were no change in the volume of goods purchased, which is clearly a false assumption, would be £315 million. But, by what cannot be an absolutely accurate calculation of the cost, allowing for certain elasticities of demand and allowing for different ones at different rates, I estimate the cost at £207 million. Therefore, the cost on the less likely assumption would not be more than the cost of the S.E.T. cut, which is £290 million, and, on the more likely, that it would be a little less than the S.E.T. cut.

I mention this in relation to S.E.T. because, as the Committee will be aware, we on this side have taken the view throughout our discussions on the Budget and on Second Reading that, given the right hon. Gentleman's Budget judgment, he would have done better to have proceeded against purchase tax rather than against S.E.T. I shall explain the main reasons why we take that view. First, the effect would have been far greater on prices. The effect of the Clause on the retail price index would be 1.2 per cent. The effect on the consumer price index would be about 1 per cent., and this must be admitted to be a slightly more valid basis of comparison if one is pursuing the S.E.T. argument, because clearly one must look at the consumer index to see the full effect of S.E.T., since this includes services to a greater extent.

On the other hand, it appears that the price effect of the S.E.T. concession can be varyingly calculated at between 0.3 per cent. and 0.6 per cent., according to the assumptions that one makes about how much of the reduction is passed on directly in price reductions, how much is used to increase profit margins, and how much is used to increase employment. But all three effects cannot take place to the full extent at the same time and, to the extent that the latter two effects take place, the effect of the S.E.T. cut is likely to be nearer 0.3 per cent. than 0.6 per cent.

There is no doubt that, on any assumptions, the effect of a slightly cheaper cut in purchase tax on prices would have been substantially greater than the effect of the S.E.T. cut which the Chancellor of the Exchequer announced. There can be no doubt that a direct effect on prices would be most beneficial from the point of view of one of our major problems and is bound to be a factor to be taken into account in deciding whether the Chancellor of the Exchequer proceeded in the right direction.

Secondly, the effect of a cut in purchase tax as opposed to a cut in S.E.T. would have been a fairer one. It would have helped more those at the lower end of the scale than the S.E.T. cut. It cannot be denied that a cut which would have been somewhat fairer is badly needed in the general complex of this Budget.

I do not want to exaggerate this point. I hope that I never exaggerate. The make-up of S.E.T. is such that, assuming that the full 0.6 per cent. were passed on in price reductions, which is a big assumption, since this applies both to distribution and all the other industries concerned, about 0.3 per cent, would come from distribution and about 0.3 per cent. from the other industries affected, broadly speaking, the service industries.

The effect of the 0.3 per cent. applied to distribution, from a distributive point of view, would be no different from that of purchase tax. On the food side, it might be regarded as being marginally less regressive. As for the other 0.3 per cent., I have no doubt that that would be substantially more regressive than a cut in purchase tax, because services grow strongly as a country gets richer. One has only to look at the extent to which national income is made up of services in different countries and compare the position in a poor country with that in the United States to see that that is true of individuals or groups of individuals in any country.

Purchase tax is mildly progressive. In other words, one pays in purchase tax a very slightly higher proportion of one's income after direct taxes as one's income increases. According to Economic Trends, the percentages move about in a fluctuating way without any clear pattern from about 2.4 per cent. to 2.9 per cent. between £600 and £2,500, and then up to about 3.2 per cent. when one gets over £3,000. That is why I say I do not exaggerate the effect.

8.0 p.m.

I have no doubt that a cut in purchase tax as opposed to the cut in S.E.T. would not to any overwhelming extent but to a significant extent, apart from the price effect with which I have already dealt, be more beneficial to those at the lower end of the scale.

I turn from that to the speed of the impact. This is why I did not use the word "impact" but the word "effect" at an earlier stage. These calculations of between 3 and 6 per cent. will apply to their full extent only after two years. The purchase tax cut would have applied almost immediately it was announced. It would therefore have had a different degree of impact, apart from the issue of the size of the reduction which could have been effected.

This bears directly on what I believe to be one of the weaknesses of the Budget measures concerning the economic needs of this country. The Chancellor chose to proceed in such a way that the limited concessions which he gave could not come into effect until a substantial time after the Budget, although it was already clear that there was a great deal of unused capacity. It has become clear since that the Budget base was falsely high and that the economy was more depressed in the late winter and early spring months than the Chancellor knew when forming his Budget. That cannot be denied. I do not blame him. It is a hazard with which a Chancellor has to operate. It is also the case that, allowing for seasonal adjustment, unused capacity is continuing to grow.

When we ask what is to be done about it, as the Home Secretary in his capacity as acting Prime Minister was asked today and as the Chancellor was asked on Tuesday, we are constantly told that we must wait for the right hon. Gentleman's Budget measures to have their effect. It is his own fault that we have to wait for them to have their effect. He could have chosen Budget measures which would have had their effect immediately and could have been far more expertly tailored to the needs of the situation.

There is a further difficulty. The Chancellor cannot know with certainty how strongly those Budget measures will come through. It is not always easy to estimate these things with accuracy. Furthermore, he cannot know with what kind of situation he will be confronted when they do come through. He may at that time be confronted with a more deflationary situation than at present.

This may be so from three points of view. There is no indication of any pickup in investment. One merely has to look at the sorry tale emerging from the machine tool industry to realise how serious the situation is. Exports in volume have been very disappointing recently. From a price point of view, the position has been somewhat disguised, but in volume the situation is disappointing. I think that it is below the Chancellor's hopes and expectations. I hope that this trend will alter. It has not yet altered, and I doubt whether there is any immediate sign of it doing so.

What about consumption? The Chancellor tells us—I do not know with how much conviction, but this is what he said at a dinner a night or two ago—that the rate of increase in the level of wage settlements and earnings is being reduced. I expect that to some extent this was based on taking a slightly exceptional month. However, there may have been some reduction. Indeed, it is possible that earnings are not increasing significantly faster than prices. It is even possible that they may be increasing a little more slowly. But there is no increase in real earnings going on at the moment. If so, this is extremely significant from the point of view of the management of the economy.

If the Chancellor is right in his predictions and he is able to reduce the level of wage increases further, and if he is not going to take any special measures against prices—price increases will go on, whatever happens to wage increases, I should say for the rest of the year at a rate of nearly 10 per cent.—we may get a fall in real earnings during the rest of the year. This is one difficulty of moving from a situation in which both prices and wages are moving at a fast rate. If that happens a strong new deflationary factor will come in on top of the great deal of unused capacity and unbalanced on present indications by any support either in investment or exports.

This is a difficult situation. What this adds up to is that, both on the internal merits of the alternative methods of tax reduction and on their relationship to the needs of the economic situation, the Chancellor would have been better advised to have accepted something along the lines of the new Clause at the time of the Budget. I believe that the situation is such that, by means of the regulator, perhaps, he will have to do something like the new Clause seeks to do within the next six months. Therefore, it would have been better if he had done this before—it would be better if he accepted the new Clause in the Finance Bill—but he has been prevented from doing this by his doctrinal party attachment to cutting S.E.T., which is a far less suitable weapon.

Sir G. Nabarro

It is always a pleasure to follow the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins). If I do not deal immediately with some of his comments, it is only that I wish to follow my own line and allude to what he said as opportunity permits.

I have set down two new Clauses concerning purchase tax matters, both of which are vehicular in character, in that they will enable me to range over a wide area of indirect taxation.

My attitude to purchase tax reductions in the Budget could not possibly have been stated earlier than on Budget Day, when the Leader of the Opposition was responding to the Budget and made a reference to purchase tax. I should like to quote the exchange which then took place. The Leader of the Opposition was saying: "The hon. Gentleman"—referring to myself— must be very disappointed about purchase tax today. Sir G. NABARRO: Splendid stuff, Harold. Mr. WILSON: There is not even a reduction of purchase tax on the red, white and blue boxer shorts in which, so we read, he sleeps in bed. Sir G. NABARRO: I want to say only one sentence to the right hon. Gentleman. I pause there, because here are the pregnant words: I prefer a promise of an abolition totally of purchase tax in 1973 to a slight reduction in it now, and I am wholeheartedly in favour of a general sales tax or a value-added tax—it is the same thing—which I have always advocated."—[OFFICIAL REPORT, 30th March, 1971; Vol. 814, c. 1403–4.] I am therefore using these two new Clauses as a vehicle for drawing attention today to certain things which I think my right hon. Friend ought to do before 1973 when we switch over completely to the continental system of a value-added tax.

It is no part of my speech today to debate the merits and demerits of a value-added tax, save only to say that, totally without any originality myself in this sphere, I have always advocated a general sales tax or a value-added tax manipulated in a particular fashion to suit our national economic requirements, but largely because a general sales tax or a value-added tax recognises a taxation principle of my own which I have always been anxious to advocate in these circles. It is that in times of peace there is no such thing as a luxury manufactured article. All manufactures contribute to two things: first, the employment of our people and, secondly, the export of British manufactured goods.

It is equally as important to be able to export those articles which are presently taxed at 55 per cent. as to export those articles which are presently taxed at one quarter of that rate, 13¾ per cent. The Socialist idea is that we must try to sort out all the manufactured articles into those which are very luxurious, and tax them at 55 per cent.; those which are not quite so luxurious, and tax them at 36⅔ per cent.; those which are a little less luxurious, and tax them at 27½per cent; those which are slightly less luxurious again, and tax them at 22 per cent.; and those which are not so luxurious, taxing them at 13¾ per cent.; and then let off a whole range of articles, saying that they are essentials and so should not be taxed.

Thus, when my right hon. Friend the Prime Minister buys himself a new oceangoing racing yacht at £20,000, it is not taxed. If a constituent of mine buys himself a plush, expensive caravan costing £2,000, to tow behind his motor car, it is not taxed. But if he prefers to spend his money on a motor car it is taxed at 36⅔ per cent., and if he is so unwise as to prefer a camera it is taxed at 55 per cent., and so on through the whole gamut of manufactured articles.

There is no logical justification for that range of rates. Some faceless boffin and bureaucrat reposing within the fastnesses of the Treasury decided, on an obscure and far-distant date at some time since 1940, when this iniquitous form of taxation, purchase tax, was introduced, that a particular rate should apply to a particular article. There is no logical justification whatever for any differential rates.

But once we are on to a value-added tax in mid-1973—save only perhaps food, save only perhaps fuel and transport, save only these fundamental and critically important commodities or such as perhaps minerals—this type of indirect taxation will apply equally across the whole field of manufacturers so I am led to believe, though it is not beyond the bound of possibility that differing rates of value-added tax may be applicable. I pray that they will not be, that in pursuit of the principle I enunciated a few moments ago all manufactured articles that are taxed will be taxed at an equal rate.

My new Clause 2 is vehicular in Parliamentary purpose and vehicular literally, being to reduce purchase tax from 36⅔ per cent. to 33⅓ per cent., and most of that category comprises motor cars.

Mr. Barber

Vehicles.

Sir G. Nabarro

I am sorry. I was referring to the Clause earlier as vehicular. My right hon. Friend, as always, is perfectly right. Vehicles are concerned.

I propose to talk about motor cars for a few moments. It is significant that the expected level of new registrations of motor cars during 1971 will be about 1,190,000. As we are only just over a third of the way through the year, we cannot make a precise estimate, but that figure was given to me by the Society of Motor Manufacturers and Traders this morning, and it is most likely to be accurate. It is significant that the registration of new cars in 1964 was 1.19 million, so the level of new registrations seven years later will be the same as it was in 1964. Notwithstanding the vast increase in manufacturing capacity for vehicles in this country, notwithstanding the great improvement in production techniques for vehicles in this country, the output is the same in 1971 for the home market as it was in 1964. I do not dispute that there has been an increase in exports.

The best estimate we can make is that the motor industry of Britain, our biggest and most important manufacturing industry, is working today at about 85 per cent. of capacity. This is having a salutary and inflationary effect on costs of production. If an industry is working at only 85 per cent. of production capacity, it follows that the cost per unit rises.

Mr. Taverne

I cannot understand why, in view of what he has now said, the hon. Gentleman described the effect on costs as salutary.

Sir G. Nabarro

Salutary, because it is significant, because it is important, striking.

Mr. Taverne

The hon. Gentleman does not understand what "salutary" means.

8.15 p.m.

Sir G. Nabarro

I said "salutary". I do not think that that is wrong.

Mr. Taverne

"Salutary" means "healthy".

Sir G. Nabarro

I am sorry. I bow to the hon. and learned Gentleman's great erudition, and I substitute "significant". The word I used does not mean healthy in that context.

Perhaps the hon. and learned Gentleman will apply himself to the point I have made, which he cannot fail to understand. Production at 85 per cent. of capacity is likely to drive costs up above the true economic level. Were we operating at 100 per cent. production, the cost per unit would be commensurately lower, at a time when raw material prices, including those based on steel, are driving remorselessly upwards, and when there have been so many inflationary wage settlements in the motor industry. The time has now arrived for my right hon. Friend the Chancellor to examine the restrictions on production which are thrust by artificial, Government action on the motor industry.

The first of these are the draconian hire-purchase restrictions impressed by the right hon. Member for Stechford directly after the devaluation of sterling. They have not been changed since. They are still at the same level. [Interruption.] The right hon. Gentleman is contradicting me, but that is so.

The Temporary Chairman

Order. The Question before the Committee has nothing to do with those restrictions.

Sir G. Nabarro

No, Mrs. Jeger. It was only a passing reference to one of the two major factors—the draconian restrictions put on the industry in the form of hire-purchase restrictions.

The second has been the continuous increase in the rate of purchase tax on cars since the Labour Government came to power in 1964. The rate of purchase tax on cars was then 25 per cent. It was brought down to 25 per cent. on 5th November, 1962, by my right hon. Friend the present Home Secretary. The Tory Party had progressively reduced purchase tax on motor cars all the way along the line from 1951 to 1962, and when it left office in 1964 we had the illustrious record of having reduced the rates from 66⅔ per cent. to 25 per cent. The Labour Government then drove them up between 1964 and 1970 to 36⅔ per cent., where they stand today. Not only did the Labour Government do that to purchase tax on cars, but in six years they doubled the amount of revenue from purchase tax. In 1963–64 it was approximately £600 million. When the Labour Government left office during the tax year 1970–71, the revenue from purchase tax was £1,260 million. Part of that might be attributed to expansion of production, but most largely it was due to a progressive increase in all purchase tax rates, and here I pause to deal with the speech of the right hon. Member for Stechford, who would have preferred a reduction of purchase tax to a reduction of S.E.T. I should not.

I should prefer a reduction in S.E.T., because the whole of that money comes off the prices in the shops. That is not necessarily the case when purchase tax is reduced. We have evidence of that from many leading retailers. I shall not go through all their names, but they range across the whole field of retailing organisations which have announced important reductions in retail prices following the halving of S.E.T., to be effective from the first week of July, and I congratulate my right hon. Friend in his judgment on that important matter.

I want relief now, in the sense suggested in one of the new Clauses, for this major group within the 36⅔ per cent. tables; namely, motorcars. Not only is the motor industry working very much below capacity, but unemployment in the Midlands is pretty bad. Many hon. Members will have read the leading news story on the front page of The Times today by the economics editor, Mr. Peter Jay. Under the heading, Steep increase in Midlands unemployed points to massive national total", he writes: Unemployment is still rising fast. But this afternoon it was announced that there was a fall in unemployment. Mr. Peter Jay is very inaccurate in the national setting, but he is strictly correct when he draws attention to the fact that unemployment has been rising continuously in the manufacturing areas of the Midlands during the last six to nine months.

Birmingham and Coventry are the hub of the motor and vehicle industry of Britain. Last year the industry exported more than £1,000 million worth of motor cars, tractors, commercial vehicles, components and spares. This increase in unemployment in the Midlands area spills over into Bromsgrove, where a by-election is in progress, and will undoubtedly be reflected in the results of the polls shortly, into South Worcestershire, which is partially a dormitory constituency for motor industry and other workers. There is real apprehension in these Midland industrial towns, notably Birmingham and Coventry, about the trends of unemployment and the fact that it is urgently necessary to take unilateral action to assist the motor industry and reverse these trends.

I suggest that action should be taken unilaterally and urgently, first, by following the recommendation of the Crowther Committee, which was total abolition of hire-purchase restrictions, and, second, by reducing purchase tax on cars, certainly to 33⅓ per cent., as one of my new Clauses suggests, but preferably down to 25 per cent., which is what my right hon. Friend the Home Secretary did, though from a higher level of tax, on 5th November, 1962.

I pass, now, to two items of special pleading, because the only way that I can make this appeal to the Chancellor is through the method employed of a general new Clause to reduce purchase tax rates. I ask my right hon. Friend to do something about toothpaste, and I refresh him, as he, with his splendid teeth, refreshes his mouth morning and night with dentifrice.

Some years ago we persuaded a Tory Chancellor of the Exchequer unilaterally to relieve toothbrushes of purchase tax. They were put on a nil rate of purchase tax in the same fashion as we relieved pianos and put them on a nil rate—pianos to save our industry from German competition, and toothbrushes because they would help the dental health of the nation, accompanied by measures of fluoridation of our water supply over many years. I shall not stray into matters of fluoridation—that is a highly controversial topic—but I have always been a powerful supporter of fluoridation or dental health and preserving youngsters' teeth. The fact that I have survived to my ripe age with a head full of good teeth is no doubt due to vigorous brushing with purchase-tax-free toothbrushes, and the recognition of the merits of fluoridation. I hope to add to those important attributes of dental health a capacity to persuade my right hon. Friend to deal unilaterally with dentifrice.

It really is preposterous that the cause of dental decay, most largely, and especially the deteriorated and deteriorating condition of children's teeth—namely, the consumption of excessive quantities of sweets—should be taxed at 22 per cent., whereas dentifrice is taxed at 36i per cent. That is called preventive medicine, if my right hon. Friend takes the irony. He would make a great political impact on this country, even greater than he has achieved so far, if he unilaterally relieved dentifrice from the 36⅔ per cent. rate of purchase tax.

8.30 p.m.

I am sure that my right hon. Friend, in the course of his wide reading on matters of such importance, will have studied the professional journal, The Dental Practitioner. I quote from the issue of November, 1969, when dealing with an analysis carried out of the dental condition of British competitors at the Olympics: Altogether, the results of examination were very disappointing and the dental state of those of our team who were seen, was considered to be very poor indeed. On a later page my researches and reading reveal the following dental pearl: One must conclude that before the Olympics, medical officers were not of the opinion that dental fitness was of any importance with regard to the health or the prowess of team members. If Olympic athletes have bad teeth, what hope is there for us, or our children? I will not pursue that matter further.

The Chancellor should in the whole field of purchase tax look at this one tiny item. It is the only one on which I plead for a total abolition and for getting rid of a 36⅔ per cent. purchase tax. I will tell my right hon. Friend how to do it. He should stop classifying dentrifrice as a cosmetic and should start classifying it as a non-perfumed detergent or soap. It would be equally sensible because, since the latter category carries no purchase tax at all, he could effectively carry out the transformation and, by Statutory Instrument, put it through the House of Commons at an early date. Loss of revenue would be small.

Finally, a word about the purchase tax on foodstuffs. The former Chancellor of the Exchequer, the right hon. Member for Stechford will recall having made a speech at Aberystwyth in the summer of 1969 when he impugned the Tory Party and said that we were the only party that wanted to put a tax on people's food. If the right hon. Gentleman does not remember it, I will send him an extract from the Sunday Times.

Mr. Roy Jenkins

I remember the occasion though not the words since the hon. Gentleman, as usual, is misquoting.

Sir G. Nabarro

I will send the right hon. Gentleman the extract. I thought his memory was so good that he would recognise the accuracy of the words.

Mr. Jenkins

I cannot remember inaccurate words.

Sir G. Nabarro

I will remind the right hon. Gentleman, after the debate, of the accuracy of my words, though I do not purport to quote him precisely. He impugned the Conservative Party as anxious to tax the people's food, totally forgetting that he himself through S.E.T. imposed a swingeing tax on the people's food and raised the price of it at every stage of distribution from the port of entry when imported or from the farm gate when home produced, until it passed over the counter in the grocers' shop to the housewife. When we get on to V.A.T. and abolish S.E.T. there will be a significant reduction in food prices

There is a category of food, including animal food stuffs, which I feel the Chancellor should deal with. It is an important category covering a large number of items, and we have to blame the former Chancellor of the Exchequer for putting a tax on the great majority of food stuffs. Moreover, the former Chancellor put a tax on all pet foods in 1969. He raised the price of pet foods by about four old pence in two shillings of the old currency or about 17 per cent., which affected about six million households in the country. But in the same category we have a heavy level of purchase tax, some 22 per cent., as in the case of pet foods, which is levied on soft drinks, confectionery, on all kinds of sweetmeats, imposed in 1961 by a former Conservative Chancellor of the Exchequer who is now the present Speaker of the House of Commons. To tax these food stuffs directly with a 22 per cent. rate of purchase tax is in my judgment wholly bad.

If anybody has any difficulty in defining what is a food stuff, whether for human consumption or for animal consumption, I give him in reply no more difficult definition than a comestible that finds its way down the throat and gullet into the tummy of the recipient, human or animal. Anything that does not follow that definition is not a food stuff. It may be argued that certain medicines go into the tummy but large numbers of medicines are not taxed. Only certain proprietary medicines are taxed. But I feel that it is wholly bad to tax either human food or animal food. This is why I greatly prefer my right hon. Friend's recourse of cutting in half S.E.T. on 5th July next and promising to get rid of the remainder in the summer of 1973. I hope that V.A.T. will not cover any kind of food either for human or for animal consumption. I do not wish to go too far on that matter since the hon. Member for St. Helens (Mr. Spriggs) has set down an Amendment about pet foods and he will be perfectly capable of deploying detailed argument on that. I believe that we should seriously study in the next few months a means of getting rid of these food taxes.

If I may summarise, I ask my right hon. Friend for early and dynamic action on the motor industry with special reference to motor cars in the sense I have suggested. Secondly, I would like to see before the Summer Recess total abolition of the purchase tax on toothpaste. Thirdly, I would like my right hon. Friend to deal with taxation on food stuffs for both human and animal consumption and give at least an undertaking that all food will be outside the scope of V.A.T. when it is introduced.

I congratulate my right hon. Friend on his measures in connection with indirect taxation. He has taken several hundred million pounds off indirect taxes for the first time in seven years. Whenever I hear any bleats of dissatisfaction about my right hon. Friend's Budget judgment compared with his miserable predecessor's, I always feel tempted to reply, "My right hon. Friend, for all his faults, has achieved something which no British Chancellor of the Exchequer has achieved this century, something in the order of £750 million in a single Budget off the taxes." That is both salutary and significant, and I warmly congratulate my right hon. Friend.

[Miss QUENNELL in the Chair]

Mr. Spriggs

I am pleased to have the opportunity of following the hon. Member for Worcestershire, South (Sir G. Nabarro), because he touched on the question of purchase tax on pet foods, dentifrice and tooth brushes. Each of the points he raised deserves mention, and I trust that the Chancellor of the Exchequer took due note of them.

The Minister of State will remember answering, on behalf of the Chancellor of the Exchequer, correspondence from me early in the year. I will remind him of that correspondence later, but I want to draw to his attention the reaction of the Stamina pet food firm in my constituency of St. Helens. He will remember that I sent to him diagrams showing what had happened since the imposition of purchase tax on pet foods, for which my right hon. Friend was responsible. Between December, 1969, and March, 1970, a serious decline commenced in the St. Helens factory. The number of employees fell in the first 12 months from 386 to 257. Before the imposition of purchase tax, six shifts were operating. Since then, 50 per cent. of those shifts have been cut out altogether.

The Chancellor of the Exchequer will understand the concern of my constituents and myself about the severe and growing unemployment in the Greater Merseyside area. I have today obtained from the Department of Employment the latest unemployment figures. There are 1,748 men, 274 women, 91 boys and 41 girls signing the register for work, making a total of 2,154 people out of work, a percentage of 4.7.

My constituents and I feel that, since the imposition of the 22½ per cent. purchase tax has had this bad effect upon the employment opportunities in the one pet food firm in the town, something should be done.

The Minister of State, Treasury (Mr. Terence Higgins)

I well recall the correspondence and I studied the diagrams which the hon. Gentleman sent with great care. However, my memory fails me on one point. Would he refresh it and say whether, in the period to which he is referring—which, perhaps, he would define—there were any figures for what happened to the output of pet food, as against the employment figures.

8.45 p.m.

Mr. Spriggs

As the hon. Gentleman knows, this particular firm produces Paws cat food and Stamina dog food, which are probably the best animal foods in the country. I believe in testing these foods myself on the animals for which I am responsible. I find that by using Stamina dog food I have one of the finest dogs in Britain. Her coat shines like black satin and she is as healthy a dog as one could ever see and is full of vigour.

I come to figures to which the hon. Gentleman referred. Prior to the imposition of the 22 per cent. purchase tax, the average annual increase in production was about 6 per cent. or 7 per cent. In the cheaper group, from the date of the imposition of the tax, that percentage increase levelled out to a 1 per cent. increase in the first year. But the premium sector of dog food production saw a serious decline from a 12 per cent. increase in the previous year to a 13 per cent. decrease in the following year. My constituents made an impassioned appeal to me to put the case to the Chancellor of the Exchequer, because this small industry had been thriving until the imposition of this tax. It had been able to increase shifts and productivity right up to the point when the imposition of taxation made itself felt upon the consumer.

The Minister of State will recall that there was another diagram relating to Paws and Stamina, which are brand names. I have a diagram here, which he will have read carefully, which shows the number of cases, in thousands, which were sold up to the time of the imposition of the purchase tax, and those sold at present. In the premium sector of the canned dog food market, there was a dive in the orders from 6,900 cases to 6,400. Since then, there has been a further serious decline.

On 8th February I wrote to the Minister drawing his attention …to the tax imposed on the higher quality dog food known by its trade name 'Stamina' and 'Paws', which now stands at level of 22 per cent. There are five reasons for my doing so and I list them in order of priority as follows: (1) significantly slowed down total market growth; (2) caused an absolute decline in the quality sector of the market; (3) has more significantly affected Stamina products than others because of market size; (4) resulted in a reduction in numbers employed at St. Helens; (5) reduced the number of shifts worked at the factory. And whilst I am aware that the Chancellor is not directly responsible for employment, I feel sure he is concerned with the present trend in the North-West Region. The management of McDougalls Foods Ltd. have quite rightly drawn my attention to the step decline in job opportunities at their St. Helens factory since the imposition of the 22 per cent. purchase tax in 1969. And during the last few months, many retired people have drawn my attention to the mounting problems of feeding their pets, and guide dogs for the blind are a necessity in several cases brought to my notice, and here again, I found the increased cost of keeping a working dog bearing heavily on those least able to meet the increased costs". After referring to the graphs which I enclosed, I said: I hope, at the very least, the Chancellor will be able to reduce the purchase tax on pet foods to the level of household goods at 13¾ per cent. Had I been able to move my Amendment, I would have argued for nil per cent.

It is wrong to tax food, and pets become a part of the family. I know poor people who, because they cannot afford to buy the proper foods for their pets, give them part of their own food. It is not possible for the poorer section of the community to go to the butcher and appeal for scraps. Most of them cannot or dare not go to the butcher now even for themselves, because of the price of meat. It is more difficult still in the towns than it is in the country.

When I considered the guide dogs for the blind I found that even those who were employed were on some of the smallest incomes in the country. The heavier breeds like alsatians and golden retrievers are costly to maintain. For those who live alone, their dogs are literally their best friends. Many people rely on other animals and birds for company. The Chancellor would be doing a great service for both the human race and animals if he took this step.

It was easy in the old days for people to buy scraps. Today only those who are wealthy enough to buy sides of beef, or the less wealthy who nevertheless buy meat at the weekends and during the week, can afford to keep their pets in food.

There are 36 hon. Members who have factories in their constituencies making or concerned with pet food. If I mention St. Helens and the Stamina food industry the Committee will know the size of the companies I have in mind. I will not mention other firms because the hon. Members concerned are not present. Some firms are having to declare workers redundant, and this particularly applies to the North-East Coast.

The hon. Member for Worcestershire, South frequently calls for a reduction in purchase tax. I appeal to the Chancellor to take this opportunity to remove purchase tax from the commodities about which I have been speaking. The result would be reflected in the happiness of, in particular, the elderly and the blind, and he would also help to maintain job opportunities in many parts of the country.

Mr. David Madel (Bedfordshire, South)

It is essential to remember when discussing proposed cuts in purchase tax the general economic background against which the Bill has been framed. Time and again my right hon. Friend the Chancellor of the Exchequer has called for a substantial reduction in the level of pay settlements as a prerequisite for faster economic growth, and only yesterday we were informed that pay settlements in the past few months had been levelling off. The danger is that unless further action, rather than exhortation, is taken by the Government, pay settlements will start to drift upwards again.

We are now being bombarded with pro and anti-Common Market propaganda, one piece of which has had some effect in this country. It compares wages here with Common Market wages and it merely confirms in many people's eyes that we are a relatively low wage economy and that, therefore, the people who are bargaining for higher wage increases are determined to do something about it.

Every post-war incomes policy except the statutory one has failed because prices drift upwards while the Government make themselves hoarse urging people not to ask for increases that are too large. I heartily endorse what my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) said in dealing with the need for cuts in purchase tax in relation to the motor industry. Quite rightly, he paid great tribute to its fine export record not only in finished products—cars and trucks—but also in spare parts and engines. These make a substantial contribution to our export performance. Cutting purchase tax soon would do two things which would have an important effect on the economy.

First, production in the motor industry would be boosted. My hon. Friend was right to hint that the motor industry is becoming exasperated to the nth degree by restrictions under which it has laboured for so long. Although hire purchase is not dealt with in the new Clause, he touched on the subject and underlined the fact that a loosening of hire purchase restrictions would also make a substantial contribution to boosting production. If we do make purchase tax cuts soon, it will be of tremendous help to unions and employers when considering the level of pay settlements, quite apart from the extra spending power which would go into the economy and which must lead to the faster and greater economic growth without which we shall not get a higher real standard of living.

The danger in this country at present is that so many of the wise and imaginative proposals in the Budget are going to be forgotten unless we get a quick downward drift in the total number of unemployed. There is great national concern about this. My hon. Friend the Member for Worcestershire, South mentioned the Midlands, which hitherto has had virtually no unemployment. There is rising and tremendous national concern about the increase in unemployment in certain areas. This could be cured quickly if we were to use the spare capacity that there is in many industries.

If my right hon. Friend the Chancellor of the Exchequer cannot cut purchase tax now, I hope he will soon be able to. We have heard much talk about the regulator. Since it was introduced in 1961, it has been not so much a regulator but a sort of "upward-ator". It has not been used to reduce taxes but always to put them up, while in the background the Government have been trying to get substantial reductions in the level of pay demands. That reduction in pay settlements will come about more quickly if we have purchase tax cuts soon. Unless we can get our manufacturing industries to run at much nearer full capacity, then our dream of economic growth will not become a reality.

Mr. Dalyell

I want to follow exactly on the issues raised by the hon. Member for Bedfordshire, South (Mr. Madel). I hope I might be forgiven for making the observation that a number of us have lived with unemployment problems for a long time. I have done so, if not directly in the east of Scotland, then certainly in the west of Scotland, just as my hon. Friend the Member for Gateshead, West (Mr. Horam) has lived with them in his part of the country. We might be forgiven if we reflect that there might have been more understanding of our problems from certain right hon. and hon. Members. The hon. Member for Bedfordshire, South is new to the House, and I do not point the finger at him, but it is revealing to some of us that when the first sign of unemployment hits south Bedfordshire or—dare I say it?—South Worcestershire, I will not say that there is squealing but, understandably, the hon. Members concerned get hot under the collar. I say to those hon. Members, gently, that they should imagine what it has been like for some of my hon. Friends who represent areas with levels of unemployment of ten, 11. 12 or 13 per cent. That is the sort of situation which parts of our country find themselves in.

Continuing specific points before coming to the general economic issue, I would like to talk about not the motor car industry itself, because I have no locus to do so, but certainly the motor vehicle industry, because I represent the huge British Leyland factory for trucks and tractors at Bathgate. In many ways this has been a remarkably successful factory in the recent past. It has an enormous order from India which will keep part of the factory going for some time. To get such orders, there must be a fairly flourishing home market.

9.0 p.m.

The Minister of State should pay heed to the assertion by my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) and by some hon. Members opposite that we look in the fairly immediate future to have some relaxation to enable the home market for the motor industry to produce more. I do not think that this will have any great effect on wage inflation as such, because all that has been said previously about unit costs is only too true; and with greater production unit costs could come down.

I return to the point made by my right hon. Friend the Member for Stechford that, if there had been a purchase tax change rather than a change in S.E.T., the effect would be quicker. Timing is everything in these matters. I do not pretend that any of my right hon. Friends or indeed any Government Minister can control this very delicate instrument that is the motor industry with any degree of precision. However, the notion that it can be done through S.E.T. and the like is very far fetched. There is no substitute for purchase tax changes.

While we are on particular changes, I should like to grind an axe. As the Minister of State knows, there was a delegation to him led by my hon. Friend the Member for Huddersfield, West (Mr. Lomas) and the hon. Member for Shipley (Mr. Fox) on the question of school books. Many of us have felt for some time that the tax on school books was not only glibly a tax on knowledge but a very undesirable tax in itself. The situation has been made much worse because the local authorities are under an unprecedented squeeze.

To say that it is up to the local authorities to help the publishers, to provide more books, and to pay higher prices is not very realistic; because when most education budgets are scrutinised the fact is it varies enormously from authority to authority. The allocation of school books is one of the matters that are cut.

This is highly undesirable, because it is good in itself that we should develop at school the habit of book ownership. Those who come from better off homes know only too well the value of having books in the home and, indeed, the value of the possession of books. It will not quite do just to say that books can be handed out at school libraries. A school, to be effective, must have a vast stock of books. Indeed, I believe that books for children should be cheap, so as to get children into the reading habit.

This delegation went to the Minister. We did not have great satisfaction. I should like if possible some comment tonight. If that is unrealistic and the officials who are up to date on what has happened are not present, I should like a letter on it at the convenience of the Treasury Minister.

I return to the speech of my right hon. Friend the Member for Stechford. The alternative is S.E.T. Throughout I have been a strong supporter of S.E.T. for a number of reasons, partly that it was easily the cheapest tax to collect. This doctrinaire promise to get rid of S.E.T. just because it was superficially unpopular was not very sensible in terms of Revenue staff, because it has been far easier to raise a given amount of money by S.E.T. than by any other means in our fiscal history.

In addition, I should like to know the extent to which the claims of that happy March day seven weeks ago are likely to be realised or look like being realised. I agree with the Chancellor of the Exchequer that not everything can be done at once, but let us reflect what was said to tremendous cheers when the right hon. Gentleman announced that S.E.T. would be halved: This reduction of S.E.T. by one half will help in the fight against inflation, for it will have a direct influence on prices". It is reasonable to imagine that the anticipated halving of S.E.T. would have some effect on prices. I am a fair man, and I can see that a number of supermarkets have made cuts. But ask any housewife whether there have been cuts across the board, and one gets a pretty dusty answer. I happened to be on political business in Southampton last night. There is no doubt that Southampton's major issue is prices. I have not been to Bromsgrove. The hon. Member for Worcestershire, South (Sir G. Nabarro) seems to be very concerned about Bromsgrove. Shall we find from the ladies of Bromsgrove whether they think there has been any effect yet on prices? If the Government say that we must wait until 5th July and that there will be an effect then, we shall certainly wait until 5th July. However, if the claim is likely to be substantiated in reality, I assume that it ought have begun to show by now. I should like a Treasury comment on any trends which it thinks show that the Chancellor's hopes will be fulfilled.

The right hon. Gentleman went on in March: This reduction in S.E.T. will also cut by one half, or upwards of £100 million, the average amount outstanding of the forced loan from manufacturing industry to the Government, which arises from the arrangements for collection and repayment. In this way it will strengthen the liquidity of companies in manufacturing as well as in service industry and so help with the financing of working capital and investment. In all our previous debates on Finance Bills, we have heard squeal after squeal from hon. Gentlemen opposite that the liquidity situation of our major companies was getting worse and worse. When I begged leave to doubt whether that could be made as a blanket assertion across British industry, and hesitantly said that some companies were in a fairly good liquidity position, I was rebuked by hon. Gentlemen opposite, especially by the hon. Member for Cities of London and Westminster (Mr. Tugendhat), and told that the liquidity situation was very serious. I ask the Treasury whether there is any sign that the liquidity situation has been affected by the decision on S.E.T. That is a direct question, and I await the answer.

The right hon. Gentleman went on: In revenue terms, the net cost of the reduction in S.E.T. will be £290 million in 1971–72 and £245 million in the following year. In demand terms, it will play an important part in providing the additional stimulus which, as I said earlier, I consider to be necessary, although the effect on demand will be less than the revenue cost, and will build up gradually."—[OFFICIAL REPORT, 30th March, 1971; Vol. 814, c. 1396.] Those of us who represent constituencies in central Scotland, Merseyside, or the North-East of England want to know what is meant by "gradually". One of the alarming features is that, as far as any objective person can detect, there has been no stimulus.

That brings me back directly to the Clause. Surely a reduction in purchase tax would have acted as a stimulus. The halving of S.E.T. for purely doctrinaire reasons, as we see it, seems to have given no stimulus at all. If the Treasury thinks that we are being over-hasty, we can wait, but the 820,000 odd unemployed cannot. Therefore, I should like a precise statement from the Treasury on what is meant by "stimulus" and how gradually is "gradually". I believe that the dismantling of S.E.T. was a profoundly wrong move. It was pandering to doctrine in the worst possible way. An operation on purchase tax, such as my right hon. and hon. Friends suggest, would at least have saved some of those who can and want to work, but are unable to do so.

Mr. Parkinson

I should like to take up one or two remarks made by the hon. Member for West Lothian (Mr. Dalyell) about selective employment tax and, in particular, its effect on prices.

We have had a few illustrations—one must be truthful and say that they are but a few—of large groups of companies which have made cuts, of others which have promised to make cuts, and of a number of restaurants which had a special S.E.T. surcharge and have removed it, and so on. I hope that more will continue to do so.

I have knowledge of the food industry, because I acted as financial adviser to a group of cash-and-carry stores in the North and Midlands. The profit margin on which the food industry works is minute. A profit of 1½ per cent. is very good. But, like everybody else, it is under tremendous cost pressure. We shall not know just how much prices would have had to go up had S.E.T. not been cut. There is the positive sign from certain groups that there have been cuts, and there is the negative sign, which I believe is just as valid, that groups have been able to avoid putting up prices as a result of the cut in S.E.T.

One thing always puzzles me when I listen to hon. Gentlemen opposite talk of wage settlements. We heard no complaint from hon. Gentlemen about the Ford settlement and the fact that Fords announced that their prices would have to go up as a direct result of increased costs. In other words, Fords said, "We cannot absorb the costs we are going to pass them on".

The negative sign that prices have not gone up by as much as they might have done is discounted by hon. Gentlemen opposite. It is less easy to prove that prices would have gone up had the tax not been cut. However, I am convinced that that is so.

We shall have to wait until the profits of the retail groups are revealed in 12 months to see whether I am right or whether hon. Gentlemen opposite are right. However, I am prepared to back my judgment and to bet the hon. Member for West Lothian that the profits of the retail groups, especially in the food and distributive industries, will not show a huge increase as a result of the cut in S.E.T. which one would expect if they had been keeping it for their own benefit instead of passing it on.

Accountants have had substantial salary increases over the last four or five years. One thing for which my profession is particularly grateful to right hon. and hon. Gentlemen opposite is that accountants have never been in such demand as during their period in office. S.E.T. has had reactions on our salaries bill, because we have had to absorb and still are absorbing substantial costs. We shall use our S.E.T. cut, because we have also benefited, to hold our costs, which, just like everybody else's, would have had to be put up. We shall not know what effect the cut has had until the financial results come out. I do not think that the hon. Member for West Lothian had any ground for saying that companies are profiteering as a result of S.E.T. We shall have to wait to see who is right.

Mr. Dalyell

This is a fairly powerful critique of the hopes and expectations raised by the Chancellor only seven weeks ago.

Mr. Parkinson

Not necessarily.

The Temporary Chairman

Order. I hope that the hon. Member will bring his argument back to the point before the Committee which concerns purchase tax.

9.15 p.m.

Mr. Parkinson

In the opening speech of the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) the argument centred around the reason for the Clause calling for a cut in purchase tax, and we were told that my right hon. Friend the Chancellor had made an error in not cutting purchase tax and cutting S.E.T. That was the basis of most of the opening speech, and S.E.T. was almost the basis of all the remarks of the hon. Member for West Lothian (Mr. Dalyell).

Another reason why we have cut S.E.T. is that we explained to the country in June that we felt that it was an inflationary tax. We made no secret of our intention to cut it because we thought that it was very damaging. Our proposal to cut it was universally accepted. We felt ourselves bound by our pledge, and we had to keep that pledge. If the hon. Gentleman is surprised that we cut S.E.T., he has been suborned by the failure of his right hon. and hon. Friends to keep their promises to an extent that I find surprising. We were committed to do it, and we did. But I am not allowed to say any more about S.E.T.

I particularly object to the new Clause because once again right hon. and hon. Members opposite are putting forward a very simplistic, slightly panic measure. My right hon. Friend the Chancellor only eight weeks ago gave his Budget judgment. There have been assertions from hon. Members opposite that he was not right. It was made clear in that Budget judgment that my right hon. Friend was laying down long-term guidelines, yet after eight weeks we are being asked to abandon it and do as the previous Government did, with mini-budgets, adjustments right down the line, and fine tuning. Yet our problems are not short-term. My biggest criticism of the Opposition when they make proposals like this is that they are again suggesting that we have short-term problems which can be tackled by cutting a percentage point or two off here or there. In giving the impression that as a result unemployment will be cut very dramatically, they are misleading the people about whom they undoubtedly care, and about whom we care. They are raising their hopes.

I do not think that the present unemployment situation is short-term, that its causes are short-term or that its solutions are short-term. My diagnosis of the cause is a complete failure of investment of the quantity needed by industry over the six years when hon. Gentlemen opposite were in power, when companies were squeezed and cash was not available, and the capital market was shot to pieces. To suggest that with a little bit of fine tuning of the economy people who are out of work will automatically be brought back into flow, unit costs will fall, and the whole thing will come right, is misleading. We have long-term problems, and we have set out to tackle them on that basis in a way which will provide sound future long-term employment for many of the people who unfortunately are now out of work. Labour hon. Members are just raising hopes and misleading people about the true causes of the present situation when they suggest that the answer is a percentage point or two here or there of purchase tax.

We have identified the cause as something quite different and much more significant—wage and cost inflation. I agree wholeheartedly with my right hon. Friend the Secretary of State for Employment, who said that to add demand pull to cost push would be a real recipe for disaster. Yet this again is what Labour hon. Members are suggesting.

Mr. John Horam (Gateshead, West)

I am always charmed by the speeches of the hon. Member for Enfield, West (Mr. Parkinson), who seems to speak either preceeding or following me. He usually begins by making a disarming disclaimer that he has risen to his feet only because he cannot resist the fascinating smile of the Whip. He has not done that this time, and I give him credit for that.

The hon. Gentleman usually goes on to say that almost by chance he happens to be an accountant in a particular field. On a previous occasion he mentioned an interest in the building industry. This time he mentioned an equally far-reaching field, namely, the food industry. It so happens that as an accountant in the food industry he understands its particular problems and gives specific examples of why the Government's case stands up. He always presents his case against this background of factual grasp and hard understanding of the market, but usually his points add up to something of a rather marginal kind. Sometimes I feel that he is nibbling at one corner of the total area and not looking at the entire picture.

Unfortunately in what he has said today he has gone rather below his usual level of fairness in calling the new Clause a panic measure. It will be accepted by all members of the Committee that the Opposition have consistently put forward this point of view, and since—

Mr. Parkinson

The operative word is "since" and I look forward to hearing the next sentence, because one of the things right hon. and hon. Members opposite did not say when they were in government was anything about cuts in purchase tax.

Mr. Eric S. Heffer (Liverpool, Walton)

The hon. Gentleman was not here and he would not know what some of us said.

Mr. Parkinson

I can read.

Mr. Horam

If I may intervene in my own speech, we have consistently put forward the point of view ever since the election that we were looking for a high rate of growth and have consistently advocated measures to do that. We have always said, as has my right hon. Friend the Member for Stechford, that what we objected to as much as to anything else was the timing of the Government's measures. We believe that something should have been done to attack the situation which we are now facing. Hon. Members on both sides would agree that that was said and that that was right. This new Clause carries forward that point of view.

My right hon. Friend in moving the Clause said that it would have an effect far more immediately than the S.E.T. reductions, which are rather an alternative chosen by the Government out of the political promises made at the General Election. But what has been the situation since the Government came into power? They came into power with one enormous problem, which was that of inflation, and they had a considerable opportunity. That opportunity was created for them by the former Government who left a healthy balance of payments situation. It created a situation in which a Government could not afford to think about the matter completely exclusively. There was the opportunity to go forward at a faster rate.

How have the Government reacted to this situation? They have tried to tackle the problem of inflation by reducing the rate of growth. They have done exactly what the old adage tells us—they have thrown out the baby with the bath water. Indeed, the present Government have gone even further. They have thrown out the baby but retained the bath water in the sense that they have certainly reduced the rate of growth. Equally, they have not solved the problem of inflation, or even reduced it.

I notice that the Chancellor of the Exchequer has been making some claims to bolster morale after last week's round of by-elections, and they will no doubt be hit over the head once again next week. A headline in this morning's Financial Times said: Barber shows signs of progress in the fight against inflation. I take it that is a reference to the Chancellor of the Exchequer. He quotes the Chancellor of the Exchequer as saying, in a speech last Wednesday evening: … some grounds for hope that we are at last beginning to get on top of the problem of inflation. The most recent provisional figures show that, whereas average earnings in January were more than 14 per cent. higher than a year earlier, in February they were less than 13 per cent. higher and in March less than 11 per cent. higher than a year before. It is not for me to comment on the way the Financial Times handles its major news story, but, curiously enough, the next paragraph but one says: It is believed that Whitehall officials are reluctant to draw any firm conclusions from the March earnings figures … which the Chancellor has just quoted as showing that there may have been progress towards solving the problem of inflation— … which are considered to be something of a freak. A more reliable indicator is the three-month moving average of earnings, which shows an annual rise of 12 to 12½ per cent. So even within the one news story any good tidings we have had from the Chancellor of the Exchequer are contradicted. There is nothing to show that we are winning the battle of inflation.

I am not wholly without sympathy for the predicament of the Government. As a new Member of the House since 18th June last year, I appreciate the problems of coming into a new situation. It takes time to find one's feet, unexpected things happen and, since it takes time to understand the full situation, one is slower to move. Equally, the Government came in with certain problems about taxation to which they felt they must give priority. Whatever the motives, there was a fatal lack of attention to the old problem of reconciling growth and inflation and trying to get a higher rate of growth with a lower rate of inflation. Although the Government have had 10 months to achieve something positive, even now they have not got the situation right. They will not get it right until they try more direct methods. I think it was Lord Keynes who said that one should never trust a man who says he will do something by an indirect method. One should always go for the direct method.

We should return to the simple philosophy of tackling inflation by means of a kind of prices and incomes policy, coupled with other measures to make it possible to sell such a policy—

Mr. Parkinson

What kind of policy?

Mr. Horam

I should be happy to explain it, but in the middle of a debate on a new Clause on purchase tax we do not want to embark on a separate debate about a prices and incomes policy; it would be out of order.

If we tackle inflation directly by a prices and incomes policy, and tackle the balance of payments problem by changing the exchange rates, that leaves the central area freer to go for growth. This is what the Government should do. The new Clause is symbolic of the desire of the Opposition to go for growth and to use the methods which we set in train when we were in power—a prices and incomes policy and devaluing the pound. That is the simple logic, and until the Government grasp that logic they will not make much progress. If the Government do not use the Regulator, if they do not adopt the new Clause, if they make no change of any kind, what will be the situation when we are debating the Finance Bill next year? There will probably be faster growth; we may have climbed to 3 per cent. a year; but what is 3 per cent. a year when everybody else is getting 4 per cent., 4½ per cent. or 5 per cent. a year?

Mr. Parkinson

It will be faster than the Labour Government achieved.

Mr. Horam

It may be faster than it is at the moment, but it is not as fast as that achieved by everybody else. It still has not got beyond the point at which we have been chugging along for so many years. We still do not have the advance for which we have been looking. We are still fundamentally in the same wood.

9.30 p.m.

Equally, what will happen to unemployment figures in a year's time? if we are lucky we may not reach a figure of one million unemployed. I suspect that is part of the small parcel of goodies in the Budget. But will we still be talking about 850,000 unemployed, 900,000 unemployed or 950,000 unemployed? The unemployment figure could well be something of that kind, even if it does not reach one million—which is quite on the cards.

What will be the position about inflation a year from now? Will it be down to 4 per cent., say, the German rate? It will probably be around 7 or 8 per cent. Even if it is as low as 6 per cent., will that be any advantage over 8 per cent.? What is the use of a policy which causes the rate to descend from, say, 8¾ per cent. at present down to 7½ per cent. next year, 7 per cent. the year after, and 6 per cent. the year after that? Is that the kind of progress which was envisaged in that famous phrase "at a stroke"? By that time a General Election will be near for the Government and they will have to do some praying as well as policy making to get out of that difficulty. Any progress towards getting rid of the problem of inflation will have to be quicker than that if we are to call it a significant advance.

The Government are caught in their own sterile method of trying to solve the problem of inflation by acting on the growth rate. The new Clause is symbolic of the Opposition's approach, which is wholly different and would be as wholly successful.

Mr. Higgins

We have had a very broad-ranging debate covering everything from the most profound issues of economic policy to a very considerable number of constituency points. I will endeavour to answer the various points made.

When I looked at the Amendment on the Notice Paper in the name of the official Opposition, I confess that I was a little surprised by it. It seemed that J. B. Priestley had intended to write one of his time plays on an "I have been here before" basis, and had ended up writing "Alice Through the Looking Glass" instead, because we seem to have a complete reversal of what the Labour Party did when in Government, especially about purchase tax. If I may remind the House of what the Labour Administration did and relate it to the Amendment, it will be rather illuminating.

In October, 1964, there were three rates of purchase tax: 10 per cent., 15 per cent. and 25 per cent. In July, 1966, the Labour Government used the regulator, upwards, and the rates became, effectively, 11 per cent., 16½ per cent. and 27½ per cent. In the April, 1967, Budget, the regulator increases were consolidated. Then, in the March, 1968, Budget the 11 per cent. rate was increased to 12½ per cent., the 16½ per cent. rate was increased to 20 per cent., and the products liable at 27½ per cent. were divided between two new rates, 33⅓ per cent. and 50 per cent. Purchase tax at 33⅓ per cent. was extended to a number of other items, and at 50 per cent. to other items yet again.

The hon. and learned Member for Lincoln (Mr. Taverne) may catch your eye shortly, Miss Quennell. I have good reason to remember the debate on Clause 5 of the Finance Bill, 1968. It started at 5.40 p.m. on 8th May and ended at something after 5.40 a.m. the following day.

Throughout the period of the Labour Government, the rates of purchase tax were increased and increased and increased. But this is not the end of the story, because, in November, 1968, the regulator was again imposed and the rates became, effectively, 13¾ per cent., 22 per cent., 36⅔ per cent. and 55 per cent., and in the 1969 Budget, the regulator increases were consolidated and extended at 13¾ per cent. to household textiles and 22 per cent, to pet foods.

It is a little extraordinary that they should have put down an Amendment to reduce the rates of purchase tax when on almost every conceivable occasion when they could have done so when in government the Labour Party increased the rates of purchase tax.

Sir G. Nabarro

Would my hon. Friend confirm the salient point that when the Tories went out in 1964 the yield from purchase tax was approximately £600 million and when the Labour crowd went out in 1970 it was £1,260 million—more than double?

Mr. Higgins

I do not have the precise figures in front of me, but I know that my hon. Friend has often quoted them and I do not doubt that the general trend is of the kind that he describes. But it is not surprising that we find this kind of proposal, because it is by now well established that Labour Governments increase purchase tax and other taxes and Conservative Governments try to reduce them.

But I must ask my right hon. and hon. Friends to join me in opposing the new Clause. My right hon. Friend has made massive tax reductions since we were elected and we do not feel that there is scope for further reductions at this moment. The reasons for this were debated at length on 11th May in the debate on the regulator, when we put forward our views clearly. My right hon. Friend, in columns 290 to 293, gave our reasons for believing that the Budget judgment had been right and remained right and that it was not correct to alter it. That being so, it necessarily follows, because the sums involved are not small, that I cannot give a favourable reply to the various points made.

The right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) overestimated the effect of the Amendment on prices and under-estimated its effect on revenue. We feel that it would probably cost £280 million in a full year, not the £207 million which the right hon. Gentleman mentioned. This would be nearly the same as the 1971–72 cost of the Budget reductions in S.E.T. and about £35 million higher than the full year cost of that reduction. So there is a substantial difference here.

Mr. Roy Jenkins

I gave one estimate of the cost at £315 million, according to what assumption one made about demand elasticities. I do not know what the hon. Gentleman is assuming there.

Mr. Higgins

The right hon. Gentleman gave one estimate, and I think he was right in saying £315 million on the assumption of no change in demand. He then gave a figure of £207 million with some estimate of demand. Our view of what would actually happen is £280 million, so there is a substantial difference. But, of course, there is no great precision in these matters and they are not easy to estimate.

Similarly, the proposal of my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) would cost nearly £70 million in a full year, which again is a substantial sum. Given our view that we do not think it is prudent to increase demand for the reasons that have been given, we do not feel able to accept any of the proposals.

Having said that, I must answer a number of specific points that were made. The hon. Member for West Lothian (Mr. Dalyell) referred to school books. He was a member of a deputation which I was glad to receive, though I was sorry to hear him say that he felt that the deputation was not satisfactory. I was not at that stage able to give any undertaking.

The discussion which took place was on the question of educational equipment generally, and the position relating to school books is not just a question of whether one should make a reduction because it is difficult to distinguish exercise books from other items which might be used for non-educational purposes.

The hon. Gentleman seemed to be referring to printed books, which puzzled me because I am advised that there is no purchase tax on printed books. The hon. Gentleman was, therefore, on a bad point. However, if there is something about which he wants to write to me I shall be glad to look into the matter.

In a moving speech, the hon. Member for St. Helens (Mr. Spriggs) spoke of pet food, and my hon. Friend the Member for Worcestershire, South also raised this point. I assure the Committee that before the Budget we looked at this question in great detail. Perhaps without presumption I can tell the hon. Member for St. Helens that the case he presented, in correspondence and again tonight, while we are unable to accept it, was extremely cogently presented. His constituents have every reason to feel that their views have been represented clearly and distinctly. To meet his request would cost in the region of £15 million, a substantial sum, and we are not, therefore, able to meet the point he raised.

My hon. Friend the Member for Worcestershire, South asked a number of questions, particularly about the motor industry—or what he prefers to call the industry producing vehicles. The questions which arise in this context are extremely complex and the sums involved are very large. The revenue from purchase tax on motor vehicles is about £257 million. I have taken careful note of the points my hon. Friend made, and I am sure that my right hon. Friends who are concerned with other aspects of the motor industry will have done the same. We feel, however, that we cannot accept his proposal.

My hon. Friend went on to raise the question of toothpaste and called in aid the experience of Olympic athletes. He spoke of a 1969 document which stated that they did not pay much attention to their teeth. My hon. Friend may care to know that before the 1952 Olympics my dentist positively insisted that he should extract one of my wisdom teeth. Whether that had any effect on my performance in the 1952 Olympics I have no idea. I assure him that I am mindful of the point he raised.

Sir G. Nabarro

Would my hon. Friend be more expansive on this matter? It is a very narrow point but it has great psychological value. It is important economically as well as in saving dental charges. How much would it cost to get rid of purchase tax on toothpaste? I do not expect him to answer off the cuff, but I would appreciate an answer before the end of the debate, even if it means the P.P.S. scurrying to the official box in the corner of the Chamber.

Mr. Higgins

I can save anyone the need to scurry because I had anticipated that my hon. Friend would ask that question. I made inquiries—

Sir G. Nabarro

Very good.

Mr. Higgins

—alas, however, without success. Toothpaste falls within a broad category of items including cosmetics. The total revenue from that group, I am advised, comes to about £68 million. I am sorry to tell my hon. Friend that precisely what percentage comes from toothpaste it is not possible to ascertain, since the information is not available.

9.45 p.m.

Sir G. Nabarro

This has been an aggravated grievance over many years. Will my hon. Friend please undertake before Report to find out from the manufacturers, because I am informed that they have got figures. Then I will proceed, in solicitous fashion, with a further Amendment unilaterally to relieve dentifrice.

Mr. Higgins

I will do my best to meet the point. If my hon. Friend puts down a Question, I will try to answer it, but I cannot guarantee to do so. It may be that, for one reason or another, it will not be possible. But perhaps he will put down a Question.

Sir G. Nabarro

I want an Amendment on Report.

Mr. Higgins

An Amendment on Report is another matter, and no doubt if my hon. Friend wishes to put one down, he will do so.

I turn now to the broader issues raised by the right hon. Member for Birmingham, Stechford on new Clause 4. He was particularly anxious to argue, and largely rested his case on the argument, that it would have been better to have reduced purchase tax than selective employment tax. Before the Budget, we examined carefully all the possible alternatives but concluded that the right course of action was to reduce selective employment tax by 50 per cent. The right hon. Gentleman made some important points on the question of timing and we listened to what he said with great care. One can never tell in advance how these matters are going to work out as far as macro-economics is concerned. But if there was any occasion when there was clearly a mistake in Government timing, it was in the procrastination of the Labour Government after devaluation in 1967, when they failed to reinforce devaluation with fiscal measures on an appropriate scale. I regard that as one of the major errors of judgment of the last Government and one of the original causes of the immediate problems with which we are confronted.

Purchase tax is paid quarterly in arrears and, therefore, if a cut is made at the beginning of the financial year, the effect on the yield is only about 75 per cent. over the full year. Given the concentration of the right hon. Gentleman on timing—and I make this point to the hon. and learned Member for Lincoln as well—new Clause 4 is framed in rather a strange way because it would not come into effect until the Bill had received the Royal Assent, whereas it would have been possible to frame it in a different way, as the hon. and learned Gentleman will recall from Amendments we discussed upstairs in Standing Committee in 1968.

I think the Committee will agree that the argument that we should cut purchase tax rather than selective employment tax is very much out of touch with the general feeling in the country. I believe that on this issue the Opposition are out of touch with public opinion. In modern times no tax has aroused, justifiably, such widespread dislike in the minds of the general public as S.E.T. has done, and the substantial cut we propose to make in it will do much to convince the taxpayers that the Government mean business in their desire to reduce taxation and reform our tax system. We promised that we would do this in our Election Manifesto, and S.E.T. will end in 1973. We believe in keeping our promises, and for that reason I believe that the initial cut in S.E.T. is one that we are right to have made.

I will not labour the point which I made in the Budget debate about Lord Diamond, who was Chief Secretary to the Treasury throughout the period of office of the Labour Government. I recalled that he said that he thought selective employment tax would eventually become accepted. It is right to stress that the effect of cutting S.E.T. as against the effect of cutting purchase tax has a number of repercussions which reflect the arguments which we consistently advanced against S.E.T. when we were in Opposition.

First, as regards exports, S.E.T. is paid by many firms involved in the export of both goods and services. In Opposition we repeatedly moved Amendments to exclude export firms from the tax for that reason. S.E.T. has tended as a tax to reduce the level of exports and inhibit them. The 50 per cent. reduction will help in this respect.

Second, the cut in S.E.T. will halve the effect of the many anomalies which the tax produces and which lead to trade distortion. There is an extensive range of wholesalers and service engineers who find that their activities are taxed while those of their competitors escape the tax because their activities extend into manufacturing also.

We believe that these effects are important. If we were to cut purchase tax instead we would not have this benefit.

The third point which is worth making is as regards the effect on prices. Purchase tax applies over a certain range of consumer items and to cut purchase tax would affect only those articles, not labour costs generally as the cut in S.E.T. will. A cut in purchase tax would have little or no effect on the prices of most food stuffs or on construction, other than the one referred to in the speech of the hon. Member for St. Helens.

In contrast, the cut in S.E.T. will have an effect in reducing the costs of the distribution of food. We have already seen this effect, as has been frequently pointed out, in the more competitively minded sections of the retail trade. Even before the cut in the tax actually becomes effective it has had an effect on the level of prices.

I see that the hon. Member for Liverpool, Walton (Mr. Heffer) has left his seat, though he has been here for much of the debate. As regards the effect of S.E.T. on the construction industry, here again a stimulus is badly needed, and a reduction in an important element of labour costs in the construction industry will help to give that stimulus and will be of direct assistance to people who want to buy houses. It will also have the effect of reducing labour-only sub-contracting, which has always been a point made by the hon. Member for Walton. Again, if we were to reduce purchase tax these benefits would be thrown away. Therefore, we think it is right to have given priority to cutting S.E.T. rather than to cutting purchase tax.

S.E.T. is very odd indeed, because it is a normal feature of the tax system that the taxpayer bears much of the cost of collecting revenue. S.E.T. is very odd in that it is borne by employers who are meant to be outside the scope of the tax and who for administrative reasons are subject to a forced loan. The hon. Member for West Lothian referred to this. The cut in S.E.T. will have an effect in increasing company liquidity and reducing the size of that forced loan.

In our view the Government, although they regret that it will take three months from the date of the announcement before employers begin to feel the benefit of the cut, have no doubt that it is the right cut to make in the present circumstances and that we are right to have given it priority.

Mr. Dalyell

On the question of timing, when do the Government think the companies will be helped with their liquidity problems as a result of the changes in S.E.T.? What is the timing of this? It certainly has not been fully felt yet. What is the estimate?

Mr. Higgins

This is something which comes into effect as the tax is cut. There is a slight bulge initially because employers will be getting refunds at 100 per cent. and paying the tax at only 50 per cent. The pattern is not very clear. If I understand the situation correctly, it is loaded at the beginning of the period, for the reason I have just mentioned.

The right hon. Gentleman also referred to the question of fairness, and said that it would be fairer to cut purchase tax rather than S.E.T. I leave on one side what the effect must have been when time after time he increased purchase tax. Be that as it may, the fact is that cutting S.E.T. has a considerable effect on charities. This is not unimportant, because charities are subject to the forced loan effect of S.E.T. When we opposed the original intention of imposing S.E.T. on charities at the time of its introduction, the Government eventually gave way, but they did not give way on the forced loan point. I understand that about 19,500 charities are registered for refund, although they are not all currently active, and that in the financial year 1970–71 they will be repaid about £30 million. So the cut in S.E.T. will have a favourable effect on those charities, and perhaps, when one considers the broad question of fairness, this is a matter which is not totally irrelevant. Nor is the fact that the cut in S.E.T. will help nursing homes and relieve the pressure on the National Health Service, and so on.

This question of fairness should be looked at as a whole. That being so, I doubt the validity, tenuously based statistically, of the right hon. Gentleman's remarks.

If we look at the Clause as a whole, I think it is right that we should reject it and pursue the course that my right hon. Friend put forward in his Budget speech. I should perhaps remind the Committee that we shall soon be abolishing both S.E.T. and purchase tax and replacing them with value-added tax.

I listened to the speech of my hon. Friend the Member for Worcestershire, South with an air of impending nostalgia. In advocating a V.A.T., he is to some extent putting himself out of a job. No one has been stronger in attacking the anomalies of purchase tax. But the course that we are pursuing is the right one, and we are glad to have my hon. Friend's support in this matter.

It is not only S.E.T. which is a bad tax. Purchase tax is bad as well. It distorts the pattern of consumer preference and results in some very difficult and arbitrary decisions having to be made between one commodity and another.

Mr. Spriggs

Will the hon. Gentleman undertake that when a V.A.T. replaces purchase tax the Government will not put the V.A.T. on pet foods and human foods?

Mr. Higgins

My right hon. Friend has been asked questions on this point on a number of occasions, and the position has been made quite clear. We should propose to give relief for food, except perhaps in the case of those items now bearing purchase tax. But we shall bear in mind the representations which have been made to us.

There will be a great many technical changes involved in this transition. We hope that trade associations envisaging problems or difficulties will make their views known to Customs and Excise—and the sooner, the better—as part of their comments on the Green Paper on the V.A.T. So far not many trade associations have taken this opportunity. If right hon. and hon. Members on all sides feel that there is an industry which has problems of a technical nature on which they wish to make representations, I hope they will get in touch with Customs and Excise and make sure that their views are known so that they can be taken into account when we come to form a better tax.

Mr. John Roper (Farnworth)

Will the hon. Gentleman respond to the request which, I understand, the C.B.I. has made, that a further three months be given to trade associations to make representations on this very complicated matter?

Mr. Higgins

That is not necessary. It is open, and has been since the Budget, for trade associations and others to make representations. We believe that the time available is adequate. It is easier for us to take the representations fully into account if they are made as soon as possible, but we believe that the overall period is sufficient.

For the reasons which I have set out, I ask my right hon. and hon. Friends to join me in voting against the inclusion of the Clause in the Bill. The course which the Government have set out in the Budget is right. Therefore, it would be wrong to accept the Clause.

[Sir ROBERT GRANT-FERRIS in the Chair]

10.0 p.m.

Mr. Taverne

The Minister of State started by making a point which was not worthy of him. He drew attention to the complete reversal of attitudes towards purchase tax which he claimed was shown in the new Clause. The hon. Gentleman realises that there is nothing in this point. It is a totally different position where one has a balance of payments deficit and has to achieve a shift of resources to exports from that where one has a large balance of payments surplus and must act urgently to deal with record unemployment.

Three main themes have run through the debate. The first concerned the effect of purchase tax compared with selective employment tax on prices. There can be no doubt that the effect of a cut in purchase tax would have a greater effect on prices than a cut in S.E.T.

Sir G. Nabarro

There is a great deal of doubt about that.

Mr. Taverne

The hon. Member for Worcestershire, South (Sir G. Nabarro) mentioned a number of things, to which I shall return, at least with one of which I agreed. But let me quote the Government's figures which perhaps the hon. Gentleman has not noticed.

On 7th July, 1970, the Financial Secretary was asked what was the effect on the Retail Price Index of S.E.T. The hon. Gentleman said: it is estimated that S.E.T. represents about 1 per cent. on the retail price index."—[OFFICIAL REPORT, 7th July, 1970; Vol. 803, c. 468.] Therefore, one would think that a halving of S.E.T. would have an effect on the retail price index of about one-half per cent. This contrasts with the effect on the retail price index of a cut in purchase tax which we are proposing of about 1.2 per cent. That has not been challenged, and it can be substantiated. Clearly, on the Government's figure, there is a far greater effect on prices, which is of enormous significance if one directs the cut on purchase tax and not on S.E.T.

All that the Minister of State came back to was the general attitude of public opinion. It was perhaps a somewhat unfortunate time to choose when we have just had some expression of public opinion in the course of the last week. But a simple dogmatic assertion of demerits based on the supposed reactions of public opinion is no substitute for analysis and argument.

The second theme running through the debate has concerned fairness. In effect, the Minister said, "Of course, there are more unsatisfactory features of S.E.T.; it has an effect on exports and on charities". But he did not deny that the redistributive effect of a cut in S.E.T. is less favourable to the lower income groups than the effect of a cut in purchase tax.

Perhaps I might divert and refer to exports. The sphere in which it has had an effect on exports, if any, concerns earners of invisible exports. Yet this is the sphere where exports are most healthy and have been advancing best. So it, cannot be said to be a millstone round the necks of our exporters when the one area in which it operates is that where we show a successful record.

On progressiveness and regressiveness, both the Minister of State—

Sir G. Nabarro

The hon. and learned Gentleman refers to exporters, but invisible exporters benefit enormously from a, cut of 50 per cent. in selective employment tax. It is a substantial reduction in their weekly wage bill, and they are all grateful for it.

Mr. Taverne

I think that the hon. Gentleman will find that the proportion of S.E.T. to the total on-cost of labour in invisible exporting is very small. The proof of the pudding is in the eating, in the enormous achievements which have in no way been hampered by the effect of S.E.T.

I return to the question of the redistributive effect. Both the hon. Member for Worcestershire, South and the Minister of State referred to the comparative advantages of value-added tax and the disadvantages of purchase tax. The hon. Member for Worcestershire, South made one of his rumbustious and rollicking speeches on the anomalies of purchase tax. It was enormously enjoyable. But the very reason why purchase tax is mildly progressive compared with the regressive effect of value-added tax is the existence of bands. Their existence creates anomalies, but if we are to make it less regressive and more progressive there must be bands.

Even if there is an exemption of food from value-added tax, that will not greatly affect its regressive effect. The more exemptions there are, the more administratively expensive it becomes, and to some extent anomalies will re-emerge. The only study of the effect of value-added tax of which I am aware, based on an analysis of the family expenditure survey, shows that there is no much regressive effect through the workings of the value-added tax if food is exempted than if it is not. However one approaches value-added tax—if one replaces S.E.T. and purchase tax by it, one will strike a considerable blow against the lower income groups.

The third theme running through the debate has been the effect of timing on growth. If there is a way in which out new Clause could be given immediate effect, and the Government said that they would put the matter fight if we would withdraw it, we should be happy to do so. But it is not a matter of drafting to which the Minister of State has objected. On this part of the theme I find myself very much in agreement with what was said by the hon. Member for Bedfordshire, South (Mr. Madel) and some of what was said by the hon. Member for Worcestershire, South. There is a tremendous need to stimulate demand. For that purpose, the Clause can be considered separately from the objective of S.E.T.

The hon. Member for Worcestershire, South talked about the need to bring down costs in the motor industry. He said that it was operating at only 85 per sent. of capacity and that a boost to demand would bring down costs. That is precisely the argument which we on this side have been putting to the Government and which the hon. Gentleman's Front Bench has turned its back on. It is true that stagnation adds to inflation, because it increases unit costs. The only answer given is that we must not add demand inflation to cost inflation.

But I must tell the hon. Member for Enfield, West (Mr. Parkinson) that we do not have our present unemployment for an unexplained reason. It is because demand is insufficient; there is not sufficient aggregate demand. With so much slack in the economy, to stimulate demand

and bring down unit costs will not add demand inflation, because we are nowhere near the limits of our capacity. It is no answer for the Government to say, "We cannot stimulate any more demand because otherwise we make the inflationary position worse."

On the issue of timing, the Minister of State gave no answer to my right hon. Friend. I have no doubt that in the position in which we find ourselves at the moment, with unemployment rising—and with the seasonally adjusted figures still rising—the Chancellor will have to act on demand by using, among other things, the regulator. He will have to act in July or in the autumn. For every month he delays, he is keeping tens of thousands of people out of their jobs for so many more months, and he will create further unemployment. Therefore, it is totally unjustified to postpone action. In its effect on growth and timing, the new Clause is wholly justified, and I appeal to my right hon. and hon. Friends to support us in the Lobby.

Question put, That the Clause be read a Second time:—

The Committee divided: Ayes 100, Noes 139.

Division No. 370.]	AYES	[10.12 p.m.
Albu, Austen	Janner, Greville	Price, William (Rugby)
Allen, Scholefield	Jenkins, Hugh (Putney)	Rees, Merlyn (Leeds, S)
Archer, Peter (Rowley Regis)	Jenkins, Rt. Hn. Roy (Stechford)	Robertson, John (Paisley)
Armstrong, Ernest	Johnson, James (K'ston-on-Hull, W.)	Roderick, Caerwyn E.(Br'c'n & R'dnor)
Barnett, Joel	Jones, Dan (Burnley)	Rodgers, William (Stockton-on-Tees)
Blenkinsop, Arthur	Judd, Frank	Roper, John
Callaghan, Rt. Hn. James	Kaufman, Gerald	Ross, Rt. Hn. William (Kilmarnock)
Carmichael, Neil	Kelley, Ri[...]chard	Sheldon, Robert (Ashton-under-Lyne)
Carter-Jones, Lewis (Eccles)	Latham, Arthur	Shore, Rt. Hn. Peter (Stepney)
Cocks, Michael (Bristol, S.)	Lawson, George	Short, Rt. Hn. Edward(N'c'tle-u-Tyne)
Crossman, Rt. Hn. Richard	Lee, Rt. Hn. Frederick	Silkin, Hn. S. C. (Dulwich)
Cunningham, G. (Islington, S. W.)	Leonard, Dick	Sillars, James
Dalyell, Tam	Lever, Rt. Hn. Harold	Skinner, Dennis
Davidson, Arthur	Lewis, Ron (Carlisle)	Spearing, Nigel
Davies, Denzil (Llanelly)	Lomas, Kenneth	Spriggs, Leslie
Davis, Clinton (Hackney, C.)	Mabon, Dr. J. Dickson	Stallard, A. W.
Deakins, Eric	McElhone, Frank	Stewart, Rt. Hn. Michael (Fulham)
de Freitas, Rt. Hn. Sir Geoffrey	Mackenzie, Gregor	Stoddart, David (Swindon)
Douglas, Dick (Stirlingshire, S.)	Mackie, John	Stonehouse, Rt. Hn. John
Dunnett, Jack	McNamara, J. Kevin	Strang, Gavin
Eadie, Alex	Mallalieu, E. L. (Brigg)	Summerskill, Hn. Dr. Shirley
Fisher, Mrs. Doris (B'ham, Ladywood)	Marquand, David	Taverne, Dick
Fitch, Alan (Wigan)	Mayhew, Christopher	Thomas, Jeffrey (Abertillery)
		Torney, Tom
Fletcher, Raymond (Ilkestone)	Meacher, Michael	Urwin, T. W.
Fraser, John (Norwood)	Millan, Bruce	Weitzman, David
Gilbert, Dr. John	Morgan, Elystan (Cardiganshire)	Wellbeloved James
Golding, John	Orbach, Maurice	Wells William (Walsall, N.)
Gordon Walker, Rt. Hn. P. C.	Oswald, Thomas	White, James (Glasgow, Pollok)
Grant, John D. (Islington, E.)	Paget, R. T.	Whitlock, William
Hamilton, William (Fife W.)	Parker, John (Dagenham)	Wilson, Rt. Hn. Harold (Huyton)
Hart, Rt. Hn. Judith	Pavitt, Laurie
Heffer, Eric S.	Perry, Ernest G.	TELLERS FOR THE AYES:
Horam, John	Prentice, Rt. Hn. Reg.	Mr. Kenneth Marks and
Houghton, Rt. Hn. Douglas	Prescott, John	Mr. William Hamling.
Hunter, Adam
NOES
Adley, Robert	Gorst, John	Morrison, Charles (Devizes)
Atkins, Humphrey	Gower, Raymond	Nabarro, Sir Gerald
Baker, Kenneth (St. Marylebone)	Grant, Anthony (Harrow, C.)	Neave, Airey
Baker, W. H. K. (Banff)	Gray, Hamish	Normanton, Tom
Barber, Rt. Hn. Anthony	Green, Alan	Nott, John
Bell, Ronald	Grieve, Percy	Oppenheim, Mrs. Sally
Benyon, W.	Grylls, Michael	Owen, Idris (Stockport, N.)
Biffen, John	Gummer, Selwyn	Page, Graham (Crosby)
Blaker, Peter	Gurden, Harold	Parkinson, Cecil (Enfield, W.)
Boardman, Tom (Leicester, S. W.)	Hall, John (Wycombe)	Percival, Ian
Body, Richard	Hastings, Stephen	Powell, Rt. Hn. J. Enoch
Boscawen, Robert	Hawkins, Paul	Pym, Rt. Hn. Francis
Bossom, Sir Clive	Hay, John	Raison, Timothy
Bowden, Andrew	Higgins, Terence L.	Redmond, Robert
Bray, Ronald	Hiley, Joseph	Reed, Laurance (Bolton, E.)
Bruce-Gardyne, J.	Hill, James (Southampton, Test)	Rees, Peter (Dover)
Buck, Antony	Holland, Philip	Rippon, Rt. Hn. Geoffrey
Butler, Adam (Bosworth)	Hordern, Peter	Russell, Sir Ronald
Carlisle, Mark	Hornsby-Smith, Rt. Hn. Dame Patricia	Scott-Hopkins, James
Chichester-Clark, R.	Hunt, John	Shelton, William (Clapham)
Churchill, W. S.	Hutchison, Michael Clark	Sinclair, Sir George
Clark William (Surrey, E.)	Iremonger, T. L.	Soref, Harold
Clegg, Walter	James, David	Speed, Keith
Coombs, Derek	Jenkin, Patrick (Woodford)	Spence, John
Cooper, A. E.	Kershaw, Anthony	Stainton, Keith
Cormack, Patrick	Kilfedder, James	Stewart-Smith, D. G. (Belper)
Costain, A. P.	King, Tom (Bridgwater)	Stodart, Anthony (Edinburgh, W.)
Crowder, F. P.	Kinsey, J. R.	Stuttaford, Dr. Tom
Curran, Charles	Knight, Mrs. Jill	Sutcliffe, John
		Taylor, Frank (Moss Side)
d'Avigdor-Goldsmid, Maj.-Gen. James	Knox, David	Taylor, Robert (Croydon, N. W.)
Dean, Paul	Le Marchant, Spencer	Tebbit Norman
Deedes, Rt. Hn. W. F,	Lewis, Kenneth (Rutland)	Temple, John M.
Digby, Simon Wingfield	Longden, Gilbert	Tugendhat, Christopher
Dixon, Piers	McCrindle, R. A.	Turton, Rt. Hn. R. H.
Dykes, Hugh	Maclean, Sir Fitzroy	van Straubenzee, W. R.
Elliot, Capt, Walter (Carshalton)	McMaster, Stanley	Vaughan, Dr. Gerard
Elliott, R. W. (N'c'tle-upon-Tyne, N.)	McNair-Wilson, Michael	Vickers, Dame Joan
Eyre, Reginald	McNair-Wilson, Patrick (NewForest)	Waddington, David
Fenner, Mrs. Peggy	Mather, Carol	Ward, Dame Irene
Finsberg, Geoffrey (Hampstead)	Maude, Angus	Warren, Kenneth
Fisher, Nigel (Surbiton)	Maudling, Rt. Hn. Reginald	White, Roger (Gravesend)
Fietcher-Cooke, Charles	Meyer, Sir Anthony	Wilkinson, John
Fookes, Miss Janet	Miscampbell, Norman	Woodhouse, Hn. Christopher
Fortescue, Tim	Moate, Roger
Fox, Marcus	Money, Ernie	TELLERS FOR THE NOES:
Fry, Peter	Monro, Hector	Mr. Hugh Rossi and
Goodhart, Philip	Montgomery, Fergus	Mr. Bernard Weatherill.
Goodhew, Victor

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

Bill (Clauses 6 to 8, 10, 22, 30 and 49) reported, without Amendment; to lie upon the Table.