Commons Sitting of 10 May 1972

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS
BRITISH TRANSPORT DOCKS BILL(By Order)
Order for Third Reading read.
To be read the Third time Wednesday next.

ORAL ANSWERS TO QUESTIONS
  POSTS AND TELECOMMUNICATIONS

    Television Licence Fee
    Mr. Meacherasked the Minister of Posts and Telecommunications what reply he has given to the 2,500 retirement pensioners who have petitioned him to remove the inequity in the licensing of television for the elderly.
    The Minister of Posts and Telecommunications (Sir John Eden): I am looking carefully at the arrangements for the special licence for old persons' homes and when I have done so I will write to the hon. Members for Oldham, West (Mr. Meacher) and Oldham, East (Mr. Lamond) who forwarded this petition to me.
    Mr. Meacher: Is the right hon. Gentleman aware that there is widespread resentment at the anomaly whereby some old people have to pay the full £7 for their television licence while others only have to pay 5p? In view of the important social function of television in old age, will the right hon. Gentleman look again at ways of recompensing the BBC for the revenue which would be lost by making television licences free for all old people?
    Sir J. Eden: I have already made it clear that I am looking very closely at what the hon. Gentleman describes as this anomaly. As the hon. Gentleman knows, it derives from a decision taken by the present Deputy Leader of the Opposition.
    Sir G. Nabarro: Will my right hon. Friend please recognise, new as he is to his present office, that this controversy has been going on for the last six years? Is he aware that whenever I ask about it I am fobbed off for another few months? Can he, with his characteristic alacrity, reach a determination and decision at an early date and remove all old-age pensioners from liability to the combined television and radio licence?
    Sir J. Eden: The latter part of my hon. Friend's supplementary question is the subject of a later Question on the Order Paper. With regard to the first part I have already indicated that I am studying the matter closely, and I will arrive at a decision when I have completed my study.
    Mr. John Mendelson: Will the right hon. Gentleman accept that his precessor was pressed for a more limited concession for many elderly people living alone in that, if the Government did not find it possible to grant a licence to all retirement pensioners for 5p only, they should at least introduce a half-price licence for old-age pensioners? The right hon. Gentleman's predecessor promised to consider the suggestion but no action has been taken.
    Sir J. Eden: Yes, Sir, but this is a matter which requires very careful consideration and that is why I have made it clear that I will study it and then announce a decision.
    Mr. Fidler: In the course of his consideration of the anomaly, will my right hon. Friend bear in mind the importance of maintaining the 5p concession for those at present enjoying it? If it is not possible to extend the 5p concession to all old-age pensioners, will he consider special categories, particularly elderly people living on their own and whose only window on the world is the television set?
    Sir J. Eden: That is the sort of point I am looking at.
    Mr. Gregor Mackenzie: Will the right hon. Gentleman recognise—as I am sure he will from the questions today—that there is a strong feeling on both sides of the House and in the country in favour of the proposition argued by my hon. Friend the Member for Oldham, West (Mr. Meacher)? While I recognise the difficulties and what has happened in the past, may I ask whether the right hon. Gentleman will request his colleagues in the Government to consider the position and, if need be, to set up a departmental inquiry into the whole question of concessions on television licences?
    Sir J. Eden: There is no need to press me on this matter. It is because I share the feelings expressed in the House today that I caused the inquiry to be made.
    Mr. Tebbitasked the Minister of Posts and Telecommunications if he will now abolish the television licence fee.
    Mr. Gurdenasked the Minister of Posts and Telecommunications if he will reduce the television licence fee.
    Sir J. Eden: No, Sir.
    Mr. Tebbit: In view of the brevity of that reply I hope I may have your indulgence, Mr. Speaker, to ask my right hon. Friend whether he agrees that the BBC would be placed in a less invidious position when dealing with controversial matters if it did not depend for its income on what is virtually a tax levied by Her Majesty's Government. Would he further agree that we would think it quite disgraceful if we had to purchase the British Gazette published by the Government to have the right to read the Daily Express or for that matter the Morning Star? This is what is happening with the BBC licence fee.
    Mr. Helier: Whatever is the hon. Member talking about?
    Sir J. Eden: My hon. Friend will recognise that the dual system of operation, the financing of a broadcasting system by a licence fee and another system by advertising, has become established in this country. The future of broadcasting, including the method by which it should be financed, will be the subject of close study leading up to the post-1976 period.
    Mr. Gurden: Is my right hon. Friend aware that there is a wide degree of
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    opinion in support of what my hon. Friend the Member for Epping (Mr. Tebbit) has said? Is he further aware that this anti-British Broadcasting Cor-poration—
    Hon. Members: Oh!
    Mr. Heifer: Get back under your stone.
    Mr. Gurden: —ought to consider its consumers a title more and that if it was competitive as are the ITV companies and operating under the same sanctions, it would have to listen to them?
    Sir J. Eden: It is competitive with the ITV companies, and it is open to anybody to look at ITV and not at BBC television if he so chooses.
    Mr. Edwin Wainwright: Will the right hon. Gentleman ignore entirely the supplementary questions of his hon. Friends? Does he realise that many of our senior citizens are in the lower income groups? Will he consider reducing the television licence fee by at least 50 per cent. for all retired people?
    Sir J. Eden: The matter of the licence fee for old people is the subject of another Question on the Order Paper which I shall answer later.
    Mr. Marten: Will my right hon. Friend consider how the licence fee is obtained —whether it is most efficiently obtained through the Post Office or whether it should be obtained through some other organisation at a much lower cost which could contribute to lowering the fee?
    Sir J. Eden: I note my hon. Friend's suggestion. The cost of collection is about £9 million to yield a revenue of about £122 million.
    Mr. Alfred Morris: Does the right lion. Gentleman agree that the BBC should receive a grant in aid in respect of its superb work in educational and, in particular. school broadcasting?
    Sir J. Eden: There is a certain amount of uncertainty about grants in aid which I do not think the BBC would welcome.
    Mr. Greville Jannerasked the Minister of Posts and Telecommunications what reply he has sent to the petition from residents of Leicester asking for a reduction in the television licence fee for retirement pensioners.
    Sir J. Eden: I shall be confirming what I told the deputation which the hon. and learned Member brought to see me, that it has never been the policy of any Government to grant cheap licences to all retirement pensioners.
    Mr. Janner: Is the Minister aware that television is no longer a luxury for elderly people, many of whom depend upon it for their sole companionship? Does he not think it grossly unfair that an elderly person living off his inadequate old-age pension should pay the same licence fee as a well-off person who has several television sets, one of which is probably a colour set? Will the Minister give new consideration to the views of the 18,000-odd signatories to the petition which representatives of the Leicester Old Folks Supporters Association and I presented to him?
    Sir J. Eden: The right way to further the interests of retired people is through the medium of the cash benefits of the old-age pension and other social security formulæ.

    Telephones (Dialling Aids)
    Mr. Leslie Huckfieldasked the Minister of Posts and Telecommunications whether he will give a general direction to the Post Office Corporation to publicise as widely as possible aids available under its auspices to assist quicker telephone dialling.
    Sir J. Eden: No, Sir. The scale of publicity is for the Post Office to decide, and it assures me that suitable publicity is already given to these aids.
    Mr. Huckfield: Does the right hon. Gentleman appreciate that the failure rate of local calls in certain London exchanges is as bad as the STD failure rate and that all we are getting is snap, crackle and pop? Since this involves dialling one, two, three, four and even five times, the Post Office should do something to advertise to the general public the quicker dialling aids which are available under its own auspices.
    Sir J. Eden: This is a matter for the Post Office. It is very much alive to the need to ensure improved dialling but, as the hon. Gentleman himself well knows, even the speeding up of dialling is not itself the complete answer, because the introduction of new aids also depends
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    on the standard of exchange equipment available.

    USSR (Telephone Calls)
    Mr. Greville Jannerasked the Minister of Posts and Telecommunications whether he will make representations to the International Telecommunications Union concerning difficulties customarily caused to persons telephoning Jewish people in the United Soviet Socialist Republic outside Moscow from the United Kingdom.
    Sir J. Eden: I have no evidence that the International Telecommunication Convention is being contravened in the way the hon. and learned Member has suggested.
    Mr. Janner: Is the right hon. Gentleman aware that considerable difficulties are incurred by those who try to telephone Jewish citizens of the Soviet Union in places such as Kiev, Kharkov, Minsk, Leningrad and other cities outside Moscow? If he is given specific evidence of breaches of the convention will he be good enough, as his predecessor did in other circumstances, to undertake to raise these with the authorities? Will he also be good enough to convey to his operators who work on the Continental exchange the deep appreciation of those who use the Moscow service for their tact, patience and courtesy in the very difficult circumstances created for them by the Moscow operators?
    Sir J. Eden: I am grateful for the last comments of the hon. and learned Gentleman and I will certainly pass them on to the people concerned. I can assure the hon. and learned Gentleman that any evidence he cares to put before me on this matter will be studied with the utmost seriousness.

    Post Office Advisory Committees (Representation)
    Mr. Redmondasked the Minister of Posts and Telecommunications if he will seek to amend the Post Office Act, 1969, to allow for pensioners and other similiar organisations to have a statutory right of representation on local Post Office advisory committees.
    Sir J. Eden: No, Sir. The committees are voluntary and independent bodies, and it would not be appropriate for any

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    particular organisation to have a statutory right of representation on them.
    Mr. Redmond: While I accept to some extent what my right hon. Friend has said may I ask him in turn to accept that the major customer of the Post Office is the Department of Health and Social Security? Is he aware that when there is a proposal to close a sub-post office the old-age pensioners and others who are seriously affected by sudden changes in the places where they get their pensions and who are often put to great inconvenience are not consulted because the local Post Office advisory committees are almost entirely commercially composed? If the Minister cannot introduce legislation, could he drop a hint to the Post Office Users' National. Council that it should extend the representation on these committees?
    Sir J. Eden: The Post Office exercises considerable care in the closing of sub-post offices. I am sure my hon. Friend will have been heartened by the views expressed on this subject the day before yesterday by the Managing Director of Posts. These are important issues. My hon. Friend would be well advised to suggest to old-age pensioner organisations that they can make their own approaches direct to the users' council concerned.
    Mr. Carter-Jones: Would the right hon. Gentleman agree that his hon. Friend has made an extremely valid point? Is he aware that if he consults the Chronically Sick and Disabled Persons Act, 1970, he will find that it is incumbent upon him to have such representation? Can we who have done some work in this area assure the Minister that these committees would be stronger and much more representative if he acted on the advice he has received from his hon. Friend?
    Sir J. Eden: The original Question was concerned with the advisory committees which are non-statutory bodies. That is a matter for local choice. As for the statutory body, the Post Office Users' National Council, any organisation can make direct representations to it. There are no vacancies on the council at present.

    Contracts (Development Areas)
    Mr. Dempseyasked the Minister of Posts and Telecommunications what is
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    the annual value of public contracts placed by the Post Office Corporation; and what proportion of those sanctioned by him are placed in special development areas.
    Sir J. Eden: The Post Office tells me that the total value of all contracts awarded in 1970-71, the last year for which information is available, was £384 million. The placing of individual contracts is a matter for the Post Office but I understand that a considerable proportion of telecommunications equipment is manufactured in special development areas.
    Mr. Dempsey: Will the right hon. Gentleman bear in mind that special development areas such as Coatbridge and Airdrie rely a great deal on the Post Office Corporation for employment? Will he convey my personal thanks on behalf of the firms and workers in my constituency for the opportunities we receive? Will he continue to prevail upon the corporation to place the maximum number of contracts in such special development areas since this is one of the most effective ways of minimising the unemployment problem which is so serious in my locality?
    Sir J. Eden: I am sure that the Post Office will be grateful for the hon. Gentleman's remarks. He will recognise that it is for the Post Office to place contracts and it is for the individual firms concerned to decide where the product is to be manufactured.
    Mr. Hugh Fraser: Would my right hon. Friend agree that there is surplus capacity in this country which could be used and that one of the reasons why it is not being used is that his Department goes far too much in leaps and starts without a steady development and investment? Will he think of going to the market to raise money for these investments, which show a good return, instead of leaving it to the public to find the money by increased charges? Is he aware that if this were done we could get a steady advance in telecommunications?
    Sir J. Eden: I can assure my right hon. Friend that the forward requirements of the Post Office indicate a steady and increasing demand for equipment. The second part of his question is another matter.

    Staff Associations (Recognition)
    Mr. Wintertonasked the Minister of Posts and Telecommunications whether he will issue a general direction to the Post Office Corporation to give details of the steps available to the staff associations in their endeavours to obtain official recognition by the corporation.
    Sir J. Eden: No, Sir. A direction would not be appropriate. This is a management matter for the Post Office.
    Mr. Winterton: Is my right hon. Friend aware that the Telecommunications Staff Association, a constructive and reasonable association of employees within the postal services, is having great problems in negotiating with the Post Office over recognition? Does he consider that this is the spirit and intent of the Industrial Relations Act?
    Sir J. Eden: The association has recently referred its case for recognition to the National Industrial Relations Court under the Act. In this situation comment would not be appropriate.
    Mr. Charles R. Morris: While accepting that this matter is essentially one for the corporation, may I ask the right hon. Gentleman to discourage the corporation from encouraging recognition of new associations and trade unions which can serve only to undermine existing staff associations and trade unions which have served the Post Office and the nation so well?
    Sir J. Eden: No, Sir. There is established machinery for dealing with this and under the Industrial Relations Act it is open to anyone claiming recognition to appeal to the court. This procedure has been put into effect in the present case and we ought to see how that proceeds.

    British Broadcasting Corporation (Chairman of Governors)
    Mr. Evelyn Kingasked the Minister of Posts and Telecommunications when he expects to announce the appointment of a new chairman of the British Broadcasting Corporation.
    Mr. William Priceasked the Minister of Posts and Telecommunications when he now expects to announce the new chairman of the Governors of the British Broadcasting Corporation.
    Sir J. Eden: I have nothing to add to my predecessor's reply on 9th February to my hon. Friend the Member for Belfast, North (Mr. Stratton Mills).—[Vol. 830, c. 1319.]
    Mr. King: Will my right hon. Friend accept that broadcasting is an area in which policy decisions are urgently required and that the sooner this appointment is made the better? Will he also accept that when it is made it would be better to go not to a person on the point of retirement, however eminent he may be, but to a young man at the height of his power?
    Sir J. Eden: I accept the first part of my hon. Friend's supplementary question. I take note of the second.

    Broadcasting (Inquiry)
    Mr. Whiteheadasked the Minister of Posts and Telecommunications when he expects to announce the appointment of a committee of inquiry into broadcasting.
    Sir J. Eden: I have nothing to add to my predecessor's reply of 1st March to the hon. Member.—[Vol. 832, c. 396.]
    Mr. Whitehead: Does the Minister realise that the broadcasting organisations are maintaining, quite rightly, that an inquiry should report in 1974 if the restructuring is to be done by 1976? Will he therefore say when he will bring forward the inquiry and if he will not make any decision about it, as his predecessor failed to do, and since two years have been lost, will he postpone the restructuring of broadcasting in 1976?
    Sir J. Eden: I hope to be in a position to announce a decision shortly. I am aware of the need to come to an early conclusion in the matter.
    Mr. Gregor Mackenzie: When the right hon. Gentleman is thinking about this matter, will he bear in mind that the pressure for an inquiry is coming not only from this side of the House but from many consumers outside? If a start is not made quickly, we in the House will not have the information on which to base a proper judgment in 1976.
    Sir J. Eden: I note what the hon. Gentleman has said. However, the main need is to come to a decision about the

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    future of broadcasting after 1976 and that, as I have indicated, will need to be taken considerably before that time.

    Subscriber Trunk Dialling
    Mr. Maclennanasked the Minister of Posts and Telecommunications if he will make a statement on the reasons for the delay in introducing subscriber trunk dialling and on the revised programme for its introduction.
    Sir J. Eden: While there have been difficulties in adapting new exchange systems, 93 per cent. of telephone customers now have subscriber trunk dialling facilities. The Post Office hopes to complete its STD programme by the end of 1974.
    Mr. Maclennan: Will the Minister confirm that there has been a delay in and a setback to the programme for the Highlands of Scotland? Bearing in mind the importance of a proper telecommunications system to industrial and economic development in the area, will he do all in his power to advance the date?
    Sir J. Eden: There has been special difficulties there, as the hon. Gentleman has indicated. But 89 per cent. of customers in Scotland as a whole already have STD facilities and the same target for completion by 1974 is the Post Office's aim.

    Stamps
    Mr. Kenneth Lewisasked the Minister of Posts and Telecommunications whether he will give a general direction to the Post Office Corporation to limit the size of stamps when future new issues are being introduced.
    Sir J. Eden: This is a matter for the Post Office and a direction would be inappropriate.
    Mr. Lewis: Is my right hon. Friend aware that, although postage stamps seem to be getting rather larger, we would nevertheless like to congratulate the Post Office on the way in which the stamps illustrate various historic occasions? May I suggest that postage stamps should become smaller? Then it would be a good thing if the Post Office issued a stamp depicting some historic building in Rutland, say the castle, so that people might see why this county should remain a district of its own?
    Sir J. Eden: I have no doubt that the Post Office will note my hon. Friend's interesting suggestion.

    Value Added Tax
    Mr. Charles R. Morrisasked the Minister of Posts and Telecommunications whether he will make a statement indicating what estimates he has made of the effect which the introduction of the value added tax will have on the finances of the Post Office Corporation.
    Sir J. Eden: Telephone charges would attract the standard rate of tax but any effect on the finances of the postal business and hence on postal charges would be marginal.
    Mr. Morris: Can the Minister confirm the estimate that value added tax will impose a financial burden of £40 million on the Post Office telephone service and that this financial albatross, which will add about 10 per cent. to every telephone subscriber's account, is an imposition?
    Sir J. Eden: No. I confirm the hon. Gentleman's figures to the extent that private telephone users will pay an additional 10 per cent. But the impact on the finances of the corporation as a whole will be marginal.
    Mr. Arthur Lewis: Can the right hon. Gentleman confirm that this is yet a further "benefit" which we shall get from going into the Common Market?
    Sir J. Eden: No, because, as the hon. Gentleman well knows, the decision about the introduction of value added tax would have been taken whether or not we were moving towards the Common Market; it will of course replace other taxes already in existence.
    Mr. Gregor Mackenzie: We hoped that by now the right hon. Gentleman would have been able to make a very precise estimate of the increase in telephone charges resulting from value added tax. By how much would the CBI figure of 5 per cent. be exceeded if one lumped together the recent possible increase in charges and the charges we have heard about today?
    Sir J. Eden: I am sorry I cannot answer that question now. If I have the information available, I will answer it. As the hon. Gentleman knows, however,

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    most of these detailed matters about the tax depend on the way in which it is to be put into effect, and decisions on that have not yet been taken.
    Mr. Goldingasked the Minister of Posts and Telecommunications what is his estimate of the effect on telephone calling rates of the imposition of value added tax.
    Sir J. Eden: Detailed forecasts of this nature are a matter for the Post Office, which tells me that it does not expect VAT to be particularly significant among the many factors which affect calling rates.
    Mr. Golding: Is the Minister aware that, on his own admission, value added tax will increase the costs to the residential subscriber by at least 10 per cent.? Is the Minister not aware that the cost of making telephone calls is a matter of some concern to those with an interest in the Post Office? Is the right hon. Gentleman not further aware that one of the great difficulties which the Post Office faces is the low calling rate by residential subscribers in this country?
    Sir J. Eden: I do not believe that this will have any direct effect in itself on the calling rate, and I think that we shall see that in practice.
    Sir G. Nabarro: Will my right hon. Friend consider whether all postal and telecommunications services should officially and statutorily be designated zero-rated, thereby removing all possibility in any circumstances of their attracting value added tax?
    Sir J. Eden: I think that exemption, which allows rebating, will be found to be less onerous than zero-rating to the Post Office as a whole.
    Mr. Gregor Mackenzie: The right hon. Gentleman must be aware that this is bound to have an adverse effect on the calling rate. He has promised, as have the officials of the Post Office, to do everything possible to increase the calling rate. If there is to be a minimum increase of 10 per cent. plus the 3½ per cent. that is under consideration, the effect on the calling rate will be serious.
    Sir J. Eden: No, Sir, I do not believe that that will be the case.

    Council of Post Office Unions
    Mr. Goldingasked the Minister of Posts and Telecommunications whether he will issue a general direction to the Post Office to include in the annual report and accounts reports from the Council of Post Office Unions.
    Sir J. Eden: No, Sir. This is not an appropriate matter for a direction.
    Mr. Golding: Is the Minister aware that the annual report of the Post Office would be more balanced if it included sections of the reports of the trade unions and users' councils? Is he further aware that the experiment along these lines conducted by my right hon. Friend the Member for Bristol, South-East (Mr. Benn) was very successful?
    Sir J. Eden: It is for the Post Office Corporation to include in its report the material it thinks appropriate.
    Mr. Alfred Morris: Is the right hon. Gentleman aware of the extremely generous offer of the members of the Post Office Engineering Union to install telephones under Section 2(1)(h) of the Chronically Sick and Disabled Persons Act, 1970, in their own time and without pay? Is he also aware of the difficulty about industrial injuries cover? What is he doing to solve this problem?
    Sir J. Eden: I have seen the report in The Guardian.It deals with a totally different question from that on the Order Paper. I have no doubt that this matter could be satisfactorily resolved by discussions between the men concerned or their representatives and the Post Office Corporation.

    Telephones (Waiting Lists)
    Mr. Madelasked the Minister of Posts and Telecommunications how many people are currently waiting for a telephone.
    Sir J. Eden: According to the Post Office, 218,000 at the end of March, 1972, of whom about 209,000 were residential applicants.
    Mr. Madel: May I draw my right hon. Friend's attention to the situation in my own constituency? It is Government policy to encourage both industrial and housing development there and yet

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    the Post Office is barely able to keep pace. Would my right hon. Friend therefore arrange for greater resources to be placed at the disposal of the Bedfordshire authorities?
    Sir L Eden: I am aware of the position in my hon. Friend's constituency where there are now 1,737 applicants waiting for telephone service. The majority of these are on the Leagrave exchange. The Post Office expects to provide service for most of these applicants by August this year.
    Mr. Heller: Will the right hon. Gentleman tell the Post Office to explain in future when supplying telephones to applicants that they will now have to pay an extra 10 per cent. in value added tax, which is part of the efforts of the Government to keep down the inflationary spiral?
    Sir J. Eden: No, Sir. The Post Office scale of charges is already well known.
    Captain W. Elliot: Can my right hon. Friend tell me of any other organisation whose supplies are so far behind demand? Can nothing be done to satisfy this demand?
    Sir J. Eden: As I made clear the last time this question was raised in the House, I am discussing urgently the way in which it is best to tackle the backlog. I have had talks so far with representatives of industry, with my colleagues and with the Post Office Corporation.

    Post Office Equipment (Foreign Purchases)
    Mr. William Hamiltonasked the Minister of Posts and Telecommunications if he will make a statement on the award to a Swedish firm of a £14 million order for Post Office equipment which he sanctioned.
    Mr. Willeyasked the Minister of Posts and Telecommunications what purchases from abroad he has sanctioned of Post Office equipment; and in what circumstances he is prepared to sanction such purchases.
    Sir J. Eden: I would refer the hon. and right hon. Members to the reply I gave to the right hon. Member for Sunderland, North (Mr. Willey) on 3rd May. The placing of individual contracts is
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    primarily a matter for the Post Office, which is currently spending about £400 million a year with British industry.—[Vol. 836, c. 146.]
    Mr. Hamilton: Is it not the case that the answer is the complete failure of the private enterprise companies which supply the Post Office with its equipment and that, despite the denials of the Minister, the ring still exists? Is it not the case that this is why the Post Office has to go abroad to get this expensive equipment at a time when there is so much unemployment in this country and people could be employed to produce the equipment here?
    Sir J. Eden: The reasons are varied and various, including the difficulty of adapting the system, the difficulty of getting buildings completed on time and the results of industrial disputes in some of the factories, not least those in Scotland. But the reason why this order had to be placed was the anticipated growing demand in the international telecommunications services, particularly to Europe.
    Mr. Willey: Is the Minister aware that his first concern ought to be unemployment and that the loss of 2,000 jobs in the development areas is a very serious blow? Can he say whether he has brought any pressure to bear in Ericsson's to open up a plant in this country to provide employment for our own people in the development areas?
    Sir J. Eden: The major need here is to ensure that we have a steadily improving telecommunications service in this country, and one has to look ahead to the expected growth in demand and to provide as efficiently as possible to meet that on time.
    Mr. Rost: Is not the attack made by hon. Members opposite on British industry in this case grossly unfair in view of the fact that the companies which are supplying British telephones to the Post Office are also exporting very substantially abroad?
    Sir J. Eden: I confirm that that is so.
    Mr. Gregor Mackenzie: I think the Minister will be aware that while we on this side have every sympathy with the Post Office in its dilemma nevertheless it is very disappointing when the private

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    sector fails to win a contract of this kind. We would like the Minister to be a bit more specific and to say why this order was placed—whether it was on price or delivery or was because of the unwillingness of British suppliers to provide this kind of equipment? May I push the right hon. Gentleman a little further on one other thing? In the near future when the Post Office is reaching final decisions about future equipment, will he encourage the Post Office to do what the 1969 Act allows it to do—that is, enter into the manufacturing field on its own account?
    Sir J. Eden: I do not think such a suggestion would be helpful in the circumstances. With regard to the first part of the hon. Gentleman's question, the Post Office came to its decision in the light of the various circumstances which it had to examine when considering the best way to meet the anticipated demand.

    Telephone Calls (Charges)
    Mr. Wyn Robertsasked the Minister of Posts and Telecommunications if he will refer to the Post Office Users' National Council the computerised system of recording and charging for telephone calls in view of the fact that certain subscribers have been charged for calls they have not made.
    Sir J. Eden: The Post Office itself recently asked the Post Office Users' National Council to look into its arrangements for metering telephone calls.
    Mr. Roberts: Does my hon. Friend agree that it is esssential in these matters to have not only a high degree of accuracy but absolute accuracy in charging for telephone calls?
    Sir J. Eden: Yes, I absolutely agree with my hon. Friend. It is because there have been doubts about this that the Post Office has asked the users' council to look into the whole of this question.

    Telephone Installation (Deposits)
    Mr. Horamasked the Minister of Posts and Telecommunications if he will issue a general direction to the Post Office instructing it to cease the practice of demanding a deposit from private sub-
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    scribers in certain localities when they apply for a telephone to be installed.
    Sir J. Eden: No, Sir. The decision to seek a deposit is a matter for the Post Office which, I understand, gives discretion to local managers in individual cases.
    Mr. Horam: Does the Minister realise that this is discrimination of a most unfair kind when the charge for installation is now going up to £35 from £25 as from Monday, and that to demand a deposit in addition makes the cost almost prohibitive to the most needy of people?
    Sir J. Eden: This is a difficult matter. One has to recognise that there is a very large amount of money outstanding as a result of bad debts. I know that this is a matter which is very closely watched, and I am sure that the Post Office uses its powers with maximum discretion.

    BBC Licence and Agreement
    Mr. Evelyn Kingasked the Minister of Posts and Telecommunications what recent use he has made of his powers under clause 13 of the British Broadcasting Corporation Licence and Agreement.
    Sir J. Eden: None. The directions requiring the BBC to refrain from broadcasting its own opinions on matters of Public policy, and programmes using subliminal techniques, remain in force.
    Mr. King: That answer is because my right hon. Friend, like his predecessors, quite rightly, assumes that the British Broadcasting Corporation is responsible for what it broadcasts; but on the rare occasions on which complaints are made that it acts irresponsibly, what cure is there? Can my right hon. Friend tell us what duties in such circumstances under the Licence and Agreement devolve upon him?
    Sir J. Eden: It is the long-standing practice for the Government to be extremely careful about intervening in matters of programme content. I am sure that the best way of making individual views known about a particular programme or about the general tenor of programmes is for those views to be directed to the governing body of the British Broadcasting Corporation which has the major responsibility for these matters.
    Mr. Whitehead: While endorsing entirely what the Minister has said, may I ask whether he will accept that there has been considerable concern recently over the failure to observe section 12 of the Licence, as some would contend? Will he call for a report from the director general or the chairman of the Governors of the British Broadcasting Corporation relating to the contracts drawn up with the Time-Life organisation before advertisements were recently transmitted by the BBC?
    Sir J. Eden: Section 12 is a totally different matter from the subject of this Question.

    Postal Mechanisation
    Mr. Charles R. Morrisasked the Minister of Posts and Telecommunications when the Post Office Corporation hopes to complete its review of postal mechanisation.
    Sir J. Eden: This is primarily a matter for the Post Office which, I understand has decided to continue with a programme of mechanisation.
    Mr. Morris: I accept that this is primarily a matter for the Post Office Corporation, but will not the Minister agree that there has been lethargy in proceeding with the postal mechanisation programme, and will he use his influence with the Post Office Corporation to expedite the mechanisation of the postal system?
    Sir J. Eden: I do not find any lethargy on the part of the Post Office Corporation; rather do I find a desire to promote the maximum possible efficiency in the Post Office commensurate with good management of its resources.

    Broadcasting Council
    Mr. Fowlerasked the Minister of Posts and Telecommunications whether he will now set up an inquiry into the need for an independent broadcasting council to hear complaints from the public.
    Sir J. Eden: No. I do not think any separate inquiry is necessary.
    Mr. Fowler: Does not my right hon. Friend agree that the public should have the right of appeal to a tribunal? If he will not set up an inquiry, will he at
    1306
    least confirm that the door is not closed to his re-examination of the case for a tribunal?
    Sir J. Eden: I was not announcing a decision on the merits of the case. I was merely saying that it is not necessary to have an inquiry to arrive at a decision.

  ENVIRONMENT

    Stockholm Conference
    Mr. David Clarkasked the Secretary of State for the Environment what subjects he will seek to place on the agenda of the Stockholm Conference on the Environment.
    The Secretary of State for the Environment (Mr. Peter Walker): An agenda has been prepared by the United Nations Conference Secretariat centred upon a plan for action on those environmental matters commanding the widest world interest. The Government look to the conference in particular for progress towards a global convention on marine pollution, the establishment of a workmanlike system for the exchange of environmental information and a dispassionate examination of major environmental issues.
    Mr. Clark: Will the Minister raise at the Stockholm conference the subject of industrial obsolescence and the pollution problems connected with it? Many parts of the country suffer terribly from age-old industrial pollution, which is also a problem throughout Europe.
    Mr. Walker: Yes, Sir. One of the major papers pat in by the British Government will deal with many aspects of this problem.

    Members' Letters and Questions
    Mr. David Clarkasked the Secretary of State for the Environment if he is satisfied with the administrative arrangements within his Department for co-ordination in the answering of hon. Members' letters and parliamentary Questions.
    Mr. Peter Walker: Yes, Sir. But in handling some 350,000 letters a month that come into the Department over 2,000 of which come from hon. Members—and about 500 parliamentary Questions, delays and mistakes do occur. I regret that we have had to apologise to the hon. Member on two occasions for mistakes that affected him.
    Mr. Clark: Does the Minister realise that on one of the occasions when he apologised to me he asked me to table another parliamentary Question so that he could correct his first answer, and when I tabled that Question his answer referred me to the previous answer?
    Mr. Walker: I give a double apology.

    Motorways and Trunk Roads (Classification)
    Mr. Sydney Chapmanasked the Secretary of State for the Environment if he is satisfied with the system of classification of motorways and trunk roads in Great Britain; and if he will make a statement.
    The Under-Secretary of State for the Environment (Mr. Keith Speed): The present system of defining motorways and trunk roads seems to be well understood by motorists but the classification system is kept under continuous review.
    Mr. Chapman: Assuming that one of the main purposes of the classification of roads is to assist road users, will my hon. Friend seriously and carefully consider the possibility of a new category of road classification between the motorways and the "A" trunk routes, which might consist of two-lane motorways on the one hand and long and good stretches of A-class roads on the other and might be called associated motorways?
    Mr. Speed: I think we have to be careful here. There are already short sections of motorway forming part of all-purpose roads which are "A" classification and have an "M "suffix, but I will consider my hon. Friend's proposal.

    Roads (Wandsworth)
    Mr. Thomas Coxasked the Secretary of State for the Environment if he will list the major road development proposals for the London Borough of Wandsworth that are now under consideration by his Department.
    Mr. Speed: As the answer is in the form of a tabular statement I will, with permission, circulate in the OFFICIAL REPORT a list of major schemes, each estimated to cost more than £250,000, which are under consideration by the Department.
    Mr. Cox: I warmly welcome that reply. but is not the hon. Gentleman aware that in Wandsworth we continually hear of major road proposals that will destroy housing and open spaces but, in spite of all the talk about consultation, the first we ever know about them is as the result of direct local pressure to find out what is taking place? Will the hon. Gentleman ensure that in future the fullest consultation takes place with local residents so that they know what is proposed in the areas in which they live?
    Mr. Speed: Yes, but these schemes are metropolitan highway schemes. The highway authority is the Greater London Council, which is responsible for submitting details to the Department. I will take notice of what the hon. Gentleman says.
    Following is the information:

    MAJOR ROAD DEVELOPMENT PROPOSALS FOR THE LONDON BOROUGH OF WANDSWORTH UNDER CONSIDERATION BY TILE DEPARTMENT OF THE ENVIRONMENT

    Route

    Location

    Nature of Scheme

    A3

    Robin Hood Gate

    Grade separation.

    A24

    Balham High Road/ Balham Hill/Clapham Common South Side

    Widening.

    A23 and A24

    North of proposed Ringway 2 junction

    Widening.

    A219

    Putney High Street

    Diversion.

    A214

    Trinity Road

    Widening.

    A3

    Roehampton Vale

    Widening.

    A3205

    Nine Elms Lane/Battersea Park Road/York Road

    Widening.

  HOUSE OF COMMONS

    Parliamentary Building
    Mr. Jesselasked the Lord President of the Council, if he will arrange to set back the proposed new parliamentary building a sufficient distance to allow for an additional lane of eastbound traffic in Bridge Street, Westminster.
    Mr. Sydney Chapmanasked the Lord President of the Council if he will make a statement about the choice of design for the new parliamentary building, and the date of commencement of works.
    The Parliamentary Secretary to the Civil Service Department (Mr. Kenneth Baker): I have been asked to reply, and I wish to convey to the House the apologies of my right hon. Friend the Lord President of the Council, who is indisposed.
    The Services Committee is at present considering in detail the proposals for the new parliamentary building, including the question of siting, design and date of commencement. I would anticipate that a full report will be made to the House after Whitsun.
    Mr. Jesse': Will my hon. Friend ask the Services Committee to consider setting back the building to allow for an extra traffic lane? Does he not think it would be sensible to use the opportunity of the reconstruction of the buildings to take action to relieve the traffic congestion in the area of Parliament Square generally?
    Mr. Baker: I am sure that the Services Committee will consider both those points, and in particular the question of the extra traffic lane.
    Mr. Chapman: I am grateful to my hon. Friend for his reply, but will he bear in mind the concern in the architectural profession that the architects of the winning design are being blamed for the brief they were given, which they were obviously told to hold to? Will he consider an early decision on the building and also the possibility of a debate at the earliest opportunity after Whitsun?
    Mr. Baker: It would be superfluous for me to assure the House that there will be a debate. This is such an important matter that there will certainly be a debate upon it. I will not poach upon my right hon. Friend's prerogative and suggest a date, but it will certainly be at some stage after we receive the report of the Services Committee.
    Mr. Lipton: Are the Government paying heed to the observations of the Greater London Council, which has many reservations about what the Government intend to do, in particular about the horrible idea of a five-deck car park in New Palace Yard which the GLC thinks should be nearer Victoria Tower?
    Mr. Baker: This is not a matter for the Government. The Services Committee of the House is examining it and it will be a matter for the House.
    Mr. Kimball: Is my hon. Friend aware that many of us feel that not only should this project be set back in position but that it should be set back into the far distant future?
    Mr. Baker: I am sure that the Services Committee will note the comment of my hon. Friend.
    Mr. Crosland: We must of course debate the matter in the House, but is it not impossible to have a serious debate upon the proposal for this building without knowing what, if anything, is proposed for the new Home Office building and the Scotland Yard and Richmond Terrace site? The Government have had the report of the inspector who held the inquiry into that site for about a year and a half. When are we likely to have that information?
    Mr. Baker: The right hon. Gentleman raises very much wider points, but I assure him that the Services Committee is seized of the urgency of this matter, and I am informed that it expects to report shortly after Whitsun.
    Sir D. Walker-Smith: Does my hon. Friend agree that this matter must be looked at in the perspective of the environmental effect of the whole of the surrounding area and therefore is not only a domestic matter, important though that may be, for the House of Commons or the Houses of Parliament?
    Mr. Baker: My right hon. and learned Friend raises an important matter, and I am certain that the Services Committee will also take these wider considerations into account.
    Mr. David Steel: Reverting to the question of an extra traffic lane in Bridge Street, is the hon. Gentleman aware that the Services Committee has already taken the view that in the long run there should be no traffic at all in Bridge Street, far less an extra traffic lane?
    Mr. Baker: This must await the report of the Services Committee. Obviously this is a matter which will be considered.

    Car Parking
    Sir G. Nabarroasked the Lord President of the Council whether he is yet in a position to make a statement denoting the accommodation arrangements for a minimum of 400 motor cars, driven by Members of Parliament, which is the agreed number to be accommodated on occasions of three line Whips on both sides of the House, during the construction of the underground car park in Palace Yard from summer 1972 to summer 1973 when accommodation for only 100 motor cars will be available within the precincts of the Palace of Westminster.
    Mr. Kenneth Baker: I have been asked to reply.
    The Services Committee laid a report on the Table of the House last night making recommendations with regard to parking facilities for Members' cars during the construction of the new underground car park. This report will be published on Friday. The arrangements provided that at no time during the construction of the underground car park should there be fewer parking spaces for Members than at present.
    Sir G. Nahum: I recognise the hard work carried out by the Services Committee in this important matter, but will my hon. Friend have regard to the fact that the proposals contained in the report suggest that more than 70 per cent. of the space to be provided is at Broad Sanctuary? Since this is some distance away from New Palace Yard and hon. Members will be gravely inconvenienced in reaching the Division Lobbies and may well miss Divisions because of traffic congestion, will not this cause some discomfiture to the Patronage Secretary? Therefore, will my hon. Friend recommend to the Patronage Secretary and the Opposition Chief Whip that the length of a Division should temporarily be extended from seven to 10 minutes in order to accommodate all those aggravated Members who will be some distance away in their cars?
    Mr. Baker: The critical period is only in the two months of November and December later this year when the parking spaces in New Palace Yard will be temporarily reduced from 100 to about
    1312
    25. I hope that I may ask for the forbearance of hon. Members in appreciating this point in Divisions just before Christmas. I am sure that my right hon. Friend the Patronage Secretary and the Opposition Chief Whip will share the general desire not to have a three-line Whip at 10 o'clock in November and December.
    Mr. Arthur Lewis: Since I have not yet had the benefit of seeing the report of the Services Committee, may I ask the hon. Gentleman to say whether the Committee considered the suggestion made by the Motor Club that the Old Scotland Yard parking facilities would be available, if only temporarily, for Members of Parliament because that would help the position? Does he not appreciate that there is a large car park there which could be used by hon. Members?
    Mr. Baker: I am told that the Services Committee considered that matter, and the car park to which the hon. Member refers is not available during this period. One of the main recommendations of the Services Committee is to ask the servants of the House to forgo 60 of their places in Old Palace Yard, for which I am sure we shall be grateful.
    Mr. Cormack: Is my hon. Friend aware that it has been suggested that the construction of the new car park will threaten the foundations of Westminster Hall? Is he satisfied that this is not the case?
    Mr. Baker: I am sure that the architects and the Services Committee who have been advising on these matters are satisfied that this will not occur.

    Copying Machines
    Sir G. Nabarroasked the Lord President of the Council whether he is aware that Members and their secretaries are accommodated in rooms on the Upper Committee corridors of the House, and that the Rank Xerox copying machines are situated on the interview floor, entailing loss of time in essential copying of Parliamentary documents; and whether he will arrange installation of a copying machine in an alcove in the corridors referred to.
    Mr. Kenneth Baker: I have been asked to reply.
    I hope that it may be possible to install a copying machine in the North Bridge corridor, but it is unlikely that the necessary arrangements for its supervision can be made before the Summer Recess.
    Sir G. Nabarro: Will my hon. Friend bear in mind the great distances now involved owing to the extension of Members' accommodation, which means that secretaries and hon. Members have to travel excessive distances on foot if they wish to photocopy a document? Since secretarial charges are set against tax, the revenue is thereby being diminished on account of wasted time for Members and their secretaries. Could not the Government buck up and install this machine next week?
    Mr. Baker: The machine could be put in next week, but there are certain regulations which have to be followed, particularly in regard to fire precautions, and this requires some degree of supervision. Arrangements are being made with the assistance of the HANSARD office. Since my hon. Friend has a great concern for any increase in the number of Government employees, I am sure he would not want a special supervisor to be specifically employed in looking after one machine in the corridor to which the Question refers.

    Staff Appointments
    Mr. William Hamiltonasked the Lord President of the Council if he will move for a Select Committee to examine the ways by which appointments are made to the staff, at all levels, in the House of Commons.
    Mr. Kenneth Baker: I have been asked to reply.
    I am not aware of any reason at the present time for appointing such a Select Committee.
    Mr. Hamilton: Is the hon. Gentleman aware that this question was last looked at in 1954 and, if so, has he read that report? Does he recognise that it revealed a morass of nepotism in this House and that a large proportion of it still exists? Can he assure the House that the Government, by whatever means in their power, will take early steps to en-
    1314
    sure that all appointments in this House are within the control of this House and are not the perks of the Armed Services or any other body?
    Mr. Baker: I must refute completely the allegation that the appointment of officials of this House is part of a morass of nepotism. This is simply not the case. The great majority of appointments of staff are made through the normal recruiting procedures in which the Civil Service is involved. If the hon. Member has in mind, as I am sure he has, the appointment of the Serjeant at Arms, I would remind him that Mr. Macmillan made clear in 1962 that in regard to future appointments informal discussions would take place with Mr. Speaker.

    Press Releases
    Mr. Robert Hughesasked the Lord President of the Council whether he will make it a practice of his Administration in cases where material is made available to the Press in advance of a statement being made in the House, that such material is made available at the same time to hon. Members.
    Mr. Kenneth Baker: I have been asked to reply.
    This Administration will continue to follow the practice of successive previous Administrations in this matter.
    Mr. Hughes: Does not the hon. Gentleman feel it would be better if there were informed comment and answer to such statements and that it would be better for the country if such material as was available to the Press was made available to the Vote Office? Is it not a curious doctrine in regard to the availability of material that members of the Press should be regarded as more trustworthly than Members of the House?
    Mr. Baker: I remind the hon. Gentleman that we are following a precedent set by previous Governments. The Government's aim is to be as helpful as possible to hon. Members. Ministers normally endeavour to inform the House of such material before it is published in the Press.
    Mr. Fry: Does not my hon. Friend appreciate that this is one of the more deplorable precedents set by a previous

    1315
    Administration, and does he not realise that many of us would have preferred the present Government to have made a fresh start in this direction?
    Mr. Baker: I assure my hon. Friend that each Minister tries to be as helpful as possible in this regard and we have tried to make a small improvement in this matter in the last two years.

    Bills (Reintroduction)
    Mr. Lathamasked the Lord President of the Council if he will propose an amendment to Standing Orders so that the Question on a Bill which has been discussed on previous occasions shall, if the Bill is reintroduced, be put after not more than two hours' debate.
    Mr. Kenneth Baker: I have been asked to reply.
    This, of course, is a matter which the Procedure Committee could examine if it so wished and which will, I am sure, have noted the hon. Member's suggestion.
    Mr. Latham: While thanking the hon. Gentleman for that reply, may I ask whether he accepts, regardless of whether it is reasonable or unreasonable, that although a Measure may be talked out once it is monstrous that it should be possible for it to happen on several occasions as occurred, for example, to the Hare Coursing Bill? Does not the hon. Gentleman agree that it would be reasonable to make an amendment to procedure so that the Chair, in deciding whether to accept a closure, could have regard to the amount of time spent on previous occasions, thus ensuring that the will of the House was not frustrated by a minority?
    Mr. Baker: The hon. Gentleman raises very important constitutional points, going right back to the seventeenth century, the continuity of legislation and the desirability of not having a carry-forward. I have no doubt that the Procedure Committee will note what the hon. Gentleman has said.
    Sir Robin Turton: Will my hon. Friend reconsider this attitude? Surely this matter is one involving the exercise of your discretion, Mr. Speaker. It cannot be the function of the Select Committee on Procedure to inquire into or give directions to Mr. Speaker about how he exercises his discretion on the closure.
    Mr. Baker: This is one aspect of the question asked by the hon. Member for Paddington, North (Mr. Latham). He is also raising the question of the continuity of legislation from session to session and from Parliament to Parliament. That has deep constitutional implications.

  UNIVERSITIES (STUDENT REPRESENTATION)
  Mr. Dalyellasked the Lord President of the Council (1) what discussions he has had with governing bodies of universities about the question of student representation being written into the appropriate charters and statutes;
  (2) what representations he has had from the National Union of Students about the question of representation of students on governing bodies of universities being written into the appropriate charters and statutes.
  Mr. Kenneth Baker: I have been asked to reply.
  While there have been no general discussions I believe that all the universities are aware of the Privy Council's approach on this subject.
  Where necessary, proposals for amendments to charters and statutes are discussed individually with university authorities.
  In recent years, the Lord President's predecessors and the Privy Council Office have received a number of representations from the National Union of Students both on the general question of student participation in university government and in relation to particular cases.
  Mr. Dalyell: On what coherent basis do Privy Councillors consider it to be their business to interfere with the appointment of student members to university governing bodies where appointments have already been agreed with the university authorities?
  Mr. Baker: The Privy Council has a duty because charters are involved. I am informed that the Privy Council's approach in these matters is very helpful and is sympathetic to the representation of students on university bodies.
  Mr. Evelyn King: Though it may be desirable to appoint student members, is it not also desirable to ensure that the

  1317
  total number of students and teachers does not exceed, as in some universities it does exceed, the number of lay members on the council?
  Mr. Baker: This is a complicated matter and we are trying to ensure that certain criteria are achieved, one of which is that student members must be genuinely representative of the student body.

BRITISH RAILWAYS (DISPUTE)
Mr. Prentice (by Private Notice)asked the Secretary of State for Employment if he will make a statement on the railways pay dispute.
The Secretary of State for Employment (Mr. Maurice Macmillan): As the House is aware, the three railway unions yesterday decided to re-impose industrial action from midnight tomorrow. If this takes effect, widespread dislocation of passenger and freight services of the kind the country recently experienced will again occur.
Since I informed the House on 25th April that I hoped that day to certify to the Industrial Court that there had been a resumption of normal rail services, the British Railways Board and the unions have again met during the period stipulated by the court to explore whether a settlement to their dispute could be found. The House will share my regret that this has not proved possible.
These further negotiations broke down on 4th May, and that same night I invited both the board and the unions to meet me so that I could learn at first hand what remaining differences there might be between them.
The board told me that in the course of these discussions it had first improved its offer from 11 per cent. of the wages and salaries bill to 12½ per cent., representing the award made by Mr. Jarratt on 16th April which had not then been accepted by any of the parties. The implementation of this award would have increased the minimum rate from £17·20 to £19·65 from 1st May with a minimum earnings guarantee of £20·50 also from 1st May and would have further increased the minimum rate to £20 from 1st January. At each stage there would have been consequential increases in rates throughout the grading structure to preserve all differentials.
1318
When this offer was rejected by the unions, the board, in a further attempt to reach a settlement, offered to bring forward the full implementation of Mr. Jarratt's award from 1st January to 5th June. This would have provided the minimum rate of £20 and consequential increases to preserve all differentials seven months earlier and brought them into payment in just over three weeks' time. For their part, the unions told me that this offer was also not acceptable to them and their joint claim was for the £20 minimum rate and preserved differentials from 1st May. This, in effect, was an insistence that there should be an increase on the wages and salaries bill of 14 per cent.
Last night the board made it clear that it was still prepared to conclude a settlement on the basis of its offers and was ready to meet the unions again if at any time they had agreed a constructive approach. There have also been public statements earlier today by some union representatives that all they are seeking is an offer equivalent to 12½ per cent. of the wages and salaries bill. It is clearly important that once again I should seek to clarify any confusions which remain in view of the grave threat which has again arisen to the travelling public and the economy. Accordingly, I have invited both the board and the unions to meet me later today.
Mr. Prentice: The Government's first major intervention in an industrial dispute under the Industrial Relations Act clearly has been an abysmal failure.
May I ask the right hon. Gentleman to confirm the following points for the record? First, will he confirm that when the Solicitor-General appeared before the court three weeks ago he had to convince it that the Government believed that a cooling-off period would be conducive to a settlement by negotiation, conciliation or arbitration? Will the right hon. Gentleman confirm, secondly, that during the cooling-off period there has been no conciliation, no arbitration and nothing which could seriously be called negotiation?
Thirdly, will the right hon. Gentleman confirm that during the cooling-off period for which the Government asked, the Government themselves have taken no initiative to bring the two sides together

1319
with a view to seeing whether the comparatively narrow difference between them could be bridged?
Fourthly, and worse, is it not clear from the extraordinary behaviour of the British Rail authorities and their refusal to have even normal discussions with the unions on their counterproposals that the Government have been leaning on British Rail all along to dissuade the board from taking any steps which could lead to a bridging of the gap? Would it not have been better three weeks ago to have held the meeting that the right hon. Gentleman proposes to hold today? Will he now take the opportunity that he neglected three weeks ago of trying to bridge the gap between the two sides, thus avoiding damage to the national economy and hardship to the travelling public?
Mr. Macmillan: I do not agree that the Government's intervention in an industrial dispute for the first time since the Industrial Relations Act has been a failure—
Mr. Orme: But what a failure you are!
Mr. Macmillan: If it has done nothing else, it has demonstrated a number of matters. First, the court was convinced that it was possible—and I believed that it was possible—that some settlement would be reached by negotiation, conciliation or arbitration.
I dispute that there was no negotiation. But I remind the House that the position reached by one side, the unions, is precisely the same at the moment as it was when I first intervened and saw them some weeks ago. The position of the other side, the employers, is different. The one side has moved; the other has not. I accept that the recent statements of some union representatives have led to the possibility of doubt about whether the unions are now willing to move. I have called them together with a view to trying to resolve that doubt.
The right hon. Gentleman's third point was to ask why I had not done more to bring both sides together. Both sides were negotiating and, as I have said, it is extremely difficult to do more when it is indicated plainly at regular intervals, publicly and privately, that negotiation consists in this case of one party to the
1320
dispute making a further advance from the point that it had already reached.
The right hon. Gentleman's last point was to suggest that the Government had been leaning on the British Railways Board during the discussions. They were most certainly not. The British Railways Board made it perfectly plain that an increase of 11 per cent. on its wages and salaries bill was almost beyond the limit of prudence and was taking a grave commercial risk. In the course of my intervention I persuaded the board and the unions to accept a modified form of arbitration. The board has now moved to an offer of l2½ per cent. on its total wages and salaries bill which from its point of view must present an even graver commercial risk. The board has moved. But again I point out that any statement that Mr. Jarratt's award should be accepted from 1st May is not an acceptance of Mr. Jarratt's award. It is a re-phasing to make it plain that a 14 per cent. increase on the wages bill is what the unions are asking at present.
I hope that my intervention later today will have some effect. But I am bound to say that it means a modification in the present attitude of the union negotiators in the sense that some statements earlier today indicated might occur.
Mr. Hastings: Would my right hon. Friend be prepared to make a general comment on the motive behind the unions' action at this stage? Is this simply an attempt by the three unions concerned to extract the maximum on behalf of their membership, or is it part of a carefully concerted policy by an element within the trade union leadership to force up the general level of settlements to a totally unacceptable degree in order to wreck the Government's attempt to control inflation?
Mr. Macmillan: I understand my hon. Friend's deductions, and I see why he and others might make them, but I should not like to express a firm conclusion, as he has done, until I have seen the unions later this afternoon and heard what they have to say. If my hon. Friend is right and the motive is what he says it is, it would be not only an attempt to call into question the Government's attempt to contain inflation but a severe blow to the economy of the country and the interests of the people.
Mr. Bagier: Would not the right hon. Gentleman agree that for him to say that Mr. Jarratt's proposals have been accepted by British Railways as something which amounts to negotiation is an abortion of the facts? Not one penny more has been offered during the 14 days, or whatever the period is, of negotiations.
Would not the right hon. Gentleman also agree that the fact that the London Transport Executive has agreed to implement as from 1st May whatever wage increase is agreed for British Railways has driven a coach and horses through any possibility of a different date being negotiated for British Railways? Will he realise that there is a wages board arbitration decision of 1947 which provides for parity between London Transport Executive employees and those on British Railways?
Mr. Macmillan: The question of the London Transport Executive Board's negotiations is entirely separate. The hon. Gentleman referred to the agreement of 1947. ASLEF tried to establish a new agreement as long ago as June last year. There is no common basis for this. The point that I was making was that both sides appear to have accepted the 12½per cent. Jarratt award. What I am trying to clarify is the terms on which that acceptance by both sides is possible.
Mr. Holland: May I ask my right hon. ' Friend to keep an open mind over the next few days on the possibility of taking a view on the extent to which the executives of the unions are supported by their members?
Mr. Macmillan: I am prepared to keep a very open mind. Indeed, I have from time to time in the course of these negotiations and discussions urged the unions concerned to test the position by holding a ballot themselves, or by asking the CIR to undertake a ballot for them if their organisations are not capable of so doing. So far I have had no response to the suggestion for a ballot. I should not like to be more specific about what the Government might decide to do as a result of the outcome of these talks.
Mr. Walter Johnson: Is the right hon. Gentleman aware that the cooling-off period has been an abject failure, and that no meaningful negotiations at all
1322
have taken place during the last 14 days? Is he further aware that the stupid and provocative statements of the Chairman of the British Railways Board, who ought to know better, and those of the labour 'relations chief have caused bitterness and 'resentment amongst railwaymen? There have been precisely four hours of negotiations in 14 days, and British Railways broke off the negotiations. The Government should have called the two sides together before now. I am pleased that the Minister is doing so, but for goodness' sake keep an open mind on this matter.
Mr. Macmillan: I think that the hon. Gentleman is taking a slightly biased view. He has referred to provocative statements by the Chairman of British Railways. I have heard some extremely provocative statements by members of the unions. When watching television, I have repeatedly heard union leaders make the point that it is cheaper for British Railways, for the Government and for the people to pay the money on demand than it is to suffer the inconveniences imposed by not so doing. That is a very partial remark, characteristic of bullies in all places, and if the Chairman of the British Railways chooses to defend himself he should not be attacked too much.
As to whether the board should have made a recent approach to the unions, in no case have the unions made an approach to the board, put a constructive idea or, indeed, a suggestion or position at all. They have insisted on the board's putting a position to which they could react, and it is this technique which has enabled the settling position put forward by the board to be upped by the unions into a negotiating position.
I shall approach the discussions this evening in the earnest hope that I can get some agreement on the 12½per cent. which has apparently been accepted by both sides.
Several Hon. Membersrose—
Mr. Speaker: In view of the discussions which the Minister is to have later today, I think that we should move on to other business.
Mr. Harold Wilson: In view of the Minister's comment that he is to meet both sides tonight, which is welcomed by my right hon. Friend the Member for

1323
East Ham, North (Mr. Prentice), can we expect the Minister to make a statement in the House tomorrow?
Mr. Macmillan: I hope to be in a position to make a statement to the House as soon as possible. This must depend on the outcome of my talks and how long they take.
Mr. Wilson: I am sorry, but I should like to press the right hon. Gentleman a little further on this. If he deems that the talks have gone as far as they can helpfully go—and the House hopes that they will lead to a successful conclusion —will he agree not to rule out the possibility of making a statement in the House later tonight?
Mr. Macmillan: I should not like to put such pressure on the unions. They may wish to retire to consider their position.
Later—
Mr. Atkinson: On a point of order, Mr. Speaker. Assuming that things do not work out too well in the railways dispute, is the right hon. Gentleman saying that he will come to the House first before he again approaches the Industrial Court? [Interruption.] If the right hon. and hon. animals below the gangway would be quiet for a moment, I could continue with my point of order.
Mr. Speaker: Order. It would help the proper conduct of proceedings if I could hear what the hon. Member is saying on a point of order.
Mr. Atkinson: Thank you very much, Mr. Speaker.
1324
My purpose is to ask whether, in view of the ruling that you have given and the semi-assurance that we shall have an opportunity to discuss some of these matters before they are again submitted to the Industrial Court by the Government, we may be assured by the Minister that before he makes a fresh approach to the court he will give the House an opportunity of questioning him on the matter.
Mr. Speaker: That is not a point of order.

BILL PRESENTED
INDUSTRY
Mr. Secretary Davies, supported by Mr. Secretary Whitelaw, Mr. Secretary Campbell, Mr. Secretary Walker, Mr. Secretary Thomas, Mr. Secretary Macmillan, Mr. Christopher Chataway, Mr. Patrick Jenkin and Mr. Anthony Grant (under Standing Order 91 (Procedure upon Bills whose main object is to create a charge upon the public revenue)), presented a Bill to authorise grants towards expenditure on the provision of assets for industry in certain regions in Great Britain, to authorise the provision of financial assistance for industry in those regions or elsewhere, and provisions about credits and grants for the building of ships and of offshore installations, to amend the Local Employment Act 1972 and to make temporary provision as to one of the areas to be treated as a development area under that Act; and for connected purposes.
And the same was read the First time; and ordered to be read a Second time tomorrow; and to be printed. [Bill 138.]

PROVISIONAL COLLECTION OF TAXES (AMENDMENT)
3.50 p.m.
Mr. George Cunningham: I beg to move,
That leave be given to bring in a Bill to extend the Provisional Collection of Taxes Act 1968 to apply to stamp duties.
The Bill is relevant to changes in the rate of stamp duty that are made from time to time. I can best explain the purposes of the Bill by reference to the matter which has given rise to it. The House will recall that the Chancellor of the Exchequer announced the other week that he had decided to reduce stamp duties applying to the buying of houses. The result of that change, in brief, is that once the change has been made in law the stamp duty on a £10,000 house will fall from£100 to nil and there will be corresponding reductions above and below that level.
When the Chancellor announces changes in tax rates, the normal practice is that such changes come into effect immediately. In this case, however, the Chancellor has had to announce that the reduction will not come into effect until 1st August. This is because the Provisional Collection of Taxes Act, which allows tax rates to be changed by means of a Resolution of the House in anticipation of the passing of legislation, and subject to very strong safeguards, applies to income tax, to purchase tax and to customs and excise duties but does not apply to stamp duties.
I do not think there was or can be any ground in principle why stamp duties should be treated differently in this respect from other taxes. It is just one of those accidents which have happened over the years and from which the public unfortunately suffer.
The disadvantages of continuing the present arrangements are two. First, I am sure that the House will agree that it will be, to say the least, irritating for those house purchasers who expect to complete their purchase before the Chancellor's date of 1st August to be obliged to pay £100, more or less, in a duty which it has already been announced the Government do not wish to collect, and which it is completely certain that Parliament will allow them to re-
1326
duce and, in most cases, to abolish. Such people are doing what the Government and others have urged them to do. They are buying their homes. Yet they will find that this duty continues in the coming three months to be payable, not because the desirability of the change is being intensely debated or contested in Parliament but only because the reduction has to wait for the Finance Bill to be passed, and all the other provisions of the Finance Bill of a controversial nature will ensure, as always, that the Bill is not passed until the middle of July.
But there is another practical consideration. Solicitors find that, naturally, those who might have bought their houses in the months between the announcement of the reduction in the rate and the date upon which it takes effect want to delay the completion of the purchase until 1st August in order to save the duty.
This was the experience of solicitors on the two other occasions in this decade when stamp duties were reduced, in 1963 and in 1967. The result of this is that solicitors try to time their work, the various searches they have to make, and so on, in order to bring them to maturity early in August. As all solicitors are doing the same, the result is a build-up of work in land charge registries and the like, and that means greater uncertainty about just how long any search will take. If the solicitor guesses wrongly, he can find himself with a clearance certificate which is invalid for completion in August because it is dated more than 15 days before the end of July. So he has either to commission another search, with extra expense for his client, or tell his client that despite his endeavours, he has managed to complete his work at a time when the duty is, unfortunately, still payable. That was the experience in 1963 and 1967.
The consequences are all the more serious this year, because the fast rate of inflation in house prices means that accepting any delay involves a far greater risk of gazumping than in previous years. This is a situation which there is no need for us to impose upon the public for a moment longer.
The Bill I seek to introduce will correct the anomaly by allowing the Government, if they so wish, to use in respect

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of stamp duty changes the procedure which we always use in respect of other tax changes. The Bill would not in itself make any change in the rates of duty, nor would it oblige the Government to employ the Resolution procedure. It will only give the Government a legal opportunity which they will take the decision of using or not using. It will be up to the Government whether to do so.
If the House allows the Bill to be introduced, I would hope that it might also, given the very uncontroversial and safe nature of the change proposed—as the effect of it is entirely in Government hands—be disposed to accord the Measure an early passage, so that in the next few months, if the Government were willing, house buyers would be relieved of a duty upon which sentence of death has been passed but has not yet been carried out.
Question put and agreed to.
Bill ordered to be brought in by Mr. George Cunningham, Mr. Geoffrey Finsbere, Mr. Frank Allaun, Mr. Martin McLaren, Mr. Clinton Davis, Mr. Sydney Chapman, Mr. Ernest G. Perry, Mr. Dick Leonard.
PROVISIONAL COLLECTION OF TAXES (AMENDMENT)
Bill to extend the Provisional Collection of Taxes Act, 1968, to apply to stamp duties: And the same was read the First time; and ordered to be read a Second time on Friday, 12th May, and to be printed. [Bill 139.]

FINANCE BILL
(Clauses, 1, 9, 12, 63, 64, 71, 73, 110, and 112 and Schedule 4)
Considered in Committee [Progress. 9th May].
[Sir ROBERT GRANT-FERRIS,in the Chair]

Clause 9
RATE OF TAX
Amendment proposed:No. 2, in page 8, line 17, to leave out "ten" and insert "seven and a half ".—[Mr. Brian Walden.]
Question again proposed, That the Amendment be made.
3.57 p.m.
The Chancellor of the Exchequer (Mr. Anthony Barber): When we rose last night we were considering Amendment No. 2, with Amendments Nos. 3, 4, 5, 7 and 88. I should like first to deal with the issues raised in Amendment No. 7, in the name of the Opposition, and Amendment No. 88, in the name of my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne).
Both these Amendments are concerned with the economic regulator, and here there is some genuine misunderstanding. The scale of the regulator power proposed in the Bill is a question to which I gave a great deal of consideration. I decided that the variation of the existing VAT rate by up to 20 per cent. was in all the circumstances appropriate. It has been suggested during the debate that this variation is too great. But it may not have been appreciated that it will affect the revenue by an amount roughly equivalent to that of the existing regulator.
I would ask the Committee to bear two points particularly in mind. The first is that we are now operating in an environment where we have removed hire-purchase controls—I think that there were very good reasons for that—in particular, the concentration of the effects of hire-purchase restrictions on products of a

1329
narrow group of consumer durable industries. But one consequence of this has been the suspension of a quick-acting instrument of demand management. If the present arrangements are to continue it is necessary for any Government to have at their disposal sufficiently powerful alternative instruments. It also should be borne in mind, in the light of some of the things said yesterday, that the regulator can be used to reduce taxation as well as to increase it.
4.0 p.m.
The second point is that the power to vary the rate by 20 per cent. does not mean that a change to that extent is necessary envisaged in a typical situation. That is the maximum variation which can be made under this power in the light of the economic situation.
Mr. Denis Healey: I am grateful for that explanation. The Chancellor has given himself the power by order to vary the coverage and yield of the tax by eliminating certain trades from the zero rate which enjoy it under the present proposals. Would he undertake to limit the scope of the regulator so that he would not be in a position to raise substantially more by use of the regulator than he is able to raise at the moment; namely, roughly the amount that can be raised by use of the regulator on purchase tax?
Mr. Barber: I do not think that would be a wise thing to do. We shall come later to consider one of the Amendments dealing with taking goods in and out of the zero-rating schedule, and I hope that when my hon. Friend the Financial Secretary deals with that he will explain the present position in relation to purchase tax. It is not generally realised that successive Governments have had the power for many years to bring into the purchase tax schedule by order a whole range of new items not already subject to purchase tax. But on the regulator I believe it is reasonable in all the circumstances to accept that any future Government, Labour or Conservative, will behave with the same sort of responsibility with which successive Governments have behaved in the past.
The variation in the yield of VAT by the operation of the 20 per cent. regulator, which it is now sought to reduce, would be about £380 millions in a full year, and
1330
the yield of the existing regulator, if it were imposed at the maximum rate of 10 per cent., would be about £375 millions. My hon. Friend the Member for South Angus raised a particular point about the reduction of rates of purchase tax last July. The cuts were made by Treasury order under the Purchase Tax Act, 1963, and not under the regulator power. As I understood it, he asked whether there was any comparable power to reduce the rate of VAT by order other than the use of regulator power. Last July the reductions were made under Section 2(3)(b)(i) of the 1963 Act because the two-elevenths reduction was in excess of the variation of up to 10 per cent. of the existing rate which could be made under the economic regulator power. In all the circumstances, I have come to the conclusion that it is not necessary to continue the Section 2(3)(b)(i) purchase-tax power under VAT, and, therefore, apart from the regulator power, there is no provision in the Finance Bill to lower the rate of VAT by order.
Mr. J. Bruce-Gardyne: I want to get this absolutely clear. Is my right hon. Friend the Chancellor saying, therefore, that if we were to limit the power of the Government as proposed either in Amendment No. 7 or in Amendment No. 88 they would be effectively restricted at all times in their ability to adjust the VAT rates to a percentage increase or reduction either of 10 per cent. in both directions or, according to Amendment No. 7, of 10 per cent. up and 20 per cent. down?
Mr. Barber: I am not sure without considering very carefully what my hon. Friend has said whether I can subscribe wholeheartedly to that proposition. The best and fairest way to put it, especially in the light of the question by the right hon. Member for Leeds, East (Mr. Healey), is that when Section 2 of the 1963 Act goes in its present form the only powers which will be in any way comparable will be the VAT regulator and the powers to which the right hon. Gentleman referred, which we shall come to in Clauses 12 and 13.
Mr. Robert Sheldon: To get this quite clear, is the Chancellor saying that the Government are taking powers to increase taxation no more than were available to previous

1331
Governments, under Section 9 of the 1961 Act or in any other way? On that basis the Government had power to raise roughly £140 million of extra taxation from purchase tax. Excise duties remain unchanged. The Government now are asking for 20 per cent. of a sum roughly similar to that raised in purchase tax. This allows for a possible increase in taxation greater than that enjoyed by previous Governments.
Mr. Barber: It is impossible to answer that question precisely for a simple reason which is sometimes forgotten. I will ask my hon. Friend the Financial Secretary to correct me if I am wrong about specific points of what can go in and out of zero-rating under the exemption in the two Schedules. But under the present powers it is possible to bring a whole variety of new products into purchase tax, at any rate up to the highest, which at one time, under a previous Government, was as high as 55 per cent. Therefore, it would have been possible under powers which now exist to have made a considerable increase in the yield from purchase tax, but previous Governments have not used it in that way. I do not think the two things can safely be equated.
The yield under the regulator, which we have been considering, is roughly the same as the yield from the change in the regulator to the maximum extent under the existing provisions.
On the main group of Amendments Nos. 2, 3, 4, and 5, in the name of the official Opposition, the Committee will recall that in my Budget speech I declared our determination that the value added tax to be introduced in 1973 should be as simple as possible. I announced that it should be charged at a single positive rate and that that rate was the lowest of any of the standard rates in Europe. Today the House is witnessing an Opposition who when they were in Government raised taxation to an unprecedented level but who are now attempting to present the Labour Party as a convert to reducing taxation. They want me now to agree to an even lower rate of VAT than 10 per cent. I wish I could say that I believed for one moment that this belated conversion was genuine. To be told by the right hon. Member for Leeds, East during the debate on Second Reading that I could always increase the rate of
1332
VAT by 2½ per cent. in order to make room for concessions on coverage, and now almost in the next breath to be told by him in Committee that I should agree to decrease the rate again by 2½ per cent., when he and his hon. and right hon. Friends have tabled Amendments seeking additional reliefs of coverage, is to strain the credulity of any Chancellor.
One of my main aims since I became Chancellor has been to simplify taxation, and we are embarking on a wide range of programme of reform. The simplicity of the rate structure which I propose for VAT will, I believe, make a major contribution towards simplification. My hon. Friend the Member for Dartford (Mr. Trew) spelt out very clearly and cogently the advantages of VAT. Most of the European countries with a VAT have several positive rates. Some, such as France and Belgium, have as many as four. We shall be the largest industrial country to succeed in levying VAT at a single positive rate. Compared with countries with a single positive rate, the Scandinavian countries, ours will be far and away the lowest.
This single-rate structure will greatly assist industry and commerce in their forward planning. It represents a major simplification of taxation. I mentioned on Second Reading, and make no excuse for doing so again, the inestimable value of the discussions between commerce and industry and Customs and Excise which preceded the proposals we are now debating. If similar wide-ranging and in-depth discussions had preceded some of the taxation changes made by the Labour Government we might not have needed to carry out so many reforms today. If consultation had preceded SET, I doubt very much whether that tax would ever have been introduced. or whether it would have gone through the House if introduced.
Our decision to have a single-rate structure for VAT and to announce the intended rate a year in advance, which unprecedented for indirect taxation in this country, was in line with the representations made by trade associations and others to Customs and Excise during the consultations. There were some Press reports before the Budget that my officials were pressing for a rather complicated rate structure. Nothing could have been further from the truth, because they also

1333
favoured the simplest possible structure, and that is what together we have devised.
Labour right hon. and hon. Members have made much of the argument that in deciding on a single rate of VAT I shall be reducing the taxation of luxury goods. We heard a great deal about that yesterday from one or two Labour hon. Members. It is part of the philosophy of the Labour Party to single out certain goods as so-called luxuries and then to tax them to the hilt—up to a maximum of 55 per cent. under the previous Government. We on this side reject the discriminatory approach, which has caused so many distortions and anomalies. I am sure that is right. Therefore, I came to the conclusion that we should have a single positive rate of VAT, but at the same time I decided to zero-rate basic necessities such as most foods, fuel, housing and passenger transport. This we have done with the interests of poorer families particularly in mind. Therefore, there is no reason to believe that a single positive rate of VAT will result in regressive taxation.
Mr. Tam Dalyell: Has any serious work been done on the saving of civil servants, Inland Revenue personnel, by the introduction of one rate rather than two rates? Are any figures conveniently available from the Treasury on this?
Mr. Barber: I do not have any figures to hand, hut I know that as we move from a single-rate system into a multi-rate system—
Mr. Dalyell: Two rates.
Mr. Barber: A two-rate system is a multi-rate system. Some countries with VAT have two rates. As soon as a country moves away from one rate it gets into difficulties involving more officials and considerable complications for those on the other side, particularly in the retail trade, who have to deal with more than one rate. Therefore, I am certain that we have taken the right decision, and that it has generally received the approval of the country.
Mr. Dalyell: No quantification.
Sir Harmar Nicholls: Apart from the question of the number of civil servants, the extra staff and so on required in business under a multi-
1334
rate system would perhaps be more expensive to the country than the cost of civil servants.
4.15 p.m.
Mr. Barber: There is no doubt about that. During the consultations between Customs and Excise and trade and industry, the representatives of trade and industry again and again said that their task would be infinitely simpler if there were only one rate. I was recently told rather sadly by a Minister from another country with several rates of VAT—I had better not say which country it is—that he wished very much that his country had started on the same road as this country.
Mr. Norman Atkinson: Is not the Chancellor arguing the philosophy of the Conservative Party? If that philosophy is based upon the idea of a means-tested society, of necessity he must argue universality in this kind of indirect taxation. The two things go together. In a means-tested society there must be a single-rate indirect tax.
Mr. Barber: If we are to go into the question of a means-tested society, I hope the hon. Gentleman will support us, as I think he and most of the Committee will, when we consider our new proposals for a tax credit scheme, which will do away with a considerable amount of individual means-testing. My party believes that if we want to help those in need, it is to some extent inevitable that we should have some sort of means test to find out just who is in need, to make sure that the help goes to those who need it. The more we can do that automatically without the disadvantages inherent in individual means testing, which we all know about from our constituencies, the better. I hope that together, when the Green Paper is produced, we can make real progress in this direction.
I turn to the starting rate of the tax, which is the main point in the official Opposition Amendments. As I explained in my Budget speech, in order to help forward planning of industry and commerce I announced this year, a year in advance, the rate of VAT for next year, which is prescribed in the Bill at 10 per cent. But, to allow for the needs of economic management between now and the time when the tax comes into opera-

1335
tion next April, Clause 9(2) provides a once-for-all power to substitute by Treasury order before 1st April, 1973, a rate not lower than 7½ per cent. nor higher than 12½per cent. There seems to have been some misunderstanding of this provision in some quarters, although there is probably no misunderstanding within the Committee now. This once-for-all power is quite distinct from the VAT regulator power in Clause 9(3), which I talked about a few minutes ago. That power will enable the rate of VAT to be altered by order by up to 20 per cent. of the existing rate after the tax has been introduced. The once-for-all power in subsection (2) is to be used only before the tax has started, and unless economic circumstances require the operation of the power the starting rate for VAT will be 10 per cent.
We heard yesterday from the Opposition Front Bench and successive speakers from the Opposition back benches that the Labour Party is very suspicious of our intentions. We were told that we had put 10 per cent. in the Bill but had given ourselves the power to change that before the tax became operative either upwards by 2½per cent. or downwards by 2½per cent. We have all heard such allegations before. We have heard them repeatedly from Labour right hon. and hon. Members.
Mr. Healey: Fully justified.
Mr. Barber: The right hon. Gentleman falls into the trap. I was about to quote the words of the Leader of the Opposition when he was Prime Minister. On 3rd June, 1970, just a week or two before polling day, he said:
" Value-added tax would mean 4s. in the pound, that is 20 per cent., more on your bus fares, on your rail fares, for these would be subject to the tax, and 4s. in the pound, that is 20 per cent., on your gas bills, your electricity bills, and your coal bills."
None of that came to pass. Today we hear just the same old scary stuff. [Interruption.] It is all very well the right hon. Member for Leeds, East laughing, but he followed almost precisely the words of his right hon. Friend the Leader of the Opposition and included them in his election address.
Mr. Healey: Does the Chancellor agree that the Government have no need to introduce VAT to increase the cost of
1336
living by 4s. in the pound? They did that by the way they managed the economy.
Mr. Barber: I do not think the Committee will accept that sort of remark from the right hon. Gentleman. The simple fact is that the words
" would be subject to the tax "
were quite specific. It was not a question of "might be" or "could be ". It was stated to the British nation that with a Conservative Government bus fares, railway fares, gas bills, electricity bills and coal bills would be up by 20 per cent. Of course, it has turned out to be utterly untrue.
Having met the wishes of the House and many right hon. and hon. Gentlemen opposite, as well as those outside the House, who made this plea and urged me last year to declare this year in some way a provisional rate of VAT which is to become operative next year, I think the Committee will agree that there should be some exceptional treatment for varying it if the need should arise.
Looking at the way in which this group of Amendments is phrased, it is clear that the Opposition accept in principle that the Government should have the extraordinary and unusual power, before the tax comes into operation, to vary the rate. There is no dispute about that.
The issue between us—it is clear and came out in debate yesterday evening—is the level of the tax when it comes into operation. The rate proposed is 10 per cent., and the Amendments suggest 7½per cent. This suggestion from the Labour Party, which piled on to the British people an unprecedented burden of indirect taxation, is the height of impudence. My hon. Friend the Member for South Angus rightly said yesterday evening that these Amendments would not wash in view of the Labour Government's record. If we are to make up our minds whether we are right in what we have prescribed in the Bill, or whether the suspicions of right hon. and hon. Gentlemen are justified, it is worth while looking at the history of the matter.
Mr. Joel Barnett: As the right hon. Gentleman is making a great deal about suspicions,

1337
is he prepared to give us an assurance that the tax will not go up?
Hon. Members: Answer.
Mr. Barber: Of course I will answer. What is the purpose of having an economic regulator or a provision which allows us to put taxation up or down? The hon. Gentleman and his right hon. and hon. Friends have an absolute obsession with increasing taxation. It never occurs to them that it might go down on occasions. I am not surprised, because they have never had any experience of that. [Interruption.]
When we left office in October, 1964, there was no such thing as SET. There were three rates of purchase tax: 25 per cent., 15 per cent. and 10 per cent. What happened then? Two years later, in July, 1966, the Labour Government increased all three rates of purchase tax by 10 per cent. Two years later, in March, 1968, the Labour Government again raised the two lower rates, this time by 12½per cent. and 20 per cent. All the goods at the top rate, which by then had already been increased to 27½per cent., were split into two rates and the increase went up in the one case to 33½per cent. and in the other case to 50 per cent. from the top rate of 25 per cent. which they had inherited.
Even this was not the end of the story. In the same year, in November, 1968, all the rates were increased again by the Labour Government to 13¾per cent., 22 per cent., 36⅔per cent., and 55 per cent.
In opening this debate in his usual agreeable manner last night, the hon. Member for Birmingham, All Saints (Mr. Brian Walden)—I took down his words, which are significant in relation to this discussion—said:
" All indirect taxation is regressive."
Mr. Brian Walden indicated assent.
Mr. Barber: The hon. Gentleman indicates agreement. So we can only assume that it was the deliberate policy of his Government—he would support another Labour Government—to make taxation more regressive. That is what they did. The record is there for all to see.
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That was not the end of the story, because the Labour Government invented SET in 1966. It is worth recalling what happened to SET. The rate in 1966 was 25s. for a full-time employee. In 1968 they put the rate up to 37s. 6d., and in 1969 they put it up to 48s. The right hon. Member for Leeds, East and other right hon. and hon. Gentlemen now on the Opposition Front Bench tramped through the Lobby again and again in order to heap this increase in indirect taxation on the backs of the British people. They all did it. The hon. Member for All Saints supported it.
Mr. Walden Mr. Walden indicated assent.
Mr. Barber: The hon. Gentleman knew that this had to be done. Therefore, he went into the Lobby night after night and supported it.
Mr. Waldenrose—
Mr. Barber: I will give way in a moment. Putting it bluntly, the Labour Party must be round the bend if it now thinks that the British people will regard it as the party which cuts indirect taxation.
Sir Harmar Nicholls: Would my right hon. Friend be prepared to give way if the Opposition wanted to question his figures or, in the light of them, to withdraw their Amendments to stop themselves appearing stupid?
Mr. Walden: If the Chancellor of the Exchequer is arguing the matter at this level about what was done—he and everybody else knows that increasing taxation is not popular and not likely to win votes—will he tell us why it was done? Will he explain the situation which we inherited from his tax-cutting Government which he has been praising?
Mr. Barber: We had all the excuses from the two right hon. Members for Cardiff, South-East (Mr. Callaghan) and Birmingham, Stechford (Mr. Roy Jenkins) who were then Chancellors of the Exchequer, who undertook these massive increases in taxation, but the excuses that they gave did not wash with the country at the General Election.
If we are considering whether there should be suspicion about the present intentions of the Government, it is also worth considering the other side of the

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coin: what changes in indirect taxation there have been since we took office in June, 1970. I will run through them very quickly.
In March, 1971, I announced that SET would be cut by half, reducing indirect taxation by £245 million in a full year. In July, 1971, I announced that purchase tax would be cut by the largest overall cut for 18 years, thus reducing taxation by a further £235 million in a full year. In March, 1972, I announced that the top two rates of purchase tax would be cut from 45 per cent. and 30 per cent. to 25 per cent., thus reducing taxation by a further £175 million in a full year. Since we have been in office we have cut indirect taxation, purchase tax and SET by no less than £680 million in a full year. The truth is that when we look at movements. the Labour Government put taxes up and we put them down. Now the Labour Opposition, of all people, have the audacity to propose even greater cuts. For sheer cheek, that takes the cake.
The country will not be deceived because the Labour Party will always be known as the party of high taxation. These Amendments will he dismissed for what they are—the joke of the century.
Mr. Walden: This is a basically noncontroversial point. The right lion. Gentleman will recall that I put it to him that if the tax had to be varied at all there should be some provision to keep it within the limits of two rates of decimals because of the business equipment difficulties involved. I know that he cannot bind his successors, but will he indicate the direction of his own thinking?
Mr. Barber: I took note of the hon. Gentleman's point. I will see whether anything can be done to meet the particular objection which he put forward. We must do everything we conceivably can within the basic principles of the tax to meet the problems faced by traders and the manufacturers of the equipment which has to be operated by the traders. I will look into this and perhaps write to the hon. Gentleman in due course.
4.30 p.m.
Dr. John Gilbert: The Chancellor of the Exchequer has accused us of having suspicious minds. It is not an accusation from which we flinch with any great distaste. But we can infer that he
1340
thinks of it as a pejorative term of speech and that therefore he is in no way a suspicious person himself. We can therefore take it that he will take any comments coming from us in the good faith in which we submit them.
These Amendments are intended to be helpful to the right hon. Gentleman. In the first group—Nos. 2 to 5 inclusive—we are attempting to reduce the initial rate of value added tax from 10 per cent. to 7½ per cent. We are attempting within the first discretionary band to give him the option of reduction from 9 per cent. to 5 per cent.
There are various reasons why the Amendments would be of assistance to him. First, they would help in his negotiations with the Europeans. He knows that there will have to be a process of harmonisation with VAT. It has to come, and by a process of negotiation. As he has rightly pointed out, he, along with any other Finance Minister, will have the right of veto both over the rate and over the extent to which the tax is applied.
But we have been told—and the right hon. Gentleman will be the last to deny it—that our entry is not intended to be an exercise in veto swapping. There will be negotiation, and negotiation means that one moves towards the other fellow's point of view and the other fellow, one hopes, moves towards one's own point of view. The Chancellor has boasted that he starts from a lower base than the Europeans. That is a mercy for which we should be grateful. As he has adduced this lower rate as a sign of strength, afortiori the lower the rate, the stronger his position will be in negotiating terms. Therefore, I am sure he realises that if we succeed in these Amendments his negotiating position with the Europeans will be even stronger because they will have further to go to meet him. He has boasted of his low rate; we will help him to hold his head even higher.
But there are two other reasons why this first group of Amendments is helpful to the Chancellor. He has claimed, as have many of his hon. Friends, that the present rate and structure of VAT are not regressive. For the purpose of argument, we will accept that claim for a moment. If, however, the right hon. Gentleman agrees to cut his basic rate of VAT, he might even be able to go a

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little further. Who knows but that he might even be able to say that it is a progressive tax. Would not that be a wonderful thing for a Conservative Chancellor to be able to claim, if only once in his lifetime? Of course we do not accept that this tax is not regressive. We have had no hard evidence to show that it is not—just soft assertions from the Chancellor, repeated incessantly by his hon. Friends.
Why cannot we have some evidence if the right hon. Gentleman's case is so strong? There are techniques available for assessing whether a tax is regressive. I am sure that they are well known to the right hon. Gentleman and his civil servants in the Treasury. There is the well-known and statistical analysis based on the calculation of income co-efficients. Has any such study been made in the Treasury? If so, why cannot we have the results and why have we not heard about it? Those of us with suspicious minds must conclude that no such study has been undertaken, or that if it has been, the results are not favourable to the Chancellor's case, for otherwise we would clearly have heard far more about it.
Furthermore, if the present level of VAT is not regressive, can the right hon. Gentleman go on from that to claim that the full use of his discretionary powers —the initial power and the subsequent power in the regulator—would not produce a regressive situation in our tax structure? Of course he cannot, and he has never attempted to do so. In that case, if he is so proud of his claim that the tax is not regressive, and if he cannot claim furthermore that an exercise of his discretionary powers would not introduce a serious element of regressiveness into the tax system, will he then give an assurance that he will take steps, if he has to increase the rate of the tax, to ensure that there is no further element of regressiveness in the system?
If the right hon. Gentleman expects to use these powers—and presumably he must be expecting the possibility, otherwise they would not be in the Bill—will he give an undertaking that if they have to be used, social service benefits will be increased proportionately to the extent that ensures that those who would be worst affected by such increases in the
1342
rate of the tax would be protected from hardship accordingly? [Interruption.] I do not expect the right hon. Gentleman to listen to every word I am saying, but clearly he has not heard the last bit, so I will repeat it for his benefit. If he finds it necessary to increase the tax and to use the regulator upwards, as he clearly conceives as a possibility, otherwise it would not be in the Bill, will he give an assurance that he will ensure that there is no further element of regressiveness in the tax system by seeing that social security benefits are adjusted upwards in order to protect those who would suffer most from the sort of increases he anticipates in the Bill?
While we are on the subject of the degree of regressiveness in the tax system, I remind the Committee that the right hon. Gentleman yesterday declined frequent and warm invitations from my right lion. Friend the Member for Leeds, East (Mr. Healey) to give any assurance on food. He equally declined a few moments ago to give any assurance to my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) on fuel, fares and rents. It is not at all surprising that we are suspicious. The right hon. Gentleman quoted the words of my right hon. Friend the Leader of the Opposition during the last General Election. All he has been able to flaw my right hon. Friend on is my right hon. Friend's anticipation of events which have yet to come to pass. There will be plenty of time for my right hon. Friend's words to be proved very sadly right in the event.
But if the Chancellor cannot give us an assurance that he will never, never, never introduce VAT on food, can he go a little way in our direction and give an undertaking that in the first round of negotiations with the Common Market countries, when he has to harmonise, he will use the veto of which he has been so proud to prevent VAT being levied on food? Can we have an assurance that in those circumstances the veto will be used as a permanent weapon?
Mr. Bruce-Gardyne: On a point of order, Sir Robert. The hon. Gentleman is asking for assurances about the application of the value added tax to food, fuel and rents. I do not quite see where, within the context of the Clause and the

1343
Amendments we are discussing, the application of VAT to food, fuel and rents could be applicable, since the Clause relates to adjustments in rates of the tax where there is a positive rate and not to where there is currently a zero-rating.
The Chairman: As far as I have been able to ascertain from listening to the hon. Member for Dudley (Dr. Gilbert), I do not think he is out of order. I will pay particular attention to him, and if I think there is any substance in what the hon. Member for South Angus (Mr. Bruce-Gardyne) says, I will call the hon. Member for Dudley to order.
Dr. Gilbert: I am grateful to you, Sir Robert and I am glad that you at least will be paying attention to these singularly important points, as is the hon. Member for South Angus (Mr. Bruce-Gardyne). No doubt he will not like what he hears.
We pass from the question of regressiveness and our negotiations with the Common Market to discuss the whole theory which the Chancellor put forward a few moments ago—we have had it so often from him; it is more appropriate to the Tory Party Conference—that the Labour Party is the only party which puts up taxes and the Conservative Party is the only one that brings them down.
Mr. Christopher Tugendhat: Before the hon. Gentleman leaves that point—
Dr. Gilbert: I have only just begun it.
Mr. Tugendhat: I refer to the previous point. I know that the hon. Member has great knowledge of taxation matters. Drawing upon his great knowledge, could he give the Committee some examples of other taxes which have been introduced when the introducer has given the type of assurance that never, never, never in any possible circumstances would the tax be extended in any possible way? Can he think of any examples in which a Chancellor has bound himself for eternity in that way? Does he not think it wrong for a Chancellor to give such assurances?
Dr. Gilbert: I am prompted, usefully as so often, by my hon. Friend the Member for Birmingham, All Saints (Mr. Brian Walden) who tells me that Pitt
1344
made that assurance when he introduced income tax.
Mr. Peter Rees: Before the hon. Gentleman leaves that point, will he confirm that Pitt the Younger was the Conservative Chancellor who carried out his promise and did abolish income tax although it was subsequently reintroduced by another Chancellor?
Dr. Gilbert: It was, of course, another Conservative Chancellor. Even if they do not break their election pledges at one election, they break them at another, with maybe a century or two in between. When it comes to the present Conservative Party we do not have to wait for such a long time span.
The Chancellor had the gall to talk about taxes and general elections. I seem to remember that there was a certain pattern in the 1950s to do with taxes and general elections. It seemed that just before the general elections of 1955, 1959 and in 1964, taxes melted away in the sunshine of the Chancellor's benevolence—a Conservative Chancellor—and shortly after the general election was won back they came, back came the squeeze, back came the freeze, time after time.
We have heard the Chancellor so many times we know that he protests too much. But things are changing.
Mr. Peter Hordern: The hon. Gentleman has referred to reductions in taxation before elections. Will he tell the Committee what reductions took place in 1964?
Dr. Gilbert: The trouble in 1964 was that the reductions had taken place in 1963. We had enormous reductions then and because they had not taken effect, the 1964 election was postponed to the last possible moment to try to gain electoral benefit. That failed.
[Miss HARVIE ANDERSON in the Chair]
4.45 p.m.
Let us move on to what is in the mind of the Government for the future. We hear, again, that no Conservative Government ever put up taxes. Perish the thought! That is the last thing in their mind. All they are ever thinking about is cutting taxes for the benefit of everyone all the time. It was interesting to read

1345
a passage from the Financial Secretary in yesterday's HANSARD. He had been asked what the cost of certain concessions to VAT would be. He declined to give the cost of certain concessions to the revenue and came out with the memorable phase:
"…it is not meaningful to ask what will be the cost of this or that concession. In answering that, one would need to take account of all the other concessions which would then be pressed."—[OFFICIAL REPORT, 9th May, 1972; Vol. 836, c. 1252.]
He was not being asked necessarily to give all the concessions. All he was being asked was to give an estimate of their cost. Clearly he did not know it, clearly he did not care, clearly he is not interested in making any concessions under the VAT system.
The Financial Secretary to the Treasury (Mr. Terence Higgins): I have slight difficulty in relating what the hon. Gentleman is saying to the Amendment. Would he please clarify?
Mr. Denis Healey: Windy!
Dr. Gilbert: Hon. Gentlemen opposite should not be so sensitive. If I am out of order the Chair will pull me up. The Chair has been listening very closely to what I have been saying and I have in no way strayed from the Amendment. The right hon. Gentleman has made his speech. I intend to make mine in my own way and I will not be put off by the fact that hon. Gentlemen opposite do not like it.
We were talking a moment ago about the fact that the Financial Secretary had no plans to reduce the coverage or rate of value added tax—
Mr. Higgins: I am sorry to interrupt the hon. Gentleman again but he was not even listening to his own speech. That was not what he was talking about a moment or two ago.
Dr. Gilbert: We can check with that tomorrow when we read HANSARD. I am glad to know that at last I have the attention of the Financial Secretary.
If we turn to Written Answers which appeared in HANSARD yesterday we see a whole lot of Questions put down to the Financial Secretary by my hon. Friend the Member for Heywood and Royton. Every one of those—no doubt the hon.
1346
Member for South Angus (Mr. Bruce-Gardyne) will be up on one of his points of order in a moment—relates to the revenue that could be gathered for the Treasury if the coverage of the Bill were extended. There is one item after another. Now all of a sudden we find that the Financial Secretary has done his homework. He does know what the cost would be. He did not know what the cost of the concessions would be, but he knows what revenue he can expect from introducing a 10 per cent. VAT on food—£675 million; on books—£60 million; on water—he has worked that out! —£ l0 million; on newspaper advertising—£3 million. That is probably safe because the Government have many friends in that industry anyway. On transport the figure is £85 million and for caravans it is £1 million.
Mr. Bruce-Gardyne: I am trying hard to follow the hon. Gentleman's argument. Could he enlighten me? Do these points relate to Amendment No. 2 or Amendment No. 3 or Amendment No. 4 or Amendment No. 5 or Amendment No. 7 or Amendment No. 88? Could he be specific, because it is not clear to all of us to which of the Amendments he is referring?
Dr. Gilbert: I am sorry the hon. Gentleman is having difficulty. I can tell him that the Amendment to which I am not referring is No. 88, in his name. The Financial Secretary is perfectly capable of doing his sums when it is a question of the revenue he expects to get from jacking the rate up—
Mr. Higgins: We must be quite clear about this. We have, in conformity with our policy of giving the Committee as much information as possible, answered the Questions put down yesterday by the hon. Member for Heywood and Royton (Mr. Joel Barnett). The hon. Gentleman is now totally distorting those answers. The answers I gave said that the hypothetical yield on these items, which will be zero-rated, were the figures which he has quoted. These are the items which we are not taxing. The hon. Gentleman is seeking to give the impression—it was reflected to some extent in some Press reports today, too—that these are items which are to be taxed. This is totally untrue, and I hope the hon. Gentleman will snake that absolutely clear.
Dr. Gilbert: The hon. Gentleman is an amiable fellow, but he made a peevish speech yesterday and today he is making a series of peevish interruptions. I do not know what is getting under his skin. I never said that these were the yields which would be involved in the Budget. I am merely pointing out that the hon. Gentleman has worked out what the revenue will be from increasing the taxes on all these items, but not what the concessions from the Treasury will be. The hon. Gentleman should not be so sensitive about this.
I come to the third reason why our Amendments are helpful to the Chancellor of the Exchequer. They would have beneficial balance of payments effects. The Chancellor has claimed that because exports are zero-rated, this will be one of the enormous benefits of VAT; there will be no element of VAT in exports. But the right hon. Gentleman is an honourable man, and he will admit that there will inevitably be a residual element of VAT in exports in that any exporter who receives taxable supplies from an exempt supplier will have that element of VAT in his input costs which he will not be able to reclaim. I do not wish to make too much of this, but it is a fact. In so far as insurance costs enter into export costs, it seems that under the present scheme—and I shall welcome correction on this point if I am wrong—the exporter will not be able to shrug off that element of VAT.
In addition, there will be balance of payments effects on the increase in the domestic price level as a result of the introduction of VAT. The Confederation of British Industry has said that the effect on the cost of living will be about ½per cent. to1½per cent. In fact, the increased cost on the disposable income of that section of the population most active in making wage claims will probably be considerably greater. We know, because we have been told on very good authority, that there is a spiral in these matters. I will not go into who said what at the last election, but there is an opportunity of cutting into that spiral, and we suggest that this would be a very good time to do it by amending Clause 9.
I wish to say a word or two about the regulator. The Financial Secretary claimed that it was symmetrical. It is symmetrical only in the sense that it
1348
is 20 per cent. up or 20 per cent. down. The net effect, such is the operation of the percentage system, is that the Chancellor can increase the rate by 5 per cent. but he can reduce it by only 4 per cent. In other words, there is an asymmetry in the system, and there is a bias upwards. The combined effect of the initial discretionary power and the regulator which the Chancellor is proposing will be a value added tax of about 15 per cent. Every one of the figures which the Financial Secretary gave in answer to my hon. Friend the Member for Heywood and Royton would have to be increased by 50 per cent. if, perish the thought, we were to come to the pass where all these things were covered by VAT and at the maximum rate which the Chancellor has power to impose.
This may seem a far-fetched nightmare, but it is not, because even if the tax went to 15 per cent. and covered all the other items in the tax system, we would still have a VAT system below the mean of the existing taxes in the Community with which we are supposed to harmonise. It is therefore possible that we shall find ourselves saddled with a 15 per cent. rate over a whole range of goods not taxed at present as a result of the requirements of the harmonisation programme.
As my hon. Friend the Member for Birmingham, All Saints said yesterday, the pressure to increase the yield from this tax will be insidious, inexorable and irresistible. In every country where the tax has been introduced it has been increased, if not once, then many times. One of the claims put forward in its favour yesterday was that it was a buoyant tax. The thing, about buoyant objects is that they float upwards, upward and ever upward. The rate is too high, the discretion given to the Government is too great. The temptation to slide into a higher rate and over a wider base will be too easy to succumb to.
For those reasons, I invite my right hon. and hon. Friends to support the Amendments.
Mr. David Madel: We have had an interesting general debate on the various rates proposed for the value added tax and regulator powers. I wish to say a few words about the 10 per cent. car tax

1349
rate which has been touched on in the debate. My hon. Friend the Member for the Cities of London and Westminster (Mr. Tugendhat) yesterday mentioned the American attitude to VAT and the fact that the United States looked carefully at the domestic economy situations in this country and in the countries of our partners-to-be in Western Europe. Coming from a car-making constituency, I am very conscious of the investment decisions made on the other side of the Atlantic and that they take into account the domestic demand situation in various countries.
I ask my right hon. Friend the Chancellor of the Exchequer to bear in mind two points before finally fixing the 10 per cent. rate which is proposed for next March: first, what the level of employment will be in the motor industry as we get to the end of this year; and,
secondly, the general domestic demand situation. The car industry—a giant employer of people in this country—is extremely anxious about this point. I hope that my right hon. Friend will assure us that the 10 per cent. rate is flexible and can be changed should the economic situation demand it.
Mr. Barber: In considering the use of any powers given in the Clause, I shall take into account all the relevant considerations, of which that mentioned by my hon. Friend the Member for Bedfordshire, South (Mr. Madel) is certainly one.
Question put,That the Amendment be made:—
The Committee divided:Ayes 219, Noes 239.

Division No. 171.1

AYES

[4.58 p.m.

Abse, Leo

Edelman, Maurice

Jones, Barry (Flint, E.)

Albu, Austen

Edwards, William (Merioneth)

Jones, Dan (Burnley)

Allaun, Frank (Salford, E.)

Ellis, Tom

Jones, RI.Hn.Sir Elwyn(W.Ham, S.)

Allen, Scholefield

English, Michael

Jones, Gwynoro (Carmarthen)

Archer, Peter (Rowley Regis)

Evans, Fred

Judd, Frank

Armstrong, Ernest

Ewing, Henry

Kaufman, Gerald

Atkinson, Norman

Faulds, Andrew

Kelley, Richard

Barnes, Michael

Fernyhough, Rt. Hn. E.

Kerr, Russell

Barnett, Guy (Greenwich)

Fisher, Mrs. Doris(B'ham, Ladywood)

Lambie, David

Barnett, Joel (Heywood and Royton)

Fitt, Gerard (Belfast, W.)

Lamborn, Harry

Benn, Rt. Hn. Anthony Wedgwood

Fletcher, Raymond (likeston)

Lamond, James

Bennett, James (Glasgow, Bridgeton)

Fletcher, Ted (Darlington)

Latham, Arthur

Bidwell, Sydney

Foley, Maurice

Lawson, George

Blenkinsop, Arthur

Foot Michael

Leadbitter, Ted

Boardman, H. (Leigh)

Ford Ben

Lee, Rt. Hn. Frederick

Booth, Albert

Forrester, John

Leonard. Dick

Boyden, James (Bishop Auckland)

Fraser, John (Norwood)

Lever, Rt. Hn. Harold

Broughton, Sir Alfred

Galpern, Sir Myer

Lewis, Arthur (W. Ham, N.)

Brown, Bob (N'c'tle-upon-Tyne, W.)

Gilbert, Dr. John

Lipton, Marcus

Brown, Hugh D. (G'gow, Provan)

Ginsburg, David (Dewsbury)

Loughlin, Charles

Brown, Ronald (Shoreditch & F'bury)

Gordon Walker, Rt. Hn. P. C.

Lyons, Edward (Bradford, E.)

Buchan, Norman

Gourlay, Harry

McBride, Neil

Callaghan, Rt. Hn. James

Grant, George (Morpeth)

McCartney, Hugh

Campbell, l. (Dunbartonshire, W.)

Grant, John D. (Islington, E.)

McElhone, Frank

Carter, Ray (Birmingh'm, Northfleld)

Griffiths, Will (Exchange)

Mackenzie, Gregor

Castle, Rt. Hn. Barbara

Hamilton, James (Bothwell)

Mackie, John

Clark, David (Colne Valley)

Hamilton, William (Fife, W.)

Mackintosh, John P.

Cocks, Michael (Bristol, S.)

Hamling, William

Maclennan, Robert

Cohen, Stanley

Hannan, William (G'gow, Maryhill)

McMillan, Tom (Glasgow, C.)

Coleman, Donald

Hardy, Peter

Mahon, Simon (Bootle)

Concannon, J. D.

Harper, Joseph

Marsden, F.

Corbet, Mrs. Freda

Harrison, Walter (Wakefield)

Marshall, Dr. Edmund

Cox, Thomas (Wandsworth, C.)

Hattersley, Roy

Mason, Rt. Hon. Roy

Cronin, John

Healey, Rt. Hn. Denis

Mayhew, Christopher

Crosland, Rt. Hn. Anthony

Heffer, Eric S.

Meacher, Michael

Cunningham, G. (Islington, S.W.)

Horam, John

Mellish, Rt. Hn. Robert

Cunningham, Dr. J. A. (Whitehaven)

Houghton, Rt. Hn. Douglas

Mendelson, John

Dalyell, Tam

Huckfield, Leslie

Mikardo, Ian

Darling, Rt. Hn. George

Hughes, Mark (Durham)

Millan, Bruce

Davidson, Arthur

Hughes, Robert (Aberdeen, N.)

Milne, Edward

Davies, Ifor (Gower)

Hughes, Roy (Newport)

Molloy, William

Davis, Terry (Bromsgrove)

Hunter, Adam

Morris, Alfred (Wythenshawe)

Dell, Rt. Hn. Edmund

Janner, Greville

Morris, Charles R. (Openshaw)

Dempsey, James

Jeger, Mrs. Lena

Murray, Ronald King

Doig, Peter

Jenkins, Hugh (Putney)

Oakes, Gordon

Douglas, Dick (Stirlingshire, E.)

John, Brynmor

Ogden, Eric

Duffy, A. E. P.

Johnson, James (K'ston-on-Hull, W.)

O'Halloran, Michael

Dunnett, Jack

Johnson, Walter (Derby, S.)

Oram, Bert

Eadie, Alex

Johnston, Russell (Inverness)

Orbach, Maurice

Orme, Stanley

Sheldon, Robert (Ashton-under-Lyne)

Tomney, Frank

Oswald, Thomas

Shore, Rt. Hn. Peter (Stepney)

Torney, Tom

Padley, Walter

Short,Rt.Hn.Edward(N'c'tle-u-Tyne)

Tuck, Raphael

Palmer, Arthur

Short, Mrs. Renée (W'hampton.N.E.)

Urwin, T. W.

Pannell, Rt. Hn. Charles

Silkin, Rt. Hn. John (Deptford)

Varley, Eric G.

Parry, Robert (Liverpool. Exchange)

Silkin, Hn. S. C. (Dulwich)

Wainwright, Edwin

Pavitt, Laurie

Sillars, James

Walden, Brian (B'm'ham, All Saints)

Pendry, Tom

Siiverman, Julius

Walker, Harold (Doncaster)

Pentland, Norman

Skinner, Dennis

Wallace, George

Prentice, Rt. Hn. Reg.

Small, William

Watkins, David

Prescott, John

Smith, John (Lanarkshire, N.)

Weitzman, David

Price, J. T. (Westhoughton)

Spearing, Nigel

White, James (Glasgow, Pollok)

Price, William (Rugby)

Spriggs, Leslie

Whitehead, Phillip

Probert, Arthur

Stallard, A. W.

Whitlock, William

Rankin, John

Steel, David

Willey, Rt. Hn. Frederick

Rhodes, Geoffrey

Stewart, Donald (Western Isles)

Williams, Alan (Swansea, W.)

Richard, Ivor

Stewart, Rt. Hn. Michael (Fulham)

Williams, Mrs. Shirley (Hitchin)

Roberts, Albert (Normanton)

Stoddart, David (Swindon)

Williams, W. T. (Warrington)

Robertson, John (Paisley)

Strang, Gavin

Wilson, Alexander (Hamilton)

Roderick, Caerwyn (Br'c'n R'dnor)

Summerskill, Hn. Dr. Shirley

Wilson, Rt. Hn. Harold (Huyton)

Rodgers, William (Stockton-on-Tees)

Taverne, Dick

Woof, Robert

Rose, Paul B.

Thomas,Rt.Hn.George (Cardiff, W.)

Ross, Rt. Hn. William (Kilmarnock)

Thomson, Rt. Hn. G. (Dundee, E.)

TELLERS FOR THE AYES:

Rowlands, Ted

Thorpe, Rt. Hn. Jeremy

Mr. John Golding and

Sandelson, Neville

Tinn, James

Mr. James Wellbeloved.

NOES

Adley, Robert

Fell, Anthony

King, Evelyn (Dorset, S.)

Alison, Michael (Barkston Ash)

Fenner, Mrs. Peggy

King, Tom (Bridgwater)

Allason, James (Hemel Hempstead)

Fidler, Michael

Kinsey, J. R.

Amery, Rt. Hn. Julian

Fisher, Nigel (Surbiton)

Kitson, Timothy

Archer, Jeffrey (Louth)

Fletcher-Cooke, Charles

Knight, Mrs. Jill

Atkins, Humphrey

Fookes, Miss Janet

Knox, David

Balniel. Rt. Hn. Lord

Fortescue, Tim

Lamont, Norman

Barber, Rt. Hn. Anthony

Fowler, Norman

Lane, David

Beamish, Col. Sir Tufton

Fox, Marcus

Legge-Bourke, Sir Harry

Bennett, Dr. Reginald (Gosport)

Fry, Peter

Le Marchant, Spencer

Berry, Hn. Anthony

Gardner, Edward

Lewis, Kenneth (Rutland)

Biffen, John

Gibson-Watt, David

Lloyd, lan (P'tsm'lh, Langstone)

Biggs-Davison, John

Gilmour, Sir John (Fife. E.)

Longden, Sir Gilbert

Blaker, Peter

Godber, Rt. Hn. J. B.

Loveridge, John

Boscawen, Robert

Goodhew, Victor

Luce, R. N.

Bossom, Sir Clive

Gorst, John

McLaren Martin

Bowen, Andrew

Gower, Raymond

Mc Master Stanley

Bowden, Andrew

Grant, Anthony (Harrow. C.)

McNair-Wilson, Michael

Braine, Sir Bernard

Gray, Hamish

McNair-Wilson, Patrick(NewForest)

Brinton, Sir Tatton

Green, Alan

Maddan Martin

Brocklebank-Fowler, Christopher

Griffiths, Eldon (Bury St. Edmunds)

Madel David

Brown, Sir Edward (Bath)

Grylls, Michael

Msginnis, John E.

Bruce-Gardyne, J.

Gummer, Selwyn

Marten, Neil

Bryan, Paul

Gurden, Harold

Mather, Carol

Bullus, Sir Eric

Hall, John (Wycombe)

Maude, Angus

Burden, F. A.

Hall-Davis, A. G. F.

Mawby, Ray

Butler, Adam (Bosworth)

Hamilton, Michael (Salisbury)

Maxwell-Hyslop R. J.

Campbell, Rt.Hn.G.(Moray&Nairn)

Hannam, John (Exeter)

Meyer, Sir Anthony

Carlisle, Mark

Harrison, Brian (Maldon)

Mills, Peter (Torrington)

Chapman, Sydney

Harrison, Col. Sir Harwood (Eye)

Miscampbell, Norman

Chichester-Clark, R.

Haselhurst, Alan

Mitchell, Lt.-Col.C. (Aberdeenshire, W.

Churchill, W. S.

Hastings, Stephen

Mitchell, David (Basingstoke)

Clark, William (Surrey, E.)

Havers, Michael

Moate, Roger

Cockeram, Eric

Hawkins, Paul

Molyneaux, James

Cooke, Robert

Hayhoe, Barney

Money, Ernle

Cooper, A. E.

Heath, Rt. Hn. Edward

Monks, Mrs. Connie

Cordle, John

Heseltine. Michael

Monro, Hector

Corfield, Rt. Hn. Frederick

Hicks, Robert

Montgomery, Fergus

Cormack, Patrick

Higgins, Terence L.

More, Jasper

Costaln, A. P.

Hiley, Joseph

Morrison, Charles

Critchley, Julian

Hill, John E. B. (Norfolk, S.)

Mudd, David

Crouch, David

Hill, James (Southampton, Test)

Murton, Oscar

d'Avigdor-Goldsmid, Maj.-Gen.James

Holland, Philip

Nabarro, Sir Gerald

Dean, Paul

Hordern, Peter

Neave, Airey

Deedes, Rt. Hn. W. F.

Hornby, Richard

Nicholls, Sir Harmar

Digby, Simon Wingfield

Hornsby-Smith, Rt.Hn.Dame Patricia

Normanton, Tom

Dixon, Piers

Howell, Ralph (Norfolk, N.)

Nott, John

Douglas-Home, Rt. Hn. Sir Alec

Hutchison, Michael Clark

Onslow, Cranley

Drayson, G. B.

James, David

Oppenheim, Mrs. Sally

du Cann, Rt. Hn. Edward

Jenkin, Patrick (Woodford)

Orr, Capt. L. P. S.

Dykes, Hugh

Jessel, Toby

Osborn, John

Edwards, Nicholas (Pembroke)

Johnson Smith, G. (E. Grinstead)

Owen, ldris (Stockport, N.)

Elliot, Capt. Walter (Carshalton)

Jopling, Michael

Page, John (Harrow, W.)

Elliott, R. W. (N'c'tle-upon-Tyne, N.)

Kellett-Bowman, Mrs. Elaine

Parkinson, Cecil

Emery, Peter

Kershaw, Anthony

Percival, Ian

Eyre, Reginald

Kilfedder, James

Pike, Miss Mervyn

Farr. John

Kimball, Marcus

Pink, R. Bonner

pounder, Rafton

Skeet, T. H. H.

Tugendhat, Christopher

Powell, Rt. Hn. J. Enoch

Soref, Harold

Turton, Rt. Hn. Sir Robin

Price, David (Eastleigh)

Speed, Keith

Vaughan, Dr. Gerard

Prior, Rt. Hn. J. M. L.

Spence, John

Vickers, Dame Joan

Proudfoot, Wilfred

Sproat, lain

Waddington, David

Pym, Rt. Hn. Francis

Stanbrook, lvor

Walder, David (Clitheroe)

Ramsden, Rt. Hn. James

Stewart-Smith, Geoffrey (Belper)

Walker, Rt. Hn. Peter (Worcester)

Redmond, Robert

Stoddart, David (Swindon)

Walker-Smith, Rt. Hn. Sir Derek

Reed, Laurance (Bolton, E.)

Stoddart-Scott, Col. Sir M

Walters, Dennis

Rees, Peter (Dover)

Stokes, John

Ward, Dame Irene

Rees-Davies, W. R.

Stuttaford, Dr. Tom

Weatherill, Bernard

Rhys Williams, Sir Brandon

Sutcliffe, John

Wells, John (Maidstone)

Ridsdale, Julian

Tapsell, Peter

White, Roger (Gravesend)

Roberts, Michael (Cardiff, N.)

Taylor, Sir Charles (Eastbourne)

Wiggin, Jerry

Roberts, Wyn (Conway)

Taylor, Edward M.(G'gow, Cathcart)

Wilkinson, John

Rodgers, Sir John (Sevenoaks)

Taylor, Frank (Moss Side)

Winterton, Nicholas

Rossi, Hugh (Hornsey)

Tebbit, Norman

Wolrige-Gordon, Patrick

Rost, Peter

Temple, John M.

Wood, Rt. Hn. Richard

Russell, Sir Ronald

Thatcher, Rt. Hn. Mrs. Margaret

Woodhouse, Hn. Christopher

St. John-Stevas, Norman

Thomas, John Stradling (Monmouth)

Worsley, Marcus

Sharpies, Richard

Thomas, Rt. Hn. Peter (Hendon, S.)

Shaw, Michael (Sc'b'gh & Whitby)

Thompson, Sir Richard (Croydon, S.)

TELLERS FOR THE NOES:

Shelton, William (Clapham)

Tilney, John

Walter Clegg and

Simeons, Charles

Trew, Peter

Mr. Kenneth Clarke.

Sinclair, Sir George

Question accordingly negatived.
Amendment proposed: No. 7, in page 8, line 28, after increase', insert:
' the rate for the time being in force by such percentage thereof, not exceeding ten per cent.'.—[Mr. Joel Barnett.]
Question put,That the Amendment be made:—
The Committee divided:Ayes 218, Noes 236.

Division No. 172.]

AYES

(5.8 p.m.

Abse, Leo

Dunnett, Jack

John, Brynmor

Albu, Austen

Eadie, Alex

Johnson, James(K'ston-on-Hull, W.)

Allaun, Frank (Salford, E.)

Edelman, Maurice

Johnson, Walter (Derby, S.)

Allen, Scholefield

Edwards, William (Merioneth)

Johnston, Russell (Inverness)

Archer, Peter (Rowley Regis)

Ellis, Tom

Jones, Barry (Flint, E.)

Armstrong, Ernest

English, Michael

Jones, Dan (Burnley)

Atkinson, Norman

Evans, Fred

Jones, Rt.Hn.Sir Elwyn(W.Ham, S.)

Barnes, Michael

Ewing, Henry

Jones, Gwynoro (Carmarthen)

Barnet, Guy (Greenwich)

Faulds, Andrew

Judd, Frank

Barnett, Joel (Heywood and Royton)

Fernyhough, Rt. Hn. E.

Kaufman, Gerald

Benn, Rt. Hn. Anthony Wedgwood

Fisher, Mrs. Doris (B'ham, Ladywood)

Kelley, Richard

Bennett, James (Glasgow, Bridgeton)

Fitch, Alan (Wigan)

Kerr, Russell

Bidwell, Sydney

Fitt, Gerard (Belfast, W.)

Lambie, David

Blenkinsop, Arthur

Fletcher, Ted (Darlington)

Lamond, James

Boardman, H. (Leigh)

Foley, Maurice

Lamborn, Harry

Booth, Albert

Foot, Michael

Latham, Arthur

Boyden, James (Bishop Auckland)

Ford, Ben

Lawson, George

Broughton, Sir Alfred

Forrester, John

Leadbitter, Ted

Brown, Bob (N'c'tle-upon-Tyne.W.)

Fraser, John (Norwood)

Lee, Rt. Hn. Frederick

Brown, Hugh D. (G'gow, Provan)

Galpern, Sir Myer

Leonard, Dick

Brown, Ronald (Shoreditch & F'bury)

Gilbert, Dr. John

Lever, Rt. Hn. Harold

Buchan, Norman

Ginsburg, David (Dewsbury)

Lewis, Arthur (W. Ham, N.)

Callaghan, Rt. Hn. James

Gordon Walker, Rt. Hn. P. C.

Lipton, Marcus

Campbell, l. (Dunbartonshire, W.)

Gourlay, Harry

Loughlin, Charles

Carter, Ray (Birmingh'm, Northfield)

Grant, George (Morpeth)

Lyon, Alexander W. (York)

Castle, Rt. Hn. Barbara

Grant, John D. (Islington, E.)

McBride, Neil

Clark, David (Colne Valley)

Griffiths, Will (Exchange)

McCartney, Hugh

Cocks, Michael (Bristol, S.)

Hamilton, James (Bothwell)

McElhone. Frank

Cohen, Stanley

Hamilton, William (Fife, W.)

Mackie, John

Coleman, Donald

Hamling, William

Mackintosh, John P.

Concannon, J. D.

Hannan, William (G'gow, Maryhill)

Maclennan, Robert

Corbet, Mrs. Freda

Hardy, Peter

McMillan, Tom (Glasgow, C.)

Cox, Thomas (Wandsworth, C.)

Harper, Joseph

Mahon, Simon (Bootle)

Cronin, John

Harrison, Walter (Wakefield)

Marsden, F.

Crosland, Rt. Hn. Anthony

Hattersley, Roy

Marshall, Dr. Edmund

Cunningham, G. (Islington, S.W.)

Healey, Rt. Hn. Denis

Mason, Rt. Hn. Roy

Cunningham, Dr. J. A. (Whitehaven)

Heffer, Eric S.

Mayhew, Christopher

Dalyell, Tam

Horam, John

Meacher, Michael

Darling, Rt. Hn. George

Houghton, Rt. Hn. Douglas

Mellish, Rt. Hn. Robert

Davidson, Arthur

Huckfield, Leslie

Mendelson, John

Davies, Ifor (Gower)

Hughes, Mark (Durham)

Mikardo, Ian

Davis, Terry (Bromsgrove)

Hughes, Robert (Aberdeen, N.)

Millan, Bruce

Dell, Rt. Hn. Edmund

Hughes, Roy (Newport)

Milne, Edward

Dempsey, James

Hunter, Adam

Molloy, William

Doig, Peter

Janner, Greville

Morgan, Elystan (Cardiganshire)

Douglas, Dick (Stirlingshire, E.)

Jeger, Mrs. Lena

Morris, Alfred (Wythenshawe)

Duffy, A. E. P.

Jenkins, Hugh (Putney)

Morris, Charles R. (Openshaw)

Murray, Ronald King

Rose, Paul B.

Thomson, Rt. Hn. G. (Dundee. E.)

Oakes, Gordon

Ross, Rt. Hn. William (Kilmarnock)

Thorpe, Rt. Hn. Jeremy

Ogden, Eric

Rowlands, Ted

Tinn, James

O'Halloran, Michael

Sandelson, Neville

Tomney, Frank

Oram, Bert

Sheldon, Robert (Ashton-under-Lyne)

Torney, Tom

Orbach, Maurice

Shore, Rt. Hn. Peter (Stepney)

Tuck, Raphael

Orme, Stanley

Short, Rt.Hn. Edward (N'c'tle-u-Tyne)

Urwin, T. W.

Oswald, Thomas

Short, Mrs. Renée (W'hampton.N.E.)

Varley, Eric G.

Padley, Walter

Silkin, Rt. Hn. John (Deptford)

Wainwright, Edwin

Palmer, Arthur

Silkin, Hn. S. C. (Dulwich)

Walden, Brian (B'm'ham, Al Saints)

Pannell, Rt. Hn. Charles

Sillars, James

Wallace, George

Parry, Robert (Liverpool, Exchange)

Silverman, Julius

Watkins, David

Pavitt, Laurie

Skinner, Dennis

Weitzman, David

Pendry, Tom

Small, William

White, James (Glasgow, Pollok)

Pentland, Norman

Smith, John (Lanarkshire, N.)

Whitehead, Phillip

Prentice, Rt. Hn. Reg.

Spearing, Nigel

Whitlock, William

Prescott, John

Spriggs, Leslie

Willey, Rt. Hn. Frederick

Price, J. T. (Westhoughton)

Stallard, A. W.

Williams, Alan (Swansea, W.)

Price, William (Rugby)

Steel, David

Williams, Mrs. Shirley (Hitchin)

Probert, Arthur

Stewart, Donald (Western Isles)

Williams, W. T. (Warrington)

Rankin, John

Stewart, Rt. Hn. Michael (Fulham)

Wilson, Alexander (Hamilton)

Rhodes, Geoffrey

Stoddart, David (Swindon)

Wilson, Rt. Hn. Harold (Huyton)

Richard, Ivor

Stonehouse, Rt. Hn. John

Woof, Robert

Roberts, Albert (Normanton)

Strang, Gavin

Robertson, John (Paisley)

Summerskill, Hn. Dr. Shirley

TELLERS FOR THE AYES:

Roderick, Caerwyn E.(Br'c'n&R'dnor)

Taverne, Dick

Mr. John Golding and

Rodgers, William (Stockton-on-Tees)

Thomas, Rt.Hn.George (Card.ff.W.)

Mr. James Wellbeloved

NOES

Adley, Robert

Emery, Peter

Johnson Smith, G. (E. Grinstead)

Alison, Michael (Barkston Ash)

Eyre, Reginald

Jopling, Michael

Allason, James (Hemel Hempstead)

Farr, John

Kellett-Bowman, Mrs. Elaine

Amery, Rt. Hn. Julian

Fell, Anthony

Kershaw, Anthony

Archer, Jeffrey (Louth)

Fenner, Mrs. Peggy

Kilfedder, James

Atkins, Humphrey

Fidler, Michael

Kimball, Marcus

Balniel, Lord

Fletcher-Cooke, Charles

King, Evelyn (Dorset, S.)

Barber, Rt. Hn. Anthony

Fookes, Miss Janet

King, Tom (Bridgwater)

Beamish, Col. Sir Tufton

Fortescue, Tim

Kinsey, J. R.

Bennett, Dr. Reginald (Gosport)

Foster, Sir John

Kitson, Timothy

Berry, Hn. Anthony

Fowler, Norman

Knight, Mrs. Jill

Biffen, John

Fox, Marcus

Knox, David

Biggs-Davison, John

Fry, Peter

Lamont, Norman

Blaker, Peter

Gardner, Edward

Lane, David

Boscawen, Robert

Gibson-Watt, David

Legge-Bourke, Sir Harry

Bossom, Sir Clive

Gilmour, Sir John (Fife, E.)

Le Marchant, Spencer

Bowden, Andrew

Godber, Rt. Hn. J. B.

Lewis, Kenneth (Rutland)

Braine, Sir Bernard

Goodhew, Victor

Lloyd, Ian (P'tsm'th, Langstone)

Brinton, Sir Tatton

Gorst, John

Longden, Gilbert

Brocklebank-Fowler, Christopher

Gower, Raymond

Loveridge, John

Brown, Sir Edward (Bath)

Grant, Anthony (Harrow, C.)

Luce, R. N.

Bruce-Gardyne, J.

Gray, Hamish

McLaren, Martin

Bryan, Paul

Green, Alan

McMaster, Stanley

Bullus, Sir Eric

Griffiths, Eldon (Bury St. Edmunds)

McNair-Wilson, Michael

Burden, F. A.

Grylls, Michael

McNair-Wilson. Patrick (NewForest)

Butler, Adam (Bosworth)

Gummer, Selwyn

Maddan, Martin

Campbell, Rt.Hn.G.(Moray&Nairn)

Hall, John (Wycombe)

Made), David

Carlisle, Mark

Hall-Davis, A. G. F.

Marten, Neil

Chapman, Sydney

Hamilton, Michael (Salisbury)

Mather, Carol

Chichester-Clark, R.

Hannam, John (Exeter)

Maude, Angus

Churchill, W. S.

Harrison, Brian (Maldon)

Mawby, Ray

Clark, William (Surrey, E.)

Harrison, Col. Sir Harwood (Eye)

Maxwell-HySlop, R, J.

Cockeram, Eric

Haselhurst, Alan

Meyer, Sir Anthony

Cooke, Robert

Hastings, Stephen

Mills, Peter (Torrington)

Cooper, A. E.

Havers, Michael

Miscampbell, Norman

Cordle, John

Hawkins, Paul

Mitchell, Lt.-Col.C.{Aberdeenshire, W)

Corfield, Rt. Hn. Frederick

Hayhoe, Barney

Moate, Roger

Cormack, Patrick

Heath, Rt. Hn. Edward

Molyneaux, James

Costain, A. P.

Heseltine, Michael

Money, Ernle

Critchley, Julian

Hicks, Robert

Monks, Mrs. Connie

Crouch, David

Higgins, Terence L

Monro, Hector

D'Avigdor-Goldsmid, Maj.-Gen.James

Hiley, Joseph

Montgomery, Fergus

Dean, Paul

Hill, John E. B. (Norfolk, S.)

More, Jasper

Deedes, Rt. Hn. W. F.

Hill, James (Southampton, Test)

Mudd, David

Digby, Simon Wingfield

Holland, Philip

Murton, Oscar

Dixon, Piers

Hordern, Peter

Nabarro, Sir Gerald

Douglas-Home, Rt. Hn. Sir Alec

Hornby, Richard

Neave, Airey

Drayson, G. B.

Hornsby-Smith, Rt.Hn.Dame Patricia

Nicholls, Sir Harmar

du Cann, Rt. Hn. Edward

Howell, Ralph (Norfolk, N.)

Normanton, Tom

Dykes, Hugh

Hutchison, Michael Clark

Nott, John

Edwards, Nicholas (Pembroke)

James, David

Onslow, Cranley

Elliot, Capt. Walter (Carshalton)

Jenkin, Patrick (Woodford)

Oppenheim, Mrs. Sally

Elliott, R. W. (N'c'tle-upon-Tyne, N.)

Jessel. Toby

Orr. Capt. L. P. S.

Osborn, John

St. John-Stevas, Norman

Thompson, Sir Richard (Croydon, S.)

Owen, Idris (Stockport, N.)

Sharpies, Richard

Tilney, John

Page, John (Harrow, W.)

Shaw, Michael (Sc'b'gh & Whitby)

Trew, Peter

Parkinson, Cecil

Shelton, William (Clapham)

Tugendhat, Christopher

Percival, Ian

Simeons, Charles

Turton, Rt. Hn. Sir Robin

Pike, Miss Mervyn

Sinclair, Sir George

Vaughan, Dr. Gerard

Pink, R. Bonner

Skeet, T. H. H.

Vickers, Dame Joan

Pounder, Rafton

Soref, Harold

Waddington, David

Powell, RI. Hn. J. Enoch

Speed, Keith

Walder, David (Clitheroe)

Price, David (Eastleigh)

Spence, John

Walker, Rt. Hn. Peter (Worcester)

Prior, Rt. Hn. J. M. L.

Sproat, Ian

Walker-Smith, Rt. Hn. Sir Derek

Proudfoot, Wilfred

Stanbrook, Ivor

Walters, Dennis

Pym, Rt. Hn. Francis

Stewart-Smith, Geoffrey (Belper)

Ward, Dame Irene

Ramsden, Rt. Hn. James

Stodart, Anthony (Edinburgh, W.)

Weatherill, Bernard

Redmond, Robert

Stoddart-Scott, Col. Sir M.

Wells, John (Maidstone)

Reed, Laurance (Bolton, E.)

Stokes, John

White, Roger (Gravesend)

Rees, Peter (Dover)

Stuttaford, Dr. Tom

Wiggin, Jerry

Rees-Davies, W. R.

Sutcliffe, John

Wilkinson, John

Rhys Williams, Sir Brandon

Tapsell, Peter

Winterton, Nicholas

Ridley, Hn. Nicholas

Taylor, Sir Charles (Eastbourne)

Wolrige-Gordon, Patrick

Ridsdale, Julian

Taylor, Edward M.(G'gow, Cathcart)

Wood, Rt. Hn. Richard

Roberts, Michael (Cardiff, N.)

Taylor, Frank (Moss Side)

Woodhouse, Hn. Christopher

Roberts, Wyn (Conway)

Tebbit, Norman

Worsley, Marcus

Rodgers, Sir John (Sevenoaks)

Temple, John M.

Rossi, Hugh (Hornsey)

Thatcher, Rt. Hn. Mrs. Margaret

TELLERS FOR THE NOES

Rost, Peter

Thomas, John Stradling (Monmouth)

Mr. Walter Clegg and

Russell. Sir Ronald

Thomas. Rt. Hn. Peter (Hendon, S.)

Mr. Kenneth Clarke

Question accordingly negatived.
Mr. Dalyell: I beg to move Amendment No. 8, in page 8, line 34, at end insert:
(4) Without prejudice to the generality of the preceding subsection the Treasury may make an order under that subsection prescribing a rate lower than the general rate in respect of those goods and services which are so designed and manufactured as to facilitate the re-use in cyclical processes of the basic materials of their construction.
The First Deputy Chairman: With this Amendment it will be for the convenience of the Committee to discuss also Amendment No. 9, in line 34, at end insert:
(4) Without prejudice to the generality of the preceding subsection the Treasury may make an order under that subsection prescribing a rate lower than the general rate in respect of specified goods which are designed so as to avoid or reduce pollution or are manufactured by a process specially adapted to avoid or reduce pollution.
and Amendment No. 10, in line 34, at end insert:
(4) Without prejudice to the generality of the preceding subsection the Treasury may make an order under that subsection prescribing a rate different from the general rate in respect of chargeable vehicles or a specified class of chargeable vehicles, as defined in section 51 of this Act.
Mr. Dalyell: The case for the Amendments can be succinctly put, and the power of the case is in no way related to the length of the arguments which I shall deploy. The Amendments pose the question of the extent to which the Government are prepared to bias the fiscal
1358
system in favour of goods and services which are anti-pollutant and against goods and services which are pollutant. They raise the question whether the Government are prepared to put teeth into the orations of the Secretary of State for the Environment and others who pay lip service to the needs of the environment in the 1970s.
I go back to the old chestnut, familiar to the Standing Committee on the Finance Bill last year, of liquefied petroleum gas, and I use it as an example. The question is whether the Government are prepared to help those forms of fuel that are anti-pollutant and to discriminate against those forms of fuel that are pollutant. Are the Government prepared, with long-term notice because this cannot be done overnight, to bias the fiscal system in favour of manufacturers who are prepared to take a long time and great care to construct machines, vehicles and engineering equipment that is non-pollutant at somewhat greater expense, and to bias the fiscal system against manufacturers who produce machines that perhaps are designed with profit mainly in mind and are pollutant?
My hon. Friend the Member for Birmingham, Northfield (Mr. Carter) will deploy the case in relation to industrial waste and the important subject of the recycling of materials referred to in Amendment No. 8. To what extent is relief to be given from value added tax and other taxes to those who are prepared at greater expense to do something about the environment rather than merely

1359
pay lip service to it at conferences and seminars?
These Amendments seek to introduce a note of seriousness and purpose to all the speeches we have heard about the environment. The Amendments may not be perfectly drafted and we are prepared to be told that the Treasury advisers and others could well have produced a better form of wording. Whether we decide to divide on these Amendments will depend on the spirit of the answer we receive and on assurances that something will be done in this direction. We certainly would not stand on our dignity on terms of drafting, which may leave a good deal to be desired.
Sir Gerald Nabarro: I intervene at an early stage in this most constructive discussion about appliances which may be of a pollutant or anti-pollutant character because I have long been associated with measures taken in this House to abate atmospheric and other forms of pollution, originating with the first Clean Air Bill, which was written in 1955 and which ultimately made its way to the Statute Book in 1956.
During the passage of that statute we were confronted with propositions of this kind. This idea was originally suggested in the Beaver Report of 1954 which was the forerunner in this sphere with its castigation of the chronic atmospheric pollution which existed at that time, notably in areas stigmatised as "black" areas. "Black" areas were those in which the pollution of the atmosphere from ill-combusted particles of bituminous coal was among the worst in Britain, particularly in certain areas of the Midlands. It was said in the Beaver Report that there should be a certain fiscal bias towards or a tax alleviation in respect of fuel and power appliances which polluted the atmosphere less than others.
The proposition in those days was to get rid of the stool-bottom grates from houses and to replace them by what were called modern solid-fuel burning appliances and the employment of solid smokeless fuels. There was as alternatives the employment of electricity, gas and oil in suitable appliances, all of which would have had the general effect of reducing atmospheric pollution or, as we call it today, improving the quality of the environment.
1360
It was decided in the following years that there should be no fiscal bias or tax relief—in other words, that no discriminatory action was to be taken in favour of those appliances which polluted the atmosphere less than others, and that the tax system should not be employed for the purpose of bias to improve the quality of the environment. That was a decision with which I am generally in agreement.
It would be nearly impossible for the Treasury to define which fuel and power appliances pollute the atmosphere less than others. This would involve arguments whether a gas fire for room heating is less of a pollutant than an electric fire or a heating appliance of a particular type. It would involve the Treasury in looking at the whole gamut of solid fuel-burning appliances and defining which were more efficient than others in terms of pollution. It would then cause the Treasury to seek to define which fuels were more efficient than others, and whether to use the proprietary premium fuels of well-known specifications such as Phurnacite, or Rexco or Coalite. These are proprietary premium solid fuels of high efficiency, with a small pollutant aggravation in atmospheric terms. If we were to pursue a policy of tax discrimination against pollution, this would involve the Treasury in trying to define both appliances and fuels, and would impose a tremendous burden on that Department.
Mr. Dalyell: The burden is not on Great George Street. The burden, such as it is, would be upon those of the hon. Gentleman's constituents who work at the Royal Radar Establishment at Malvern and many other Government establishments. I can think of some jobs carried out in research establishments which are a great deal less valuable to the nation than the kind of function I am suggesting. This would be a good task to be carried out at Malvern.
Sir G. Nabarro: I agree that the greatest concentration of scientific manpower is to be found at Malvern, Worcestershire, in my constituency, in the Royal Radar Establishment. But if I were to say to the eminent scientists, physicists and chemists, who work in that establishment, "Will you take 20 different proprietary, solid fuel-burning appliances and graduate them all in terms

1361
of which are the most polluting and which the least polluting?", I imagine the reply would be that this would confront them with an almost impossible task. If they graduated them in that way, endless disputation would arise in this House why certain appliances of a proprietary character had been given tax relief when others had not.
I do not believe in using the tax system for a purpose of this kind. I would prefer to proceed with the generic policies which we are employing at present in diminishing atmospheric pollution and in improving the quality of the environment.
We have yet to hear from the hon. Member for Birmingham, Northfield (Mr. Carter), who is rightly concerned with appliances to reduce the pollutant effect of the exhausts of motor vehicles of all kinds. He is anxious to prevent our city centres from degenerating into the kind of atmospheric squalor which is characteristic of Los Angeles and other major American cities which are deeply polluted by exhaust fumes.
I would remind the Treasury Front Bench that the United States has already legislated for appliances of the kind designed to cleanse the exhaust fumes of motor vehicles and to reduce their polluting effect. In the same way as we scrub in our most modern plants the noxious and often asphyxiating effluents flowing from power station and other chimneys or from the chimneys of chemical works because of their poisonous effects, including sulphurous compounds, the United States by attaching appliances to motor vehicles is seeking to cleanse the fumes which are emitted. They are making good progress.
I remind my hon. Friend the Financial Secretary that we shall have to do the same. Every encouragement should be given to the development of these appliances in order to improve the quality of the environment. But my case is that it would be wrong in principle to use the tax system for purposes of this kind. We never succeeded in using purchase tax discrimination for this purpose, and VAT in this context is much less a virulent appliance for the purpose than was purchase tax, which could be used on a much more discriminatory scale than can VAT. But to try to exclude
1362
from VAT all of the range of appliances which contribute directly or indirectly to atmospheric pollution and to graduate the tax on those appliances and on the manufacture and distribution of them is to place an impossible task on the shoulders of the Treasury.
5.30 p.m.
Mr. Dalyell: Clearly that is the hon. Gentleman's opinion. However, the Road Research Laboratory can fairly easily do this job for road vehicles. It is no great problem for it.
Sir G. Nabarro: I do not doubt that the Road Research Laboratory can make recommendations. However it does not make the tax law. This House makes the tax law. The Road Research Laboratory, the Royal Radar Establishment at Malvern or any other major scientific establishment, the basis of which is set in this context, can make recommendations. But, with the best will in the world, if it seeks to discriminate between this and that appliance or between this and that fuel on the ground, for example, that burning coal pollutes the atmosphere more than burning electricity, which in my judgment is a very dubious proposition, every kind of scientific argument and disputation will arise.
That is my first objection—[Interruption.] I hope that it will be noted on the Treasury Bench. My hon. Friend the Financial Secretary should drop his parliamentary Private Secretary in the drink for a moment and listen to me—
Mr. Higgins: I am listening very carefully to my hon. Friend, and I have noted his comments. In fact, I was talking not to my PPS but to one of my hon. Friends on the back benches.
Sir G. Nabarro: I come to my major objection to this group of Amendments. I shall oppose them vigorously. I said yesterday that I was not in favour of a cricket club or a football club being excluded from VAT. I am myself president of the Broadway United Football Club—
Mr. William Price: They did not win a match last year.
Sir G. Nabarro: I am also—
Mr. Arthur Lewis: What about the girls.
Sir G. Nabarro: The hon. Member for West Ham, North (Mr. Arthur Lewis) reminds me that I am also president of the Vale of Evesham Ladies Football Club—
Mr. William Price: The hon. Gentleman might get a place in that team.
Sir G. Nabarro: I hope that the hon. Member for Rugby (Mr. William Price) will not be unnecessarily discourteous. I am also president of the Broadway Cricket Club and a member of the Worcestershire County Cricket Club. I am deeply interested in sport. I shall be speaking at an international sports dinner tonight. However, none of this prevents my saying that the claim of sporting institutions to be relieved of VAT runs wholly counter to the spreading of the base of this form of taxation as widely as possible in order to diminish to the lowest level the applicable rate of the tax. That is what I want to do. If I had my way, I would include in it fuel and power, transport, food, and everything else. Then the rate of tax could be reduced to substantially below 10 per cent.
What I oppose vigorously is all this special pleading for football clubs, cricket clubs—
The First Deputy Chairman: Order. I hope that the hon. Member for Worcestershire, South (Sir G. Nabarro) will confine himself to the subject matter of these Amendments.
Sir G. Nabarro: I accept your rebuke, Miss Harvie Anderson. I promise you that I was making only a passing reference.
I resist vigorously these Amendments which seek to relieve appliances and fuels which in the judgment of a certain scientific body have caused less atmospheric or other pollution than other appliances or fuels. Not only shall we in this House be plunged into endless special pleading on behalf of this or that product and on behalf of this or that appliance, but we shall also breach wide open the whole of this spendid new tax which ought to be spread on the widest possible base in the interests of, first, the Revenue, secondly,
1364
equity, and, thirdly, the harmonious collection of revenue.
Mr. Dalyell: After the hon. Gentleman's speech, has he reconciled himself to being the ex-president of Broadway United?
Sir G. Nabarro: I must not be led from the path of righteousness by returning to the subject of VAT on sport, with which we shall deal extensively later.
All that I am trying to say in my characteristic and imperfect terms is that I want all special pleading on the VAT resisted by the Treasury in order that the tax shall be spread as wide as possible and shall be applicable at the lowest possible rate. I believe that that is the proper principle in these circumstances.
I hope therefore that the Treasury will reject this group of Amendments decisively and call upon the Committee to keep the tax on a wide base and as nearly generic as possible in the matter of all goods and services purveyed in the United Kingdom.
Mr. Ray Carter: For one brief moment at the outset of the contribution of the hon. Member for Worcestershire, South (Sir G. Nabarro), I thought that my hon. Friend the Member for West Lothian (Mr. Dalyell) and I had his company. I was a little worried about that because the hon. Gentleman is doubtful company. When we lost his company after a few moments, I was sure that my hon. Friend and I were right. I should have had the gravest doubts if the hon. Gentleman had come along with us.
The hon. Gentleman said at one stage that it would be impossible for the Government so to organise the taxation system as to bias the value added tax in favour of those industries and activities which do not create pollution and, consequently, in favour of those industries which recycle the basic materials that they utilise in the course of their manufacturing processes. I do not believe that it is impossible. This is a very complex tax and it is to be administered in a very complex way. It is not beyond the wit of experts so to arrange the system as to take account of the principles that my hon. Friend and I propose.

1365
I intend to direct my comments to Amendment No. 8 which concerns itself not with pollution but with the re-utilisation of materials. Over the long history of taxation, it has been collected in a variety of ways for a variety of purposes. It has been used as a source of revenue. as a means of carrying out social changes and improvements, as a means of fiscal control over the redistribution of income, and so on. The list grows year by year of the uses to which the tax is put. SET is one example, of a negative kind, while REP, of a positive kind, is another.
In a highly complex economy, in which a highly sophisticated degree of control is necessary, the Government should operate a flexible taxation system because they have to do a multitude of things with the money they raise by way of tax. One of the grave doubts which my hon. Friend and I have about VAT is that, apart from the fact that it appears too regressive, it lacks the very flexibility which there has been in our historic and ever-changing taxation system. The system that we have had in the past has been largely quantitative. What the Government are proposing is that the tax system should become qualitative, and this is where we think VAT falls down. It is not capable of the kind of flexibility that is necessary to take account of the principles embodied in our Amendments.
The hon. Member for Worcestershire, South is happy and satisfied with the inflexibility of VAT and the fact that future Chancellors will not be able to vary it to produce the kind of effect which they may want to produce in specific areas.
Sir G. Nabarro: The hon. Gentleman must not put into my mouth words which I did not use. Only yesterday I received a letter from the Chancellor confirming that VAT is far from inflexible and that it may be varied by order. Because no new legislation will be involved, we shall be able, in Adjournment debates, to plead for variations in the rate of tax, the application of the tax or the scope of the tax. There will be the greatest possible flexibility and parliamentary control.
Mr. Carter: I think that the hon. Gentleman has substantiated the point that I was making. He referred just now
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to the rate of the tax. Earlier he referred to the scope of the tax. He wants it to cover all commodities, and presumably he agrees with his Front Bench that, for the sake of administrative ease and efficiency, there should be one rate. To that extent it will not be possible for a future Chancellor to single out an area of the economy and, by reducing the rate of VAT as it affects that area, to bring about any necessary changes there. Any changes in the future will have to be made horizontally, which means that they will cut across every section of economic activity. From that point of view it is an accountant's dream, easily administered. but from the Government's point of view the tax will not be capable of manipulation in the way in which in the past, for good reasons, taxes have been manipulated.
5.45 p.m.
The term "value" as it is applied to the tax is a grotesque distortion. It should be called a cost-added tax. Where the term "value" comes from I do not know. According to the Oxford English Dictionary, "value" means "worth". I cannot see anything intrinsically of worth in this tax. Nor can I see that by adding the tax to the product the Government will thereby enshrine the principle of worthiness. On the contrary, wages and profits seem to be the principal source for deciding the proportion of the tax that has to be paid at each stage of manufacture. I think that CAP, rather than VAT, would be a more appropriate name for the tax.
I come to the heart of the Amendment as it affects industry. I ask the Committee to remember that industry produces all our wealth from finite resources. These are known and calculable. At the same time, industry throughout the world has to cater for infinite needs which increase year by year. The net result so far has been pollution, contamination, waste and despoliation. This is the result of more than 200 years of industrial activity, and it is becoming more and more an area of public argument and controversy. More and more people are becoming concerned about the way in which our industrial system works and the pollution and contamination that it causes.
Because of the way in which industry operates there is a rapid rundown of raw

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materials. Similar problems were faced during Elizabethan times, when Statutes were introduced to control the rate at which trees were cut down and used for the building of ships, and so on. It looks as though in the not-too-distant future the life blood of modern industry—oil, coal, metals, minerals of all kinds and, once again, wood—will run into problems of supply.
Let me give the Committee a few examples of what I mean. Each ton of paper that we use involves the cutting down and processing of 17 trees, the use of 275 lbs of sulphur, 350 lbs of limestone, 60,000 gallons of water, 9,000 lbs of steam and 255 kilowatt hours of electricity. That is an enormous amount of industrial energy effort and material to utilise in the process and manufacture of one ton of paper. The worst aspect of the whole exercise is that at the end of the day three-quarters of the resultant material is wasted. Only one-quarter of all newspaper is re-cycled and reproduced in the form of newsprint and other items of paper manufacture.
It requires 10 kilowatt hours of electricity to produce 1 lb of aluminium, a metal which is growing in importance in industry. It is used in the making of cans, foil and packaging material. Quite the worst aspect of aluminium production is that more than 95 per cent. of the product is wasted after all that energy and effort has gone into its production.
Polythene is another material which is being used more and more; 193,000 tons of it is used annually. Absolutely none of that is reclaimed. It is creating massive problems for local authorities in terms of waste disposal. It is creating problems in villages such as Broadway, where it is littered. In many cases it is non-destructible. One of the themes lying behind my Amendment is the need to get industry not merely to reclaim material but to use materials which can be re-cycled.
In addition to those problems there is the overriding problem that all the materials to which I have referred are running out at a geometric rate. The need far outdistances the supply. I recognise that this is not the time for an exhaustive, detailed debate on the usage, supply and potential available of
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raw materials. It is unfortunate that we get so few opportunities in the House of Commons to debate matters which are of critical importance to our community and society. It is a tragedy that we do not spend more time looking at these matters in a rather more profound way.
Having said that, the introduction of value added tax offers us, if only briefly, an opportunity to examine the problems involved in the way in which our industrial society is developing and using at an alarming rate the raw materials which we have. We should be doing something of a disservice to the many people who are concerned about these matters if we let this opportunity pass.
Much of this concern is rational and it is right. We ought to be concerned about pollution. The House of Commons has been concerned about it in the past and the Statute Book bears testimony to that. However, much of the argument coming from the various environmental pollution, conservation and ecology lobbies is not right. One of my fears is that unless we look at their arguments rationally, unless we examine the philosophy of their arguments and produce answers to meet them—and legislation, if necessary—we could reach a situation where the very philosophy of the industrialised society is undermined.
This is apparent in the United States at present, where many people feel that industrialism has gone as far as it can and people want to see it curbed, curtailed and in many instances run down. But I do not believe this. Industrialism has given us our wealth and standard of living. But I want to see it controlled. In spite of the warnings and forebodings of the hon. Member for Worcestershire, South, value added tax offers us an opportunity of controlling industry and ensuring that we utilise the world's resources, which are finite and known, in the best possible way and of removing pollution, referred to by my hon. Friend the Member for West Lothian (Mr. Dalyell), and removing, even worse, the waste to which we have referred.
I know that my proposal is sizeable and that probably I should be unwise to expect too much from the Treasury Bench today. But there is an additional problem, with which probably the Minister could deal. That is the way in which

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re-cycling takes place at present in industry. I refer to returnable bottles, crates, canisters and various other items that are used in industry, apart from normal consumer returnable items, and the way in which VAT will affect these. This is a point on which we could expect complete assurance from the Minister today. I ask him to bear in mind that there has been an enormous growth in recent years of the principle of the nonreturnable disposable item. That is regrettable. Governments have a responsibility in this matter. I am sure that I speak for the majority of my hon. Friends when I say that we are opposed to it. Not only is it wasteful of raw materials but it spoils the countryside and places on local authorities the enormous burden of having to get rid of the resultant waste.
I have probably spoken for long enough, though of all subjects that we shall probably discuss during debates on the Bill, some of which will be the source of political controversy, this is a subject about which, I should have thought, there is not much between us and which we should have spent rather longer discussing. Perhaps that is not to be so, but I am sure that later Finance Bills will return to this subject and that it will become the source of legislation in the future through another Finance Bill.
In conclusion, and especially on the latter point, I ask the Minister to give some very firm assurances on VAT with regard to the broader points I have outlined. I should like a firm commitment from the Treasury Bench that the points I have mentioned will be borne in mind. Given that, and given sufficient assurances, my hon. Friend the Member for West Lothian and I would not press the Amendments to a vote.
Mr. James Hill: On behalf of the Government side of the Committee, I should like to say that my right hon. Friend has been extremely sympathetic towards the anti-pollution campaign. I recall that a very short time ago, in a statement which may have gone unnoticed, it was announced that the Customs and Excise would put only a 50 per cent. duty on liquefied petroleum gas, which, as most of the anti-pollutant lobby will know. is a form of fuel which has been proved conclusively to have
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a very low lead content. The Treasury Bench is not completely oblivious of the fight that we who believe that this is the time to think about pollution are trying to conduct.
The three Amendments are very acceptable but, as my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) has so ably pointed out, they are practically unworkable. Where the Treasury may be able to see its way clear in this matter is in the car industry. We need a very critical look at car exhaust systems and anti-pollutant devices that can be fitted to cars, and at Southampton University's research into a diesel engine which gives a very low amount of pollution. These are the sort of things which my right hon. Friend may be able, perhaps at a later date, to cover by a small reduction of the VAT.
But the main crunch of the matter is that we are not attacking this from the right end. I feel that the Treasury should be more flexible with research grants for materials such as degradeable plastics, and for new forms of engines and fuels; certainly for any form of equipment fitted to mechanised vehicles which will stop pollution.
I should very much like to back the Amendments but, though they are from the heart, they are unworkable.
[MrS. JOYCE BUTLER in the Chair]
6.0 p.m.
Mr. Eric Deakins: My hon. Friends the Members for West Lothian (Mr. Dalyell) and Birmingham, Northfield (Mr. Carter) are to be congratulated on these Amendments and on the way they were moved. Although this is only a short debate, it is important and significant because, apart from the debate on LPG last year, this is the first time in a Finance Bill debate that we have had the opportunity of taking a wider look at the problems of pollution, conservation and recycling.
Any case for exemption or lower rating in connection with the value added tax must be a case for special pleading. But there is special pleading and special pleading, and there are many worthy sectional interests which we shall be considering shortly. This, however, is a form of special pleading which concerns us all. Pollution is a matter that knows no

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politics and no frontiers. The future of our natural resources is also a matter which ought to occupy the attention of every hon. Member. The system of society in which we live works on the basis of economic incentives and market forces. Unless there is economic incentive or a free market force to help promote research and development, and eventually the sale of devices, products, goods and services which are pollutant free, or which are capable of being recycled, there will be a long delay in such products, goods and services coming on to the market.
Therefore we must consider using the tax system, as it is used in many other spheres of society, to serve what are considered to be desirable social ends and purposes. I should have thought this was a completely non-political matter and that the Government could give favourable consideration to some form of relief of value added tax on these products.
If they do not do so, the manufacturer who develops a product which is capable of being re-cycled will find that his research and development costs, plus the fact that he will have to market it against better-known products, will make the final price much higher than that of the ordinary product. Unless consumers are very pollution conscious, which they are not, such a product might not sell and might have to be withdrawn. Therefore, whether it is dealt with in the way suggested in the Amendments or in some other form, the idea that there should be central government economic incentives for the research and development and the sale of such products is one which the Committee should support.
I hope that even if the Amendments are not to be pressed, my hon. Friends will return to the subject at a later stage because this is far too important to be disposed of in a 30-minute debate.
Mr. Hugh Dykes: I hope the hon. Member for Birmingham, Northfield (Mr. Carter) will accept my sincere apologies for not having heard his initial remarks. I was able to glean from the part of his speech that I heard the principle and ideas behind the Amendment. I think, however, that it would be right, as my hon. Friend the Member for Southampton, Test (Mr.
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James Hill) said, to oppose the Amendments.
There are a number of related themes here which suggest that both in intellectual terms and in practical terms they are fraught with enormous difficulties. It would be a pity if the Committee were tempted by some of the obvious attractions of the Amendments to put a formal request to the Chancellor that the Government should take action along these lines.
In practical terms the value added tax has to be structurally as homogenous as perhaps the basic exemptions and exceptions allow. Therefore once particular exceptions are allowed, even on a matter which will contribute towards one of the most important problems in our society, namely pollution and the devices which contribute most towards it, there will always be a case for another kind of exception which would be equally worthy. Like other hon. Members, I applaud the principle but I do not agree with the practical idea. I therefore welcome what the hon. Members have said about not wishing to press their Amendments at this stage. There is another important reason—
Mr. Dalyell: Applauding is all very well but sometimes teeth are required and we must do more than applaud. What are the enormous difficulties to which the hon. Member refers?
Mr. Dykes: I do not want to detain the Committee for too long by going into too great detail on the enormous difficulties. Intellectually there are difficulties in considering the new VAT structure. In practical terms there is a whole range of structural difficulties. It would be tedious to go into them now.
Mr. Dalyell: The hon. Member does not know.
Mr. Dykes: There are better ways in which society can take action against pollution and the devices which contribute to it than through the VAT system.
Mr. Dalyell: Such as?
Mr. Dykes: There is the possibility, for example—and if the hon. Member is asking questions from a sedentary position I will give him a standing reply—of fiscal devices in company taxes and in

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expenditure by companies on anti-pollution equipment and this is the point at which the policy should be aimed.
I want to conclude by referring to Amendment No. 10 because it is important for the Committee, while sympathising with the principle behind it, none the less to oppose it for some of the reasons I have tried to explain. The Chancellor has already said that it may be possible, and I hope that it will, to consider the enormous attractions of a lower rate of tax on cars than the 10 per cent. proposed. To do this a homogenous basis, applicable to all vehicles and not only to chargeable classes, would be the best way of combining the effects or the intentions of the hon. Members in proposing the Amendment. In the past the industry has been far too much the main whipping boy of successive Chancellors and has had to bear the brunt of their fiscal and strategic intentions.
In view of what the Chancellor said about a possibility of considering a lower rate of car tax, albeit for different reasons from those behind the Amendments, I think that that would be the right way to tackle particular themes including pollution. This would be better than upsetting the VAT system and tinkering around with differential rates for different purposes. I oppose the Amendments but sympathise with their longer-term aims.
Mr. John Cronin: I will make few comments because I am sure the Committee wants to make progress. I support the Amendments which have been so ably moved by my hon. Friends the Members for West Lothian (Mr. Dalyell) and Birmingham, Northfield (Mr. Carter). I am prepared to accept the suggestion by the hon. Member for Harrow, East (Mr. Dykes) that there are other ways of dealing with the problem. The most obvious and the most sensible way is by direct legislation introduced by the Secretary of State for Trade and Industry or the Secretary of State for the Environment. But both these right hon. Gentlemen would recoil in horror at the idea of bringing forward such legislation because it would reduce profits. It would cause inconvenience to industrialists and it would do the very things which the Conservative Party is pledged to avoid in any circumstances. Therefore, although the Amendments are
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in some ways a second best, they should be taken very seriously by the Financial Secretary.
The whole question of pollution is one of the most detestable features of this century. The situation is becoming worse and worse. If it can be fought in any way, if anything can be done to mitigate the damage, it should be supported by the Committee. Therefore, the Financial Secretary should give the most serious attention to the Amendments and see what he can do to introduce changes in the Bill to achieve the end that they seek.
We heard from the hon. Member for Worcestershire, South (Sir G. Nabarro) that there might be some difficulty in assessing at what stage favourable treatment should be given to mechanisms that avoid pollution. He said the matter would cause endless disputation. I am surprised that that worries him, because I recollect that he was a source of endless disputation on purchase tax for years.
Sir G. Nabarro: The hon. Gentleman is quite wrong, and that statement is wholly unworthy of him. I am never the source of disputation or controversy. The fact is that the persons, the bureaucrats in the fastnesses of the Treasury, who devised the purchase tax orders, with their multiplicity of incongruities, anomalies, inconsequences and the remainder, were the source of the disputation, and I am glad to see their early demise and the replacement of purchase tax by value added tax.
Mr. Cronin: This side of the Committee at least can form its own conclusions about what the hon. Gentleman says.
Another argument against the Amendment made by the hon. Gentleman is that he wants to preserve the purity of the value added tax and not have it diluted in any way. But if we turn over the page of the Notice Paper we see that he has himself tabled Amendments calling for special treatment for whisky, for spirits—
Sir G. Nabarro: That is quite wrong. All I have pleaded there—and I shall do it in due course when we debate the Amendments—is for the reclassification of alcoholic beverages as food in order that they may escape value added tax If the hon. Gentleman, as a distinguished

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doctor, can argue with me that Guinness is not good for you and that Guinness is not food, he is not the man I think he is.
Mr. Cronin: I shall not be drawn into an argument about the medical desirability of spirits, wine and beer, because we are getting well away from the subject.
It is unfortunate and rather characteristic of what happens on the Government side of the Committee that while we are trying to introduce Amendments to minimise pollution, to recycle basic products, on the other side, in the person of the hon. Member for Worcestershire, South, there are Amendments simply to make life agreeable for people who want to pour whisky, wine and beer down their throats. This shows the difference between the high motives on this side and the rather coarse gluttons on the other side.
Sir G. Nabarro: The hon. Gentleman used the word "coarse". Is he suggesting that the British working man is coarse because he consumes beer, and that I, as his saviour in seeking to remove beer from value added tax, am coarse?
Mr. Cronin: There is no question of suggesting that the British working man is coarse. An hon. Member condemns, on the grounds that it impairs the purity of value added tax, an Amendment which has the purpose of decreasing pollution and re-cycling basic materials, and at the same time himself seeks to give special treatment to certain commodities, to the drinking of spiritous and intoxicating liquors. I am merely saying that it is a rather coarse motive compared with the elevated motives of my hon. Friends the Members for West Lothian and Birmingham, Northfield in their Amendments.
I shall carry this question no further, except to say that pollution is something we must fight by every possible means. The attractive suggestion has been made by my hon. Friend the Member for Walthamstow, West (Mr. Deakins), and I think by the hon. Member for Southampton, Test (Mr. James Hill), that much more money should be spent by the Treasury on research to cut down pollution and to improve the recycling of basic materials. I do not think it is enough. We should have a fiscal incentive, as is suggested in the Amendments. I hope the Financial Secretary will give
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them the most careful consideration and favourable treatment.
6.15 p.m.
Mr. Norman Buchan: I should like first to deal with the argument about the inviolability of the value added tax. First, it deals with only a Proportion—about 60 per cent, or less—of our domestic economy. Secondly, throughout our whole fiscal system we make the kind of exception sought.
The problem here is that the kind of sums needed to deal directly with pollution will be very difficult for Governments of either party to provide. We face an increasing cost of pollution. In industry in my area over 90 per cent. efficiency is achieved in sulphur dioxide extraction, but the trouble is that beyond that level the costs escalate enormously. We need to give an incentive to industries to achieve even higher efficiency in extraction. It is difficult for the Government to use direct social expenditure to do that in a politically tenable way. It will be helpful if we can give industry the kind of inducement suggested in the Amendments to close the gap between a reasonable efficiency and the necessary efficiency.
Pollution is a problem not only in Britain but throughout Europe. Hardly a yard of beach on the huge coastline of Italy is not now polluted. Even in our more remote areas of Scotland there is pollution from the failure to recycle industrial waste. I see it in my own area in the Clyde. It is an important human problem.
The cost of dealing with the problem is such that unless we can give inducements to industry to make it worth while to carry out its own research we shall find it very difficult to succeed. I welcome the suggestions, which are not new —we have been arguing about them for years, for vast governmental public expenditure on research into the problem. Clearly, if there can be allied to that an incentive to each industry, with its existing expertise, more results will be produced for the expenditure.
None of the arguments against what is suggested is valid, either on cost or on the purity of the value added tax. Throughout society we make exceptions, and one of the clearest ways of doing it

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is to use the imprimatur of Government together with the financial incentive to have the problem recognised for the dangerous problem that it is.
Mr. Higgins: We have had an interesting debate, and the Committee will be grateful to the hon. Member for West Lothian (Mr. Dalyell) for moving his Amendment as he did.
Despite a certain amount of controversy below the Gangway a few minutes ago, I do not think there is any difference in basic approach between the two sides of the Committee in expressing their concern about the whole problem of pollution.
I can well understand that the Amendment should be moved by the hon. Member for West Lothian, because I can recall when he was at King's College, Cambridge, Professor Pigou, who was the author of "The Economics of Welfare", I suppose the first standard work on the whole subject, sitting in the middle of King's College lawn, and the hon. Gentleman was then attending the same college. I am not sure whether he was actually taught by Professor Pigou. Things have moved on a lot since then. The whole question of pollution has understandably and rightly become a very fashionable subject.
I think that the basic premise is common to both sides of the Committee. Therefore, it is important that we should not get into the position on either side of the Committee of saying: "Here is a good idea concerned with pollution. We have not managed to work out how it will operate in practice, but if you cannot do it there is something wrong with your basic approach to the problem of pollution." I think it will be agreed that that would not be an attractive way of going about it.
Understandably the hon. Member for West Lothian in his opening remarks said that it may be that his Amendments were not perfectly drafted and might be defective. I confirm that that is the case. The power which is taken in subsection (3) about the regulator is an across the board power not suitable for operating in the way that he has suggested. I make no point about that other than to confirm what he said in his opening remarks.
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There are more fundamental difficulties about definition. The Amendments do not define clearly or precisely what items the hon. Gentleman has in mind concerning recycling or pollution. I will turn to that in a moment. That raises very serious problems. One cannot draft tax legislation in such an ambiguous and nebulous way.
The hon. Gentleman and other hon. Gentlemen who spoke subsequently put considerable stress on scientific appraisal of the degree of pollution, and so on. I think the hon. Member assumed too readily—I am surprised after the experience we had last year in the Finance Bill Committee—that there were unambiguous scientific answers to these problems which would give the Committee a clear idea about how much pollution is derived from one kind of fuel as against another. We learned clearly from our experience last year that there were big variations in the degree of pollution which might be caused by this or that fuel. That is a very real but practical problem which we must necessarily face.
Mr. Dalyell: This is not a Great George Street problem. There are huge resources available to the Government in the form of Government research establishments, both civil and military. People in these establishments have told us that this is a task which they see within their orbit and would like to tackle. They say that there are no problems.
Mr. Higgins: That assumes a degree of precision and scientific agreement on what the figures would be which the Committee would have to implement in tax legislation. That is a serious practical problem which the committee would be right not to overlook.
There are other more detailed complications which I should point out to the committee. For example, if we were to accept the kind of approach the hon. Gentleman has put forward in his Amendments, that would mean going from a single rate of value added tax to a multiple rate. Indeed, if we were to grade the various fuels and all the other recycling products by degrees of pollution we would have an infinite number of tax rates. Even if we went only from a single to a double rate and gave preferential treatment we would be back with all the problems we began by debating yesterday. First, we would have

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a great many other pleas for special treatment of one kind or another. If we had a multiple rate tax the number of civil servants required to administer the tax would be a great deal larger.
There is a certain amount of schizophrenia on the other side of the Committee on this issue and a number of other issues concerned with value added tax. If we had a multiple rate the administrative costs would increase quite substantially and we would create many of the anomalies which it is our objective in this tax to avoid. I am not saying that there are not other measures which one might take; I am saying that value added tax is not a suitable vehicle as far as this is concerned.
Mr. Dalyell: Will the hon. Gentleman define the schizophrenia?
Mr. Higgins: On the one hand, the Opposition put down Amendments saying they want multiple rates and, on the other, they say they want fewer civil servants.
Sir G. Nabarro: My hon. Friend is understating what I put to him, that if he indulged in the kind of discrimination which is called for in these Amendments it would be necessary for the scientists to categorise carefully not only the pollutionising effect of all proprietary fuel-burning appliances, but the pollutionising influences of the fuels themselves. As a Fellow of the Institute of Fuel, I say that that is an impossible task.
Mr. Higgins: My hon. Friend made the points so cogently in his original speech that it did not seem necessary for me to underline them.
If we are to look at the degree of pollution of this, that or the other item, we would have to carry out a great deal of research. Even if one had only two rates, it would create considerable problems of administration.
There are more specific points to which I should turn which the Committee would wish me to touch upon. They stem from misunderstanding of the way in which value added tax operates. I hope to be rather more forthcoming on this matter. The situation is not as bad as right hon. and hon. Gentlemen think it to be. The intention of the Amendments, as I understand it, is that, by
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applying a reduced rate, there will be a reduction of the effective tax burden on certain goods and services which will encourage their use. That is essentially the argument.
However, the position with value added tax is not so simple. If the goods or services to which the lower rate is applied were purchased by a private consumer the price would be less and there would be some incentive to buy that particular item, but most of the items the hon. Gentleman had in mind were those which would be recycled. The kind of provision which I have just mentioned would not apply generally to packaging—for example, plastic bottles, which I know many hon. Gentlemen feel are a problem, or tins or cardboard cartons—because the tax is levied on the rate of the goods which it contains in those circumstances.
Similarly, if one were thinking of goods or services for industrial use or re-use —I imagine the hon. Gentleman had in mind catalysts used in various chemical processes—the operation of the VAT credit mechanism would allow any tax charge to be deducted on any materials required by a taxable business. Similarly, any tax on scrap or waste materials would be deductible by the firm which undertook the reclamation. In these cases the reduced rate would neither encourage nor discourage the use of the particular item concerned.
It may be that hon. Gentlemen have in mind the question of returnable bottles. Under VAT tax is payable on the consideration for the goods, but where containers are returnable by the customer and the refund is given the tax is chargeable on the net price. To this extent, the normal workings of the credit mechanism would encourage the return of empties. If the hon. Gentleman will follow through the normal operations of the tax he will find that we have to some extent met the points he has in mind.
Mr. Dalyell: The trouble is that the normal workings of the credit mechanism do not meet the problem at the design stage. One of the reasons why we are putting forward these propositions is that it is at the design stage that encouragement and incentive are needed for industry to be anti-pollutant.
Mr. Higgins: If it is a particular item of capital equipment purchased by a firm, the operation of the tax mechanism will be such that the tax charged on that item will be deductible. The input tax will be deductible from the output tax charged to the person using it.
6.30 p.m.
A number of my hon. Friends referred to vehicles. This matter arises in Amendment No. 10. I do not believe that we can introduce a multiple rate of VAT without serious problems arising concerning both administration and the creation of anomalies. However, it is worth pointing out that while, with effect from 1st April, 1973, a 10 per cent. tax will be charged on certain passenger road vehicles propelled by an internal combustion engine—this comes under Clause 51, which is relevant to this point—the tax will not apply to electric cars. Last year, in the debates on LPG, this point was raised by several hon. Members. They will find when we come to Clause 51 that there is a distinction of that kind. Therefore, we are equally concerned about the problem of pollution. As to finding solutions to that problem. it is essential to look at solutions which are practicable and workable. We cannot generalise by saying that we must always do it in this or that way.
Mr. Carter: I should like to take up the hon. Gentleman on the point that we should not necessarily be bound one way or the other. Will he note that both Amendments Nos. 8 and 9 state:
"Without prejudice to the generality of the preceding subsection the Treasury may make an order"?
Does that not put the argument into an entirely different context? Is not the hon. Gentleman prepared to make any concession on the principle?
Mr. Higgins: It is not a question of making a concession on the principle. If by "the principle "the hon. Gentleman means concern about pollution, I assure him that that concern is shared by both sides of the Committee. If the question is whether the value added tax should be a multiple rate tax, then for the reasons which my right hon. Friend has set out, which I think have been generally welcomed in the country, it is not desirable. Therefore, I do not think that this is the right approach.
Mr. Buchan: There is one simple principle on which we want an answer. Does the hon. Gentleman accept the principle that we should use the taxation system to assist in this matter?
Mr. Higgins: One cannot generalise. If we were to say "Yes"—this is very much a "beating your wife" question—then, whenever there was a way of using the tax system, however impracticable, hon. Gentlemen would complain if we did not do it. We would not positively wish to rule out for all time this or that solution to the problem of pollution. We must look at the merits of individual cases.
The Amendment proposed by the hon. Member for West Lothian (Mr. Dalyell) is not practicable. Nor is value added tax a suitable vehicle for achieving non-fiscal social aims of the kind which he put forward. Largely for the reasons that the tax is a single rate tax and that we do not believe it is right that there should be multiple rates, we do not think that we could get into the position for which the hon. Gentleman was arguing of a great many rates graded by the degree of pollution. Therefore, without disagreeing with the basic approach, I must advise the Committee to resist the Amendment.
Mr. Sheldon: The Opposition consider the Financial Secretary's intervention most unhelpful. He said that he was not prepared to look at this proposal because of the number of problems it raises. Those of us who heard the arguments put forward by my hon. Friends the Members for Birmingham, Northfield (Mr. Carter), West Lothian (Mr. Dalyell) and Loughborough (Mr. Cronin) know that they were not suggesting that the Clause should be amended in precisely the way suggested in the Amendments. They were seeking co-operation from the lion. Gentleman in finding some solution to the problem of recycling. He has singularly failed to provide that cooperation. The need to carry out research is a matter for which the Government should share some responsibility.
What the hon. Gentleman said amounted to very little. He might have referred to the problem of companies, anxious to recycle goods, having to purchase those goods suitable for recycling after they have paid a value added tax

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and then, when those goods have been through the recycling process and are to be sold, having to pay a value added tax on top of the previous value added tax. There is an anomaly here which may not apply to many firms. We do not know the number because the hon. Gentleman was not prepared to help us. This fact should be borne in mind. We expected a better answer about the situation of such a company dealing in these processes.
Mr. Higgins: The hon. Gentleman is dealing in abstracts. Does he have in mind an item used in industry, such as a catalyst, which goes to the consumer and returns to the manufacturer?
Mr. Sheldon: Clearly, an item going to the consumer, or it would not have the value added tax paid twice.
This is a serious matter. The kind of disposable goods which are being made will increase in quantity. Therefore, it is not too early to have a discussion on them at this stage.
My hon. Friend the Member for Loughborough talked about direct legislation. This should also be considered. The hon. Gentleman cannot excuse himself from considering it by saying that it has nothing to do with him. Obviously, taxation plays some part in this matter. We consider that the answers given by the hon. Gentleman are unsatisfactory. Because of the unsatisfactory nature of his reply, we are forced to press the principle behind the Amendment to a Division.
Question put, That the Amendment be made:—
The Committee divided: Ayes 202, Noes 220.

Division No. 173.]

AYES

[6.36 p.m.

Abse, Leo

English, Michael

Kaufman, Gerald

Albu, Austen

Evans, Fred

Kelley, Richard

Allaun, Frank (Salford, E.)

Ewing, Harry

Kerr, Russell

Allen, Scholefield

Fernyhough, Rt. Hn. E.

Lambie, David

Archer, Peter (Rowley Regis)

Fisher, Mrs. Doris(B'ham.Ladywood)

Lamborn, Harry

Armstrong, Ernest

Fitch, Alan (Wigan)

Lamond, James

Atkinson, Norman

Fletcher, Ted (Darlington)

Latham, Arthur

Barnett, Joel (Heywood and Royton)

Foley, Maurice

Lawson, George

Benn, Rt. Hn. Anthony Wedgwood

Ford, Ben

Leadbitter, Ted

Bennett, James (Glasgow, Bridgeton)

Forrester, John

Lee, Rt. Hn. Frederick

Bidwell, Sydney

Fraser, John (Norwood)

Leonard, Dick

Blenkinsop. Arthur

Galpern, Sir Myer

Lever, Rt. Hn. Harold

Boardman, H. (Leigh)

Gilbert, Dr. John

Lewis, Arthur (W. Ham, N.)

Booth, Albert

Ginsburg, David (Dewsbury)

Lipton, Marcus

Boyden, James (Bishop Auckland)

Golding, John

Loughlin, Charles

Broughton, Sir Alfred

Gordon Walker, Rt. Hn. P. C.

Lyon, Alexander W. (York)

Brown, Bob (N'c'tle-upon-Tyne, W.)

Gourlay, Harry

McBride, Neil

Brown, Hugh D. (G'gow, Provan)

Grant, George (Morpeth)

McElhone, Frank

Brown, Ronald (Shoreditch & F'bury)

Grant, John D. (Islington, E.)

Mackie, John

Buchan, Norman

Griffiths Eddie (Brightside)

Mackintosh, John P.

Callaghan, Rt. Hn. James

Griffiths, Will (Exchange)

Maclennan, Robert

Campbell, I. (Dunbartonshire, W.)

Grimond, Rt. Hn. J.

McMillan, Tom (Glasgow, C.)

Carter, Ray {Birmingh'm, Northfield)

Hamilton, James (Bothwell)

Mahon, Simon (Bootle)

Castle, Rt. Hn. Barbara

Hamilton William (Fife, W.)

Marsden, F.

Clark, David (Colne Valley)

Hamling, William

Marshall, Dr. Edmund

Cocks, Michael (Bristol, S.)

Hannan, William (G'gow, Maryhill)

Mason, Rt. Hn. Roy

Cohen, Stanley

Hardy, Peter

Mayhew, Christopher

Concannon J. D.

Hardy, Joseph

Meacher, Michael

Corbet, Mrs. Freda

Harrison, Walter (Wakefield)

Mellish, Rt. Hn. Robert

Cox, Thomas (Wandsworth. C.)

Hattersley, Roy

Mendelson, John

Cronin, John

Healey, Rt. Hn. Denis

Mikardo, Ian

Crosland, Rt. Hn. Anthony

Heffer, Eric S.

Millan, Bruce

Cunningham, G. (Islington, S.W.)

Horam, John

Molloy, William

Cunningham, Dr. J. A. (Whitehaven)

Houghton, Rt. Hn. Douglas

Morgan, Elystan (Cardiganshire)

Dalyell, Tam

Huckfield, Leslie

Morris, Alfred (Wythenshawe)

Darling, Rt. Hn. George

Hughes, Robert (Aberdeen. N.)

Morris, Charles R. (Openshaw)

Davidson, Arthur

Hughes, Roy (Newport)

Murray, Ronald King

Davies, Ifor (Gower)

Hunter, Adam

Oakes, Gordon

Davis, Terry (Bromsgrove)

Janner, Greville

Ogden, Eric

Deakins, Eric

Jeger, Mrs. Lena

O'Halloran, Michael

Dell, Rt. Hn. Edmund

John, Brynmor

Oram, Bert

Dempsey, James

Johnson, James (K'ston-on-Hull, W.)

Orbach, Maurice

Doig, Peter

Johnston, Russell (Inverness)

Or me, Stanley

Douglas, Dick (Stirlingshire, E.)

Jones, Barry (Flint, E.)

Oswald, Thomas

Duffy, A. E. P.

Jones, Dan (Burnley)

Padley, Walter

Dunnett, Jack

Jones, Rt.Hn.Sir Elwyn(W.Ham, S.)

Palmer, Arthur

Eadie, Alex

Jones, Gwynoro (Carmarthen)

Parry, Robert (Liverpool, Exchange)

Edelman, Maurice

Judd, Frank

Edwards, William (Merioneth)

Pavitt, Laurie

Short, Mrs. Renee (W'hampton, N.E.)

Tuck, Raphael

Pendry, Tom

Silkln, Hn. S. C. (Dulwich)

Varley, Eric G.

Pentland, Norman

Sillars, James

Wainwright, Edwin

Prentice, Rt. Hn. Reg.

Silverman, Julius

Walden, Brian (B'm'ham, All Saints)

Prescott, John

Skinner, Dennis

Wallace, George

Price, J. T. (Westhoughton)

Small, William

Watklns, David

Price, William (Rugby)

Smith, John (Lanarkshire, N.)

White, James (Glasgow, Pollok)

Probert, Arthur

Spearing, Nigel

Whitehead, Phillip

Rankin, John

Spriggs, Leslie

Whitlock, William

Rhodes, Geoffrey

Stallard, A. W.

Willey, Rt. Hn. Frederick

Richard, Ivor

Steel, David

Williams, Alan (Swansea, W.)

Roberts, Albert (Normanton)

Stonehouse, Rt. Hn. John

Williams, Mrs. Shirley (Hitchin)

Robertson, John (Paisley)

Strang, Gavin

Williams, W. T. (Warrington)

Roderick, Caerwyn E.(Br'c'n&R'dnor)

Summerskill, Hn. Dr. Shirley

Wilson, Rt. Hn. Harold (Huyton)

Rodgers, William (Stockton-on-Tees)

Taverne, Dick

Wilson, William (Coventry, S.)

Rose, Paul B.

Thomas, Rt.Hn.George (Cardiff, W.)

Woof, Robert

Ross, Rt. Hn. William (Kilmarnock)

Thorpe, Rt. Hn. Jeremy

Sandelson, Neville

Tinn, James

TELLERS FOR THE AYES:

Sheldon, Robert (Ashton-under-Lyne)

Tomney, Frank

Mr. Donald Coleman and

Shore, Rt. Hn. Peter (Stepney)

Torney, Tom

Mr.James Wellbeloved.

Short, Rt.Hn.Edward(N'c'tle-u-Tyne)

NOES

Adley, Robert

Fowler, Norman

McNair-Wilson, Michael

Alison, Michael (Barkston Ash)

Fox, Marcus

McNair-Wilson, Patrick (New Forest)

Allason, James (Hemel Hempstead)

Fry, Peter

Maddan, Martin

Amery, Rt. Hn. Julian

Gardner, Edward

Madel, David

Atkins, Humphrey

Gibson-Watt, David

Marten, Neil

Awdry, Daniel

Gilmour, Sir John (File, E.)

Mather, Carol

Balniel, Lord

Godber, Rt. Hn. J. B.

Maude, Angus

Barber, Rt. Hn. Anthony

Goodhew, Victor

Mawby, Ray

Beamish, Col. Sir Tufton

Gorst, John

Maxwell-Hyslop, R. J.

Bennett, Dr. Reginald (Gosport)

Gower, Raymond

Meyer, Sir Anthony

Berry, Hn. Anthony

Grant, Anthony (Harrow, C.)

Mills, Peter (Torrington)

Biffen, John

Gray, Hamish

Mills, Stratton (Belfast, N.)

Biggs-Davison. John

Green, Alan

Miscampbell, Norman

Blaker, Peter

Griffiths, Eldon (Bury St. Edmunds)

Mitchell, Lt.-Col.C.(Aberdeenshire, W)

Boardman Tom (Leicester, S.W.)

Grylls, Michael

Moate, Roger

Boscawen, Robert

Gummer, J. Selwyn

Molyneaux, James

Bowden, Andrew

Hall, Miss Joan (Keighley)

Money, Ernie

Braine, Bernard

Hall-Davis, A. G. F.

Monks, Mrs. Connie

Brinton, Sir Tatton

Hamilton, Michael (Salisbury)

Monro, Hector

Brocklebank-Fowler, Christopher

Hannam, John (Exeter)

Montgomery, Fergus

Brown, Sir Edward (Bath)

Harrison, Brian (Maldon)

Mudd, David

Bruce-Gardyne, J.

Harrison, Col. Sir Harwood (Eye)

Nabarro, Sir Gerald

Bryan, Paul

Haselhurst, Alan

Neave, Airey

Bullus, Sir Eric

Havers, Michael

Nicholls, Sir Harmar

Burden, F. A.

Hawkins, Paul

Normanton, Tom

Butler, Adam (Bosworth)

Hayhoe, Barney

Nott, John

Campbell, Rt.Hn.G.(Moray&Nairn)

Heath, Rt. Hn. Edward

Onslow, Cranley

Carlisle, Mark

Hicks, Robert

Oppenheim, Mrs. Sally

Chapman, Sydney

Higgins, Terence L.

Osborn, John

Chichester-Clark, R.

Hiley, Joseph

Owen, Idris (Stockport, N.)

Churchill, W. S.

Hill, John E. B. (Norfolk, S.)

Page, John (Harrow, W.)

Clark, William (Surrey, E.)

Hill, James (Southampton, Test)

Parkinson, Cecil

Clarke, Kenneth (Rushcliffe)

Holland, Philip

Perclval, Ian

Clegg, Walter

Hordern, Peter

Pike, Miss Mervyn

Cockeram, Eric

Hornsby-Smith, Rt.Hn.Dame Patricia

Pink, R. Bonner

Cooke, Robert

Howell, Ralph (Norfolk, N.)

Pounder, Rafton

Cormack, Patrick

Hutchison, Michael Clark

Powell, Rt. Hn. J. Enoch

Costaln, A. P.

James, David

Price, David (Eastleigh)

Critchley, Julian

Jenkin, Patrick (Woodford)

Prior, Rt. Hn. J. M. L.

Crouch, David

Jessel, Toby

Proudfoot, Wilfred

d'Avigdor-Goldsmid, Maj.-Gen. James

Kellett-Bowman, Mrs. Elaine

Pym, Rt. Hn. Francis

Dean, Paul

Kershaw, Anthony

Ramsden, Rt. Hn. James

Deedes, Rt. Hn. W. F.

Kilfedder, James

Redmond, Robert

Digby, Simon Wingfield

Kimball, Marcus

Rees, Peter (Dover)

Dixon, Piers

King, Evelyn (Dorset, S.)

Rees-Davies, W. R.

Drayson, G. B.

King, Tom (Bridgwater)

Rhys Williams, Sir Brandon

du Cann, Rt. Hn. Edward

Kinsey, J. R.

Ridley, Hn. Nicholas

Dykes, Hugh

Kitson, Timothy

Ridsdale, Julian

Edwards, Nicholas (Pembroke)

Knight, Mrs. Jill

Rippon, Rt. Hn. Geoffrey

Elliott, R. W. (N'c'tle-upon-Tyne, N.)

Knox, David

Roberts, Wyn (Conway)

Eyre, Reginald

Lamont, Norman

Rodgers, Sir John (Sevenoaks)

Farr, John

Lane, David

Rossi, Hugh (Hornsey)

Fell, Anthony

Legge-Bourke, Sir Harry

Rost, Peter

Fenner, Mrs. Peggy

Le Marchant, Spencer

Russell, Sir Ronald

Fidler, Michael

Lloyd, Ian (P'tsm'th, Langstone)

St. John-Stevas, Norman

Fisher, Nigel (Surbiton)

Longden, Gilbert

Sharpies, Richard

Fletcher-Cooke, Charles

Loveridge, John

Shaw, Michael (Sc'b'gh & Whitby)

Fookes, Miss Janet

Luce, R. N.

Sinclair, Sir George

Fortescue, Tim

McLaren, Martin

Skeet, T. H. H.

Foster, Sir John

McMaster, Stanley

Shelton, William (Clapham)

Speed, Keith

Temple, John M.

Warren, Kenneth

Spence, John

Thomas, John Stradling (Monmouth)

Weatherill, Bernard

Sproat, Iain

Thomas, Rt. Hn. Peter (Hendon, S.)

White, Roger (Gravesend)

Stanbrook, Ivor

Thompson, Sir Richard (Croydon, S.)

Wiggin, Jerry

Stewart-Smith, Geoffrey (Belper)

Trew, Peter

Wilkinson, John

Stodart, Anthony (Edinburgh, W.)

Tugendhat, Christopher

Winterton, Nicholas

Stoddart-Scott, Col. Sir M.

Turton, Rt. Hn. Sir Robin

Wolrige-Gordon, Patrick

Stokes, John

Vaughan, Dr. Gerard

Wood, Rt. Hn. Richard

Stuttaford, Dr. Tom

Vickers, Dame Joan

Woodhouse, Hn. Christopher

Sutcliffe, John

Waddington, David

Worsley, Marcus

Tapsell, Peter

Walder, David (Clitheroe)

Taylor, Sir Charles (Eastbourne)

Walker, Rt. Hn. Peter (Worcester)

TELLERS FOR THE NOES:

Taylor, Edward M.(G'gow.Cathcart)

Walker-Smith, Rt. Hn Sir Derek

Mr, Michael Jopling and

Taylor, Frank (Moss Side)

Walters, Dennis

Mr. Oscar Murton.

Tebbit, Norman

Ward, Dame Irene

Question accordingly negatived.
Clause 9 ordered to stand part of the Bill.

Clause 12
ZERO-RATING
6.45 p.m.
Mr. Joel Barnett: I beg to move Amendment No. 81, in page 10, line 9, at end insert:
'but no such variation shall have the result of charging a supply for the time being zero-rated'.
We come now, in effect, to the major part of the Bill, since Clause 12 paves the way for Schedule 4 and zero-rating. I should have expected right hon. and hon. Members on both sides to feel great concern about the immense powers which it is proposed to give the Government and the Customs and Excise.
Although some of the powers given to the Customs and Excise already exist in respect of purchase tax, they apply in that case to only about 68,000 registered firms and individuals, whereas, the powers which it is now proposed to give will apply to about 1½million to 2 million firms and individuals.
Within the wide limits laid down by the Bill, the Customs and Excise will be allowed, by regulation or by order—in many cases, it will be just by regulation —to confiscate, to waive payment of the tax, to increase the amount of the tax, to adjust the time of payment, to take powers of entry, power to remove books, power to fix the percentage of sales which should be liable to the output tax, and power to disallow certain inputs. Moreover, we see such words as, "The Commissioners may impose such conditions as they think fit".
I should have expected all hon. Members on both sides to be reluctant to
1388
accord powers of that description to the Customs and Excise, but, much worse, by subsection (4) the Government may by order bring into value added tax all or any of the items which are now zero-rated.
It will be said, no doubt—the Chancellor said as much earlier—that there is already power to bring into purchase tax goods not at present liable to purchase tax. But, apart from the fact that that concedes the case made yesterday by my right hon. Friend the Member for Leeds, East (Mr. Healey)—that one can broaden purchase tax itself very considerably without having anything like so complicated a tax as VAT—it was always understood under the purchase tax Acts that, while one had the power to bring into purchase tax goods which were not and are not subject to purchase tax, it would relate to one or two items and not to whole industries which under this Bill are to he taxable supplies although zero-rated. That is a totally different situation.
In Clause 12 the Chancellor is taking enormous power to increase by a single order the value added tax by a tremendous amount. As my hon. Friend the Member for Dudley (Dr. Gilbert) has said, from the replies to some questions which I put yesterday one gets an idea of the amount of extra revenue which could be raised by a simple order.
Mr. Higgins: I am seeking to follow the hon. Gentleman's argument. Why is it a totally different situation where a large amount of revenue can be raised by order simply by bringing into the scope of the tax items which were not previously within it. whether it be purchase tax or VAT?
Mr. Barnett: The hon. Gentleman should appreciate that under the power of purchase tax it was not contemplated that any Government would bring into

1389
the scope of purchase tax a whole industry like, say, the food industry. But under this Bill the Government could introduce by order value added tax on food amounting to some £675 million in terms of revenue. When Governments had the ability to use an order to increase the scope of purchase tax, it was never understood that it could be used, or was ever likely to be used, to bring food into the scope of purchase tax. I appreciate why the hon. Gentleman is so busily intervening, because the whole burden of his reply apparently is that Governments had the power to bring food into purchase tax. If it is his whole case that previously any Government had that power and that, therefore, the present Government must have the power to bring food into VAT, it is not a case I would accept.
Mr. Higgins: The hon. Gentleman is understating the point. It was possible under previous powers to bring food, for example, into purchase tax at the top rate, which under the Labour Government was 55 per cent.. compared with the VAT rating of 10 per cent.
Mr. Barnett: I am prepared to leave the hon. Gentleman to make that sort of absurd case in defence against the Amendment.
Mr, J. T. Price: Will my hon. Friend allow me to intervene? I will not say I can help him, because he is doing pretty well on his own. Perhaps I can help the poor struggler opposite on this matter. Will the Financial Secretary give an undertaking that it is not the intention of the Government to apply VAT to food at any rate of tax, whether it be 55 per cent. or any other figure? That is the sort of undertaking I want. Let us not piddle about with academic arguments about what happened in the "pots and pans "Budget and with other things which are minor matters compared with this Bill.
Mr. Barnett: I am obliged to my hon. Friend the Member for Westhoughton (Mr. J. T. Price). I am coming to that point. It is interesting that the Financial Secretary should be saying that previous Governments could have put purchase tax at 55 per cent. by order on food. Yesterday the Chancellor of the Exchequer—this is why we are concerned—would not give the undertaking which my hon.
1390
Friend the Member for Westhoughton is asking for. I remind the Committee that my right hon. Friend the Member for Leeds, East asked for precisely the same assurance. The Chancellor replied:
"The right hon. Gentleman knows perfectly well that I cannot, regarding any future decision concerning any form of taaxtion, give an absolute assurance."
That is true—he could not. But he went further, following another intervention by my right hon. Friend, and said:
"I am not prepared to do that."
That was in answer to the direct question of whether he would give an assurance
"…will not agree in discussions which take place when we are in the Community, to the imposition of a VAT rating on food."
The Chancellor was not even prepared to go as far as to say that he would fight to retain food as a zero-rated item. So, when the Financial Secretary now tells us that we had power to introduce purchase tax at 55 per cent. on food, he will not be surprised if we take that a little harshly.
The Chancellor yesterday was not even prepared to concede in advance of harmonisation negotiations that he would fight any move to impose VAT on food. Nor would he say that he would veto such an attempt. Apparently, the Government's only answer to the Amendment is that the power was there under purchase tax to tax food. Certainly, such a power was there, but it was a power which no one in this House or elsewhere expected to be used or understood as being a power to bring food within purchase tax. If that is the hon. Gentleman's only answer, it is not satisfactory.
Mr. J. T. Price: I want to be satisfied on this point before I leave the Chamber. [Interruption.] If I am sufficiently provoked, I will make a speech later on, but I do not want to be provoked at the moment. I want to be assured at this stage that another important aspect of this tax is not to go undebated. Whatever the hon. Gentleman may say about the position of food under purchase tax, there was no power to levy purchase tax on entertainments, field sports and so on. They were dealt with under an Act which fixed the entertainments duty and which was repealed by the House many years ago. But now

1391
the Government are taking power to levy VAT on entertainment, field sports and everything else which has been free of tax for many years. It is a regressive. reactionary and idiotic step to take.
Mr. Barnett: My hon. Friend the Member for Westhoughton is right. But I saw you, Mrs. Butler, looking at him closely and I would not wish to follow him too far in that direction. I am sure that he will have an opportunity on another Amendment.
The Chancellor said yesterday:
"I believe everybody would agree that it would be wholly irresponsible and intolerable to give an assurance about future taxation". —[OFFICIAL REPORT, 9th May, 1972; Vol. 836, c. 1154.]
The right hon. Gentleman was talking in particular about a tax on food. In my view, it was totally irresponsible of him not to give an assurance that he would at least fight for food to be zero-rated. That is why we are suspicious. That is why we have the feeling that there is a clear intention—otherwise, why should he not give an assurance?—on the part of the Chancellor to agree to the taxation of food and many of the items now zero-rated. If that is a controversial statement I would say that it is not controversial to suggest that any hon. Member would be reluctant to give any Government the power to introduce by order, in an hour and a half at the end of the day, a consumption tax which would increase prices by over £1,000 million.
Mr. Bruce-Gardyne: What sort of limitations were there under the Purchase Tax Act, 1963, on the ability of the then Government to increase the yield from that tax by any percentage they chose by order at the end of the day?
Mr. Barnett: The hon. Gentleman must have just walked in. He obviously missed the exchange we had earlier. Perhaps he will forgive me if I do not retrace those footsteps.
Mr. J. T. Price: Touché!
7.0 p.m.
Mr. Barnett: The considerable difference here is that all the zero-rated items are taxable supplies under VAT. They are zero-rated, but, as the hon. Gentleman will know having read the
1392
Bill line by line and page by page, they are taxable supplies. The Chancellor can by order, in one and a half hours in the House, increase revenue by over £1,000 million. This is something that no one can take lightly. The Government should accept the Amendment; otherwise we are committing ourselves to a fundamental change in the basis of our taxation. Despite the fact that I know which argument the Financial Secretary is to deploy, I hope that when he hears himself deploying it he will realise how weak it is and accept this reasonable Amendment.
[Sir ROBERT GRANT-FERRIS in the Chair]
Mr. Higgins: I am rather surprised to find that the hon. Member for Heywood and Royton (Mr. Joel Barnett) does not have the support of his back benches. I had understood that there were to be vast numbers of attacks on the Bill. This must reflect the feeling of inadequacy over the hon. Gentleman's case.
As will be apparent to the Committee as the result of our exchanges earlier, it is true that substantial powers are taken in this Clause, similar to those already existing in purchase tax legislation. The powers to amend Schedule 4 by order do not create a precedent for indirect taxation. There are considerable powers in Section 2 of the Purchase Tax Act, 1963, to amend the scope and coverage of purchase tax by order. These include powers to bring untaxed goods into tax at one of the existing rates and to move any class of goods from a lower rate to an existing higher rate, and, in the other direction, to exempt or remove goods from the scope of purchase tax altogether or to reduce the rate at which any particular class of goods is charged.
I emphasise the point I sought to make in my intervention, that these considerable powers have been given to successive Chancellors and to the best of my knowledge have not been seriously challenged at any stage. If it is a question of what powers are being taken it is worth pointing out that at present the rate can be moved to the highest existing rate. As the Chancellor pointed out, the previous Government raised the level of indirect taxation time and again and increased the highest rate. By the time the last

1393
Administration left office in June, 1970, the rate had reached 55 per cent.
It would be possible under existing powers by order to bring any item into purchase tax which did not bear it or to increase any item from a lower rate to the highest possible rate. This is a very great power, and it has not been significantly challenged over the years.
Mr. J. T. Price: The gravamen of our case is not that there has been any variation in the principle of applying purchase tax as against VAT. What we are saying is that, whereas under the old regulations the fiscal basis for purchase tax was laid on a certain number of items, this Bill introduces a new method of taxation not available to any previous Government. I have already referred to entertainment duty. The purchase tax argument could not be used there. Now every citizen is being called upon to pay a 10 per cent. tax on every theatre and cinema ticket, every ticket bought at the turnstile for a football or cricket match. This affects all organised sport and was not there before. I know that you are getting restive, Sir Robert, about my interventions, but this is directly relevant.
The Chairman: I have always noticed that the hon. Gentleman's interventions are most effective when they are short.
Mr. Higgins: I am not sure whether, if I were to reply to the hon. Gentleman's points in detail, I would be in order. It is important to realise that we are broadening the indirect tax base. That is the whole purpose of this legislation. We have done so in a clear way and we have excluded a large number of items by zero-rating. That is because we believe it to be right to do so, but this is not precisely what the Amendment is about.
I return to the point that, while it is true that it would be possible by order to bring new items into tax at the standard rate of 10 per cent., it is possible under earlier legislation affecting purchase tax to bring such items as food into tax at the top rate, which under the previous Government was 55 per cent. on wholesale value as against a VAT rate of 10 per cent.
Mr. Healey: What the hon. Gentleman says is true. The cause of our concern is that by joining the Community we are
1394
in some way committed to harmonising the rates and coverage with the rates and coverage of other Community members which have a value added tax. The proposals before the Committee involve a narrower coverage and a lower rate than any of the Community value added taxes, and for this reason any form of harmonisation, unless the others conform in every respect to the current British proposals, will involve an increase in coverage and in rates. It is because these powers are clearly designed to enable the Government to raise the rate and increase the coverage that we are so deeply concerned that the Government should take these powers by order.
Mr. Higgins: I understand the point. The right hon. Gentleman is perhaps too closely interpreting the word "harmonisation" to mean "averaging", which may not necessarily be accurate. We went over this ground yesterday during the exchanges between the right hon. Gentleman and my right hon. Friend the Chancellor. It is a good debating point to say "Will the right hon. Gentleman give an assurance that never, never, never in any circumstances will he do this or that". Successive Chancellors have not been prepared to give assurances of that kind.
Mr. Healey: I am sure that the Financial Secretary does not wish to misrepresent me. He will recall that the point which concerned us most about the Chancellor's reply was that he was asked to give a very reasonable assurance—namely, that in the negotiations in Brussels he would fight against the imposition of a positive VAT rate on food—and he flatly refused to give it.
Mr. Higgins: I do not wish to go over the ground which the right hon. Gentleman and my right hon. Friend traversed yesterday. It is all very well to say that it was a very reasonable assurance for which my right hon. Friend was asked, but it was expressed in very dramatic terms—that never, never, never would such a thing be done.
I turn to a point which is extremely relevant to the Amendment. The reason for the power which existed under the purchase tax regulations was that it is found from time to time that anomalies exist in the scope of purchase tax. We have had a great many purchase tax

1395
orders since 1961 and even before that. Since returning to office I have moved various purchase tax orders concerned with, for example, frozen yogurt and waste disposal units. Changing technology or the desire of manufacturers for a reduction in the tax burden often creates situations which are grossly inequitable and we find as a result of representations made to us that the definition of a tax is not sufficiently accurate. While it may be trivial in revenue terms and perhaps not of major national importance, it is of vital importance to the industry or firm concerned. These powers have historically been used for this purpose.
It is likely that anomalies will arise with the introduction of a new tax such as VAT. They are not likely to arise on anything like the same scale as with purchase tax, partly because we now have a single rate tax, at any rate for the moment, rather than a multiple rate tax, despite all the blandishments of hon. Members opposite, who seem, unlike the country as a whole, to be in favour of a multiple rate tax.
Mr. Joel Barnett: Can the hon. Gentleman say when anybody on the Opposition Front Bench advocated a multiple rate tax?
Mr. Higgins: The hon. Gentleman voted for the last Amendment, which clearly involved a multiple rate tax.
Mr. BarnettNo.
Mr. Higgins: Then I am not sure what the hon. Gentleman was voting for.
Mr. Barnett: Perhaps the hon. Gentleman will read out the last Amendment.
Mr. Higgins: I should be in grave trouble if I were to recapitulate on the last debate. It was absolutely clear that the purpose of the previous Amendment was to ensure that a lower rate of tax was charged for social reasons on particular items. How that could be done without having more than a single rate, I am completely unable to understand. The Opposition Front Bench appeared to support the Amendment of the hon. Member for West Lothian, which clearly involved a multiple rate tax. Perhaps the hon. Member for Heywood and Roytion will confirm that the Opposition Front Bench is totally opposed to a
1396
multiple rate value added tax and is in favour of a single rate value added tax.
Mr. Barnett: Yes, we are.
7.15 p.m.
Mr. Higgins: That is a fascinating intervention. It will help to clarify the situation on future Amendments on multiple rates.
Mr. Barnett: The hon. Gentleman is trying to have it both ways. He has a multiple rate now. He has a zero rate and a 10 per cent. rate. The purpose of any Amendments we move will be to increase the zero-rating, not to add to the number of rates.
Mr. Higgins: That is not what the last Amendment did.
Mr. Barnett: It was not an official Opposition Amendment.
Mr. Higgins: Perhaps it was not, but the hon. Gentleman voted for it.
The Chairman: Order. We must let sleeping dogs lie. The last Amendment is the last Amendment.
Mr. Dalyell: As the person who put forward the last Amendment—
The Chairman: Order. We must not discuss the last Amendment, interesting as these reminiscences are. We must discuss the present Amendment.
Mr. Higgins: I agree that it would be wrong to reminisce about the debate we have just had, in which the Committee clearly favoured the Government's view. Nevertheless, there is an important point at issue about the powers we are seeking to take here. We do not believe that we shall have as much need of these powers as was the case with purchase tax because having a single positive rate of tax, which we are in favour of but which the hon. Gentleman apparently is not—
Mr. Barnettrose—
Mr. Higgins: Am I to understand that the hon. Gentleman is in favour of more than one positive rate of tax?
Mr. Barnett: No, we are not. But the hon. Gentleman must not take it from a particular vote on a particular Amendment that a particular policy

1397
should therefore be attached to the Opposition. My hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) made it absolutely clear that we voted for the last Amendment because of the hon. Gentleman's totally inadequate reply. He was not even prepared to make a sympathetic noise in favour of doing something about pollution.
Mr. Higgins: This is a rather intriguing proposition. The hon. Gentleman is not in favour of more than one positive rate of tax, but he voted for an Amendment tabled by the hon. Member for West Lothian, which necessarily involved more than one positive rate of tax, on the ground that the Government's reply was not good enough. I do not wish to pursue the point further.
Mr. Barnett: It is a silly debating point.
Mr. Higgins: It is not. We have had an important assurance from the Opposition Front Bench about the number of positive rates of tax that they are in favour of, and we shall be able to return later to the matter, bearing in mind the assurance which the hon. Gentleman has so readily given.
I turn to the mainstream of my argument. Because we have, and will, I hope, retain, a single positive rate of value added tax, there will be fewer anomalies than there were with purchase tax, which has multiple rates. There will probably be fewer anomalies between items which are zero-rated and items which are positively-rated because the broad blocks of expenditure which my right lion. Friend has relieved by zero-rating them are fairly clearly defined. But there will inevitably still be some borderline problems, as I pointed out during the debate on the Budget. It is, therefore, right and proper that we should have the powers for which we ask in the Clause in order to facilitate the kind of changes which it might be necessary to make in the light of changes in technology or in the light of changing marketing techniques and so on. That being so, I think it is right that we should have this power.
As I say, there is ample precedent for it in the purchase tax legislation. An affirmative Resolution of the House is required under Clause 43(4)(c) within 28
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days to confirm an order amending Schedule 4 or Schedule 5
"to abolish the zero-rating of a supply or to abolish the exemption of a supply without zero-rating it."
Again, this has the fullest precedents in Section 39(3) of the Purchase Act, 1963.
Mr. Bruce-Gardyne: I would like to clear up one point about which there is to some extent doubt in my mind. Are we to take it that the powers under this Clause combined with the Clause to which my hon. Friend has referred mean that, just as, with the old Purchase Tax Acts, in effect the only purpose of the regulator was to enable rates of purchase tax to be manipulated when the House was not sitting—during a recess—so under these provisions as well the only need for the regulator would be because, during periods when the House is not sitting. we should adjust tax rates for the purposes of economic management?
Mr. Higgins: With respect to my hon. Friend, I think it would be out of order if I were to pursue this point. We are not here concerned with the regulator. We are concerned with the power to bring into tax items which are not taxed.
I found the distinction which the hon. Member for Heywood and Royton sought to draw between the purchase tax powers and the powers in the Schedule that we are debating by saying that purchase tax was simply imposed by order but under value added tax items already in tax are merely zero-rated to be a distinction which was purely metaphysical in this context, in as much as either way the tax could be imposed by order. The new power is no greater in the Clause that we are now debating.
That being so, it is true, as he said, that the previous purchase tax power, while it existed, was used by successive Chancellors to make changes of this kind—as 1 have said, to remove anomalies which reflect changes in technology or changes in marketing techniques or whatever. It was also the case that previous Chancellors, although they had this power, if they increased taxes—one major occasion was the increase in purchase tax coverage which the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) introduced in the 1969 Budget—the increases were made in an actual Budget. I think it is likely that Chancellors would continue to follow that

1399
practice, but, none the less, I believe the powers are necessary, particularly in the period when the tax is coming into operation for the first time and when we may find that there are various problems of the kind I have sought to outline to the Committee.
Mr. Joel Barnett: Could the hon. Gentleman give us one reason why it would not be possible to use the Clause with the acceptance of this Amendment to deal with the various anomalies which might arise—even if he accepted this Amendment?
Mr. Higgins: Yes, certainly. It is because there may turn out to be anomalies between certain items which are zero-rated and certain items which are positively-rated and it might be necessary, as in the past, to bring them into tax. Governments of both political complexions have done this in the past, and it may be the case. As I say, we must operate in the light of experience, but this is something which has happened under purchase tax, and we are following that precedent, and I would hope that the Committee would agree to the powers.
Mr. Dalyell: Why is the Treasury so certain that there are going to be—could I have the Financial Secretary's attention, because I shall be very brief?—fewer anomalies? One thing which occurs is the problem of mixed businesses, with goods and services of which some are zero-rated and some exempt and some subject to tax. I am quite willing to be convinced by the Financial Secretary if he would produce any evidence for his assertion that there will be fewer anomalies. I should like to hear him work that one out.
Mr. Tom King: I have some hesitation in intervening in the august circles in this Committee. I had some difficulty even in understanding the purpose of the Amendment that we are debating, but I went on to feel much more at home by realising that the hon. Member for Heywood and Royton (Mr. Joel Barnett) did not understand the previous Amendment on which he voted.
Mr. Joel Barnett: The hon. Member might have understood it if he had been here.
Mr. King: I was here, and I understood it, and 1 am wholly in support of
1400
the comments which my hon. Friend the Financial Secretary made on that matter.
On this Amendment, however, I think it is surely ludicrous to try to establish a fixed rule at this stage, because, as my hon. Friend has said, there will be changes. Anybody who has any experience of the food industry knows that there are new recipes and new products. and that there is a large number of them, and we know how they are marketed every year and how in that way the edges are blurred of each definition which is drawn.
There is one point in particular which I think would appeal to the hon. Member for West Lothian (Mr. Dalyell). This is particularly relevant to his previous Amendment. Consider the number of foods which are grossly over-packaged and the problems which packaging causes through pollution of the environment. Bearing in mind the sort of aspects the hon. Member was discussing, a future Chancellor might determine over-packaging in the food industry something he might wish to move against. That is only one example, perhaps a little extreme, but I think the hon. Member knows the point I am making, and it could be a measure which might be considered appropriate in certain conditions. So to attempt to draw this rigid line at this stage seems to me utterly ludicrous.
Similarly, some of my hon. Friends hope that it will be possible to extend the range of zero-rated items, and it seems to me inevitable that in certain other areas one must reserve power also to contract the range of zero-rated items, and to lose flexibility at this stage seems to me quite unreasonable, and I certainly support the position on this matter of my hon. Friend the Financial Secretary.
Mr. T. H. H. Skeet: All Members opposite can do is laugh like hyenas.
Mr. Piers Dixon: I should like to address myself specifically to the Common Market implications, and perhaps some of the remarks I shall make may be of some assistance to the hon. Member for Heywood and Royton (Mr. Joel Barnett) and the right hon. Member for Leeds, East (Mr. Healey). The Common Market has been brought into this debate. We ought to be perfectly

1401
clear what the Common Market implications are in relation both to zero-rating and to exemption, and in relation both to the coverage and to the rate of the tax.
First of all, there is the obligation which we as a nation will be under when we enter the Common Market to contribute to the European budget. We shall be bound fairly strictly by the rules. As I understand it, Her Majesty's Ministers will not be able to deviate from them very much. We shall be bound by the coverage of value added tax, and we shall eventually have to confrom to the rate of the tax, which has to be the same in every European country; but that does not immediately mean that if the European coverage of the tax includes certain items one has to charge tax on all the items which are covered.
When we go into the Common Market we shall not be allowed to say that certain commodities and services are exempted, but we shall be able to have as many zero-rated commodities as we like. The significance of this—it will be of some advantage to the right hon. Member for Leeds, East to know this—is that, although we shall be compelled to have absolutely the same coverage throughout the countries of the Common Market, we shall not have to impose value added tax on any commodity which this Parliament does not wish to bring within the range of VAT. At the end of every year the Treasury will have to calculate what 1 per cent. would have been on the full range of coverage decided by the other European countries.
[Mr. HAROLD GURDEN in the Chair]
7.30 p.m.
The second aspect of our eventual entry into the Common Market which lies many years ahead and has nothing to do with the immediate demands of the European budget is harmonisation. I am talking about not what happens in January, 1973, but what may happen in January, 1978, or January, 1983. Long before we reach that point—
Mr. Healey: I am following the hon. Gentleman with great care and attention, but he will be well aware that the Commission has already proposed 1975 as the year for harmonisation and has already stated the two bands for the
1402
two rates which it would propose. The hon. Gentleman is being far too optimistic if he thinks that we have another eight years before us. My impression is that the discussions on harmonisation will begin next year.
Mr. Dixon: There is every indication that possibly by 1975, and certainly by 1978, the whole question of harmonisation will not even be decided by the Council of Ministers, let alone by the Commission, and that it will to a large extent be decided by the European Parliament. There are already discussions going on in Brussels and Strasbourg as to the possibility of the European Parliament having a large measure of control over the desires and recommendations of the Commission and the Council of Ministers. I thought that this might be of some comfort to the right hon. Member for Leeds, East. He may think that in the middle and late 1970s the Labour Party will form the Government which will have the right of veto at Brussels. Even if this does not happen, there will presumably be a large representation from the Labour Party in the European Parliament who, together with their friends and allies in other socialist parties in Europe, will be fully capable of ensuring that the rate of value added tax throughout the Community is at a lower level.
Mr. Healey: Is the hon. Gentleman aware that what he has just said would scandalise his right hon. and learned Friend the Chancellor of the Duchy and his right hon. Friend the Prime Minister, who consistently in the debates on the European Communities Bill have insisted that the decisions on the major matter of taxation will lie with national governments responsible to national parliaments? His suggestion may represent the intentions of many of the Continental Governments, and certainly the Commission, but it is totally contrary to assurances which have repeatedly been given to the House of Commons over the last six months by the Chancellor of the Duchy of Lancaster.
Mr. Dixon: I take the right hon. Gentleman's point but, as he may have noticed, in many respects the words I express do not precisely conform to the

1403
words of my right hon. Friends on the Front Bench.
Mr. Healey: The hon. Gentleman is a great deal more frank with the Committee than some of his right hon. Friends.
Mr. Dixon: As the right hon. Gentleman has said, one has to be realistic about these matters. He as a parliamentarian will know that the institutitons of the Community are developing in such a way as to make it extremely likely that the European Parliament will initially have power—
The Temporary Chairman: Order. I hope the hon. Gentleman will relate what he is saying to the Amendment.
Mr. Dixon: It was my misfortune that you were not in the Chair when I began my speech, Mr. Gurden. The relevance of what I have been saying is that if taxes are to be harmonised throughout the Common Market that decision will rest not entirely or not even primarily with the Council of Ministers, but that the right hon. Gentleman, with his parliamentary friends and allies in the European Parliament, and we, with our parliamentary friends and allies in the European Parliament, will be able to decide the rate and coverage of value added tax.
Mr. Peter Trew: In the Budget debate the right hon. Gentleman the Leader of the Opposition committed his party to an all-out attack on value added tax. The empty benches opposite are an eloquent testimony to the extent to which that attack has failed to materialise.
Mr. Healey: Does not the hon. Gentleman agree that the presence of several hon. Members on the Government benches is due largely to the fact that the Whips brought them in?
Mr. Trewrose—
The Temporary Chairman: I should not like the hon. Gentleman to follow that point; it is out of order.
Mr. Trew: I will follow your ruling, Mr. Gurden. One reason why the attack has failed to materialise is that, as a result of the long consultation period, my right hon. Friend has managed to eliminate many of the possible objections to the VAT. Consequently, the Labour
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Party is less and less concentrating on the proposals as they stand and more and more expressing its fears as to what might happen in the future. The Amendment is very much on those lines.
My hon. Friend the Financial Secretary has put forward the case for having the power to alter the provisions of Schedule 4 by order—because there are anomalies, because there are new technologies. The Opposition have suggested that this provision might be used later one night after the business of the House has been completed suddenly to bring all food into the VAT category. That is a ludicrous suggestion. Hon. Members on both sides of the Committee feel strongly that food should be one of the relieved items. It has been the subject of many pledges by the Conservative Party.
My right hon. Friend yesterday made it clear that in matters concerning the EEC and harmonisation we had the power of veto on any matter that affects our national interest. Surely no item could be said to affect our national interest more than the taxing of food? It is ludicrous to suggest that any Government by an order made late at night would bring food into the VAT net. I accept entirely the case put forward by my hon. Friend the Financial Secretary that the power to make orders is necessary and that it will be used only in the minor way he has suggested. The fears of the Labour Party are quite unfounded, and I shall, therefore, oppose the Amendment.
Mr. J. Grimond: The hon. Member for Truro (Mr. Dixon) referred to the situation of Great Britain when we become full members of the EEC and have to contribute to the European budget, and he mentioned the implications of the harmonisation policies when fully implemented. We are not now in a situation which involves our having to conform to these policies, and even if we reach that situation we shall still have some latitude as to the types and methods of taxation to be applied in this country.
The imposition of VAT on freight and transport is of great concern to my constituency of Orkney and Shetland. Even if this subject were not to be exempt, we at least thought that it would be zero-rated. However, I understand that this

1405
is not to be the case. On the one hand, the Government are considering whether to give us further assistance in terms of freight and transport and, on the other hand, they are imposing a tax which will be extremely damaging to the economy of the far-distant parts of Britain, including my constituency.
Mr. Bruce-Gardyne: I appreciate what the right hon. Gentleman said, but it might be relevant to his remarks to study Schedule 4, Group 9, Item 3, which refers to the
" Transport of passengers in any vehicle, ship or aircraft designed or adapted to carry not less than 12 passengers."
Mr. Grimond: I was about to come to that. I had hoped to elicit a little further explanation from the Government. I was hoping that the proposal which we are debating might enable the Government, as part of their transport policy, to vary the rates on transport and freight—if rates have to be imposed at all.
I am not clear about the effect of the group to which the hon. Gentleman has drawn attention which relates to the imposition of VAT on goods carried by sea, air or rail or by any other method. I hope that account is being taken of this factor and I can see no reason why for the time being we should not exempt these goods effectively either by zero-rating or by other methods.
I further hope that when the Government implement their transport policy, so far as it goes—and it is rather vague and unsatisfactory—they will consider this point very carefully. If the Amendment had the effect of enabling the Government to adjust the rates in our favour, I should be in favour of it, but I am not clear about the Government's intentions on the vital question of transport and freight. However, I am certain that it would be anomalous and unnecessary under Common Market regulations to levy VAT on these services at present and it would be contrary to any policy which seeks to encourage a healthy economy in the North of Scotland.
Mr. Bruce-Gardyne: I shall be interested to hear the Treasury's reply on this matter, but I feel that the mind of the right hon. Member for Orkney and Shetland (Mr. Grimond), can be put fairly easily at rest since the services about which he is concerned are zero-
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rated. Whether we accept or reject the Amendment is not relevant to the application of the tax on those services, because it will not happen.
I am almost tempted to support the Amendment for fear that the British public, for reasons which would be beyond my understanding, might take it into their heads to return a Labour Government. If we were to have another Labour Government, I believe there might be some case for saying that zero-rated items should not be capable of being moved back into the tax bracket.
The Opposition's case has been to the effect that some appalling conduct will emanate from the present Conservative Government. The right hon. Member for Leeds, East (Mr. Healey) appears to ignore the fact that the record of the Labour Party has always been one of consistently expanding the net and take of indirect taxation. That is not the record of the Conservative Party or of the present Government. It is the opposite.
7.45 p.m.
The right hon. Gentleman appears to envisage the present Government calling for some evil powers. If one is to take these fears seriously, what should concern us is not the possible conduct of the present Government and the Conservative Party in the context of negotiations within the European Community, but the possible conduct of a future Labour Government who have behind them this tax weapon within or outside the European Community. Labour's record speaks for itself. It is about time the right hon Gentleman dropped that tack, which will not get him very far.
I should like to say a word about the speech of my hon. Friend the Member for Truro (Mr. Dixon), and I hope that I shall not be called to order by the Chair. We were grateful to my hon. Friend for his interesting comments about the way in which harmonisation might be applied. To that extent it is relevant to the Amendment because the Opposition's argument, for what it is worth—and it is not worth very much —is that the Government might be required to move items out of zero-rating into positive rating to conform to the other Community countries.
The Temporary Chairman (Mr. Harold Gurden): Perhaps I could say to the hon. Gentleman that I made my intervention a little earlier in terms of whether certain remarks could be related to the Amendment. Clearly, I now see that the hon. Member for Truro (Mr. Dixon) was in order.
Mr. Bruce-Gardyne: I was not querying your ruling, Mr. Gurden. I was merely pointing out the relevance of this subject within the context of the Amendment.
I take issue with my hon. Friend the Member for Truro on two points. First, he said that there should be a discretion in terms of the items to be zero-rated and those which should be positive rated, but that the Treasury would provide the equivalent of a 1 per cent. yield of VAT on all the range of items on which there is agreement within the Community. The important point is that the agreement is not in regard to 1 per cent. but in regard to a figure of up to 1 per cent. That could make a substantial difference.
Secondly, I wish to question my hon. Friend's comment as to the rôle of the European Parliament. It is speculation, but it is surely probable to anticipate that within the time scale involving a period of seven, eight or 10 years it is much more likely that national governments will be taking these decisions than that a European Parliament will be doing so. However, Mr. Gurden, I am sure that if I were to pursue that argument I might be trespassing on your patience.
I return to the substance of the Amendment. I shall not attempt to deal with the Opposition's argument, which envisages the Government waiting poised from one moment to the next to throw the whole gamut of breakfast cereals into the context of positive rating. The serious argument relates to the various groups included in Schedule 4 and whether it might be desirable to move them in or out of zero-rating. Group 3 includes children's picture books and painting books, newspapers, journals and periodicals, and it might turn out that in the light of experience those items will be included within the scope of positive rating. The Clause as unamended will enable this to be covered.
The Opposition's Amendment seeks to evoke fantasy fears which are justified
1408
only by reference to Labour's past record, and certainly not to the Conservative record. The case is clearly made out that the Government should enjoy a discretion and I shall certainly vote against the Amendment.
Mr. Healey: Before the hon. Gentleman sits down, perhaps he will answer one question. I know of his deep interest in these matters. He referred to the fact that his Government had made substantial tax cuts in the last two years. He will be aware that the economic justification for the cuts as distinct from the dogmatic justification for them was the need to stimulate demand at a time of total industrial stagnation and rising unemployment and the need, as the Conservative party sees it, to provide incentives by reducing taxation on profits and incomes. The hon. Gentleman will be aware also that if the Chancellor of the Exchequer succeeds in his objectives it may be necessary in 12 months to increase taxation. The hon. Gentleman has indicated that the Government will not increase indirect taxation. Is he telling us that in his opinion they will instead increase income tax?
Mr. Bruce-Gardyne: That was a speech more suitable for the Budget debate or the Second Reading of the Finance Bill. It was hardly a speech on this Amendment. However if it is in order for me to answer those comments, I say this to the right hon. Gentleman. He must begin to understand that under a Tory Government who have an expanding economy ahead of them it is not invariably necessary to increase taxation. The right hon. Gentleman must not become overwhelmed by the memories of his own experience. when he and his right hon. and hon. Friends required ever-increasing taxation in the face of a stagnating economy and constantly increasing public expenditure.
Mr. Evelyn King: My hon. Friend the Member for Bridgwater (Mr. Tom King) said that he felt diffident about speaking to this Amendment. I am naturally a diffident person. but there is no Amendment to which I feel less diffident about speaking than this one. I base my argument not upon economic, financial or constitutional grounds, but on the ground of sheer common sense.

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The Clause to which the Amendment is tabled refers to Schedule 4 and the possibility of leaking from it, adding to or varying the descriptions. The Amendment seeks to make that impossible. In Schedule 4 one finds four pages of the most intricate descriptions that one has read for a long time. They include such items as chocolate couverture, drained cherries, candied peels, herbal teas, and water other than distilled water. Right hon. and hon. Gentlemen opposite must have an extraordinary faith, which I am unable to share, in the wisdom and virtue of Treasury officials and parliamentary draftsmen if they imagine that at one blow these items have been described so perfectly that no amendment is ever likely to be necessary.
While there is not much in the realm of value added tax and perhaps the Budget about which we all agree, I believe that most hon. Members accept that this tax is extraordinarily complicated. It turns the whole time upon difficult definitions. At the inception of its use, I believe that we ought to preserve our right to vary these descriptions. That is not political doctrine but sheer common sense which I like to think will appeal to all sides of the Committee.
In putting down their Amendment, right hon. and hon. Gentlemen opposite apparently are nervous lest the Government should demonstrably and unreasonably increase taxation and, above all, taxation upon food. That is a curious charge. Nearly all the charges that we have ever heard from right hon. and hon. Members opposite concerning the economy have been the reverse. They have argued that we have sought unduly in recent months to reduce taxation. They have described as harsh our policies on school milk and school meals. We have been called skinflints who are always trying to reduce taxation. Suddenly the charge is the opposite. They regard my right hon. and hon. Friends as a Government who take huge delight in putting taxation on food and raising taxation to impossible limits. That is not a charge which is likely to find credence anywhere.
Mr. Healey: Is it not the case that it is precisely this Government who have adopted an agricultural policy which is deliberately increasing the price of food?
Mr. Evelyn King: I was talking about taxation.
Mr. Healey: What is the difference?
Mr. Evelyn King: I was trying to make the point that my right hon. and hon. Friends are an unlikely Government to increase taxation in the way that right hon. and hon. Members opposite suggest.
Mr. Brian Walden: At the beginning of his speech, the hon. Gentleman made an appeal to common sense, and this House always responds to such an appeal. However I should like to know from him or from anyone else on the benches opposite what is the practical difference between a tax which is levied on someone, a charge which someone has to pay, and a levy at the ports which increases the price of food? Right hon. and hon. Members opposite are making a twaddle of a case that they have reduced taxation without taking into account all the additional burdens that they have imposed on ordinary families.
Mr. Evelyn King: That is the sort of intervention which makes me wish that I had not given way. It has nothing to do with the Amendment. There would be no difficulty in dealing with it. However I am dealing with the Clause and the Amendment which the Committee is now considering. You would be the first to object, Mr. Gurden, if I departed from the subject matter of this debate and attempted to deal with that intervention.
In a controversial and complex Bill of this character it would not be right to freeze descriptions as right hon. and hon. Gentlemen opposite seek to do by their Amendment, especially if those descriptions turned out in the long run to be wrong, as is almost certain. Therefore I am sure that it is the wish of the Committee, in the spirit of common sense with which I began, that reasonable power should be left to the Government to amend the descriptions if it proves necessary to do so.
Mr. David Crouch: Mr. Gurden, you were not in the Chair last night when I rose to speak to protests from the benches opposite and questions about my whereabouts earlier in the day. I hope that right hon. and hon. Members

1411
opposite will not make similar protests tonight. If they do, I shall not tell them.
I have a special interest in what is zero-rated in the Government's proposals. When my right hon. Friend the Chancellor of the Exchequer published his Green Paper on the VAT a year before the Budget, I gave a great deal of thought to it, including a certain amount of conjecture about what would be zero-rated. I must confess that I had not expected a Schedule containing such a long list of zero-rated items. In that, I do not think that I was alone. I am sure, too, that, like me, right hon. and hon. Members opposite felt assured that food would be zero-rated. There was no doubt in my mind about that. My right hon. Friends the Prime Minister and the Chancellor had given us enough assurances about it. It is only in these last two days of detailed debate on the value added tax that I have become aware of the scare-mongering from the benches opposite suggesting that it may still be in the minds of the Government to do anything other than zero-rate food.
It is very irresponsible opposition to this Measure to make that suggestion now. Are the Opposition really asking us to produce a Measure in the Finance Bill which is completely rigid and totally inflexible? By their Amendment, are they asking the Committee to say that the Government must be allowed no flexibility and must be put into a straitjacket as they consider the new tax? It is quite irresponsible for right hon. and hon. Gentlemen opposite to put forward this case.
8.0 p.m.
I have not been impressed by the management of the opposition to this Finance Bill so far. I have not been impressed by the strength of the support from behind the right hon. Member for Leeds, East (Mr. Healey). I am impressed by the geniality of the right hon. Gentleman, who is always particularly fair and genial towards me and some of my colleagues. I was even more impressed last night by the Father of the House, who, in an unguarded moment, called me a Colonel Blimp. Even though he has his own views on our entry to the Common Market, in a forthright and honest way my right hon. Friend said that he supported the whole idea of VAT. But
1412
that is a matter on which it would be wrong to dilate.
Mr. Healey: I wonder whether, as an honorary colonel, the hon. Gentleman would accept from an ex-Defence Minister that the Opposition, in carrying out their strategy in this debate, are interested in economy of force, but are still conscious that he and those who have spoken before him are conducting a holding operation?
Mr. Crouch: I suspect, Mr. Gurden, that you were particularly attracted to those military terms which came from such a defensive character as the right hon. Gentleman. We do not fault him on his knowledge of military strategy and tactics. I shall prove, as I go on, that I am not such an old soldier but, rather, a young tactician.
It is irresponsible of the Opposition to suggest by the Amendment that we should put ourselves into a straitjacket and produce legislation which will be inflexible and incapable of adjustment. As several of my hon. Friends have said, with a Schedule such as this, which goes into great detail about goods and services, it may well be that the Chancellor will want to make some adjustments one way or the other. It may well be that he will want to take out of the exceptions to zero-rating certain products and include them in Schedule 4 so that they become zero-rated in future. It may well be that after representations have been made to him he will take the view that some products that are zero-rated will not be so rated.
Are we to say that the Chancellor and the House of Commons are not to have that sort of freedom? Are we to say that the Government are not to have freedom at all in such a matter? It is wrong to do so, and that is why it is wrong of the Opposition to indulge in this scaremongering. It is wrong of them to base their opposition solely on scaremongering. Such action in this Committee is irresponsible.
We are more sophisticated in these matters. We recognise a debating point when we hear one, but it is not necessarily so recognised outside the House. What must be stressed by myself and others, and perhaps repeated by the Chancellor, is what he said last night in the House, and what he has said on other occasions

1413
outside it; namely, that he has no intention of giving food other than a zero-rating.
Mr. Joel Barnett: It is remarkable what the hon. Member for Canterbury (Mr. Crouch) can read into speeches by his right hon. Friend, because the Chancellor did not say what his hon. Friend has attributed to him.
The hon. Gentleman says that by the Amendment we are seeking to put the Government in a straitjacket. It is clear that not only did the hon. Gentleman not hear the Chancellor's speech last night but he did not hear what we said earlier today. All that we are seeking to do is to say that any Government shall not have the power to increase taxation by more than £1,000 million by means of an order debated for 1½ hours late at night, and I should have thought that the hon. Gentleman could have supported that proposition.
That is all that we are saying. To say that it makes the tax incapable of adjustment is nonsense. All that we are saying is that it should be incapable of adjustment by means of an order debated for 1½ hours late at night. If the hon. Gentleman wants the Government to have power to make the change by order after such a short debate, he will no doubt vote against the Amendment. What we are seeking to do is to prevent the taxation of food, fuel and the other items which are now zero-rated by means of an order which is debated for1½ hours late at night. We shall, of course, seek to prevent any change at all—
Mr. Crouch rose—
Mr. Barnett: The hon. Gentleman has kept his part of the bargain. His hon. Friends will now be back from dinner and we can, I hope, proceed to a Division and thus save his hon. Friends from having to stay in the House later than they might otherwise have to do, having had a reasonable dinner. I ask my right hon. and hon. Friends to support an Amendment which I should have thought any reasonable Government backbencher would have been pleased to support.
Mr. Higgins: The points at issue are clearly defined and straightforward.
1414
On the question of removing anomalies, my hon. Friend the Member for Dorset, South (Mr. Evelyn King) rightly said that, although this is a fairly complex Schedule setting out the items which have a zero-rating, it is very much shorter than the purchase tax provisions, which run to many pages.
The hon. Member for West Lothian (Mr. Dalyell) asked why I thought there were likely to be fewer anomalies under this tax than under SET. The answer is simple. It is that this is a single rate tax and not a multiple rate tax. My right hon. Friend has given a zero-rating to large blocks of expenditure concerned with food, housing and so on, which means that there will be considerably fewer borderlines.
The right hon. Member for Orkney and Shetland (Mr. Grimond) raised some points about transport to his constituency. I should tell him that the Amendment is concerned with removing the power of the Government to increase the scope of the tax by order, and that the points which he has raised more naturally fall to be dealt with on the zero-rating Clause and the Clause dealing with the definition of ships, and so on.
Mr. Grimond: There are two matters which perhaps the hon. Gentleman would clear up. If the Amendment is accepted, the Government will not be prevented from bringing new categories into zero-rating. It will prevent them from taking things out of zero-rating. Is it conceivable that if we were in the Common Market, in order to enable them to extend zero-rating the Government might have to take goods out of zero-rating because under Common Market rules it would be necessary to equalise in some way contributions to the Budget? Am I right in saying that in the Schedule many things connected with freight and passenger transport are zero-rated, but freight is to bear VAT?
Mr. Higgins: I think I should explain to the right hon. Gentleman that the purpose of the Amendment is to remove from the Government the power to bring items out of zero-rating into the tax, and that the points which he has raised arise more naturally on the debates to which we shall come in due course on whether this or that item ought to be zero-rated. The Amendment moves in the other direction

1415
to that on which the right hon. Gentleman has raised his argument.
As many of my hon. Friends have said, the Opposition are basing their case largely on scaremongering, with particular emphasis on food. This is remarkable when one recalls that when they were in office hon. Gentlemen opposite imposed a tax on certain items of food for the first time. We have reduced those taxes. But we can go into this in greater detail on a later Amendment. It is also the case, as many of my hon. Friends who have an interest in the Co-operative movement have said, that the introduction of SET by the Labour Government had an effect on distribution costs, which are an important factor in the price of food.
Mr. Healey: I am sure that the hon. Gentleman will accept that his Government presided over a 12 per cent. increase in the cost of food last year, which was partly brought about by the Government's own agricultural policies?

Division No. 174.]

AYES

[8.9 p.m.

Abse, Leo

Fisher, Mrs. Doris (B'ham.Ladywood)

Lamond, James

Albu, Austen

Fitch, Alan (Wigan)

Latham, Arthur

Allen, Scholefield

Fletcher, Ted (Darlington)

Lawson, George

Archer, Peter (Rowley Regis)

Foley, Maurice

Leadbitter, Ted

Armstrong, Ernest

Ford, Ben

Lee, Rt. Hn. Frederick

Ashton, Joe

Forrester, John

Leonard, Dick

Atkinson, Norman

Fraser, John (Norwood)

Lever, Rt. Hn. Harold

Barnett, Joel (Heywood and Royton)

Galpern, Sir Myer

Lewis, Arthur (W. Ham, N.)

Benn, Rt. Hn. Anthony Wedgwood

Gilbert, Dr. John

Loughlin, Charles

Bennett, James (Glasgow, Bridgeton)

Ginsburg, David (Dewsbury)

Lyon, Alexander W. (York)

Blenkinsop, Arthur

Golding, John

McBride, Neil

Boardman, H. (Leigh)

Gordon Walker, Rt. Hn. P. C.

McCartney, Hugh

Booth, Albert

Gourlay, Harry

McElhone, Frank

Boyden, James (Bishop Auckland)

Grant, George (Morpeth)

Mackintosh, John P.

Broughton, Sir Alfred

Grant, John D. (Islington, E.)

Maclennan, Robert

Brown, Bob (N'c'tle-upon-Tyne, W.)

Griffiths, Eddie (Brightside)

McMillan, Tom (Glasgow, C.)

Brown, Hugh D. (G'gow, Provan)

Griffiths, Will (Exchange)

Mahon, Simon (Bootle)

Brown, Ronald (Shoreditch & F'bury)

Grimond, Rt. Hn. J.

Marks, Kenneth

Buchan, Norman

Hamilton, James (Bothwell)

Marsden, F.

Campbell, 1. (Dunbartonshire, W.)

Hamilton, Wiliam (Fife, W.)

Marshall, Dr. Edmund

Carter, Ray (Birmingh'm, Northfleld)

Hamling, Wiliam

Mayhew, Christopher

Clark, David (Colne Valley)

Hannan, William (G'gow, Maryhill)

Meacher, Michael

Cohen, Stanley

Hardy, Peter

Mellish, Rt. Hn. Robert

Coleman, Donald

Harrison, Walter (Wakefield)

Mendelson, John

Concannon, J. D.

Healey, Rt. Hn. Denis

Mikardo, Ian

Corbet, Mrs. Freda

Heffer, Eric S.

Millan, Bruce

Cox, Thomas (Wandsworth, C.)

Hooson, Emlyn

Miller, Dr. M. S.

Crosland, Rt. Hn. Anthony

Horam, John

Mitchell, R. C. (S'hampton, Itchen)

Cunningham, G. (Islington, S.W.)

Houghton, Rt. Hn. Douglas

MolFoy, William

Cunningham, Dr. J. A. (Whitehaven)

Huckfield. Leslie

Morgan, Elystan (Cardiganshire)

Dalyell, Tam

Hughes, Robert (Aberdeen. N.)

Morris, Alfred (Wythenshawe)

Davidson, Arthur

Hughes, Roy (Newport)

Morris, Charles R. (Openshaw)

Davies, Ifor (Gower)

Hunter, Adam

Murray, Ronald King

Davis, Terry (Bromsgrove)

Jeger, Mrs. Lena

Oakes, Gordon

Deakins, Eric

John, Brynmor

Ogden, Eric

Dell, Rt. Hn. Edmund

Johnson, James (K'ston-on-Hull, W.)

O'Halloran, Michael

Dempsey, James

Jones, Barry (Flint, E.)

Oram, Bert

Doig, Peter

Jones, Dan (Burnley)

Orbach, Maurice

Douglas, Dick (Stirlingshire, E.)

Jones, Rt.Hn.Sir Elwyn(W.Ham, S.)

Orme, Stanley

Duffy, A. E. P.

Jones, Gwynoro (Carmarthen)

Oswald, Thomas

Eadie, Alex

Judd, Frank

Padley, Walter

Edelman, Maurice

Kaufman, Gerald

Paget, R. T.

English, Michael

Kelley, Richard

Palmer, Arthur

Evans, Fred

Kerr, Russell

Pardoe, John

Ewing, Henry

Lamborn, Harry

Parry, Robert (Liverpool, Exchange)

Fernyhough, Rt. Hn. E.

Lambie, David

Pavitt, Laurie

Mr. Higgins: I think that I should find myself out of order if I were to pursue that. The point that I am making is precisely on this question of indirect taxation. The scare which the right hon. Gentleman is trying to put about comes rather strangely from him when one remembers that his Government imposed and extended the scope of purchase tax on food, and later imposed SET, which had the effect of taxing distribution costs, and, therefore, food.
It would be too risky to leave the position that if certain anomalies arose as a result of the introduction of the new tax they could be put right only by widening the scope of the tax. I hope, therefore, that the Committee will reject the Amendment.
Question put,That the Amendment be made:—
The Committee divided: Ayes

Pendry, Tom

Silkin, Hn. S. C. (Dulwich)

Tuck, Raphael

Pentland, Norman

Sillars, James

Urwin, T. W.

Prentice, Rt. Hn. Reg.

Silverman, Julius

Varley, Eric G.

Prescott, John

Skinner, Dennis

Wainwright, Edwin

Price, William (Rugby)

Small, William

Walden, Brian (B'm'ham, All Saints)

Probert, Arthur

Smith, John (Lanarkshire, N.)

Wallace, George

Rankin, John

Spearing, Nigel

Watkins, David

Rhodes, Geoffrey

Spriggs, Leslie

Weitzman, David

Richard, Ivor

Stallard, A. W.

White, James (Glasgow, Pollok)

Roberts, Albert (Normanton)

Steel, David

Whitehead, Phillip

Robertson, John (Paisley)

Stewart, Donald (Western Isles)

Whitlock, William

Roderick, CaerwynE.(Br'c'n&R'dnor)

Stonehouse, Rt. Hn. John

Williams, Alan (Swansea, W.)

Rose, Paul B.

Strang, Gavin

Williams, Mrs. Shirley (Hitchin)

Ross Rt. Hn. William (Kllmarnock)

Summerskill, Hn. Dr. Shirley

Wilson, Rt. Hn. Harold (Huyton)

Rowlands, Ted

Taverne, Dick

Wilson, William (Coventry. S.)

Sandelson, Neville

Thomas, Rt.Hn.George(Cardiff, W.)

Woof, Robert

Sheldon, Robert (Ashton-under-Lyne)

Thomson, Rt. Hn. G. (Dundee, E.)

Shore, Rt. Hn. Peter (Stepney)

Tinn, James

TELLERS FOR THE AYES:

Short, Rt.Hn.Edward(N'c'tie-u-Tyne)

Tomney, Frank

Mr. James Wellbeloved and

Short, Mrs. Renee (W'hampton.N.E.)

Torney, Tom

Mr. Joseph Harper.

NOES

Adley, Robert

Grant, Anthony (Harrow, C.)

Moate, Roger

Allason, James (Hemel Hempstead)

Green, Alan

Molyneaux, James

Atkins, Humphrey

Griffiths, Eldon (Bury St. Edmunds)

Money, Ernie

Awdry, Daniel

Grylls, Michael

Monks, Mrs. Connie

Barber, Rt. Hn. Anthony

Gummer, Selwyn

Monro, Hector

Beamish, Col. Sir Tufton

Hall, Miss Joan (Keighley)

Montgomery, Fergus

Berry, Hn. Anthony

Hall-Davis, A. G. F.

Mudd, David

Biffen, John

Hamilton, Michael (Salisbury)

Murton, Oscar

Biggs-Davison, John

Hannam, John (Exeter)

Nabarro, Sir Gerald

Blaker, Peter

Harrison, Col. Sir Harwood (Eye)

Neave, Airey

Boardman, Tom (Leicester, S.W.)

Haselhurst, Alan

Nicholls, Sir Harmar

Boscawen, Robert

Havers, Michael

Noble, Rt. Hn. Michael

Bowden, Andrew

Hawkins, Paul

Normanton, Tom

Braine, Bernard

Hayhoe, Barney

Nott, John

Brinton, Sir Tatton

Heath, Rt. Hn. Edward

Onslow, Cranley

Brocklebank-Fowler, Christopher

Hicks Robert

Oppenheim, Mrs. Sally

Brown, Sir Edward (Bath)

Higgins, Terence L

Osborn, John

Bruce-Gardyne, J.

Hiley, Joseph

Owen, Idris (Stockport, N.)

Bryan, Paul

Hill John E B (Norfolk, S)

Page, Graham (Crosby)

Burden, F. A.

Hill, James (Southampton, Test)

Page, John (Harrow, W.)

Campbell, Rt.Hn.G.(Moray&Nairn)

Holland, Philip

Parkinson, Cecil

Carlisle, Mark

Horny, Richard

Percival, Ian

Chapman, Sydney

Hornsby, Smith Rt Hn Dame Patricia

Pike, Miss Mervyn

Chichester-Clark, R.

Howell Raiph Norfolk, N

Pink, R. Bonner

Churchill, W. S.

Hutchison, Michael Clark

Pounder, Rafton

Clark, William (Surrey, E.)

James David

Powell, Rt. Hn. J. Enoch

Clarke, Kenneth (Rushcllffe)

Jenkin Patrick Woodford)

Price, David (Eastleigh)

Clegg, Walter

Jessel Toby

Prior, Rt. Hn. J. M. L.

Cockeram, Eric

Jopling, Michael

Proudfoot, Wilfred

Cooke, Robert

Pym, Rt. Hn. Francis

Corfield, Rt. Hn. Frederick

Joseph, Rt. Hn. Sir Keith

Ramsden, Rt. Hn. James

Cormack, Patrick

Kellett-Bowman, Mrs. Elaine

Redmond, Robert

Costain, A. P.

Kershaw, Anthony

Rees, Peter (Dover)

Critchley, Julian

Kilfedder, James

Rees-Davies, W. R.

Crouch, David

Kimball, Marcus

Renton, Rt. Hn. Sir David

Dalkeith, Earl of

King, Evelyn (Dorset, S.)

Rhys Williams, Sir Brandon

d'Avigdor-Goldsmid. Maj.-Gen. James

King, Tom (Bridgwater)

Ridley, Hn. Nicholas

Dean, Paul

Kinsey, J. R.

Ridsdale. Julian

Deedes, Rt. Hn. W. F.

Kitson, Timothy

Rippon, Rt. Hn. Geoffrey

Digby, Simon Wingfield

Knight. Mrs. Jill

Roberts, Michael (Cardiff, N.)

Dixon, Piers

Knox, David

Roberts, Wyn (Conway)

Drayson G B

Legge-Bourke, Sir Harry

Rodgers, Sir John (Sevenoaks)

du Cann, Rt. Hn. Edward

Le Merchant, Spencer

Rossi, Hugh (Hornsey)

Edwards, Nicholas (Pembroke)

Lloyd, Ian (P'tsm'th, Langstone)

Rost, Peter

Elliot Capt Walter (Carshalton)

Loveridge, John

Russell, Sir Ronald

Eyre, Reginald

Luce, R. N.

St. John-Stevas, Norman

Farr John

Lamont, Norman

Sharpies, Richard

Fell Anthony

McLaren, Martin

Shaw, Michael (Sc'b'gh & Whitby)

Fenner, Mrs. Peggy

McMaster, Stanley

Shelton. William (Clapham)

Fisher, Nigel (Surbiton)

McNair-Wilson, Michael

Skeet, T. H. H

Fletcher-Cooke, Charles

Maddan, Martin

Speed, Keith

Fookes, Miss Janet

Madel David

Spence, John

Fortescue, Tim

Marten, Neil

Sproat, lain

Foster, Sir John

Mather, Carol

Stanbrook, Ivor

Fowler, Norman

Maude, Angus

Stewart-Smith, Geoffrey (Belper)

Fry, Peter

Mawby, Ray

Stoddart-Scott, Col. Sir M.

Gibson-watt, David

Maxwell-Hyslop. R. J.

Stokes, John

Gilmour, Sir John (Fife, E.)

Meyer, Sir Anthony

Stuttaford, Dr. Tom

Godber, Rt Hn. J. B.

Mills, Peter (Torrington)

Sutcliffe. John

Goodhew, Victor

Mills, Stratton (Belfast, N.)

Tapsell, Peter

Gorst, John

Miscampbell. Norman

Taylor, Sir Charles (Eastbourne)

Gower, Raymond

Mitchell, Lt.-Col.C.(Aberdeenshire, W.)

Taylor, Edward M.(G'gow, Cathcart)

Taylor, Frank (Moss Side)

Vaughan, Dr. Gerard

Wilkinson, John

Tebbit, Norman

Waddinglon, David

Winterton, Nicholas

Temple, John M.

Walker, Rt. Hn. Peter (Worcester)

Wolrige-Gordon, Patrick

Thomas, John Stradling (Monmouth)

Walker-Smith, Rt. Hn. Sir Derek

Wood, Rt. Hn. Richard

Thompson, Sir Richard (Croydon, S.)

Walters, Dennis

Woodhouse, Hn. Christopher

Tilney, John

Ward, Dame Irene

Worsley, Marcus

Trew, Peter

Warren, Kenneth

Tugendhat, Christopher

Weatherill, Bernard

TELLERS FOR THE NOES:

Turton, Rt. Hn. Sir Robin

White, Roger (Gravesend)

Mr. Marcus Fox and

van Straubenzee, W. R.

Wiggin, Jerry

Mr. Hamish Gray.

Question accordingly negatived.
Clause 12 ordered to stand part of the Bill.

Schedule 4
ZERO-RATING
The Temporary Chairman: The next Amendment is No. 77, in page 96, leave out line 17.
With that Amendment it will be cenvenient to take the following Amendments:
No. 12, in line 17, after catering ', insert:
by an establishment with annual turnover in excess of £10,000 '.
No. 80, in line 17, after catering ', insert:
other than at factory or office canteens'.
No. 93, in page 97, line 30, leave out first ' on ' and insert ' by a person seated in '.
No. 21, in line 31, at end insert:
'but shall not include catering on the premises of any educational establishment'.
Mr. Carter rose—
Mr. Joel Barnett rose—
The Temporary Chairman: Mr. Barnett.
Mr. Joel Barnett: I beg to move Amendment No. 12, in page 96, line 17, after "catering ", insert:
"by an establishment with annual turnover in excess of £10,000."
We have already been assured by the Government about how they propose to treat all the Amendments to the provisions on zero-rating. We have had a very considerable warning in a whole series of speeches from the Chancellor, the Chief Secretary and the Financial Secretary. Last night we were told by the Financial Secretary:
" This means, because we have not got a completely comprehensive tax, that we are
1420
bound to have some borderline problems. But the lines which have been drawn are lines which, to coin a phrase, are at the saddle point. Generally speaking, if one tries to move any of those lines a little further on a particular border, one is likely to slide a long way before one could call a halt at a sensible point. The early history of purchase tax demonstrates what an anomalous and inequitable system emerges once one begins to slide down such a slippery slope.
For that reason it is not meaningful to ask what will be the cost of this or that concession. In answering that, one would need to take account of all the other concessions which would then be pressed."—[OFFKIAL REPORT, 9th May, 1972; Vol. 836, c. 1251–2.]
That is a very interesting view about how the Government propose contemptuously to deal with Amendments to Schedule 4. No matter how good the Amendment and how fair the concession, it must be resisted. If the Amendment would cost £1, all the others must be looked at because they would cost £X million and the Government could not concede the £l Amendment. This illustrates the Government's whole attitude.
Last night the Financial Secretary chided my right hon. Friend the Member for Leeds, East (Mr. Healey) about repetition. I hope that we shall not have repetition from Ministers on the Amendments about zero-rating. They argue that because the Bill provides a comprehensive tax, further Amendments cannot be accepted because, as the Financial Secretary said, we would
" slide down such a slippery slope".
They are interesting words and I shall be interesting to see how many slippery slopes we slide down. The Ministers on the Treasury Bench seem to have a great love of the comprehensive nature of the tax. The Chief Secretary nods, agreeing that it is comprehensive. But it is nothing of the sort, and the Government have started to slide on the slippery slope by excluding about 40 per cent. of consumer expenditure. It is not comprehensive, and the Government have opened the door to concessions.
They virtually rest their case for resisting Amendments on a false argument.

1421
The only remaining argument—that if they concede once it will cost a great deal—is too absurd to require any answer. In effect, the Government are saying that they know that it is unfair to resist some of the Amendments but that they want a comprehensive tax and they must therefore accept unfairness. This sums up the Government's case, and I assume that it will be their approach to all these Amendments.
I will deal with that argument therefore and relate it to the Amendment which I am moving. My Amendment relates to catering. All food is zero-rated for the moment, although we have no assurances about the future. It is zero-rated unless, according to the Bill, it is in the course of catering. In note (3) is the definition:
" A supply of anything in the course of catering includes any supply of it for consumption on the premises on which it is supplied."
That seems a very interesting definition. It seems simple enough that if food is eaten on the premises it is subject to the VAT but if it is eaten off the premises it is not. But it is nothing like as simple because there are many catering establishments where some food is eaten on the establishment and some off. This applies, as I said on Second Reading, to fish and chip shops, some Chinese restaurants, snack bars, and sandwich bars. It is even likely that hon. Members will decide that it is cheaper to buy their food in the dining room and take it away and eat it on the terrace because it would then be free of tax. The Chief Secretary is disagreeing with me, but I should be delighted to hear whether I could do that. We have a canteen here, and I will deal with canteens in the course of my remarks.
If anyone thinks that establishments providing mixed catering are only few in number I must quickly disillusion them. I have tried to find out how many there are, and the latest figures I have been able to find are in the Trade and Industry Journal of 13th April, 1972, relating to an inquiry carried out in 1969. According to this there are 27,978 restaurants, cafes and snack bar companies having fewer than ten shops. A large number of these will have two and three shops, but
1422
it is obvious that in that 27,978 there will be many cafés and snack bars with mixed types of business where there is eating off as well as on the premises.
There are 14,282 fish and chip shops. I speak about this with some feeling because if that is an average of about 24 per constituency in the country, in the North West we have a very much higher proportion. In my constituency, although I may have missed a few, we certainly have more than 60, and in other constituencies in the North West there may be even more. This is not a small matter because it affects large numbers of people who eat in fish and chip shops. These are not the sort of people who will eat caviar and lobster and oysters. We are discussing a different sort of person.
Mr. Brian Walden: Our voters.
Mr. Barnett: There will be people eating in pubs and clubs, on and off the premises. We are talking about a large number of people.
I did a little research in my constituency over the weekend and found that in many fish and chip shops there is perhaps one table, sometimes more, and in some cases the customer eats at the counter. Whether he uses the table or the counter, he is eating on the premises, so presumably that proportion of the fish and chip shop's sales would be subjected to VAT. I should be delighted to hear that that is not so, but my understanding of the Bill is that it is.
The Amendment would help the Government to deal with the problem. It helps to avoid some of the problems by proposing that there should be a zero-rating below £10,000 a year turnover. This is different from the exemption—
The Temporary Chairman: Order. Before I leave the Chair I should like to apologise to the hon. Member for Birmingham, Northfield (Mr. Carter), because Amendment No. 77 stands in his name. I did not see him rise. But I will ask that he may be called soon.
Mr. Barnett: I am sorry, Mr. Gurden, but the Amendment I am moving is a different one, and my hon. Friend will, I am sure, be moving his own Amendment.
[Miss HARVIE ANDERSON in the Chair]
8.30 p.m.
Mr. Arthur Lewis: May I refer to the very kind and courteous remarks of your predecessor in the Chair, Miss Harvie Anderson? The whole Committee thanks him for them. But this is not the first occasion on which such things have happened. On a number of occasions I have had Amendments on the Notice Paper and have been told that they would be called, but not only have they not been called, and others have been called before me, but sometimes I have failed to be called even on my own Amendment, so this is not an unusual occurrence.
The First Deputy Chairman: Order. My understanding is that we are on Amendment No. 77.
Mr. Barnett: A reading of HANSARD will show that in very clear words I moved Amendment No. 12. No one who was here will be in any doubt about that.
The First Deputy Chairman: My understanding is that we are on Amendment No. 77. and that for the convenience of the Committee the Amendments already mentioned are being discussed at the same time.
Mr. Barnett: I cannot understand why there should be any misunderstanding, because I very clearly moved Amendment No. 12.
The First Deputy Chairman: I do not think there need be any difficulty. My understanding is that the Amendment which is being moved is Amendment No. 77, with which we are taking Amendments Nos. 12, 80, 93 and 21.
Mr. Barnett: May I suggest that my hon. Friend formally moves Amendment No. 77, but speaks to it later, and that I finish my speech on my Amendment?
Mr. Carter: I am prepared formally to move my Amendment, provided that I may have an assurance from you, Miss Harvie Anderson, that as soon as my hon. Friend sits down you will call me.
I beg to move Amendment No. 77, in page 96, leave out line 17.
The First Deputy Chairman: It would be very unwise for the Chair to commit itself publicly to any such assurance.
Mr. Barnett: Thank you, Miss Harvie Anderson. I am speaking to my own Amendment, as will be clearly understood, and as my hon. Friend understands very well. I was saying that the Amendment seeks to zero-rate all catering establishments with a turnover of under £10,000 a year. That is very different from the exemption of £5,000 in Schedule 1, because an exemption is very different.
It is clear from the inquiry to which I have referred that the Amendment would go a considerable way towards helping to remove many of the anomalies. The inquiry showed that the 14,282 fish and chip shops had a total turnover of £124 million, which is about £9,000 each. Obviously, some will have more than £10,000 and some will have less, but clearly large numbers would be zero-rated, and therefore the anomalies would be removed. The annual turnover of the restaurants, cafés and snack bars is, according to the inquiry, £402.2 million, which means, with 27,978 establishments, an average turnover of about £14,500. A substantial number will have a turnover of less than £10,000; certainly more will be exempted than if we take the £5.000 in the exemption Clause in Schedule 1. Whilst one cannot say with certainty how many would be exempt under the terms of the Amendment, clearly it would take a large number out.
I will take this opportunity to refer to the other Amendment about factory canteens. We would seek completely to exclude factory canteens and allow them to be zero-rated. I am not sure whether that definition would include our own "factory canteen" or whether one would describe that as something different.
The difficulty about factory and office canteens which arises from the other Amendment is: even if total sales in the canteen are less than £10,000, will it be necessary to add that to the total of the company's other sales? Clearly, anything less than £10,000 would be meaningless. The figure of £5,000 that has been taken by the Government for exemption purposes is, on any analysis, far too low. One only has to consider

1425
the gross profit margin of an average cafe and take off the normal overheads to find that one would be zero-rating hardly anybody if one zero-rated up to only £5,000 a year.
Our Amendment has three purposes: first, it would simplify the tax and reduce evasion; secondly, it would keep prices down for the lower paid and the average paid workers who use establishments of this sort; and, thirdly, it would remove a considerable anomaly.
Regarding simplification, without this Amendment it would seem that the Customs and Excise would have to decide what proportion of the total sales of these mixed types of establishment should be subject to zero-rating and what proportion should be taxed. That would be a tremendous problem. In the small amount of research that I carried out over the weekend I found one fish and chip shop in my constituency that had one table, one with about 10, and one where customers ate round the counter. How on earth are the Customs and Excise to decide what proportion should be subject to the output tax? Will it suggest that at every point of sale one will charge VAT? That would show how crazy it is.
It would be a great temptation to claim that none of the sales of these establishments is eaten on the premises. What would inevitably happen is that we would create a new type of criminal in our fish and chip shops. We would have fish and chip shop proprietors and Chinese restaurant proprietors saying either that their customers do not eat anything in, that everything is bought, taken and eaten off the premises, or that it is considerably less than the actual case.
Mr. Arthur Lewis: Has consideration been given to the origin of all this; namely, the EEC? The Treasury has probably considered that in Germany the tax operated adequately with the hot sausage stalls. Perhaps that is what is wanted here and what the Treasury have in mind to bring into this country.
Mr. Barnett: My hon. Friend is attempting to draw me out. I hope he will not mind if I am not tempted, as we want to get on. Maybe the Minister will let him know whether the
1426
Treasury has in mind to create hot sausage stalls all over the country to create anomalies.
The situation will be absurd as it stands, but then we come to the question of prices. I said earlier that the lower and average paid worker tends to use fish and chip shops, small cafes and canteens. I have found, when talking to restaurant proprietors, that particularly at lunch time the majority of customers are school children and workers from local factories. If they are served and eat inside the premises they will be subject to VAT. If, on the way from the counter to the door, they stop and have a chat and eat 26 chips—I do not know whether there are 50 chips in a bag, but let us assume there are—will it mean that the other 24 chips are subject to VAT? I am sure the Minister will tell us. I am not altogether clear because it is not spelt out in the Bill. I am suggesting that it should be, because the Bill is big enough already. This illustrates the nonsense of the tax and shows how much we are trying to help.
All our Amendments are drafted in a way to help the Government get off the hook of some of the terrible anomalies which they have created. This Amendment will help to avoid the vicious circle of a wages cycle following a prices cycle. If every day of the working week a factory worker pays an increased price for his canteen meal and at some time during the year he is told by the Chancellor, "Do not hold me to ransom for a wage increase ", he will not take too kindly to that suggestion. He might be more inclined to say," No. I insist on the wage claim which my union has submitted." I repeat, we are trying hard to help the Government in this respect.
We have heard a great deal about the anomalies of purchase and selective employment tax. It has been said that SET has changed the habits of many firms. That is true. Some firms have changed various habits to avoid SET. This particular group of provisions in Schedule 4 will change the habits of millions. Those who like to stand and eat chips at the counter will have to pay tax on them, so, to avoid it, they will be forced to go out on the streets to eat them. I do not know what effect this will have on pollution, about which we have been talking, with the litter on

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the streets which will inevitably follow. The Amendment is therefore very helpful.
Mr. Crouch: I am sorry that I was not here when the hon. Gentleman began his speech. I should explain that the notice which appeared on the television annunciator was not that we were discussing Amendment No. 12, but that we were discussing Amendment No. 77. If I had known that we were to discuss fish and chips, I should have come in instantly. Did the hon. Gentleman define what he understands is meant by "catering "? I missed that early part. Is he now saying that to eat fish and chips at the counter is to enjoy" catering "? Do I understand that if I go to the Savoy and take my lunch away in a packet I do not have to pay VAT on it? If so, I should like to try it.
Mr. Barnett: That is an interesting suggestion. However, I am surprised that when the hon. Gentleman saw Amendment No. 77 go up on the television annunciator he did not realise that it related to all restaurants, including his having lunch at the Savoy and bringing back his oysters and caviare to the House of Commons to eat in our presence. We would be pleased to see the hon. Gentleman eating them here.
The Amendment goes a long way towards removing the difficulties inherent in this group in Schedule 4. It also has an important effect on prices at a crucial point. The Amendment is reasonable. Therefore, I trust the Minister will now tell us that he will accept it.
8.45 p.m.
Mr. Carter: I do not intend to make a meal out of my contribution. I shall be as brief as I possibly can. However, I got a bonus with an eloquent introduction to my Amendment which I should not have had had I been called first.
The purpose of my Amendment No. 77 is to preserve our traditional approach to the taxation of food. All food should be exempt from tax. This principle is ingrained in our economic and social life, and, especially at this time, with the possibility—indeed, one may say, the certainty—of our entering the EEC, we should do all in our power to reinforce it. I am certain that, but for our projected entry into the Common Market,
1428
we should not have been discussing a Finance Bill containing provisions for value added tax, or, in the unlikely event of such a Bill, we should certainly not be discussing proposals to put a tax on food.
I do not agree with the value added tax. Moreover, like most of my right hon. and hon. Friends, I am disturbed about the terms of entry into the EEC. Nevertheless, we accept that we shall probably enter the EEC fairly soon. At the earliest opportunity, therefore, we should lay the basis for our arguments when we do go in. We should be saying clearly and convincingly now that our determination is that all food should be exempt from tax. To make a concession at this point to the Community in the form of a tax on catering or on confectionery and other food items would be to weaken the argument which, I hope, we shall take with us into Europe.
Much was said earlier today about scare-mongering on this question. The hon. Member for Canterbury (Mr. Crouch) raised that matter in a brief intervention. But at no stage has the Chancellor or any Treasury Minister stated categorically that the Government will apply the veto if there is any attempt on the part of the Six to get Britain to apply the value added tax to food. We should welcome such a statement from the Government, but it has not been forthcoming so far, and any scare-mongering of which we might be accused is based on the fear that when we are in the Common Market, we shall have to introduce the value added tax on food.
Over the past few years there has been an enormous change in the pattern of eating habits. People are eating out more and more. It seems that, without our having joined the EEC, we are acquiring continental habits. The number of restaurants has grown enormously, and there have been great developments in such services as take-away meals, convenience foods, canteens and so forth.
These changes are reflected in the figures. In 1966 £2,203 million was spent on food bought out, but by 1971 the figure had risen to £2,950 million. The average weekly consumption per household rose from £0.617 in 1965 to £0.996 in 1970, a growth of about 10 per cent. per year in that period. Moreover, that

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rate of growth shows every sign of increasing in the future. What is more, all this has come at a time when the percentage of the household budget spent on food has been declining. There is, therefore, a positive shift away from consumption at home to consumption outside.
The future rate of growth in what is clearly a desirable trend could well be inhibited if the VAT is applied. Already to a large extent it bears tax, but that has not inhibited its growth. It is worth pointing out that selective employment tax was imposed on this industry and that the Conservative Party made a clear commitment to remove it. Naturally, the caterers thought that it would be removed. Now they know that this is a broken election pledge because SET is merely to be replaced by VAT.
My hon. Friend the Member for Heywood and Royton (Mr. Barnett) mentioned a long series of anomalies, including fish and chip shops and Chinese food. One could add Indian food to the list. I know a very good take-away Indian food shop in Earls Court.
Dr. Gilbert: Hear, hear.
Mr. Carter: My hon. Friend the Member for Dudley (Dr. Gilbert) obviously knows it. The food of many other nationalities is involved.
I want to draw attention, although this is rather a late hour, to another anomaly briefly touched upon by my hon. Friend the Member for West Ham, North (Mr. Arthur Lewis)—food stores. I wonder where a winkle stall stands in all this. I remind the Committee that Note (3) to Group 1 of Schedule 4 says:
" A supply of anything in the course of catering includes any supply of it for consumption on the premises on which it is supplied."
There is an obvious anomaly there with fish and chip shops. One buys fish and chips at the counter, goes outside to eat them and escapes tax. But what is the position of the person who buys a plate of winkles? Winkle stalls are neither inside nor outside. They are on the public highway.
Mr. Arthur Lewis: Before my hon. Friend leaves fish for winkles, has he realised that the latest thing even with
1430
fish and chips is not to have a shop at all, but to have a travelling bar? If he had been lucky enough to be at Wembley last Saturday—
Mr. Carter: I was.
Mr. Lewis: —he would have seen dozens of these travelling fish and chip bars. What is to happen with them? They are neither shop nor stall.
Mr. Carter: I thank my hon. Friend for that intervention. I am glad he brought Wembley to mind. I saw those very bars. At the height of the match I wondered what position they would be in under the provisions of this Bill.
But, of course, it is not just winkles. There are tripe bars in the North. My hon. Friend the Member for Heywood and Royton no doubt in the past has partaken of cartons of hot peas, again bought off stalls. I wonder what the position of such stalls is to be. We have heard about sausage stalls and hamburger bars. All these things are enjoyed by large sections of the community. What position are they to be in under the Bill?
Mr. James Dempsey: Pies and beans.
Mr. Carter: I hear my hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey) making a remark about Scotland and its delicacies. It might be a plate of old Scotch whisky, perhaps, or a plate of haggis.
Mr. Dempsey: One of the biggest problems we have is not the fish and chip shops or the hamburger stalls but the pie and beans vans. They clutter up the main street, and there is little the police can do because they are not creating congestion. People purchase and eat pies and beans in the main street. How do these vans stand in relation to VAT? Has my hon. Friend given any thought to that aspect? Could I advise my hon. Friend that there is another beverage about which he may not know very much—
The First Deputy Chairman: I hope that the hon. Gentleman will not make his intervention too long.
Mr. Dempsey: All Scots have the gift —you should know this, Miss Harvie Anderson—of brevity. [Laughter.] We produce "pea brae" which is the water

1431
from the hot peas. It is quite a mixture with the Scots. What has my hon. Friend to say about this?
Mr. Carter: My hon. Friend will know more about hot pies and beans than I do. One wonders what might happen if all catering establishments in Scotland become liable to VAT but hot pie and bean stalls escape it. It may lead to the sort of congestion on the pavements to which my hon. Friend was referring. I cannot give a detailed or authoritative answer but no doubt the Treasury Minister will be able to do so, because stall owners throughout the country, from winkle stalls to hamburgers and hot pies and beans will be hanging on his every word. We would like some convincing answer from him.
Eating habits are changing and will change more rapidly in future. The continental habit of eating out will grow and it is conceivable that more food will be consumed outside the household than inside it. For these reasons I hope that the Minister will consider the points I have put to him and which some of my hon. Friends have put to him through interventions.
Captain Walter Elliot: Hon. Gentlemen opposite can indulge in a good deal of fun over this Schedule. We all enjoyed it but I am glad to hear that their opposition is not that serious.
Mr. Carter: Yes, it is.
Captain Elliot: I should like to contradict the assertion by the hon. Member for Heywood and Royton (Mr. Joel Barnett) that this series of Amendments is aimed at simplifying the Bill. Consider Amenedment No. 93. The substitution of:
" by a person seated in "
for "on" would cause a great deal of chaos and confusion when it came to attempting to assess those seated on a stool and eating sandwiches as opposed to those standing and eating them. With Amendment No. 21 there is the question of deciding what is an educational establishment. That would he very difficult, and in any case I do not see why such places should be exempted from the tax.
9.0 p.m.
The point which I wish to make concerns the increased cost in workers' can-
1432
teens. There is a wide range of places of that sort attached to businesses as well as industry where employees can obtain cheap and good meals. They are regarded as one of the attractions of the place of employment, and it is a valuable attraction. The hon. Member for Northfield (Mr. Carter) said that all food should be exempt from tax. It was not exempt when his party was in office because selective employment tax was paid. Can my hon. Friend the Financial Secretary say what difference, if any, is made by removing SET and imposing the value added tax? Is it possible to make a calculation?
Mr. Gordon Oakes: The fact that we have dealt lightly, good humouredly and sometimes facetiously with these Amendments does not mean that we are not serious about their effects. The purpose of Amendment No. 93 is to help the Government and to give a precise definition of catering, which the Bill manifestly fails to do, namely, if a person is seated in premises that is catering.
All the Amendments are designed to relieve of the tax those people who must go out to eat. Many people do not wish to eat in cafes or canteens but they must do so because they have to travel to work. This is a matter not of choice but of compulsion for them. Yet it is proposed to tax their food at 10 per cent. Perhaps hon. Members opposite want people not to eat in canteens but to take sandwiches to work or to school. In fact, the hon. and gallant Member for Carshalton (Captain Elliot) said "I do not see why education establishments should be exempt from this tax ". Of course he does not. That is the thinking of the Government who increased the cost of school meals and took away school milk. We on this side of the Committee think that they should be exempt because children attending them often stay for school meals because the school is some way from their homes.
Similarly people go to works canteens because they cannot get home for a meal. They will have the choice of eating the meal in the works canteen and paying a 10 per cent. tax on the food, which is as much food as the food they would eat in their home, or taking sandwiches. I thought that we had left behind the days when workmen had to take food to work in luncheon boxes and that now they

1433
were able to eat properly balanced meals. This tax discriminates against the person who, perforce, must eat in a canteen or school as against the person who can eat at home.
My Amendment has been tabled in a spirit helpful to the Government, although I detest the tax which they propose. Its object is to get them out of a difficulty. It would be helpful to the many thousands of fish and chip shop proprietors and other small caterers who will have to implement the tax. They will have to decide whether a person is chargeable for tax. What is a fish and chip shop proprietor to do—to put a notice in his shop saying, "Any person found eating any products in this shop will be subject to a 10 per cent. tax "? What will his customers think about it? What will they think if they have to leave?
Pollution was mentioned by my hon. Friend. People in the North of England often eat in fish and chip shops. It is customary for them, when they buy, bags of fish and chips, to start to eat them then and there. They may wander out and eat them, but very often it happens that they start eating them in the shop, when they are served. That is an ordinary eating habit. A while ago I put down a Question for written answer by the Treasury and I was told very specifically that if people started to eat fish and chips in a shop they would be liable for tax.
What will the proprietor of a fish and chip shop do? Suppose on his premises he has tables or stools, or a shelf at which people stand and eat fish and chips—doing no harm to anybody, but rather doing a great deal of good because they will not be dropping any of their purchases outside and causing pollution. If this Amendment goes through, then, if a person is seated the proprietor knows whether he will pay tax—but suppose the person is standing up? I know hon. Members are laughing, but this is the sort of complication which arises with this ridiculous tax, and these are the difficulties we get into when the Government bring in such a tax as this. I am trying to help to resolve some of the difficulties.
By my Amendment tax will be paid in respect of a person who sits at a table
1434
on the premises, and the proprietor will know that. It is a simple Amendment which I think will help the Government out of a difficulty. What will a proprietor do? My hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) is a Lancashire Member, as I am, and he knows that in a fish and chip shop there may be tables where people can very often sit to eat their fish and chips at no extra cost. One can take the fish and chips outside, and people take plates to take them home.
How will the proprietor know whether or not he is within the £5,000 turnover limit? What will he do? He will say. "All my customers took them out ". Of course he will. How will he be able to estimate how much of the fish and chips which he sold were sold to people who ate them on the premises, and whether he has gone over the £5,000 limit? He will not sit like a calculating machine when he ought to be frying fish and chips. although hon. Members opposite, by producing this proposal in the Bill, seem to want him to do so.
The Bill as it stands is loosely drafted, and this is a taxing statute in which every word matters. What do the Government mean by" on the premises "? They are thinking in terms of a café or shop, I suppose. Hon. Members opposite, as well as hon. Members on this side, on a fine day enjoy a walk round St. James's Park. In St. James's Park there is a café. That café, I understand, is part of the Royal Park. If I go to that café and buy some cakes and take them to a seat within the same Royal Park, am I not still on the premises? How does the proprietor who served me know whether I shall eat them there or whether I shall bring them into this Chamber to eat them?
The whole phrasing in the Bill as it stands is too loose. By the words "on the premises" people do not know precisely what the Government mean, and in a taxing statute they ought to be able to know, because the Government should spell out precisely what they mean, and whom they mean to tax and whom they do not. I repeat, it is not hon. Gentlemen opposite who will have to do the calculations and work out the tax, but it will be simple, ordinary, decent people serving the public. They do not want to break the law; they do not want to defraud the Inland Revenue. They just want to

1435
know where they stand under the imposition of this tax.
I hope the Government will see some sense in some of these Amendments, not only mine about whether a person is seated or not, but other Amendments which are much more important. It has to be remembered that some persons are obliged to eat out—at school or factory; it is not always a question of choice, of pleasure, in going to a café.
Mr. Arthur Lewis: I will develop the point made by my hon. Friend the Member for Widnes (Mr. Oakes). The working man's usual dining place is the pub—when he happens to be in employment. That is rare under this Government, but under a Labour Government working men were getting high incomes and the cost of living was lower, and many of the workers in my constituency used to have their lunch or, as they called it, their dinner, in the pub. Is a pub a catering establishment? I understand that pubs are licensed premises. Most pubs supply snacks—pie and beans, sausages, bubble and squeak, cheese and pickled onions. There are tables in the pub, but the customers do not usually sit at the tables; they prefer to stand at the bar, have a pint of beer and eat their snacks.
My hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) mentioned the £5,000 limit. There might be a public house next dor to a small café which provided the same sort of food and which, because it was below the £5,000 limit would be zero-rated—
Mr. Joel Barnett: It would not be zero-rated; it would be exempt, which is a different thing.
Mr. Lewis: What I meant was that the café would have an unfair advantage over the next-door public house.
In my constituency, because of the various wicked Measures introduced by the Government and the savage way in which they have attacked old-age pensioners, the sick and the disabled, we have had to introduce meals on wheels. The service is run by the Royal Women's Voluntary Service and charitable organisations. They are not catering establishments—or are they? People do not eat those meals seated in a café. The facilities provided are not the same as those provided at the Wembley Stadium
1436
by a travelling fish and chip van where people may eat their fish and chips on the spot or take them away. The food for the meals-on-wheels service is cooked either at a school or at a catering establishment, and the meals are taken to people's homes. Meals are also delivered to the sick and the disabled. Will these meals be exempted or zero-rated, or will they be chargeable to tax?
Captain W. Elliot: The hon. Gentleman seems to be trying to make a point about the difficulty of defining a catering establishment. Will he show me in Schedule 4 where a catering establishment is mentioned?
Mr. Lewis: I have not mentioned "catering establishment ". Some of my hon. Friends have been talking about the various types of food that would be liable to VAT, and I have been giving one or two other examples. The question has been raised whether stalls would attract VAT. My hon. Friend the Member for Birmingham, Northfield (Mr. Carter) mentioned a number of stalls, but left out one of the most important in London —Tubby Isaacs, which sells jellied eels. I do not know whether that would be regarded as a catering or food establishment and would be liable to VAT. I hope the hon. Gentleman will explain the situation.
9.15 p.m.
Whether we like it or not, it appears that we shall go into the Common Market, but hon. Members on both sides of the Committee are not in favour of VAT being imposed. I believe that the reason that these Amendments have little chance of success is that the Government do not wish to do anything to prejudice the type of taxes which are already in being in the Common Market countries.
There are certain of my right hon. and hon. Friends on the Opposition Front Bench who are in favour of going into the Common Market on any terms —though, of course, I exclude my hon. Friend the Member for Dudley (Dr. Gilbert) who is at the moment the only honourable exception. But even my pro-Market hon. Friends must know that VAT will eventually be imposed on many items, including food. I am certainly opposed to entry into the Common Market, and I am very much against the imposition of VAT on food.

1437
In France and other Common Market countries there is already a value added tax on food. I understand the Government's difficulties. They do not want to make concessions now only to find that next year, after entry into the EEC, they will be told by the other Common Market countries that we in this country will have to impose the same taxes as are imposed in the Community at large. We certainly will not be able to move Amendments if the Commission—
The First Deputy Chairman: Order. I hope the hon. Gentleman will not test the patience of the Chair too sorely.
Mr. Lewis: I will not go into detail, Miss Harvie Anderson, but this is relevant to what we are discussing. Will the Minister explain what will be the deleterious effects of this tax on this country after entry into the Common Market? I will not go into detail, but will content myself by saying that this is probably an important reason why the hon. Gentleman will not be in a position tonight to give way on these Amendments.
The Minister of State, Treasury (Mr. John Noll): I have no doubt that this debate will be enshrined in the annals of Parliament as "the fish and chip debate". However, before coming to the comments of the hon. Member for Heywood and Royton (Mr. Joel Barnett) on his fish and chip shop example, I ought to mention the basic principle of VAT.
The tax is intended to be broadly based and to fall upon consumption. In designing VAT my right hon. Friend the Chancellor of the Exchequer has sought to tax all consumer expenditure on goods and services. By definition, such a tax must include meals out. In doing that, my right hon. Friend has succeeded in keeping the rate down to 10 per cent. But it is the broad base of the tax which enables a large revenue yield to be obtained with such a modest rate. These are fundamental points to a discussion of these Amendments.
At the same time, the Government are aware that indirect taxation in the forms of purchase tax and SET bears heavily on the lower income groups. As my right
1438
hon. Friend said in his Budget statement, VAT has been designed deliberately with the interests of low income families in mind. It was to relieve this section of the community that zero-rating was introduced for all those items of expediture which form a high proportion of the low income family's budget, and that relates especially to food.
The charge which has been made constantly that VAT will bear more heavily on low income families than SET and purchase tax is entirely without foundation—
Mr. Carter: The Minister of State has repeated what his right hon. Friend the Chancellor of the Exchequer said about all food being zero-rated. What is more, it is in the Bill. However, will he now say categorically that when we are in the EEC, should the Conservative Party still be in power, the British Government will use the veto in order to keep a zero-rating on food in this country?
Mr. Nott: I will come to that point in a moment. All food will not be zero-rated. The hon. Gentleman said that traditionally in this country food was exempt from tax. Of course, some items of food bear purchase tax now. The hon. Gentleman was not correct. What is more, some items of food bear SET, which we are abolishing. That tax also enters into food prices. I will come to the hon. Gentleman's point about the Common Market in a moment. If he will allow me, I will complete my opening remarks before dealing with that.
If it is appreciated that food is zero-rated with the principal intention of providing relief for low income families, bearing in mind at the same time that it is a general principle of VAT that it should be a tax on all consumer expenditure, surely it is inconsistent not to apply VAT to meals out, to catering, to restaurants, to canteens and to other such establishments.
Amendment No. 12 seeks to zero-rate catering establishments with an annual turnover not exceeding £10,000. while leaving larger catering establishments subject to VAT at the standard rate. The Committee will be aware that the Government's proposals envisage exemption, not zero-rating, for all traders with an annual turnover in taxable goods and services not exceeding £5,000. The Opposition's

1439
Amendment would extend to this sector the wider relief of zero-rating and would apply it in the catering sector alone to traders with a turnover not exceeding £10,000 I must tell the hon. Gentleman that, apart from the fact that a concession of this sort would be bound to lead to pressure from traders in all sorts of other businesses throughout the economy, it would be likely to lead to economic distortions within the catering sector itself.
I presume that the object of the Amendment is to help small businesses, but it is not by any means certain that it would do even that. For instance, an establishment which supplies other goods and services as well as catering would be taxable on its catering supplies if the turnover exceeded £10,000, even if the turnover in catering itself was less than £10,000. I think that the hon. Gentleman's question about a canteen in a company and whether the £10,000 limit would apply purely to the output of the canteen or be taken in with the output of the firm as a whole is an example of that. In fact, it would apply to the firm's turnover as a whole.
The effect of the Amendment would be to zero-rate a small luxury restaurant of the sort which some of the hon. Gentleman's right hon. Friends frequent. The right hon. Member for Leeds, East (Mr. Healey) no doubt eats caviar in a small luxury restaurant. Under the Amendment, to take a figure of £10,000 could mean that that luxury restaurant selling caviar would be zero-rated, whereas a more humble abode of the kind which the hon. Gentleman and I attend, perhaps slightly larger and with a bigger turnover, where simple fare is available, would be taxable. Drawing the line where the hon. Gentleman seeks to draw it would throw up many more anomalies than exist now.
1 was interested to learn that the hon. Gentleman has a great concentration of fish and chip shops in his constituency. It is a most interesting and important factor in this debate. I was also fascinated to learn that he spent so much of his time last weekend tramping around visiting them. He performed an excellent constituency service, but he should know that under the Bill—his suspicions were correct—if he wishes to avoid VAT he will have to wrap his fish and chips in the Heywood Advertiser—I think that
1440
that is the name of his local newspaper—and take them out of the establishment. It is a pity that he cannot wrap them in the St. Ives Times and Echo,because I am sure that they would taste very much better. It is the case that if the fish and chips are consumed on the premises they are liable to VAT, but if they are taken away they are not.
[Mr. HAROLD GURDEN in the Chair]
Mr. Alexander W. Lyon: The only proper way to eat fish and chips—and I speak with some experience—is out of a newspaper as they are given to the purchaser, with lots of salt and vinegar. If someone who buys fish and chips proceeds to eat them as he gets them in his hand and walks out of the shop still eating them, will he pay half the 10 per cent. rate, or will he be zero-rated up to the moment when he reaches the door?
Mr. Nott: If the purchaser consumes his fish and chips on the premises, the trader is liable. If he does not consume them on the premises, the trader is not liable. I think that the hon. Gentleman must make up his mind about where he will consume his fish and chips.
Mr. Oakes: The hon. Gentleman spoke about fish and chips being consumed on the premises. Does he mean wholly consumed on the premises, or starting to be consumed there? That is the kind of difficulty that we are in.
9.30 p.m.
Mr. Nott: I am coming to the accounting side of it, because the fish and chip shop proprietor will be faced with this problem. I realise that this situation may seem anomalous, but it derives directly from the Government's determination to zero-rate food. In doing this the Government obviously have to make a distinction between food which is consumed on the premises—in a restaurant, canteen OT fish and chip shop—and food which is taken away, which would normally be food which is bought in a retail shop and taken home.
Mr. Dalyell: Why "obviously "? What is obvious about this?
Mr. Nott: I shall answer that question, although I do not think that the hon. Gentleman was present when the debate

1441
first began. The reason is that—I withdraw the word "obviously "—if catering were to be excluded in the way suggested, if it were to be zero-rated in accordance with the suggestion of the hon. Member for Heywood and Royton, the cost would be about £130 million. The effect of this clearly would be very serious upon the basic rate of VAT.
As I have said, my right hon. Friend is determined to maintain the wide coverage of the tax in order that he can have a low and simple rate of 10 per cent.
Mr. Arthur Lewis: Who said that that is low?
Mr. Nott: I appreciate the problem and I shall come to the hon. Member's point. of establishments which supply both food to eat on the premises and food to take away, a good example would be that given by the hon. Member for Heywood and Royton, of the Chinese restaurant. Many Chinese restaurants provide food to take away and you can also sit in the restaurant and have your chop suey and use your chopsticks in that way. I apologise, Mr. Gurden; I should not have said "your chopsticks ". But the hon. Gentleman can use his, inside or outside the Chinese restaurant. In this case, it is intended to apply a very simple form of retailers' accounting scheme which will enable such establishments to divide those items of their output which are taxable and those which are not. This will be a very simple procedure which will be proposed by Customs and Excise in due course.
Mr. Brian Walden: On that point, though it has always been understood that there will be a certain amount of evasion, which one wants to keep to a minimum, it has also been the principle of the Inland Revenue that it does not introduce the kind of taxation which it knows will lead to wholesale avoidance—in this case, evasion, not avoidance. If the Government do this, will it not be the case that there is not the slightest chance that anyone, unless he is very carefully supervised by Customs and Excise—which he cannot be, given the number of personnel available—will make a fair return on this? However simple the formula devised, is not the method wide open to evasion? On those grounds, would it not be sensible to accept the Amendment?
Mr. Nott: One of the principal complaints of the Opposition is about the enforcement provisions. It is quite clear that there will be a considerably greater number of taxable persons. There is a problem of evasion with any tax. This is something that we accept. Therefore, we are proposing certain enforcement provisions which will enable spot checks to be made in just the sort of case which the hon. Gentleman mentions. But there are opportunities for evasion in other taxes. The hon. Gentleman's suggestion that evasion will be widespread, or is now widespread, is not accurate.
Dr. Gilbert: Before we come to the question of accountability, will the hon. Gentleman say a little more about the geography? Where I come from, Dudley, we quite clearly have more sophisticated eating habits than certain of my hon. Friend's constituents. My constituents tend to take their fish and chips outside and eat them in their cars. If the car is still on the car park, is it on the premises? We must have some idea, because a formula will later be introduced for apportionment as between inside and outside catering. How will that be decided?
Mr. Nott: If the hon. Gentleman wishes to eat his fish and chips in his car outside the premises, I am sure they will not be taxable—
Dr. Gilbert: In the car park.
Mr. Nott: Even in the car park.
I come on to the winkles, the jellied eels, so beloved in the East End of London, the haggis, the pork and bean pies and all the various other items of food mentioned in the debate.
Sir G. Nabarro: Worcestershire sauce.
Mr. Nott: My hon. Friend has an important Amendment to move later on wines and spirits, and I will include Worcestershire sauce.
Sir G. Nabarro: My hon. Friend must not mislead the Committee. I rebuke him at once. All my Amendments are concerned with alcoholic beverages. Lea and Perrins Worcestershire Sauce, the original Worcestershire Sauce, which dates from before I arrived in Worcestershire, has nothing whatever to do with alcoholic beverages, and is a wholly nonalcoholic foodstuff.
Mr. Nott: I am quite aware of that. I consume it myself, and it is an extremely attractive food.
I realise that there are serious problems of definition in many areas, but we intend to approach the matter in a practical way in consultation with all the traders concerned. Any attempt to define in a statutory form all the matters raised in this debate would throw up even greater anomalies than exist in, for example, the purchase tax system. There will be consultations with traders in all these areas, and I am convinced that definitions will be arrived at in the case of all the items mentioned which are to the satisfaction of the traders concerned. If it is not possible for the traders to agree a definition with the Customs and Excise, which I do not think is likely to happen, they can appeal to the appeals tribunal.
Mr. Carter: The hon. Gentleman has gone rather further on the question of stalls, which although put in a humorous way was not frivolous. Many millions of pounds are spent on food consumed from them. In Note 3 a definition is given concerning consumption on the premises. Consumption from stalls is surely neither on nor off the premises.
Mr. Nott: I take the hon. Gentleman's point. But 30 examples have been given tonight, and to try to define all of them in statutory form would throw up great absurdities. This will be a matter of discussion between the Customs and Excise and the traders concerned. I am sure it will be possible to arrive at sensible and flexible arrangements in each case.
Mr. Dempsey: Will the hon. Gentleman deal with the van trading at the roadside? A person could easily purchase a bowl of pea brae at the roadside, drink some of it, and throw the rest down in the gutter, defying all the laws on food and hygiene, and be exempt from VAT according to the hon. Gentleman's definition.
Mr. Nott: I find it a little difficult to follow the hon. Gentleman's example. I think he was asking about the position if he were to buy something at a stall—
Mr. Dempsey: A van.
Mr. Nott: —and tip it down a drain.
1444
I must move on, because there are many other points to deal with. I come to Amendment No. 93.
Mr. Arthur Lewis: The Minister of State has not dealt with my serious point about old-age pensioners, the sick and the disabled who have "meals on wheels ".
Mr. Nott: I will deal with that point. Under Amendment No. 93 the hon. Member for Widnes (Mr. Oakes) proposed to confine the taxation of food supplied in the course of catering to food supplied for consumption by persons seated in the premises in which the supply is made. If the Amendment were accepted it would create far more problems than it would solve. In many establishments, such as coffee bars and pubs, seating is not available to all the clientele, and neither the proprietor nor the customer would know at the time the food was supplied whether the customer would be taking a seat. I appreciate that the Amendment is intended to simplify matters for the fish and chip shop, for pubs and for cafés. But if it were accepted the shop would still have to apply a different tax treatment on supplies to standing customers from supplies to seated customers and this would be very complicated.
Amendment No. 80 was referred to by the hon. Member for Heywood and Royton when he said that it was anomalous to tax essential expenditure on meals by workers who were unable to get home to lunch. The answer is that it would be quite impossible to draw a satisfactory line between so-called essential meals and so-called luxury meals in cafés, say, outside the works. Another argument of his was that workers' canteens should not be taxed because they provided a sort of welfare service within the plant. But many firms do not have canteens and their employees have to use cafés and pubs and other eating places near their works. There would be complaints, therefore, of unfair competition if workers in canteens were relieved of the tax and nearby cafés were not. To avoid that anomaly I am sure it is right that all meals out, whether in canteens or cafés, should be taxable.
The hon. Member for West Ham, North (Mr. Arthur Lewis) spoke of his

1445
pub. If he has a snack in his pub it will be taxable.
Mr. Austen Albu: Has the Minister of State not overlooked the fact that canteen meals are nearly always subsidised?
Mr. Nott: If they are subsidised, the price at which they are purchased by the individual in the plant will be lower than it would otherwise be and therefore the VAT will be lower since it is levied on the price. The more the meal is subsidised, the lower the VAT will be. I hope that is a satisfactory answer to the hon. Member.
We come finally to the zero-rating of catering schools and educational establishments. This matter was raised by my hon. and gallant Friend the Member for Carshalton (Captain W. Elliot). Schedule 5 Group 6, which exempts supply of any goods or services incidental to the provision of any education provided by a school or university, also exempts meals supplied to students, and therefore such meals in a local authority or other school will be exempted.
I can assure the hon. Member for West Ham, North that "meals on wheels" are not supplied in the course of business so they are outside the scope of the tax. As for his comments on the EEC, I do not think that hon. Members would wish me once again to launch into a lot of debate on the question of VAT and the EEC directives. This has been referred to in practically every debate we have had, and I should be quite happy to deal with it, but it does not arise on the Amendment.
9.45 p.m.
Mr. Arthur Lewis: I do not want a long debate. I want a short answer. Can we have an assurance, notwithstanding what happens or what might happen in the EEC about VAT, that the Government can, if they want, carry out whatever we may decide in this House, without let or hindrance from the EEC?
Mr. Nott: I will answer it quickly, but I hope the hon. Gentleman will not raise the point again. I can only refer to the remarks made by my right hon. Friend on 9th May when he was asked by the right hon. Member for Leeds, East the same question about the taxation
1446
of food in the EEC. My right hon. Friend replied:
" There is no obligation under the Treaty of Rome, and as a result of the decisions which have been taken by the Six to impose VAT on food."—[OFFICIAL REPORT, 9th May, 1972: Vol. 836, c. 1154.]
Mr. Arthur Lewis: I said VAT generally, not only on food.
Mr. Nott: That does not arise on this Amendment.
Finally, I will revert to the basic idea underlying the tax. It is designed in principle to fall on all consumer expenditure on goods and services. My right hon. Friend has zero-rated certain items because they make up a large proportion of the low income families' budget. On that basis there is no justification to zero-rate any meals eaten out. It is the broad coverage of the tax which enables approximately the same amount to be raised as is now raised by SET and purchase tax. It will be gathered by the modest and simple rate of 10 per cent. If these Amendments are accepted the standard rate of VAT will have to be raised. I therefore invite my right hon. and hon. Friends to vote against these Amendments when the time comes.
Mr. Joel Barnett: The Minister of State started by telling us that if he accepted our Amendment to limit the VAT on catering to a turnover of £10,000 a year it would create distortions. Any hon. Member who was listening to the reply he has given about the anomalies, about which I and other hon. Members spoke, would find it difficult to accept what he was saying. The hon. Gentleman referred to what might happen if he accepted our Amendment to limit the VAT only to those establishments with a turnover above £10,000 a year—in other words, to avoid paying tax on food eaten by ordinary working people in canteens, fish and chip shops and the rest. For example, he asked: "What about the little shop that sells caviar with a turnover of £10,000 a year?" I do not know what sort of establishment he knows that sells caviar with a £200 a week turnover. Perhaps he will have a word with me afterwards, as it must be very cheap caviar.
Our purpose was to seek to assist him, as he knows and as we pointed out, to remove some of the crazier anomalies.

1447
We also are attempting to help those with low incomes who are compelled for a variety of reasons to eat in fish and chip shops and similar establishments.
The Minister told me that concerning fish and chip shops and Chinese restaurants with take-out food I should still be able to eat food from a Chinese restaurant with my chopsticks, but outside the restaurant, and thereby be free of VAT. He then went on to say that he will have a simple form of accounting for the proprietor to decide what proportions are eaten inside and outside. I must say that they will need chopsticks to work out the proportions that are eaten inside and outside.
The Minister did not deal with many of the interventions about chips. For example, what will happen if a man buys his chips and, as is usual, goes outside to eat them? That is free of VAT. But if he finds it is raining and he walks back inside the proprietor presumably says, "Would you mind giving me another 10p?" That is precisely what he is saying.
Then the hon. Gentleman accuses us of proposing more distortions and anomalies by exempting under £10,000 a year. The hon. Gentleman seemed to imply that all my constituents eat their fish and chips from the Heywood Advertiser. I hope that they do because I have a weekly article in that paper which includes my photograph. It would be helpful if everyone did so.
The hon. Gentleman will be surprised to know that in the North-West large numbers of ordinary working people eat at fish and chip shops. This is not a minority interest. They will now be told by the fish and chip shop proprietor when they ask the price, "Hang on a minute while I work it out." I can imagine what this will do to the fish and chip shop customers and, I hope, to their votes.
Mr. Alan Haselhurst: The hon. Gentleman is exaggerating, and he must know it. He must realise that in the part of the country from which we both come by far the majority of people who go into fish and chip shops as a regular routine go during
1448
their factory lunch hour or in the evenings to purchase fish and chips to take home. In the evening they take them out and eat them in their cars and in the street. The tell-tale of rubbish shows that most people go outside.
[Sir ROBERT GRANT-FERRIS in the Chair]
Mr. Barnett: The hon. Gentleman should have been here when I opened. I said that I did some research at the weekend and that in almost every fish and chip shop I found one or a number of tables or people eating at the counter. The point is that not everybody eats inside. I also pointed out that many factory workers and schoolchildren go into fish and chip shops and eat there.
Consider the problems which will be created. The Minister said that there would be spot checks against evasion. It will be an extremely interesting job for these extra 6,000 members of the bureaucracy to visit Chinese restaurants and fish and chip shops and decide whether they have allocated an adequate proportion of fish and chips to be taxed. We are getting to an absurd situation.
Sir G. Nabarro: On the subject of the bureaucracy and fish and chips, the hon. Gentleman misses the point. An essential ingredient in the consumption of fish and chips all over Britain is a generous douching with Worcestershire sauce which is zero-rated as a foodstuff. Therefore, no value added tax ultimately accrues to the fish and chip shop proprietor for the Worcestershire sauce ingredient.
Mr. Barnett: I am sorry to disappoint the hon. Gentleman, but in Lancashire, at any rate, people eat fish and chips with large doses of salt and vinegar.
We really are in an absurd situation. The Minister gave no answers to the points raised in the debate. I must therefore ask my right hon. and hon. Friends to vote for the Amendment.
Amendment negatived.
Amendment proposed: No. 12, in page 96, line 17, after ' catering ', insert:
' by an establishment with annual turnover in excess of £10,000 '.—[Mr. Joel Barnett.]
Question put,. That the Amendment be made:—
The Committee divided:Ayes 201, Noes 219.

Bruce-Gardyne, J.

Holt, Miss Mary

Price, David (Eastleigh)

Bryan, Paul

Hordern. Peter

Prior, Rt. Hn. J. M. L.

Burden, F. A.

Hornby, Richard

Proudfoot, Wilfred

Butler, Adam (Bosworth)

Hornsby-Smith, Rt.Hn.Dame Patricia

Pym, Rt. Hn. Francis

Campbell, Rt.Hn.(Moray&Nairn)

Howell, Ralph (Norfolk, N.)

Ramsden, Rt. Hn. James

Carlisle, Mark

Hutchison, Michael Clark

Redmond, Robert

Chapman, Sydney

James, David

Rees, Peter (Dover)

Chichester-Clark, R.

Jenkin, Patrick (Woodford)

Rees-Davies, W. R.

Churchill, W. S.

Jessel, Toby

Renton, Rt. Hn. Sir David

Clark, William (Surrey, E.)

Jopllng, Michael

Rhys Williams, Sir Brandon

Clarke, Kenneth (Rushcliffe)

Joseph. Rt. Hn. Sir Keith

Ridley, Hn. Nicholas

Clegg, Walter

Kellett-Bowman, Mrs. Elaine

Ridsdale, Julian

Cockeram, Eric

Kershaw, Anthony

Rippon, Rt. Hn. Geoffrey

Cooke, Robert

Kilfedder, James

Roberts, Michael (Cardiff, N.)

Cooper, A. E.

Kimball, Marcus

Roberts, Wyn (Conway)

Cordle, John

King, Evelyn (Dorset, S.)

Rodgers, Sir John (Sevenoaks)

Corfield, Rt. Hn. Frederick

King, Tom (Bridgwater)

Rossi Huoh (Hornsey)

Cormack, Patrick

Kinsey, J. R.

Rost. Peter

Costaln, A. P.

Kitson, Timothy

Russell, Sir Ronald

Critchley, Julian

Knight, Mrs. Jill

Sir John-Stevas Norman

Crouch, David

Knox David

d'Avigdor-Goldsmid, Maj.-Gen.James

Lamont, Norman

Sharpies, Richard

Dean, Paul

Legge-Bourke, Sir Harry

Shaw, Michael (Sc b gh & Wnitby)

Deedes, Rt. Hn. W. F.

Le Marchant, Spencer

Shelton, William (Clapham)

Digby, Simon Wingfield

Lloyd, Ian (P'tsm'th, Langstone)

Sinclair, Sir George

Dixon, Piers

Loveridge, John

Skeet, T. H. H.

Drayson, G. B.

Luce, R. N.

Soref, Harold

du Cann, Rt. Hn. Edward

McLaren, Martin

Speed, Keith

Edwards, Nicholas (Pembroke)

McMaster, Stanley

Spence, John

Elliot, Capt. Walter (Carshalton)

McNair-Wilson, Michael

Sproat, lain

Elliott, R. W. (N'c'tle-upon-Tyne, N.)

McNair-Wilson, Patrick (NewForest)

Stanbrook, Ivor

Eyre, Reginald

Maddan, Martin

Stewart-Smith, Geoffrey (Belper)

Farr, John

Madel, David

Stoddart-Scott, Col. Sir M.

Fell, Anthony

Marten, Neil

Stokes, John

Fenner, Mrs. Peggy

Mather, Carol

Stuttaford, Dr. Tom

Fidler, Michael

Maude Angus

Sutcliffe, John

Fisher, Nigel (Surbiton)

Mawby, Ray

Tapsell, Peter

Fletcher-Cooke, Charles

Maxwell-Hyslop, R. J.

Taylor, Sir Charles (Eastbourne)

Fookes, Miss Janet

Meyer, Sir Anthony

Taylor, Edward M.(G' gow, Cathcart)

Fortescue, Tim

Mills, Peter (Torrington)

Taylor, frank (Moss Side)

Fowler, Norman

Mills, Stratton {Belfast, N.)

Tebbit, Norman

Fox, Marcus

Miscampbell, Norman

Temple, John M.

Fry, Peter

Mitchell, Lt.-Col.C.(Aberdeenshire, W)

Thomas, John Stradling (Monmouth)

Gibson-Watt, David

Moate, Roger Molyneaux, James

Thompson, Sir Richard (Croydon, S.)

Gilmour, Sir John (Fife, E.)

Molyneaux, James

Tilney, John

Godber, Rt. Hn. J. B.

Money Ernie

Trew, Peter

Gorst, John

Tugendhat, Christopher

Gower, Raymond

Monks, Mrs. Connie

Turton, Rt. Hn. Sir Robin

Grant, Anthony (Harrow, C.)

Monro, Hector

van Straubenzee, W. R.

Green, Alan

Montgomery, Fergus

Vaughan, Dr. Gerard

Griffiths, Eldon (Bury St. Edmunds)

Mudd, David

Waddington, David

Grylls, Michael

Murton, Oscar

Walker, Rt. Hn. Peter (Worcester)

Gummer, Selwyn

Nabarro, Sir Gerald

Walker-Smith, Rt. Hn. Sir Derek

Hall, Miss Joan (Keighley)

Neave, Airey

Walters, Dennis

Hall, John (Wycombe)

Nicholls, Sir Harmar

Ward, Dame Irene

Hall-Davis, A. G. F.

Noble, Rt. Hn. Michael

Warren, Kenneth

Hamilton, Michael (Salisbury)

Normanton, Tom

Weatherill, Bernard

Hannam, John (Exeter)

Nott, John

White, Roger (Gravesend)

Harrison, Col. Sir Harwood (Eye)

Onslow, Cranley

Wiggin, Jerry

Haselhurst, Alan

Oppenheim, Mrs. Salty

Wilkinson, John

Havers, Michael

Osborn, John

Winterton, Nicholas

Hawkins, Paul

Owen, Idris (Stockport, N.)

Wolrige-Gordon, Patrick

Hayhoe, Barney

Page, Graham (Crosby)

Wood, Rt. Hn. Richard

Hicks, Robert

Page, John (Harrow, W.)

Woodhouse, Hn. Christopher

Higglns, Terence L.

Parkinson, Cecil

Worsley, Marcus

Hiley, Joseph

Percival, Ian

Hill, John E. B. (Norfolk, S.)

Pike, Miss Mervyn

TELLERS FOR THE NOES:

Hill, James (Southampton, Test)

Pink, R. Bonner

Mr. Hamish Gray and

Holland, Philip

Powell, Rt. Hn. J. Enoch

Mr. Victor Goodhew.

Question accordingly negatived.
Amendment proposed:No. 80,in page 96, line 17,after 'cating' insert:
'other than at factory or office canteens'.—[Mr.Healey]

Division No. 176.1

AYES

[10.5 p.m.

Abse, Leo

Armstrong, Ernest

Benn, Rt. Hn. Anthony Wedgwood

Albu, Austen

Ashton, Joe

Bennett, James (Glasgow, Bridgeton)

Allen, Scholefield

Atkinson, Norman

Blenkinsop, Arthur

Archer, Peter (Rowley Regis)

Barnett, Joel (Heywood and Royton)

Boardman, H. (Leigh)

The committee divided:Ayes 200.Nose217.

Booth, Albert

Horam, John

Palmer, Arthur

Boyden, James (Bishop Auckland)

Houghton, Rt. Hn. Douglas

Pardoe, John

Broughton, Sir Alfred

Huckfield, Leslie

Parry, Robert (Liverpool, Exchange)

Brown, Bob (N'c'tle-upon-Tyne, W.)

Hughes, Mark (Durham)

Pavitt, Laurie

Brown, Hugh D. (G'gow, Provan)

Hughes, Robert (Aberdeen, N.)

Pendry, Tom

Brown, Ronald (Shoreditch & F'bury)

Hughes, Roy (Newport)

Pentland, Norman

Buchan, Norman

Hunter, Adam

Prentice, Rt. Hn. Reg.

Campbell, 1. (Dunbartonshire, W.)

Janner, Greville

Prescott, John

Carter, Ray (Birmingh'm, Northfield)

Jeger, Mrs. Lena

Price, J. T. (Westhoughton)

Clark, David (Colne Valley)

Jenkins, Hugh (Putney)

Price, William (Rugby)

Cohen, Stanley

John, Brynmor

Probert, Arthur

Coleman, Donald

Johnson, James (K'ston-on-Hull. W.)

Rankin, John

Concannon, J. D.

Jones, Barry (Flint, E.)

Rhodes, Geoffrey

Corbet, Mrs. Freda

Jones, Dan (Burnley)

Cox, Thomas (Wandsworth, C.)

Jones, Gwynoro (Carmarthen)

Richard, Ivor

Cronin John

Judd, Frank

Robert, Albert (Normanton)

Crosland, Rt. Hn. Anthony

Kaufman, Gerald

Robertson, John (Paisley)

Cunningham, G. (Islington, S.W.)

Kelley, Richard

Rose, Paul B.

Cunningham, Dr. J. A. (Whitehaven)

Kerr, Russell

Ross, Rt. Hn. William (Kilmarnock)

Dalyell, Tarn

Lambie, David

Davidson, Arthur

Lamborn, Harry

sandelson, Neville

Davies, Ifor (Gower)

Lamond, James

Sheldon, Robert (Ashton-under-Lyne)

Davis, Terry (Bromsgrove)

Latham, Arthur

Shore, Rt. Hn. Peter (Stepney)

Deakins, Paul

Lawson, George

Short, Mrs. Renee (W'hampton, N.E.)

Dell, Rt. Hn. Edmund

Leadbitter, Ted

Silkin, Rt. Hn. John (Deptford)

Dempsey, James

Lee, Rt. Hn. Frederick

Silkin, Hn. S. C. (Dulwich)

Doig, Peter

Leonard, Dick

Sillars, James

Dormant), J. D.

Lever, Rt. Hn. Harold

Silverman, Julius

Douglas, Dick (Stirlingshire, E.)

Lewis, Arthur (W. Ham, N.)

Skinner, Dennis

Duffy, A. E. P.

Loughlin, Charles

Small, William

Eadie, Alex

Lyon, Alexander W. (York)

Smith, John (Lanarkshire. N.)

Edelman, Maurice

Lyons, Edward (Bradford, E.)

Spearing, Nigel

English, Michael

McBride, Neil

Spriggs, Leslie

Evans, Fred

McCartney, Hugh

Stallard, A. W.

Ewing, Henry

McElhone, Frank

Steel, David

Faulds, Andrew

Mackintosh, John P.

Stonehouse, Rt. Hn. John

Fernyhough, Rt. Hn. E.

Maclennan, Robert

Strang, Gavin

Fisher, Mrs. Doris (B1 ham, Lady wood.

McMillan, Tom (Glasgow, C.)

Summerskill, Hn. Dr. Shirley

Fitch, Alan (Wigan)

Mahon, Simon (Bootle)

Taverne, Dick

Fletcher, Ted (Darlington)

Marks, Kenneth

Thomas, Rt.Hn.George (Cardiff, W.)

Foley, Maurice

Marsden, F

Thomson, Rt. Hn. G. (Dundee. E.

Ford, Ben

Marshall Dr Edmund

Tinn, James

Forrester, John

Mason, Rt. Hn. Roy

Tomney, Frank

Fraser, John (Norwood)

Mayhew, Christopher

Torney, Tom

Galpern, Sir Myer

Meacher, Michael

Tuck, Raphael

Gilbert, Dr. John

Mellish, Rt. Hn. Robert

Urwin, T. W.

Ginsburg, David (Dewsbury)

Mendelson, Jhon

Varley, Eric G.

Gordon Walker, Rt. Hn. P. C.

Wainwrlght, Edwin

Gourlay, Harry

Mikardo, lan

Walden, Brian (B'm'ham. All Saints)

Grant, George (Morpeth)

Millan, Bruce

Wallace, George

Grant, John D. (Islington, E.)

Miller. Dr. M, S.

Watkins, David

Griffiths, Eddie (Brightside)

Mitchell, R. C. (S'hampton, Itchen)

Weitzman, David

Griffiths, Will (Exchange)

Molloy, William

White, James (Glasgow. Pollok)

Grimond, Rt. Hn. J.

Morgan, Elystan (Cardiganshire)

Whitehead, Phillip

Hamilton, James (Bothwell)

Morris, Alfred (Wythenshawe)

Whitlock, William

Hamilton, William (Fife, W.)

Morris, Charles R. (Openshaw)

Williams, Alan (Swansea, W.)

Hamling, William

Murray, Ronald King

Williams, Mrs. Shirley (Hitchln)

Hannan, William (G'gow, Maryhill)

Oakes, Gordon

Williams, W. T. (Warrington)

Hardy, Peter

Ogden,Eric

Wilson, William (Coventry, S.)

Harper, Joseph Oram, Bert

Woof, Robert

Harrison, Walter(Wakefield)

Orbach, Maurice

Hattersley, Roy

Orme, Stanley

TELLERS FOR THE AYES:

Healey, Rt. Hn. Denis

Oswald, Thomas

Mr. John Golding and

Heffer, Eric S.

Padley, Walter Mr.

James Wellbeloved.

Hooson. Emlyn

Pagat, R. T.

NOES

Adley, Robert

Brown, Sir Edward (Bath)

Corfield, Rt. Hn. Frederick

Allason, James (Hemel Hempstead)

Bruce-Gardyne, J.

Cormack, Patrick

Atkins, Humphrey

Bryan, Paul

Costain, A. P.

Awdry, Daniel

Burden, F. A.

Critchley, Julian

Balniel, Rt. Hn. Lord

Butler, Adam (Bosworth)

Crouch, David

Barber, Rt. Hn. Anthony

Campbell, Rt.Hn.G.(Moray&Nairn)

d'Avigdor-Goldsmid, Maj.-Gen..

Berry, Hn. Anthony

Carlisle, Mark

Dean, Paul

Biffen, John

Chapman, Sydney

Deedes, Rt. Hn. W. F.

Biggs-Davison, John

Chichester-Clark, R

Digby, Simon Wingfield

Blaker, Peter

Churchill, W. S.

Dixon, Piers

Boardman, Tom (Leicester, S.W.)

Clark, William (Surrey, E.)

Drayson, G. B.

Boscawen, Robert

Clarke, Kenneth (Rushcliffe)

du Cann, Rt. Hn. Edward

Bowden, Andrew

Clegg, Walter

Edwards, Nicholas (Pembroke

Braine, Sir Bernard

Cockeram, Eric

Elliot, Capt. Walter (Carshalton)

Bray, Ronald

Cooke, Robert

Elliott, R. W. (N'c'tle-upon-Tyne, N.)

Brinton, Sir Tatton

Cooper, A. E.

Eyre, Reginald

Brocklebank-Fowler, Christopher

Cordle, John

Farr, John

Fell, Anthony

Legge-Bourke, Sir Harry

Roberts, Michael (Cardiff, N.)

Fenner, Mrs. Peggy

Le Marchant, Spencer

Roberts, Wyn (Conway)

Fidler, Michael

Loverldge, John

Rodgers, Sir John (Sevenoaks)

Fisher, Nigel (Surbiton)

Luce, R. N.

Rossi, Hugh (Hornsey)

Fletcher-Cooke, Charles

McLaren, Martin

Rost, Peter

Fookes, Miss Janet

McMaster, Stanley

Russell, Sir Ronald

Fortescue, Tim

McNair-Wilson, Michael

St. John-Stevas, Norman

Fowler, Norman

NcNair-Wilson, Patrick (New Forest)

Sharpies, Richard

Fox, Marcus

Maddan, Martin

Shaw, Michael (Sc'b'gh & Whitby)

Fry, Peter

Madel, David

Shelton, William (Clapham)

Gilmour, Sir John (Fife, E.)

Mather, Carol

Sinclair, Sir George

Godber, Rt. Hn. J. B.

Maude, Angus

Skeet, T. H. H.

Gorst, John

Mawby, Ray

Soref, Harold

Gower, Raymond

Maxwell-Hyslop, R. J.

Speed, Keith

Grant, Anthony (Harrow, C.)

Meyer, Sir Anthony

Spence, John

Green, Alan

Mills, Peter (Torrington)

Sproat, lain

Griffiths, Eldon (Bury St. Edmunds)

Mills, Stratton (Belfast, N.)

Stanbrook, Ivor

Grylls, Michael

Miscampbell, Norman

Stewart-Smith, Geoffrey (Belper)

Gummer, J. Selwyn

Mitchell, Lt.-Col.C.(Aberdeenshire, W)

Stoddart-Scott, Col. Sir M.

Hall, Miss Joan (Keighley)

Moate, Roger

Stokes, John

Hall, John (Wycombe)

Molyneaux, James

Stuttaford, Dr. Tom

Hall-Davis, A. G. F.

Money, Ernie

Sutcliffe, John

Hamilton, Michael (Salisbury)

Monks, Mrs. Connie

Tapsell, Peter

Hannam, John (Exeter)

Monro, Hector

Taylor, Sir Charles (Eastbourne)

Harrison, Col. Sir Harwood (Eye)

Montgomery, Fergus

Taylor, Edward M.(G'gow, Cathcart)

Haselhurst, Alan

Mudd, David

Taylor, Frank (Moss Side)

Havers, Michael

Murton, Oscar

Tebbit, Norman

Hawkins, Paul

Nabarro, Sir Gerald

Temple, John M.

Hayhoe, Barney

Neave, Airey

Thomas, John Stradling (Monmouth)

Hicks, Robert

Nicholls, Sir Harmar

Thompson, Sir Richard (Croydon, S.)

Higgins, Terence L.

Noble, Rt. Hn. Michael

Tilney, John

Hiley, Joseph

Normanton, Tom

Trew, Peter

Hill, John E. B. (Norfolk, S.)

Nott, John

Tugendhat, Christopher

Hill, James (Southampton, Test)

Onslow, Cranley

Turton, Rt. Hn. Sir Robin

Holland, Philip

Oppenheim, Mrs. Sally

van Straubenzee, W. R.

Holt, Miss Mary

Osborn, John

Vaughan, Dr. Gerard

Hordern, Peter

Owen, Idris (Stockport, N.)

Waddington, David

Hornby, Richard

Page, Graham (Crosby)

Walker, Rt. Hn. Peter (Worcester)

Hornsby-Smith.Rt.Hn.Dame Patricia

Page, John (Harrow, W.)

Walker-Smith, Rt. Hn. Sir Derek

Howell, Ralph (Norfolk, N.)

Parkinson, Cecil

Walters, Dennis

Hutchison, Michael Clark

Percival, Ian

Ward, Dame Irene

James, David

Pike, Miss Mervyn

Warren, Kenneth

Jenkin, Patrick (Woodford)

Pink, R. Bonner

Weatherill, Bernard

Jessel, Toby

Powell, Rt. Hn. J. Enoch

Wells, John (Maidstone)

Jopling, Michael

Price, David (Eastleigh)

White, Roger (Gravesend)

Joseph, Rt. Hn. Sir Keith

Prior, Rt. Hn. J. M. L.

Wiggin Jerrv

Kellett-Bowman, Mrs. Elaine

Proudfoot, Wilfred

Wilkinson, John

Kershaw, Anthony

Pym, Rt. Hn. Francis

Winterton, Nicholas

Kilfedder, James

Ramsden, Rt. Hn. James

Wolrige-Gordon, Patrick

Kimball, Marcus

Redmond, Robert

Wood, Rt. Hn. Richard

King, Evelyn (Dorset, S.)

Rees, Peter (Dover)

Woodhouse, Hn. Christopher

King, Tom (Bridgwater)

Rees-Davies, W. R.

Worsley, Marcus

Kinsey, J. R.

Renton, Rt. Hn. Sir David

Kitson, Timothy

Rhys Williams, Sir Brandon

TELLERS FOR THE NOES:

Knight, Mrs. Jill

Ridley, Hn. Nicholas

Mr. Hamish Gray and

Knox, David

Ridsdale, Julian

Mr. Victor Goodhew.

Lamont, Norman

Rippon, Rt. Hn. Geoffrey

Question accordingly negatived.
Mr. Carter: I beg to move Amendment No. 13, in page 96, line 31, leave out from beginning to end of line 13 on page 97.
The Chairman: With this Amendment we can take the following Amendments:
No. 14, leave out lines 34 to 38.
No. 15, in line 35, leave out from ' fruits ' to end of line 38.
No. 19, in page 97, leave out lines 7 to 13.
No. 20, in line 8, leave out potato crisps '.
No. 74, leave out lines 14 to 16.
Mr. Carter: I have dual interests in confectionery matters. The first stems from the position which I adopted on the previous Amendments, namely, that all food should be zero-rated for value added tax. I adopt the same attitude towards the question of confectionery. The second interest is that I have in my constituency Cadbury of Bournville, which employs about 8,000 people. It is a large employer of local labour and over the years it has provided a considerable number of very stable employment opportunities for my constituents. Cadbury is a part of a very large industry which employs some 700,000 people. It ought to be said that the industry's products are food. Chocolate, crisps, biscuits, nuts—all these things are food.
[Mrs. JOYCE BUTLER in the Chair]
10.15 p.m.
Another very important fact about the confectionery industry's trade is that its products form a very high proportion of the food consumed by low-income families. For many a child a bar of chocolate and one or two others of the products of the confectionery industry will make up a substantial part of the day's diet.
I know and appreciate that purchase tax is already levied on confectionery. Earlier today there were remarks about who first imposed the tax and who increased and decreased it to the greatest extent. I would remind the Committee that it was a Conservative Chancellor who first imposed purchase tax on confectionery, and it was levied at a time when,
1458
it was said, there was great economic difficulty. It is my submission now, and it is the submission of Cadbury and of the whole of the confectionery industry, that, due to the efforts of a Labour Government in building up the economy, we no longer live in a time of great economic difficulty, and, therefore, that this tax should be removed.
The Conservative Party, when in Opposition, pledged itself to remove selective employment tax. The removal of SET and purchase tax would leave confectionery, with other items of food, in a non-taxable state, but, in any event, we are surely entitled to argue, with this new value added tax being proposed, that a fresh approach should be adopted. Food should not be taxed, and that old-established principle should be reintroduced as a basic principle across the whole food range.
With respect to confectionery the following arguments weigh very heavily in favour of having confectionery and other foods exempted. It is my belief, and it is the belief of the confectionery industry, that to impose value added tax on that industry will weaken our arguments once we are inside the Common Market. If food is zero-rated, that could be used in argument in future by our EEC colleagues as a ground on which we in Britain should extend value added tax to other areas of food. If we decide not to impose VAT on confectionery, we shall be in a much stronger bargaining position within the EEC.
Another argument in favour of zero-rating for confectionery is that in Germany—which is our strongest competitor —confectionery is rated at 5½ per cent.— a lower rate than the standard rate—whereas the proposed rate for confectionery in this country is the standard rate. To put our home industry in this unfavourable position would jeopardise its export prospects within a wider Community where the buoyant German confectionery trade operates under much more favourable conditions. Confectionery has always been a major export industry.
Because of the buoyancy of the confectionery trade and the success of its operations—particularly Cadbury—it has been able to pioneer new types of food

1459
production. Convenience foods and frozen foods are examples that spring to mind. Any new tax which is imposed could seriously jeopardise the pioneering efforts of the past.
When purchase tax was first levied on confectionery it was followed by an immediate reduction in trade—
Sir G. Nabarro: Although there was a temporary fall in consumption of sweets and confectionery after purchase tax was levied on them for the first time in 1961, there was only a temporary drop, after which consumption went up again sharply, much to the detriment of children's teeth.
Mr. Carter: I am sorry to say that the hon. Member for Worcestershire, South (Sir G. Nabarro) is wrong once again.
Sir G. Nabarro: I am right, as always.
Mr. Carter: The hon. Gentleman has not been right at all today—and this is no surprise. I have it from a most reliable source, the Alliance which governs the affairs of the confectionery trade, that ever since purchase tax was introduced consumption has diminished. The argument of the trade, which is borne out by the fact, is that the imposition of higher tax will have an even more deleterious effect upon consumption. If it is said that sweets have a harmful effect on children's teeth, I suppose sweets could be singled out for the imposition of VAT, but we are not discussing sweets alone, we are discussing confectionery, which covers a very wide range of goods.
The confectionery trade has been treated unfairly in the proposal that VAT should be chargeable on items of confectionery. The impression has been given in the Green Paper and thereafter that unfair discrimination in industry and commerce will be removed.
Mr. Raymond Gower: Could the hon. Gentleman, instead of merely making general statements, give figures of the turnover in respect of the imposition of purchase tax on confectionery to show that there has been a definite decline and that the industry has suffered badly from the imposition of the tax?
Mr. Carter: I have the figures with me and I can assure the hon. Gentleman that I am not plucking them out of the air. Perhaps I may be able to introduce these figures a little later in the discussion.
Sir G. Nabarro: The fact is that sweets and confectionery increased enormously in price between 1961 and 1971. It would be a difficult calculation to reduce them back to the 1961 pre-purchase tax prices in order to discover whether the volume consumed had or had not increased. I believe that it has increased substantially, and also the price.
Mr. Carter: The hon. Gentleman is wrong as usual. He will find that chocolate consumption has declined in percentage terms per head of population since the introduction of purchase tax. It may be argued that that development is due to factors other than the introduction of purchase tax, but it seems more than a coincidence that the decline has set in.
I would remind the Committee that we are not simply talking of sweets, but of crystallised fruits, beverages, possibly Worcestershire sauce and even cider.
Sir G. Nabarro: This again is an absolute red herring. The fact is that Worcestershire sauce by Lee & Perrins and by Heinz is zero-rated as a foodstuff. It is not in a separate category as a condiment, sweet or confectionery.
Mr. Carter: I cannot see why Worcestershire sauce should be zero-rated and ice lollies for small children should be subject to this tax. It comes strangely from the hon. Member for Worcestershire, South, who earlier in the day was complaining about VAT being levied on Scotch whisky, now to argue that it is appropriate for VAT to be levied on sweets. Surely whisky is more harmful than sweets. I have gone far enough to establish that confectionery should be zero-rated—
Sir G. Nabarro rose
Hon. Members: Sit down.
Sir G. Nabarro: We are in Committee, Mrs. Butler, and the hon. Gentleman has given way.
Mr. Buchan: Could we not be protected from this idiot?
The Temporary Chairman: If the hon. Gentleman gives way, it is perfectly in order for another hon. Member to intervene.
Sir G. Nabarro: I am grateful to the hon. Member for giving way. All I was trying to tell the hon. Gentleman was that I am being scrupulously careful in observing my election undertakings. We wrote in our election manifesto that a value added tax would not apply to food except for those few items already subject to purchase tax. Therefore the whole Conservative Party is committed to VAT on sweets and confectionery because the Conservative Party brought in purchase tax on those items in the Budget of 1961.
10.30 p.m.
Mr. Arthur Lewis: On a point of order, Mrs. Butler. It is a serious point seeking clarification for the future guidance of hon. Members. Quite rightly and making a factual statement of the truth, my hon. Friend the Member for Renfrew, West (Mr. Buchan) called the hon. Member for Worcestershire, South (Sir G. Nabarro) an idiot. For the guidance of hon. Members, is "idiot" a parliamentary expression, because it may be that many hon. Members will choose to use it on future occasions?
The Temporary Chairman: It is not a desirable expression.
Sir G. Nabarro: Further to that point of order, Mrs. Butler. As the hon. Member for Birmingham, Northfield (Mr. Carter) very properly gave way to me, because this is a sensible argument on a complex matter which affects large industries, if the expression is undesirable, will you cause it to be withdrawn?
The Temporary Chairman: I did not say that. I think that it is undesirable, and I hope that hon. Members will not use it again.
Mr. Carter: Unfortunately, that exchange was not long enough for me to turn up the information that the hon. Member for Barry (Mr. Gower) wanted, but I assure him that I am in possession of it.
As for the reference by the hon. Member for Worcestershire, South to the Conservative Party manifesto, I do not think that we should embark on the contents
1462
of it now. It might be greatly to the displeasure of right hon. and hon. Gentlemen opposite if we peered too deeply into its contents.
I hope that the Financial Secretary will take note of the quite serious point which the confectionery trade has put to me and about which I have been in correspondence with the Chancellor of the Exchequer. There is great concern about the way in which VAT will be applied to products which will be sold in retail outlets next Easter. The Minister is probably aware of submissions already made to the Treasury to the effect that products sold at Easter will be ordered between now and Christmas, will be manufactured during that period, and in most cases will be dispatched either to warehouses or to retailers two or three months before the date of sale. Therefore they will incur purchase tax, and there is the distinct possibility, unless we can get some clear statement from the Treasury, that they will have to bear VAT as well.
Obviously one has to arrive at a suitable period. The trade has been informed that there will probably be a fortnight during which time purchase tax can be rebated on items already purchased. Bit clearly for Easter eggs this will not be anywhere near long enough. While at this hour it may seem a rather obscure and not too important point, it is extremely important for the confectionery trade. It accounts for a very large part of its manufacturing capacity and effort in the course of a year.
On that point alone, I ask the Financial Secretary whether he cannot give serious consideration to it and assure those concerned that they will not be asked or expected to bear both purchase tax and VAT on Easter products.
Mr. Higgins: I am sure that the hon. Gentleman appreciates that I am seeking to understand what he is saying. Why does distribution from the wholesaler to the retailer have to take place so long before the moment of sale?
Mr. Carter: It is a question of storage. It is as simple as that. I have been supplied with information by the trade, and I merely pass it on to the Committee without verification, but I have no doubt that it is accurate. I am told that it is impossible to set aside sufficient space

1463
for the storage of Easter eggs. This probably applies to other products at other times of the year, such as Christmas, but they will not be affected by the introduction of VAT. If the Minister is unsure of the position, will he undertake to enter into early negotiations with the trade as this will affect the working capacity and possibly the employment prospects of firms—for example, Cadbury—in the coming months when they will set about manufacturing next year's Easter eggs?
I believe that confectionery should be exempted from VAT. To impose it will weaken our argument that all food should be exempted from the tax. Conceding the Amendment would put us in an infinitely stronger bargaining position when we go into Europe and when, as I hope will happen, this Government, or their successors, will argue for zero-rating of all food.
Sir G. Nabarro: The Conservative Party made the position abundantly clear during the General Election when it debated the merits of various alternative forms of indirect taxation of a sumptuous character. It stated that if VAT were decided upon, either in the form discussed and reported on by Professor Richardson 10 years ago, or in an alternative form similar to that operated in France, or West Germany, or in certain Scandinavian countries, food would be exempted, but that certain items which were made subject to purchase tax in the Budgets of 1961 and 1969—of which there are five groups, namely, sweets and confectionery, soft drinks, roasted peanuts and crisps, pet foods, and finally ice cream, of which three, soft drinks, sweets and confectionery and ice cream were brought in and made subject to purchase tax by a Conservative Chancellor in 1961, and two, pet foods, and crisps and roasted peanuts were brought in by a Socialist Chancellor in 1969—would be made subject to VAT.
What has happened with sweets and confectionery is that in accordance with that election undertaking they remain subject to VAT as a successor to purchase tax. They were made subject to purchase tax in 1961, and they have attracted purchase tax since then. The present proposals for VAT—and I hope that the hon. Member for Birmingham,
1464
Northfield (Mr. Carter) will note this—on sweets and confectionery reduce the incidence of tax on them. For example, purchase tax at 22 per cent. was originally levied on the wholesale price. That was reduced by two-elevenths by a Conservative Chancellor—and I hope that the Minister of State will check these figures for me—bringing it down to 18 per cent. on wholesale, which is 13 per cent. on retail. The 13 per cent. purchase tax on retail will become 10 per cent. on VAT. Therefore, we have an overall reduction on sweets and confectionery.
As I said in an earlier speech on value added tax, I am not in favour of any form of unilateral relief. I believe that all foodstuffs, all fuel, all transport, all these excepted items, ought to be subject to value added tax in order to secure a much lower rate, which is the general practice in Europe. But if we exclude any items at all, we should be ill advised to take one particular group, such as sweets and confectionery, and exclude it from value added tax. It would immediately give rise to a hundred other anomalies of a parallel kind.
If the whole group of five items, including particularly ice cream, is to be taxed under value added tax, which is the proposal in the Bill, it would be best to leave it as it is for the time being until all food is brought into value added tax in harmony with European practice. —[HON. MEMBERS: "0h."] It is no good saying Oh ". I was quite frank about this in a speech on Second Reading. I have always been quite frank that I would prefer a 5 per cent. overall value added tax applied universally, right across the board, to all items of manufacture, all services and all foodstuffs—a 5 per cent. rate or less—rather than a 10 per cent. rate of a selective character, as we have now.
The more items we except from the value added tax, whether manufactures or services, the higher the rate of tax has to be; the greater the number we bring into the net and the greater the volume, the lower the tax will be.
Mr. James Lamond: Would not that course of action be contrary to the Tory Party's election manifesto, about which the hon. Gentleman has just been boasting? Surely the hon. Gentleman is not advocating a policy

1465
which is contrary to that for which he stood at the General Election?
Sir G. Nabarro: No, because these are matters for the future. For the time being, we have gone to the point of excluding foodstuffs, save only the five items which are subject to purchase tax. What is done later is an entirely different matter. It will be subject to debate in the House of Commons, and in the context of what happens with harmonisation of tax with the European Economic Community countries if we join the EEC on 1st January next.
All of that is hypothetical. I do not favour or support any unilateral relief for particular products because it leads to endless special pleading on every kind of service as well as manufacture and is wholly to be deprecated in the interests of taxation equity.
Mr. Geoffrey Rhodes: I am grateful to the hon. Gentleman for his customary courtesy in giving way. The point which the Opposition are trying to make is that if there is harmonisation of fiscal levies, such as VAT, throughout the Community, which is a principle stated by the Community, it is inevitable that those hon. Members who take a pro-Market view—I exempt the hon. Gentleman in this respect—are faced with the logic that sooner or later they will be faced with a requirement which applies in every country of the Community at present except Italy, which has not yet introduced VAT, of levying a tax on the nation's basic necessity, foodstuffs. Some of us consider that the Government Front Bench would be a little more honest if they admitted this fact to the people of this country.
Sir G. Nabarro: I can claim with due humility that I have been talking about indirect taxation in the House of Commons for more than 20 years, and every aspect of purchase tax, selective employment tax and now value added tax. I invite the hon. Gentleman to turn up the OFFICIAL REPORT for 30th July, 1971, where he will find, in Written Answers, a detailed schedule showing the rates of value added tax applicable in all the countries of the EEC save only Italy, and demonstrating that there is a different rate of value added tax on food in each
1466
of five of the six EEC countries; indeed, in many of those countries, foodstuffs are classified under two or three different rates. It is, therefore, a matter of great complexity.
One either puts all food in or one leaves all food out. I would prefer it that way. But the proposal in the Bill is useful for a year or two, which is exactly in consonance with the Conservative Party's election undertaking, which was to exclude food generally and to adopt value added tax as a form of indirect taxation applicable only to the five groups that formerly attracted purchase tax. That seems to me both reasonable and logical. Although I would like these five groups to be excluded this year, I am prepared to run it for a year and to see what happens and move to exclude them next year. That seems to me a sensible approach to the problem.
10.45 p.m.
Mr. Lamond: Is the hon. Member telling us that the Tory election pledge to zero-rate food was to be understood by the electorate to be carried out only as long as it was expedient and that it might change at any moment if 'the Government felt it was necessary?
Sir G. Nabarro: No, that is a wholly false allegation. What will probably happen is that the value added tax will be introduced in the form we are now proposing in April, 1973. My guess is that the next General Election will take place in October, 1974. We shall therefore have a run of perhaps 18 months with the tax in its present proposed form. It would be sensible then to debate the matter on the hustings. Wherever I went on the last General Election whether in the Black Country, Coventry, Nuneaton, Lichfield, Tam-worth, or any of the other Midland industrial seats, the electorate, knowing my interest in purchase tax, asked me whether I would support the value added tax. I always replied the same.
I was the first person in the Conservative Party to write this in any newspaper in detail. I said in the Daily Telegraph in 1967 that I would abolish purchase tax and selective employment tax—I included capital gains duty as well but that has not yet materialised as an item for abolition—and substitute for them a value added tax. I have always

1467
believed this to be the sensible thing to do, and although I am opposed to going into Europe I am a proponent of the value added tax on a comprehensive basis. I am not alone in this view. I see that several national journals wrote when the Bill was published that it made no sense at all to exclude great tranches of national activity such as food, fuel, transport, housebuilding and the remainder.
I would prefer the tax to be truly comprehensive and at a commensurately lower level than at present. I believe that this will come. I shall instruct my hon. and right hon. Friends in the Treasury properly, year by year, until my objectives are achieved. I am sure this will be absolutely in harmony with the European countries, should we join the EEC.
Mr. Carter: Can the hon. Member explain what benefit would be gained by debating at the hustings how we should level, and on what items we should level, the tax, when, having signed the Treaty of Rome, we are bound by the effective decision of the Community? This is especially so as the Government are not prepared to use the power of their veto in advance on the question of zero-rating of food, quite apart from the other issues connected with VAT.
Sir G. Nabarro: We shall have a powerful voice in the councils of Europe in debating harmonisation or otherwise. I am opposed to going into Europe, but if I accept the democratic decision of the House and we eventually enter Europe, I should hope to finish up in Brussels myself, dealing with taxation matters, pleading for rational harmonisation of indirect taxation in order that the very situation to which the hon. Member for Birmingham. Northfield alluded, with bars of chocolate—because Cadbury's chocolate is largely produced in his constituency—should not arise. The hon. Gentleman was less than fair when he said that the West Germans levy a value added tax on chocolate at 5½ per cent. We will levy value added tax, under the proposals in the Bill, at 10 per cent. What the hon. Gentleman did not say was that the French rate of value added tax on—
Mr. Carter rose—
Sir G. Nabarro: Sit down a minute. I will give way in a minute. I have given way six times already. The French rate of value added tax is much higher than the German rate on sweets and confectionery. The Belgians and the Dutch also make very good confectionery. There is a chocolate house called "Nabarro" in Amsterdam—I commend it to hon. Gentlemen opposite—where the value added tax is not of a swingeing character. though the chocolate is of a very high order. I now give way.
Mr. Carter: The reason I did not mention France was that it has no confectionery industry of any account whatsoever.
Sir G. Nabarro: What?
Mr. Carter: The French have a very small confectionery industry. Our biggest competitor is the German industry. We should he in direct competition with Germany. For the German confectionery industry to have a considerably lower value added tax rate than us, 5½ per cent.—a difference of almost 100 per cent.—would put us at a severe disadvantage.
Sir G. Nabarro: I will leave the hon. Gentleman to the tender mercy of the French confectionery manufacturers who will no doubt instruct him that their industry is substantially larger than ours.
I believe it is wholly harmful to relieve unilaterally a single product—[Interruption.] That is what is being pleaded here. I have already said today that if it came to the Broadway United Football Club. the Worcestershire County Cricket Club, the Vale of Evesham Swimming Pool Association, or any sporting activity, I should subject them all to value added tax in the interests of fiscal equity. The application of this tax should be both ubiquitous and universal right across the board. Therefore, I oppose any move by sectional interests opposite, constituency or otherwise, Schweppes-Cadbury or the remainder, to except—
Mr. Carter: The hon. Gentleman is always wanting us to stop importing apples.
Mr. Lamond: Humbugs.
Sir G. Nabarro: A delectable sweet. Humbugs are a favourite form of confectionery, but they cannot be related to the words of wisdom I am uttering in this plea tonight. I hope that the Committee will reject the proposal to leave out sweets and confectionery.
Mr. Alexander W. Lyon: I cannot follow the argument of the hon. Member for Worcestershire, South (Sir G. Nabarro), who argues for equity in these matters and for dealing with food on a comprehensive basis by either all in or all out, and yet has Amendments down which would seek to leave out at least spirits and beer and wine—or British wine.
Sir G. Nabarro: Will the hon. Gentleman permit me one intervention and then I will keep completely quiet? Alcoholic beverages are the subject of a following Amendment of mine—three Amendments in fact. The hon. Gentleman must be fair. They are enormous revenue raisers already through excise duties, none of which applies to sweets and confectionery.
Mr. Lyon: If the hon. Gentleman's argument is to be followed to its logical conclusion, spirits and beer and wine, being food by the definition in the Bill, he ought to be consistent in seeing that item 3 is kept as an excepted item if he is arguing that we ought to have no further deviation from the present position.
I do not accept that. In my view, there is some strength in the point which he makes that, if we were talking about this in the context of the relationship with the pre-existing purchase tax position, since the exceptions have been made for purchase tax and have been maintained for a substantial time, it would be equitable to continue them into the future. But the situation has radically changed.
It is now proposed to establish a completely new tax base, and to do so in the context of entry into the Community. Therefore, we are beginning again, and we should wipe the slate clean, trying as far as possible to make the tax simple and to avoid all unnecessary complication. We should take the general principle that food should be excepted, because of its enormous importance to the average household budget.
1470
Accepting that principle, we must begin by saying that food includes all items of food, including the five excepted items in Schedule 4. I subscribe, therefore, to the argument advanced by my hon. Friend the Member for Birmingham, Northfield (Mr. Carter)—I almost said "for Cadbury and Bourneville "—that we ought to delete all the references to the excepted five items.
I have put down Amendments which would cover only the products of R own-tree, Mackintosh, Terry and Craven, but I accept as valid the argument of general principle. I put down my rather narrow Amendments because the standard rebuke to the argument of general principle is the one which the Chancellor put in his Budget statement, namely, that to delete all these items would be to add a loss of revenue of £150 million and, the base being rather narrower, one would, therefore, have to increase the 10 per cent. rate.
It is interesting that the loss to the Revenue on the catering trade, which we discussed earlier, would be about £120 million, according to the Minister of State, and on these five items the loss, according to the Chancellor, would be £150 million. The total of £270 million has to be set against a gross yield from VAT of, I understand, about £1,600 million. Thus, a substantial part of the total yield of VAT, which is now to cover an area of services which were not even within SET—there is a whole new area of tax revenue coming in—is still to come under the general heading of food. At the same time, however, the Government are committed to the general principle that food ought to be excepted from the VAT range.
I start with that basic issue of principle. Let us begin by wiping the slate clean and say that no food items ought to be included.
Mr. Higgins: We are reducing the total tax on food. I hear what the hon. Gentleman says now. It seems a little singular that he never said it, and never voted that way, when his party was in Government.
Mr. Lyon: I said that, if one relates this tax simply to the position heretofore, there is some strength in the argument that the five excepted items should

1471
be continued, and there is an overall fall in the burden of taxation on even these five items—
Mr. Brian Walden: I am sure that my hon. Friend will not fall for so palpable a trick as that. The tax on food may have gone down, but, when the things called levies are taken into account, the amount coming into the Exchequer has risen.
Mr. Lyon: I did not want to enter a dialectical debate of that kind and obscure the issue. I am prepared to concede the Financial Secretary's point, that there is a case for saying that, if we were continuing our domestic tax, the purchase tax, into VAT, there would be some point in keeping these excepted items. All I am saying is that we are considering it afresh and in the new circumstances one can look at the total rate.
[Mr. HAROLD GURDEN in the Chair]
11.0 p.m.
Until 1962, no items of food were taxed and then the then Chancellor, now Mr. Speaker, decided to put tax on a certain range of confectionery items. There was a considerable amount of criticism of that, but it was justified on the basis that we were in a period of financial stringency when the tax base had to be widened and new ways of finding tax had to be discovered. That was perhaps a legitimate argument in the context of purchase tax, which was a rigid tax. The argument for VAT is that it is a buoyant tax and that therefore one does not need constantly to be widening the tax base.
The same argument was used by my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) when he introduced purchase tax on potato crisps and peanuts in 1968. There again, he was arguing that because of the need to raise more revenue, to damp down demand, one could not simply put up existing rates but one had to widen the base again.
Therefore, this further incursion into food was permitted by the House. But we have changed the whole basis of the structure and are moving to a system which, of its nature, is buoyant rather
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than rigid and we do not have constantly to be widening the tax base. It seems right at this early stage to ask whether we need to tax food at all.
I recognise the loss which would accrue to the Revenue and that if the Government insist on getting the same amount of revenue, it would mean an increase in the rate on other items, but surely, in order to keep the logic of the system, it is right that we should at least begin, with the slate wiped clean. On that general issue of principle, the Committee should accept my hon. Friend's Amendment and mine.
Mr. Carter: A short while ago, my hon. Friend was on the subject of purchase tax and its introduction. I have discovered the reference I had to the fall in consumption with its introduction. May I remind my hon. Friend of the figures? They were eight ounces a week in 1961 and with the onset of purchase tax this fell by 1970 to 7.4 ounces.
Mr. Lyon: I was about to deal with the point raised by the hon. Member for Worcestershire, South who was changing his place, but before I do, if the Financial Secretary wants to raise a point, I will give way.
Mr. Higgins: Purely from the point of view of information, one would need to know what was happening to the relative price of chocolate, apart from taxation.
Mr. Lyon: The Financial Secretary has a legitimate point in saying that a fall in consumption may be due to other factors than purchase tax. Nevertheless, experience immediately after 1962 was that we had the highest consumption,per capita,of any country at about 8½ ounces falling to about six ounces. It picked up again over the succeeding years and has now been stable for a considerable time at 7½ ounces, so the hon. Member for Worcestershire, South was wrong in saying that it picked up to anything like the same kind of consumption as before the tax. It must follow from the fact that the fall was registered immediately after 1962 that the tax had a considerable effect on consumption. In the light of that my hon. Friend's point about the German tax at 5½ per cent. is valid. The German confectionery industry is by far our biggest competitor. The hon. Member for Worcestershire,

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South is right in saying that there is a French confectionery industry, but it is not nearly as strong a competitor of ours as is the German industry.
In the new opportunities which open up in the Common Market, we have very considerable advantages. Our confectionery manufacturing industry is very large and it is located in a number of very big companies with, on the whole, low unit costs. They have considerable experience in marketing their items by reference to a number of limited, well-known names to the consumer. This system of marketing is not widespread in Europe and still less in America.
It is for this reason that in Europe the average consumption is about 5½ ounces per head, having risen in recent years from about 4 ounces. We have the picture of a market where the consumption is rising but is nowhere near the per capita consumption in this country. We have in this country a domestic industry geared to selling in a much more efficient and aggressive way than its European competitors. It is therefore a hopeful sign for the British confectionery industry once we are in the Common Market.
But if we are to give a tax advantage to our major German competitor, whereby it has a 5½ per cent. rate of VAT and we have a 10 per cent. rate, clearly we are in difficulty. I know that exports can be exempted, but the effect on the domestic market of the tax at this level has repercussions for the export market as well. It is for this reason that our confectionery industry is very concerned that we should not start off with this disadvantage inside the Common Market.
The turnover of the British confectionery industry is about £450 million a year, and about £45 million, or 10 per cent. is in exports, so it is a considerable export earner. But another factor also causes me concern, as Member for a constituency where one-third of the population is employed in the confectionery industry. Rowntree-Mackintosh, by far one of the biggest of the firms, also has factories in Europe, one in Hamburg and another in Paris, which it has just taken over. In these circumstances, the firm may well have to choose its German outlet as the means of producing its Common Market products if the German factory is to be taxed at
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5½ per cent. while the York factories are taxed at 10 per cent. There may be reasons of economic prudence for concentrating production for Europe in Germany. I am sure that is not what the Chancellor intends.
I accept that this is largely a constituency point but it is of considerable importance because this group of factories employs about 20,000 people, and I am sure the situation is the same elsewhere. It is therefore a matter of general importance and I hope the Financial Secretary will pay some attention to it. Therefore, on a matter of principle and as a matter of practical expediency in helping this important British industry to get off to a good start in Europe, there is good reason for saying that the Government should remove these exceptions from the general zero-rating of food. 1 hope that the hon. Gentleman will respond in a favourable fashion.
I thought that my hon. Friend's remarks about the change-over from purchase tax to VAT were perhaps a little wide of the mask. Since the Minister responded to my hon. Friend's argument, I hope that he will say something about the scheme suggested by the industry for allowing the transitional period to be much easier upon the retailers than the system suggested by the Chancellor in his Budget Statement. It is true that the right hon. Gentleman made some concessions on these points but they are not concessions which assist an industry such as the confectionery industry where the whole of the retail outlets are geared to certain seasonal factors, such as trade at Christmas or Easter. We are particularly concerned about the trade at Easter. The products are manufactured in the autumn and go out to the retail outlets between January and Easter.
For the reasons given by my hon. Friend the Member for Birmingham, Northfield, a considerable amount of this has to be passed to retail distribution outlets long before it is likely to get into the shops for sale. The cost of storage for this huge weight, particularly at Easter, is so great that the manufacturers like to get the products off the premises as quickly as they can. That will cause considerable difficulties for them and the retailers, even allowing for the concession that purchase tax will be taken off

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some time before the introduction of VAT, and allowing for the other concession made by the Chancellor.
There is bound to be a certain amount of destocking in the period when the retailer is uncertain whether he will be caught twice on taxation for the same items. For that reason he is likely to want to destock. That would have catastrophic effects on the industry because production would be hindered. In the end it would mean a loss of jobs in my own and many other constituencies. I am sure it is not the Minister's intention that unemployment should be increased.
The other alternative is that the increase in price which would follow double taxation would permanently increase the price of confectionery. would not regard this as satisfactory because it is bound to affect consumption. I am sure the Minister would not regard that as satisfactory because it would be bound to affect the retail price index. For all these reasons I hope that the Minister will consider accepting the Amendment.
Captain W. Elliot: I agree with the hon. Member for York (Mr. Alexander W. Lyon) about the proportion of the low income group budget which is spent on food. I support the view that VAT will be particularly regressive unless this matter is dealt with, and I am glad that food generally is exempted.
Otherwise I found it difficult to believe my ears when I heard hon. Gentlemen opposite advocating tax exemptions and reductions. From 1964 to 1970 I sat on the benches opposite when the then Government retained purchase tax and introduced SET. We have already removed half of that. The hon. Gentleman's argument about these articles was settled long ago. For years attempts were made to bring this category of goods into the taxation net, and I believe that when it was done by the Conservative Party and maintained by the Labour Party it was right.
11.15 p.m.
My point to the Minister is this. We realise that the Government must get their revenue from somewhere. The present Government have made tremendous reductions in taxation. I wonder whether
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my hon. Friend could say exactly what exemption would cost. If these goods are exempted and the Government lose this revenue, presumably they will have to get it from other goods, which might be undesirable, as this category of goods should come into the VAT net. What would it cost the Government if it did not?
Mr. Dalyell: I do not represent anything like the concentration of the confectionery industry represented by my hon. Friends the Members for York (Mr. Alexander W. Lyon) and Birmingham, Northfield (Mr. Carter). However, I represent a number of smaller firms, like Patersons of Livingston, and I should like to emphasise two of their points.
The smaller firms, like the giants, have the same fear of German competition. The Minister must take this point seriously. In this industry much depends on exports, not only to Europe, but to third markets. One firm at Livingston exports more to Australia than it sells in Scotland. This is a fairly typical pattern. The difference between a 10 per cent. tax in this country and the 5½ per cent. borne by competitors in Europe is marked. I hope that the Government will give this point consideration.
The other issue is the tax holiday. It arises not only in relation to Easter but from the Government's view on stocking. Having accepted the invitation months before, I was a guest at the annual general meeting of the Cake and Biscuit Alliance in Scotland this weekend. I went to talk on a very different subject. but Mr. Michael Cadbury, Mr. Palmer, Mr. Porteous, Mr. Cramb and others cornered me to talk about the value added tax and its effect on stocking and the tax holiday. They said "We must know about it. We must be told in advance." If there are to be changes in 1973, from 1st January or from 1st February, it is important that the confectionery industry knows about them fairly soon.
What is the Government's philosophy on the question of the tax holiday? Is the rumour true that it will be a two-week tax holiday? Would it not be sensible to give the industry the benefit of the doubt and have an eight-week or ten-week holiday? Otherwise, as my hon. Friend the Member for York said, there will be

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double taxation and the effects, according to the industry, which we have no reason to disbelieve, will be permanent rather than temporary.
Mr. John Farr: I believe that my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) was incorrect when he said that we as a party undertook not to place VAT on foodstuffs except for certain special items subject to purchase tax. Prior to the last General Election the Labour Chancellor of the Exchequer, after successive questions from both sides of the House, gave an undertaking that no food would be subject to VAT except, he added as an afterthought, possibly some of the items then subject to purchase tax. The questions put to the Minister of Agriculture were put to the Conservative Chancellor of the Exchequer in 1970, and his answer was that it was not the policy of the Government to impose VAT on foodstuffs, except, possibly, those items which were already subject to purchase tax.
It is wrong to say that our election manifesto said that these food commodities would be subject to VAT. It was a possibility. The impression of many hon. Members was that whichever Government won the last election food as a whole would be exempt from VAT. I welcome Amendment No. 13. The hon. Member for Birmingham, Northfield (Mr. Carter) is absolutely right. It is wrong to put VAT on any items of foodstuffs for human consumption.
The new policy of agricultural support has moved from deficiency payments to import subsidies, and we must face the consequences of it. It will mean an additional cost to the housewife. When this policy comes into effect a family of four, two adults and two children, with an income of £20 a week, in a year will pay over £30 extra for their food. A family of six, two adults and four children, with an income of £1,500 a year, will be paying more than £50 a year extra for their food. We have to recognise this, and my right hon. Friend the Minister of Agriculture and his colleagues weighed these facts carefully when they took that decision. The exemption of foodstuffs from VAT would provide a little relief for the housewife.
Amendment No. 15 relates to chocolate-coated biscuits. In my constituency there
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is the big Nabisco Freer factory which specialises in that delicious commodity. Amendment No. 20 relates to potato crisps, and there is in my constituency the head office of Golden Wonder—the market leader in potato crisps. Biscuits are the highest selling commodity in the food shops. Four out of five households buy them every week. At present chocolate-coated biscuits bear purchase tax at 18 per cent., reduced from 22 per cent. in the July, 1971, mini-Budget. To exempt chocolate-coated biscuits from purchase tax and VAT entirely would remove an historic anomaly and a discriminatory and illogical tax.
Luxury items such as pheasant soup, tinned asparagus tips, Gold Blend coffee and certain specialist teas attract no tax whatever. It is therefore illogical that chocolate biscuits, which are a staple ingredient in many work people's lunch baskets, should be subject to VAT when these other specialist items are exempt. To remove these items from purchase tax or VAT and to zero-rate them will help considerably to boost production, and, indeed, will help to increase employment in my constituency and others. By expanding consumption it will help to encourage producers of certain specialist biscuit wheats.
Both political parties have lent a hand in keeping in existence the purchase tax on potato crisps, but there are many good reasons why the tax should be removed. The potato crisp is a product which has attained almost 100 per cent. acceptability. It is consumed by young and old, rich and poor, in all parts of the country, in all seasons of the year. It plays a part in main meals and snacks, and not many lunch baskets omit a packet of potato crisps. If within any normal meaning of the word potato crisps is not a food and worthy to be included within the scope of the principles of taxation related to food, what other product could more properly qualify?
It is worth remembering that as soon as purchase tax was imposed on crisps by the Labour Government in 1969 consumption immediately dropped by 20 per cent. Despite a large increase in sales between 1960 and 1968, since 1969 with the introduction of purchase tax on this product customer resistance has been maintained. That 20 per cent. loss in the market has never been regained and

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there is still a good deal of excess capacity in the industry. Plans by manufacturers to expand their activities in East Anglia and in the Midlands have had to be shelved because of the hold-up in the progress of sales. It is interesting to note that on average every man, woman and child in the United Kingdom consumes more than £1 worth of crisps each year.
Finally, I wish to emphasize that potato crisps are produced by an industry which gets all its raw materials, apart from frying fats, from the farmer. The industry takes 8 per cent. of the potato crop of the United Kingdom. I support the hon. Member for Birmingham, Northfield in drawing attention to the importance of omitting these items from the VAT provisions.
11.30 p.m.
Mr. Rhodes: I support the whole range of the Amendments and I trust that hon. Members will press them to a Division. I hope not to detain the Committee for long and, as I am paired after midnight, I hope that the Committee will quickly come to a decision so that I may register my vote.
I do not in any way represent the confectionery industry or the potato crisps industry, although there is a disused crisps factory in my constituency which may have been the victim of the levies mentioned by the hon. Member for Harborough (Mr. Farr). Almost without exception, the range of items that hon. Members seek to exempt from the levy of value added tax loom as the basic necessities and a larger proportion of the budgets of the poorer members of the community than of the budgets of the richer. The argument for the large-scale exemption of items that loom large in the budgets of the poorer members of the community is basically the argument against the value added tax as a whole.
Unlike some of my hon. Friends and some hon. Members opposite, I do not seek td recoup' the revenue lost by exempting these items by transferring an even heavier levy to other items subject to value added tax later. I would seek to remedy the loss of revenue by levying taxation according to the ability to pay and not according to the necessity to spend. For that reason, I support the Amendments.
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I accept that the Government have already committed themselves to zero-rating on food stuffs, but many of the other items which will not be exempt loom large in average household budgets, particularly those of my poorer constituents, and in the cost-of-living index. One such item is beer.
Several years ago, in an Adjournment debate, I suggested that the specific gravity of beer should be noted on the label on a beer bottle. That is by the way. However, it is a fascinating subject and I know that my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) is interested in the subject personally.
On that occasion the debate was answered by the then Minister of Agriculture, Fisheries and Food. When I asked why he was dealing with the matter, he said that beer was classified as a foodstuff. I am not sure who classified it, nor whether it is still so classified, but if it is classified in the cost-of-living index, why is it not given a zero-rating along with the other foodstuffs mentioned in the Schedule?
I am not sure that large-scale consumption of confectionery is good for the health of the nation, but, whatever my judgments about confectionery as a health item, it is a substantial item in the average household budgets of many of my constituents, a larger proportion in the budgets of those who live in the poorer parts of the constituency than the budgets of those who live in the richer areas.
I return to the basic proposition that I have argued in the last two days in Committee. We are debating the unfair effects of the value added tax, which is a tax on consumption and is therefore levied not on ability to pay but on necessity to spend. Rightly or wrongly, it happens to be one of the prices that have to be paid in logic by those who support our entry into the European Common Market.
As I said last night, I spent a lot of time as a delegate of this Parliament to the Consultative Assembly of the Council of Europe and Western European Union at the very time that value added tax was being introduced in several member countries of the EEC. Because it was passed directly to the consumer, in several instances it had an astronomic

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effect on the cost of living, particularly in Holland where it resulted in large-scale strike action.
If the Government are pledged to restrict the rise in the cost of living and if, of necessity, they have to pay the price of entry into the EEC—namely, the value added tax—they must seek to exempt items which loom large in the cost-of-living index. Although many items are covered by the Amendments, almost without exception they are those that loom large in the cost-of-living index.
The whole origin of the problem in Europe was that there was enormous tax avoidance, particularly in Italy and France, of fiscal measures which put a levy on the factors of production. It was found that up to 20 per cent., 30 per cent. —even 40 per cent.—of the income Governments expected to receive from taxes levied on factors of production—that is, on ability to pay—was avoided in some way or other. So the only way to get the revenue was to catch people where they could not avoid paying, which was the point of consumption. and VAT was one method of doing it.
That is all very well if the levy is made with some sense of social or moral purpose, but that is where I quarrel with the hon. Member for Worcestershire, South (Sir G. Nabarro). The hon. Gentleman wants it to be universal—just a simple all or nothing. I remind him, however, that any fiscal policy, at least on this side—although we have not always lived up to expectations there—has always been based on the argument that we should give preferential tax reliefs according to what are regarded as social necessities or requirements. We have sought to avoid taxing the nation's food. We have not always succeeded, but I can say that I have been consistent, because I have never voted, for example, for selective employment tax. There is, therefore, a strong case for exempting as many basic necessities as possible.
Since food has been mentioned, I give the Committee a warning and a prophecy. It is all very well the Government in this mid-term stage having this policy, and that policy may continue to the time of the next General Election—and the hon. Member for Worcestershire, South knows better than I when that will be. But, if not before that General Election then after it, in order to raise
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revenue and because of pressures for harmonisation in the Community, we shall not be allowed to be the only member of the Community that does not make a direct levy on basic foodstuffs. I regard it as humbug and hypocrisy, and an ignoring of the realities of the Community, to think that we can go on for long without taxing the people's food.
One of the basic reasons why I was driven, before the Labour Government went out of office, to oppose entry was precisely that I saw the unfairness of a fiscal system within the Community which increasingly transferred the burden of taxation from the factor of production to the point of consumption, including not only potato crisps and confectionery, and so on, but the basic foodstuffs.
Furthermore, when the time comes that we have to toe the line and meet the same requirements as the other members of the Community for levies on basic foodstuffs, the House will not have an opportunity to debate the matter as we usually would, because of the rules and regulations of the Community and the rules we have agreed here. We shall be lucky to get 1½ hours at the end of an evening to discuss what will be major increases in the taxation of the nation's foodstuffs.
I speak on this with a clear conscience, as I opposed the selective employment tax during the lifetime of my Government precisely because I did not agree with taxation levied on the capacity to spend, and I believed that selective employment tax levied on retail distributors would seep through as a levy on the nation's foodstuffs. It is true that the impact of selective employment tax was less than some of us forecast, because the competitive factor in the retail trade in, for instance, groceries limited that increase, but there is no denying that under the Labour Government that tax made a direct contribution to the rise in the cost of living. I have never denied it, and that is why I never supported it. But it is humbug for hon. Gentlemen opposite who opposed SET now to support VAT, which is worse than SET in the way that it has worked in the Community.
Mr. Tom King: In a previous life, I have considerable experience of the activities which have been referred to by all

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those hon. Members who have spoken in the debate. If they had not declared their interests first, I should have been able to pick off one by one the hon. Member for Rowntree, the hon. Member for Cadbury and the hon. Member for Nabisco Freers, for example. In my time, I have had some contact with all these companies.
The hon. Member for Widnes (Mr. Oakes), who declared his interest in a crisps factory, raised the argument to a more philosophical level. Unfortunately, however, there has been no speech, for or against the Amendment, which I have felt able to accept. For example, I could not accept the argument of my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) about the existence of a manifesto pledge that under all conditions we would maintain tax on these items. That is a distortion of the normally accepted manifesto pledge. There is a pledge that food would be relieved from tax, but I do not regard the question of exemptions from that relief in the same context.
Then we had the speeches of the hon. Members for York (Mr. Alexander W. Lyon) and West Lothian (Mr. Dalyell). This argument about exports is untenable and contradicts their other points. The first point was that the rate of VAT in Germany is 5½ per cent., whereas it will be 10 per cent. in this country. They appeared to instance the fact that our exports would suffer in third party countries. I appreciate that they recognise that exports are relieved of the tax. It does not apply directly to exports in competition with third countries.
Then the argument came back to the fact that the basic domestic demand was not sufficiently buoyant because it was penalised by a higher rate of tax and, therefore, that companies were not so well placed to compete effectively abroad. But hon. Members destroyed their argument by saying that, anyway, domestic consumption here of confectionery was higher than in any of the other countries, albeit in the present situation—
Mr. Carter: What about Germany?
Mr. King: With respect to the hon. Gentleman, consumption is higher than in Germany—
Mr. Carter: No.
Mr. King: If the hon. Gentleman studies the brief with which he has been supplied, he will see that what I say is correct.
When one considers that our consumption is higher and, as my hon. Friend for Worcestershire, South pointed out, when one considers that in any case the tax rate will be reduced under VAT as against the equivalent rate of purchase tax, I cannot see how the failure to relieve from VAT is a major threat to the existence of these companies.
Hon. Members then took the argument on into employment. They saw the tax as a major threat to it. Their argument in this respect is equally false. I know that the hon. Member for Birmingham, Northfield (Mr. Carter) is anxious not to mislead the Committee. He led off with the fact that 700,000 people are employed in this industry. With respect, he was referring to the food manufacturing industry and not to the number employed manufacturing the items which will not be relieved from this tax. That is a very different matter.
There was the further argument about pioneering. The hon. Member for Northfield said that if these companies are under threat in their basic markets, such as confectionery, it will inhibit their ability to pioneer. Why does the hon. Gentleman think that Cadbury went into instant mashed potato called "Smash "? Why did Cadbury go into cakes? The reason was that the company found that growth was stultified in its basic products and markets, and that increased its incentive to look for other markets and products and so increased its pioneering drive. In the time of Cadbury's greatest success and growth, there was no pioneering of outside activities and products.
11.45 p.m.
The success of Rowntree is built on four products which were the brainchild of one sales and marketing director in the 'thirties. "Polo ", "Kit Kat ", "Aero" and "Black Magic" were all 1930 creations. The company exploited those products and it did not feel the need to pioneer again until it found that they had topped out and there was a need, if it were to grow, to find new product areas.
Mr. Alexander W. Lyon: The hon. Gentleman cannot have it both ways. Either VAT will seriously affect the competitiveness of the confectionery industry to export because of a lack of buoyancy in the home market or it will not. He has conceded that companies have had to move into areas other than chocolates and confectionery simply because the domestic market is not buoyant. It is in this respect that we are worse off than the German market where there is rising consumption and where the amount of VAT is considerably less.
Mr. King: The hon. Gentleman is trying to misrepresent my argument. The consumption of confectionery in this country is at a high level compared with any other country in the world. Hon. Gentlemen opposite argue that the market will be jeopardised and threatened, that it will be reduced, that this will be a threat to employment, and that this in turn will be a threat to the viability of these companies. That argument has been exploded by my hon. Friend the Member for Worcestershire, South who said that under VAT the rate will be lower than it is now.
The argument goes on that companies will be inhibited from pioneering if there is any threat to their present position. I am merely saying that this threat exists anyway, and that" any company has to pioneer if it wants to survive. No company can survive if it remains static, and it is for that reason that companies which are finding a ceiling in their present market activities are having to find new outlets and new products in which to grow.
Mr. Carter: I accept the hon. Gentleman's point that in spite of purchase tax and various other restrictions and economic factors the confectionery industry has been able to pioneer other products. The point I was making was that given those conditions the industry was viable and was able to pioneer, but that what is worrying it now—and I take on board its fears and worries—is that with VAT at a level which is disadvantageous compared with that of its competitors it will no longer be in a position to continue this pioneering.
Mr. King: I appreciate that the hon. Gentleman has a close constituency interest in this matter. I am sure that he
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takes a close interest in the activities of a substantial company in his constituency. But I cannot accept his argument. To suggest that the industry will be threatened by what is, in fact, a reduction in tax in the domestic market seems a total distortion of the argument. As the hon. Member for York said the industry has an outstanding position which is capable of considerable exploitation in world markets, and the relevant rate of VAT in the German market is as nothing compared with the possibilities which exist for British confectionery.
I am disappointed by the debate. Some better arguments could have been made. I have considerable sympathy for the movers of the Amendments. But in all honesty and in the interests of accuracy, I felt it necessary to intervene to attempt to correct some very unsatisfactory arguments adduced in support of the Amendments.
Mr. Oakes: Although this is an important series of Amendments, the hour is very late and I promise not to detain the Committee for more than two minutes.
I rise only to support what the hon. Member for Harborough (Mr. Farr) said about Amendment No. 20. Golden Wonder Crisps has its head office in his constituency. It has one of the largest crisps factories in Europe in my constituency, which is a development area. Anything which is likely to reduce consumption of crisps, as the Bill may well do, is of great importance to future employment prospects in Widnes.
Mr. Higgins: Why is this Measure likely to reduce consumption of crisps? The tax is being reduced.
Mr. Oakes: The hon. Member for Harborough pointed out that when the tax was imposed by a Labour Government—I think that they were wrong in imposing that tax—it had the effect of reducing the consumption of crisps. As the VAT separates crisps from other foodstuffs, it will deter people from buying crisps.
In his Budget speech the Chancellor pointed out that many purchase taxes were anachronistic and that many needed revision. It was thought, certainly in the crisps industry, that the tax imposed by the Labour Government—wrongly imposed in my opinion—would be one of the taxes to go.

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Many crisps are bought not as an item of confectionery but in quantity by housewives, from supermarkets, and they use them in the home. Can the Financial Secretary distinguish the difference between crisps and, for example, corn flakes? What is the difference in manufacture or in any other respect? Why should there be no tax on corn flakes but a 10 per cent. VAT on crisps?
Another difficulty with the imposition of this tax is that many crisps are sold to children and individuals in single packets. The average price of a packet of crisps is 3p. The VAT on crisps ought to be, therefore, 0·3p. There is no 0·3p. in our currency. As a minimum the retailer will charge an extra He may well charge 1½p. There is no other means by which the retailer can recover his tax. The manufacturer will not get it, but the customer will have to pay it. That is the sort of difficulty involved in taxing low-priced items.
I hope that the Minister will reply to the point that an inflationary situation will be created far and above the 10 per cent. tax he is imposing on crisps.
Dr. Gilbert: After a lengthy and interesting debate I shall not detain the Committee for long.
I entirely endorse the representations made to the Minister by my hon. Friend the Member for Birmingham, Northfield (Mr. Carter), in a most valuable contribution in opening the debate, about the need to remove VAT from convenience foods as a means of strengthening our case for keeping food zero-rated after harmonisation.
Harmonisation will happen. The odds are most heavily that we shall be forced to move towards European practice in this respect and this point has been made with great honesty by hon. Members on the Government side this evening. I can see the dangers quite clearly and I hope the Financial Secretary will take the point on board. I do not propose to labour it any further.
A further point was introduced from this side of the Chamber in connection with the transition period for stocks of this type that already carry purchase tax and may also be liable to value added tax. So far we have had virtually no information from the Government on this
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point. There is no excuse for this whatever. It is not a question of the Government being asked to make up their mind about the final rate of the tax which they have quite understandably taken power to vary. This is an administrative problem and if the introduction of the tax had been as well thought out as we have been led to believe, consultations with industry should have taken place to solve this extremely difficult problem.
This has been the theme of the speech not only of my hon. Friend the Member for Northfield. It was also brought up again by my hon. Friends the Members for York (Mr. Alexander W. Lyon) and West Lothian (Mr. Dalyell). My hon. Friend the Member for West Lothian pointed out that this was not just a question of stocking problems for goods made for the Easter trade but that it ranged over the many other types of goods subsumed in the Amendments. It concerns a great many goods that are not even affected by the Amendments. All types of goods which involve a slow movement of stock from the wholesaler to the retailer could be affected if the Government do not make up their mind quickly about the transition period. The amounts involved, particularly for wholesalers, could be considerable where there are no sale or return facilities.
I do not want to delay the debate because I know hon. Members wish to pass on to other things. The threats we have heard from the hon. Member for Worcestershire, South (Sir G. Nabarro) about what will happen tonight make us think of his expectation that should we join the Common Market he will find himself in Brussels. For some of us that moment cannot come too soon. In fact it is the best argument I have heard so far for going into the Common Market.
The only other speech I would comment on is that of my hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Rhodes) who introduced a most fundamental note that has been lacking in the Government's approach in all the debates on value added tax—the necessity to distinguish between the ability to pay and the necessity to spend. He quite clearly shot away the rational basis for the argument from the Government benches that by increasing the tax on

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consumption, consumption is reduced and savings increased. There is no evidence that the introduction of a general sales tax of this sort will be conducive to higher savings. Arguments like that ignore totally the price elasticity effects on demand of higher consumer prices.
My hon. Friend the Member for Harborough (Mr. Farr) struck a note with which many of us would sympathise. We are still awaiting some sort of indication from the Government as to what negotiating procedure we shall adopt with the Common Market when we come to the talks on harmonisation of VAT rates, particularly on foodstuffs.
[Sir ROBERT GRANT-FERRIS in the Chair]
12 midnight
It would be interesting to know whether the Treasury, which has all along been saying that one of the great advantages of a single rate system is the reduction in the number of civil servants who would be needed compared with a multiple rate system, has made any calculations of the extra number of civil servants who will be needed to operate the various types of multiple rate system. We have had the bland assertion time after time that if we went for more than one rate, ignoring zero-rating, we could greatly increase administrative costs, particularly in the bureaucracy. However, we have not had any figures given to us.
It seems extremely ominous that if we must accept a value added tax on food —the odds are most heavily stacked that we shall—then, unless the Government change their mind, it will be at a standard rate.
I urge the Financial Secretary to investigate this matter as closely as possible to see whether it would be possible, if we have a VAT on food, to introduce it at a lower rate and to provide the Committee with information about the extra number of civil servants and administrative costs which would be involved if that were so.
Finally, I reiterate the representations which have been made by my hon. Friends about the transition period. Industry of all kinds, not just industry dealing with the products the subject of the Amendments, desperately needs information on this matter. It needs that
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information now. Jobs are at stake throughout the country. There can hardly be a constituency in the land where great numbers of jobs are not in jeopardy because this information is not forthcoming. There is no excuse for delay. I ask the Financial Secretary as soon as possible to give the answers to the questions which have been put by my hon. Friends.
Mr. Higgins: I should like to reply to the various points which have been made in the debate, but several of them have already been answered by my hon. Friend the Member for Bridgwater (Mr. Tom King) in what I thought was a remarkable and certainly very expert speech.
I will take as my starting point in replying to the debate the statement made by my right hon. Friend the Chancellor of the Exchequer in his Budget speech on 21st March 1972, when he said:
" I come next to the main areas where relief will be given by zero-rating. First, food.
In our election manifesto we promised that VAT ' would not apply to food, except for those few items already subject to purchase tax.'
This undertaking will be honoured. Food, other than those foods now subject to purcase tax, will be zero-rated. Those items at present liable to purchase tax are estimated to yield about £150 million in the corning financial year, and if they were to be relieved altogether from VAT there would have to be a commensurate increase in the rate of VAT. They will, therefore, be charged at the standard rate. The overall effect of these proposals, together with the abolition of SET, will be a reduction in the burden of tax on food."—[OFFICIAL REPORT, 21st March, 1972; Vol. 833. c. 1375–6.]
That extract from my right hon. Friend's Budget speech brings out a number of points which I should like to emphasise tonight. The first is that, as my right hon. Friend said, our election manifesto clearly stated that VAT
" would not apply to food, except for those few items already subject to purchase tax."
I confess, therefore, that I am puzzled by the remarks made by my hon. Friend the Member for Harborough (Mr. Farr). It seemed that the position about purchase tax foods was clear. I cannot suppose that anyone could be surprised, when we introduced the value added tax, that the position about purchase tax foods was as we described it in our manifesto and as my right hon. Friend confirmed in his Budget speech.

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Shortly before the passage which 1 have just quoted, my right hon. Friend had referred to the question of tax-paid stocks. I have noted what was said by the hon. Member for Birmingham, Northfield (Mr. Carter) about the position of the confectionery industry, and we shall bear that in mind. But we must take into account the overall economic situation as the time of the transition period approaches, and we must have in mind also the position of individual industries. There is a wide variation between one industry and another as regards the length of time for which stocks are held, the size of stocks, and the various seasonal factors to be taken into account.
Dr. Gilbert: Are we not to be told until the last moment, until we are certain what the economic climate is likely to be? It is only a transition period. We are not talking about a final rate of tax. Surely the hon. Gentleman can be more forthcoming than that.
Mr. Higgins: The hon. Gentleman argues that it is a matter of urgency. I am not aware of any holding off at this time. Clearly, it is a matter which will have to be considered as the economic situation develops. Also, as I say, one has to take account of other factors, for example, the Christmas trade, the incidence of sales after Christmas, and so on. But we shall bear in mind the points which the hon. Member for Northfield made.
Mr. Dalyell: On the question of a tax holiday, what are we to say to those who have been to see us? Is it likely to be two weeks, or eight weeks, and when will they be told?
Mr. Higgins: I told the hon. Gentleman that I was not in a position at present to give answers to those questions. If he thinks about it, he will, I am sure, see that there are difficulties.
The proposal of the hon. Member for Northfield, who was especially concerned about the confectionery industry, is, in effect, for a zero rate on icecream, chocolates, sweets and similar products. It is clear from the passage in my right hon. Friend's Budget statement which I quoted that we think it right for revenue reasons to continue to tax these items, though at the standard rate. It would
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be inappropriate at a time when we are broadening the tax base, which is the object of the VAT, actually to narrow it in respect of some previously taxed items.
Several hon. Members, notably my hon. and gallant Friend the Member for Carshalton (Captain W. Elliot), asked for certain figures. If the foods covered by Amendment No. 13, now subject to purchase tax, were zero-rated, there would be a loss of revenue of about £95 million in a full year, out of a total revenue from purchase taxed foods of £110 million. To maintain the revenue from VAT would require an increase in the standard rate of 0·7 per cent. In other words, if we were to make the concession sought by the hon. Member for Northfield, the standard rate would have to go up by 0·7 per cent., and that would apply to all other goods and services subject to the value added tax.
That emphasises the point which 1 made in the Budget debates, and more recently, that if one gives concessions on one item and it is necessary to raise the same revenue, the tax will have to go up.
Sir G. Nabarro: My hon. Friend would help us all to understand the validity of this argument, which is generally accepted, if he could tell us the estimated total yield of value added tax in the first year of its operation.
Mr. Higgins: If my hon. Friend will refer to the Red Book he will find that information set out, but it is also implied in the figures I have given to him. I am not sure that hon. Members opposite appreciate the relationship between concessions and a necessary change in rate to give the same yield. As I pointed out last night, on the one hand they are asking that concessions should be given on this, that and the other, and on the other that standard rate should be reduced. There is a degree of schizophrenia in that.
Mr. Sheldon: Yes, but it does not come from this side. Under our rules of debate it is difficult to suggest an alternative tax. We have to suggest a reduction and leave it to the Government to suggest the alternative way to make up the revenue. Otherwise, in any Amendment put down by the Opposition it is not possible to bring about changes in taxation. Those are the

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changes we can bring about, and if the Financial Secretary's dictum was to hold water throughout our debates much of the discussion would be meaningless.
Mr. Higgins: If the hon. Member had been here for much of our debate, that would have been a point one could have considered, but we must look at these things in the context of the Finance Bill, and there is a degree of schizophrenia among hon. Members, who want it both ways.
My point is the simple one that if we were to accept the Amendment in the name of the hon. Member for Birmingham, Northfield, it would be necessary, to preserve the revenue, to raise the standard rate of value added tax by 0·7 per cent., and this is a point that hon. Members who have interests in their constituencies in other items covered by the tax will need to bear in mind.
In respect of the revenue—and this will be of interest to the hon. Member for Widnes (Mr. Oakes) it is worth underlining the point that the current yield of purchase tax on food is 18 per cent. of the wholesale value, which we reduced from 22 per cent. in 1971, and that in the year 1972–73, the first full year at 18 per cent., the total revenue from those items concerned is estimated at £150 million. The revenue from VAT in a full year is £110 million, £91 million being contributed by the four groups which are the subject of Amendment No. 13.
The point I wish to bring home to the Committee, and this is important, is that we reduced tax on the items concerned in the Amendment in July, 1971, and that the changeover to VAT will also bring a reduction of tax on those items.
It is rather remarkable not perhaps that the hon. Member for York (Mr. Alexander W. Lyon) and his hon. Friends did not vote against their own party when they were in Government, when the tax was increased, but that we did not get from them what we might have expected, the tiniest bit of acknowledgement that VAT will benefit their constituents. This might have been brought out in the speech by the hon. Member for York. I am rather puzzled. The same applies to the hon. Member for Widnes, and to his argument that the changeover to VAT will reduce the consumption of crisps and have an adverse effect on his con
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stituents. I ask him to explain to his constituents that this will not be the case.
I was saying a moment ago in a different way—and this will help to make it clear--that the overall effect of the Chancellor's proposals for indirect taxation will be to reduce taxation on food.
SET, which will he abolished when VAT is introduced, falls on distribution activities, as many hon. Members opposite with co-operative interests made clear when in Government, and on food prices. The retail equivalent of purchase tax on food to which it applies is on average 12·5 per cent. If, therefore, the rate of VAT is 10 per cent., the purchase-taxed food industry will secure a further reduction in the rate of tax slightly greater than that given by the two-elevenths' reduction in the rate of purchase tax last July.
12.15 a.m.
I put it in two different forms so that the hon. Members for Widnes, York, and Northfield can go to their constituents and say: "We are glad to tell you that the Conservative Government have twice on these items reduced the level of taxation and, therefore, it will be of considerable value to you." The arguments I have just used, and used the other day, about the need to encourage consumption and get economies of scale and so on will be brought about by these measures of the Conservative Government. That is the position; but not one of these things escaped the lips of the hon. Member for York.
Mr. Alexander W. Lyon: I thought I had made it clear, but obviously the hon. Gentleman was not listening. He is not usually a party political hack. Why go on with these silly party political points? If one looks at the records of the two Governments, one sees that in 1962 the Conservative Government first put on the tax on food and by far the larger part of the £150 million it brings in comes from that source. It is true that the Labour Government in 1968, in very considerably different circumstances from those obtaining today, added to the tax. But do not let us make these silly political points. This is an issue of principle. When one is starting with a completely new tax, it is perfectly right and proper to ask whether one has got the principle right.

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That is all I ask. Will the hon. Gentleman now answer that point?
Mr. Higgins: I will answer it. I am putting the argument, because it is fairly late, in as lively a form as I can make it. But even if this is a party political point, it cannot be refuted that the two changes we have made have been of benefit to those interests which the hon. Gentleman was anxious to bring out. This is something one would have thought he would have said.
Mr. Lyon: I did.
Mr. Higgins: Perhaps I can pursue a rather more technical point which the hon. Gentleman made, since he urges me to be apolitical and non-partisan. I had some difficulty in following his argument about the effects of taxation and relative rates of tax here and in Europe. Apparently he feels his constituents' investment in Germany, in that the firm has a factory there, would mean that they might consider it the right or most efficient or least costly place to use for the European market. Given the fact that exports of confectionery and so on will be zero-rated—a not unimportant point—I find it difficult to reconcile that with the remarks he first made on this problem, when he said one needed a larger home market in order to get greater economies of scale. There are either economies of scale in this industry or there are not, but one prong of his argument was based on the assumption that there were economies of scale and the other prong was based on the assumption that there were not. The hon. Gentleman urges me to be apolitical and alter the tone of the debate, but it seemed to me that his arguments were as invalid on that point as they were perhaps just a wee bit partisan on the first point.
Mr. Dalyell: The argument put forward by the confectionery industry is based on the importance of the home market as a base for exports. It is that if the United Kingdom industry has to pay a 10 per cent. rate while our chief competitor pays less, our competitor will have a better home market as a base for exports than we have. If this is not true, we should like to be told.
Mr. Higgins: It is difficult for me to say whether that is true. I cannot profess
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to be an expert, as is my hon. Friend the Member for Bridgwater, in the technology, the production functions, and the economies of scale in this industry. What I am saying is that if the technology and the production functions and the economies of scale are as the hon. Member has suggested then I have difficulty in reconciling that with the argument that it is better to set up a smaller factory in Germany and operate from there. It will to some extent depend upon transport costs, I am prepared to concede that. It certainly does not work with exports because they will be zero-rated. It seems that there is this inconsistency in the arguments. We can only make one valid set of assumptions and, having done so, we would then know which argument is right.
In Amendment No. 15 my hon. Friend the Member for Harborough seeks to bring about zero-rating for chocolate-coated confectionery and chocolate biscuits. This would effectively move the border, and if that were to be done we would have some difficult borderline decisions between confectionery as such and chocolate biscuits as such. It would create a number of difficulties and anomalies, and that is why it seemed to be best to leave the border where it is.
The other point made by the hon. Member for Widnes was to do with the pricing of the product if the tax is imposed. I have pointed out that the tax is being reduced, not increased. It may be argued that the tax reduction will be on a bigger scale as against a tax increase on a bigger scale. It is possible to alter not only the price but the number of crisps in the packet. From personal experience, although one always hesitates to quote that here, I am not convinced that the number of potato crisps in a packet has remained exactly the same over the last 25 years.
I think I have covered all the points raised, and I must ask my hon. and right hon. Friends not to support the Amendment.
Mr. Carter: The Committee can be nothing but disappointed by the Financial Secretary's reply.
Sir G. Nabarro: I am not. It was a very good reply.
Mr. Carter: There is one exception to that remark of mine.
The Financial Secretary is being rather pedantic. He seems to have got worse as the day wore on. His reply appears to bear out what we feared at the beginning of Committee stage—that we were not likely to get any concession from the Government on the structure of VAT. I was impressed by the arguments of the hon. Member for Harborough (Mr. Fan) and the concern that he and other hon. Members opposite felt for the predicament of the low income families who rely to a large extent on confectionery to make up a substantial part of their diet.
It is a sad reflection on the Government's attitude towards these matters that they view with equanimity the prospect of caviar escaping VAT while ice cream and chocolate biscuits get the full 19 per cent.
It is obvious that the Government would carry the day on this Amendment. Therefore, the wisest thing I can do, even though we have carried the day on the argument, is to withdraw the Amendment and possibly return to it at a later stage.
I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Sir G. Nabarro: I beg to move Amendment No. 16. in page 97, line 2, leave out spirits '.
The Chairman: It will be convenient also to discuss the following Amendments:
No. 17, in line 2, leave out ' beer '.
No. 18, in line 2, leave out ' wine or British wine '.
No. 73, in page 97, leave out lines 3 to 6.
Sir G. Nabarro: I propose to address myself to the question of alcoholic beverages, which in terms of excise duty are divided into three categories: beer, spirits and table wines. The revenue we collect in terms of excise duty from this group of alcoholic beverages is very large indeed. It is many times larger than the amount collected from the subject of the last Amendment. The estimated out-turn of excise duties on alcoholic beverages in
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1971–72. according to the Red Book, was £1,000 million exactly. At the end of the year the provisional estimated out-turn was £1,005 million. According to page 17 of the Financial Statement and Budget Report, 1972–73, the estimated figure for the present year, before Budget changes, was £1,071 million. There was a minor alteration to excise duties which reduced the estimated out-turn to £1,065 million. Therefore, by any estimate or standard, the revenue derived from alcoholic beverages under these three heads is very large.
By comparison, on the last Amendment dealing with sweets, confectionery and soft drinks, we were talking in terms of about £150 million in purchase tax and a rather lesser amount in VAT. Those products turn out about one-seventh of the excise duties which we levy on alcoholic beverages. It should be no part of our policy to subject alcoholic beverages to taxation in the network of VAT in addition to the huge volume of excise duties.
The licenced trade of Britain is very concerned about the present position. Value added tax enters very substantially into the price of beer, wines and spirits sold on licensed premises and otherwise. Clearly, the cost of distributing, for example, bottled beers is very high. Compared with draught beers which are sold from the cask, the whole of the distribution costs by rail or road or otherwise will be subject to VAT. The label on the bottles, the printing of the labels and many auxiliary processes will be subject to VAT because beer, wines and spirits are not zero-rated for VAT purposes. Although it has not been possible to calculate precisely the increase in the price of beer, wines and spirits in public houses and otherwise—even in restaurants—the fact that they are not zero-rated makes it evident that there will be a substantial increase in price on account of the tax.
12.30 p.m.
The hon. Member far Rugby (Mr. William Price) recently raised this matter, and an interesting exchange took place:
" MR. WILLIAM PRICE asked the Chancellor of the Exchequer what effect he expects the introduction of value added tax to have on Exchequer revenue from the sale of beer."

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The Minister of State replied:
" This will depend on the extent to which the revenue duty on beer may be altered when VAT is introduced, which in turn will depend on the total revenue required from beer in 1973–74."
After further exchanges I intervened and said:
" Would not my hon. Friend consider that a suitable solution would be the reclassification of beer as food, notably the reclassification of Guinness as food, which indubitably it is?"
To which the Minister of State replied:
" I regret to say that I could not go along with my hon. Friend's suggestion. As to the definition problem, there are revenue problems which must be taken into account."—[OFFICIAL REPORT, 25th April, 1972; Vol. 835, c. 1257.]
In Europe alcoholic beverages are generally classified as food to ensure that they attract a relatively low rate of VAT. For example, in all European countries which have VAT there are higher, intermediate and lower rates of tax. Food is generally classified in the lower bracket for VAT purposes, but in one or two cases it is classified in the intermediate bracket. All these figures, with the exception of the figures for Italy, which is not yet fully attuned to VAT, have been quoted by the Treasury and appear in
the OFFICIAL REPORT of 30th July, 1971, and, so far as I am aware, have not been changed since that date. The important point is that the European countries which are members of the EEC generally classify alcoholic beverages as food, and it would be for the convenience of our revenue arrangements in Britain if we did the same.
There are many ways of achieving this. It can be achieved by the reclassification of alcoholic beverages as food in accordance with Amendment No. 16 and the similar Amendments to Schedule 4, which would immediately cause all alcoholic beverages to be zero-rated. That would be the easy way of doing it, although it would place on thousands of licensed houses and publicans the complex responsibility of recovering the VAT already paid on the bottling process, the distribution processes and the auxiliaries of the sale of bottled beers, bottled spirits and wines.
Another way of doing it, which would relieve the publican of this onerous and complex task, would be for the Treasury to calculate the aggregation of VAT
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attracted by all alcoholic beverages on their production, distribution and sale in the United Kingdom and cause a commensurate or equivalent sum to be deducted from the date of excise duties for beer, table wines and spirits.
I personally prefer the second recourse, and I believe that the licensed trade will support me in saying that, for the very good reason that publicans are busy people with a great deal to attend to, and to put on their backs responsibilities for the recovery of VAT arising from a number of contributory causes would be cumbersome, costly and unnecessarily burdensome to the publicans.
The Treasury should reach an early conclusion on the principle, and I see no reason why the principle could not be announced tonight or before the Finance Bill has left the House of Commons. The licensed trade, the whisky distillers, the brewers, all those who participate in the drink trade, have been discussing VAT and excise duties with the Treasury for more than 12 months. The Treasury has been keenly aware of the problem of the duplication of taxation, first by excise duties and secondly by VAT, throughout the period since the publication of the Green Paper on VAT. It would remove a great deal of uncertainty in the drink trade if we could have an announcement at an early date.
I favour an announcement in principle as to which of the two recourses the Treasury prefers, either the recourse of zero-rating all alcoholic beverages or the recourse of finding out in aggregate what is the VAT payable on all the drink sold in this country under the three categories and then reducing the rate of excise duty to give an equivalent rebate in respect of total taxation which would otherwise occur. We could have a proclamation from the Treasury, leaving the details to a later date, but I could not accept a position in which alcoholic beverages were taxed twice—first, heavily taxed in terms of excise duties and then, to a lesser extent, by value added tax. I do not believe that is the intention of the Treasury, but we have yet to receive a positive assurance on this matter. All the Chancellor has done so far is to make sympathetic noises.
This matter is also important in the context of the retail cost of living index,

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in which the price of beer figures. It was a startling fact that in the Budget of 1959, directly before the General Election on 8th October, 1969, the excise duty on beer was reduced by an amount equal to twopence a pint.
Mr. William Price: That is the way to win elections.
Sir G. Nabarro: There is an element of truth in that because beer is heavily weighted in the cost of living index. That is why the Chancellor of the Exchequer chose at that time to try to stabilise retail prices by putting forward in the Budget a significant and large reduction in the excise duty on beer. That was the last time it was done, 13 years ago, and no attempt has been made to reduce excise duty since 1959.
1 make a comparable point now. Unless we deal with this prospective double taxation on beer once and for all, the implementation of VAT in April, 1973, will inevitably mean the price of beer going up by as much as 2p per pint, whisky by as much as 20p per standard bottle, and all wines sold in this country by as much as 10p to 20p per bottle. All this will result from VAT. Having regard to the excessive excess duties at present, notably on whisky—which I consume hardly at all —I believe we should have an announcement from the Treasury before the Bill leaves this House.
I would remind my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) how large is the excise duty on whisky at present. On 22nd April, 1970, I was privileged to address the first annual dinner of the Highland Chamber of Commerce in Inverness. My hon. Friend the Member for Ross and Cromarty (Mr. Gray), not then a Member of the House, moved the vote of thanks for my speech. I proposed the toast to the industry, trade and commerce of the Highlands and Islands. I produced a bottle of Inverness Cream whisky from beneath the table, having previously been supplied with it at the wholesale price, for I could not talk about the industry, trade and commerce of the Highlands and Islands without dealing with the principal exported product—namely, whisky—which contributes so mightily to our balance of payments.
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I demonstrated, by holding aloft that bottle of Inverness Cream, which I had bought at 49s. 10d.— the duty was 44s. Id. and the wholesale price of the whisky 5s. 9d.—that it was the most heavily taxed article in Britain. It would be absolutely iniquitous to add 5p, 10p, or 15p, to the duty on whisky by taxing it a second time by value added tax. Exactly the same principles apply to the working man's principal item of diet, namely, beer, sold to him in the public house.
On all of it value added tax will have to be paid unless we get an assurance from the Chancellor of the Exchequer that it is not the policy of the Government to apply taxation twice to the alcoholic beverages that I have named—beer, whisky, table wines.
Mr. William Price: Perhaps I should start by declaring an interest: I have a working connection with the National Federation of Licensed Victuallers, an organisation of 35,000 of the most effective and often the most unwilling tax collectors in the country. The hour is late and the hon. Member for Worcestershire, South (Sir G. Nabarro) has said most of the things that I should have wanted to say, and I shall not detain the Committee.
The reclassification of beer as a food is an attractive proposition in many ways, and in many ways it is logical. But it would create major difficulties in public houses. Have those who are arguing for this reclassification thought out the problems of the licensee faced with the situation in which many of his products are subject to value added tax and some are not? We think that on balance, attractive though the idea is, in many respects it would be a practical nonsense.
12.45 a.m.
If the Minister rejects the Amendment, as I suspect he will, I hope that he will understand that we do not want a tax on top of a tax. There must be a limit to what the licensed trade will stand. The Government collect £1,000 million a year in excise duty from the trade. There have been seven increases since the war. We believe that if there is to be yet another imposition on the licensed trade the effects could be disastrous. All we say to the Minister is: "For goodness' sake give us an assurance that you do

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not intend to slap another 10 per cent. on a long-suffering public, and that if you have to choose between the alternatives suggested by the hon. Member for Worcestershire, South you will take the second."
Will the Minister therefore make it absolutely clear that if value added tax is to be placed on beer, spirits and table wines, there will at least be a corresponding reduction in the rate of excise duty? That is all we would expect him to say tonight. I thought that that was the position of the Government and that it had been made fairly clear until I made the fatal mistake of tabling the Question to which the hon. Member for Worcestershire, South referred. When I listened to the Financial Secretary's answers to that Question and to the hon. Gentleman's question it became far less apparent to me what the Government's position is.
All we ask is that the matter should be made clear tonight. If we cannot get the assurance which we seek, if the hon. Gentleman will not give the assurance that we are not to have a tax on top of a tax, we shall have to come to the conclusion, reluctantly, that the Government are taking yet another bite out of the cherry, which we think would be bad all round.
Mr. Bruce-Gardyne: I do not say that I support Amendment No. 16, because I do not think my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) was asking for support. Indeed, he made it clear that the proposition of zero-rating of spirits was not in his view the ideal answer, and I agree. Unfortunately, I do not have an interest to declare, as had the hon. Member for Rugby (Mr. William Price)—I wish I had. I do not even have a distillery in my constituency, though I am surrounded by them. But the taxation of Scotch whisky is of vital interest to all my compatriots.
I honestly do not think that one could be surprised if the Government tonight failed to respond to the second of my hon. Friend's propositions, because what he asked the Government to do was to commit themselves to make no increase in next year's Budget in the burden of taxation on spirits and the other beverages mentioned. That is an undertaking that I do not suppose any Government have
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ever been prepared to give six months in advance of their Budget.
I intervene only to express the hope that the Government can give some assurance that they will pay particular attention to the implications of putting yet a further burden of taxation on Scotch whisky, in particular. I ask for that assurance for two reasons. The first, which my hon. Friend emphasised, is the appalling burden of taxation which this beverage already bears—which he brought out so clearly—and the fact that the level of tax on Scotch whisky must very nearly, if not quite, have reached the point of diminishing returns.
My second reason, which is, I think, new, is that we have to pay increasing attention to the very serious problem which the Scotch whisky industry will face so long as we have a vast disparity in the levels of duty on Scotch whisky in this country and the levels in the other member countries of the Community. I do not think I need elaborate on that, because we shall go into it in greater detail when we come to consider the excise Clauses in Committee.
It is a matter that the Government must consider seriously. Even if my hon. Friend the Minister of State cannot give the sort of undertaking for which my hon. Friend the Member for Worcestershire, South asks, I hope he will give the Committee some assurances on these points. There is especially the relationship between the level of duty on Scotch whisky in this country and the levels in the other Common Market countries, where it is nowhere charged at more than half the duty that it bears here. I hope my hon. Friend will assure us that these points will be borne carefully in mind when consideration is given to the impact of VAT coupled with excise duty at the time of next year's Budget.
Mr. Brian Walden: My hon. Friend the Member for Rugby (Mr. William Price), who knows a great deal about these matters, was extremely temperate in the amount of time that he took at this late hour, and so shall I be. I have a great many facts and figures on the subject, but I do not intend to weary the Committee with them now.
Without in any way committing the Opposition officially to the idea of zero-rating as proposed by the hon. Member

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for Worcestershire, South (Sir G. Nabarro), I have considerable sympathy with what I take to be the objectives behind the Amendments. Though I always get on well enough with the hon. Gentleman, I rarely agree with him. However, for once, I find myself with him on practically all his points. Of course, these are not party political points. It is a fact that we have used the Excise duties on alcohol as a major revenue raiser, and some of the hon. Gentleman's arguments in regard to a value added tax have some relation to this matter. We have tended to have a fairly narrow tax base and have chosen to get a good deal of revenue from it.
I do not claim that the Conservative Party bears any more guilt for this than the Labour Party. However, the rates of Excise duty on alcohol have reached a farcical level. The example of the dinner in Inverness could not be duplicated anywhere else in Europe, and I admit that both political parties are equally culpable or praiseworthy, depending on one's point of view. Both parties have relied on these massive Excise duties.
My figures show that the elasticity of demand in relation to duties plays a significant part. If alcohol in this country has to bear additional taxation—which I had assumed was not originally the Government's intention—the Revenue may be the loser rather than the gainer. There are indications that at the present rates of duty there is sufficient buoyancy in the market, especially in regard to light and quality wines but also in regard to spirits, and enough to bring in the Revenue more at existing rates.
Plainly we cannot get an absolute guarantee. I do not agree with the hon. Member for South Angus (Mr. Bruce-Gardyne), who said that the Government would be chary of letting forth Budget secrets in advance of the Budget. That has not been our experience with this Government. They might be prepared to give the kind of guarantee for which the hon. Gentleman asked. But if we are not to have that, a little more is needed than words of comfort. I am attracted to the second option presented to us by the hon. Member for Worcestershire, South. I agree with my hon. Friend the Member for Rugby that there should be an aggregation and that Excise duty should be reduced to take account
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of VAT. VAT will increase administrative costs and, proportionately, they will fall more heavily on the smaller firms.
My reason for intervening was not to chide the Government for doing what all Governments have done, but to say that a few vague phrases will not satisfy the trade. On the contrary, they will cause considerable uncertainty and will be palpably unjust in my view. Both the people who sell alcohol and the unfortunate consumers of it pay enough as it is. Some sort of assurance from the Government that they broadly share that point of view, are taking it into account and are working to meet the problem would satisfy me, and for all I know might satisfy the hon. Member for Worcestershire, South, too.
Mr. Nott: My hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) has strong views on this subject, and I recall the occasion when this matter came up at Question Time the other day. My hon. Friend said that a suitable solution would be to reclassify beer as food, notably the reclassification of Guinness as food, which indubitably it is. I will not at this late hour question my hon. Friend's definitions. He is entitled to exercise his subjective judgment and to classify Guinness as food for his purpose, but I have to tell him that the Government's definitions do not coincide with his own in this instance.
Bearing in mind my hon. Friend's Question on 25th April, I was almost prompted to remark, before I heard him speak in this debate, that perhaps he was here only for the beer, but I notice that his further Amendments relate to spirits and wine.
I have to tell the Committee again that in principle—and I can give my hon. Friend an assurance on this—VAT, being a comprehensive tax, it has to apply to goods such as alcoholic drinks just as it does to other goods, and that as alcoholic drinks are already subject to duty, VAT cannot be zero-rated on them. My hon. Friend was kind enough to speak in favour of VAT in yesterday's debate, when he said:
"I want to urge on the Chancellor of the Exchequer that he does not submit to any special pleading at all during the passage of the Bill in Committee."—[OFFICIAL REPORT. 9th May. 1972; Vol. 836, c. 1182.]

1507
No doubt that is why my hon. Friend strongly favours the second of his two alternatives, with which I shall now deal.
Incidentally, perhaps I should add, because my hon. Friend mentioned the different rates in different EEC countries, that all countries with a VAT, except Belgium and France, tax alcoholic beverages at the standard rate and also apply a Revenue duty. Belgium applies the reduced rate to wine and the higher rate to spirits. France applies the intermediate rate to both.
I come to the question of Excise duty, which was the second of my hon. Friend's alternatives. In this respect I cannot go beyond the comments of my right hon. Friend the Chancellor when he presented his Budget statement. He said then:
"The extent to which I can make such reductions"
ߞ,that is reductions of Excise duty—
" must take account of economic circumstances nearer the time. I propose, however, to take a power, to be used only before the introducof VAT, to make appropriate reductions in the Revenue duties by order."—[OFFICIAL REPORT, 21st March, 1972; Vol. 833, c. 1373.]
I am sure my hon. Friend will appreciate that my right hon. Friend must take his decision on this matter in the light of the economic position and the budgetary requirements nearer the time of the change. That was the point made by my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne).
I think that it is generally true to say, as the hon. Member for Rugby (Mr. William Price) said in his short intervention, that the trade associations have generally accepted the idea that VAT should apply to their products, provided that the Revenue duties are reduced so that there is no increase in the overall fiscal burden. In other words, the trade associations also favour the second alternative. All I can say is that the appeal of my hon. Friend the Member for Worcestershire, South, and that of the hon. Member for Rugby will be borne in mind.
1.0 a.m.
I take the point made by the hon. Member for Birmingham, All Saints (Mr. Brian Walden) about the elasticity of demand for these products. Obviously that is very relevant. I also assure my
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hon. Friend the Member for South Angus that the implications of any extra tax on Scotch whisky will also receive full consideration at the time together with, in so far as this is relevant, any rates of duty which are now being levied on these items in other countries.
Mr. William Price: Even allowing for the fact that obviously future economic circumstances must be a major consideration, would not the Minister at least be prepared to say that alcohol, already facing enormous burdens of excessive duty, ought not to be expected to face an addition on top of one of the most severe taxes that this country has ever imposed on anything?
Mr. Nott: As I have said, in the last resort this is a budgetary matter, and I cannot give any firm statement of the sort the hon. Gentleman mentions. But I hope that I have given a reasonably helpful answer and that we can now pass to another Amendment.
Sir G. Nabarro: Having regard to the nature of the reply, I thank my hon. Friend for the solicitude he has displayed in responding to my plea on behalf of the drink trade and all the boozers of Britain. In order to put into correct perspective the extent and burden of excise duty on spirits, notably whisky, I remind my hon. Friend that if Excise duty on whisky were abolished and it were subject only to VAT at the rate proposed by my right hon. Friend the Chancellor, namely 10 per cent., the retail price of a bottle of whisky would be approximately 75p instead of £3. That is indeed a very attractive prospect.
However, I am grateful to my hon. Friend for the fashion in which he has received the Amendment. This evening I have done my duty by the drink trade. I am glad to see my right hon. Friend the Chancellor raising his glass of cheer and conviviality to me, though it contains tax-free water only. I am satisfied by the response from my hon. Friend and from the Chancellor, and the point has been well registered by the hon. Member for Rugby (Mr. William Price), whom I thank for his co-operation, and the hon. Member for Birmingham, All Saints (Mr. Brian Walden), whom I thank also, with my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne).

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I look forward, pregnant with fiscal anticipation, to the Treasury order in the early days of 1973 regulating these matters and reducing the Excise duty on whisky to tolerable proportions.
The Chairman: Do I understand that the hon. Member wishes to withdraw his Amendment?
Sir G. Nabarro: Thank you for prompting me, Sir Robert. I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Mr. Duffy: I beg to move Amendment No. 97, in page 97, line 41, at end insert:
' including delivery of such items to the public '.
I want first to declare my interest in the matter and to admit a family involvement. My brother-in-law is in the trade. He is a newsagent. But I shall not plead on such narrow grounds. I hope that my argument will have universal appeal. In essence, it amounts to a reminder to the Chancellor of the intention proclaimed in his Budget statement, not merely this year but also last year, to zero-rate newspapers. I want also to remind the Committee that the practice well established in Britain of newspaper delivery is inseparable from the consumption of the bulk of such newspapers. It is argued that to subject delivery charges to value added tax would defeat the Chancellor's intention. The imposition would end the long-standing tradition in Britain not to tax knowledge. Hon. Members earlier today referred to the 18th Century, albeit to its closing decade and mostly to the contributions to revenue raising of Mr. Pitt. I want to refer to the 18th Century, but to its early years and to remind the House of the imposition of a tax on newspapers as long ago as 1712 when cheap newspapers ceased to exist. The tax was imposed from time to time until in 1815 it stood at 4d. a sheet, the usual price of newspapers then amounting to 7d. a copy.
In 1724 a Committee of the House of Commons sat to consider the action of certain printers who were evading the stamp duty by publishing cheap newspapers in the guise of pamphlets. The tax, after several reductions, was finally repealed on 15th June, 1855, and a rush of cheap newspapers immediately fol-
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lowed. The day after the Bill repealing it received the Royal Assent The Guardian carried the following verse:
" Today the press, from duty free,
Appears on every side;
Whilst competition reigns around,
And news is scattered wide,
A perfect flood of papers rise.
Like breakers in the storm,
Of every size—of every price—
And every make and form."
That is how the abolition of taxes on knowledge was greeted and not only in The Guardian,but on all sides. It undoubtedly helped speed developments in newspaper history, the benefits of which are now known, especially to hon. Members. These benefits received their early impulse with the spread of education, the improvement of machinery, the more efficient collection of news. Subsequently it helped in the constant adaptation to the new demands of a wider public, the progress in the art of advertising as applied to the Press and, especially in its later stages in this century, the development of a system of internal distribution in this country that is without parallel in the modern world.
The house delivery of newspapers in Britain is a modern miracle. The plop of the daily newspaper inside the front door in most homes in Britain is taken for granted, whatever the weather and whatever the season, because the system is so smooth and dependable. But this is not accidental. It is the final stage in a remarkable process of distribution. It is not achieved without some cost, especially to the newsagent who provides the crucial link in the chain of distribution. He has to hire young people to assist him. Increasingly that means finding them first. Inevitably he is compelled to pass on some of the cost to the consumer in the form of a delivery charge. Nowhere does the newsagent pass on the full cost. In most instances he will permit a rebate to old-age pensioners. Nowhere does the newsagent charge people what the market will bear. That delivery will now be subject to VAT and yet the system of delivery is an integral part of the consumption of the bulk of newspapers in this country.
It can scarcely be maintained that newspapers will in reality be zero-rated. The Chancellor's intention, as proclaimed in his Budget Statement, will therefore be frustrated. The long-standing British

1511
tradition to avoid the taxation of knowledge will be terminated unless the Financial Secretary favourably considers my Amendment. That I earnestly invite him to do.
Mr. Higgins: I had occasion yesterday to agree with much that the hon. Member for Sheffield, Attercliffe (Mr. Duffy) said about the principle of value added tax as such. This evening he has sat in his place with great patience waiting to move the Amendment which, I presume to say, he has done with considerable charm and eloquence.
It is important to distinguish between the regard in which in many ways one probably holds newspaper boys—perhaps no less in this country than in the United States where they have often been identified with the American ideal—and the fact that the tax, as the Clause stands, is to be imposed on the actual service of delivery. I am afraid that we must take the position that the supply of a taxable service in the supply of goods is taxable under the Bill, so I must advise the Committee not to accept the Amendment, despite the cogent way in which the hon. Gentleman put forward his argument.
The delivery of a newspaper is an optional service for which an identifiable payment is normally made. As such it would be stretching the meaning of the word to say that to tax such a service was a tax on knowledge. It is a tax on the actual delivery service. That is clearly recognised because the price charged for a newspaper is separate from the price charged for the delivery service.
As far as can be estimated—there is no great precision in these matters—the cost of accepting the Amendment would be about £500,000 in a full year, a not inconsiderable sum.
I should point out, because the hon. Gentleman might reasonably say that this is to some extent an important matter, for example, in rural areas, that a number of the newsagents to whom he referred may be small traders within the meaning of the Bill—that is, they will have a turnover on taxable goods of less than £5,000 a year—so they would be exempt and would not have to add VAT to their delivery charges.
To accept the Amendment would cause considerable anomalies. Services,
1512
such as delivery for which a separate payment is made, are rightly within the scope of the Clause. Therefore, I do not feel able to accept the Amendment and I advise the Committee to reject it.
1.15 a.m.
Mr. Duffy: I am grateful to the Financial Secretary for his consideration and reply, but it disappoints me.
I should like to take him up briefly on two points. First, he described delivery as an optional service. Will he think about it again? I assure him that it is not optional in practice. I argued, for the sake of brevity at this late hour, that it was an integral part of newspaper consumption in this country. For most people—this is probably true even of the Financial Secretary—it is inseparable from the use of newspapers. In theory, it is possible to argue that the delivery is an optional service, but for the bulk of newspaper users, delivery is inseparable from use. They receive their newspapers when they come into the home, although they may pay for them at the point of dispatch.
What is more, when people pay for their newspapers, they pay a single bill. I remind the Minister of what happens in the delivery of milk. Milk is delivered to people's homes in the same way, and the 5p a bottle, or whatever it may be, will include a charge for delivery; but that will not, presumably, be subject to the value added tax. One can imagine the sense of grievance among some newsagents that that may cause. I ask the Minister to think about it again. In practice, newspaper delivery is not an optional service. I am sure that he knows that from his own experience. One cannot disregard the sophisticated arrangements by which newspapers are now distributed in this country.
I recognise that £500,000 is not an inconsiderable sum. Yet is it too much to pay to protect the Chancellor's intention to zero-rate newspapers—he will not do that if delivery charges are subject to the tax—and to preserve the principle that knowledge should not be taxed?
I am most disappointed by the Minister's reply, but, in the circumstances, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
To report Progress and ask leave to sit again.—[Mr. Barber.]
Committee report Progress; to sit again this day.

ADJOURNMENT
Motion made, and Question proposed, That this House do now adjourn.—[Mr. John Stradling Thomas.]

MOTORWAYS (POLICE PATROLS)
1.18 a.m.
Mr. William Molloy: I realise that in some parts of the country something like a special police highway patrol exists, but I urge that we should take a more rational view of the matter and establish a proper national force, instead of having adequate police patrols on motorways and major trunk roads in certain places but insufficient elsewhere.
There is great national concern every time there is a ghastly vehicle pile-up causing death and serious injury to many. It seems that these disasters are getting worse. Moreover, much of the trouble is exacerbated in fog, and, despite all the advances of science and technology, we still do not know how to get rid of fog.
I pay tribute to the Press generally, and the motor trade Press in particular, for the serious way in which it has given propaganda to this subject and the manner in which it has sought solutions to the problem. From my researches, it is clear to me that it is not simply a matter of arrogant bloody-mindedness on the part of motorists which causes these ghastly pile-ups.
It seems, from my researches, that there are a number of contributory reasons. There is the general condition of the vehicle which I would describe as vehicle fitness or unfitness. Speeding also makes a contribution, as does overloading a vehicle. While we acknowledge that the truck drivers of Britain can be regarded as the knights of the road, there are rumours, which the Minister should investigate, of many truck drivers being put under severe strains to meet schedules. They are tempted to do so, because if they race
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down the motorway in a certain time they can earn more money, but the tragedy is that they can contribute to accidents. I do not say that this is a known cause, but it is worth examining.
It seems that scientific investigation will show that fog on motorways is a subject which we should investigate in depth. Objects in fog seem twice the distance away that in fact they are and this leads to the motorist travelling too fast for the visibility and making wrong assessments of the distance between him and the next vehicle. Another factor which has emerged from various researches is that we have to have a hard look at whether vehicle lighting is sufficient in these conditions, with a particular look at brake lighting. Another factor which seems to be revealed in the post-mortems on these terrible crashes is that of gross mechanical neglect and yet another is ordinary boredom of the driver. All these have been revealed in pile-up post-mortems.
Remedial measures have been proposed by the Minister's advisory committees, using mechanical and electronic devices, but they are not, by themselves, enough. There are even complaints because sometimes mechanical and electronic devices controlling speeds and giving warnings do not function and ordinary users of motorways are losing confidence in them. We have to look at this quickly.
It is patently true that, with all the mechanical and electronic devices, there is nothing like having a police car in evidence at the time. When I visit my constituency of Ealing, North I see cars rushing down the A40 in a 40 miles per hour controlled area at 60, 70 and even 80 miles per hour, sometimes going through red lights. All the devices will not stop that, but the appearance of one police car will have a magic effect.
We have to have something like a national form of highway patrol on the major highways. The need is for a specialist highway patrol which would have sole responsibility for maintaining and promoting safety on our highways.
The entire road network should be divided into regions. I realise the difficulty and that many chief constables are apprehensive, but they will acknowledge that something has to be done. Should we not find an answer instead of going

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on killing and maiming people? It should be realised that we have slain more people on the roads since the war than were killed by Hitler's Luftwaffe during the war.
If this suggestion were taken up, there would be a conference of chief constables to work out the details to establish a national highway patrol. I should like to see everyone engaged in it a specialist. They would need to be mechanical specialists and would have a knowledge of first-aid.
The cars would be linked to special locations on motorways so that there could be constant liaison for all sorts of emergencies. I should like to see highway patrols operating from stations and sub-stations along Britain's major networks. They would be so spaced that they would be ever ready to take preventive action.
We should examine anew the country's fog black spots. Such a patrol, if it arrives quickly on the scene of an initial pile-up of, say, two or three cars might well avoid a further 30 or 40 vehicles charging one into the other.
Each highway patrol would have its own warning system operating throughout Britain's road network. This would involve a thorough-going radio link-up to see that the cars were sent where they were needed. It would prevent a car being sent to a robbery or whatever it may be in one area when it may be needed to avoid a dangerous situation on a motorway or ordinary highway and would lead to the proper use of such patrols in a traffic sense. I envisage these highway patrols being relieved of all other responsibilities than traffic duties. I foresee them dividing up the networks, with special conferences of chief constables to lay down the duties of the patrols. Every patrol member would be a specialist in his own right in making his contribution in bringing down the terrible toll on our roads today.
I appreciate that the Minister will seek to argue a case on the basis of the initial cost of establishing these highway patrols. I suggest that the initial cost would be far outweighed by the vast gains which will accrue from the establishment of these patrols on our great motorways. This must result in more efficiency in
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moving our transport from one end of the country to the other, and it would certainly make a contribution to helping our economy.
Mr. John Golding: My hon. Friend knows that the M6 runs through my constituency and that I, too, have been concerned with the problems he mentioned. But is he not perhaps overstating the separation that he would like to see between highway patrols and crime prevention and detection work? In Staffordshire we have excellent highway patrols which are very successful in terms of crime detection. Many criminals are arrested on the motorways. Priority should be given to accident work, but I feel that the two functions should not be entirely separated.
Mr. Molloy: I take my hon. Friend's point. However, I must say to him that I know of no greater criminal activity than which involves a pile-up of 20 or 30 or more cars, with all the resultant misery in terms of people being killed or maimed.
We must also think of what will happen over the years with the increasing numbers of cars coming on to our roads, with all the possible future snarl-ups that will occur. We must do something urgently about the situation. The patrols will benefit industry and the ordinary private motorist. Not only will such patrols bring safety to Britain's roads but they will bring peace of mind.
1.30 a.m.
The Minister of State, Home Office (Mr. Mark Carlisle): I am grateful to the hon. Member for Ealing, North (Mr. Molloy) for raising what is an important subject. The tragic multiple accidents in fog which occur from time to time on our motorways are matters of great concern to the Government and all members of society. We welcome any suggestions for improving road safety. The police attach great importance to road safety and the enforcement of traffic laws. About 10 per cent. of the total strength of the police service is devoted to road traffic work. In 1970 proceedings were taken by the police against more than 1 million people involving more than 1½ million alleged road traffic offences.
Every police force has a specialist traffic department whose members concentrate on traffic work. However—and

1517
here I take up the point mentioned in an interjection by the hon. Member for Newcastle-under-Lyme (Mr. Golding)—police officers engaged in road traffic patrol work do not confine their attention to road traffic matters alone. They exercise full police powers, and a surprising amount of ordinary crime is detected and dealt with by means of such patrols. As the hon. Member for Ealing, North said, it is well recognised that the mere presence of the police on a road has a salutary effect on the standard of driving, on conformity with the law and road safety generally. It is important that police traffic patrols should not only be busy but should be manifestly seen to be about their business.
In deciding how his available resources should be allocated, a chief officer of police must bear in mind all the various policy requirements of his area, including, obviously, the maintenance of public order and the investigation of crime.
I turn to the policy of motorways, with which the hon. Member was mainly concerned—
Mr. Molloy: With the best will in the world, I cannot accept that if there were a police squad controlling traffic under difficult circumstances it should pop off to investigate some burglary, with the result, perhaps, that 20 foolish people were killed or maimed.
Mr. Carlisle: I did not say that. I know the hon. Gentleman's concern about this. What I said was that within the total resources of police forces the chief officers of police have the difficult task of allocating such resources.
Turning to the policy of motorways, almost 30 forces in the country have stretches of motorway in their areas and each force provides patrols to police them. They are composed of men with special training, many of them with years of experience in motorway work, and they use conspicuously marked and specially equipped vehicles.
The presence of a police car, easily recognisable, on a motorway is a major factor to good motorway or road behaviour. There is, I am glad to say, excellent liaison between the various forces responsible for continuous stretches of motorway. Patrol cars of different forces are in touch with each other by
1518
radio at all times and with their various headquarters, and in some cases control centres are shared and messages are passed as necessary between the forces on such matters as breakdowns and accidents.
Today there are about 900 miles of motorway in use. Therefore, more and more police forces are getting experience of motorway patrol work, and that experience, I am glad to say, is being pooled between the various forces. Conferences of heads of traffic departments are held at which motorway problems are discussed and views and experiences are exchanged.
It has been suggested from time to time, as the hon. Gentleman suggested just now, that motorway patrols should be organised and commanded separately from the police forces through whose area the motorway runs. One idea which I think the hon. Gentleman mentioned and which, I think, the committee on which he served recommended was that the motorway police might be organised in regional units. But we must face the fact that an organisation of that kind, transcending existing force boundaries, would not fit easily into the existing pattern of policing. This places on the chief officer of police in each area the responsibility for policing the whole of his area, including the motorways which run through it.
Thus, under the law as it stands, any separate system of control for motorway police would involve—and the hon. Gentleman accepted this—some surrender of sovereignty by each of the chief officers of police concerned, which is quite distinct from the co-operation and support which the forces are now always ready to give each other. But in the end this is a matter entirely within the discretion of chief officers of police, and I assure the hon. Gentleman that at the request of the Home Office those concerned with motorways have gone into this possibility from time to time in recent years.
They have, to my knowledge, decided, for example, to set up in one place a unified control of pooled resources where there is a special need for it. This is in the Midland Links area, with the M6, M5 and Ml which within the next fortnight or so will join together, and it is situated in parts of five separate police

1519
areas. Here the police cover is provided by a composite motorway patrol group comprising officers from each of those five forces. The group operates from a purpose-built control centre where computer-controlled signal and surveillance systems are installed to help in operational control. Extensive use is made of closed circuit television.
Similar arrangements may eventually be made elsewhere to meet special operational needs. But, in general, chief constables do not favour any separation of control over their motorway patrols. They think that it would have no advantage over the present system and might have the disadvantage of separating the traffic and crime aspects of police duties and might militate against the mobilisation of the whole of the resources of a force in a time of emergency. They consider that the present system allows for more flexibility in the use of police resources, whether the need is to deploy those resources on or off a motorway in a specially urgent situation. When it comes to a serious accident or other emergency on a motorway, it must be remembered that serious repercussions are felt on other primary routes in the police area, especially if the motorway must be closed.
The chief constables think it is best to deal with their traffic problems as a whole and not to look upon a motorway passing through an area as distinct and separate from the other road systems. But, I repeat, the concept of motorway policing is still evolving. Chief constables will continue to review their organisation of both patrols and operational techniques in the light of their experience of the developing motorway network.
I will say a brief word about the new computer-controlled signalling system which we are bringing into existence on motorways and which is being installed on all those motorways for which my right hon. Friend the Secretary of State for the Environment has responsibility. This system is now replacing the manually operated hazard warning signs. It is designed to give warnings of all hazards not only fog, and tells motorists about lane closures and safe maximum speeds for the prevailing conditions. The signals are controlled by the police from
1520
remote control centres on the basis of information provided by police patrols on the road.
The system is already in operation over 180 miles of motorway, and I understand that this total should rise to about 500 miles by the end of this year. Once installed, we believe that the system should make our motorways even safer than they are now and should greatly assist the police patrols in carrying out their duties, particularly in conditions of poor visibility, by enabling them to advise reduced speed limits at any time on any particular stretch of motorway.
Foggy conditions create special difficulties. Drivers feel more isolated from their surroundings than they do on other roads, and they may find it difficult to judge speed. I concede the point made by the hon. Gentleman that they may also find it difficult to judge distance on a motorway. I am sure the hon. Gentleman will be interested to know what is happening in West Yorkshire. There, the constabulary have been employing, with considerable success, a system under which, in foggy conditions, as many police patrol cars as are available are injected into the existing traffic flow. They travel, straddling the motorway lanes, at speeds which they feel are the safe maximum speeds for other drivers. By doing this they control the speed at which other motorway traffic is moving. Some other forces are now operating a similar system. Whether they do so is an operational matter for the decision of the chief officer of police of each force.
It is easy to see that measures of this kind make heavy demands on police resources. Its operation can be effective only if as many officers and vehicles as possible are diverted from other duties—usually at short notice—and that may leave other important roads short of adequate police surveillance.
Equally, as the hon. Gentleman said, the sudden descent of thick fog without warning may result in an accident occurring before the patrol system can be put into operation. Nevertheless, in areas such as West Yorkshire it has proved to be a valuable aid to motorway safety. But we must not overlook the fact that problems of fog and accidents

1521
arising from fog are not confined to motorways, and the chief constable has to keep in mind at all times the need for the police to cover the roads in the whole of the force area.
Motorways can at times be very dangerous places. Effective police patrolling makes them less dangerous. It is going on day and night throughout the year. Expertise is being built up and new ideas and methods are being studied. Motorways are, after all, comparatively new and police methods of traffic control must be based on experience. Both the police and the Government are determined to benefit from those lessons.
As I said, there are close operational links and regular discussions between forces, and there is close contact between the Department of the Environment, the Home Office and the police, for example,
1522
in the development of the national motorway network and its signalling system.
Finally, I want to emphasise two factors. First, despite the terrible accidents which occur from time to time on the motorways, the fact remains that the accident statistics show that the motorways are still our safest roads. Secondly, and, I suppose, most important of all, even with the most efficient police patrolling system, in the end it is the human element that counts, and accidents will still happen if drivers on the motorways, despite the efforts of the police, do not drive sensibly, matching speed with the conditions prevailing and showing through their driving adequate consideration to other users of the road.
Question put and agreed to.
Adjourned accordingly at fifteen minutes to Two o'clock.