Clause 9

HC Deb 10 May 1972 vol 836 cc1328-87

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 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 (Leeds, East)

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 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 (South Angus)

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 (Ashton-under-Lyne)

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 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 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 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 (West Lothian)

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 (Peterborough)

Apart from the question of the number of civil servants, the extra staff and so on required in business under a multi- 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 (Tottenham)

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- 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 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 (Heywood and Royton)

As the right hon. Gentleman is making a great deal about suspicions, 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 (Birmingham, All Saints)

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.

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. Waldenindicated 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. Walden

rose—

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 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 (Dudley)

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 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, afortiorithe 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 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 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 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 (Cities of London and Westminster)

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 made that assurance when he introduced income tax.

Mr. Peter Rees (Dover)

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 (Horsham)

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 ANDERSONin 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 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 (Leeds, East)

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. 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 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 (Bedfordshire, South)

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 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 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 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 (Worcestershire, South)

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.

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 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 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 (Rugby)

They did not win a match last year.

Sir G. Nabarro

I am also—

Mr. Arthur Lewis (West Ham, North)

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, 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 (Birmingham, Northfield)

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.

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 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 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 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 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 (Southampton, Test)

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 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 (Walthamstow, West)

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 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 (Harrow, East)

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. 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 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 (Loughborough)

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 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 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 them the most careful consideration and favourable treatment.

6.15 p.m.

Mr. Norman Buchan (Renfrew, West)

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 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.

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 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 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 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.