ZERO-RATING

HC Deb 12 July 1972 vol 840 cc1595-641

4.19 p.m.

The Financial Secretary to the Treasury (Mr. Terence Higgins)

I beg to move Amendment No. 50, in page 110, line 8, at end insert: 'or who, in the course of a business consisting wholly or mainly in the construction, alteration or demolition of buildings or civil engineering works, carries out the construction, alteration or demolition on land in which he owns a major interest'. This is a purely technical Amendment. Its effect is to exclude from the scope of the zero-rating provision in item 2 of Group 7 construction and other services supplied by a sub-contractor to a builder whose supplies by freehold or long-lease of buildings he has constructed himself are zero-rated under item 1 of this Group.

It is intended, so as to minimise the number of zero-rated traders in the con-construction industry and generally, that the zero-rating of construction should apply at the final stage only; that is to say, to the client. Supplies of services and materials to a main contractor would be taxable at the standard rate and the supply by the main contractor would be zero-rated. Note (1) to Group 7 achieves this satisfactorily where a builder is constructing a building on a client's land. Any services supplied to the builder in that situation would be excluded from the scope of the zero-rate. As it stands, however, Note (1) excludes construction services only if they are supplied to someone who himself supplies such services as are mentioned in item 2. It would not exclude services supplied to a person who supplies a major interest in a building which he is constructing; for example, a speculative builder. Such supplies would be zero-rated.

The House will recall that yesterday we distinguished in another context a building built on the client's land and a building built on the builder's land. The Amendment corrects this anomaly so that the supply of services to speculative builders is made taxable. This makes clear in law what people have assumed would be the position anyway.

Mr. Tam Dalyell (West Lothian)

The matter is not clear to me because in "wholly or mainly in the construction" "mainly" can be construed in all sorts of ways. I have the impression that this is not as simple as the Treasury Bench made out. What did the Financial Secretary mean by the "final stage"? These points are perhaps nit-picking, but I gather from the building industry that there are complications which we had not understood. There is a great deal of open ground which affects the building industry, and there may be test cases. Is the Treasury certain that the matter is clear?

Mr. Higgins

By leave of the House, Mr. Deputy Speaker. We are now familiar with the helpful remarks on many occasions made by the hon. Member for West Lothian (Mr. Dalyell) in referring to this or that brief which he happens to have received. We are always in some difficulty when he appears to have received one of which we are not aware. This has been the case on one or two occasions in Committee.

Regarding "wholly or mainly", this is a fairly common form of words and one which arises in a number of pieces of legislation. The purpose of the Amendment is precisely as I have just outlined. It is a helpful Amendment. If it were not made we should have subcontractors who would need to know whether the builder for whom they were working would be supplying a freehold or long lease under item 1 or services under item 2 to know whether to charge tax on their supplies. That would be a somewhat difficult and ridiculous situation.

This is an adequate form of wording. I am not aware that we have received any representations about it. It seems to put forward the position clearly, improve the drafting and remove the anomaly. However, if the hon. Gentleman has a more technical point which he wishes to make we will gladly consider it. I have no reason to suppose that the Amendment is not as straightforward as I have sought to show it to be.

Mr. Dalyell

By leave of the House, Mr. Deputy Speaker. I had no representation on the "wholly or mainly" part. However, over the weekend there have been complaints from the building industry that these are complicated matters and that there is a great deal of open ground. This was a specific case of an over-generalisation.

Amendment agreed to.

The Minister of State, Treasury (Mr. John Nott)

I beg to move Amendment No. 51, in page 110, line 17, at end insert 'or overseas resident'.

If it meets with the agreement of the House, we can also discuss Amendments Nos. 52 to 64.

These Government Amendments are designed to meet representations that the scope of the relief under the Group should be extended to give the maximum assistance to United Kingdom earnings from investment exports. The main effects of the Amendments are to extend zero-rating to services supplied to overseas residents, to widen the definition of "overseas trader" for the purposes of the Group, to give extended relief to services supplied to overseas authorities, to extend the order making powers for zero-rating exports of financial and insurance services, and to zero-rate the supply in the United Kingdom to an overseas trader of the transportation of imported and exported goods and ancillary services, such as handling and storage. Exports of goods are zero-rated under Clause 12(6), and exports of services should, in principle, also be zero-rated. The difficulty has been to identify them and to legislate for relief in a way that would not open a wide avenue for tax avoidance.

Since the Finance Bill was published there have been representations from a number of quarters that the scope of the relief did not go far enough to relieve investment earnings. The Amendments meet the representations that have been made on this varied matter, and I hope that they will be acceptable to the House.

Mr. Robert Sheldon (Ashton-under-Lyne)

We welcome the assistance given for services being provided in Britain for the overseas trader, but there is a problem because we must not go too far and get the wording of the Amendments so loose that they provide loopholes in the tax system for the overseas trader.

Although I accept that the majority of the Amendments improve the drafting of the Bill and go some way to provide a more precise outline in which these services can be encouraged, there is one matter which I should like to clarify, namely, the position of an overseas trader who does not have a business in the United Kingdom nor an agency operating in the United Kingdom. Is such a trader able to advertise his articles in directories or on television without paying VAT?

I appreciate the difficulty of asking the Minister a question on the Floor of the House, but this is a serious point. The matter was referred to in Standing Committee. Clearly, it has been changed slightly as a result of these Amendments.

Mr. Nott

This point arises under Amendment No. 63. I will explain the position in this type of case. The hon. Gentleman referred to the case of an overseas trader who does not have a branch, a subsidiary or an agency in the United Kingdom, but nevertheless advertises in the United Kingdom. Amendment 63 makes a technical and consequential amendment to deal with that type of case. It would be wrong in principle—this was the point that the hon. Gentleman was making—and would leave scope for tax avoidance if advertising services in the United Kingdom were zero-rated when supplied to an overseas trader and used in the United Kingdom. Amendment 63 re-writes the original note 3 to the Group, to make it clear that these services will not be zero-rated where they are supplied to an overseas trader who is a person, or the agent or subsidiary of a person, who carries on a business in the United Kingdom, or is responsible or incorporated in the United Kingdom.

I think that answers the question. The hon. Gentleman did not mention the case of advertising in newspapers, but he mentioned television advertising. I think that I have answered his question, but if he is still unclear perhaps he would care to explain the difficulty.

4.30 p.m.

Mr. Sheldon

May I inquire the position of the firm selling in the United Kingdom? Would it be regarded as having a business just because it sold in the United Kingdom? Is that the Minister's interpretation of it? This is is unclear. Under the old regulations I saw a loophole. I assumed that Amendment No. 63—Amendment No. 58 also refers to this—was an attempt to tighten up the wording. But, even though this may have been done, I am still not sure whether it tightens it up sufficiently. It would be a terrible thing if, as a result of the Amendment we were proposing to give a subsidy to those trying to import certain things into this country and to launch them in a way which has been very successfully applied on a number of occasions. It is clear that there should be no advantage to such firms.

I am not clear whether an overseas trader selling in this country, without an office or any residence here, can come under the heading of carrying on a business here. I am not clear whether sales without offices constitute a business.

Mr. A. P. Costain (Folkestone and Hythe)

As one of those who have made representations to the Treasury on this matter, I should like to thank my right hon. Friend the Chancellor for meeting a point. As the Minister of State did not specifically refer to it, I should mention that one of the problems for the civil engineering export business was the fact that in many under-developed countries, where company law is not very well defined, it has been expedient to form a company registered in this country for registration purposes only but not for operating purposes.

As I read Amendment No. 58, I feel that the Chancellor has met this point adequately, though not in a way which I should have thought expedient in the first instance.

Mr. Hugh Dykes (Harrow, East)

As one of the members of the Standing Committee who made representations on a number of points within the group of Amendments, I should like to express appreciation and thanks for the fact that the Chancellor has acceded to the representations made from many quarters on this subject.

Bearing in mind the importance of invisible earnings in the current account figures on the balance of payments, this concession and these Amendments will be received with enthusiasm by those who are contributing directly to the invisible earnings of this country and those outside who regard this as very important for the country.

Mr. Nott

As I owe an answer to the hon. Member for Ashton-under-Lyne (Mr. Sheldon), with the leave of the House I shall try to answer his point.

If an overseas manufacturer, shall we say, has no place of business of any sort in the United Kingdom, he is not, therefore, a taxable person and, therefore, if he were to advertise goods upon the television before he brought goods into the country, as I think the hon. Gentleman was suggesting he might, there would be no way of collecting the tax on this individual.

I have answered the other point in the case of an office in this country. It is the distinction between someone who has no place of business or office here, in which case he is not a taxable person, and someone who has premises here. I believe that that answer meets the point.

Amendments made: No. 52, in page 110, line 19, after 'trader', insert 'or overseas resident'.

No. 53, in line 22, at end insert 'or an overseas authority'.

No. 54, in line 25, at end insert 'or an overseas authority'.

No. 55, in line 26, leave out from 'supply' to end of line.

No. 56, in line 31, after 'trader', insert 'or overseas resident'.

No. 57, in line 37, at end insert: '8, The supply to an overseas trader of services consisting of the storage at or transport to or from a port or customs airport (within the meanings of the Customs and Excise Act 1952) of goods which respectively are to be exported or have been imported or of the handling or storage of such goods in connection with such transport'.

No. 58, in line 44, leave out from 'business' to end of line 2 on page 111 and insert: 'and has his place of business or principal place of business outside the United Kingdom'.

No. 59, in page 111, line 3, leave out 'State' and insert 'country'.

No. 60, in line 4, leave out 'State' and insert 'country'.

No. 61, in line 5, leave out 'State' and insert 'country'.

No. 62, in line 5, at end insert: '(3) Overseas resident means a person who is not resident in the United Kingdom'.

No. 63, in page 111, leave out lines 6 to 9 and insert: '(3) Items 3 and 4 do not apply where the overseas trader is a person, or the agent or subsidiary of a person, who carries on a business in the United Kingdom or is resident or (if a company) incorporated in the United Kingdom'.

No. 64, in page 111, line 10, leave out '5' and insert '3, 4'.—[Mr. Nott.]

Mr. Nott

I beg to move Amendment No. 65, in page 111, line 24, at end insert: '3. The supply to and repair or maintenance for the Royal National Life-boat Institution of any lifeboat'. The effect of this Government Amendment is to extend zero-rating to the supply, repair and maintenance of all lifeboats which are intended for use by the Royal National Lifeboat Institution. At present, lifeboats of a gross tonnage of 15 tons or more are zero-rated at item 1 of Group 9. The Amendment extends the zero-rating to the smaller RNLI lifeboats.

The Amendment results from the debate we had on the Floor of the House in Committee, and I promised then that we would consider this matter and discuss it with the RNLI. I am now glad to say that on the ground that this is a matter which concerns safety at sea the Government are able to make this Amendment clarifying the situation.

Dr. John Gilbert (Dudley)

I welcome the Amendment unreservedly and the generous way in which the Minister of State has acknowledged the contribution made to the Government's decision by the debate in Committee. In turn, I should like to acknowledge the part played in that debate by the hon. Member for Arundel and Shoreham (Mr. Luce), the hon. Member for Brighton, Kemptown (Mr. Bowden) and my hon. Friend the Member for Oldham, East (Mr. James Lamond).

I realise that one should not look a gift horse in the mouth, but the Amendment appears somewhat restrictive in so far as it relates only to the supply, repair and maintenance of any lifeboat. I see that the Amendment says "supply to". Is that wording intended to cover other equipment used by the RNLI, such as shore equipment, equipment in lifeboats and the equipment of lifeboat men?

As the hon. Gentleman pointed out, he undertook on 11th May that he would consult the RNLI. Is the RNLI satisfied with the wording of the Amendment or did the institution seek for anything more generous than the Government have been able to grant? May we have some information about the representations made by the RNLI, which I assume were made? The hon. Gentleman did not specify whether there were consultations with the RNLI between the Committee stage and the Report stage, but I am sure that he will agree that there was an undertaking to have these consultations.

Subject to those questions, we should like to record our appreciation of what the Government have done. We hope that they will be as reasonable about various other Amendments which we shall press for very similar motives on various other points in the Bill. But this has shown that with a little consideration the Government can recognise the merits of our points.

Mr. Dalyell

I am one of those who pressed this case. I heard the Minister use the words "smaller boats". These presumably are those under 15 tons. I ought to declare a family interest in the work of the RNLI. We know that the new boats now are, thank heavens, over 15 tons. Am I right in thinking that these are covered by Schedule 4 and that they are zero-rated anyway? I too, am interested in the question raised by my hon. Friend the Member for Dudley (Dr. Gilbert) about equipment, because I know that the RNLI is interested in this matter.

Mr. Nott

The larger boats are already covered in the Schedule. There never was a problem with them. The problem related only to boats under 15 tons. The Amendment puts all boats on the same basis.

The hon. Member for Dudley (Dr. Gilbert) asked about other items. On other items purchased by the RNLI there will be tax. The Amendment refers purely to boats; it extends no wider than that. I should make that clear.

Dr. Gilbert

Obviously, I have to be somewhat less warm in my encomium than I should otherwise be. Could the hon. Gentleman give some idea of the relative proportions of RNLI expenditure going into boats and into other items of equipment?

Mr. Nott

I do not have the accounts of the RNLI to hand. I cannot answer that immediately, but, if the hon. Gentleman wishes me to, I shall be happy to make inquiries about the breakdown of the institution's purchases of different items and let him know.

Mr. Deputy Speaker

May I ask about the grouping of these Amendments? We had it in mind——

Dame Irene Ward (Tynemouth)

May I have a go on the lifeboats?

Mr. Nott

I shall give way to my hon. Friend in a moment. We had it in mind, Mr. Deputy Speaker, that Amendment No. 68 would be grouped with this Amendment, No. 65. May I say a few words on No. 65 at this stage and then move it formally later? I think that that would be for the convenience of the House.

Mr. Deputy Speaker (Sir Robert Grant-Ferris)

Yes, if the House has no objection.

Mr. Nott

I am much obliged. Perhaps, before I explain the effect of Amendment No. 68, I should give way to my hon. Friend the Member for Tynemouth (Dame Irene Ward).

Dame Irene Ward (Tynemouth)

May we be told whether there have been conversations between the Royal National Lifeboat Institution and the Treasury? The hon. Member for Dudley (Dr. Gilbert) wanted to know, and so do I. My first public service was connected with the lifeboat organisation, a long time ago, and, coming from my part of the country, I take a great interest in what goes on.

Sometimes even the nicest of Treasury Ministers, Chancellors and what-not overlook the fact that it is extremely important to those who work voluntarily in the lifeboat organisations to know that their case has been put, that they have had their say, and then—gratifyingly in this case—that it has been accepted. I want to know whether conversations took place, and whether the Royal National Lifeboat Institution is as pleased with the Treasury as we appear to be. It is no good us appearing pleased with the Treasury if the institution still has comments to make.

Mr. Dalyell

Could I have a "mini-go", too, since this concerns the building of boats and what goes in them? It will be no news to the Minister that the equipment inside the boats is a matter of concern to the RNLI. In a sense, this question is analagous to the old familiar question of the cooker and the bathroom fittings which we discussed yesterday. Are the fittings in the boat, which take a significant part of the cost of any boat, under or 15 tons to be zero-rated?

Mr. Nott

If I may have the leave of the House to speak again, I have already answered the question just raised by the hon. Member for West Lothian (Mr. Dalyell) about items bought by the RNLI which it may put into its boats. Supplies which the institution buys in will, in the vast majority of cases, be tax-inclusive. The institution will be able to deduct the input tax. This Amendment refers purely to boats, to the actual lifeboats themselves.

I do not wish to swap lifeboats with my hon. Friend the Member for Tynemouth (Dame Irene Ward), but I think she knows that I have more lifeboats in my constituency than there are in any other constituency in the United Kingdom. I have five lifeboats in my constituency, and I am very proud of them. They do a remarkable job, and the fine voluntary organisation of the RNLI performs a great public service—both the voluntary crews and the many thousands of people who collect funds for the lifeboat service.

When we discussed this matter earlier, I undertook that we should have further discussions with the RNLI. There have been these further discussions between the Cusoms and the institution. We obtained the institution's agreement to this Amendment before we tabled it.

Dame Irene Ward

Thank you.

4.45 p.m.

Mr. Andrew Bowden (Brighton, Kemptown)

As one of the coastal Members who raised this matter with my hon. Friend the Minister of State, with support from both sides—and speaking now as an honorary member of the Brighton lifeguard station as a result of the speech which I then made—I must tell my hon. Friend that I am disappointed to hear that some of the equipment for lifeboats is still likely to be subject to value added tax.

What about equipment which will be standard fittings as part of the boats—oars, rescue ropes, lifebelts and things of that kind? Will those items be excluded from VAT, and may we take it that the tax will apply only to equipment specifically bought such as Very pistols and one or two other additional items? If it is just to apply to things such as Very pistols that is all right, but it will be most regrettable if the institution still has to pay VAT on standard fittings when the craft as a whole is purchased.

Mr. Nott

If I may have leave to speak again, a large proportion of the items which the RNLI buys will be tax-inclusive. For example, if it goes out and purchases rope, the rope will be bought tax-inclusive. If it buys a boat and as part of the standard equipment of that boat there are certain items in it, that standard equipment of the boat will come under the Amendment.

I wish to correct something I said earlier. I referred to input tax, but that would not be relevant here because the RNLI, as a charity, is not regarded as being in business. I apologise for the error. The main point I was making about buying in certain goods tax-inclusive was none the less correct.

I come now to Amendment No. 68, in page 111, line 45, at end insert: '(2) The supply of any ship or aircraft includes the supply of any services under a charter of the ship or aircraft. (3) "Lifeboat" includes any ship used as a lifeboat'. The effect is to zero-rate ship and aircraft chartering. In some common forms of charter of ships and aircraft, where the owner normally retains control of the ship or aircraft, the owner has been treated under case law as providing a service and not a supply of goods. As the Bill is at present drafted, these forms of charter would accordingly be taxable. The Amendment is designed to extend zero-rating to these forms of charter as well.

I hope that that explanation satisfies the House, so that I may move Amendment No. 68 formally when we come to it.

Amendment agreed to.

Mr. Joel Barnett (Heywood and Royton)

I beg to move Amendment No. 66, in page 111, line 29, at end insert: '(d) in a licensed hackney carriage or other vehicle licensed for the transport of passengers by a local authority'. Schedule 4 zero-rates transport where the vehicles carry not fewer than 12 passengers. We are seeking by the Amendment to zero-rate taxis or other hire cars if registered by a local authority. I envisaged that there could be other vehicles, apart from hackney carriages, zero-rated in this way, and this might well provide an opportunity for greater control over car hire.

If the Amendment is not accepted, there will be several anomalies and problems. Indeed, as the hon. Member for Folkestone and Hythe (Mr. Costain) said yesterday, we shall have "a proper hubble-bubble". For example, what is to happen in the case of an owner-driver taxi business. The driver will presumably be exempt on the ground that he does not take gross fees of more than £5,000 a year. I do not know how many owner drivers take less than £5,000 a year but I imagine that the Chief Secretary will have looked at their income tax returns and found that all of them take less than £5,000 a year. But, in view of the expense of running a cab, the depreciation and, in some cases, the contribution towards being a member of a pool and having a radio service, the running costs are likely to be substantial. It is possible that the returns submitted by taxi drivers indicate that their gross earnings are less than £5,000, and let us assume that that is the case and that inflation will not ensure that their earnings will rise above that figure.

One group of taxis will be exempt from value added tax but a chain of taxis with total earnings of more than £5,000 a year will be subject to VAT. It seems that the public will have the difficult task at times not only of finding a taxi but of finding one which does not have to pay VAT. Presumably we shall have to ask the taxi driver when he stops whether he is in a chain or whether he is on his own and whether he is going to charge VAT.

Mr. Dalyell

Can my hon. Friend indicate what kind of answer he might get?

Mr. Barnett

I was coming to that. Thereis another problem. If a man is travelling on business and uses the taxi, the money he spends will be an allowable input and he will want a receipt from the taxi driver. It is possible to devise a system whereby the driver will give the man a proper tax invoice of the kind we discussed in the Standing Committee which will have the taxi's registration number, the amount of the charge on the meter, and the tax on the charge.

What happens about the meters? Will the meters be calibrated differently in cabs subject to VAT? Or will there be a simple surcharge, the meters not being altered. We can imagine the effect on public relations of someone using a taxi who does not often use that form of transport, someone up from the country or from abroad. What happens if he takes a cab in London which is "owner-occupied" and free from VAT, and later he takes another cab which is subject to VAT because it is one of a group. One can imagine the difficulties which will arise.

Again, how on earth is the Customs and Excise to decide which taxi drivers are exempt and for how long? We shall be back to the situation in the fish and chip shops. There will be spot checks. One can imagine the driver's reaction when the inspector stops him and asks "What is your turnover, mate?" The driver's reply is unlikely to be printable, but very interesting none the less. So, we have hardly started on this reform when we see a tax bristling with difficulties. I would be glad to hear how the Chief Secretary envisages dealing with just a few of these.

Mr. Gordon Oakes (Widnes)

I support fully what my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett), said. The Government have wisely decided to exempt transport from the effects of VAT. But taxis, a form of transport just like any other, are not exempt. Presumably the Government's thinking is that travel by taxi is a luxury means of locomotion that is different from travel by bus or train. But for many people it is essential that they travel by taxi. It is a mistake to think always in terms of the London taxi. In many rural areas it is impossible to get a bus, and people are forced to pay the extra cost of travelling by taxi. In addition, these people are to be further penalised by 10 per cent. VAT on their bill.

Many other people who are invalids and cannot travel by public transport must travel by taxi. In my constituency, for example, many elderly people take the taxi to church even though there is a bus service. They are disabled in some way and they are unable to wait for buses or get on or get off them. Are they to be penalised because they are disabled? There is no rhyme or reason in penalising one form of public transport against all others.

My hon. Friend mentioned the anomalies which will arise between the owner-driver who will be exempt from VAT and the member of a chain of taxis who will have to pay the tax. One can imagine endless rows which will take place between the passenger and the cab driver at the end of the journey about whether the man is or is not subject to VAT.

One of the great beauties of our British taxis is that they operate with uniform scales of charge. If a person travels in a taxi he knows that he will pay the same fare to cover the same distance in the same period in a licenced hackney carriage. That fact eliminated a lot of arguments. But those arguments will now return because of the tax.

The taxi drivers in this country are very concerned and alarmed by the number of fly-by-night operators, who after working all day at their normal job spend their evenings or weekends picking up extra money and operating as a taxi without a licence. Often the drivers do not have insurance cover for their passengers. They undercut legal taxis, and because of VAT they will be able to undercut them even more.

We should do everything possible to eliminate that kind of enterprise by unqualified taxi drivers who are often not insured and often pay no tax on their earnings, unlike the legitimate taxi driver. The gap is widened yet again because the legitimate driver or his passengers will have to pay an extra 10 per cent. on top of the fare. It is quite anomalous that one kind of transport should be subject to the tax, and I hope that the Government will see the force of my hon. Friends argument and exempt or zero-rate taxi cabs.

5.0 p.m.

Mr. Bowden

I am surprised to find myself in general agreement with the comments of the hon. Member for Hey-wood and Royton (Mr. Joel Barnett). There is no question but that taxis are an integral part of the transport system. If we discourage people from using them at certain times, that must mean that they will use their cars more, which cannot help the problem in towns like my own and many other parts of the country.

I apologise for quoting the example of my own town, but that is the one I know so well. After 11 o'clock at night in Brighton there are very few buses, and taxis become a vital part of the transport system. One of the conditions of a licence in Brighton is that the taxis must meet the trains from London until the last train has arrived at Brighton station, which is normally between 12.55 a.m. and 1.15 a.m.

If taxi charges have to bear VAT, I can see a number of unpleasant things happening. I can see a disastrous effect upon tips given to individual taxi drivers. I do not like the tipping system, but it exists. I am told by my local taxi cab association that most drivers probably earn about £300 a year in tips. Surely the House can see the effect the tax would have upon tipping. When the driver tells the passenger "The fare is X pence, and, by the way, there is an extra 10 per cent. for value added tax", in many cases the driver will receive no tip or a substantially reduced amount. The drivers will then tell the owners that they must have a higher basic rate of pay, because they are losing a substantial proportion of the tips which they must regard as part of their overall income. Therefore, fares will again have to go up. Taxi cab associations know that when fares are increased some passengers are inevitably lost, which means that there is a vicious circle. Passengers are driven away. They will look for alternative forms of transport, and in nine cases out of 10 they will have their private cars on the road more frequently.

I hope that my hon. Friend the Chief Secretary will consider these points. It would be very unwise to apply value added tax to taxis, and I hope that he will favourably consider the Amendment.

Mr. Ray Carter (Birmingham, Northfield)

If the debate had taken place at noon today I am sure I should have supported the Amendment, but, unfortunately, I suffered rather a tragic experience at lunchtime, which gives me cause for some doubt.

I called for a taxi at the Members' entrance at lunchtime because I had a luncheon appointment. I asked the driver to take me to 29, King Street, whereupon he took me to King Street in the City. I asked him to wait while I checked the address, and discovered that 29, King Street was a Post Office. Clearly, that was not the place that I wanted.

The taxi driver said that the only other King Street he knew was in Covent Garden. My journey to the City had cost 54p. He assured me that it would take only five minutes to get to Covent Garden, and that the cost would be little extra. However, it was rather more than I thought. Again I checked when we arrived in King Street, Covent Garden, and found that No. 29 was not where the British Aerospace Companies was located.

We then had to try to discover a third King Street. The driver could only think of a King Street in Hammersmith, and I was sure that that was not the place where the British Aerospace Companies would reside. We eventually decided that it would be in St. James's, and sure enough it was. We had tried the only three King Streets in the whole of central London. In order to get me there, my taxi driver described the circuitous route of all three only to drop me at the last, landing me with a bill of about £1. I suppose that other taxi drivers might have taken me straight there. The journey took me three-quarters of an hour. Therefore, the only reason I can find in favour of the Amendment is that if it is not accepted such a journey would cost £1.10.

Mr. Bowden

Would it not have been wiser if the hon. Gentleman had made sure that he knew the postal code area of the King Street he wanted to go to before getting into the taxi?

Mr. Carter

That is a point, but when someone is in the kind of hurry I was in he trusts the taxi driver to take him straight away to the address. I suppose we expect an awful lot of our taxi drivers.

Mr. Oakes

The House would no doubt be interested to know what tip my hon. Friend gave the driver.

Mr. Carter

My hon. Friend will be surprised to know that in spite of that experience I still tipped the man. I suffer from the common British disease of not having the courage to walk away from someone who normally receives a tip, whether a waitress, barber, cab driver or anyone else, without giving a tip.

I see that Mr. Deputy Speaker is becoming a little edgy. I suspect that he feels that I am wandering away from the Amendment. But the story I have told is relevant because it describes what we expect of a taxi driver. The taxi is not simply a means of transport. We expect the driver to be able to get expectant mothers to hospital on time and obscurantist Members of Parliament to addresses the whereabouts of which they do not know. Therefore, taxis should be classified in the same way as every other form of transport. I ask the Government to listen patiently, and in the end rewardingly, to the arguments of my hon. Friends, and to agree that it would be entirely wrong to impose VAT on taxi fares.

The Chief Secretary to the Treasury (Mr. Patrick Jenkin)

I hope that I shall always listen patiently to any case made by hon. Members on either side, whatever the trials and tribulations they may individually have suffered at the hands of the London taxi driver.

The question of the application of value added tax to taxi fares was raised briefly in Committee, I think by the hon. Member for Ilkeston(Mr. Raymond Fletcher). I am glad that we have had a chance to return to the subject, because it affects many tens of thousands of people. In Committee my response was that we should be happy to receive any representations. It will not surprise the House to learn that we have had quite a number. A number of hon. Members on both sides have been approached by the taxi and car-hire trades, and some of the anxieties expressed have been reflected in the speeches from both sides this afternoon.

Passenger transport is zero-rated under the Bill, provided it takes place in any vehicle, ship or aircraft designed or adapted to carry not less than twelve passengers". That zero-rating therefore covers virtually the whole of fare-paying passenger transport, leaving, among road vehicles, only taxis and private car hire nominally within the charge to tax.

The effect of the Amendment would be to extend the zero-rating of passenger transport to the hiring of all licensed taxis and to private hire cars licensed by local authorities. If the Amendment were accepted, the only car hire charges which would be subject to tax would be charges for unlicensed hire cars.

We decided to zero-rate passenger fares because we were persuaded that if VAT were applied it could undermine the viability of the passenger transport industries, which could only have the effect of accelerating the decline of public transport which the Government are making very great efforts in other directions to prevent. Many sectors of public transport already receive grants and subsidies either from the Government or from local authorities. Furthermore, we were persuaded that passenger fares enter substantially into the budgets of many ordinary families, and it seemed to us right, in line with the treatment of food, fuel and housing, that such fares should be relieved of tax.

The question to which the House must address itself is whether the logic of those arguments applies to taxi fares and charges paid for private car hire. We concluded, after careful study, that it did not, and, as I said in Committee, it is the Government's intention that taxi fares should be subject to the tax; and the same applies to car hire charges. These activities are profitable. They do not depend on support from public funds. The costs do not enter to any significant extent into the budgets of the less well-off members of the community, and it seems to us that there are no economic or social arguments for relieving them from VAT.

I take the point of the hon. Member for Widnes (Mr. Oakes) that from time to time, perhaps even regularly, some people with very limited incomes—the disabled, and so on—use taxis. But I am sure that he will agree that they represent a very small proportion of the total number of users of taxis and hire cars.

Mr. Bowden

There are many local authority housing estates in my constituency, on the borders of Brighton, where a large number of people regularly use taxis because the bus service is not adequate and, after a certain time at night, there are no buses to the estates. It is not true to say that taxis are not used by a wide range of people in different income groups, because they are.

Mr. Jenkin

I entirely accept what my hon. Friend says about his constituency, but, unlike rents, food and the other items of family expenditure which we have zero-rated, taxi fares and car hire do not in general represent a significant share of the expenditure of families with very limited means.

But that is not the argument which the trade has put forward. It has not sought to justify exemption or zero-rating on the grounds put forward by my hon. Friend the Member for Brighton, Kemptown (Mr. Bowden) and the hon. Member for Widnes. The first argument put to us by the trade, which has not found expression in the House today, is that purchase tax never applied to London-type taxis and therefore they should not be subject to VAT and the taxi fares should be zero-rated.

I can give the House a complete assurance. The treatment which we propose for the London-type taxi maintains under the new regime the substance of the existing arrangement. We have already stated that we propose to make an order under Clause 3(6) under which the tax paid on the purchase of business cars would not be allowed as a credit against output tax. We propose that the order should apply to all vehicles used as taxis, except the London-type taxi. Furthermore, all vehicles, again except the London-type taxi, will be subject to the car tax. Thus, the position in respect of taxis will be similar to that under purchase tax—that is, that vehicles used in the trade will effectively bear tax, except for the Lon- don-type taxi. Perhaps I need not dwell further on that argument.

Mr. Joel Barnett

The Chief Secretary will be aware that in many parts of the country, and certainly in the North-West, although not in the main towns such as Manchester, there are taxis which are not hackney carriages. Will they have the same concession?

5.15 p.m.

Mr. Jenkin

The treatment which has applied hitherto applies to what I have described and what is known in the trade as the London-type taxi. The rationale for this—and it is not unreasonable—is that as purpose-designed vehicles, different from the ordinary run of passenger cars, they are several hundreds of pounds more expensive than the kind of vehicle which might otherwise be used. One can justify separate taxation treatment of the vehicle on these grounds.

The next argument—and this was the argument of the hon. Member for Hey-wood and Royton (Mr. Joel Barnett), and the trade has laid a lot more stress on it—was that the tax should not apply on broadly administrative grounds and grounds of practicability. It is argued that it will be impracticable to collect VAT on taxi fares and car hire charges and therefore the Government's intention to charge it on these services will be effectively frustrated.

We must maintain the clear distinction between what might happen in principle and what we expect to happen in practice. In principle, taxi fares will be taxable and any tax paid by a taxable trader can be deducted under the normal credit mechanism. VAT on taxi fares would thus effectively be borne only on hirings by individuals. But in practice—and the hon. Member for Heywood and Royton recognises this—the £5,000 exemption limit materially affects the position.

I draw the House's attention to the predominant characteristic of the taxi and car hire trade, namely, that a very large number of taxi operators are self-employed, and the overwhelming number of the self-employed operators have a turnover below the £5,000 exemption limit. Consequently, they will be exempt. They will not charge VAT on their fares. I realise that there will be some input tax—a hidden tax on their input.

Mr. Joel Barnett

Will the tips be included as takings when considering the £5,000 exemption limit? I am perhaps being over-suspicious, but, judging from my experience of tipping taxi drivers, I doubt very much whether they are 10 per cent. of the gross fees.

Mr. Jenkin

Tips are not part of the taxable turnover in this sense. They are in addition. They come into charge for income tax as they are part of the taxi driver's income. But that is a different matter.

Mr. Carter

In London, whether it is a taxi owned and run by someone who is the sole owner of it or a fleet of taxis which are owned by one company, they all charge the same fare. Therefore, the terms of trade between all sections of the London cab trade are the same. Will there be competition between the major company owning 200 or 300 cabs, or possibly more in central London, and the man who owns a taxi and has a turnover of under £5,000 a year and who therefore will be able to charge a lower fare? Will an element of competition which has not previously existed be introduced in the trade?

Mr. Jenkin

Perhaps the hon. Gentleman will allow me to develop the argument. I am conscious of that point, and I will deal with it.

We are basically dealing with three kinds of taxi operator. First, there is the London taxi service. Practically all taxi operators in London are either owner-drivers or journeymen drivers who will be treated as self-employed and thus eligible for exemption. Secondly, there are the provincial taxi services, and again most of the operators are owner-drivers, although a few of them are journeymen drivers. There are some larger companies who operate with employed drivers, and these companies, whose turnover will probably exceed £5,000, will be registrable and will charge tax on their fares. Thirdly, there is the car hire, which covers the whole spectrum from the part-time self-employed driver through to the major car hire operators, such as Hertz, Avis and so on.

Mr. Bowden

There are a large number of owner-drivers in many parts of the country who, by themselves, do not reach the £5,000 turnover a year. For eight hours of the day those owner-drivers may drive their cabs. Another person, self-employed, may then drive that cab for another eight hours, thus ensuring that the capital item, the cab, is used most effectively. What is the position then?

Mr. Jenkin

Each driver of the car in those circumstances would be regarded as a separate trader. If the second driver was the employee of the first driver different considerations would apply. It would be one business and the turnover of the two would have to be aggregated.

If what I have said is right—and I believe it to be right because, naturally, Customs and Excise have had full discussions with the trade—the House will recognise that the great majority of taxi and car hire operators will be below the exemption limit, and that effectively disposes of the administrative argument. They will not have to keep records, they will not have to charge VAT and they will not be entitled to any offset of input tax.

If the Amendment were accepted, and the taxi and car hire operators were zero-rated, then every single one of them would have to maintain full VAT records so as to be able to claim back tax on their inputs, and I find it difficult to believe that they would welcome this. The advantage of exemption is that, they being outside the tax net, there are none of the administrative problems which hon. Gentlemen would be the first to seek to magnify.

Mr. Oakes

On the question of the two types of drivers, those who will be paying VAT and those who will not, will the Minister have a word with his right hon. Friend the Home Secretary on meters, so that the public may know from the meter whether or not they are liable to pay the tax and so avoid arguments?

Mr. Jenkin

I am coming to that. I do not think that is the right solution, but I am conscious of the point.

For the larger firms, those that are within the charge, we see no difficulty whatever in administering the tax. They will be in exactly the same position as any other retailer selling taxable goods or services. They will not normally give a tax invoice, although any user who is a taxable trader and who wishes to claim tax as an input can ask for an invoice in the ordinary way. At first sight, it does not seem as though the problem of applying VAT to these traders are anything like as difficult as has been represented. Nevertheless, the trade has advanced two further points with which I must deal.

First, there is the point mentioned by the hon. Members for Birmingham, Northfield (Mr. Carter) and Widnes, that some taxi fares will be charged while some are exempt. It is said that that is unfair discrimination. Even where there is this difference, where the larger firms will be within the charge to VAT, the vast majority of customers will normally be quoted a tax inclusive price. Therefore, there will be no question of argument about adding 10 per cent. to the hire price at the end of the journey. It is a matter of complete irrelevance to the vast majority of taxi users whether or not their taxi is within that charge, just as it is quite irrelevant to the shopper calling at an exempt shop or a taxable shop. The price charged will be the same. The only difference—and the passenger does not need to concern himself with this—is whether the tax is being charged on the total turnover of the business in the ordinary way. That problem is no different from that which applies in other trades where some traders are below the exemption limit and some above it.

I recognise that car hire charges are competitive, but that of itself does not seem to be a reason to warrant zero-rating the whole industry. A large firm can make substantial economies on the purchase of spares, on the maintenance of vehicles and in many other ways which are not always open to the owner-driver, and that is why one can justify the exemption limit for the small man while charging the larger trader.

Then there is the problem of the hidden tax on the inputs of exempt taxi drivers. To the extent that this hidden tax is not absorbed it can be recouped only by an increase in fares. I recognise the point made by the hon. Member for Widnes that the adjustment of taxi meters is not a small matter. It will have to be spread over many months, but in the meantime, as we know from experience, the fares can be adjusted in accordance with a notice displayed in the cab. Our calculations suggest that the recoupment of the hidden tax might perhaps be done by a small increase possibly confined to the initial flag-drop hiring charge, with no extra charge at subsequent stages.

I must make clear that the method and amount of any adjustment are matters for consideration by my right hon. Friend the Secretary of State for Home Affairs and for local authorities which are licensing authorities. I recognise that the burden of the hidden tax will not be identical between one taxi driver and another, but from information we have been given, it does not seem that discrepancies are likely to be so wide as to amount to serious distortion of trade.

All in all, therefore, despite the representations that have been made and the discussions we have held—and I have listened carefully to the points made on both sides of the House—I believe it is still right not to include these trades in Group 9 of Schedule 4, that is to say, not to zero-rate them. Here I am reinforced by the practice on the Continent. In Belgium, Holland, France and Luxembourg, taxi fares and car hire charges are within the VAT charge, and rates range from 4 per cent. in Holland to 17.6 per cent. in France. Our 10 per cent. charge where it applies is not out of line. In Norway, Sweden and Denmark taxi fares are exempt, but car hire firms are taxed.

Under the arrangements we propose which I have outlined to the House, the great majority of taxi fares will be exempt because the operators will be below the exemption limit. The remainder, including the larger car hire fares, will be taxed, but again the rate is squarely within the range of tax rates on the Continent. I honestly believe that this is the right treatment for this form of service, and I hope that I have said enough to indicate that we are on sound ground in advising the House to reject the Amendment.

Mr. William Clark (Surrey, East)

The more I hear of this debate the more concerned I am about the administrative complications which will result. My hon. Friend knows that I am not for narrowing the tax base, but I will not rehearse those arguments again. My hon. Friend the Member for Brighton, Kemptown (Mr. Bowden) raised the question of the taxi which is shared between two individuals. If an individual owns a taxi and runs it for eight hours, the total takings will be under the exemption limit and no VAT is paid. If he lends that taxi to his friend and his friend runs it for eight hours, what about the £5,000 exemption limit? Let us assume that they bought the taxi between them and are in partnership——

Mr. Patrick Jenkin

If they are two separate traders, each being self-employed, the fact that they happen to use the same taxi would for this purpose be irrelevant. Each would be entitled to a separate £5,000 exemption limit.

Mr. Clark

That is an extraordinary extension of the income tax law. If two people own a taxi between them, under the tax law, I understand, that is considered to be a partnership. In a partnership the total takings are computed and the partners are liable to income tax, one, say, at 40 per cent. and the other at 60 per cent., and so on. There will be administrative complications here.

A person who uses a taxi for business purposes would get a tax invoice which could be used as a tax input credit. That is splendid, provided he picks a taxi that is subject to VAT. If a taxi driver is exempt, he is not able to give a tax invoice certificate.

The complication of having two sets of taxi fares is that if the fleet taxi-owner has to charge his 10 per cent., he will get his input tax credit and so on. That fleet taxi-owner must pay 10 per cent. on gross turnover, which will not be a small amount. Therefore, if London is to have common taxi fares, the self-employed person who is not paying VAT will be a much more viable proposition.

I ask my hon. Friend to look again at this matter since I feel that the Customs and Excise authorities are making a rod for their own back. The administrative complications will be immense, and I do not think the Customs and Excise Department will overcome them.

5.30 p.m.

Mr. Dalyell

There is in this debate a good deal of material for a comic opera. One can imagine the kind of conversation that might take place between the would-be passenger and various taxi owners. The House of Commons is not a place for ribaldry or bad language, and I will not go into those conversations, but we can all imagine many of the situations.

An even worse prospect is that people will try to get round the law. Taxi drivers are inventive, quick people and it will not belong before they change their status. There is no doubt that suddenly overnight many of those drivers who hitherto have belonged to large firms will become individual units and will alter their status according to the tax advantage.

I believe there should be a stay-put operation by the Treasury and that they should think again about this matter. I believe that on this occasion they have been found out.

Dame Irene Ward

I do not want to become involved in all these taxi arrangements. I like taxi drivers very much indeed, whether they are employed by big companies or small ones. As a rule I find they become great personal friends.

I believe the Treasury does not know enough about taxi drivers to pontificate in the sort of way the Chief Secretary has done this afternoon. I am a member of a Select Committee which is investigating in depth all the transport arrangements, whether they involve taxis, car hire, ships, buses or whatever it may be. We have been engaged on our investigations for many months. Would not my hon. Friend the Chief Secretary be better advised to wait for the report of that all-party Committee before taking any firm steps on this subject?

The Chief Secretary has spoken about the situation in Newcastle. I know that he has been to see us once, and we should be delighted to see him again, but I believe he has the whole situation wrong. In our part of the world we have responsible taxi firms which are decent enough to allow a certain number of independent taxi drivers to stand in the station alongside the other firms so that they may have a fair share of the business. When the hon. Gentleman begins to speak about arrangements in Newcastle, about which he knows nothing, I feel he would be better advised to ask people who live in Newcastle about the taxi situation there. He would have had a much better understanding of our difficulties.

The Treasury has had only a short time to investigate all the complications of the subject. There are occasions when somebody on the Treasury bench says, "Let us wait and see what happens". I suggest that this is one of those occasions. Therefore, I emphasise that they should await the Select Committee's report before attempting to pontificate on these very complicated matters. They would then know a little more about the problems of using car hire services in rural districts and the problems faced by people living on small incomes who have to pay these car hire charges. I wish that I had not had to sit here to listen to many things said by my hon. Friend, because they do not bear out the facts as we have found them in our investigations in the Select Committee.

Mr. Joel Barnett

Anybody who has listened to this brief debate will be satisfied that the Chief Secretary has failed to deal with the problems and anomalies which have been pointed out to him. The hon. Member for Tynemouth (Dame Irene Ward) was quite right, though I would not have chosen the title of "the great pontificator" for the hon. Gentleman. It is the hon. Lady's description, and I am sure the hon. Gentleman took it with his usual good humour.

Many of my hon. Friends, and indeed hon. Gentlemen opposite, have emphasised the anomalies which will occur, but they were not dealt with in the Government's reply. The Chief Secretary thought that it might be possible for taxis in groups to start a journey with the flag down.

Mr. Patrick Jenkin

Perhaps I may intervene to clarify this matter. On any taxi with a meter, the fare is split into two parts. There is the flag drop charge, the first amount that goes on when the flag goes down, and then there are the charges which are made stage by stage in the journey. I am suggesting that such calculations as the Customs have been able to make suggest that a very small increase in the flag drop charge will be sufficient to cover the hidden tax in the case of exempt taxi drivers. That is all I am saying.

Mr. Barnett

That only emphasises how difficult the situation will become. There was an intervention in this debate by the hon. Member for Surrey, East (Mr. William Clark)—an hon. Gentleman who loves this tax almost as much as does the Financial Secretary—and even he found it impossible to understand how the Government will operate this tax. He could not understand what would happen when new businesses were created; nor could he understand how one taxi which was run by two people would not constitute a partnership. I believe I followed what the Chief Secretary was saying on that point, namely that they are two separate people running two separate businesses in one taxi. It is all a little involved. If one of the two people was the employer and the other the employee, then from what the Chief Secretary was saying one understands that that would be regarded as one business, which would pay the tax. The whole scheme is crazy.

I do not want to take it any further. It is obvious. It is only a pity that every hon. Member of this House did not hear the debate. If everyone had heard it, I have no doubt that this Amendment would be carried. For the moment I shall press those hon. Members on both sides who are present to show their feelings about it, because we on this side of the House intend to press the Amendment to a Division.

Mr. Patrick Jenkin

I honestly believe that the administrative difficulties which hon. Members have raised are greatly exaggerated. Obviously it would be wrong to lay too much emphasis on the position in London. But it is a fact that some 98 per cent. of London taxi drivers will be below the £5,000 exemption limit and, therefore, will be exempt from VAT. They will not be concerned with VAT except to the extent that there is some element of hidden tax on their inputs——

Mr. Robert Cooke (Bristol, West)

What about the case of six noble Lords who are running the same stately home and who each do one-sixth of the work?

Mr. Jenkin

I was about to come to the point raised by my hon. Friend the Member for Surrey, East (Mr. William Clark). I appreciate that there may be special arrangements with some taxis. In every case, it must be a question of fact whether there is a partnership—that is to say a single taxable business—or whether two separate people use the taxi 12 hours each in the 24. That is a question of fact and it is one that has to be decided for other purposes, including for income tax. I do not see that this will give rise to serious difficulties.

The point that I urge on the House is that this is a broadly-based tax on consumption. The arguments which applied to public transport both from the point of view of the incomes of those at the lower end of the income scale and from that of the viability of the transport undertaking do not apply to taxis and car hire firms. I believe that we are right to say that with a broadly-based tax this

kind of consumer expenditure ought to be within the charge to tax. Nevertheless, as the tax operates we shall want to see how it is working. This is a natural and normal function of any Treasury Minister with a new tax.

I hope that the House will feel it right to reject the Amendment.

Question put, That the Amendment be made: —

The House divided: Ayes 213, Noes 238.1625

Division No. 288.]	AYES	[5.43 p.m.
Albu, Austen	Ewing, Harry	Mabon, Dr. J. Dickson
Allaun, Frank (Salford, E.)	Faulds, Andrew	McBride, Neil
Allen, Scholefield	Fisher,Mrs. Dorls(B'ham,Ladywood)	McCartney, Hugh
Archer, Peter (Rowley Regis)	Fitch, Alan (Wigan)	McGuire, Michael
Armstrong, Ernest	Fletcher, Raymond (Ilkeston)	Mackenzie, Gregor
Atkinson, Norman	Fletcher Ted (Darlington)	Mackintosh, John P.
Barnett, Guy (Greenwich)	Foley, Maurice	Maclennan, Robert
Barnett, Joel (Heywood and Royton)	Forrester, John	McNamara, J. Kevin
Baxter, William	Galpern, Sir Myer	Mahon, Simon (Bootle)
Benn, Rt. Hn. Anthony Wedgwood	Garrett, W. E.	Marks, Kenneth
Bennett, James (Glasgow, Bridgeton)	Gilbert, Dr. John	Marquand, David
Bidwell, Sydney	Golding, John	Marsden, F.
Blenkinsop, Arthur	Gordon Walker, Rt. Hn. P. C	Marshall, Dr. Edmund
Boardman, H. (Leigh)	Gourlay. Harry	Mason, Rt. Hn. Roy
Booth, Albert	Grant, George (Morpeth)	Mayhew, Christopher
Bottomley, Rt. Hn. Arthur	Grant, John D. (Islington, E.)	Meacher, Michael
Bradley, Tom	Griffiths, Eddie (Brightside)	Mellish, Rt. Hn. Robert
Broughton, Sir Alfred	Griffiths, Will (Exchange)	Mendelson, John
Brown, Robert C. (N'c'tle-u-Tyne, W.)	Grimond, Rt. Hn. J.	Millan, Bruce
Brown, Hugh D. (G'gow, Provan)	Hamilton, James (Bothwell)	Miller, Dr. M. S.
Brown, Ronald (Shoreditch & F'bury)	Hamilton, William (Fife W.)	Milne, Edward
Buchanan, Richard (G'gow, Sp'burn)	Hamling, William	Mitchell, R. C. (S'hampton, Itchen)
Butler, Mrs. Joyce (Wood Green)	Hardy, Peter	Morgan, Elystan (Cardiganshire)
Callaghan, Rt. Hn. James	Harrison, Walter (Wakefield)	Morris, Alfred (Wythenshawe)
Carmichael, Neil	Healey, Rt. Hn. Denis	Morris, Charles R. (Openshaw)
Carter, Ray (Birmingh'm, Northfield)	Heffer, Eric S.	Mulley, Rt. Hn. Frederick
Carter-Jones, Lewis (Eccles)	Horam, John	Murray, Ronald King
Castle, Rt. Hn. Barbara	Huckfield, Leslie	Oakes, Gordon
Clark, David (Colne Valley)	Hughes, Mark (Durham)	Ogden, Eric
Cocks, Michael (Bristol, S.)	Hughes, Robert (Aberdeen, N.)	O'Halloran, Michael
Cohen, Stanley	Hughes, Roy (Newport)	O'Malley, Brian
Concannon, J. D.	Hunter, Adam	Oram, Bert
Corbet, Mrs. Freda	Irvine,Rt.Hn.SirArthur(Edge Hill)	Orbach, Maurice
Cox, Thomas (Wandsworth, C.)	Janner, Greville	Oswald, Thomas
Crawshaw, Richard	Jeger, Mrs. Lena	Owen, Dr. David (Plymouth, Sutton)
Cronin, John	Jenkins, Hugh (Putney)	Padley, Walter
Crosland, Rt. Hn. Anthony	Jenkins, Rt. Hn. Roy (Stechford)	Paget, R. T.
Cunningham, G. (Islington, S.W.)	John, Brynmor	Palmer, Arthur
Dalyell, Tam	Johnson, Walter (Derby, S.)	Pannell, Rt. Hn. Charles
Darling, Rt. Hn. George	Jones, Barry (Flint, E.)	Pardoe, John
Davidson, Arthur	Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)	Parry, Robert (Liverpool, Exchange)
Davies, Denzil (Llanelly)	Jones, T. Alec (Rhondda, W.)	Pavitt, Laurie
Davis, Clinton (Hackney, C.)	Kaufman, Gerald	Pentland, Norman
Davis,Terry (Bromsgrove)	Kelley, Richard	Prentice, Rt. Hn. Reg.
Deakins, Eric	Kerr, Russell	Prescott, John
de Freitas, Rt. Hn. Sir Geoffrey	Lambie, David	Price, J. T. (Westhoughton)
Dell, Rt. Hn. Edmund	Lamborn, Harry	Price, William (Rugby)
Dempsey, James	Lamond, James	Probert, Arthur
Doig, Peter	Latham, Arthur	Rankin, John
Dormand, J. D.	Lawson, George	Reed, D. (Sedgefield)
Douglas, Dick (Stirlingshire, E.)	Leadbitter, Ted	Rees, Merlyn (Leeds, S.)
Douglas-Mann, Bruce	Lee, Rt. Hn. Frederick	Richard, Ivor
Driberg, Tom	Leonard, Dick	Roberts, Albert (Normanton)
Duffy, A. E. P.	Lever, Rt. Hn. Harold	Roberts, Rt. Hn.Goronwy (Caernarvon)
Dunnett, Jack	Lewis, Arthur (W. Ham, N.)	Robertson, John (Paisley)
Eadie, Alex	Lewis, Ron (Carlisle)	Rodgers, William (Stockton-on-Tees)
Edwards, Robert (Bilston)	Lipton, Marcus	Roper, John
Edwards, William (Merioneth)	Lomas, Kenneth	Rose, Paul B.
English, Michael	Loughlin, Charles	Ross, Rt. Hn. William (Kilmarnock)
Evans, Fred
Rowlands, Ted	Stonehouse, Rt. Hn. John	Whitlock, William
Sheldon, Robert (Ashton-under-Lyne)	Strang, Gavin	Willey, Rt. Hn. Frederick
Shore, Rt. Hn. Peter (Stepney)	Tinn, James	Williams, Alan (Swansea, W.)
Short,Rt.Hn.Edward (N'c'tle-u-Tyne)	Tomney, Frank	Williams, Mrs. Shirley (Hitchin)
Silkin, Rt. Hn. John (Deptford)	Torney, Tom	Williams, W. T. (Warrington)
Sillars, James	Urwin, T. W.	Wlson, Alexander (Hamilton)
Skinner, Dennis	Varley, Eric G.	Wilson, Rt. Hn. Harold (Huyton)
Small, William	Wainwright, Edwin	Wilson, William (Coventry, S.)
Spearing, Nigel	Walden, Brian (B'm'ham, All Saints)	Woof, Robert
Stallard, A. W.	Walker, Harold (Doncaster)
Steel, David	Watkins, David	TELLERS FOR THE AYES:
Stewart, Donald (Western Isles)	Wellbeloved, James	Mr. Donald Coleman and
Stewart, Rt. Kn. Michael (Fulham)	Whitehead, Philip	Mr. Joseph Harper.
NOES
Adley, Robert	Elliott, R. W. (N'c'tle-upon-Tyne,N.)	Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)
Alison, Michael (Barkston Ash)	Emery, Peter	Lloyd, Ian (P'tsm'th, Langstone)
Allason, James (Hemel Hempstead)	Eyre, Reginald	Longden, Sir Gilbert
Amery, Rt. Hn. Julian	Farr, John	Loveridge, John
Astor, John	Fenner, Mrs. Peggy	Luce, R. N.
Atkins, Humphrey	Fidler, Michael	MacArthur, Ian
Awdry, Daniel	Finsberg, Geoffrey (Hampstead)	McCrindle, R. A.
Baker, Kenneth (St. Marylebone)	Fisher, Nigel (Surbiton)	McLaren, Martin
Balniel, Rt. Hn. Lord	Fletcher-Cooke, Charles	McNair-Wilson, Michael
Barber, Rt. Hn. Anthony	Fookes, Miss Janet	McNair-Wilson, Patrick (NewForest)
Batsford, Brian	Fortescue, Tim	Maddan, Martin
Beamish, Col. Sir Tufton	Fowler, Norman	Madel, David
Bell, Ronald	Fox, Marcus	Marten, Neil
Bennett, Sir Frederic (Torquay)	Fry, Peter	Mather, Carol
Benyon, W.	Gibson-Watt, David	Mawby, Ray
Berry, Hn. Anthony	Gilmour, Sir John (Fife, E.)	Maxwell-Hyslop, R. J.
Biffen, John	Glyn, Dr. Alan	Meyer, Sir Anthony
Biggs-Davison, John	Godber, Rt. Hn. J. B.	Mills, Peter (Torrington)
Blaker, Peter	Goodhart, Philip	Miscampbell, Norman
Boardman, Tom (Leicester, S.W.)	Goodhew, Victor	Moate, Roger
Boscawen, Hn. Robert	Gorst, John	Money, Ernle
Braine, Sir Bernard	Gower, Raymond	Monks, Mrs. Connie
Bray, Ronald	Grant, Anthony (Harrow, C.)	Monro, Hector
Brewis, John	Gray, Hamish	Montgomery, Fergus
Brinton, Sir Tatton
Brocklebank-Fowler, Christopher	Green, Alan	Morgan, Geraint (Denbigh)
Brown, Sir Edward (Bath)	Grylls, Michael	Morgan-Giles, Rear-Adm.
Bruce-Gardyne, J.	Hall, Miss Joan (Keighley)	Morrison, Charles
Bryan, Sir Paul	Hall, John (Wycombe)	Mudd, David
Buchanan-Smith, Alick(Angus,N&M)	Hamilton, Michael (Salisbury)	Neave, Airey
Buck, Antony	Harrison, Brian (Maldon)	Nicholls, Sir Harmar
Bullus, Sir Eric	Havers, Michael	Noble, Rt. Hn. Michael
Burden, F. A.	Hawkins, Paul	Normanton, Tom
Butler, Adam (Bosworth)	Higgins, Terence L.	Nott, John
Campbell, Rt.Hn.G.(Moray&Nairn)	Hiley, Joseph	Onslow, Cranley
Carlisle, Mark	Hill, John E. B. (Norfolk, S.)	Oppenheim, Mrs. Sally
Carr, Rt. Hn. Robert	Hill, James (Southampton, Test)	Owen, Idris (Stockport, N.)
Cary, Sir Robert	Holland, Philip	Page, Rt. Hn. Graham
Chapman, Sydney	Hordern, Peter	Page, John (Harrow, w.)
Chataway, Rt. Hn. Christopher	Hornsby-Smith,Rt.Hn.Dame Patricia	Percival, Ian
Chichester-Clark, R.	Howe, Hn. Sir Geoffrey (Reigate)	Peyton, Rt. Hn. John
Churchill, W. S.	Howell, Ralph (Norfolk, N.)	Pink, R. Bonner
Clark, William (Surrey, E.)	Hunt, John	Powell, Rt. Hn. J. Enoch
Clarke, Kenneth (Rushcliffe)	Hutchison, Michael Clark	Price, David (Eastleigh)
Clegg, Walter	Irvine, Bryant Godman (Rye)	Proudfoot, Wilfred
Cockeram, Eric	James, David	Pym, Rt. Hn. Francis
Cooke, Robert	Jenkin, Patrick (Woodford)	Quennell, Miss J. M.
Coombs, Derek	Jessel, Toby	Raison, Timothy
Cooper, A. E.	Johnson Smith, G. (E. Grinstead)	Ramsden, Rt. Hn. James
Cordle, John	Jones, Arthur (Northants, S.)	Redmond, Robert
Corfield, Rt. Hn. Sir Frederick	Kaberry, Sir Donald	Reed, Laurance (Bolton. E.)
Cormack, Patrick	Kellett-Bowman, Mrs. Elaine	Rees, Peter (Dover)
Costain, A. P.	Kershaw, Anthony	Rees-Davies, W. R.
Critchley, Julian	Kimball, Marcus	Renton, Rt. Hn. Sir David
Crouch, David	King, Evelyn (Dorset, S.)	Ridley, Hn. Nicholas
Crowder, F. P.	King, Tom (Bridgwater)	Ridsdale, Julian
Dalkeith, Earl of	Kinsey, J. R.	Rippon, Rt. Hn. Geoffrey
d'Avigdor-Goldsmid, Sir Henry	Kirk, Peter	Roberts, Wyn (Conway)
d'Avigdor-Goldsmid.Maj.-Gen. James	Kitson, Timothy	Rodgers, Sir John (Sevenoaks)
Deedes, Rt. Hn. W. F.	Knight, Mrs. Jill	Rossi. Hugh (Hornsey)
Digby, Simon Wingfield	Knox, David	Rost, Peter
Dixon, Piers	Lambton, Lord	St. John-Stevas, Norman
Douglas-Home, Rt. Hn. Sir Alec	Lamont, Norman	Scott-Hopkins, James
du Cann, Rt. Hn. Edward	Lane, David	Sharples, Sir Richard
Dykes, Hugh	Langford-Holt, Sir John	Shaw, Michael (Sc'b'gh & Whitby)
Edwards. Nicholas (Pembroke)	Le Merchant, Spencer	Shelton, William (Clapham)
Elliot, Capt. Walter (Carshalton)	Lewis, Kenneth (Rutland)	Skeet, T. H. H.

Smith, Dudley (W'wick & L'mington)	Temple, John M.	Ward, Dame Irene
Soref, Harold	Thatcher, Rt. Hn. Mrs. Margaret	Warren, Kenneth
Speed, Keith	Thomas, John Stradling (Monmouth)	Weatherill, Bernard
Spence, John	Thomas, Rt. Hn. Peter (Hendon, S.)	Wiggin, Jerry
Stainton, Keith	Thompson, Sir Richard (Croydon, S.)	Wilkinson, John
Stanbrook, Ivor	Tilney, John	Wolrige-Gordon, Patrick
Stewart-Smith, Geoffrey (Belper)	Trew, Peter	Woodhouse, Hn. Christopher
Stoddart-Scotf, Col. Sir M.	Tugendhat, Christopher	Worsley, Marcus
Stokes, John	Turton, Rt. Hn. Sir Robin	Wylie, Rt. Hn. N. R.
Tapsell, Peter	van Straubenzee, W. R.
Taylor, Sir Charles (Eastbourne)	Vickers, Dame Joan	TELLERS FOR THE NOES:
Taylor,Edward M.(G'gow,Cathcart)	Waddington, David	Mr. Michael Jopling and
Taylor, Frank (Moss Side)	Walder, David (Clitheroe)	Mr. Oscar Murton.
Taylor, Robert (Croydon, N.W.)	Walker-Smith, Rt. Hn. Sir Derek
Tebbit, Norman	Walters, Dennis

Question accordingly negatived.

Mr. Higgins

I beg to move Amendment No. 67, in page 111, line 34, after 'airport', insert: 'or on land adjacent to a port'. The effect of the Amendment is to extend the zero-rating for port handling services to those which are provided on the immediate land area of the port.

The note to Schedule 4, Group 9, gives "port" the same meaning as in the Customs and Excise Act, 1952. A port for the purpose of that Act is restricted to the shore line and three miles out to sea. It does not include any land area, so that handling services on port wharves and quays would not be entitled to zero-rating as the Bill stands.

Without the Amendment all port services provided on the immediate land area adjacent to the port would be taxable at the standard rate. This could impose a discriminatory tax charge on imports, which could be held to be contrary to GATT, or a hidden tax burden on exports. For these reasons it is considered that this defect should be remedied. This is what the Amendment does. I hope it will commend itself to the House.

Amendment agreed to.

Further Amendment made: No. 68, in page 111, line 45, at end insert: '(2) The supply of any ship or aircraft includes the supply of any services under a charter of the ship or aircraft. (3) "Lifeboat" includes any ship used as a lifeboat'.—[Mr. Higgins.]

Mr. Ray Mawby (Totnes)

I beg to move Amendment No. 164, in page 112, line 4, at end insert: '2. Trailer caravans exceeding 7 metres in length and 7.5 feet in width having at least four wheels and the wheel base at least three-fifths of the overall length.' The House will know that the aim and principle is to try to give zero-rating to any accommodation that people make their homes. For this reason, Item No. 1 on page 112, which deals with caravans, tries to differentiate between caravans which people use as permanent homes and those normally used for touring. It is obvious that it is difficult to find the form of words to differentiate between the two. Therefore, the form of words in the Schedule concerns itself only with caravans which would not be allowed, under the Transport Acts, to use the public highways. So zero rating is now confined to a caravan which an owner would find it impossible to move on a public highway.

The difficulty is that some people in this country must have caravans as permanent homes because they are used in the course of their employment. One important group of people is the showmen of this country who, for the season in any year, hold a series of fairs of comparatively short duration and travel in whichever region they normally reckon to hold such fairs.

The nature of a showman's employment is such that he must have a trailer or caravan which he would normally use as his home for himself and his family during the travelling season. He will then normally go to winter quarters. The majority of showmen still use their caravans, though in permanent positions, as their winter quarters.

The aim, which has been made clear by my hon. Friend the Financial Secretary, should be to relieve caravans wherever it can be shown that they are being used as permanent homes as opposed to touring for relaxation, hobby, or whatever one likes. On this basis I believe we should seek a form of words to make certain that this group of people enjoy the home zero-rating because, by the nature of their employment, they must live in vehicles which are capable of moving on the highways. At the moment Item No. 1 does not cover them because they must have a trailer which is capable of travelling on the public highway.

The Customs and Excise is sympathetic to this matter. Indeed, I have changed the wording of the Amendment on Report to ensure a minimum size. I thought this might help. If hon. Members thinks that anyone would seek to have a vehicle of the type described in the Amendment made to take on holiday, they have only to visualise what it would be like to realise how mistaken they would be.

6.0 p.m.

This is very much a utility vehicle and is designed so that a person can use it as his home. It has to be more robust than any normal touring caravan. It is normally towed along with the wagons carrying the tools of the trade of the showman. The Amendment is restrictive, and would not be liable to be extended to other users.

It may be said that we ought to think of people employed on public works who, because of their employment, have to move from job to job and therefore might want to use this kind of vehicle. If that argument is advanced, my reply will be that they, too, should be exempt. I cannot see any large group of people being able to take advantage of these criteria in order to get zero-rating on a caravan which is not, and is not likely to be, used as a permanent home throughout the 12 months of the year.

Mr. Higgins

If I may intervene at this stage of the debate I think that it might be convenient to the House and might speed up proceedings.

I listened with great care to the way in which my hon. Friend the Member for Totnes (Mr. Mawby) moved his Amendment. As he said, the Bill is concerned to zero-rate caravans which are analagous to dwelling accommodation but as it has not been possible to say how a caravan would be used, the criterion for relief is whether it can be used only on a permanent site or towed on the road, and the simple criterion which has been used is whether, under the Motor Vehicle Construction and Use Regulations, 1969, a caravan may be towed as a trailer on the road.

The Government are not unsympathetic to my hon. Friend's intention, and I know that he has given considerable thought to this matter. He originally put down another Amendment, which has not been selected. This is the same Amendment, Mark 2. We have looked at it carefully, and there have been consultations between those concerned, particularly the showmen, and Customs and Excise.

We are sympathetic to what my hon. Friend has in mind, but we cannot say for certain that the drafting of his Amendment is satisfactory to achieve the objective which he has outlined without unfortunate side effects which neither he nor the House intend. That being so, I cannot recommend the acceptance of the Amendment as it stands. The House will appreciate that this is something which can be dealt with by order under other provisions of the Bill if it becomes an Act. Should we in due course want to make such an order, it will be possible to do so.

This is really a question of making sure that the drafting of the Amendment is as perfect as we can get it. My hon. Friend has had two shots at it, and has got very close to what is needed, but we should like to make sure that the drafting is correct. In the light of what I have said, I hope that my hon. Friend will feel able to withdraw his Amendment. We shall consider it further in consultation with the parliamentary draftsmen and interested parties.

Mr. Dalyell

The Financial Secretary has given a reasonable answer to the case made by the hon. Member for Totnes (Mr. Mawby). May I reinforce that case by drawing the Minister's attention to what happened when the Forth Bridge, one end of which is in my constituency, was being built. A number of skilled steel erectors came up to do the work, and on completion of it they moved on to another job. This is a way of life for them, and I should have thought that reinforces the case made on behalf of the showmen.

Dame Irene Ward

My hon. Friend the Member for Totness (Mr. Mawby) and I are anxious to have embodied in legislation this Amendment which emanates from the Showmen's Guild. I think the whole House will agree with me when I say that the country is brighter and better for having a touring Showmen's Guild. We want to do everything that we can to help its members, and I am therefore particularly grateful to my hon. Friend the Financial Secretary for his sympathetic approach to the Amendment. VAT is a complicated matter, and the more I listen to these debates the more complicated things become to me—I am not what one might call mathematically minded.

During the period that we have been discussing these matters with the Treasury, Ministers and Treasury officials could not have been more helpful. They have suggested that representatives of the Showmen's Guild should discuss the matter with Customs and Excise. This all sounds alarming to me, but I presume it is the right thing to do.

Members of the Showmen's Guild play a great part in our national life, and we want to see that extended because we think that it is good for the population. It gives a great deal of pleasure, and provides a considerable amount of employment. We are all devoted to those who make up the Showmen's Guild.

It is rather fun to know that sometimes Treasury Ministers find it difficult to arrive at a conclusion. My hon. Friend has not arrived at a conclusion, but he says that he will. There are three stalwart supporters of the Amendment, and we know that we shall get all the support that is necessary to ensure that the Showmen's Guild gets zero-rating, which we regard as necessary to enable this important national industry to be carried on.

I gather from what has been said that the Customs and Excise has not arrived at an acceptable form of words, but I know that what my hon. Friend has said from the Front Bench will give great pleasure to the Showmen's Guild. I wish that we could have many more Amendments accepted with the pleasure and charm that we have seen today. We know that if the Government decide to do something they will do it, and I hope that the difficulties in this instance will not be too great to be overcome by Treasury Ministers. Sometimes I wonder whether I am right in saying that.

At any rate, we thank the Government. The Showmen's Guild will be absolutely delighted. In my part of the world we have the biggest set-up of the Showmen's Guild on the Town Moor at Newcastle-upon-Tyne. It has gone on for years, and I hope that my hon. Friend's pledge will be honoured by a proper form of words appearing in the Statute Book. When that happens we shall have the Minister up to our area and he will learn a great deal more about showmen and what they do for our national life. When he does, he will be as pleased as we are that he has been able to accede to our case.

Dr. Gilbert

The hon. Member for Totnes (Mr. Mawby) will be glad to hear that there is no difference between the two sides of the House on this Amendment. I should like to congratulate the hon. Gentleman on the eloquent way in which he moved it. However, there is one point on which I should like some clarification from the Financial Secretary. Would caravans of the type or similar to them, used by the Showman's Guild which attract VAT not be considered input for business purposes and therefore qualify for relief under those provisions of the Bill?

Mr. Higgins

By leave of the House. The hon. Member for Dudley (Dr. Gilbert) has a flair, which I am beginning to appreciate more, for finding particularly detailed points which are of some interest, although I feel bound to say on this issue perhaps of some esoteric interest.

The point the hon. Gentleman has put to me would raise considerable problems if we were to say that people who happened to live in a particular structure could say that was something which they could deduct in the course of their business. There are a large number of pitfalls here. The more suitable course of action would be to proceed on the basis which I have suggested, and do what we can to help with showmen's caravans on the basis that these are normally occupied effectively as a home.

It is clear what we have in mind, and that is only showmen's caravans. I hope that my hon. Friend will see fit to withdraw the Amendment. I am grateful for the remarks of my hon. Friend the Member for Tynemouth (Dame Irene Ward)

Mr. Mawby

I am grateful to the Financial Secretary. At least we can say that we have our foot in the door. I assure my hon. Friend that we shall not take it out until we have got the door wide open. I appreciate what my hon. Friend has said. On behalf of the Showman's Guild, I thank the Customs and Excise which has been extremely helpful and tried to do what it could to meet this point.

On the undertaking my hon. Friend has given, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Dr. Gilbert

I beg to move Amendment No. 70, in page 112, line 29 leave out from '1925' to end of line 32.

The effect of the Amendment is to remove from Schedule 4 the requirement that the supply of goods dispensed by pharmaceutical chemists should be backed by a prescription from a medical practitioner, a temporary registered medical practitioner or a dentist to qualify for zero-rating.

The Bill without the Amendment would merely give effect to an additional financial inducement for a person to go to a medical practitioner for a prescription rather than to a chemist.

There is a significant word at page 112, line 26, namely "dispensed". I understand that "dispensed" has a fairly technical meaning. It applies only to the supply of goods where the pharmaceutical chemist uses a dgree of his own professional judgment in deciding what to make up for a customer. In other words, a customer may go in and say "I have a headache and I should like a bottle of aspirin tablets". That does not involve the dispensing of aspirin tablets. If a customer goes into a chemist's shop and says "I have a headache"—or it may be a bad cold—"what can you give me?" and the chemist prescribes a well-known proprietary medicine which he takes off the shelf, that also does not constitute the dispensing of the medicine in the terms of the provision. In other words, for a medicine to be "dispensed" requires the chemist to use his own judgment of what the customer requires, to make it up from various ingredients and label it as a special, custom-made job.

6.15 p.m.

I understand that only 2 per cent. to 5 per cent. of pharmaceutical business is dispensed in those terms. On the other hand that business has been growing, and for quite obvious reasons. The main reason is that there is a delay nowadays in getting to see a doctor because of the pressure on doctors' surgery time. In some parts of the country it is necessary to make an appointment two or three days in advance to see a doctor. The result is a great incentive to the public to go to the pharmacist with a relatively minor complaint and seek to benefit from his professional skill in having proper medication prepared. The people who do that are not making frivolous visits. If they were doing so they would go to the doctor to get a prescription, which would mean that even with the 20p charged on prescriptions they would be getting medication at a cheaper rate than if they were going to the pharmacist.

In every way the Amendment would be of great social value. It would save the time that the public now have to spend visiting doctors' surgeries. It would save the public's money because there are few medications which have to be dispensed in the way I have defined "dispensed". It would cost less than the 20p prescription charge. There is also the additional paper work for the doctor, who would have to see people who otherwise would have gone and received treatment direct from the pharmacist. There is the additional waiting time for the other patients who have to see the doctor and who do not have this option open to them. Those people would suffer because of the provisions of the Bill as it stands. There is also extra work for the chemists.

If we do not make the Amendment chemists will be faced with a situation where certain types of medication which are dispensed will be subject to VAT and other types will not. In other words, they will have to keep two types of record, with all the additional administrative complications which we have heard about in great detail in other discussions on the Bill. Further, unless this useful little simplification is introduced, there will be the extra work involved in the administration of VAT. I see no good argument for not accepting the Amendment. For all these reasons, but mainly because of the social consequences rather than the economic consequences which are involved, I comment the Amendment to the House.

Mr. Lewis Carter-Jones (Eccles)

There is a serious paradox about prescribing. If a prescription is taken to a chemist it is prescribed free of VAT, but if it is taken to an appliance centre VAT will have to be paid—on the same prescription. We have been told that one of the reasons why exemptions from VAT cannot be made is administrative difficulties, yet the Minister or his Department propose that if the same prescription is taken to an appliance centre the Treasury or the Customs and Excise is prepared to look at each prescription and to have VAT reclaimed. I understand that representations have been made on this to the Treasury and the Customs and Excise. If VAT is a tax which is difficult to administer, why is the Minister prepared to accept the huge administrative cost of treating the prescription taken to an appliance centre in that way—by claiming the tax back?

Mr. Nott

The effect of the Amendment is to zero-rate the supply of any goods dispensed by a pharmaceutical chemist, since it removes the provision which links relief not only to dispensing by a chemist but also to prescription by a doctor. It is the link with the medical practitioner which under the Bill as drafted makes the prescription by a chemist zero-rated. We have debated around the point raised by the hon. Member for Eccles (Mr. Carter-Jones) on several occasions and he is correct in saying that the same prescription if taken to an appliance contractor would not be zero-rated.

The hon. Member went over this ground when we debated the Amendments concerning surgical appliances. Broadly speaking, the reason is that we cannot define "appliance contractors" in the same way as we are able to define "pharmaceutical chemists" when they are actually dispensing a prescription provided by a doctor. I take the point the hon. Gentleman makes and confirm its accuracy that if the same prescription went to an appliance contractor, the item would not be zero-rated. As I made clear when we debated drugs and medicines, the Government's policy is not specifically to zero-rate medical goods but to link zero-rating to the clinical responsibility and the diagnosis of a registered doctor or dentist.

The effect of the Amendment would be to put the pharmacist in the same position as a doctor dentist. It would remove the present controlling feature within the Bill—I know that this is intentional—of prescription by a doctor. Drugs and medicines are at present chargeable for purchase tax, subject to a list of specific exemptions. This list and the regulations that go with it, although practicable in a single-stage tax like purchase tax. do not make sense under VAT.

The relief proposed in the Amendment—this is the real objection to it—could apply to virtually any goods supplied by a pharmacist even where those goods were supplied on non-medical grounds. The meaning of the word "dispense" is not precise. I know that the hon Member for Dudley (Dr. Gilbert) is saying that it is, but in our view it is not precise and it is certainly not limited to what is done in a pharmacist's dispensary. The revenue lost, even from items supplied for a medical purpose although not on prescription, would be substantial. While I appreciate that the Pharmaceutical Society is anxious to emphasise the right of the chemist to prescribe at the counter—this is really what is behind the Amendment—what it means by counter prescribing is to produce prescriptions when a customer asks a chemist for advice on what preparation to buy.

I understand what the society is seeking but I am afraid that we are not able to change the basis upon which the tax is constructed to meet the point. If we accepted the Amendment the relief would apply to goods solely by reason of their supply by a pharmacist, and this would create inequities beside the supply of other products. For instance, many proprietary drugs and medicines are supplied in grocery shops and chain stores. A good example would be cough syrups and aspirins. This is the problem which arises from the Amendment. While I appreciate the feelings of the pharmacists on this issue and the reasons why they are making these representations, it is only right that I should repeat that the estimated yield on purchase tax from drugs and medicines is now about £17 million in a full year while the estimated yield from drugs and medicines under VAT will be about £10 million a year.

Although I believe that pharmacists feel that a matter of principle is at stake, for the vast range of their goods they compete with other outlets and the interpretation of the word "prescribed" Is not as the hon. Gentleman suggests. Since the vast range of drugs and medicines which pharmacists are selling will be bearing a considerable lower rate of tax under VAT than they are now under purchase tax, I hope that the House will feel that this is reasonable and that the hon. Gentleman will withdraw his Amendment.

Dr. Gilbert

I do not find the hon. Gentleman's reply in any way satisfactory. He has sought to widen the area of debate from the somewhat narrow focus into which I put it. He talked at length about proprietary drugs, but I made it clear from start to finish that I was not talking about them at all. The Amendment was not put down by this side of the House as a result of any urging by the Pharmaceutical Society. We tabled it ourselves because our principal concern was with members of the public and the pressure on doctors' surgeries. There were the two reasons of the additional cost to the public of the Bill and also the attempt to relieve the enormous over-burden to which the doctors have to submit themselves in prescribing relatively routine medication.

As the hon. Gentleman conceded, we recognise the law that the pharmaceutical industry has professional skill in these matters it is entitled to prescribe. There is therefore no reason why it should be penalised in this way. I will not conceal from the hon. Gentleman that I have had discussions with the Pharmaceutical Society, but they were at my initiative. While I am wholly sympathetic to the society's case, it is by no means the main reason for the Amendment. We consider on every possible social ground that it is desirable that there should be no discrimination between dispensed goods and the Pharmaceutical Society was quite clear, on the lines I indicated earlier, that goods could be categorised as being dispensed in a way that the Minister of State said was not possible.

Even if we were to accept the hon. Gentleman's technical objection to my definition of dispensed goods—goods that have to be brought out of the dispensary by the pharmacist and put in a tin or a bottle and labelled specially for one customer—the least the hon. Gentleman could have done was to meet the point of principle and say that he would find a form of words that would meet our objections. We have had no encouragement from him and we find his arguments totally unconvincing. I therefore advise my right hon. and hon. Friends to divide in support of the Amendment.

Question put, That the Amendment be made: —

The House divided: Ayes 200. Noes 219.

Division No. 289.]	AYES	[6.29 p.m.
Albu, Austen	Carter-Jones, Lewis (Eccles)	Duffy, A. E. P.
Allaun, Frank (Salford, E.)	Castle, Rt. Hn. Barbara	Dunnett, Jack
Allen, Scholefield	Clark, David (Colne Valley)	Eadie, Alex
Archer, Peter (Rowley Regis)	Cocks, Michael (Bristol, S.)	Edelman, Maurice
Atkinson, Norman	Cohen, Stanley	Edwards, Robert (Bilston)
Barnett, Guy (Greenwich)	Concannon, J. D.	Edwards, William (Merioneth)
Barnett, Joel (Heywood and Royton)	Corbet, Mrs. Freda	English, Michael
Baxter, William	Cox, Thomas (Wandsworth, C.)	Evans, Fred
Benn, Rt. Hn. Anthony Wedgwood	Crawshaw, Richard	Ewing, Henry
	Cronin, John	Faulds, Andrew
Bennett, James (Glasgow, Bridgeton)	Crosland, Rt. Hn. Anthony	Fisher,Mrs.Doris(B'ham,Ladywood)
Bidwell, Sydney	Dalyell, Tam	Fitch, Alan (Wigan)
Boardman, H. (Leigh)	Darling, Rt. Hn. George	Fletcher, Raymond (Ilkeston)
Booth, Albert	Davidson, Arthur	Fletcher, Ted (Darlington)
Bottomley, Rt. Hn. Arthur	Davis, Clinton (Hackney, C.)	Forrester, John
Bradley, Tom	Davis, Terry (Bromsgrove)	Garrett, W. E.
Broughton, Sir Alfred	Deakins, Eric	Gilbert, Dr. John
Brown, Bob (N'c'tle-upon-Tyne,W.)	de Freitas, Rt. Hn. Sir Geoffrey	Golding, John
Brown, Hugh D. (G'gow, Provan)	Dell, Rt. Hn. Edmund	Gordon Walker, Rt. Hn. P. C.
Brown, Ronald (Shoreditch & F'bury)	Dempsey, James	Gourlay, Harry
Buchanan, Richard (G'gow, Sp'burn)	Doig, Peter	Grant, George (Morpeth)
Butler, Mrs. Joyce (Wood Green)	Dorman, J. D.	Grant, John D. (Islington, E.)
Callaghan, Rt. Hn. James	Douglas, Dick (Stirlingshire, E.)	Griffiths, Eddie (Brightside)
Carmichael, Neil	Douglas-Mann, Bruce	Griffiths, Will (Exchange)
Carter, Ray (Birmingh'm, Northfield)	Driberg, Tom	Grimond, Rt. Hn. J.
Hamilton, James (Bothwell)	Marks, Kenneth	Robertson, John (Paisley)
Hamilton, William (Fife, W.)	Marquand, David	Rodgers, William (Stockton-on-Tees)
Hamling,William	Marsden, F.	Roper, John
Hardy, Peter	Marshall, Dr. Edmund	Rose, Paul B.
Harper, Joseph	Mason, Rt. Hn. Roy	Rowlands, Ted
Harrison, Walter (Wakefield)	Mayhew, Christopher	Sheldon, Robert (Ashton-under-Lyne)
Healey, Rt. Hn. Denis	Meacher, Michael	Shore, Rt. Hn. Peter (Stepney)
Heffer, Eric S.	Mellish, Rt. Hn. Robert	Short,Rt.Hn.Edward(N'c'tle-u-Tyne)
Huckfield, Leslie	Mendelson, John	Silkin, Rt. Hn. John (Deptford)
Hughes, Mark (Durham)	Millan, Bruce	Sillars, James
Hughes, Robert (Aberdeen, N.)	Miller, Dr. M. S.	Skinner, Dennis
Hughes, Roy (Newport)	Mitchell, R. C. (S'hampton, Itchen)	Small, William
Hunter, Adam	Morgan, Elystan (Cardiganshire)	Spearing, Nigel
Irvine,Rt.Hn.SirArthur(Edge Hill)	Morris, Alfred (Wythenshawe)	Stallard, A. W.
Janner, Greville	Morris, Charles R. (Openshaw)	Steel, David
Jeger, Mrs. Lena	Mulley, Rt. Hn. Frederick	Stewart, Donald (Western Isles)
Jenkins, Hugh (Putney)	Murray, Ronald King	Stewart, Rt. Hn. Michael (Fulham)
Jenkins, Rt. Hn. Roy (Stechford)	Oakes, Gordon	Stoddart, David (Swindon)
John, Brynmor	Ogden, Eric	Stonehouse, Rt. Hn. John
Johnson, Walter (Derby, S.)	O'Halloran, Michael	Strang, Gavin
Jones, Barry (Flint, E.)	O'Malley, Brian	Tinn, James
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)	Oram, Bert	Tomney, Frank
Jones, T. Alec (Rhondda, W.)	Orbach, Maurice	Torney, Tom
Kaufman, Gerald	Oswald, Thomas	Urwin, T. W.
Kelley, Richard	Owen, Dr. David (Plymouth, Sutton)	Varley, Eric G.
Lambie, David	Padley, Walter	Wainwright, Edwin
Lamond, James	Paget, R. T.	Walden, Brian (B'm'ham, All Saints)
Latham, Arthur	Palmer, Arthur	Walker, Harold (Doncaster)
Lawson, George	Pannell, Rt. Hn. Charles	Watkins, David
Lee. Rt. Hn. Frederick	Pardoe, John	Wellbeloved, James
Leonard. Dick	Pavitt, Laurie	Whitehead, Phillip
Lestor, Miss Joan	Pentland, Norman	Whitlock, William
Lever, Rt. Hn. Harold	Prentice, Rt. Hn. Reg.	Willey, Rt. Hn. Frederick
Lewis, Arthur (W. Ham, N.)	Prescott, John	Williams, Alan (Swansea, W.)
Lewis, Ron (Carlisle)	Price, J. T. (Westhoughton)	Williams, W. T. (Warrington)
Loughlin. Charles	Price, William (Rugby)	Wilson, Alexander (Hamilton)
Mabon, Dr. J. Dickson	Probert, Arthur	Wilson, Rt. Hn. Harold (Huyton)
McBride, Neil	Rankin, John	Wilson, William (Coventry, S.)
McCartney, Hugh	Reed, D. (Sedgefield)	Woof, Robert
Mackenzie, Gregor	Rees, Merlyn (Leeds, S.)
Mackintosh, John P.	Richard, Ivor	TELLERS FOR THE AYES:
Maclennan, Robert	Roberts, Albert (Normanton)	Mr. Ernest Armstrong and
McNamara. J. Kevin	Roberts,Rt.Hn.Goronwy (Caernarvon)	Mr. Donald Coleman.
Mahon, Simon (Bootle)
NOES
Adley, Robert	Carr, Rt. Hn. Robert	Fletcher-Cooke, Charles
Alison, Michael (Barkston Ash)	Cary, Sir Robert	Fookes, Miss Janet
Allason, James (Hemel Hempstead)	Chapman, Sydney	Fortescue, Tim
Amery, Rt. Hn. Julian	Chataway, Rt. Hn. Christopher	Fowler, Norman
Astor, John	Chichester-Clark, R.	Fox, Marcus
Atkins, Humphrey	Churchill, W. S.	Fry, Peter
Awdry, Daniel	Clark, William (Surrey, E.)	Gibson-Watt, David
Baker, Kenneth (St. Marylebone)	Clegg, Walter	Gilmour, Sir John (Fife, E.)
Balniel, Lord	Cockeram, Eric	Glyn, Dr. Alan
Barber, Rt. Hn. Anthony	Cooke, Robert	Godber, Rt. Hn. J. B.
Batsford, Brian	Coombs, Derek	Goodhew, Victor
Beamish, Col. Sir Tufton	Cordle, John	Gorst, John
		Gower, Raymond
Bell, Ronald	Corfield, Rt. Hn. Frederick	Grant, Anthony (Harrow. C.)
Bennett, Sir Frederic (Torquay)	Cormack, Patrick	Gray, Hamish
Benyon, W.	Costain, A. P.	Green, Alan
Berry, Hn. Anthony	Critchley, Julian	Grylls, Michael
Biffen, John	Crouch, David	Gummer, Selwyn
Biggs-Davison, John	Crowder, F. P.	Hall, Miss Joan (Keighley)
Blaker, Peter	Dalkeith, Earl of	Hall, John (Wycombe)
Boardman, Tom (Leicester, S.W.)	d'Avigdor-Goldsmid, Sir Henry	Hamilton, Michael (Salisbury)
Boscawen, Robert	Deedes, Rt. Hn. W. F.	Harrison, Brian (Maldon)
Bowden, Andrew	Digby, Simon Wingfield	Havers, Michael
Bray, Ronald	Dixon, Piers	Hawkins, Paul
Brewis, John	Douglas-Home, Rt. Hn. Sir Alec	Higgins, Terence L.
Brinton, Sir Tatton	du Cann, Rt. Hn. Edward	Hill, John E. B. (Norfolk, S.)
Brocklebank-Fowler, Christopher	Dykes, Hugh	Hill, James (Southampton, Test)
Brown, Sir Edward (Bath)	Edwards, Nicholas (Pembroke)	Holland, Philip
Bruce-Gardyne, J.	Elliot, Capt. Waller (Carshalton)	Hordern, Peter
Bryan, Paul	Elliott, R. W. (N'c'tle-upon-Tyne.N.)	Hornsby-Smith,Rt.Hn.Dame Patricia
Buchanan-Smith, Alick(Angus,N&M)	Emery, Peter	Howe, Hn. Sir Geoffrey (Reigate)
Buck, Antony	Eyre, Reginald	Howell, Ralph (Norfolk, N.)
Bullus, Sir Eric	Farr, John	Hunt, John
Burden, F. A.	Fenner, Mrs. Peggy	Hutchison, Michael Clark
Butler, Adam (Bosworth)	Fidler, Michael	Iremonger, T. L.
Campbell, Rt.Hn.G.(Moray&Nairn)	Finsberg, Geoffrey (Hampstead)	Irvine, Bryant Godman (Rye)
Carlisle, Mark	Fisher. Nigel (Surbiton)	James, David

Jenkin, Patrick (Woodford)	Morgan, Geraint (Denbigh)	Smith, Dudley (W'wick & L'mington)
Jessel, Toby	Morgan-Giles, Rear-Adm.	Soref, Harold
Jones, Arthur (Northants, S.)	Morrison, Charles	Speed, Keith
Jopling, Michael	Mudd, David	Spence, John
Kaberry, Sir Donald	Murton, Oscar	Stainton, Keith
Kellett-Bowman, Mrs. Elaine	Neave, Airey	Stanbrook, Ivor
Kershaw, Anthony	Noble, Rt. Hn. Michael	Stewart-Smith, Geoffrey (Belper)
King, Evelyn (Dorset, S.)	Normanton, Tom	Stoddart-Scott, Col. Sir M.
King, Tom (Bridgwater)	Nott, John	Stokes, John
Kinsey, J. R.	Onslow, Cranley	Tapsell, Peter
Kirk, Peter	Oppenheim, Mrs. Sally	Taylor,Edward M.(G'gow,Cathcart)
Knight, Mrs. Jill	Osborn, John	Taylor, Frank (Moss Side)
Knox, David	Owen, Idris (Stockport, N.)	Tebbit, Norman
Lambton, Lord	Page, Graham (Crosby)	Temple, John M.
Langford-Holt, Sir John	Page, John (Harrow, W.)	Thatcher, Rt. Hn. Mrs. Margaret
La Marchant, Spencer	Percival, Ian	Thomas, Rt. Kn. Peter (Hendon, S.)
Lewis, Kenneth (Rutland)	Pink, R. Bonner	Thompson, Sir Richard (Croydon, S.)
Lloyd, Ian (P'tsm'th, Langstone)
Loveridge, John	Powell, Rt. Hn. J. Enoch	Tilney, John
Luce, R. N.	Price, David (Eastleigh)	Trew, Peter
MacArthur, Ian	Proudfoot, Wilfred	Turton, Rt. Hn. Sir Robin
McCrindle, R. A.	Pym, Rt. Hn. Francis	van Straubenzee, W. R.
McLaren, Martin	Raison, Timothy	Vickers, Dame Joan
McNair-Wilson, Michael	Ramsden, Rt. Hn. James	Waddington, David
McNair-Wilson, Patrick (New Forest)	Redmond, Robert	Walder, David (Clitheroe)
Maddan, Martin	Reed, Laurance (Bolton, E.)	Walker-Smith, Rt. Hn. Sir Derek
Madel, David	Renton, Rt. Hn. Sir David	Walters, Dennis
Marten, Neil	Ridley, Hn. Nicholas	Ward, Dame Irene
Mather, Carol	Ridsdale, Julian	Warren, Kenneth
Mawby, Ray	Rippon, Rt. Hn. Geoffrey	Weatherill, Bernard
Maxwell-Hyslop, R. J	Roberts, Wyn (Conway)	Wiggin, Jerry
Meyer, Sir Anthony	Rodgers, Sir John (Sevenoaks)	Wilkinson, John
Mills, Peter (Torrington)	Rossi, Hugh (Hornsey)	Woodhouse, Hn. Christopher
Miscampbell, Norman	Rost, Peter	Worsley, Marcus
Moate, Roger	Scott-Hopkins, James	Wylie, Rt. Hn. N. R.
Money, Ernle	Shaw, Michael (Sc'b'gh & Whitby)
Monks, Mrs. Connie	Shelton, William (Clapham)	TELLERS FOR THE NOES
Monro, Hector	Sinclair, Sir George	Mr. Kenneth Clarke and
Montgomery, Fergus	Skeet, T. H. H.	Mr. John Stradling Thomas

Question accordingly negatived.

Mr. Charles Morrison (Devizes)

I beg to move Amendment No. 180, in page 112, line 34, at end insert: