Clause 4

HC Deb 10 April 1973 vol 854 cc1229-84

RELIEF FOR TAX- OR DUTY-PAID STOCK HELD AT COMMENCEMENT OF VAT

Mr. Joel Barnett

I beg to move Amendment No. 2, in page 4, line 38, leave out ' taxable '.

The Chairman

With this amendment the Committee is to take Amendment No. 3, in line 40, leave out 'April ' and insert 'October'.

Amendment No. 4, in line 40, leave out April' and insert 'June'.

This selection is contrary to the selection published at the Door.

Mr. Barnett

One cannot help feeling that if there were a trade union of Members of Parliament there would be some ground for complaint about the speech of the Chief Secretary to the Treasury the other week on the subject of value added tax. That speech is to be condemned for the way in which it adds to the general disillusionment with politicians. The Chief Secretary very foolishly exaggerated the terms of this tax. He did so in a way that one might not expect even the Financial Secretary, who loves this tax so much, to speak about his beloved VAT. As has been stated in the Press, the Chief Secretary greatly exaggerated the attractions of the tax.

In respect of this tax and of anything else, what the country wants to hear is the truth. That is especially so with VAT, when they can seen for themselves what a nonsense it is. All the tax does is to add to the disbelief that exists concerning the utterances of the present Government and, probably, of Members of Parliament generally.

I do not dispute that there are some advantages in VAT. However, the main advantage of having a broadly-based tax has been very much removed by all the zero ratings which have been forced upon the Government. Furthermore, if one wanted a broadly-based indirect tax one could have done a great deal with the use of the existing purchase tax by making it much more broadly based. I do not dispute that we have to learn to live with VAT, but I still argue that for as long as it is on the Statute Book it will remain an administrative monstrosity of a tax. All those who have to deal with it will find it enormously complicated.

It would, therefore, have been very much better if the Chief Secretary had told the country the truth about the tax. For example, he could have said that prices overall should not rise because no more tax is collected through this system than was collected through the two taxes which it replaces. But the present Government are quite incapable of controlling prices. Indeed, it was absolutely lunatic to introduce this tax at present. I find it difficult to imagine that even Treasury Ministers would argue that since VAT was introduced there have not been price increases. If anyone disputes the fact that prices are still rising, let me quote one or two references made in the Press. I refer first to an article in the Sunday Times of last Sunday, by Mr. William Ellsworth Jones. He said: The pattern of complaints is the same across the country: launderettes putting 5p on a 15p wash "—

Mr. Healey

And no season tickets.

Mr. Barnett

No season tickets. I see that the Minister of State has not persuaded launderettes to issue season tickets. Mr. Jones continued: car park charges, which have shot up, the rounding off of halfpennies. Many complaints are concerned with food, and cafes which charge VAT on take-away meals and restaurants whose bills have soared. Inspectors have found that most restaurants have simply put the full 10 per cent. VAT on their prices, ignoring savings made by the abolition of SET. As we know, this was what the Chancellor was expecting all shopkeepers, cafes and restaurants not to ignore.

Mr. Higgins

The hon. Gentleman will recall that the clause and the amendments with which I understood him to be dealing are concerned with the rebate of purchase tax. I have a slight problem in relating what he has been saying to that matter.

Mr. Barnett

I am sure that the Financial Secretary would not like to hear about these things. I am surprised that he did not hear that the Chair has kindly allowed the debate to go a little wider and to cover the whole of the tax. In fairness—the Minister should not look too surprised—the first amendment would delete the word "taxable". In other words, we are discussing whether there should be a "taxable person" who would get his rebate for tax, or whether it should be a person who has not even registered for tax.

In those circumstances I am not surprised that the Chair was kind enough to agree that we should broaden the debate so as to discuss a few other matters. I am sorry, but the Financial Secretary will just have to sit and listen to some of the complaints of ordinary people.

8.0 p.m.

The Chairman

1 am sorry to interrupt the hon. Gentleman again, but what has happened in the past does not concern the amendments that we are discussing. I am sure he will realise that I have made certain concessions from the Chair to allow these amendments to be taken together. I would not, therefore, expect a broad debate, going beyond these amendments.

Mr. Barnett

I am keeping it very narrow, Sir Robert—

Mr. Charles Loughlin (Gloucestershire, West)

On a point of order, Sir Robert. Will you define for us the scope within which we can debate these three amendments?

The Chairman

No, the Chair is never so rash as to do something like that. What I will do is pay particular attention to the speeches of hon. Members and leave it to their judgment to remain in order without correction.

Mr. Barnett

I appreciate your kindness, Sir Robert. I am sure that you will interpret the debate in the right way and look at this subject in the way in which the people of this country are looking at it. I am sorry that the Financial Secretary does not like to hear this, but the people of this country do not consider that VAT is working in exactly the way in which the Chief Secretary and the Chancellor wanted.

Before I was interrupted, I was quoting from an article in the Sunday Times. It goes on: Inspectors have found that most restaurants have simply put the full 10 per cent. on their prices, ignoring the saving made by the abolition of SET. That is not surprising. Only Treasury Ministers could have imagined that traders would not simply pocket SET. Could they really have believed that this benefit would be passed on? It is remarkable that such an outcome could have been thought possible. The article goes on to quote Mr. Leslie Griffiths, a London chief inspector, as saying: It always seems to be very difficult to take a tax off. So it is hardly—[Interruption.] The hon. Member should not boast too much about the taxes that his Government have taken off. As my hon. Friend has said, the only way that he has managed to take them off is by borrowing the whole amount. But I am being tempted to go too wide.

Not only that Sunday Times report makes clear the extent to which prices are rising because of this tax. There was an interesting piece by Mary Brogan in another Sunday paper this week, in which she said that the Chief Secretary and other Treasury Ministers had been saying: Do not be diddled by VAT, shop around, compare prices and save money. She goes on: I never cease to be filled with admiration for women who can look at 4 fluid ounces of a commodity in one shop at Xp, then go off to visit another shop and spot 250 centilitres of the same substance at Yp …. The only trouble about this is that it requires a dedication to the art of shopping which I … do not possess and am never likely to. One might add that most housewives and old-age pensioners do not have that art either.

Mary Brogan goes on: It is this last point"— referring to this method of trying to get the best possible price— which makes me particularly irritated when politicians (male) take a high moral tone in exhorting housewives not just to go to the nearest shop, but to survey the field. It is just possible that these noble fellows carry the weekend shopping home, but, if they do, they are members of an extremely small minority. This applies, of course, to the small minority at the Treasury who, in a high moral tone, are telling all the housewives and old-age pensioners—as the Chief Secretary told us the other day—to say to the shopkeeper, "You have got it wrong. You really should not do that. You should reduce the price because of the abolition of SET." This is remarkable.

Mr. Higgins

The hon. Member knows that I have many times been happy to discuss all aspects of value added tax. If the hon. Gentleman is talking about SET he cannot relate it to an amendment specifically concerned with purchase tax rebate.

Mr. Harriett

The Minister should not get so bad-tempered. He must sit and take it. He has handed out to 55 million people the burden of having to deal with this damned tax and he must now sit and listen to some of the complaints that are being levied throughout the country.

If the Minister were to be truthful and honest he would not exaggerate the wonders and beauties of this lovely tax of his; he would concede the anomalies. He would not talk about a broadly-based tax, free from anomalies, and comprehensive. He should recognise that it may be that what he wanted—I have a feeling that it is precisely what he wanted—was a really comprehensive, broadly-based tax. He is still talking about that; the only trouble is that the Chancellor has changed it while he was not looking. I deduced from the look on the Minister's face that this was the case when the Chancellor was announcing yet further anomalies.

I want to refer to a few important examples. Questions are being asked in all sorts of quarters, perhaps by those who have not registered. It may be for these very reasons that they have not registered.

One relates to the clothing worn by young children—"genuine" young children, in the terms of Notice No. 714. There was a letter in The Times the other day about this, and I have had letters from people who manufacture children's clothes complaining about the way in which this will work. They do not know how it will work. They are in a terrible state of wonderment about what will happen.

The letter to which I referred, from a Mr. Tarlo, appeared in the Business News on 9th April. It related precisely to Notice, No. 714; and said: The notice asserts that children's clothing correctly zero-rated by manufacturer and wholesaler will become chargeable with VAT when sold by a retailer whose shop or counter fails to comply with requirements laid down in the notice, or if the clothing is either labelled or not labelled, as the case may be, as required by the notice. I should be interested to know—as, I imagine, would most children's clothing manufacturers and retailers—whether that is the case.

Mr. Tarlo went on: What is more important to the consumer is that if VAT-man intends to enforce his interpretation of the law as set out in the notice, then the widely publicised announcement that children's clothing will not go up in price because of VAT is false. We need to know the answer to that question.

I am sorry to burden the Financial Secretary with the responsibility of answering these questions, but they are important questions, which are being asked by many traders and manufacturers who cannot get the answers from local Customs and Excise officers. I am not blaming them; they are madly overworked and just do not have the answers. The least we can expect is that the Minister should answer them now.

What about sweets, lollipops and ice creams? What is the position of these items when sold in a cinema or at a swimming bath? As I understand it, the ludicrous situation is that if one buys a lollipop when going into the cinema it is subject to VAT, whereas if one buys it when leaving the cinema it is not. If that is not so, perhaps the Financial Secretary will set at rest my mind and those of the traders who have to deal with this matter.

At the moment precisely the same sort of situation is found with fish and chips, and the position on the railways is much the same. If a passenger buys a sandwich and then boards a train and eats the sandwich on the train it is, I presume, his own sandwich, and it will not be subject to VAT. If, however, he buys it at the bar on the train I presume it would be subject to VAT. The same thing applies to sweets and lollipops and chocolates. It is an absurd situation. The same situation applies in the case of house alterations and improvements. Many traders still do not know what the position is, and I imagine some of them would have registered if they were doing repairs exclusively. They may have registered and did not need to or, on the other hand, they may have registered because they thought they were zero rated when they were not. This is a serious problem.

Mr. Higgins

One of the amendments with which we are dealing is concerned with the refund of purchase tax to exempt traders and the other two with the extension of the time limit. With great respect, I think I would be quite out of order in answering the points that the hon. Member is making.

The Chairman

Further to what the Financial Secretary has said, I am in some difficulty. I have been examining the notes that I have about the meaning of the amendment and it seems to me that it is fairly narrow. It concerns the exemption of some people from the application of tax. As long as the hon. Member for Heywood and Royton (Mr. Joel Barnett) stays on that point I would think he will be in order. He should be careful not to go too wide.

Mr. Loughlin

On a point of order, Sir Robert. Surely it is not for the Chair to be prompted by the Minister. You will recall that I asked you at one point to define the area of discussion. Surely it would be invidious for us to get into a position in which the Chair is prompted by a Minister. If you examine the clause and the amendments you will not see anything limiting in them. As far as I can see the deletion of the word "taxable" in the context of the clause would permit of a very wide debate.

Mr. Barnett

I appreciate the difficulty in which you imagine yourself to be. Sir Robert, because of the unfortunate intervention of the Financial Secretary. I can understand his being short-tempered, because he is probably being pestered by Customs and Excise officers at local level, and by local traders. But as my hon. Friend correctly said, if we are arguing whether a person is taxable or not we are on a wide-ranging subject. For a person to know whether the goods he is selling are taxable or not he has to know whether he is exempt or not under the terms of the Bill. It is most unfortunate that the Financial Secretary was so short-tempered.

The Chairman

These are difficult matters. Hon Members are. of course, experts in all these things, and the Chair has to do the best it can to measure up to that degree of expertise. I would be very foolish not to take some guidance from any hon. Member—Government or Opposition—that something that was being done was wrong. No doubt the hon. Gentleman has in mind occasions such as when the Chair says, "Thank you very much. I know how to keep order." I have probably said that myself many times. However, the Committee must understand that there was a doubt going through my mind which tended to be crystallised by what the Minister said. I hope we can now get on.

8.15 p.m.

Mr. Barnett

I am obliged, Sir Robert, for your words, because, like ourselves, you sat through all the debates last year. You therefore appreciate how wide is the difference between a taxable person and a non-taxable person.

I shall proceed with the point that I was making about the great problem of anomalies, which are central to the people whether they are taxable or not. I was taking the example of traders who sell bottled drinks. These drinks are now zero rated but sometimes they are sold in containers which are subject to a deposit. The traders who sell them are now extremely concerned—I have had letters from them—about the way in which to deal with the situation when the container is subject to VAT. I should be obliged if the hon. Gentleman would deal with that point in his reply.

The Chief Secretary, instead of talking about birth pangs of the tax, should admit honestly that there is enormous confusion amongst all those who have to handle it. There can be little doubt about it. We know all about it from our contact as MPs, with traders and shoppers. Equally, if Treasury Ministers prefer indirect taxes—particularly those like VAT—and would prefer them to income taxes, they should say so honestly.

For goodness sake do not let them pretend that they intend to keep VAT at this level. Nobody would believe that even this Government would be so stupid as to introduce a tax that raises the same amount as the two taxes it replaces with all this confusion, trouble and problems. It would be absurd for any Government to introduce such a tax if they did not intend later substantially to increase it. I should be obliged if the Financial Secretary would tell us that this is what he intends to do. I do not think that he will do so, but I would be obliged if he would, for the sake of truth and honesty in the House.

I do not believe that the Chancellor or the Prime Minister can go on pretending that the tax cuts the Government have made are no flash in the pan. Of course, the Financial Secretary knows that real cuts other than those as a result of fiscal drag, mean that they should be either earned or the results of cuts in public expenditure. To pay for them out of borrowing only adds to the disillusionment of the public [interruption.] The Minister of State had better leave if he does not like hearing about the problems of VAT and taxation generally.

Mr. Nott

With respect to the hon. Member, he was not talking about the problems of VAT. He was not even talking about the clause, which concerns the purchase tax rebate. He was talking about the borrowing requirement, and that cannot come under the clause.

Mr. Barnett

I am surprised at the hon. Member. He was obviously not following my argument. I was talking about indirect taxes and the need to increase them under this Government.

The Chairman

I think I am beginning to get this thing clear. As I understand it, a taxable person has a particular meaning in the VAT sense. Therefore, that is the person we ought to talk about. I believe it concerns a limit on turnover of £5,000, or something like that, which hon. Members know far more about than I do. That is what we have to keep to. If the hon. Member for Heywood and Royton does not keep to the amendment I shall have to call him to order.

Mr. Loughlin

I am interested in this because I want to speak on the clause. So far I have not spoken on a single clause in the Bill. I draw your attention, Sir Robert, to page 4, Clause 4, with which we are dealing. In the left-hand column you will see a reference to: Relief for tax or duty-paid stock held at commencement of VAT. The First amendment with which we are dealing is, Clause 4, page 4, line 38, leave out ' taxable' ". If one relates it to the second amendment: Clause 4, page 4, line 40, leave out ' April' and insert ' October ' ", one sees that the commencement of VAT will be in October if the amendment is carried. Therefore, I infer from my interpretation of the clause and the amendment that this is indeed a very wide discussion of VAT. I wonder whether you would care to give me your interpretation, Sir Robert.

Mr. Barnett

I really find it difficult to understand this, because we are talking about a time situation, and it always widens a debate when a time situation is involved, and a type of taxable person. Apart from that, I did discuss this with your Clerk yesterday, Sir Robert. I asked him whether he would have a discussion with you with a view to having what is quite normal in our Finance Committee debates on the Budget—as on the last clause—a general debate. I asked whether you would mind a general debate on VAT. It was my understanding that that was to be the situation.

The Chairman

I am afraid that that was not exactly as I understood matters. I have no desire to get across the Committee or the Government in this matter. I am anxious that we should take matters in as orderly a way as possible. The hon. Gentleman will be quite at liberty to raise the points he has if he relates what he is saying to the dates and goes on talking about taxable persons. That will be all right, but I hope he will not make it a wide debate, in the sense that the last one was.

Mr. Barnett

I am most grateful. I have a feeling that this might never have arisen had it not been for the bad temper of the Financial Secretary.

Perhaps I may revert to this aspect and its effect on taxable persons. The advertisements which the Government have published about VAT are not good enough. It is not good enough for the Government to publish advertisements about this tax which are wholly misleading and are indeed political advertisements. They must be terribly misleading to people who might or might not be taxable persons. I imagine that they are saving the Tory Central Office a fortune. It is absurd to suggest, as is suggested in the advertisements, that prices will not go up because of the introduction of VAT. We know that they will and we know that they have. I sincerely hope that the Chancellor will either stop publishing these advertisements or transfer the charge to the Tory Central Office.

Mrs. Elaine Kellett-Bowman (Lancaster)

Is the hon. Gentleman aware that the Lancastria Co-operative Society— hardly a Tory Central Office-financed organ—inserted a very large advertise ment in the local Press to the effect that VAT would bring down its prices?

Mr. Barnett

The hon. Lady really must not be quite so naive. She must know that many stores on many occasions—

Mrs. Kellett-Bowman

This week.

Mr. Barnett

This week certainly, and next week and the week after, and next month, next year and a year after, we shall have advertisements telling us that people are cutting prices. But if the hon. Lady thinks they are going to cut prices across the board so that they will all lose money she is slightly more naïve than I had imagined was the case—although I may be doing her an injustice.

On the amendments themselves— [Interruption.] I see that even the Govern- ment Whips do not like the truth about this tax. I am really astonished. I would have thought that they would be delighted to have a discussion on a tax which they have acclaimed as a wondrous one—which they have acclaimed as a great reform. I notice they do not say, as with other claims, that this is a simplification of our tax system. That would be the most surprising claim of all.

I do not claim that this is necessarily the best-drafted amendment there has ever been. It is possible that it is technically defective in certain ways but, as has always been the case in our Finance Bill Committee debates, whichever party is in Opposition, amendments are not necessarily drafted as, technically, they should be. But it tends to be only the Chief Secretary to the Treasury who takes a delight in saying how badly they are drafted.

I want to make it clear that it is the principle with which the Committee and I are concerned, and I hope that is what we shall talk about. If the Financial Secretary is prepared to accept it, it can be redrafted on Report.

The first point to understand about the first amendment is that if the trader is not registered he or she is not a taxable person. That is obvious. As it stands at the moment, that means that if he or she registers after 1st April 1973 and submits a return, he or she will not get a rebate of the purchase tax paid on the stocks held. These amendments seek to ensure that if a trader registers after 1st April and submits a return before the end of June he or she will still be able to obtain a rebate of the purchase tax on the stocks held. I submit that that should be on the date at which he or she registers, although I willingly concede that the amendment does not make that entirely clear. I would wish the purchase tax rebate to apply from the date the trader registers. If a person registers on 1st May and submits his return on 1st June he should be entitled to purchase tax rebate on the stocks he holds on the date he submits his return. That is what I should like to see, and I hope it is what the Committee would like to see.

[Mr. IFOR DAVIES in the Chair]

I entirely accept that the trader should have registered and is wrong not to have done so, but I hope we shall stop this pious talk about what this poor devil should or should not have done. The fact is that most small traders, in particular, find it extremely difficult to understand this tax, and they are now finding it even more difficult to know what is zero rated, what is exempted and so on. They do not know from the statements that have been made whether, if the goods they sell have been relieved from tax, they should register. Many of them think that if their goods are zero-rated they do not need to register—

Mr. Higgins indicated dissent.

Mr. Barnett

That happens to be the case, and it is no use pompously lecturing them and telling them that they should have registered. The penalty for failing to register is substantial, as we know from our debates last year. Why, on top of the penalty for failing to register, should traders have the further penalty of not being able to get rebates of purchase tax on their stocks? This is what these amendments seek to do.

Secondly, I put this to the Financial Secretary. If his answers to Questions are right and there are very few people left unregistered, I cannot understand what all the fuss is about. On 5th April the hon. Gentleman said in a written reply that it was estimated that approximately 1,100,000 traders had registered. The reply went on: Checks by local VAT offices and other sources indicate that there was no serious shortfall in registration by traders liable to do so."—[OFFICIAL REPORT, 5th April 1973; Vol. 854, c. 156.] I find this very difficult. If that is true, there is no one left to register and I cannot see why the Government cannot accept these amendments.

8.30 p.m.

What is really surprising is to find an error of 400,000 in the calculations. Originally, the Chancellor of the Exchequer said that the estimate was 1.5 million traders. Now we are told that 1,100,000 have registered and that there is no one left to register. This bodes ill for the right hon. Gentleman's statistics, If he can be 400,000 out, I wonder about the rest of his statistics.

We are entitled to a substantial explanation. We do not want just vague reasons for the error. We want to know how many companies grouped their accounts so as to have one registration for VAT. We want to know how many have been found to be exempt who were not previously thought to be exempt. We want to know why there was this major miscalculation. It is not a matter to be dismissed lightly. It is a major miscalculation, and we are entitled to know why there is this serious shortfall from the figure originally given to us which misled us into thinking that there were 1.5 million traders to register.

I come, then, to why the traders did not register. The probable reason is that many thought that they had a turnover of less than £5,000 in goods subject to tax, not realising that the zero-rated items brought them into registration. That is one of the major problems. The other is the fear of forms. Small traders, like most people in this country, have an enormous fear of form-filling. The same goes for the average taxpayer.

There is another major fear. It is the fear of snoopers. There are to be all these inspectors who will make spot checks. Perhaps we might be told a little more about them. How many inspectors will there be? How often will they be calling on registered traders? For what exactly will they be looking? Are they likely to be going in every year or every four or five years? For the bulk of the time, will the VAT officers and the Inland Revenue be exchanging information and checking whether the accounts of individuals agree with the returns submitted for Customs and Excise purposes? Will the system of cross-checking avoid the necessity of the number of civil servants rising much above the 6,000 total, and in this way will the number of snoopers be kept down to even below the 6,000 mark? The traders concerned and the non-traders who are likely to be checked under the workings of this legislation should be made aware of the answers to these questions. I hope that the Financial Secretary is ready to give a great many answers.

I have the feeling that the Treasury may be surprised at the amount of revenue yield that it gets not necessarily from VAT but possibly from income tax. I have the feeling that we are likely to see a very much greater over-working of Inland Revenue staff as a result of back-duty investigations which are likely to arise out of the introduction of VAT than has yet been realised.

I come, then, to Amendment No. 4. This gives a trader a longer time to submit his return. It extends the period by three months. Instead of having to submit it by the end of April, he will have until the end of June. It is important here to understand the problems affecting traders having to submit their returns by the end of April. They have to deal with this problem, according to the clause, under Notice No. 748. I must say to the Financial Secretary it is extremely difficult for hon. Members in this House to deal with this problem when, for example, VAT Notice No. 748, mentioned in this clause, is not available either in the Vote Office or the Library; and neither are two other VAT forms which are required to enable traders to submit their returns. But, of course, we now know the form, and are able, eventually, to see exactly what traders have to deal with by 30th April.

It is not going to be very simple. For example, on page 5, in paragraph 8(a) it is stated: If the amount of tax and the rate actually charged were £110 and 55 per cent. respectively and the rate applying to the goods on 7th November 1972 was 25 per cent. the amount of rebate which may be claimed will be £110 times 25 over 55, i.e. £50. It is possible that most small traders will be able to deal with this quite easily but I doubt it. On top of that, by paragraph 9(f) they have not only to submit their returns by 30th April but must submit them in time to arrive not later than 30th April 1973, so they are dependent on the postal service as well. Heaven help them if they are dependent on that. They had better start posting them now.

We also know that it is not the small traders who will be dealing with these returns. It will be their accountants who will be doing so. The Committee will know my interest, and I would make it clear that from my experience, knowledge and contacts with colleagues in the profession they are madly overworked and will find it almost impossible to deal with these returns for traders so as to get them into the hands of the Customs and Excise by 30th April. I would have thought the least that the Chancellor could do would be to give this relief, to extend the period, because I know what is likely to happen if he does not do so. MPs will be inundated with complaints from their constituents because their returns have not been got in in time and they are not allowed to obtain the rebate of purchase tax to which they are genuinely entitled.

I hope the Financial Secretary is prepared to accept the amendment, because if he does not do so he fails to recognise the confusion that reigns at the present time among the traders and accountants who have to deal with the problems. I believe I have grossly understated the situation. It is a shambles. It is almost impossible to obtain information quickly from local Customs and Excise officers. Customers, traders and the Customs and Excise are "bewitched, bothered and bewildered"—and those are not my words. They are taken from the Manchester Evening News of 7th April quoting words by a very charming lady who was quoted to us before in aid of the Chief Secretary, Mrs. Regina Dollar—

Mr. Nott

A very important lady.

Mr. Barnett

—who incidentally—and the hon. Gentleman should not laugh-is the chief national organiser of the National Consumer Protection Council. She said things went wrong because of the confusion; and this is what we have, confusion. So it is only fair for the Chancellor to make it a little easier for all these traders, their professional advisers and the Customs and Excise officials themselves who have the appalling task of trying to deal with this tax. Give them a little extra time. Let them have at least until 30th June to submit their returns.

Dr. Tom Stuttaford (Norwich, South)

Yesterday afternoon when we were discussing the disabled I managed to ask a question in an intervention, and I know that the hon. Member for Norwich, North (Mr. Wallace) was also hoping to catch Mr. Speaker's eye but failed. I only seek to bring to the knowledge of the Treasury another cruel and heartless anomaly which has occured in VAT. This has had its effect in Norwich and needs rectifying immediately.

I refer to the problem of a kidney machine bought by public subscription or by donations. If a machine is prescribed under the National Health Service and is bought by the State, no VAT is payable. On the other hand, if one happens to live in a community which shows some regard for its disabled and collects the money needed to provide the machine, one finds that it is eligible for VAT. A kidney machine which a fortnight or three weeks ago cost £2,500 today costs £2,750.

I should like my hon. Friend to visualise the predicament of a man who expected to have his machine delivered last week at a certain cost. He now finds that the funds which have been collected by diligence and hard work are no longer sufficient to purchase it. The machine has now been thrown out of that price bracket by the addition of VAT.

This anomaly does not apply only to this machine. It applies to all hospital equipment which may be bought by voluntary public bodies, such as the friends of various hospitals, or by communities who care for the aged. This anomaly will occur more frequently in the future, and I hope that my hon. Friend who will reply on behalf of the Treasury will say that this anomaly has been overlooked by his Department and that he will take immediate steps to put it right.

Mr. Dalyell

I wish to speak to Amendment No. 3.

Mr. Loughlin

Really! The fourth time!

Mr. Dalyeil

I shall be brief. The amendment is in my name.

I should like to echo much of what was said by my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett). Many small traders are deeply worried by the problems which they now face. If it had been necessary they would have "lumped it", but many people now believe that this provision was unnecessary in the first place and that it is certainly wrong that it should be rushed through so quickly.

I wish to refer to a Miss Cooper who runs a small catering establishment in Linlithgow, where I hold my surgeries. On Saturday Miss Cooper told me "At my age in my sixties I am too old to start worrying about all this." The fact is that Miss Cooper, like many other people, has become used to the tax system which has stretched over her lifetime, and she now faces a great deal of extra work.

Then there is the owner of the garage which looks after my car. That gentleman told me "I spend three hours every morning working out the implications of VAT." If this provision were necessary as a result of our entry into the Common Market or for any other reason, one might have understood the situation a little more readily. However, many of us who sat through the proceedings on last year's Finance Bill believe that this provision is not necessary under EEC regulations and that, as my amendment seeks to achieve, more time is necessary.

To save time, I wish to concentrate on two issues. The first concerns the situation of charities in face of VAT. Perhaps this can be best outlined by quoting a letter of 22nd March from the National Council of Social Service, signed by Mr. J. K. Owens, its Director. Mr. Owens quotes the words of Sir Philip Allen, Chairman of the National Council, in a letter to the Chancellor of the Exchequer: There is no point in disguising the fact that the National Council is deeply disappointed with the small size of the concessions given towards VAT. We were surprised that what seemed to us to be a very strong case based on a professionally compiled survey of the effect of VAT on 52 charities did not convince you of the need to give more general relief. In your speech to the House you said ' Perhaps the greatest anxiety about the effects of VAT on charities has been in respect of sales of donated goods.' We can only assume from this statement that we have completely failed to put over to you the real priorities for relief. 8.45 p.m.

He says that this is insignificant when compared with the £472,670 of non-deductible input tax, less savings on SET and purchase tax, which the 42 charities will have to find. This non-deductible input tax is 4.4 times greater than the benefit from the abolition of SET and purchase tax, and I therefore ask the Financial Secretary to comment on that. Is it fair to say that the abolition of SET and purchase tax for charities will in any way counter-balance the introduction of VAT?

I shall not quote the whole letter, but will refer to only one other comment. He says: We are most disturbed by your restriction of the donated goods concession to charities established for the relief of distress. Many charities outside this category can but view this categorisation with alarm and concern as to whether it will eventually lead to an erosion of their existing tax concessons. We also fear that the application of this categorisation will give rise to extensive litigation. I should welcome a Treasury comment on that.

The second issue, which I shall put briefly because the Treasury must know the arguments, concerns motor cab proprietors. In a letter dated 19th July 1972 to the then Financial Secretary to the Treasury, the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin), the secretary of the association said: On page 1620 "— and he refers to me— is right in saying that as soon as it all becomes Law and effective there is no doubt that overnight London will be deprived of many cabs which are available for hire in the usual way. I shall not read the letter at length or the reply of 11th August to the Secretary of the London Motor Cab Proprietors Association.

I do not have a car in London, and I am sometimes dropped by taxi in New Palace Yard. When it is discovered that I am a Member of Parliament, almost inevitably there is a cri de coeur from the cab driver on the subject of VAT. I have seen the reactions of my hon. Friends the Members for Birmingham, All Saints (Mr. Brian Walden) and Dudley (Dr. Gilbert). Ministers are in a special privileged position, with official cars because they may benefit from the advice of their drivers, as Ministers do from time to time. They do not have this problem, but when it is discovered that the passenger in a taxi is a Member of Parliament the driver goes on and on about VAT.

Mr. Higgins

If the hon. Gentleman takes a taxi tomorrow and is asked the question he will be able to reply that the amendment debated yesterday had nothing to do with this problem.

Mr. Dalyell

It depends on whether it is a taxable person. The Financial Secretary is being a bit narrow about this, because he knows that this is the only chance to raise the question of VAT. All this reveals is that the hon. Gentleman is a bit sensitive on the subject. He does not want it to be discussed. I take a ruling from the Chair that it is not to be discussed, but I shall not take it from the Financial Secretary. That being so, I refer to this correspondence of 19th July and 11th August and ask for a Treasury assessment of the position in relation to the cab trade.

There are others who wish to speak, and I shall therefore not go on any longer. I should like the Financial Secretary to deal with the two issues that 1 have raised.

Mr. Peter Trew (Dartford)

I should like to take up what was said by the hon. Member for West Lothian (Mr. Dalyell) about the haste with which VAT was introduced. It was first announced in the 1971 Budget. There followed a full year of discussion on a Green Paper, and then the matter was debated at great length in a Standing Committee on which the hon. Gentleman was a member, as were many who are present in the Chamber tonight. I remember the introduction of SET in 1966. It was an entirely new tax, and very little time was provided to prepare for it.

One thing which interestd me in the remarks of the hon. Member for Heywood and Royton (Mr. Joel Barnett) was the change which they represented in his attitude to the tax. A year ago he and his right hon. and hon. Friends were asking for a wide extension of the reliefs and exemptions, for this and that to be rezo rated, but tonight the hon. Gentleman is complaining that too much has been relieved and that the tax is no longer broadly based. Indeed, he scoffed at the description of the tax as broadly-based and referred to the wide-range of zero rating. He is right. VAT now has the widest reliefs of any VAT in Europe, and the lowest rate.

The impact on the average family budget is not without interest. An analysis of the 1971 family budget survey shows that 52 per cent. of the average family budget now escapes VAT either through zero rating or through exemption, but the poorer the family the higher is the percentage that escapes VAT. For the poorest families in the range of £10-£15-a-week income the percentage of the budget free of VAT goes up to 66.5 per cent. That refutes any suggestion that the tax is regressive. But the Opposition ceased to argue that it was a regressive tax a long time ago.

The hon. Member for Heywood and Royton made much of the initial teething problems of the tax, but after 10 days it is a bit premature to say how it will affect the cost of living. Many price reductions have been announced. The hon. Gentleman scoffed at the suggestion that the saving through the abolition of SET would be passed on, but the most authoritative estimate of the effect on the cost of living, produced by the National Institute last May, was that if only 40 per cent. of the saving was passed on there would be an increase of 1.1 per cent. in the cost of living.

Savings in SET are passed on. My hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) has quoted her experience of the Co-op. I have not been to check up at my local Co-op, but when SET v/as halved about a year ago there was a notice outside it saying "The reduction in SET enables us to offer double dividend stamps to all our customers." I congratulate the Co-op on the speed with which it is passing on the savings in SET to the consumer.

The further reliefs in this year's Budget on children's shoes and clothing and on confectionery and soft drinks mean that the effect on the cost of living is broadly neutral. There should be no net increase.

I have heard very few people come out against the relief of confectionery and soft drinks. Most families welcome it. Strangely enough, the only dissident note I have heard comes from flower growers. My constituency is an important horticultural area. I have many flower growers, and they have objected most strongly to the relief of chocolates, for the good reason that when a man is feeling romantic he buys his girl friend or his wife a bunch of flowers or a box of chocolates. Before 1st April chocolates were subject to 18 per cent. purchase tax, equivalent to 12½ per cent. on the retail value, and flowers were not taxed. Now chocolates are untaxed and flowers are subject to 10 per cent. VAT. The flower growers argue that the competitive position of flowers compared with chocolates has deteriorated by 22½ per cent. They may have a point there.

The flower growers are worried about how VAT will work in the mechanism of the market, particularly at Covent Garden, and fear that it will come out of their margins. I hope that my hon. Friend the Financial Secretary will keep a close watch on the matter and satisfy himself that their fears are groundless.

The hon. Member for Heywood and Royton asked "Why replace purchase tax and SET with VAT when it yields exactly the same amount of revenue?" In the first year it does. Purchase tax and SET are non-buoyant taxes, because the goods subject to purchase tax each year form a progressively smaller percentage of consumer expenditure. But VAT is a buoyant tax. With no increase in rate it will each year yield more revenue. The result will be that the present tax system—the combination of the unified system, corporation tax and VAT—is a more buoyant system than previously. This will be widely welcomed by future Chancellors of both parties. For that and other reasons, I welcome the introduction of this tax, which is a neutral, fair and efficient one.

Mr. Loughlin

I was fascinated by the remark of the hon. Member for Dartford (Mr. Trew) that VAT is a buoyant tax. The tax revenue can increase year by year. The only question that arises in my mind is: who pays? If the tax revenue increases year by year, somebody must pay it; namely, the generality of the population. One can only assume that the section of the community which makes the greater number of purchases pays the most.

Previously the hon. Member talked about VAT being a great advantage in that 52 per cent. of average families will not be affected by it. When the hon. Member went on to say that the poorer families benefit more from VAT, I wondered where he lived. If he thinks that the abolition of SET and purchase tax represents two contributory factors to relief to poorer families by VAT, I would ask him to consider two matters.

First, SET is of little consequence to prices in the shops. The impact per pound of sales of any retail unit will be found to be so small that it will be virtually impossible for the retailer to pass on the relief from SET to the consumer.

I have been in distribution for many years. I know as much about distribution, distributive costs and pounds per sale per unit of employment as anyone in the Committee. I can tell the hon. Gentleman that irrespective of the current advertisements of the cuts being made as a result of the elimination of SET—just as when the Government removed 50 per cent. from SET—the information is phoney. If the hon. Gentleman looked at general price ranges in any distributive unit advertising reductions resulting from SET, he would find that, although there would be a reduction on specific items on any counter, likewise there would be a counter-balance. It is virtually impossible, unless an organisation has an enormous total turnover, for anyone in distribution, on the basis of individual items or commodities within the shop, to transfer any savings that may have been made on SET.

Mr. Trew

The hon. Gentleman said that purchase tax and SET do not affect the ordinary shopper. The total purchase tax and SET charged on food alone was £100 million. If he thinks that sum is insignificant, I am certain that the British public do not.

9.0 p.m.

Mr. Louglin

If the hon. Gentleman will relate the £100 million to the total number of items within each unit of distribution and the number of distribution units throughout the country, employing about 1½ million people, he will see the insignificance of the impact of SET on the total turnover. In the main, purchase tax was payable on luxury goods on a variable basis.

When the hon. Gentleman talks about poorer people, I do not want him to be hypocritical. I do not want him to try to con his constituents. The poorer the people, whether they are £15-a-week hospital workers or pensioners, the more adversely will they be affected by VAT, whereas they have not been adversely affected by SET or purchase tax.

I am sorry, Mr. Davies, that I have had to devote so much attention to the hon. Member for Dartford. He obviously knows nothing about distribution. As I have spent the whole of my adult life in distribution I felt that I could impose upon your generosity for a moment. Before you came into the Chair, there was some discussion about the width of the debate on the three amendments which we are discussing—

The Temporary Chairman (Mr. Ifor Davies)

Order. The House will recall that the Chairman made an appeal to hon. Members. Although he was prepared to allow a certain amount of wide discussion, he hoped that the debate would not go so wide as the earlier debate. I repeat that appeal.

Mr. Loughlin

I am grateful to you for intervening, Mr. Davies, but the Chair has no right to make an appeal to the Committee. I say this very respectfully. The Chair can interpret the rules only in accordance with the Standing Orders and procedures of the House of Commons. I was about to come to the three amendments, and, no matter who had occupied the Chair, I would have made these submissions. There is nothing persona! in them.

Clause 4(7) refers to spirits, wines and cigarette lighters and earlier subsections deal with other issues in relation to purchase tax. I doubt whether there is intellectual capacity on the Government Front Bench so to have designed this, knowing the way in which it has fallen. It seems that this is a completely wide issue in which one can reopen the whole case for VAT.

The Temporary Chairman

Order. I must point out to the hon. Member that we are discussing not the Clause but the three amendments, Nos. 2, 3 and 4. Those are the amendments before the Committee.

Mr. Loughlin

That is obvious even to me. I am very immature and naive, but I suggest that it is impossible to discuss amendments without relating those amendments to a clause. If we relate the amendments to the clause we have obviously to discuss the clause because we are dealing with the difference between the clause as it is and the clause as it would be if amended. If you say, Mr. Davies, that we are dealing with amendments but not with the clause, that seems to be stretching one's imagination a little too much. We cannot deal with the amendments without taking into account the effect of the amendments if carried and the effect of the clause as so amended.

Two or three times the Financial Secretary intervened in a rather petulant way, which was out of character with his attitude outside the Chamber. He sought to argue that my hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) could not discuss VAT. I put to the previous occupant of the Chair that we are talking about relief from tax or duty on goods held at the commencement of VAT. We go on to discuss a further amendment on extension of the period of time. It seems that in those circumstances we can do three things. We can talk about stock which carries purchase tax, we can talk about stock which involves SET—

Mr. Higgins indicated dissent.

Mr. Loughlin

Oh, yes; because we are talking about an extension of the time from April, when VAT came into effect, to October. In the shops and the warehouses during that period stock carries purchase tax. In consequence of carrying this amendment, there would be stock which involved SET. Therefore, we are entitled to talk of the whole gamut of purchase tax, SET and VAT.

If I may very respectfully remind you, Mr. Davies, the hon. Member for Dart-ford, without let or hindrance from the Chair, was allowed to talk about both purchase tax and SET. There was no interference or ruling out of order. What applies to one hon. Member should as a cardinal rule apply to every hon. Member.

The Temporary Chairman

Order. The hon. Member has not been ruled out of order but I ask him not to make the debate too wide.

Mr. Loughlin

This is true. I put it respectfully again that the Chair has no right to ask me not to make the debate too wide. The only right and responsibility of the Chair is to determine whether I am in order or not.

We are dealing witth a series of amendments relating to value added tax. My hon. Friend the Member for Heywood and Royton referred to the addition of VAT to restaurant bills. One day last week my wife picked me up at Gloucester, and, having arrived fairly late, we decided to have a meal before going home. We went into a very good restaurant, the Speech House in the Forest of Dean. It is well worth a visit by any hon. Member. I might as well get a commercial in. It is run by Trust Houses Forte Ltd. When I got my bill I worked out that I had been charged X amount for the meal—there was no deception on the part of the management; it was quite categoric—plus 10 per cent. service charge plus 10 per cent. VAT. It was 10 per cent. VAT not only on the food, but on the service. People say that this is all right and that there is an allowance for SET because the service industries are subject to SET. It is no use the Minister telling me that VAT is a substitute for purchase tax and SET if in almost the first week of its operation I am charged the full 10 per cent. not only on the meal but on the service that is provided. I noticed that the 10 per cent. service charge was lower than the 10 per cent. VAT There was no allowance for SET.

I have great respect for the manager of the hotel. I am not in any way criticising him. He is no doubt carrying out the policy of the company. He is a first-rate fellow, and I get very good service when I go into the hotel. It is essential that I am fair to the manager. My local papers may pick this up. If not, I will send it to them.

It is no use the Minister telling me that VAT to some extent compensates for the elimination of SET, because it does not. He knows as well as I do that, whilst it is all right now to talk about its being restrictive in certain areas, his hon. Friend the Member for Dartford was correct in what he said on this matter. Although there is zero-rating and exemptions now, VAT will be extended to food at the next Budget.

9.15 p.m.

I do not believe, now that the Government have got away with the introduction of VAT, that they will fail to apply it across the board in the same way as it has been applied in every Common Market country. That is because a percentage of our VAT must be paid to the Common Market. Once the Common Market finds that we can pay a greater percentage on the basis of an across-the-board application of VAT, we shall be pressurised into implementing such a system. If we cannot get away with the butter issue, we shall not get away with not imposing VAT on food.

Mr. Trew

The hon. Gentleman is misquoting me if he is suggesting that I said VAT would be imposed on food. If he reads HANSARD carefully he will find that I suggested there would be no increase in coverage or rate. I said specifically that without any increase in rate the revenue would increase year by year.

Mr. Loughlin

I apologise to the hon. Gentleman if I conveyed that impression. I did not for one moment wish to suggest that he advanced the idea that VAT could apply to food.

I do not know for how long the hon. Gentleman has been in this House. I have seen Budget after Budget. Some Conservative hon. Members may say that I have been here too long. I know that a tax is never removed. A tax is always extended irrespective of which party introduces it. I will gamble that within five years, which is a short time, we shall have VAT imposed across the board on foodstuffs, children's clothing and everything else.

VAT is an easy tax to apply and is very buoyant. It is, in the long run, a tax that is cheap to collect, although I know that 7,000 additional civil servants will be required. It is easy to adjust the rate. The rate is 10 per cent. at present, but there is nothing to stop any Chancellor setting a rate of 12 per cent., 13 per cent., 14 per cent., or 15 per cent. Rates of that kind would not be unusual in the context of the Common Market, and the same collection costs would apply. That is the danger of VAT.

I know that I may have strayed a little. All that I will say is that I am opposed totally to VAT. It is a scandal that it has been imposed upon charities. It is more than a scandal that a lot of sports and athletic societies in Britain will go out of existence because of the imposition of VAT. It is to the dying shame of the Government that they introduced a tax that taxes generosity, people's enjoyment and everything else. The Government described the last Labour Government as the Government which liked to impose misery on people. They have imposed the misery this time.

Mr. Knox

I shall not detain the Committee for as long as the hon. Member for Gloucestershire, West (Mr. Loughlin). I can only assume that having dined out last Friday night the hon. Gentleman was extending our proceedings to enable some of his hon. Friends to dine out tonight.

Mr. Loughlin

Where?

Mr. Knox

That I cannot tell the hon. Gentleman.

The hon. Gentleman said that Governments never took off taxes. I remind him that my right hon. Friend the Chancellor removed purchase tax and did not impose any other tax on a wide range of foodstuffs.

Mr. Loughlin

VAT.

Mr. Knox

My right hon. Friend has not put VAT on any foodstuffs, except meals bought in restaurants, and so on. He has removed indirect taxes from a wide range of foods. Had he not done so, I imagine that the hon. Gentleman and many of his hon. Friends would have been making highly sentimental and sloppy speeches about a wicked Tory Government who were taxing children's sweets, and so on, as did some hon. Members of the present Opposition when sweets and such things were first taxed.

The hon. Member made great play of the insignificance of the contribution of selective employment tax to distribution costs. This amount of money was spread over a wide range of things. The selective employment tax which the present Government inherited in June 1970 was bringing in a large amount of revenue. In the last analysis, that was obtained from the consumer. Let no one kid himself that employers were paying this out of profits. It came from consumers. Though the amount contributed to total costs by selective employment tax was small on each item, the tax was spread over a large range of items. A small amount of money over a large number of items was significant to individual consumers in total.

Mr. Loughlin

I take it that the hon. Member recognises that SET was related to the cost of the unit of employment, be it male or female. If one takes the sales per unit of employment as, for example, £200 a week in a supermarket— a low figure—will the hon. Gentleman say what was the ratio of SET to the £200 of sales?

Mr. Knox

I cannot tell the hon. Gentleman that. But SET was bringing in a very large revenue. It was not the employers who were paying it; it was the ultimate consumer. The hon. Gentleman is deluding himself and trying to delude others if he pretends that it did not have an effect on prices. Of course it did. When it was halved this reduction was only one of a number of factors which went into the determination of prices. Other factors were moving in an upward direction, and it was not immediately apparent to the ultimate consumer that half of SET had come off. If my memory is correct, about £1,200 million came in through SET in 1970. The consumer was paying that amount. The hon. Gentleman is kidding only himself if he pretends otherwise.

The hon. Gentleman also continued the hoary old myth that purchase tax was levied on luxuries, and that the items which poor people bought were not subject to purchase tax. But the hon. Gentleman is living in a strange world if he thinks that items such as radios, electric fires and television sets, which were subject to purchase tax at 25 per cent., are not bought by people who are quite poor. I am very pleased that they are bought by such people. These commodities were subject to 25 per cent. purchase tax. Ordinary people were paying for them, and now that value added tax has taken the place of purchase tax there will be a reduction in the tax which people will pay in such items.

I now turn to some of the remarks made by the hon. Member for Heywood and Royton (Mr. Joel Barnett) earlier. He spoke about the difficulties which the public have in making calculations about purchase tax and selective employment tax coming off and value added tax going on. He said how difficult it was for people to know exactly what prices should be. He made the point—which was quite legitimate—that most people were not prepared to shop around and carefully to measure prices in one shop and then in another, so as to ensure that the correct prices were being asked.

I agree that most people do not do this, but it is not necessary for everyone to take this action to get the right result. It is sufficient if one or two people check prices in this way. The hon. Gentleman also spoke about letters which he has received from constituents. I had a letter this morning from a constituent—a lady —who had queried a price in a particular shop and, after making inquiries, found that the price was too high. She returned to the shop and got the price reduced. She is not the only one who will benefit from this: everyone else will who buys the item concerned.

It needs only a minute proportion of people to do this to put on the spot shopkeepers who may be chancing their luck. It is not necessary for great masses of people to do this. A handful of discriminating shoppers will achieve the objective.

The hon. Member for West Lothian (Mr. Dalyell) made a great deal of the difficulty which many people have had because of the introduction of value added tax. There is a lot of truth in this. It is very awkward for people. But it was also awkward when selective employment tax and decimalisation were introduced. But the logic of this argument is that we should never change anything, that we will carry on until the end of time with things as they are. This attitude is the ultimate in conservatism. I am a Conservative with a big C and it is not the sort of conservatism which appeals to me.

My hon. Friend the Member for Dartford (Mr. Trew) challenged the argument that value added tax had not been properly discussed. As my hon. Friend said, that argument does not stand the slightest examination. The decision to introduce value added tax was announced in the 1971 Budget. Twelve months were spent discussing the Green Paper, the tax appeared in the 1972 Finance Act, it was discussed at length in Committee on that Act, discussions have continued throughout the past 12 months, and now, two years after it was announced, it has become operative. No other tax in our history has been discussed at length in this way.

I am not as enthusiastic as some of my hon. Friends for tax changes. I hope that, with all the tax changes which have taken place, there will be a long period of stability with no further changes. But the criticism of hon. Members opposite that value added tax has not been fully discussed does not stand the slightest examination. The Opposition have a cheek beyond belief to make such a criticism when one compares the length of the discussion on value added tax with what happened when selective employment tax was introduced.

Mr. Arthur Blenkinsop (South Shields)

My hon. Friend the Member for West Lothian (Mr. Dalyell) has directed attention to some of the acute problems affecting many charities. 1 want to speak about the extraordinary situation which arises with an organisation such as the Youth Hostels Association, with which I have been connected since the time I helped to form it before the war. The Youth Hostels Association has been able to develop and progress for many years, and this is the first time that a Government have taken steps which are seriously damaging to it.

9.30 p.m.

[Mr. E. L. MALLALIEU in the Chair]

We would all pay a tribute to the work of this body over the years, but there are acute dangers that this work will inevitably be limited by the operation of VAT. This matter is directly relevant to the amendments under discussion. We are concerned here with a body which is obliged to apply VAT both to its membership fees and to its overnight charges. It is also involved in paying VAT on stocks of food that it might supply for self-cookers, as well as for meals provided and also, in some cases, for some bedding which may be hired to those using the hostels.

The extraordinary situation has arisen that some of the youth hostels are seriously discussing whether they should form a series of separate companies, one for each small youth hostel, in order to secure exemption so that they would not have to register and so escape the problem of tax with all its nonsense and absurdity. That would leave them in the position that some small hostels with relatively minor facilities would not have tax imposed upon them. But the larger hostels which are most likely to take school parties, scout parties and many other groups of that sort will be caught by the tax. So there would be the anomaly that there would be different tax treatment for different parts of the movement.

There is the extreme probability that some of the larger and more important hostels will certainly lose a number of bed-nights, the number of people coming to stay, because of the increased charges. I have a whole string of correspondence— and how hon. Members on the Government side have not had such correspondence I cannot understand—from scout groups and highly responsible people of all kinds of political complexion and none, all insisting on the great damage their movement will suffer because of the way in which the tax is being applied.

I should have thought that we would all want to assist and help a body to which Governments have at all times in the past been helpful. Now we have this extraordinary situation of a body being driven to try to find ways out of its difficulty by the absurd proposal to form a whole mass of separate companies. I think it illustrates the absolute madness of some of the implications of the tax. I do not necessarily rule out the tax automatically from all spheres of activity but any application that can result in this type of situation cannot but be condemned by all of us.

Here is a case which shows that we must consider again which bodies are to be taxable and which are not. If any body should not be taxable it is surely an organisation such as the youth hostel movement. I have the interest of being president of a section of the Youth Hostels Association, having been involved in its formation in 1929 and 1930, and it is disastrous that one sad effect of the tax will apparently cause great difficulty for its future development and operation.

Mr. Duffy

I shall speak briefly, first of all about the unusual difficulties that have attended the operation of value added tax during this first week by way of showing something of its impact on the public and how the feedback to the small trader has compounded his difficulties and how working conditions render it necessary that the trader—who has, after all, to act now as the final collector of value added tax—should be given the further respite that we plead for in our amendment No. 4.

On 7th April the Sheffield Star ran a headline describing the first week's operation of VAT as "sheer murder" for both Customs and Excise in Sheffield and the staff of the corporation's department of trading standards. Customs and Excise received an average of 700 inquiries a day. I am wondering whether the Financial Secretary will say a word later on about the number of inquiries that Customs and Excise in certain parts of the country received last week.

A spokesman was reported as saying: The public think they are being overcharged, and the shopkeeper is worried about collecting enough money to pay the tax. So there were worries on both sides.

In the Sheffield department of trading standards where a section has been allocated to deal with VAT problems. Its chief inspector said that the biggest problem area has been, as has already been stated, in cafes, restaurants and canteens, where it is difficult to add 10 per cent. to low-priced orders.

Typical problems that Customs officers have had to deal with in Sheffield have been: first, from builders and contractors, because maintenance and repair work is taxed at the standard 10 per cent. while construction, alteration and demolition are VAT free; second, from traders who do not have to register for VAT because they have a turnover of less than £5,000 a year but who are not sure what their position is; third, from secondhand car dealers and buyers who are not sure what they should be paying VAT on—it is the difference between what the dealer buys it for and what he sells it for—and, fourth, from a bemused and bewildered public.

I want now to refer to the special difficulties that hamper traders many of whom have had to acquire tills—some more than one. Indeed, some have been reported in the Press as having had to acquire three tills. These are extremely expensive on any showing, and for such small traders they represent a very difficult position.

I wonder whether the Financial Secretary will give further consideration to some form of relief for these traders. After all, they will be doing his job, or that of the Government, as tax collectors from now on, and he must know that they are scarcely equipped for this. Most of these small traders—unlike, say, Marks and Spencer—have never really had to cope with paper work before. I know this has been said again and again in the House during the past year, but for many of these small traders last week brought an explosion of paper work, and I have been told that, with all the good will they can muster, when it comes to making their weekly and then their quarterly returns, to quote one, it will be "God help Customs and Excise", which will have to work them over. I hope, therefore, that Customs and Excise will go very carefully in the first year and will make every allowance.

It is, of course, the accountancy profession that will have to bear the brunt of this state of affairs in the first year. Already accountants are almost completely snarled up with VAT. Some accountants of my acquaintance have done nothing but VAT since Christmas. I suspect that in the end it will be the same accountants who will have to complete those quarterly returns. Their clients will still not understand them, and I can imagine at the end of the quarter most accountants' offices having a queue of many small traders.

I want now to refer especially to such small traders as newsagents, and I express my gratitude to the Chancellor of the Exchequer for his understanding of their problems in the past and for the expeditious manner in which he has dealt with their representations. But, grateful though many newsagents were for the right hon. Gentleman's decision to zero-rate confectionery and chocolates, it upset all their calculations. Those of them who had settled for scheme 2 found, as they saw it, that variations were necessary. Along with the Confectioners' Association they arranged a meeting with Customs and Excise officials on 20th March, when yet again they met with considerable sympathy. However, they went away with the feeling that this was a matter which would have to be settled now at ministerial level. Their fear is that at ministerial level there will be a resistance to further change if for no other reason than that enough changes have been made already and that now is the time for schemes to start working.

I hope that the Chancellor of the Exchequer will accept that there must be reservations on the part of small traders about scheme 2, given the relief on a large area of stock held by certain of them. This is true especially of newsagents, whose organisation, the News Agents' Federation, is wondering whether its members are not being strung along. It is for that reason that I ask the Financial Secretary to assure them that Customs and Excise will give their latest representations the most serious consideration.

Mr. Dempsey

I wish to raise two points of principle in respect of which I look forward to hearing the comments of the Financial Secretary. Some time ago I attempted to table a Question to the Chancellor of the Exchequer about the operation of VAT on voluntary organisations. I was advised that it was not acceptable and that the matters should be raised when it was debated in the House. Tonight, as we are debating it in Committee, I raise these two points.

I understand that it is customary for hon. Members to declare their interests. I am Vice-President of the Scottish YMCA and Chairman of the Coatbridge and Airdrie branches, those being two towns in my constituency. I assure the Committee that all three offices are honorary and unpaid.

In our efforts to raise funds for the YMCA we have come up against a serious problem. Our buildings received capital grants from the Secretary of State for Scotland and from local authorities. Our annual expenditure is grant-aided, in that the remunerations of our full-time general secretary and our part-time cleaners are grant-aided by the local authorities. This means that we must have certain organised ventures to raise sufficient money to balance our budget, which so far we have been unable to do. If, from any of our efforts, we have to contribute to VAT and thus to the Exchequer we shall have to ask the local authorities for increased grant aid.

When we organise voluntary functions such as sales of work and garden fetes, we should like to be assured that VAT will not be charged to those who serve, supply and sell at those activities in a voluntary capacity. At the moment we are not clear on the issue. I wonder whether the Financial Secretary can now give me an absolute ruling on the matter, or, if he cannot, whether he will write to me confirming that such undertakings as the voluntary work of the YMCA are totally exempted from VAT. I believe the organisation—not only in my constitu- ency but throughout Scotland and, indeed, the United Kingdom—would be grateful to hear the views of the Financial Secretary in this respect, and would be delighted to receive from him a ruling that these operations are totally exempt from VAT.

I want to raise a second point and to refer to some anomalies which have arisen—one only within the last two weeks, since the tax became operative. A constituent of mine uses the sauna bath in a local authority swimming pool. The local authority is not one of mine and the swimming pool is outwith my constituency. My constituent claims that the cost to users of the sauna baths has risen by one-third—from 60p to 80p. He advises me that the local authority concerned decided to spread the cost of VAT not over all the users but only over adults using the swimming pools and sauna baths. Those who are not adults are excused, and since they are not paying their 10 per cent. levy the result of the local authority's spreading the whole cost over adults using the swimming pools and sauna baths is that the cost has risen by 33⅓ per cent., instead of 10 per cent.

My constituent is complaining bitterly about this, and wants to know whether it is right or wrong, legal or illegal, and whether it is in accordance with the tax now being operated in this country or is in conflict with it.

There must be several other teething problems of this nature affecting VAT. I recognise that it is a new tax and that we are bound to have such experiences. It is obvious that the tax is very complicated, and in many respects unfair. It seems to me that now that it is in operation the Minister should make every effort to answer some the points I have raised. Like my colleague who spoke earlier, I am a former youth hosteller and I recognise what this means to the Youth Hostels Association in Scotland, quite apart from England and Wales. We are entitled to an unequivocal answer, if not tonight then as soon as possible, explaining how VAT operates or applies to the undertakings I have mentioned.

If the Financial Secretary cannot do what I have requested I hope he will let me have a reply on the points I have raised as soon as possible, because in my part of the country this tax is causing considerable concern to most people. They find it extremely complicated and feel that in certain respects it would require almost a Philadelphia lawyer to explain it to them.

Mr. David Stoddart (Swindon)

I want to raise only one major point. I was very surprised to hear that hon. Members opposite had not had representations about this tax, because undoubtedly people are "bewitched, bothered and bewildered" about it at the present time. Some of the anomalies are so great that people are writing to me in great numbers. Only this morning I had a letter from a women's organisation asking me to protest very loudly and clearly about the tax on women's sanitary wear. I hope that the Financial Secretary and the Chancellor of the Exchequer will take note of the early day motion on that subject.

The major point that I wish to raise— and I have written to the Financial Secretary about it—relates to the anomaly which arises on the work of voluntary radio associations. In my constituency a voluntary association runs the hospital radio service for the benefit of patients. Because of the imposition of VAT on telephone charges this association which provides a voluntary service, finds itself having to pay an extra £30 VAT on the rental of the private line, which amounts to £300 per annum. I feel sure that the Government and the Financial Secretary will agree that this anomaly penalises voluntary workers and that if, because of financial difficulties, the voluntary workers are unable to continue, hospital patients will be deprived of a valuable and valued service. I hope that the Financial Secretary will do his utmost to see that this anomaly is corrected.

Mr. Higgins

I shall seek to answer the points which have been raised on these amendments. I do not think the Committee could reasonably say that I have on any occasion been reluctant to extol the virtues of VAT or its advantages over purchase tax and SET. I hesitate to calculate the number of columns of HANSARD I have filled on this subject in the past two or three years.

We have before us three specific amendments related to Clause 4, which is concerned with rebate of purchase tax consequent upon the changeover. I should like to deal with one point which was made by the hon. Member for Heywood and Royton (Mr. Joel Barnett) about the mechanics of the matter.

I am always concerned when hon Members say that a particular document is not available for a debate. The hon. Gentleman referred to Notice 748, which he said was neither in the Library nor in the Vote Office. The hon. Gentleman said the same thing about a notice on a previous occasion. On that occasion I immediately made inquiries and I made clear that if at any stage the Vote Office did not have a complete set of VAT documents it should immediately contact my private office so that I could give the matter the utmost priority to ensure that the House had the documents.

I understand that supplies of Notice 748 were sent to the Vote Office. It is possible that there was a shortage at the moment of time when the hon. Gentleman asked for it. I understand that the Vote Office had a further 100 copies earlier today in addition to those which had already been issued. Therefore, there is no reason why there should be any shortage. I repeat that if any hon. Member finds any difficulty he should let me know personally and I will give the matter priority.

With regard to copies of documents in the Library, we have all had the experience, despite the great efforts made by the staff, of a document which we particularly require not being available. This is a problem which is not always easy to solve. However, if any questions arise in future I shall be happy to ensure that documents concerned with VAT are made available.

In regard to the question of Notice 748 being available for traders, I would point out that these have been available in local VAT offices and via coupons printed in Press advertisements and on application to Her Majesty's Stationery Office's contractors. Therefore, there is no reason why hon. Members should not have the documents concerned.

The first point which I should like to take up is that made by my hon. Friends the Members for Dartford (Mr. Trew) and Leek (Mr. Knox). They both stressed that this tax has been brought in after an unprecedented amount of consultation and discussion with trade interests. Without being complacent about it, that is one reason why the changeover has, generally, taken place very smoothly.

I accept that from time to time there has been a certain lack of communication. One example which I came across was the report of an official visiting a shop who heard a woman demanding "How much of that is VAT?", to which the reply by the bacon slicer was "Not much; you asked for streaky.". Occasional reports suggest that there are communication problems, and I should not wish to say that over the last few days there has not been any difficulty—with such a massive changeover it is to be expected that there are some problems to be settled—but I do not accept the point made by the hon. Member for Heywood and Royton. There has been nothing which can remotely be described as a shambles. As a result of the consultation the changeover has gone remarkably smoothly.

The hon. Gentleman, in the context of his amendment—and this is relevant there —asked about the estimate of the number of traders who ought to be registered for VAT. The original estimate was based on the available statistics, which were not very good, as we have freely admitted, and it now appears that the number of traders due for registration is not as great as we at first believed. I accept that the margin of error has been considerable. This appears to have been due, on the one hand, to group registration, as I told the hon. Member for Heywood and Royton the other day, and, on the other, to the fact that those who are entitled to register have evidently decided at this stage not to do so. The number of taxable traders is now at a level which reflects the numbers likely ultimately to register, but some have an option. The hon. Member for Heywood and Royton has put down many Questions on this subject, and he will be familiar with the most up-to-date answers.

Many of the matters which have been asked are in no way connected with the question of a purchase tax refund. Two hon. Members raised the question of the Youth Hostels Association. I received a deputation from that body and listened with care to what was said before the Budget, but my right hon. Friend did not feel that it would be appropriate to alter the treatment which the association has received.

I was not clear whether, on the amendment, the hon. Member for South Shields (Mr. Blenkinsop) wished to make a specific point with regard to the Youth Hostels Association. It was not entirely clear from what he said. I think I am right in saying that the point has not previously been put to me. If the hon. Gentleman will let me know what he has in mind, either now or in writing, I shall look into it.

My answer to the hon. Member for Coatbridge and Airdrie (Mr. Dempsey) is that the most appropriate thing for him to do is to put down a Question on the point that he raised and I shall gladly seek to give him an answer. I shall write to him about the more general points that he raised.

I now turn to the other points which arise on the amendment, and, in particular, to the point made by the hon. Member for Sheffield, Attercliffe (Mr. Duffy). Throughout our debates on VAT the hon. Gentleman has represented views which reflect the problems faced by small traders, and particularly by those in the news agent and confectionery business. I understand the point that he makes following my right hon. Friend's decision to zero-rate confectionery. This has required some adjustment of the practices of small traders. In particular, it has, in some cases, altered the choice which they are likely to find most to their advantage with regard to the special traders schemes. I have come across this in my own constituency, and I imagine that it is fairly common.

Customs and Excise is well aware of the difficulties which the change, made at a late hour, has caused, and is happy to deal sympathetically with problems of consequential adjustments. If the hon. Gentleman has particular points that he would like to raise I shall be happy to look into them personally. I have not come across any confectioner who is upset, looking to the long term, about the decision to zero-rate confectionery. It is a matter very relevant to the amendments.

I should say something about the amendments, beginning with Amendment No. 2.

10.0 p.m.

Dr. Stuttaford

Before my hon. Friend moves on to his general points on the amendments, will he reply to some of the rest of the debate, which he has rather ruled out of order? What does he propose to do about value added tax now charged on equipment provided by voluntary bodies in hospitals and elsewhere for the care of the sick, a point raised by me and the hon. Member for Swindon (Mr. David Stoddart)?

Mr. Higgins

It is not for me to rule anything in or out of order, and I do not propose to do any such thing. What I seek to do is to reply to the debate on the amendments, as I think is right and proper. There has been some confusion about the scope of the amendments.

Mr. Joel Barnett

Oh. really!

Mr. Higgins

The hon. Member for Heywood and Royton may say that, but he made no attempt to explain precisely what his second amendment, at any rate, was designed to achieve.

Amendment No. 2 would widen the extent of the rebate scheme to include stocks of goods held over by all traders, whether or not they were registered for value added tax. When my right hon. Friend the Chancellor announced the rebate scheme last year he said: I stress that only registered VAT traders will be able to make a claim, because only in their case would the possibility of double taxation have arisen."—[OFFICIAL REPORT, 7th November 1972; Vol. 845, c. 845.] The hon. Gentleman disarmingly said that there may be deficiencies in the amendments, and hoped that I would respond in that spirit rather than quibble about the drafting. There are indeed deficiencies in the drafting, but I happily respond in the spirit in which the hon. Gentleman moved his amendment.

I shall first deal with what I had understood the intention of the amendment to be. Those traders who are not taxable persons—that is, those traders exempt and below the £5,000 limit—would receive a refund of purchase tax if the amendment were accepted. But that is not the intention of the scheme, as my right hon. Friend made absolutely clear.

The primary purpose of the rebate scheme has always been to avoid double taxation of unsold stocks of unused goods held at the close of business on 31st March 1973, and to ensure that traders could not use that as a pretext for unjustifiable price increases. The reports we have so far suggest that the scheme has been successful in achieving that objective, which was, as my right hon. Friend said, the objective he had in mind.

Mr. Geoffrey Stewart-Smith (Belper)

There is a group of people who do a vast amount of voluntary work for hospitals—the friends of hospitals, like those at Derby Royal Infirmary, in my case. The value of their work amounts to more than £5,000 a year. We want specific assurances that they will be exempted from VAT. We do not seem to get any sympathy from the Government on the matter. May we have an answer?

Mr. Higgins

We debated this matter at great length last year. The point we are now discussing and the purpose of these amendments is to give refunds of purchase tax to traders who are exempt, not traders who are taxable.

As I sought to indicate, we do not believe that this extension should be made. Although it is the case that traders may be exempt because they are below the £5,000 limit, they will not have to keep VAT records. They pay VAT inclusive prices where they buy in goods and services and can recover the related input tax only by including it in their selling prices. The crucial point at issue is that the exempt traders, those below the £5,000 limit, do not suffer double taxation on their stocks because they will not be paying output tax on their future sales to which they would otherwise be liable if they were not exempt from VAT.

The hon. Member for Heywood and Royton also questioned whether those who are late in registering should receive a refund of purchase tax. That does not fall strictly within the amendment. The hon. Gentleman will appreciate that those who are due to register are taxable traders and would not, therefore, be covered by his amendment.

Those who are still registering—and there are some—provided they stocktake and fill in the forms in conformity with the rebate scheme within the time limit specified within the Bill as it now stands, will, through the workings of the credit mechanism and the input tax, receive the refund. As the hon. Member for Hey-wood and Royton will appreciate, they will in any case be liable to output tax from the date of commencement of VAT. This is set out clearly in the Finance Act 1972.

Mr. Joel Barnett

The hon. Gentleman appears to be making an important alteration from what he said previously. Perhaps he will correct this. I understood him to say that if any person registered now and submitted his return for purchase tax rebate, he would be able to get it. Does that include those who have not registered by 1st April?

Mr. Higgins

I am not saying anything different from what has already been said. The clause makes the position clear. I ask the hon. Gentleman to read carefully what I said a moment or two ago. I am saying that this applies providing such people conform to all the other requirements relating to stock taking and the date.

I turn now to the amendment moved by the hon. Gentleman as to the date taken with the amendment of the hon. Member for West Lothian (Mr. Dalyell). The object of the amendment is to extend the time for claiming rebate to the end of June 1973. We are unable to accept this amendment. Amongst many other matters, the question of the time limit was carefully considered with the major trade bodies concerned. The period of one month from 31st March 1973 was accepted as striking a reasonable balance. This takes account of the convenience and practicability for traders in general on the one hand and the requirements of effective control on the other.

A number of considerations make it essential to insist on an early submission of the claim. The later the claim is made, the more difficult it will become to make any positive checks that claims are consistent with the stocks held on 31st March. Therefore, there is a case for having a reasonable limit. Secondly, it needs to fit in with the work involved in checking and agreeing claims before the main flow of VAT work commences at the end of the first three-month accounting period. Although the time is relatively short, I do not believe, and nor does the representation we have had from the trade, that it is unreasonably so.

Some traders have been able to do preparatory work before 31st March. The stocktaking requirements are sufficiently flexible to allow many traders to do the major part of their stocktaking before then, leaving the figures to be updated from records of subsequent sales and purchasers. Traders will also have been able to assemble in advance the basic calculation of purchase tax due. We do not believe that there is a case for extending the date. As I have already said, as the law provides, latecomers will be registered from 1st April in order to collect all the debits due. Provided they check all stocks eligible for rebate by 31st March and submit a claim by 30th April they will be entitled to rebate. The hon. Member for Heywood and Royton seemed to think I was saying something new. I am not saying anything new; I am seeking to make the position clear.

For the reasons I have given I do not believe that it would be right to extend the scheme of purchase tax rebate to those traders who are not taxable persons, that is to say, traders who are exempt.

With regard to the date, again for the reasons I have given, the time limit is appropriate. It strikes a balance between the need for control and the convenience of traders, and I ask hon. and right hon. Members to reject the amendment.

Mr. Joel Barnett

I am sorry that the Minister has been more than a little petulant and has tried to usurp the position of the Chair in deciding what is in order. He has refused to answer legitimate questions asked by many hon. Members, including one from his hon. Friend the Member for Norwich, South (Dr. Stuttaford) and other hon. Members on medical matters. I hope that the hon. Gentleman will at least have the courtesy to look into this matter and write to the hon. Members concerned.

The only answer the Minister has given about people who have not registered at 31st March is that this was not the intention of the scheme. He has not answered the debate. Many traders, particularly small ones, have not registered, for many reasons. It is no use being pompous and pious. They did not understand VAT, and one cannot blame them for that.

I hope that hon. Members will note that as the clause stands traders will have to submit their claim for purchase tax rebate on stocks within one month. The claim has to be posted and be in the hands of Customs and Excise in Swansea within one month. That is almost certain to mean that hon. Members will be inundated with complaints

from traders who have been unable to obtain purchase tax rebate on stocks. For those reasons, I ask the Committee to support the amendment.

Question put, That the amendment be made: —

The House divided: Ayes 171, Noes 198.

Division No. 102.1	AYES	[10.14 p.m.
Allaun, Frank (Sallord, E.)	Griffiths, Eddie (Brightside)	Morris, Alfred (Wythenshawe)
Armstrong, Ernest	Hamilton, James (Bothwell)	Morris, Charles R. (Openshaw)
Ashton, Joe	Hamilton, William (Fife, W.)	Morris, Rt. Hn. John (Aberavon)
Barnett, Joel (Heywood and Royton)	Hannan, William (G'gow. Maryhill)	Mulley, Rt. Hn. Frederick
Bennett, James (Glasgow, Bridgeton)	Hardy, Peter	Murray, Ronald King
Bishop, E. S.	Harrison, Walter (Wakefield)	Oakes, Gordon
Blenkinsop, Arthur	Healey, Rt. Hn. Denis	Ogden, Eric
Boardman, H. (Leigh)	Heffer, Eric S.	Orbach, Maurice
Booth, Albert	Hooson, Emlyn	Oswald, Thomas
Broughton, Sir Alfred	Horam, John	Owen, Dr. David (Plymouth, Sutton)
Brown, Hugh D. (G'gow, Provan)	Hughes, Mark (Durham)	Palmer, Arthur
Buchan, Norman	Hughes, Robert (Aberdeen. N.)	Pardoe, John
Buchanan, Richard (G'gow, Sp'burn)	Hughes, Roy (Newport)	Parker, John (Dagenham)
Campbell, I.(Dunbartonshire, W.)	Hunter, Adam	Pavitt, Laurie
Carmichael, Neil	Irvin, Rt. Hn. Sir Arthure (Edge Hill)	Peart, Rt. Hn. Fred
Carter, Ray (Birmingh'm, Northefield)	Jenkins, Hugh (Putney)	Perry, Ernest G.
Clark, David (Colne Valley)	John, Brynmor	Prescott, John
Cocks, Michael (Bristol, S.)	Johnson, James (K'ston-on-Hull, W.)	Price, William (Rugby)
Cohen, Stanley	Jones, Dan (Burnley)	Rees, Merlyn (Leeds, S.)
Concannon, J. D.	Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)	Rhodes Geoffrey
Conlan, Bernard	Jones, T. Alce (Rhondda, W.)	Roberts, Rt. Hn. Goronwy (Caernarvon)
Crawshaw, Richard	Judd, Frank	Roderick, Caerwyn E. (Brc'n&R'dnor)
Cronin, John	Kaufman, Gerald	Rowlands, Tea
Cunningham, G. (Islington, S.W.)	Kelley, Richard	Sandelson, Neville
Dalyell, Tam	Kinnock, Neil	Sheldon, Robert (Ashton-under-Lyne)
Davidson, Arthur	Lambie, David	Short,Rt.Hn.Edward (N'c'tle-u-Tyne)
Davies, Denzil (Llanelly)	Lamond, James	Sillars, James
Davies, G. Elfed (Rhondda, E.)	Lawson, George	Silverman, Julius
Davis, Terry (Bromsgrove)	Leadbltter, Ted	Skinner, Dennis
de Freitas, Rt. Hn. Sir Geoffrey	Lee, Rt. Hn. Frederick	Smith, Cyril (Rochdale)
Dempsey, James	Leonard, Dick	Spearing, Nigel
Doig, Peter	Lewis, Ron (Carlisle)	Spriggs, Leslie
Dormand, J. D.	Lomas, Kenneth	Stallard, A. W.
Douglas, Dick (Stirlingshire, E.)	Loughlln, Charles	Stoddart, David (Swlndon)
Douglas-Mann, Bruce	Lyon, Alexander W. (York)	Stonehouse, Rt. Hn. John
Duffy, A. E. P.	Lyons, Edward (Bradford, E.)	Strang, Gavin
Dunn, James A.	Mabon, Dr. J. Dickson	Thomas,Rt.Hn.George (Cardiff,W.)
Dunnett, Jack	McBride, Nel	Thomas, Jeffrey (Abertillery)
Eadie, Alex	McCartney, Hugh	Urwin, T. W.
Edwards, Robert (Bilston)	McElhone, Frank	Varley, Eric G
Edwards, William (Merioneth)	McGuire, Michael	Wainwright, Edwin
Ewing, Harry	Machin, George	Walden, Brian (B'm'ham, All Saints)
Faulds, Andrew	Mackenzie, Gregor	Walker, Harold (Doncaster)
Fernyhough, Rt. Hn. E.	Mackintosh, John P.	Watkins, David
Fitch, Alan (Wigan)	Maclennan, Robert	Weitzman, David
Fletcher, Ted (Darlington)	McMillan, Tom (Glasgow, C.)	Wellbeloved, James
Foot, Michael	McNamara, J. Kevin	White, James (Glasgow, Pollok)
Forrester, John	Mahon, Simon (Bootle)	Whitehead, Phillip
Fraser, John (Norwood)	Marks, Kenneth	Whitlock, William
Freeson, Reginald	Marquand, David	Williams, Alan (Swansea, W.)
Galpern, Sir Myer	Marshall, Dr. Edmund	Williams, W. T. (Warrlngton)
Garrett, W. E.	Mason, Rt. Hn Roy	Wilson, Alexander (Hamilton)
Gilbert, Dr. John	Mayhew, Christopher	Wilson, Rt. Hn. Harold (Huyton)
Ginsburg, David (Dewsbury)	Melllsh, Rt. Hn. Robert	Wilson, William (Coventry, S.)
GoldIng, John	Mendelson, John	Woof, Robert
Gourlay, Harry	Millan, Bruce	TELLERS FOR THE AYES
Grant, George (Morpeth)	Miller, Dr. M. S	Mr.Donald Coleman and
Grant, John D. (Islington, E.)	Molloy, William	Mr.Joseph Harper.
NOES
Adley, Robert	Atkins, Humphrey	Batsford, Brian
Allason, James (Hemel Hempstead)	Baker, Kenneth (St. Marylebone)	Bell, Ronald
Archer, Jeffrey (Louth)	Baker, W. H. K. (Banff)	Berry, Hn. Anthony
Astor. John	Balniel, Rt. Hn. Lord	Biffen, John
Boardman, Tom (Leicester, S.W.)	Higgins, Terence L.	Parkinson, Cecil
Body, Richard	Hiley, Joseph	Percival, Ian
Bowden, Andrew	Hill, John E. B. (Norfolk, S.)	Powell, Rt. Hn. J. Enoch
Bray, Ronald	Holland, Philip	Price, David (Eastleigh)
Brocklebank-Fowler, Christopher	Holt, Miss Mary	Prior, Rt. Hn. J. M. L.
Bruce-Gardyne, J.	Hornby, Richard	Proudfoot, Wilfred
Bryan, Sir Paul	Hornsby-Smith, Rt.Hn.Dame Patricia	pym, Rt. Hn. Francis
Buchanan-Smith, Alick (Angus,N&M)	Howe, Hn. Sir Geoffrey (Reigate)	Ramsden, Rt. Hn. James
Buck, Antony	Howell, Ralph (Norfolk, N.)	Rawlinson, Rt. Hn. Sir Peter
Burden, F. A.	Hunt, John	Redmond, Robert
Butler, Adam (Bosworth)	Hutchison, Michael Clark	Reed, Laurance (Bolton, E.)
Carr, Rt. Hn. Robert	Iremonger, T. L.	Rees, Peter (Dover)
Chichester-Clark, R.	Irvine, Bryant Godman (Rye)	Rhys Williams, Sir Brandon
Churchill, W. S.	James, David	Ridley, Hn. Nicholas
Clark, William (Surrey, E.)	Jessel, Toby	Rippon, Rt. Hn. Geoffrey
Clegg, Walter	Jones, Arthur (Northants, S.)	Roberts, Wyn (Conway)
Cockeram, Eric	Jopling, Michael	Rost, Peter
Cooke, Robert	Kaberry, Sir Donald	St. John-Stevas, Norman
Coombs, Derek	Kellett-Bowman, Mrs. Elaine	Scott-Hopkins, James
Cooper, A. E.	Kimball, Marcus	Shaw, Michael (Sc'b'gh & Whitby)
Corfield, Rt. Hn. Sir Frederick	King, Evelyn (Dorset, S.)	Sinclair, Sir George
Cormack, Patrick	King, Tom (Bridgwater)	Skeet, T. H. H.
Costain, A. P.	Kinsey, J. R.	Smith, Dudley (W'wick & L'mington)
Crowder, F. P.	Kitson, Timothy	Soref, Harold
d'Avigdor-Goldsmid, Maj.-Gen.Jack	Knox, David	Speed, Keith
Dean, Paul	Lambton, Lord	Sproat, lain
Deedes, Rt. Hn. W. F.	Lamont, Norman	stainton, Keith
Digby, Simon Wingfield	Lane, David	Stanbrook, Ivor
Dixon, Piers	Langford-Holt, Sir John	Stewart-Smith, Geoffrey (Belper)
du Cann, Rt. Hn. Edward	Le Marchant, Spencer	Stokes, John
Dykes, Hugh	Longden, Sir Gilbert	stuttaford, Dr. Tom
Elliott, R. W. (N'c'tle-upon-Tyne,N.)	Luce, R. N.	Taylor, Edward M. (G'gow,Cathcart)
Eyre, Reginald	McLaren,Martin	Taylor, Frank (Moss Side)
Fenner, Mrs. Peggy	Maclean, Sir Fitzroy	Taylor, Robert (Croydon, N.W.)
Fidler, Michael	McMaster, Stanley	Tebbit, Norman
Fisher, Nigel (Surbiton)	Macmilan, Rt. Hn. Maurice (Farnham)	Temple, John M.
Fookes, Miss Janet	McNair-Wilson, Michael	Thomas, John Strdling (Monmouth)
Fortescue, Tim	McNair-Wilson, Patrick (New Forest)	Thompson, Sir Richard (Croydon, N. W.)
Fowler, Norman	Madel, David	Tilney, John
Fox, Marcus	Mather, carol	Trafford, Dr. Anthony
Fry, Peter	Mawby, Ray	Trew, Peter
Gardner, Edward	Maxwell-Hyslop, R. J.	Tugendhat, Christopher
Gibson-Watt, David	Meyer, Sir Anthony	Turton, Rt. Hn. Sir Robin
Gilmour, Sir John (Fife, E.)	Mills, Peter(Torrington)	Vaughan, Dr. Gerard
Goodhart, Philip	Mills, Stratton (Belfast, N.)	Waddington, David
Goodhew, Victor	Miscampbell, Norman	Walder, David (Clitheroe)
Gorst, John	Mitchell, Lt.-CoI.C (Aberdeenshire,W)	Walker-Smith,Rt. Hn. Sir Derek
Gower, Raymond	Mitchell, David (Basingstoke)	Ward, Dame lrene
Gray, Hamish	Moate, Roger	Weatherill, Bernard
Green, Alan	Money, Ernle	Wells, John (Maldstone)
Griffiths, Eldon (Bury St. Edmunds)	Monks, Mrs. Connie	white, Roger (Gravesend)
Grylls, Michael	Monro, Hector	Wiggin, Jerry
Gummer, J. Selwyn	Montgomery, Fergus	Wilkinson, John
Hall, Miss Joan (Keighley)	More, Jasper	Wolrige-Gordon, Patrick
Hall, John (Wycombe)	Morgan, Geraint (Denbigh)	Wood, Rt. Hn. Richard
Hall-Davis, A. G. F.	Morgan-Giles, Rear-Adm.	Woodnutt, Mark
Hamilton, Michael (Salisbury)	Mudd, Cavid	Worsley Marcus
Hannam, John (Exeter)	Nabarro, Sir Gerald	Younger, Hn. George
Harrison, Col. Sir Harwood (Eye)	Neave, Airey
Haselhurst, Alan	Noble, Rt. Hn. Michael
Hastings, Stephen	Normanton, Tom	TELLERS FOR THE NOES:
Hawkins, Paul	Nott, John	Mr. Oscar Murton and
Hayhoe. Barney	Oppenheim Mrs. Sally	Mr. Kenneth Clarke.
Hicks, Robert	Page, Rt. Hn. Graham (Crosby)

Question accordingly negatived.

Amendment proposed: No. 4, in page 4, line 40, leave out 'April' and insert ' June'.—[Mr. Joel Barnett.]

Question put, That the amendment be made: —

The Committee divided: Ayes 171, Noes 196.

Division No. 103.]	AYES	[10.24 p.m.
Allaun, Frank (Salford, E.)	Buchan, Norman	Cronin, John
Armstrong, Ernest	Buchanan, Richard (G'gow, Sp'burn)	Cunningham, G. (Islington, S.W.)
Ashton, Joe	Campbell, I. (Dunbartonshire, W.)	Dalyell, Tarn
Barnett, Joel (Heywood and Royton)	Carmichael, Neil	Davidson, Arthur
Bennett, James (Glasgow, Bridgeton)	Carter, Ray (Birmingh'm, Northfield)	Davies, Denzil (Llanelly)
Bishop, E. S.	Clark, David (Colne Valley)	Davies, G. Elfed (Rhondda, E.)
Blenkinsop, Arthur	Cocks, Michael (Bristol, S.)	Davis, Terry (Bromsgrove)
Boardman, H. (Leigh)	Cohen, Stanley	de Freitas, Rt. Hn. Sir Geoffrey
Booth, Albert	Concannon, J. D.	Dempsey, James
Broughton, Sir Alfred	Conlan, Bernard	Doig, Peter
Brown, Hugh D. (G'gow, Provan)	Crawshaw, Richard	Dormand, J. D.
Douglas, Dick (Stirlingshire, E.)	Judd, Frank	Owen, Dr. David (Plymouth, Sutton)
Douglas-Mann, Bruce	Kaufman, Geralo	Palmer, Arthur
Duffy A. E. P.	Kelley, Richard	Pardoe, John
Dunn, James A.	Kinnock, Nell	Parker, John (Dagenham)
Dunnett, Jack	Lamble, David	Pavitt, Lauri
Eadie, Alex	Lamond, James	Peart, Rt. Hn. Fred
Edwards, Robert (Bilston)	Lawson, George	Perry, Ernest G
Edwards, William (Merioneth)	Leadbitter, Ted	Prescott, John
Ewing, Harry	Lee, Rt. Hn. Frederick	Price, William (Rugby)
Faulds, Andrew	Leonard, Dick	Rees, Merlyn (Leeds, S.)
Fernyhough, Rt. Hn. E.	Lewis, Ron (Carlisle)	Rhodes, Geoffrey
Fitch, Alan (Wigan)	Lomas, Kenneth	Roberts, Albert (Normanton)
Fletcher, Ted (Darlington)	Loughlin, Charles	Roberts, Rt. Hn. Goronwy (Caernarvon)
Foot, Michael	Lyon, Alexander W. (York)	Roderick, Caerwyn E. (Brc'n&R'dnor)
Ford, Ben	Lyons, Edward (Bradford, E.)	Rowlands, Ted
Forrester, John	Mabon, Dr. J. Dickson	Sheldon, Robert (Ashton-under-Lyne)
Fraser, John (Norwood)	McBride, Neil	Short, Rt. Hn. Edward (N'c'tle-u-Tyne)
Freeson, Reginald	McCartney, Hugh	Sillars, James
Galpern, Sir Myer	McElhone, Frank	Silverman, Julius
Carrett, W. E.	McGuire, Michael	Skinner, Dennis
Gilbert, Dr. John	Machin, George	Smith, Cyril (Rochdale)
Ginsburg, David (Dewsbury)	Mackenzie, Gregor	Spearing, Nigel
Golding, John	Mackintosh, John P.	Spriggs, Leslie
Gourlay, Harry	Maclennan -in, Robert	Stallard, A. W.
Grant, George (Morpeth)	McMillan, Tom (Glasgow, C.)	Stoddart, David (Swindon)
Grant, John D. (Islington, E.)	McNamara, J. Kevin	Stonehouse, Rt. Hn. John
Griffiths, Eddie (Brlghtside)	Mahon, Simon (Bootle)	Strang, Gavin
Hamilton, James (Bothwell)	Marks, Kenneth	Thomas, Rt. Hn. George (Cardiff,W.)
Hamilton, William (Fife, W.)	Marquand, David	Thomas, Jeffrey (Abertillery)
Kannan, William (G'gow, Maryhill)	Marshall, Dr. Edmund	Urwin, T. W.
Hardy, Peter	Mason, Rt. Hn. Roy	Varley, Eric G
Harrison, Walter (Wakefield)	Mayhew, Christopher	Wainwright, Edwin
Healey, Rt. Hn. Denis	Mellish, Rt. Hn. Robert	Walden, Brian (B'm'ham, All Saints)
Heller, Eric S.	Mendelson, John	Walker, Harold (Doncaster)
Hooson, Emlyn	Millan, Bruce	Watkins, David
Horam, John	Miller, Dr. M. S	Weitzman, David
Hughes, Mark (Durham)	Mlie, Edward	Wellbeloved, James
Hughes, Robert (Aberdeen, N.)	Molloy, William	White, James (Glasgow, Pollok)
Hughes, Roy (Newport)	Morris, Alfred (Wythenshawe)	Whitehead, Phillip
Hunter, Adam	Morris, Charles R. (Openshaw)	Whitlock, William
Irvine, Rt. Hn. Sir Arthur (Edge Hill)	Morris, Rt. Hn. John (Aberavon)	Williams, Alan (Swansea, W.)
Jenkins, Hugh (Putney)	Mulley, Rt. Hn Frederick	Williams, W. T. (Warrington)
John, Brynmor	Murray, Ronald King	Wilson, William (Coventry, S.)
Johnson, James (K'ston-on-Hull, W.)	Oakes, Gordon	Woof, Robert
Jones, Dan (Burnley)	Ogden Eric
Jones,Rt. Hn. SirElwyn (W.Ham,S.)	Orbach, Maurice	Mr. Donald Coleman and
Jones, T. Alec (Rhondda, W.)	Oswald, Thomas	Mr. Joseph Harper.
NOES
Adley, Robert	Crowder, F. P.	Harrison, Col. Sir Harwood (Eye)
Allason, James (Hemel Hempstead)	d'Avigdor-Goldsmid, Maj.-Gen. Jack	Haselhurst, Alan
Archer, Jeffrey (Louth)	Dean, Paul	Hastings, Stephen
Astor, John	Deedes, Rt. Hn. W. F.	Hawkins, Paul
Atkins, Humphrey	Digby, Simon Wingfield	Hoyhoe, Barney
Baker, Kenneth (St. Marylebone)	Dixon, Piers	Hicks, Robert
Baker, W. H. K. (Banff)	du Cann, Rt. Hn. Edward	Higgins, Terence L.
Balmel, Rt. Hn. Lord	Dykes, Hugh	Hiley, Joseph
Batsford, Brian	Elliott, R.W. (N'c'tle-upon-Tyne, N.)	Hill, John E. B. (Norfolk, S.)
Bell, Ronald	Eyre Reginald	Holland, Philip
Berry, Hn. Anthony	Fenner, Mrs. Peggy	Holt, Miss Mary
Biffen, John	Fidler, Michael	Hornby, Richard
Boardman, Tom (Leicester, S.W.)	Fisher, Nigel (Surbiton)	Hornsby-Smith, Rt. Hn. Dame Patricia
Body, Richard	Fookes, Miss Janet	Howell, Ralph (Norfolk, N.)
Bowden, Andrew	Fortescue, Tim	Hunt, John
Bray, Ronald	Fowler, Norman	Hutchison, Michael Clark
Brocklebank-Fowler, Christopher	Fox, Marcus	Iremonger, T. L.
Bruce-Gardyne, J.	Fry peter	Irvine, Bryant Godman (Rye)
Bryan, Sir Paul	Gardner, Edward	James, David
Buchanan-Smith, Alick (Angus,N & M)	Gibson-Watt David	Jessel, Toby
Buck, Antony	Gilmour, Sir john (Fife, E.)	Jones, Arthur (Northants, S.)
Burden, F. A.	Goodhart Philip	Jopling, Michael
Butler, Adam (Bosworth)	Goodhew Victor	Kaberry, Sir Donald
Carr, Rt. Hn. Robert	Gorst, John	Kellett-Bowman, Mrs. Elaine
Chichester-Clark, R.	Gower, Raymond	Kimball, Marcus
Churchill, W. S.	Gray Hamish	King, Evelyn (Dorset, S.)
Clark, William (Surrey, E.)	Green, Alan	King, Tom (Bridgwater)
Clegg, Walter	Griffith's, Eldon (Bury St. Edmunds)	Kinsey, J. R.
Cockeram, Eric	Gryils, Michael	Kitson, Timothy
Cooke, Robert	Gummer, J. Selwyn	Knox, David
Coombs, Derek	Hall, Miss Joan (Keighley)	Lambton, Lord
Cooper, A. E.	Hall, John (Wycombe)	Lamont, Norman
Corfield, Rt. Hn. Sir Frederick	Hall-Davis, A. G. F.	Lane, David
Cormack, Patrick	Hamilton, Michael (Salisbury)	Langford-Holt, Sir John
Costain, A. P.	Hannam, John (Exeter)	Le Marchant, Spencer

Longden, Sir Gilbert	Page, Rt. Hn. Graham (Crosby)	Taylor, Edward M.(G'gow,Cathcart)
Luce, R. N.	Parkinson, Cecl.	Taylor, Frank (Moss Side)
Maclean, Sir Fitzroy	Percival, Ian	Taylor, Robert (Croydon, N.W.)
McMaster, Stanley	Powell, Rt. Hn. J. Enoch	Tebbit, Norman
Macmillan, Rt. Hn. Maurlce(Farnham)	Price, David (Eastleigh)	Temple, John M.
McNair-Wilson, Michael	Prior, Rt. Hn. J. M. L.	Thomas, John Stradling (Monmouth)
McNair-Wilson Patrick (New Forest)	Proudfoot, Wilfred	Thompson, Sir Richard (Croydon, S.)
Madel, David	Pym, Rt. Hn. Francis	Tilney, John
Mather, Carol	Ramsden, Rt. Hn. James	Trafford, Dr. Anthony
Mawby, Ray	Rawlinson, Rt. Hn. Sir Peter	Trew, Peter
Maxwell-Hyslop, R. J.	Redmond, Robert	Tugendhat, Christopher
Meyer, Sir Anthony	Reed, Laurance (Bolton, E.)	Turton, Rt. Hn. Sir Robin
Mills, Peter (Torrington)	Rees Peter (Dover)	Vaughan, Dr. Gerard
Mills, Stratton (Belfast, N.)	Rhys Williams, Sir Brandon	Waddington, David
Miscampbell, Norman	Ridley, Hn. Nicholas	Walder, David (Clitheroe)
Mitchell, Lt.-Col. C.(Aberdeenshire, W)	RippOn, Rt. Hn. Geoffrey	Walker-Smith, Rt. Hn. Sir Derek
Mitchell, David (Basingstoke)	Roberts, Wyn (Conway)	Ward, Dame Irene
Moate, Roger	ROst, Peter	Weatherill, Bernard
Money, Ernie	St. john-Stevas, Norman	Wells, John (Maidstone)
Monks, Mrs. Connie	Scott-Hopkins, James	White, Roger (Gravesend)
Monro, Hector	Shaw, Michael (Sc'b'gh & Whitby)	Wiggin, Jerry
Montgomery, Fergus	Sinclair, Sir George	Wilkinson, John
More, Jasper	Skeet, T. H. H.	Wolrige-Gordon, Patrick
Morgan, Geraint (Denbigh)	Smith, Dudley (W'wlck & L'mington)	Wood, Rt. Hn. Richard
Morgan-Giles, Rear-Adm.	Soref, Harold	Woodnutt, Mark
Mudd, David	Speed, Keith	Worsley, Marcus
Nabarro, Sir Gerald	Sproat, lain	Younger, Hn. George
Neave, Airey	Stainton, Keith
Noble, Rt. Hn Michael	Stanbrook, Ivor	TELLERS FOR THE NOES:
Normanton, Tom	Stewart-Smith, Geoffrey (Belper)	Mr Oscar Murton and
Nott, John	Stokes, John	Mr. Kenneth Clarke.
Oppenheim, Mrs. Sally	Stuttaford, Dr. Tom

Question accordingly negatived.

10.30 p.m.

Mr. Joel Barnett

I beg to move Amendment No. 5, in page 5, leave out lines 16 to 20.

The Second Deputy Chairman (Mr. E. L. Mallalieu)

With this amendment the Committee is to discuss Amendment No. 6, in page 5, leave out lines 32 to 38.

Mr. Barnett

These are proving amendments, of which the Financial Secretary is aware. I am sure that he will not need to be too bad tempered about these amendments. We should be glad to have an explanation.

Mr. Higgins

At no stage of the proceedings have I been the least bad tempered. I was merely anxious to remain within the bounds of order.

I was told by one of my hon. Friends just now that last year we had many proving amendments. Apparently this year we are to have symbolic amendments. Our last debate might have been symbolic. The hon. Member has said that this is a proving amendment. We know from our similar debates last year that all he wants is an explanation of what his own amendment is about. I do not want to slow down the proceedings, so I shall be happy to explain it to him.

The amendment would remove the provision under which the rebate on purchase tax is limited to an amount calculated by reference to the rates of tax in force on 7th November 1972, so effectively it would be related to possible higher or lower amounts of tax which might have been in force on some occasion before then.

It is no part of the rebate scheme to compensate for any loss sustained by retailers through earlier purchase tax reductions. Previously, no compensation has been paid on such occasions and to do so now would be particularly unfair on those traders who have already written off or cut their tax losses on such goods. This approach is in line with the recommendations of the Hutton Committee which reported on this problem in 1953, and whose recommendations have been consistently followed by successive Governments.

On Amendment No. 5, it will not be necessary for us to follow the recommendations of the Hutton Committee under VAT, because the problem of the loss of value on tax-paid stocks when there is a reduction in tax will not arise.

[Sir ROBERT GRANT-FERRIS in the Chair]

Amendment No. 6 is slightly more complicated. It would remove the provision whereby rebate on revenue duty is established as an amount calculated by reference to the rates of duty in force on 7th November 1972, the date when the rebate scheme was announced. Rebate would then have to be calculated by reference to the duty actually paid on a trader's stocks. Amendment No. 5 would remove a parallel provision in respect of purchase tax.

However, the effect of the two amendments is opposite. In the case of purchase tax, the rates in force on 7th November reflect previous reductions in 1971 and 1972, whereas in the case of revenue duty the rates in force on 7th November reflect the series of increases between April 1964 and April 1969.

Consequently, the purchase tax amendment would in some cases increase the rebate due, while that on the revenue duties would, for some goods, reduce or even remove altogether the rebate which is due.

We have found that the Opposition do not always wish to press proving amendments to a Division, and I doubt whether they would wish to press Amendment No. 6. I would not recommend that they should press either. The purpose of the Chancellor's rebate scheme is to give rebates with reference not to earlier rates of duty but only to those which existed at the date when my right hon. Friend announced the scheme. On that basis it would be right to reject the amendments. The hon. Member for Heywood and Royton (Mr. Joel Barnett) did say that their only purpose was to clarify the situation.

Mr. Barnett

I am sure that that explanation will be absolutely clear, particularly when hon. Members have read it seven or eight times. All will then be the same sweetness and light as the Financial Secretary finds in respect of the whole tax. In view of those pleasantries, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Dr. John Gilbert (Dudley)

I beg to move Amendment No. 7, in page 6, line 1, leave out subsection (4).

It is very much at the option of the Financial Secretary whether this is a proving, probing or symbolic amendment. I have enough material to make it quite a good proving amendment, but, in view of the lateness of the hour, I will settle for its being a probing amendment.

Mr. Higgins

Perhaps I may respond to the amendment in the spirit in which it was moved, which I always endeavour to do. That only goes to show how much more sweetness and light there is if one remains in order.

The point to be made is that the basic objection to the amendment is that it would increase the amount of rebate payable on some revenue duty-paid stocks for no good reason so far advanced. It would complicate the working of the scheme unnecessarily. The new rates of revenue duties effective from 1st April 1973 take account of two factors. First, there are reductions to compensate for the introduction of VAT. Secondly, reductions in the protective elements of certain revenue duties take effect on the same day in relation to EEC imports only, consistent with our Community obligations. The cuts in the protective elements are irrelevant to the rebate scheme, since they are in no way connected with the abatement of rates which has been made to take account of the imposition of VAT.

The proper basis for calculating the rebate is the difference between pre- and post-VAT rates of the revenue duties, exclusive of these special cuts for goods imported after 31st March from EEC countries. This is what the clause at present provides and rebate calculated on this basis will wholly avoid double taxation of stocks duty-paid prior to the introduction of VAT. So we do not feel we wish to extend the scheme in this way or introduce a totally different scheme which was not in our minds at any stage in our initial consideration of this matter. Therefore, I suggest that the Committee should resist the amendment. I trust that it will not be pressed to a Division, in view of the explanation I have given.

Dr. Gilbert

Thanks to the courtesy of the Financial Secretary, we now have the basis of a full-scale debate on the economic virtues of our joining the EEC. However, it would probably be unwise to diverge that far and put such a strain on the charity of the Chair at this time. Therefore, we quite happily beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 ordered to stand part of the Bill.

To report Progress and ask leave to sit again.—[Mr. Murton.]

Committee report Progress; to sit again to-morrow.