Clause 12

HC Deb 10 May 1972 vol 836 cc1387-419

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 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 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 (Westhoughton)

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. 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 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 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 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 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 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. Barnett

No.

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 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. Barnett

rose—

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 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 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 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 (Bridgwater)

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 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 (Bedford)

All Members opposite can do is laugh like hyenas.

Mr. Piers Dixon (Truro)

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 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 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 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 (Dartford)

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. Trew

rose—

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 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 (Orkney and Shetland)

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 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- 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 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 (Dorset, South)

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.

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 (Canterbury)

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 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 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 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.

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 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.