HC Deb 06 March 1973 vol 852 cc270-2

This leads to the action we are taking to safeguard the consumer, first, by special powers in the Counter-Inflation Bill which is now before Parliament, and, second, by a major campaign of newspaper and television advertising starting next week.

In the Counter-Inflation Bill we are taking special powers to ensure that, where the yield of VAT is less than that of the purchase tax and SET which it is replacing, the cuts in taxation will lead to prices being reduced in line with the tax reduction, and that, where the reverse is the case, any price increases will be no more than is strictly justified by the tax change.

Mr. Denis Healey (Leeds, East)

I wonder whether the Chancellor could clear up one point which his right hon. Friend said that he would deal with today? In fixing the legitimate amount of retail price under the value added tax, will traders be expected to take account of constant percentage margins of profit or of constant cash margins of profit, because, as the Chancellor knows, this will make all the difference in many cases?

Mr. Barber

I am coming in a moment to the discussions we have had with the retailers. What I can say is that the situation will be entirely different from that which dealt with decimalisation where the Government had no powers of any kind. Even when this special provision comes to an end, there is no question of a free-for-all—that is, when the special powers end—because prices will continue to be subject to the strict control provided for in the Bill.

The newspaper and television advertising campaign will begin next week. We have had extensive consultations with representative trade bodies, in order to work out with them patterns of price changes which will be both commercially realistic for retailers and acceptable to the Government as correctly reflecting all the tax changes—the abolition of SET and purchase tax as well as the introduction of VAT. All this has, of course, been on the provisional basis of last year's Finance Act. The trade organisations could not have been more co-operative with the Government.

I am grateful also to those consumer bodies and others who have already published fair and balanced forecasts of price changes, on the basis of the pro- visional rate of VAT. Some newspapers and magazines in particular, have in this respect performed an invaluable public service.

From some other quarters, there have been totally misleading statements about the consequences of the changeover from purchase tax and SET to VAT—some of them, I am sorry to say, made in this House.

What we shall do, therefore, in this newspaper and television campaign is to give the nation the facts. We shall give the housewife clear information about how the changeover will affect her.

We shall set out in newspaper advertising and in leaflets a list of more than 150 main items of consumers' expenditure, and show how as a result of the tax changes their prices are likely to move. If any member of the public finds that prices in a particular shop have changed in a way which is out of line with this Shoppers' Guide he or she will be able to complain to the Weights and Measures Inspectorate—[Interruption.]—as we were requested by the TUC to do during the tripartite talks—who will be empowered to investigate whether the retailer has properly reflected the tax change in his prices.