§ Item No.
§ 1. The supply to the Royal National Institute for the Blind of—
- (a) magnetic tape specially adapted for the recording and reproduction of speech for the blind;
- (b) tape recorders designed for the reproduction of sound from such tape;
- (c) parts and accessories for goods comprised in paragraphs (a) and (b) above'.
§ This Amendment arises from a discussion which took place on the Floor of the House in Committee with regard to the position of talking books for the blind. It is, of course, the intention in the Bill that these books should be relieved of the tax, and the Amendment which we are proposing would in fact relieve talking books for the blind by including them in Schedule 4. The effect is to zero-rate the supply to the Royal National Institute for the Blind of specially designed talking book machines used by the blind to play back recordings of books, newspapers, and so on, on magnetic tape, and the tapes, parts and accessories for these machines.
§ I do not think there is any hon. Member, whether present or not, who does not feel great sympathy for those who are blind. It is also widely recognised that the talking books which are provided by the Royal National Institute for the Blind provide a very valuable—indeed some would say an invaluable—service.
§ The points which were made in Committee were such that I thought it right on that occasion to say that I would bear them in mind and consider them very carefully before Report. As a result of that consideration, we believe that it would be right to make this amendment. On some of the other Amendments it has 1512 been pointed out, by myself among others, that there would be a danger that this might open up scope for pressure in respect of, as we were saying a moment or two ago, apparatus for reading microfilm or whatever kind of apparatus it might be. I am absolutely convinced that that is not the case in this instance. I had not previously seen these talking books and the apparatus connected with them, but now I have examined them and I think the machine is clearly distinguishable from any normal tape recorder.
§ Therefore I hope the House will feel it right, as I have no doubt it will, to accept Amendment No. 41. The Opposition also has an Amendment on the Order Paper. I cannot recommend the House to accept that, but I hope that all hon. Members will join in accepting Amendment No. 41.
§ Dr. Gilbert
May I say straight away to the hon. Gentleman that on this side of the House we find the Amendment most welcome. I for one would like to acknowledge unreservedly that it removes the rather unfortunate taste that was left by the niggardly Treasury attitude last night to Amendments by my hon. Friend the Member for Willesden, West (Mr. Pavitt) and the hon. Lady the Member for Plymouth, Devonport (Dame Joan Vickers).
As the hon. Gentleman has distinguished between our Amendment No. 72 and his own Amendment No. 41, it might be helpful to clarify the superficial differences between the two. Amendment No. 72 specifies that zero-rating should be available for sound records on magnetic tape or other recording material, whereas the Government Amendment confines the concession to records on magnetic tape. It is clearly more restrictive than the Opposition Amendment. I gather, however, that this is probably not too serious a restriction, subject to what I am about to say.
I understand that whereas the Royal National Institute for the Blind until a few years ago made use of gramophone records for the purposes outlined in the two Amendments, that is no longer so. I understand that the only people who are using record discs for this purpose are the United States Library of Congress. Therefore, it appears that we are well in the forefront of technological developments.
1513 What worries me slightly about Amendment No. 41 is that it fails not so much to look backwards to types of equipment that were in use until recently but to encompass the possibility of new methods of sound and voice reproduction being invented in future.
It will be recalled that earlier this afternoon on a different set of Amendments the Chancellor of the Exchequer was most adamant about the necessity of reserving to himself the freedom of manoeuvre—I think he was talking about new marketing technologies of all things; that was the general thrust of his remarks—in connection with foodstuffs. All I ask is that the Financial Secretary should give us an assurance tonight that he will retain for the Treasury the same freedom of manoeuvre in this sphere in future.
There is a second distinction between the two Amendments. The Government's Amendment confines zero-rating to supply to the Royal National Institute for the Blind. This constraint is not incorporated in our Amendment. We resisted this type of constraint, by type of supplier, in Committee, first, in connection with hearing aids—though casting my eye further down the Notice Paper I gather that we are to have a welcome concession in that direction before too long—and, secondly, in connection with the supply of pharma-ceuticals, which we shall debate later.
I am satisfied that the monopoly status that the Government's Amendment accords to the Royal National Institute for the Blind is in no way harmful to the public interest. First, I understand that it has exclusive arrangements for purchase of these machines mainly for the purpose of copyright protection. Had it not had that sort of monopoly arrangement it would not have been possible for it to make so many records available to the blind.
Secondly, and probably more important, one does not have to be a registered blind person to avail oneself of the RNIB scheme. A registered blind person gets it automatically; but, in addition, anyone who can obtain the appropriate certificate from a consultant ophthalmic surgeon can avail himself of the scheme. I understand that many of the 34,000 RNIB machines go to people not on the register. I trust that this welcome concession will lead to an even wider use 1514 of these most helpful machines and the materials that go with them.
Subject to the qualification which I made earlier, and on which I hope we shall have some reassurance from the Financial Secretary tonight, we unreservedly welcome the Amendment.
§ Amendment agreed to.
§ 9.0 p.m.
§ Mr. David Madel (Bedfordshire, South)
I beg to move Amendment No. 170, in page 109, line 9, leave out 'or periodical' and insert 'periodical or directory'.
The object of the Amendment is to zero-rate the directory publishing operation in the same way as the publishing operation of books, magazines and periodicals has been zero-rated. May I straight away declare that I have an interest in publishing.
Telephone directories are apparently not considered as periodicals since they are only published annually, yet they contain editorial content in so far as they set out a considerable amount of information and data for use by the public. This data is included free of charge to telephone subscribers, a charge being made only for the advertising space purchased in the directories.
There appears to be no logic in discriminating against telephone directories compared with many other publications which carry added editorial matter of a similar nature. Although I am saying something about telephone directories, should my hon. Friend the Member for Hendon, North (Mr. Gorst) come into the Chamber and be enabled to take part in the debate he may wish to extend the zero-rating principle right across the board of publishing as well as to the whole question of telephone directories.
The point about the advertisers in telephone directories is that many of them are small traders, such as plumbers, electricians and carpenters. Under the VAT proposals many of them with a turnover of less than £5,000 will be exempt and will be unable to pass on the VAT liability to their customers. The effect will be that the cost to them if they advertise in the directory will be more onerous than for their competitors.
Many of these people may also advertise in the local newspaper in their area.
1515 That, we are told under this part of the Bill, will be zero-rated in newspapers, magazines and periodicals. Thus, one section of the publishing industry, namely, the telephone directory section, is being discriminated against. It appears to be an anomaly which may have been overlooked due to the fact that directories are not considered to be periodicals.
The small businessman—the electrician or the plumber—will be caught in two ways. He will be caught by the fact that he is exempt from VAT because his turnover is less than£5,000 a year, and as the Bill stands he will be caught by the fact that advertising in directories will not be zero-rated.
The prime competition for advertising—and it is a competitive field—by the directory publisher comes from the local or regional newspaper. If advertising in local newspapers is zero-rated directories will be put at an unfair disadvantage. This is an anomaly. The Bill is generous to publishing. It has been said that there is to be no tax on knowledge. We know that advertising subsidies the cost of newspapers. If advertising in newspapers were not zero-rated there would be a sharp rise in the sale price of newspapers. Nevertheless, the Government have said that the newspapers provide information, which could be held to be providing knowledge, and therefore advertising in newspapers will be zero-rated.
It is a fine line between information in a directory and information in what I class as certain other periodicals. If the Government had said that they would allow only advertising in newspapers to be zero-rated and nothing else would do—no periodical, magazine or quarterly—one could accept that, but they have gone further and said that advertising will be zero-rated in newspapers, magazines and periodicals.
My case is that a telephone directory ought to be regarded as a periodical. I hope very much that the Minister will be able to see this slight anomaly in the publishing world and will put it to rights, so that the publishing industry as a unit is fairly treated across the board.
§ Mr. John Gorst (Hendon, North)
I shall be brief because the House wants to make progress.
1516 On this group of Amendments, I should like to persuade the Minister to explain how it is that the zero-rating of newspapers, periodicals and such like media can be justified whilst all other advertising media, such as posters, radio or television broadcasting and point-of-sale material, and any other advertising media, is not to be zero-rated. There is a very good case for zero-rating newspapers. But if there is a case to be made for such media, it ought to be for all media and not just selectively for certain types of media.
I ask the Minister to give an explanation on that point, and I hope that he will be able to satisfy us.
§ Dr. Gilbert
I should like briefly to make it clear that the two Amendments do not have the support of the Opposition. I do not suppose that that comes as a great surprise to the hon. Member for Hendon, North (Mr. Gorst), but I am sorry to have to disappoint the hon. Member for Bedfordshire, South (Mr. Madel), who spoke most eloquently in his cause.
It would certainly not be our view that it is illogical or against the public interest to discriminate between newspapers, on the one hand, and point-of-sale material and posters, as one part of the other media, or radio or television advertising, on the other hand.
We are all aware of the economic difficulties of the newspaper industry. I am not aware of any particular difficulties facing commercial television or radio. The arguments about point-of-sale and poster advertising have no great merit. We see no reason why they should benefit in the same way as the others.
§ Dr. Gilbert
I am very glad to hear that they are 15 per cent. more. I did not have that statistic at my fingertips, but certainly the volume of sales is not the only index of economic health, as I am sure the hon. Gentleman would agree. It is common ground on both sides of the House that the newspaper industry, at both national and local levels, is in serious economic straits, with a few exceptions, 1517 and anything which could be done to assist it through relieving it of unnecessary tax is something that the Opposition would welcome.
I cannot see that the social advantage that can be adduced in favour of the newspaper industry can necessarily be adduced in favour of the other types of media favoured by the hon. Gentleman. We shall clearly differ about that.
Without prolonging the argument, I merely wish to make our attitude clear about it. Regarding the point made by the hon. Member for Bedfordshire, South, about directories and small traders being exempt, the small trader with a turnover of less than £5,000 a year is likely to be so small that it is most unlikely that he will be able to afford to advertise. I am sure that the hon. Gentleman would agree on that point. There cannot be many small traders in his constituency grossing under £100 a week and staying in business on a scale that would enable them to advertise. If the effect of not carrying these Amendments were to direct any of their advertising money towards the local Press rather than towards telephone directories, again a very useful social purpose would have been served.
Telephone directories are just another way of minting money and I find significant the enthusiasm with which the Thomson Organisation, which knows a good thing economically when it is on to it, has rushed into the yellow pages business in telephone directories in this country. The Opposition find no immediate sympathy for any suggestion that those who are responsible for organising yellow pages advertising in the telephone directories are in any need of preferential treatment through the tax system of the sort suggested by the Amendment. I hope, therefore, that the Chief Secretary will resist the Amendment.
§ The Chief Secretary of the Treasury (Mr. Patrick Jenkin)
Fortunately I shall not have to follow the hon. Member for Dudley (Dr. Gilbert) on his excursion into the relative moral values of different forms of advertising.
§ Mr. Jenkin
It does not matter whether they are moral or social values, because one of the great advantages of VAT is that as a fiscal machine it is as neutral as 1518 we can make it in this respect. It is not a tax which is intended to draw distinctions of that sort between the different categories of goods and services on which it impacts.
§ Mr. Jenkin
That was simply a question of whether hardship might be caused to particular categories. It was not the sort of distinction which the hon. Member was seeking to draw in the earlier part of his remarks. It is important to get clear that we are dealing here with Group 4 of Schedule 4, which has the effect of zero-rating advertising in journals, periodicals and newspapers. Group 3 has the effect of zero-rating the sales of books, brochures and so forth. Item 2 deals with newspapers, journals and periodicals and Item 3 with children's picture books, painting books and so on.
We are referring here to advertising in some of these periodicals. We regard directories as falling within Item 1 of Group 3 and not Item 2 which includes newspapers, journals and periodicals. They are properly classified with books, brochures, pamphlets and leaflets, rather than with journals and periodicals. Perhaps I should explain this by giving the definition of journals and periodicals on which it is intended to base the operation of this part of the value added tax.
The heading is intended to cover journals and periodicals issued weekly, fortnightly, monthly, quarterly, half-yearly or annually, either in the form of newspapers or as paper-bound publications. They may be mainly devoted to the publication of intelligence on subjects of a specialised nature or sectional interest—for instance, legal, medical, financial, commercial, fashion or sporting, or any one of the wide range of interests or be of a general interest, such as ordinary fiction magazines and consist of a miscellany of critical and descriptive articles, essays, works of fiction and so on, with the content matter changed for each edition.
That definition of journals and periodicals is hardly apt to cover directories. That is why we regard directories as coming within Item No. 1 of Group 3, and not Item 2, and why advertising in directories is not intended to be included 1519 in the zero-rating in Group 4 of the Schedule, which is confined to publications in newspapers, journals or periodicals.
The first question is why we have thought it right to make the distinction for newspapers, journals and periodicals, so that those who advertise in them can do so free of tax. The short answer is not to be found in any of the social reasons advanced by the hon. Member for Dudley. First, the newspapers are in a parlous state. Secondly, and perhaps most important, a far higher proportion of newspaper advertising is done by private individuals who cannot roll the tax forward onto anybody else, and who therefore would have to bear it, whereas almost all the other forms of advertising to which my hon. Friend the Member for Hendon, North (Mr. Gorst) referred—the posters, television, the point of sale and all the rest—are overwhelmingly carried out by taxable traders. Therefore, the value added tax imposed on the charges to them will be regarded through the ordinary operation of the credit mechanism as an input tax in their hands. That is not the case with newspapers. The newspapers, which made representations after the publication of the Green Paper, feared that unless their advertising were zero-rated they would lose out very heavily to the other forms of advertising which are open to the individual on whose advertisements in newspapers, particularly local newspapers, the Press is so dependent.
We come to the next question, posed by my hon. Friend the Member for Bedfordshire, South (Mr. Madel): "Why has this not been extended to directories? Why should not advertising in them be zero-rated?" First, it has nothing to do with the fact that they may be published annually, because the definition I have already given of what we regard as a journal or periodical includes one which may be published only annually. The first reason why they can be distinguished from newspapers, is that they are not in a parlous financial state. There is no suggestion that those who publish directories are having a difficult time to make ends meet and make the businesses pay their way. On the contrary, they are a very flourishing form of publica- 1520 tion. It would be wrong, therefore, to single them out for any specially favourable treatment on the grounds of their economic viability Secondly, those who advertise in directories will be overwhelmingly taxable traders, and any tax charged to them on the cost of advertising will be input tax in their hands. For those reasons, we thought it entirely right that they should be classified with the rest of the advertising media and not singled out for inclusion with the newspapers, journals and periodicals.
§ Mr. Gorst
Does it follow that, for example, those trade journals which are in a profitable position, and into which goes advertising which is probably entirely of the sort that is not from consumer advertisers, are liable, therefore, at a future date to be thought of in a different sense from that in which the Government are now thinking of them?
§ Mr. Jenkin
I should not like my hon. Friend to draw that conclusion. The problem here is the same as it has always been when my hon. Friend the Financial Secretary has carried the burden of steering the tax through Committee and through the Report stage so far. He has constantly had to say that whenever we make exceptions of this sort we face the difficulty of trying to find a defensible line. I see my hon. Friend's point. Some of the trade journals are prosperous businesses and might well have been included with the rest of advertising, but it seemed to us to be right to draw the line so as to include in the zero-rating not only newspapers but also journals and periodicals. This is a fairly reasonably defined category on the basis of the definition I have given to the House.
My hon. Friend the Member for Bedfordshire, South made a point which it is right I should answer, because it is clearly one that is worrying the proprietors of the directories. It is the fear that they will be put at a disadvantage—particularly with the small trader who may be exempt and may not be able to treat the tax as input tax and claim credit for it—vis à vis the local newspapers. I have looked into this because it seems to be a point of some importance and as a result of the limited researches I have done I have come to the conclusion that the anxieties expressed are ill-founded. Advertising on any regular 1521 basis in directories as compared with local newspapers is likely to be considerably less expensive, even if the VAT has to be added to the charge for advertising in directories.
If we take the "Yellow Pages", mentioned by the hon. Member for Dudley, its charges are explained in the front. There is one free entry in ordinary type for each business rate subscriber in the London Telecommunications Region, with the exception of barristers. I am not sure why barristers should be excluded but they always are rather singular. The free entry is allowed in respect of each main line or group of main lines. There can be additional entries for which additional charges are made. The extra light-face entry is £29 per annum, the bold-face entry £35 per annum and the one inch listing £70 per annum, going right the way up to a full page for £1,456 per annum.
An analysis was carried out to find out who were the advertisers in "Yellow Pages" and where the bulk of their advertising was placed. It was found that three-quarters was placed on those first three categories of entry, extra light-face entry, bold-face entry and the one inch listing and that 56 per cent. of the entries were of the one inch listing, that is more than half the total of the survey. The Central London rate for that is £70.
If we take a local newspaper, I have taken one circulating in my constituency the Stratford and Newham Express, we find that a classified advertisement booked for a year is paid for on the basis of 37 weeks with a discount for the rest. A plumber or electrician in a small way of business, instead of paying the £70 for the "Yellow Pages" entry, would pay £120 to £125 for one column inch in the Stratford Express for a full year.
I know that that is only one example, but it is the example of where most of the advertising goes in "Yellow Pages" and I would argue from that, even with the 10 per cent. VAT raising the charge to £77, there is still a handsome margin of advantage to "Yellow Pages" as against the local Press. I feel that that part of my hon. Friend's argument, advanced in all sincerity, can be shown to be not well-founded. The fears expressed are not justified.
1522 In short, I do not believe that there is an anomaly here. The exclusion of directories from Group 4 is entirely logical. It accords with the logic of what is in Group 4 and no hardship, discrimination or unfair distortion will arise as a result of that. I hope, in these circumstances, that my hon. Friend may feel that he does not want to press his Amendment.
§ Amendment, by leave, withdrawn.
§ Mr. Sydney Chapman (Birmingham, Handsworth)
I beg to move Amndment No. 47, in page 109, line 38, leave out from first 'services' to end of line 40.
§ Mr. Speaker
It will be for the convenience of the House to discuss also Amendment No. 76, in page 112, line 34, at end insert: