VALUE ADDED TAX

HC Deb 30 April 1974 vol 872 cc1043-111

8.26 p.m.

The Chief Secretary to the Treasury (Mr. Joel Barnett)

I beg to move, That the Value Added Tax (General) (No. 1) Order 1974 (S.I., 1974, No. 542), a copy of which was laid before this House on 26th March, be approved. The effect of the order is to implement the intention announced by my right hon. Friend in his Budget speech to apply the standard rate of VAT from 1st April to soft drinks, confectionery and other inessential foods which used to be charged with purchase tax, and also to road fuels and light oils which bear the full rate of hydrocarbon oil duty.

There has been some criticism from the Select Committee on Statutory Instruments about the order. My hon. and learned Friend the Solicitor-General is with me on the bench tonight and will be prepared, with your leave, Mr. Deputy Speaker, to intervene in the debate on this point.

As my right hon. Friend explained in his Budget Statement, the changes he has made in indirect taxation represent a shift in price from essential to less essential goods, and in particular have gone a long way towards covering the demand effects of our proposals for subsidies on essential foodstuffs. This was an important part of my right hon. Friend's decision that the Budget should be demand neutral.

Given that decision, revenue had to be raised to meet vital expenditure on pensions and housing, as well as essential goods. In these circumstances, my right hon. Friend had little hesitation in deciding that expenditure on inessential consumption should contribute a fair share of revenue to the Exchequer.

My right hon. Friend increased the duties on alcoholic drinks and tobacco, which remained largely untouched during the spending spree of the previous Chancellor, and it was only appropriate that expenditure on the so-called purchase tax foods should be brought back into the field of indirect taxation. It cannot reasonably be argued that sweets and chocolates, no matter how enjoyable, even if a trifle fattening, are essential for a healthy diet. I say this despite the claim which, I understand, is made that some of them may have a protein content little short of that of pressed caviar.

There is nothing novel about the proposal to impose indirect taxation on inessential foods. The House will recall that purchase tax was first imposed on ice cream, soft drinks, sweets and similar products in 1962. It probably took a lot of courage on the part of the then Chancellor to take the risk of going down in history as the Chancellor who first taxed children's spending money, but I am sure there is now a broad measure of agreement that the judgment was right, to broaden the scope of the purchase tax by including some articles which most people would consider no less suitable for taxation than those which were already included.

That the judgment was right is borne out by the fact that all successive Chancellors have regarded confectionery, soft drinks and ice cream as inessential foods suitable for taxation. In 1969 my right hon. Friend the Member for Birmingham, Stechford (Mr. Jenkins) applied purchase tax to potato crisps and roasted and salted nuts. In 1972 the right hon. Member for Altrincham and Sale (Mr. Barber) decided, rightly in my view, that these inessential foods should be charged with VAT at the standard rate.

Perhaps I might remind the House of what the hon. Member for Worthing (Mr. Higgins) who, I understand, will be opening for the Opposition, and who seems to be frowning at me rather fiercely, told us during Committee on the Finance Bill in 1972: It would be inappropriate at a time when we are broadening the tax base, which is the object of the VAT, actually to narrow it in respect of some previously taxed items."—[OFFICIAL REFORT, 10th May 1972; Vol. 836, c. 1491–2.] This was, of course, at the time when the hon. Member was constantly telling us that VAT was a "broad based comprehensive tax".

It therefore came as a considerable surprise to most of us that just before VAT was due to come into operation, the right hon. Member for Altrincham and Sale had a last minute change of mind and decided to zero-rate sweets and the other inessential foods which had been subject to purchase tax. We on this side of the House strongly opposed that decision at the time. I will not dwell at length on it now, but it speaks volumes for Conservative social priorities that they prefer to give £100 million a year in tax to relieve ice cream, lollypops, candyfloss and peanuts instead of concentrating the money on measures to meet the needs of ordinary families.

Let me at this point say a few words about the taxation of food generally. Some commentators have professed to interpret my right hon. Friend's decision to propose to reintroduce taxation on inessential foods as the first move to taxing all foods. Any such interpretation is both ill-informed and irresponsible. We have repeatedly declared our total commitment to the principle of not taxing the essentials of life, including foods which enter into the staple diet of the ordinary family. That remains an important element of our policy of ensuring social justice in the area of taxation.

Ice cream, sweets and confectionery are not essentials, and families on low incomes will generally gain far more from our proposals to subsidise certain basic foods than they will lose through paying additional taxation here.

I turn now to the part of the order which deals with road fuels. The effect of this part of the order is to apply the standard rate of VAT to road fuels, both petrol and derv, and other substitutable products such as power methylated spirits and gas for use as road fuel, and to other light oils on which the high rate of hydrocarbon oil duty is chargeable. Other hydrocarbon oils, lubricating oils and petroleum gases will continue to be zero-rated.

My right hon. Friend explained in his Budget Statement that he believed that there was a good case for increasing the taxation of road fuel. While appreciating that the cost of road fuels had increased significantly for reasons outside the control of any Government in this country he considered that in the context of a Budget which necessitated an increase in revenue from indirect taxation some increase in road fuel taxation would be both consistent with his general approach and would encourage the economical use of an imported commodity in uncertain supply.

I turn briefly to the objections raised in some quarters to what is described as the imposition of a tax on tax. There is no new principle involved in charging value added tax on the duty-inclusive price of petrol. The provisions of the 1972 Finance Act, which were stoutly defended by the hon. Member for Worthing—indeed, he waxed almost lyrical in his defence of VAT then—made it clear beyond any doubt that value added tax should be charged on the full value of goods, inclusive of any customs or excise duty. That was what was done when the previous Government decided, rightly in my view, to apply value added tax to alcoholic drinks and tobacco.

A moment's reflection will show that that is the only practicable course when one applies an ad valorem tax right down to the retail stage. It would be impracticable for retailers to charge tax on the value of goods exclusive of any customs or execise duty which had been charged at a much earlier point in the process of manufacture and distribution, as in most cases they would not know the amount of duty that had been paid.

Moreover, those who object to paying tax on tax overlook the fact that the Chancellor has to decide what contribution to total tax resources to seek from a particular commodity. If he were unable to get the right amount from value added tax he would have to increase the revenue duty.

Having decided that he had to look for a further contribution from road fuels towards the additional tax revenue he needed to pay for essential social policies my right hon. Friend recognised that a traditional increase in the duty on road fuel would enter directly into business costs and would not be justified. He therefore decided to apply the standard rate of VAT to road fuels, with an estimated gain to the revenue of about £150 million in a full year.

If, on the other hand, my right hon. Friend had decided instead to obtain the same sum by increasing the hydrocarbon oil duty, he would have had to raise the rate by nearly 3p a gallon across the board. This would have increased business costs by about £75 million a year, about one-fifth of which would have fallen on exports. The chief advantage of electing to apply VAT is that the tax burden will fall on only few business users.

I should now like to deal briefly with the impact of the change on retailers and the trade. We were in the fortunate position when drafting the order of being able to describe the goods to be covered by using definitions long established and long operated by the traders concerned. The definitions of sweets, confectionery and ice cream were introduced and have been operated since 1962. Those for potato crisps, salted nuts, and so on, date from 1969.

Some commentators have implied that the provisions in the order are defective because, for example, chocolate biscuits are chargeable with VAT but chocolate-covered cakes are not. As the hon. Member for Worthing knows only too well, this is a complicated issue. The late hon. Member for Worcestershire, South, Sir Gerald Nabarro, suggested that to tax everything, right across the board, was the only way to avoid anomalies in indirect taxation. Governments of both parties decided over the years, with purchase tax, that to do that was impossible. Any indirect tax is inevitably the subject of great good humour for those who want to examine the various anomalies in it. I do not complain, because I have had my fair share of that on VAT. All indirect taxes must incorporate liability borderlines. In the present context those borderlines have been operated for the purposes of purchase tax, both by traders and by Customs and Excise, with relatively little difficulty for a number of years.

As for road fuel, the order uses the definitions operated and recognised throughout the trade for the purposes of the hydrocarbon oil duty. Nevertheless, I recognise that the traders affected have had some practical difficulties in giving effect to the order on rather less than one week's notice. For sellers of road fuel there was the need to prepare urgently for issuing VAT invoices to business customers, so that they could claim the input tax deductions to which they would be entitled, as well as the problems of adapting pumps and so on, which arise on any change in petrol and derv prices. For confectionery and soft drinks there was the repricing of hundreds of different lines. In both areas there were problems affecting the special VAT retail schemes.

Some retailers, including garages, will have found themselves no longer eligible for the scheme they had chosen, because of the increased proportion of standard-rated sales in their total turnover, and thus obliged to change to a different scheme. At the same time others will have wished to change because different schemes will suit them better in the new situation. Even those who are continuing to use the same scheme may have fresh calculations to make.

I acknowledge that representations were made by trade associations concerned for a postponement of the coming into operation of the order, and I regret that it was not practicable to give those concerned more time to think out those matters. I am sure the House will agree that there is no virtue in delaying the introduction of new taxes on consumption any longer than is absolutely necessary. Any undue delay would lead only to distortions in the pattern of trade in the goods affected.

All the trade bodies concerned fully understand, I think, that Customs and Excise are ready to look at any further problems and give any help that they reasonably can. I feel it is a tribute to the resource and resiliency of those trades that little further need for this help seems to have arisen, and that the changes have on the whole been introduced remarkably smoothly.

Finally, I turn to possible alternatives to these tax increases. Clearly this is not the occasion for a detailed discussion of Budget strategy, but any discussion of this order must take into account the fact that the proposals it contains will yield altogether £275 million in a full year.

We could not have forgone a sum of that magnitude without either increasing the Government's total borrowing requirement, or cutting down the funds available for the Government's programme for subsidising essential foodstuffs and for other priority expenditure, or further increasing other taxes. None of these courses would have been acceptable to us.

The House knows already why my right hon. Friend decided to reduce the borrowing requirement, and why, unlike the Opposition, we think it necessary and desirable to subsidise essential foodstuffs. However, it may be worth spelling out what the implications would have been for other taxes if we had decided to raise the £275 million in some other way.

It would have meant getting on for a 1p increase on the basic rate of income tax or over 1 per cent. on the standard rate of VAT, which applies to so many necessities as well as luxuries, or 7½p on a packet of cigarettes in addition to the 5p increase already made. If we had decided to get the money from alcoholic drink it would have meant a further 2p a pint on beer, plus another 10p on a bottle of wine, and another 30p on a bottle of spirits.

Our view was that, in a situation where we were asking for sacrifices from all who were able to make them, it made sense to ask for sacrifices also from the private motorist and from expenditure on inessential foodstuffs.

I suppose we may this evening have the Opposition claiming to be the motorist's friend. It should be recalled that under a Conservative Government the private motorist not only had difficulty in finding a house but he had difficulty finding a garage for his car. This Government will help the motorist and his family by creating the economic and social climate to enable him to enjoy a better standard of living. What is more, we shall at the same time ensure that the motorist enjoys many miles of happy motoring.

The only argument left to the Opposition is that they would rather not subsidise food. The net result of such a policy would be to reduce the price of sweets, chocolates, etcetera, and to increase the price of bread and milk. That is the sort of irresponsible proposal that only this Opposition could support —that is, if on this occasion they were to decide to press the matter in the Division Lobby with perhaps slightly more than their customary 50 per cent. support. Whatever they decided to do, I strongly recommend and advise my right hon. and hon. Friends to support the order.

Mr. Robert Carr (Carshalton)

Can the hon. Gentleman tell us what is the net effect on the cost of living index? He talks about all these things as being inessentials. I doubt whether the ordinary family would regard them as quite so inessential, and they certainly enter into the cost of living of every ordinary family.

Mr. Barnett

The effects on the cost of living index must be seen in the context of the Budget as a whole and what was done to lower the index. The net effect of both these two items is, in the case of sweets and so on, 0.3 per cent. and in the case of petrol another 0.3 per cent.

Mr. Carr

No. I am sure that the hon. Gentleman would not wish to say that, because it is not consistent with the view expressed by the Paymaster-General in an answer recorded in HANSARD.

Mr. Barnett

I will be happy to look up that reference, but my information is that it is 0.3 per cent. in each case.

Mr. Carr

indicated dissent.

Mr. Barnett

It is no good the right hon. Gentleman shaking his head. I have given the answer. It is 0.3 per cent. I will look up what my right hon. Friend said, unless the right hon. Gentleman is prepared to quote it to me now, when I am prepared to deal with it.

Mr. R. J. Maxwell-Hyslop (Tiverton)

Since, as the hon. Gentleman knows, the House cannot amend statutory instruments, why did the Government put sweets and petrol together in the same statutory instrument when they could easily have separated them into two statutory instruments? The merits of the two proposals are totally dissimilar.

Mr. Barnett

We wanted the House to have a good debate. It was hoped to start at seven o'clock and we have till 11.30 p.m. tonight, which is four and a half hours. That would have been too much to debate just one item, so we put the two together, and that gives the House an opportunity to debate both.

Mr. Deputy Speaker (Mr. George Thomas)

Before we proceed further I must inform the House that the amendment standing in the name of the right hon. Member for Devon, North (Mr. Thorpe) and the names of his right hon. and hon. Friends is not in order and cannot be called.

8.48 p.m.

Mr. Terence Higgins (Worthing)

The Chief Secretary to the Treasury has spelt out very clearly the purpose of the order. Unlike his speech in the Budget debate, which consisted almost entirely of an official brief, several sentences which he read out tonight sounded as though they might have been his own. After the answers he gave to my right hon. Friend the Member for Carshalton (Mr. Carr) and my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop), however, I do not think the House feels that he should sit down to cries of "Author" on this occasion.

This measure is a mistake. Before explaining the reasons, I remind the House of a number of things that the hon. Gentleman said when in opposition on the question of extending the coverage of value added tax by order. I am sure he has forgotten, for instance, what he said on 11th July 1972 in discussing an amendment on whether such measures should be taken by order. He said a large number of things about the matter on that occasion.

I had earlier emphasised, as Financial Secretary to the Treasury, that the intention was to take these powers so that, if we found that there were anomalies or changes of that kind which needed to he rectified, we could do so without having main legislation in a Finance Bill. But that did not satisfy the hon. Gentleman. He said: It is fair to sum up the Financial Secretary's contribution on that occasion by saying that the powers in any case have always been available under the purchase tax regulations and that the Government need the powers because anomalies may arise. That was what I had said. The hon. Gentleman went on to say: I do not concede the general case because I think that the powers are far too great in a tax as wide in scope as this one. If this provision is not amended we shall give the Government power to bring into tax items which have not been taxed to date, and what is more they will be able to do so by means of an order at the end of the day. Surely there cannot be a case for giving the Government this power in respect of food, unless it is intended at some time to slip in a tax on food by means of an order. My right hon. Friend the Member for Altrincham and Sale (Mr. Barber), who was then Chancellor of the Exchequer, said: It is right to remind the House that both under the previous Labour Government and under the Conservative Government that power "— that is, the power we are now talking about to amend by order— has never been used to impose purchase tax on wide categories of goods. It is essentially an instrument for making borderline adjustments or more occasionally for securing overall reductions in taxation."—[OFFICIAL REPORT, 11th July 1972; Vol. 840, c. 1469, 1471.] My right hon. Friend went on to give an undertaking that he would not support any measure which would use these powers other than for the purpose of minor amendments.

Despite what the Chief Secretary said on that occasion, however, he now puts before the House this order which clearly makes massive increases in taxation. We have little time to debate the matter. What is more important is that the order is not divisible, in the sense that we have to take it or leave it as a whole, even though it contains some disparate items and amounts in total to a large amount of revenue. If the matter had been proceeded with as it ought to have been, and as the Chief Secretary himself has clearly argued it should have been, by Finance Bill legislation, amendments could have been made and proposals could have been altered in a way in which they ought to have been altered. It is important to stress that the amounts involved are very large.

Let us consider some of the previous tax-increasing Budgets of the last Labour Government. In November 1964 there was £300 million in extra taxation, in April 1965 £123 million, in May 1966 £258 million, in July 1966 £176 million and in November 1967 £200 million. We then had a big figure in 1968 of £923 million, while in November 1968 there was £250 million and in April 1969 £340 million.

One must quote these figures to bring out precisely the magnitude of what the Government are doing in the order. As the Chief Secretary has just pointed out, the revenue involved is £275 million, which is substantially more—as the House will see from the figures I have just given—than many of the massive tax increases imposed by the previous Labour Government which were subject to full four-day debates in the House, and discussion on Finance Bills in Committee and on Report and Third Reading. To bring this matter to the House at just after eight o'clock in the evening and to have only the amount of time which we now have for debate, without the matter being amendable or divisible, is an insult to the House. The Chief Secretary has a great deal of nerve to stand at the Dispatch Box and put this order before the House.

Technical questions also arise regarding the validity of the order. My right hon. Friend the Member for Crosby (Mr. Page) is expert in these matters and if he is fortunate to catch your eye, Mr. Deputy Speaker, he will have something to say which the House will need to consider very carefully.

I turn to the merits of the issue as such. We must first ask whether the order is necessary. The Chancellor's philosophy on indirect taxation was set out in his Budget Statement on 26th March when he said: I deal with indirect taxation. Here my aim is to help pay the cost of reducing the price of the more essential goods by increasing the tax on the less essential. The House has already spent some time this Session discussing the disadvantages of massive food subsidies and the indiscriminate way in which they are being given by the Government.

I quote from an article in The Times of 23rd April by Mr. Bernard Levin which I think put it very clearly. He said: Take the question of food subsidies. The subsidy on bread, though meaningless itself in the short term (if will reduce the price of bread for everyone in the country by 37.5p a year, or roughly seven-tenths of a penny a week) is symbolically effective. Behind the symbolism, however, is the fact that the commitment to subsidies is open-ended so that—since the price of food will certainly continue to rise—the sum that will have to be spent on subsidies will also continue to rise without limit. A little later, referring to a Question answered in the House he said: the annual cost to the taxpayer of keeping Mr. Paul Getty's food bill down as much as those of pensioners would now not be £21 million but £200 million. We cannot even argue that the Government are robbing the rich to pay the poor because the tax will not be charged, under the Government's arrangements, on this or that millionaire's caviar. That will still be zero-rated, in my view rightly, because I am against taxing food. It is a bizarre argument to say that a millionaire's caviar should not be taxed but that the ice cream, crisps, orange squash and rose-hip drink which constitute a heavy financial burden for large families with low incomes should be taxed. It brings out the essential absurdity of the way in which the Government go about making this distinction between what is and what is not essential.

The Chancellor tried in his Budget speech to give a human touch to the question and said: I appreciate that this step"— he was referring to the contents of this order— may be unpopular with the children, although I met a delightful young lady outside No. 11 Downing Street this morning who recommended me to take precisely this step."—[OFFICIAL RFPORT, 26th March 1974; Vol. 871, c. 308–9.] It rather stretches credulity to imagine that some small child should have gone along to Downing Street on Budget Day to waylay the Chancellor and say "Please tax my sweets". I find that that stretches the imagination a trifle. No doubt the right hon. Gentleman wished to bring out a homely analogy.

Mr. Joel Barnett

I hope that the hon. Gentleman is not suggesting that the Chancellor was lying to the House. This was something that actually happened that morning when a group of young children came to the area of No. 11. It was reported in the news.

Mr. Higgins

I do not doubt what the Chancellor said. I am saying that it was singularly unfortunate that it happened. The Chancellor is very much out of touch with the ordinary housewife with a family of young children if he really believes that these items are not important in her budget. It is no good the Chief Secretary saying that these items are not essential. The reality is that they are bought in large quantities by such families and therefore affect the cost of living of these families. They have to pay the tax, and the large amounts of revenue mentioned by the hon. Gentleman are produced by families in this group, many of them with low incomes.

Mrs. Elaine Kellett-Bowman (Lancaster)

Does my hon. Friend agree that for mothers with young children VAT on water is even more serious?

Mr. Higgins

I leave my hon. Friend to make that point herself. When I tabled a Question yesterday to the Financial Secretary asking what would be the effect on the cost of living of various families, he gave the remarkable answer that the data required were not available. Surely the Family Expenditure Survey provides the necessary data to give us information on this. I am not satisfied with the answer he gave.

The present Chancellor of the Exchequer in the debates in 1972 made great play of the harmonisation of VAT. Since then we have had a directive from the EEC on tax harmonisation. I believe that it is essential to ensure the continuance of zero rating and to persuade the members of the Community that it is an advantage, not least because it can prevent VAT from being regressive.

The Chief Secretary protested that there was a distinction between food in general and the food covered by the order, but he will have difficulty in convincing the European Community that that is so. I imagine that the conversation might go in this way: "We must have zero rating because we want to give relief on food." Someone on the other side of the Channel might say "Does that mean that you do not tax any food?" The answer would be "We tax some food." The question might be asked "Luxuries or essentials?" We then get into the argument that I have just rehearsed.

The hon. Gentleman's position in these negotiations is somewhat weakened if any food is taxed. The success of the measures taken in the EEC and reported in The Times on 15th March to get the Commission to take back its proposals so that the question of zero rating could be reconsidered is to be greatly welcomed. I am glad that the Chief Secretary has taken an apparently abrasive line on this, but the creation of the precedent in the order is extremely unfortunate.

I turn next to the effect on the cost of living of the first part of the order. I was astonished by the Chief Secretary's reply when I suggested in the closing stages of my earlier intervention that he had the figures wrong. I will tell him the answer which the Paymaster-General gave to my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) who asked what would be the effect on the retail price index of (1) the imposition of value added tax upon confectionery, soft drinks, ice cream and potato crisps; (2) the imposition of value added tax and other extra duties upon petrol, derv and oil; (3) the imposition of extra tax, duty and value added tax upon tobacco; and (4) the imposition of extra tax, duty and value added tax upon alcoholic beverages. The Paymaster-General replied: The increases in the retail price index in respect of each of the four indirect tax changes listed by the right hon. and learned Member are 0.3 per cent., 0.3 per cent., 0.8 per cent. and 0.35 per cent., respectively. He went on to say: there are no indirect effects."—[OFFICIAL REPORT, 4th April 1974; Vol. 871, c. 416.] I hope that the Chief Secretary will take that reply into account.

In his Budget speech the Chancellor said that the threshold agreement had somewhat inhibited indirect tax changes. Had it not been for the threshold agreement, the Chancellor clearly would have made bigger indirect tax changes. Nevertheless there are indirect tax effects because, if the overall effect on the cost of living is as suggested in the answer to which I have referred, the threshold agreement will be triggered earlier, which is likely to have an effect on aggregate demand which will tend to be inflationary. It is not true that there are no indirect effects, and this must be taken into account because the Government have introduced a Budget which will increase prices.

I turn to retailers' problems. There have been changes in regard to VAT schemes, but the hallmark of our introduction of VAT was consultation. It is a great shame that the Government should have put themselves in a position of having to make changes of this kind at short notice. A letter which I have received from a trader points out the difficulties which face him and his firm. He says: The cost in time and paper work with this manoeuvre will be colossal. For a firm like ours, with six shops and paying no VAT, there will now have to be two tills at each shop and all the calculations involved with VAT … We ask you to try to get this crazy idea cancelled and revert to the only sensible idea, which is to have all foods free from VAT. We believe it is right that all food should be free of VAT. Despite the Chief Secretary's quotations, we never imposed VAT on food and we were right not to do so.

Secondly, I turn to the question of petrol and other road fuel. Again the order is not subject to amendment and will not be brought before the House in such a way that it can be debated. I have some fascinating quotations on this topic from Labour Members when in opposition—indeed, from right hon. Members who now occupy positions on the Government Front Bench. I wish to give two by way of example.

My first quotation is from the present Leader of the House—it is fashionable to quote from him—when speaking at Stockport on 13th February 1974, shortly after there had been massive increases in the price of petroleum. The right hon. Gentleman said: Of the 47½p you pay now for four-star petrol, 22½p goes straight to Mr. Heath in tax". That was not strictly true, so far as I know. The right hon. Gentleman went on to say: A sensible Government who wanted to restrain prices would reduce the tax. The right hon. Gentleman is now a member of a Government who seek to introduce this order which will raise revenue on petrol by £150 million. He should perhaps consider slightly what his own position is.

I then have a quotation from the Prime Minister when speaking to an Eastern Region Labour Party rally on 22nd October. As far as I know, he has not uttered on the subject since.

Mr. Maxwell-Hyslop

Before my hon. Friend reads the quotation, I wonder whether he has noticed on the reverse side of the order that the names of the two Lords Commissioners of Her Majesty's Treasury who signed the order were Harold Wilson and Denis Healey.

Mr. Higgins

I had noticed that, and I thought it was an interesting point. Let me bring to my hon. Friend's attention what the present Prime Minister said on 22nd October. He said that higher petrol and oil prices would give a further twist to the inflationary spiral, but the Government had 'a ready weapon' to meet his threat—tax cuts and subsidies. The aim must be to keep down the cost of oil, whether as motive power or as a fuel, to the present level. I know that the collective responsibility of the present Government seems to be a little weaker than normal, but this is ridiculous. Is the Prime Minister aware of the order we are now debating? He has not expressed any change of view since the quotation I have just made.

We should carefully consider the arguments advanced by the Chancellor of the Exchequer in his Budget speech. He said that its aim was to conserve the supply of oil, to reduce the pressure on our road space and to make life more tolerable in our towns and countryside. The question arises not whether the order will make things more difficult for those who live in the countryside and who look to the motor car as their only means of getting about, but whether the Government believe that the demand for petrol is elastic or inelastic. It appears to be a little inconsistent on the one hand to argue that the effect of the tax increase will massively reduce the amount of traffic on our roads and on the other hand not to give a clear indication of what the overall effect on demand will be. If the Government increase the tax in the way proposed and a gallon less of petrol is bought, they lose not only VAT but a considerable amount of the duty they already collect. We should like to have from the Financial Secretary an indication of what he thinks will be the net effect on the revenue as a result.

We believe that the order is a mistake. We deplore the way in which it has been brought before the House because it is not amendable and it is not divisible. We believe that it will have a regressive effect on many families. It will tend to raise industrial costs. Even the Chief Secretary agreed that it would not be possible to deduct all the input tax on every business. It will put forward the date on which threshold agreements are triggered. We believe that it is inflationary and therefore that it cannot be justified to bring it before the House in this way. For those reasons, the Opposition cannot support it.

9.10 p.m.

Mr. Raphael Tuck (Watford)

I do not want to embarrass my hon. Friend the Chief Secretary, but there is one matter which plumbs the depths of financial muddle in this order. I refer to the VAT on petrol.

Before the Budget, a gallon of 4-star petrol cost 50p. I took the trouble to telephone by hon. Friend's office today and from one of his secretaries I obtained the information that of that 50p, 22½p was tax. In other words, the value of the petrol without the tax was 27½p. However, the tax which is being imposed now is 10 per cent. not of the 27½p—the value added—but 10 per cent. of the total 50p. Therefore it is a tax on a tax—

Mr. Maxwell-Hyslop

Hear, hear.

Mr. Tuck

It is nothing more than highway robbery. Value added tax means just that. It does not mean a tax on tax. Although I shall not vote against the order—

Mr. Maxwell-Hyslop

Shame.

Mr. Tuck

I have no doubt that the Opposition will. I said that I did not want to embarrass my hon. Friend. I ask him to look at it again. Let the value added tax be a tax added on the value and not a tax on the tax, which in my opinion is quite wrong.

9.12 p.m.

Mr. Geoffrey Pattie (Chertsey and Walton)

It is always a matter for concern when this House stands on the verge of approving a statutory instrument, one of whose provisions will lead to an anomalous absurdity.

I have in my hand a large, roundish, multi-celled juicy, sweet or acid fruit enclosed in a bright reddish-yellow, tough rind. It is a fruit which has been enjoyed in Europe since the eleventh century. We know that in the year 1290 the Queen of Edward I purchased seven of them from a Spanish ship which had docked at Portsmouth. Why she purchased so few I do not know. Perhaps it was a special offer—

Mr. Maxwell-Hyslop

The VAT on them.

Mr. Pattie

For several hundred years we have enjoyed this fruit without realising that it possesses vitamins. We have discovered vitamins in more recent years. These large, roundish, multi-celled, juicy—

Mr. Deputy Speaker (Mr. Oscar Murton)

Order. The hon. Gentleman is perhaps not aware, because he has not been very long in this place, that there are certain conventions about producing objects. There was in fact an occasion on which eggs were produced, and it was ruled to be dangerous in case anyone should throw an egg. On another occasion some other edible object was produced, and the egg incident was referred to. I shall be grateful if the hon. Member will refrain from holding the exhibit throughout the remainder of his speech.

Mr. Maxwell-Hyslop

On a point of order, Mr. Deputy Speaker. I recall visually noting the occasion when one of my hon. Friends representing a Kent constituency not only produced an apple in the Chamber but ate it. Therefore, would it be in order for my hon. Friend to eat the orange after his speech, or must he eat it now?

Mr. Deputy Speaker

I must explain that in the ruling to which I have referred it had been ruled by Mr. Speaker that it is not good practice to bring into the Chamber objects unnecessary for the debate. Regarding the eating of an apple, a ruling was then given that Mr. Speaker would not interfere. However, Mr. Speaker reminded hon. Members of their responsibility for the dignity of the House.

Mr. Pattie

I am grateful for that ruling, Mr. Deputy Speaker. I will not exhibit the offending fruit again. It is in the careful custody of my hon. Friends.

None the less, in recent years the aforementioned fruit was discovered to be very strong in Vitamin C. In December 1941 the wartime Government decided to introduce certain measures designed to protect various sections of society which were nutritionally vulnerable. I refer to young children and expectant and nursing mothers. Therefore, the Government decided to issue to them free cod liver oil and free pure concentrated orange juice, the latter item ironically being imported from the United States in wartime conditions under the Lend-lease programme.

It seems that the Government of 1941 had a higher regard for concentrated orange juice than the Government of 1964 and of Governments since. In 1964 quick frozen concentrated orange juice was included in the purchase tax proposals in Group 35, as it was called, and put in with squashes and other soft drinks to which it bears no resemblance whatsoever. Squashes are a combination of water and synthetic materials plus a little of the genuine article.

We are talking about a 6¼ fluid ounce can which contains not the equivalent of, but the juice from, 12 oranges. When a pint and a half of water is added to the contents of the tin we then have the juice from 12 oranges.

The Government will no doubt say that the housewife is at liberty to purchase 12 oranges—this evening the canteen price was 5½p per orange—to take them home, squeeze them to extract the juice, and thereby get her concentrated orange juice. The point is that if she purchases 12 oranges, the fresh natural product, they will attract no VAT, whereas the juice from 12 oranges when put into a can does attract VAT. This must be one of the more absurd proposals that we have seen in modern years.

Mr. Maxwell-Hyslop

Is not the possible explanation that the fresh oranges come from either Spain or South Africa and that this Government are anxious to increase trade with those countries?

Mr. Pattie

I think that oranges also come from other sources.

The process here is that, immediately after the harvest, the orange has its juice removed and this is then quick frozen so that the vitamin content is retained. I am surprised that the Chancellor has not carried his logic right through and put VAT on the fresh fruit itself, because the large, roundish multi-celled, juicy, acid or sweet fruit enclosed in a bright, reddish-yellow tough rind has at least got pips which he can delight in squeezing, whereas the poor, quick-frozen concentrated orange juice has none.

9.20 p.m.

Mr. Graham Page (Crosby)

I cannot possibly follow what was said by my hon. Friend the Member for Chertsey and Walton (Mr. Pattie) about anomalies over oranges and orange juice, but there are other serious anomalies in this order.

Let me first join the protests that have been made from this side of the House at the fact that the order includes two important matters, one of which is wholly invalid, and the other which it is possible to debate. Had this order been divided into the two subjects we should have had proper debates on each, and I deprecate the practice of trying to get through two matters in one order when one of those, as I hope to show, is entirely invalid and creates not only anomalies but a most extraordinary situation.

The explanatory note to the order says that the order imposes VAT "on certain food products and drinks" that—in short —are called lollies or sweets and are set out in the four categories in the explanatory note, but the order itself makes no specific reference to those goodies. All that it does in this respect is, by Article 3, to revoke the order which zero-rated sweets, that is Value Added Tax (Food) Order 1973, which is No. 386 of that year. That revocation can have the effect of imposing VAT on sweets and lollies, and so on, only if it revives the law that existed before the 1973 order became effective; in other words, if it revives in full Group 1 in Schedule 4 to the Finance Act 1972.

The history of this is that Section 12 of the Finance Act 1972 deals with zero-rated food as a whole as defined in Group 1 in Schedule 4, but Group 1 in Schedule 4 also listed certain exceptions to the zero-rating of food, and those exceptions were what was called the lollies list. Before the 1972 Act came into operation the 1973 order substituted a new Group 1 Schedule 4 which omitted the lollies list. In other words, they were no longer an exception to zero rating. They were therefore zero rated.

Now we have this new order which revokes the 1973 No. 386 order and assumes by the explanatory note that by rubbing out that 1973 order one magically restores Group 1 Schedule 4 to the 1972 Act. Before 1889 that magic might have been effective. Under the common law, that revival by repeal of a repeal did happen, but in 1889 there was passed the Interpretation Act, Section 38(2) of which said that where an Act passed after the commencement of that Act repeals any other enactment, then, unless the contrary intention appears, the repeal shall not— (a) revive anything not in force or existing at the time at which the repeal takes effect". It is, therefore, abundantly clear that this order does not do what the explanatory note says it intends to do as regards the lollies and the sweets. The repeal of the 1973 order has not restored Group 1 in Schedule 4 to the 1972 Act, so there is now no Group 1 of Schedule 4 to the 1972 Act, nor is there a 1973 order. What does that mean? It means quite simply that at the present moment no food is zero-rated. All food is subject to VAT. I do not know why I should put the Government right in this matter, but that is the effect of the order, that all food is subject to VAT.

The Government can only avoid that conclusion by the completely fallacious argument that an order is not an enactment. An order is subordinate legislation. Nevertheless, it is legislation and it is enacted. There was a case in which a learned judge said that in the Road Traffic Act 1960 "enactment" did not mean "regulations". But what he said was: The word 'enactment' may include within its meaning not only a statute but also a statutory regulation but, as it seems to me, the word does not have that wide meaning in the Act of 1960. He then went on to say why it did not, implying that elsewhere it would. That is the only authority on which the Government can base their argument that the explanatory note to this order is correct and that the order has revived Group 1, Schedule 4 to the 1972 Act. I submit that it has not done anything of the sort.

The result is that we are left in this ridiculous position of having no Group 1, Schedule 4 to the 1972 Act. That was wiped out in 1973 and it has not been revived. The result of passing this order is that all food will be subject to VAT.

9.27 p.m.

Mr. David Steel (Roxburgh, Selkirk and Peebles)

I do not think I will follow the line of argument adduced by the right hon. Member for Crosby (Mr. Page), important though it is, because the concern of myself and my colleagues is the second part of the order. I entirely associate myself with what the right hon. Gentleman and others have said about the way in which the Government have produced this order, covering the two unrelated subjects of sweets and petrol. It is all very well if, as happens, the Conservative Opposition is opposed to both, but there is no logical reason why they should be. They are unrelated subjects.

When the Chief Secretary smugly says that he thinks that it would be for the convenience of the House to take both these matters together, he knows perfectly well that it is nothing of the kind. It is the Government trying to be a bit too clever in order to get their business through, and this is not appreciated by the House. I hope that those on the Government Front Bench will take note of our strong feelings in this mater. We do not wish to see a repeat of omnibus orders of this kind.

In any Act of Parliament bringing in an affirmative procedure as opposed to a negative procedure, this House acts on the basis that each and every subject will be properly debated under the procedure laid down by the Act. By our procedure tonight we are certainly skirting around the spirit of the legislation. I therefore associate myself with the criticisms of the Government on that score.

I want to turn not to the question of these foods, because I think there is another view in addition to that stated by the Opposition. No mention has been made so far of the considerable evidence which has been sent to us from the medical profession, and in particular from the dental profession, about the effects of over-consumption of certain of the goods mentioned in this order. I speak as a parent of young children. I remember their glee when the price of sweets went down and their sudden devotion to the Conservative cause as a result, but I thought it was wholly misplaced. I told them so at the time, and I was supported in that view by those who attend them medically. However, in all seriousness, there are two arguments on this question.

I and my colleagues who will be voting against the order are not concerned with that section of it which deals with sweets and so on. I am very concerned about the part which relates to fuel oils. We had a most extraordinary statement in the House yesterday in an Answer from the Under-Secretary for Energy, which has received inadequate publicity. When asked by my hon. Friend the Member for Hazel Grove (Dr. Winstanley) about his views on the rationing of petrol by price, the Under-Secretary said: I would have thought that if there is no rationing of petrol—and we are all agreed that eventually we want to get rid of the present allocation system—we will have a situation in which rationing is by price."—[OFFICIAL REPORT, 29th April 1974; Vol. 872, c. 757.] That sort of philosophy has a very dangerous effect in the rural areas of our country. The plain fact is that in the rural areas throughout Britain over several years bus services have been in decline and costs, both to operators of bus services and to those who travel on them, have been constantly increasing. Yet in his Budget speech the Chancellor of the Exchequer refered to this matter and said: The normal VAT provisions for deducting input tax will apply to the VAT on road fuel purchased by all commercial and industrial undertakings registered for the tax, and neither industrial costs nor bus fares should therefore be affected by the increase."—[OFFICIAL REPORT, 26th March 1974, Vol. 871, c. 310.] The extraordinary thing was that within exactly a week of that speech the Scottish Bus Group had a successful hearing before the Scottish Traffic Commissioners producing substantial increases in bus fares, some in my constituency. One of the group's arguments was that the Chancellor's statement covered only 85 per cent. of the mileages covered by the group's vehicles. Despite the widespread publicity given in newspapers and on television to undertakings that bus fares would not rise—undertakings which the public accepted—the fact is that the rebates mentioned apply only to the fare stage sections of the companies' businesses. Therefore, the total costs of the companies have been directly affected, as have those of all road transport undertakings, by the Chancellor's measure.

I also believe that the cost of passenger transport in rural areas has not been adequately subsidised though the machinery of the Transport Act introduced by the previous Labour Government. I welcomed that at the time as something that was better than nothing, but in the light of experience I believe that it is no longer enough to try to leave the subsidy on buses in rural areas to local authorities, which very often are in the least able financial position to support these undertakings. By definition, a bus route very frequently passes through the areas of several different local authorities. It is a long and tedious business to get agreement on subsidies for particular services.

In recent years we have seen a pattern in which, because of inadequate support, rural bus services have fallen away. A mistake has been made in that successive Governments have closed railway lines—some closures justified, some unjustified—and the savings which each Government have claimed as a result of closures have not been transferred into subsidies for road transport in the areas affected.

My constituents feel very bitter about the fact that when the Waverley route from Edinburgh to Carlisle was closed, the Government of the day gave an assurance about adequate alternative transport, but the £750,000 alleged to have been saved has not been transferred to a more effective public transport system. Moreover, we appear to have lost sight of the proposals, which were being brought forward by the previous Government, for the releasing from public licensing of certain road vehicles. Are the Government able to say something soon about their intentions on that matter? It would help transport in rural areas if mini-buses and private cars could be used much more in order to get people to work. This is an area of policy which has been long delayed. We could have help in the rural areas if something of that kind came forward.

A basic fact of life which Ministers sometimes overlook is that in rural areas such as the Highlands or Borders of Scotland the use of a private car is an essential cost of getting to work, but this is not subject to any form of tax remission. This is a source of considerable grievance, but successive Chancellors—sometimes for good, sometimes for bad reasons—have refused to allow it. The proposal to increase the cost of petrol in this way comes on top of the very substantial natural increases which have occurred in the price of petrol because of the international situation.

I believe strongly that parties should not make sweeping promises in opposition which they are not prepared to redeem in government. On 20th October 1973 the present Prime Minister made a speech in Cambridge which was reported widely in the Sunday Press, no more widely than on the front page of the Sunday Mirror, where it carried the banner headline "Cut Petrol Tax." The political editor of the Sunday Mirror wrote: Harold Wilson pulled out of the bag yesterday a plan to save Britain's motorists from predicted petrol price rises of up to 5p a gallon. The Opposition leader called on the Government to offset the soaring cost of Arab oil by tax cuts and even subsidies. He said in Cambridge that if Chancellor Anthony Barber was concerned about the effect on the revenue he should: Introduce an emergency crisis tax on land speculation … He said, 'Petrol and some oil products are heavily taxed. The Government should do all in its power to stabilise oil prices by corresponding reductions in taxation.' But Mr. Wilson's plan would also take in the cost of running a private car, an important item in millions of British budgets. That general statement is particularly true for those living in rural areas. The then Leader of the Opposition gave us to understand that he believed it was right for the Government to use their powers to reduce the cost of petrol by reducing tax on petrol. Instead, eight months later we are asked to approve a proposal to increase the tax on petrol.

If the Government must increase the price of petrol, it could be done by other means and those living in rural areas who must use their private cars could be compensated. The regional employment premium might be adapted as a method of operating some kind of grant for travel to work. There are other possibilities. The Liberal amendment, which has not been selected for debate, refers to the possibility of compensating those in rural areas in particular. Until the Government recognise that in such circumstances the cost of running a private car is an unavoidable cost and is not a luxury, my hon. Friends and I will continue to oppose tax increases of this kind.

9.37 p.m.

Mr. Daniel Awdry (Chippenham)

Three reasons were given by the Chancellor for the imposition of value added tax on petrol. As I understand it, the three reasons were these. It is argued first that it will help to conserve our supplies of oil, secondly that it will reduce the pressure on our road space, and finally that it will make life a little more tolerable in our towns and in the countryside. I believe that all these reasons are invalid.

First, will it help to conserve our supplies of oil if valued added tax is imposed on petrol? It is difficult to obtain statistics on the use of oil used for road fuel but I believe that there are indications that the amount of oil used to produce petrol is only about 15 per cent. of the total imported and that about half of that is used for commercial transport. It therefore follows that any reduction which could be achieved by the imposition of VAT on petrol for private transport will probably have a very insignificant effect on total supplies of oil.

If I am wrong about that and if a significant reduction in car usage were to be brought about by these fiscal means, I think that the consequences would be grave, because the transfer from private to public transport would considerably embarrass operators of public transport. As those of us who represent rural constituencies know, the public transport simply is not available to handle the traffic.

Further, increases in the price of petrol will in many cases be the last straw which will make a motorist decide to postpone the purchase of a new car or a newer replacement vehicle. It is therefore likely that the Chancellor will lose more revenue because of reduced car sales than he will gain by imposing VAT on petrol. I do not therefore believe that the first argument—that the tax will help to conserve our supplies of oil—stands up on examination.

Will it reduce the pressure on our road space? The commercial users of cars and goods vehicles will be able to reclaim any VAT they pay on their petrol and, therefore, that traffic will not be reduced. But many people have to use their cars because they have no alternative. The housing situation has forced people to live considerable distances away from their employment and in areas where for various reasons there is simply not sufficient public transport.

I entirely agree with the hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) that people have to get to work by using private cars. Where there is no public transport and a private car has to be used, it is a totally unfair imposition to add to people's other hardships by putting VAT on petrol. These people will have no option but to pay. It is not only the people in the rural areas who feel bitterly about this. Often in the towns public transport is also inadequate and a car is essential for getting to work. Such people also have no option but to pay up, and they too are being unfairly penalised. I do not think, therefore, that the tax will reduce the pressure on our road space.

The Chancellor envisages life becoming more tolerable through a reduction in the use of the private car. I think the Government realise the vital contribution made by commercial transport to the economy but they have signally failed to recognise the vital rôle of private transport in the life of the community. More than half the households in the country possess a motor car, and this represents two-thirds of the population. I for one utterly refute the suggestion that the use of the private car could possibly cause a deterioration in the quality of life. For two-thirds of the people of this country the car is an essential means of personal transport and is vital for maintaining an up-to-date standard of living. The buoyant demand for private cars leaves no room for doubt about that.

I do not believe that the imposition of the tax will achieve the Chancellor's objective and I do not believe that he will get the extra revenue he wants. The current price of petrol is 55p a gallon. Of that, 22½p is customs and excise revenue, 27½p is the retail price and now there is another 5p VAT. The hon. Member for Watford (Mr. Tuck) was right in saying that this was a tax upon a tax. He said it was highway robbery and he made a powerful speech, but he has now left the Chamber and is not going to vote against the Government. It is iniquitous to levy a tax upon a tax particularly when tax already forms such a large part of the retail price. It is time the Government woke up to the fact that the private car is not a luxury for a privileged few but is an essential element in the transport of people and that it is just as desirable as public transport. I hope that many hon. Members will vote against the order.

9.44 p.m.

Mr. R. J. Maxwell-Hyslop (Tiverton)

I start on the basis of the jumble of the order. There was an opportunity in the last Session of Parliament to do something about that. The Joint Select Committee on Delegated Legislation, which looked at, among other things, the question of whether statutory instruments should be amendable, sat for more than a year. In the whole of that time no Liberal Member bothered to give either written or oral evidence. Therefore, it does not come very well from the Liberal spokesman, the hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) to complain now about inability to amend statutory instruments. As I gave both written and oral evidence to the Committee I have no need to wear a white sheet on that subject.

Mr. David Steel

What effect did the hon. Gentleman's representations have? It does not seem to me that they were very fruitful.

Mr. Maxwell-Hyslop

I was in a tiny minority of hon. Members who were so concerned. Those who now say that there should be a process to disentangle the order should search their consciences and consider whether they should have done something about it in the last Session, when they had the opportunity.

However, that in no way excuses the Government for introducing an order which combines a number of totally dissimilar elements and which is clearly introduced in that form solely to enable them to say of those who vote against a tax on fuel that they have voted against a tax on lollipops. There is no other reason.

I say with great respect to the Chief Secretary to the Treasury—I would say it with even greater respect if he were present—that it was fatuous of him to say that the matters were all jumbled together because the debate was due to begin at 7 o'clock tonight and last till 11.30. Unless he claims a degree of clairvoyance many weeks ago as to what the business of the House would be tonight, that clearly is not the reason.

The reason is a shoddy one. It is to enable the Government to try to score electoral points by misrepresenting the fact that people voting against the tax on fuel have no option but also to vote against the tax on lollipops. That does not do credit to the Government. If they were sincere in saying that they wanted by the imposition of taxation to make life more tolerable in our towns and countryside by reducing road congestion, they would not impose a tax which adversely affects people with much lower than the national average income, people in country districts who have to use a car or motor cycle to get to work because they have no other means of transport. What the Government would do in that case would be to put a tax on for example, towed caravans, which certainly cause congestion in towns and the countryside. No such tax has been imposed.

Do the Government realise the effect the tax will have not only on employment but on doctors, for instance? I have had written representations from doctors. Fuel consumption of 60 gallons a month is very modest for a doctor. That is what is consumed in a town practice, with some surrounding countryside, not a purely rural practice. The tax will mean an extra £36 a year for each doctor in the practice, totally unrecovered, because doctors are not registered for VAT.

The same goes for the hospital service. Patients in rural areas have to travel to and from out-patient appointments, and sometimes in-patient appointments as well. It applies to the whole realm of voluntary services which depend on cars. Very few, if any, are registered for VAT. To regard the car as a luxury is to go back to the day of the red flag, a different sort of red flag, but an equally inappropriate one.

The Chief Secretary did not sign this miserable order. It is as well to put on record that it is signed: Harold Wilson, Denis Healey, Two of the Lords Commissioners of Her Majesty's Treasury In other words, this measure stems from the Prime Minister and the Chancellor of the Exchequer, neither of whom thinks it worth while to show his nose in the House for one moment while this grossly harmful measure is, they hope, put through its affirmative procedure.

My hon. Friend the Member for Worthing (Mr. Higgins) has already pointed out that this measure will have an effect that even the Government probably do not intend in imposing value added tax on the whole realm of foodstuffs. Whether or not that is the case I have not my hon. Friend's vision to assert. If that is so, it is yet an additional reason for the Government to withdraw the order. If that is so, it will be interesting, when the matter goes to a Division, to learn how many hundreds of Labour hon. Members will troop into the Lobby to vote for it, quite unaware of what they are doing—namely, voting for value added tax right across the full spectrum of food. The previous Labour Government withdrew an ill-conceived order that set up, with many inappropriate details, the Agricultural Trading Board. Some of my hon. Friends will doubtless remember the occasion.

It is a little difficult to know who on the Government Front Bench is now in charge of this measure. It is clear that it is not either of the signatories. Neither is it the Chief Secretary, who introduced it. We do not know who will be winding up. Whoever it is, it would be interesting if he could intervene now to tell us whether he has discretion to withdraw the order if he is convinced by the arguments that have been put forward, or whether he has a steamroller instruction that whatever is said he is prohibited from withdrawing it, even though he must now realise that that is what he should do, because the Chief Secretary has vacated the Chamber and the two Lords Commissioners who signed it have not even shown up.

This is another example of the abuse of the statutory instruments procedure, against which I have protested on many occasions. Indeed, I have introduced a Bill to enable statutory instruments to be amended. I hope that this example of abuse will stimulate a few more of my colleagues. This is a matter that can work both ways. I hope that both sides of the House will tackle with enthusiasm the question of introducing an effective and workable procedure for amending statutory instruments. I ask all hon. Members to join us in voting against this measure if the Minister in charge lacks either the authority or the good sense to withdraw it.

9.54 p.m.

Mr. Peter Mills (Devon, West)

I welcome this chance to talk about the effect of VAT on petrol, and particularly that effect in rural areas. I have no hesitation in extending the argument that has been so well put by my hon. Friends. There will be a considerable burden on rural areas which will have an effect on rural life as a whole. It will have a considerably greater effect on those living in rural areas than on those living in our towns and cities.

I believe that the countryside is being taken for a ride by the Government. We have only to think of what they have done to the rural areas since they have been in power. First, we must consider rates. I shall be out of order if I continue any longer on that theme, but there has been an important effect on agriculture. The countryside now has to cope, amongst other things, with the burden of the imposition of VAT on petrol. This will affect the rural areas considerably more than the towns and cities.

The increased oil costs alone were sufficient to put a considerable burden on the rural areas. But now the Government are making it even worse. The increase proposed is serious and unwelcome. The effect on the rural areas has been noted and will continue to be noted by those who live there. They realise the Government's aim. The Government just do not care for rural areas at all, and it is obvious why. They do not get many votes there.

I am sorry that the hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) has left the Chamber. It is all very well for him to criticise the Government on behalf of the Liberals, of whom not one is present, but if not so many people had voted Liberal we should not have had the sort of damage which the Government are now inflicting on the rural areas.

It is all very well for the hon. Gentleman to say that the Conservative and Labour Parties make sweeping statements in opposition and change their tune in government. I point out to him that the Liberals, too, make sweeping statements —indeed, even more sweeping statements than we do—knowing very well that they will never have to put them into operation. It is a pity that he should come here and criticise Government and Opposition in this way.

As my hon. Friends have stated, one of the main problems is that of rural workers, and the effect of these measures on them will be considerable. Petrol is used on an ever-increasing scale in the rural areas in order to get to work. There are few buses and, certainly in the South-West, except for main lines, there are no trains to get to work. These people therefore have to use their own cars. Their costs will now be considerably increased and it was already an expensive business for them to get to work with petrol as the old price.

The situation is galling to those of us who work so hard to get a number of industries established in the rural towns. They need people to come in from the villages to work in the factories. But it will be increasingly difficult to do this with the ever-increasing cost of petrol and the order will not help.

The situation is quite different for those who live in our towns and cities. They do not understand what it costs a chap living in a village to get to work. He has to pay the total cost of running his own car. I hope that the workers in the villages will note the action of the Government and the bias they have against rural folk.

Another problem is the effect on elderly people, of whom we have a large number in the South-West. It is difficult for them to get to town. They have to use their cars. They live on fixed incomes and are finding it extremely difficult to cover their costs. Yet now they are being given an increased burden. The Government may say that they should stay where they are, but that is not fair.

Then there is the effect on village life as a whole. The cost of going anywhere will be even more expensive. We do not want the continual drift from the villages and the rural areas to the towns and cities. It is important to those who live in villages that village life should be maintained. But everything connected with village life will become much more expensive.

For example, one very essential service in village life is meals-on-wheels for elderly people. This will cost considerably more. The Government are always talking about their care for the elderly, but have they thought of the effect of this tax on the provision of meals on wheels for those living in villages?

The effect on rural garages must also be considered. These garages rely heavily on petrol sales from which they get a large part of their profits. Owners of quite a few of these garages have already told me that petrol sales have dropped considerably. These garages play an important part in rural life and must be enabled to remain in existence because they do all sorts of repairs, welding and other work which help to keep rural life going. I do not want the Government to underestimate the effect on rural garages.

There is also an effect on the holiday industry. Some people may say that this is a good thing and that it will reduce the number of cars, particularly perhaps in the South West. But I say to the Government and to those who feel that way that we in the South West rely heavily on the tourist industry, and because of the tax motoring will become even more expensive. Motorists pay enough tax and it seems that whatever Government are in power motorists are clobbered. The tax will have an unfortunate effect on the holiday industry.

I could talk about other things such as ice lollies, orange juice, pips and the rest. I feel strongly that the Government should seriously consider the effect of the order and the tax on rural life as a whole. Rural areas will not be helped by the tax. The Government may not be interested, but I am. This is not the sort of tax which will help rural life to continue and which will make things pleasant and easier for people in rural areas.

10.3 p.m.

Mr. Neil MacFarlane (Sutton and Cheam)

I associate myself with the remarks of my hon. Friends. I shall deal with a sector of society which has been greatly affected by the Chancellor's Budget Statement earlier this year—the small retailer and the small businessman, who have been affected by the introduction of 10 per cent. value added tax on foodstuffs within a price category below lop.

After listening to the Chancellor's statement many retailers asked me, "What do we do. Do we charge 10 per cent. on goods labelled 10p?" I said that I would ring the Treasury and then let them know. I made inquiries and the Department concerned was clearly dismayed by my inquiry. An hour or so later I received a rather unsatisfactory reply from the Department and a few days later I received a document, issued by Customs and Excise. It was Press Notice No. 305 which, not by the wildest stretch of optimism, could be commended for its clarity.

The document stated that the smallest coin was ½p—that was very observant. The notice pointed out that traders would not be able to put up the price of each item by exactly 10 per cent. The notice stated that some items would go up by more, some by less and some not at all, but that the average charge, allowing for the pattern of sales, should be 10 per cent.

I submit that this is not the case. This is not what constituents have told me. The Government and the Treasury must have a rethink quickly and drastically and must enter into discussion with the National Chamber of Trade. It will not have escaped the attention of hon. Members that it is impossible to apply value added tax at a rate of 10 per cent. on items below 10p.

If an extra ½p is levied on items below 5p then VAT is being applied at a rate of anything between 20 per cent. to 40 per cent. The law has still not been clarified. This issue has not been correctly prepared. Small shopkeepers throughout the country are adversely affected, particularly in their book-keeping on which they spend many hours a week. They have had extra work ever since the introduction of VAT last year. The repricing structure has proved complex.

Above all, their profit margins have been affected on a turnover of £100. The Treasury has not given a satisfactory answer on this. I hope that the Government will give urgent attention to the problem and will consult small retailing businesses. The Government have unleashed a problem upon this sector with which I hope the Minister will deal tonight. If he does not get into immediate contact with the National Chamber of Trade and Industry he will be underestimating the depth of feeling in the country.

10.7 p.m.

Mr. David Mitchell (Basingstoke)

Tonight we are asked to approve an order which imposes value added tax on some items of food. I am bound to say that this sticks in my gullet, probably more so than with some of my hon. Friends because during the recent election it was charged in my constituency that this was the intention of the Tory Party. I spent much of my time denying that scurrilous rumour. And so I feel a sense of surprise and ridicule at seeing the Labour Party introducing this order.

A number of my hon. Friends have spoken about the effect of the petrol tax and suggested that it would have been desirable to have the order split into two parts so that there could have been two votes. I would not want it to be thought that the food side is any less important than the petrol side. The yield from food will, I understand, be £125 million which will come from the pockets of housewives, children and pensioners. All of this will add to the cost of living.

I noted the words of the Chief Secretary in moving the order. He suggested that this was a tax not on essential foods but only upon luxury foods. What world is it in which he lives? This is an attack on old-age pensioners and on those with large families. Those are the people who rely on this type of food. Anyone who has been into a home for senior citizens knows that almost invariably the sort of pudding served up consists of ice cream with a fruit salad. Those who go into old-age pensioners' houses know that this is part of their staple diet. Ice cream is also a staple food of youngsters, certainly of mine and those of my constituents. It is not a luxury food. It is untrue to say that it is not a part of the everyday cost of living. The same is true of frozen yoghurt. Perhaps it was a luxury 10 years ago, but no one could call it that today.

This is particularly an attack on old-age pensioners because such people continually rely upon sweets and chocolates to give them energy. Many smoke, but many cannot afford to do so and suck chocolates or sweets. [Interruption.] If Labour Members scoff, they are out of touch with what happens. Anyone would think that a chocolate digestive biscuit had become a luxury. Increasingly, people are using potato powder to save on cooking expenses. This too is affected by the order.

Then there is the matter of petrol, to which several of my colleagues have referred. With the enormous increase in the cost of petrol that has been forced on the country by events in the Middle East, there could have been a case for reducing the tax on petrol. I would not support that case, although it has been suggested by several of my constituents. But there can be no case for deliberately increasing the tax on petrol, especially as the cost of petrol enters into so many other costs.

In my constituency there are many rural villages and doctors have to visit their patients by car. The extra tax means an added cost for them. The people who live in villages and go into towns to work will also have to face this extra cost.

Then there is the problem of small businesses. The small filling station is to be drawn into the net of VAT, with all the workload that goes with it. For these added reasons I view the order with considerable distaste.

Mr. Peter Viggers (Gosport)

Is my hon. Friend aware of the even more extreme case of taxi drivers, who are not registered for VAT and who are unable to claim back the additional petrol tax which they are now called upon to pay because they are limited by the restrictions of the Home Office, which controls taxi fares? That is an anomaly which appears to have been overlooked by the Government.

Mr. Mitchell

I am grateful to my hon. Friend for drawing attention to that anomaly. I hope that the Financial Secretary will take the opportunity tonight to clarify the position and confirm that it is not as my hon. Friend suggests. If it is, that is another reason for not passing the order.

I am sorry that the opportunity has not been taken to iron out a difficulty which has appeared in the working of the system. Many small businesses find it almost impossible to do the detailed accountancy work that is required in the accurate filling up of quarterly returns. The Government should have taken this opportunity to allow small businesses to pay an estimated amount of VAT quarterly and the full amount, with any adjustments that might be necessary, at the end of the year when they have their auditors in. There are many small businesses out in the sticks whose accountancy system consists of three spike files. It is almost impossible for them to assemble the figures and practically impossible for them to get their auditors to come in quarterly because they are overloaded with work.

I ask the Minister to consider the possibility of allowing an estimated return to be made at a figure with the concurrence of the auditors, with a final return being made at the time of the annual audit. If that opportunity had been seized tonight, the order might have been more sensible. I regret that the order stems neither from sense nor from promises made by the Labour Party during the election campaign.

10.15 p.m.

Mr. Michael Shersby (Uxbridge)

I strongly oppose the Government's decision to impose VAT on a range of foods—yes, foods!—which form an important and popular part of the British diet as enjoyed by most "ordinary families". To say that ice cream, frozen yoghurt and similar fresh and frozen products are not essential is not to live in a world of reality. It shows that the Government have no understanding of modern dietary practices followed by their constituents.

We also must consider the impost of VAT on chocolate biscuits. Do not the Government understand that these are extremely popular and a useful part of the diet of ordinary families, for whom the Chief Secretary and his colleagues feel they have such a monopoly of concern?

What about potato crisps, which are to bear the full rate of VAT? Many of my constituents find potato crisps a helpful, useful and convenient part of their diet. They eat them with salads and with other nutritious foods, but they will go up in price by 10 per cent.

We then have that other important group of manufactured non-alcoholic beverages—in simple language, orange and lemon squash. I wish to correct my hon. Friend the Member for Chertsey and Walton (Mr. Pattie) and assure him that those products are extremely nutritious. They are made of natural fruit juices, water and sugar so they give benefit by providing vitamins and energy and are enjoyed by millions of ordinary families. Children drink lemon squash and orange squash with their daily meals. The cost of these products has considerably increased in the past few years, but yet another twist is being given to the inflationary spiral of foodstuffs. It is no use Labour Members shaking their heads because they are foods—energy-giving products. There are many children today who still do not enjoy a balanced diet because of lack of nutritional foods. It is these products—fruit juices, squashes and the like—which provide a valuable safeguard against nutritional deficiencies.

What is objectionable about the order is that it reintroduces a tax—VAT—on an important group of foodstuffs which, until now, have been exempt from VAT. It certainly shows a complete lack of understanding of the basic elements of the modern diet enjoyed by ordinary families.

I am opposed to the imposition of VAT on sweets. I was talking to a delightful young lady this evening—

Mr. William Hamilton (Fife, Central)

Name her!

Mr. Shersby

I met her, not outside No. 11 Downing Street, but in my own home. The young lady's name, I am happy to say, is Lucinda Shersby. She recommended me—and I accept her recommendation—to oppose the imposition of VAT on sweets which, she said, would be highly inflationary to the Shersby family budget. As a parent, I can accept that solemn advice; and I assure the House that my daughter's recommendation was delivered as strongly as any advice given by any young lady outside No. 11 Downing Street.

I should like to say a few words about road fuel. I regard it as an absolute scandal—there is no other word for it—that the cost of road fuel is to be increased by 10 per cent. since this means that every road user will suffer. Many of my constituents who find it essential to use their cars to go to work, or visit relatives, or take children to school, or go shopping will face a substantial extra charge. I calculate that it will amount to an extra £20 per year for the average family with a small car. The charge will bear particularly heavily on nurses, teachers, local government officers—about whom we have been hearing so much recently—and many others.

But it will bear especially harshly on young families, because it is young families struggling to buy their homes on mortgages, to buy their first cars and to bring up their children who will find another £20 a year a very unwelcome addition to their family budgets. I cannot help wondering how many young couples who voted Labour at the General Election will be wishing tonight that they had not done so as they calculate their family budgets.

Petrol is an essential item in the family budget. I believe that there is a case for reducing the tax on road fuel—certainly not for increasing it.

I suggest that it is no business of the Chancellor of the Exchequer of the day, whoever he may be, to tell my constituents that the effect of the increased tax on road fuel will be … to reduce the pressure on our road system and to make life more tolerable in our towns and countryside."—[OFFiciAL REPORT, 26th March 1974; Vol. 871, c. 309.] I could assure the right hon. Gentleman, were he present to hear me, that many of my constituents find his Budget and his proposals, with their highly inflationary effect on every family, to be far more intolerable than any pressure that they may suffer on the roads.

For all those reasons, I shall oppose the order in the Division Lobby.

10.22 p.m.

The Solicitor-General (Mr. Peter Archer)

It may assist the House if I rise at this stage to offer a view on the matter of construction referred to by the right hon. Member for Crosby (Mr. Graham Page) and subsequently by the hon. Member for Tiverton (Mr. Maxwell-Hyslop). I am aware that time draws on, and I hope to be brief, but it would be an act of gross discourtesy to the right hon. Gentleman if I were not to make reference to his argument.

Perhaps the right hon. Gentleman will permit me to say that I believe that the House is indebted to him and to the Select Committee on Statutory Instruments for their scrutiny of this order, and the fact that I have to advise the House that in my view they have been led to a false conclusion in no way diminishes my admiration for their vigilance.

The effect of Section 38(2)(a) of the Interpretation Act on this order turns on two questions. The first, which is that discussed by the Select Committee and by the right hon. Member for Crosby, is whether the word "enactment" in subsection (2) includes an order.

Whether the word "enactment" in a particular statute includes subordinate legislation can be ascertained only from reading that statute taken as a whole. There may be indications in a particular statute that the word is used in a wider sense. But in the Interpretation Act the word occurs in only two other sections.

In section 11, there is a reference to an Act repealing an enactment. There, it seems clear that the word "enactment" is intended to refer to something contained in a statute.

In Section 35 it is provided: … any enactment may be cited by reference to the section or subsection of the Act in which the enactment is contained". There again, the word appears to refer to provisions contained in a statute.

Since the word is normally deemed to be used with the same meaning where-ever it occurs in the same statute, it would appear to have that meaning in Section 38. But, as the Committee points out, the question then arises whether the position is affected by the formula used in Article 2(a) of the present order and Article 2 of the 1973 order: … the Interpretation Act 1889 shall apply for the interpretation of this Order as it applies for the interpretation of an Act of Parliament". I should point out that what is in question is whether the order revoked—the 1973 order—is to be treated for the purpose of the section as an Act of Parliament. The matter is carried no further by providing in the 1974 order that it—the present order—is to be so treated. The 1973 order provides in Article 2 that it is to be treated in that way … for the interpretation of this Order". But what is in question is not the interpretation of that order, but its revocation, and of course Article 2 is revoked by the present order together with the rest of the 1973 order.

Had it been sought in the present order to provide that the 1973 order should be treated on revocation as though it were a statute, there is a clear and well-used formula which would have been available to the draftsman. He could have stated in the 1974 order that … the Interpretation Act 1889 shall apply for the interpretation of this Order as it applies for the interpretation of an Act of Parliament, and as if this Order and the Orders hereby revoked were acts of Parliament". The right hon. Gentleman did not do so. It follows that the 1973 order is not an enactment within the meaning of Section 38 (2) of the Interpretation Act. That appears to be the correct way of approaching the question.

Mr. Graham Page

Surely the common sense reading of Article 2(a), The Interpretation Act 1889 shall apply for the interpretation of this Order as it applies for the interpretation of an Act of Parliament", means that we are dealing with both orders as if they were Acts of Parliament and the Interpretation Act therefore applies in that way.

The Solicitor-General

I have a feeling that the House may become a little impatient if this develops into a long dialogue between the right hon. Gentleman and myself.

The argument that I intended to deploy is that what is in question is whether those words in the 1973 order have the effect which the right hon. Gentleman contends. The whole point is that the words in the 1973 order are revoked.

In honesty I should tell the right hon. Gentleman and the House that it would be possible to argue that the revocation of an order should be construed by analogy to the repeal of an enactment. I will not attempt to spell out that argument in greater detail. Those who do so might find themselves in difficulties. But it would be a bold Law Officer who expressed confidence that the courts would never take that view. I have no doubt that would be the view that the right hon. Member for Crosby would seek to deploy. I feel bound to advise the House that had the matter rested there it would not be free from doubt. I dealt with the matter fairly fully out of courtesy to the right hon. Gentleman and to the Committee.

Mr. Arthur Latham (Paddington)

I understand the argument, which may mean that there are two of us in the House in addition to the Solicitor-General who understand it. I do not think that we would want to press the technical point further.

However, is my hon. and learned Friend prepared to go on record, to help the Select Committee and the House in future, by agreeing that on another occasion when an order is laid with the intention of reinstating a position that was exempted in a previous order it would be more helpful to be explicit in the instrument and to state that which is to be read into the original enactment which a previous order had excluded? If this order had been explicit in that fashion this technical point about the Interpretation Act would not have arisen. If my hon. and learned Friend will go on record as saying that, it might be a guide to Departments in future and helpful to the House and the Select Committee on Statutory Instruments when considering these orders.

The Solicitor-General

I am sure that those concerned will bear in mind what has been said by my hon. Friend. But draftsmen are frequently criticised for the length and prolixity of the orders that they produce. If a draftsman goes out of his way to avoid using the long formula in an order because it is not necessary, I feel that the House would not want to criticise him.

If I may say so—perhaps this will answer the point made by my hon. Friend the Member for Paddington (Mr. Latham) —there is a much shorter way of dealing with the argument put forward by the right hon. Member for Crosby. I dealt with the specific point to which he directed attention out of courtesy to him and to the committee. But the second point, which somewhat curiously does not appear to have been discussed by the committee and was not mentioned by the right hon. Gentleman, turns on other words in Section 38(2). The effect envisaged by the right hon. Gentleman is to obtain unless the contrary intention appears". For that purpose we are entitled to look at the explanatory note, and this makes it clear that the order is intended to impose VAT—

Mr. Graham Page

It is well recognised that the explanatory note is nothing to do with the order. It states that at the top of the explanatory note.

The Solicitor-General

I had always understood the position to be that where any ambiguity is contended, it is possible to look at the explanatory note although it is not part of the order.

Mr. Higgins

I do not think that the House will accept what the hon. and learned Gentleman said. In any case, if the idea is to look at the intention, one should surely look at the intention which was unanimously expressed on both sides of the House that changes of the size being made here should not be made by statutory instrument.

The Solicitor-General

I think that the hon. Gentleman is referring to comments made in debate, which are not available to be looked at.

I think that I can again shorten this part of the argument, because there is a clear indication of an intention to the contrary. Article 4 of the order sets out a substituted form of words for Group 2 of the Schedule, and the proposed Item 1(b) is water comprised in the excepted items set out in Group 1. That indicates a clear intention that there should be items in Group 1, and not that Group 1 should be deleted altogether, otherwise the words in Article 4 would be utterly meaningless.

Mr. Higgins

If that were so, would not Group 2 become Group 1?

The Solicitor-General

That would make even greater nonsense of the words in Group 2. [Interruption.] If the hon. Member for Worthing (Mr. Higgins) ceases to mutter from a sedentary position, it might be possible to continue the dialogue.

The point I want to make is that the words as they appear in the revised Group 2 make it clear that there is an intention that there should be items set out in Group 1.

Mr. Higgins

There will be a Group 1. The Solicitor-General knows that if Group 1 is revoked, the second group becomes the first group in the order as it stands.

The Solicitor-General

That could not be the intention, because the words I have quoted are in the group to which the hon. Gentleman is referring.

This is a highly technical argument. I should be happy to continue to conduct the debate for as long as it is the wish of the House that I should do so, but I have set out what I consider to be the decisive argument in this matter. For those reasons, I advise the House that the draft order is effective for the purpose set out, and I do not think it would assist if I were to trespass further on the patience of the House to reiterate what I have already said.

10.32 p.m.

Mr. Michael Fidler (Bury and Radcliffe)

I am glad that the Chief Secretary has returned to adorn the Government Front Bench. I was afraid that even an attenuated debate lasting three and a half or four hours might prove beyond his physical capacity.

Now that the hon. Gentleman has returned to the Chamber I want to refer to something that he said during the debate on children's shoes and clothing when he was on this side of the House.

I hope that, in his infinite wisdom, the Chief Secretary will withdraw the order rather than put it to the test, as it will have to be, of being voted down, as I hope it will be, by the Opposition. I am sure that any right-thinking person who has had a chance to study the order will agree that a more muddled provision could not be devised. We have been entertained by the Solicitor-General elucidating the muddle in which we find ourselves, and I am sure that many hon. Members must be wondering what we shall do if, by mischance, the order is passed. If the order is passed, we shall have voted to put VAT on all foodstuffs, despite the explanation given by the Solicitor-General.

When challenged about the effect of the order on the cost of living, the Chief Secretary said that in respect of the lollipop group the effect would be 0.3 per cent. The hon. Gentleman was applying his figure of 0.3 per cent. to the whole range of the cost of living throughout the entire community. By chance, I have the census figures for 1971, which I think the hon. Gentleman will accept. They show that the number of marrieds in the community is 27 million, out of about 55 million, that the number of children under 4 years old is 4½ million, and that those between 5 and 14 years old total about 8½ million. That makes a total of 13 million children below the age of 14 who are the consumers of all these commodities that will have VAT applied to them if the order is passed.

The order is a typical example of inequality, since it seeks to collect tax not from the entire community, which is what income tax does, but from a very small section of the community which has the added burden of bringing up children—a burden which parents with older children or with no children do not have.

Thus we have a £125 million impost placed on those people who are most in need with their growing children. I remember the eloquent plea made by the Chief Secretary, when he sat on the Opposition benches, when the suggestion was made in this House that VAT should be applied to childrens shoes and clothing, and how eloquent he was in championing and expressing sympathy for the parents who have a burden—a lovable burden but nevertheless a financial burden—of bringing up their children, who are not wage earners and therefore cannot provide the money which the parents have to find in order to buy these things for their children.

If that principle is correct—I accept it, and I am glad that children's clothing continues to be exempt—surely that same principle should be applied in this case. It must be wrong to put so large an impost on one section of the community only. It may be that the Liberal spokesman, the hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel), has views about the addition of VAT to sweets and other things. But I would remind him that it cannot be the desire of the Government to see consumption reduced, because they have produced statistics to show that the addition of VAT will bring in £125 million. If it were their belief that this would reduce the consumption of these articles, they would not have produced a figure of £125 million as the yield.

When I come to the other part of the order dealing with petrol tax, the position is even worse.

Mr. Arthur Latham

Will the hon. Gentleman be kind enough tomorrow to read carefully the OFFICIAL REPORT? Whereas he has been arguing that the children's section is singled out, one of his hon. Friends has argued that the items referred to in this order are the staple diet of old-age pensioners, and another of his hon. Friends has been saying that each of these items is part of the necessary nutrition for a balanced diet for every member of the community.

Mr. Fidler

Perhaps the hon. Gentleman would care to look at these figures which I have in my possession. I should be glad to lend them to him. I was present throughout the debate and I heard the points made by my hon. Friends. The total population over the age of 65 is 7 million. I have already referred to a much larger number of children than 7 million. So if we included old-age pensioners over 65 who are not capable of eating as much as children do, it would still be a substantial tax on parents of young children.

I move on to the question of petrol. I find that in the statistics the number of households with cars totals just over 8 million, out of a total of 18 million households. The petrol side of this matter means an impost on half the community. Only half the community have cars. Obviously this tax will be paid by only half the community. It is sheer nonsense to say that the car is a luxury. Already it has been eloquently pleaded from this side of the House that the car is an essential form of transport, particularly outside the main urban centres. Even in the main urban centres there are hon. Members opposite—

Mrs. Elaine Kellett-Bowman (Lancaster)

There are, of course, many rural areas which have been very badly affected by the revamping by the Secretary of State for the Environment of the domestic rate order. These are precisely the households which will be adversely affected by the additional impost of VAT on petrol.

Mr. Fidler

I endorse entirely my hon. Friend's intervention, but it is a little out of order in connection with this order.

By placing his impost we are taxing an essential thing which is used by half the households in the country. We are putting an even greater impost unfairly on those who live in the rural areas. Even within the urban centres the use of the car for travel to and from work or for the carriage of goods will inevitably add to the cost of living. The collection of this extra VAT from only half of the community is quite unfair.

I appeal to the Chief Secretary to look again at what he has placed before us. It is a muddled order, the legality of which is in doubt and the legal explanation of which has held the House entranced but not enlightened. It places a burden in so far as essential foods, which sweets, ice cream, yoghurts and so on are, on only a part of the community It puts the whole burden of petrol tax again on only half the community. I appeal to the Chief Secretary to take this order back in order, if he wishes, to make sure that we return to a situation far more equal, and not divisive, as this order must be. If he does not withdraw it I appeal to my hon. Friends and to fair minded hon. Members on the Government side of the House to vote against it.

10.41 p.m.

Mr. Giles Shaw (Pudsey)

There have been two themes running through many of the contributions from Opposition Members. One is the effect on small businesses, whether one is examining the question of VAT on petrol or on confectionery; the other is the question of VAT on food, as a principle. Both those themes go together in the question of VAT on confectionery, soft drinks, fruit juices, ice creams and so on—the category which is so easily and inaccurately described by Labour Members as the "lollipop sector". Labour Members conveniently ignore the fact that about half of the volume produced by the confectionery industry is in chocolate and chocolate confectionery.

But it is the smaller businesses to which we attach great importance. We find it extremely difficult to accept that in this year, at this time, when many smaller businesses are facing significant and, indeed, frantic increases in rate demands, when they are having to contend with the increased costs of administering businesses—telephones, postage and the use of electricity, or, if they employ people, by the proposed increases in employers' contributions—the small shopkeeper in particular is now to be faced with the added cost of administering, collecting and accounting for VAT on a proportion or, in some cases, the entire amount of his turnover.

I inquired this morning of the Retail Confectioners Association and was informed that one member of its council had calculated that the increase in his overheads alone amounted to £60 a week. In dealing with the sale of low-priced items—such as items of confectionery traditionally are—the recovery of such an amount towards his business is almost impossible.

I wish hon. Members to be under no misapprehension that when it comes to products of this industry we are dealing fundamentally in small unit prices. My hon. Friend the Member for Sutton and Cheam (Mr. Macfarlane) referred to the difficulty of achieving a 10 per cent. VAT on small unit prices. The position with small shops is that we have the products of an industry being distributed in about 250,000 or 300,000 outlets. There is practically not a shop on which an hon. Member can call which does not stock one item of this category of products, and most shops stock a wide range.

In this case, small shops are being asked to handle very small-priced units and asked to recover a tax of 10 per cent. on those units. Furthermore, they are being asked by the Government, in view of the imposition of this tax with such rapidity, to recover this tax by a most haphazard method of pricing. They are being asked to impose a 25 per cent. or possibly a one-third or 40 per cent. increase in price on one article, with no price increase on another. Is that a contribution to the fair prices policy of Labour hon. Members? The consumer tries to find value for money in the products of this industry. The consumer's loyalty has been built up over many years because of the high standard of value. Is this a fair contribution to the consumer? It is not. It is a confusion born out of misapprehension.

That misapprehension is simply that the products of this industry can be pilloried by those in this House who wish to have an aura of sanctity. They are allocating some products to be known as inessential foods and setting at naught the fact that 95 per cent. of the population buy with great frequency the products of this industry. The point raised about which percentage of the population purchases should not be confused with the point about which percentage of the population happens to consume.

Mr. F. A. Burden (Gillingham)

Is it not extraordinary that cheese, which, after all, is an "after" for many older people, should now be subsidised, whereas ice cream, which is also a basic food, particularly for many young people, should now have a tax imposed upon it?

Mr. Shaw

I am grateful to my hon. Friend for drawing attention to that point. It is an addition to the list of peculiarities. The basic products of this industry come to a great extent from the third world—from the developing countries, the growers of nuts, fruit and cocoa beans. These are amongst the countries which right hon. and hon. Members opposite most desire to help. It is difficult to see how this measure will contribute to the development of the economies of those countries.

There is here a real confusion. For arbitrary reasons, a line has been drawn between essential foods because they happen to be foods which are eaten with a knife and fork and inessential foods because they happen to be conveniently packaged, low-priced and bought in vast quantities by most households. This is a wrong way of distributing taxation in this day and age.

I remind the House that the products of the confectionery industry account for 6½ per cent. of the total expenditure on food and that they occupy fourth place in the food price index. The levying of value added tax on this sector will have a significant effect on the food price index at a time when the Government are using subsidies to try to reduce the price of certain foods. This is an unnecessary and undesirable imposition and I urge my right hon. and hon. Friends to vote against it tonight.

10.47 p.m.

Mr. Maurice Macmillan (Farnham)

I listened, as I am sure the whole House did, with great—if not complete—fascination to the attempt of the Solicitor-General to refute the argument of my right hon. Friend the Member for Crosby (Mr. Page) about what the order does. Hon. Members should recollect, when they go into the Lobbies tonight, that it is at least arguable that if we approve the order we shall approve the taxing of all forms of food.

That argument should never have arisen. It arises only because of the form in which the Government have sought to increase taxation. Two totally different taxes are brought together. The House must vote for both or for none. There is a difference of opinion about the propriety of imposing these two taxes one with the other. The debate is a short one, held late at night. As my hon. Friend the Member for Worthing (Mr. Higgins) and other hon. Members have said, this is no way in which to seek the approval of the House to £275 million worth of extra taxation.

We all realise how views change with the taking of office. However, some changes are more abrupt than others. The Leader of the House once said that a sensible Government who wanted to restrain price rises would reduce the tax on petrol. The tax increases effected by the order are not sensible. They do not make political, economic or social sense. They certainly have nothing to do with common sense. The order even restores the anomaly which the Chief Secretary criticised in such scathing terms in 1972 by taxing potato crisps alone among the products of the potato.

At least the Chancellor did not pretend in his Budget debate speech that the tax was being imposed for the benefit of children's teeth. I agreed with a great deal of what was said by the hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) but it cannot be honestly argued, as he appeared to argue at one point, that the tax will reduce the amount of tooth decay resulting from eating sweets. No one could seriously put that before the House and expect to be believed. I may remind the Labour Members that it was one of their Governments that used to tax toothpaste at the luxury rate, and that it was a Conservative Government which twice reduced that tax.

In introducing his Budget Statement the Chancellor regarded the increase in VAT as balancing the zero rating of other items. The Chief Secretary took a somewhat broader view and saw the increase in VAT as balancing the subsidies on food generally. I make the total of subsidies so far about £220 million in a full year, as against a full-year yield of VAT on food and drink of £125 million. Those of my right hon. and hon. Friends who said that this was a charge on families were right. It is a charge on families, pensioners and all ordinary people. The Government Front Bench has a curious view of the life of ordinary families and what those families regard as necessary or unnecessary expenditure.

There has been an increase in general tax on drink of £100 million for beer. There is an extra £5 million in VAT in addition to that. There is also an additional £200 million on tobacco plus £10 million in VAT. That makes a total of over £300 million. Add to that the extra £125 million on food and drink under the proposal before us and we see an extra £425 million on items that every family in Britain regards as ordinary necessary expenditure in a modern country with a reasonable standard of living. It is sheer hypocrisy for the Government to suggest that they are taxing items which are less essential to ordinary people.

What does it mean anyway? It means a penny off a pint of milk and 2p a bottle on Ribena. I am grateful to my hon. Friend the Member for Chertsey and Walton (Mr. Pattie) for his even more telling point about orange juice. The 14 oz. loaf is subsidised, but not the 8 oz., 9 oz. or 10 oz. loaf, which the pensioner and those who have the misfortune to live alone buy much more frequently. There are more anomalies in this complex of legislation and proposals than in any other. I am glad that, unlike many shopkeepers, I shall not have to explain to pensioners why their little loaf is not subsidised, unlike the large family loaf.

I now turn to the effect of the order on shopkeepers and small businesses especially. Those who happen to have a turnover of less than £5,000 a year will be the hardest hit. They will have no input and there will be no possibility of any of the value added tax that they pay being offset. The same applies to the professional man whose fees do not amount to £5,000, unless he volunteers to register. That is a complicated and expensive matter as my hon. Friend the Member for Pudsey (Mr. Shaw) said. A good deal of administration is involved.

I took the trouble to talk to three village shopkeepers, putting them together as a composite figure. Their turnover was about £20,000 a year. Their overheads were about 10 per cent. of that turnover. Value added tax administration already accounts for 5 per cent. of their total overheads and the Government now propose to add more. Such shopkeepers are dealing, as my hon. Friend the Member for Sutton and Cheam (Mr. Macfarlane) said, in small items and small unit prices. That makes the administration problem more complex and more difficult.

These matters have had their effect on manufacturing industry, and especially on the confectionery trade, which has not found it possible to make any price adjustments. Over a period it is possible to make an adjustment in the size of a block of chocolate, for example, but that means the expensive re-equipping of moulds, which are items of precise accuracy. That means a further charge on industry.

Like my hon. Friend the Member for Worthing (Mr. Higgins) I am against taxing food. Now that my hon. Friends who attend the European Parliament have at last persuaded that Parliament to be against taxing food, or at least to be willing to accept the concept of zerorating food, the Government are weakening their hand, to say the least, by giving in and taxing some food.

The order will have the effect of imposing VAT on a sorry collection of items of food and drink, namely, ice creams, iced lollies, yoghurt—which I was always led to believe was very good for one—non-alcoholic beverages, bottled waters, potato crisps, roasted nuts, and so on.

The Chancellor of the Exchequer said that he thought that part of the object of VAT on petrol was to reduce the pressure on our road system. However, it is clear from what he said that he did not intend any part of the VAT on petrol and diesel oil to impinge upon industry. Presumably he meant that there should be less private motoring. He could have meant nothing else in that context. However, the Chief Secretary thought that the result would be many miles of happy motoring.

The hon. Member for Watford (Mr. Tuck) was critical. Perhaps I can entice him into our Lobby by reminding him that it was a Labour Government that increased petrol duty by 1s. 9d. in the old currency and 9p in the new. Over half of the 27½p that is represented by tax on a gallon of four-star petrol has been imposed by Labour Governments. As my hon. Friend the Member for Chippenham (Mr. Awdry) has said, no reduction in the volume of industry's use of fuel or its use of roads is intended or will happen, because they will get the VAT back in full.

So the whole burden of saving is to go on to the private motorist. I give one example. My hon. Friend the Member for Gosport (Mr. Viggers) referred to taxis. As I understand it, VAT is recoverable on taxi fares when the drivers operate as employees of a company, but not by owner-drivers. There is a minute saving in petrol, anyway, but the whole burden falls on the private motorist. Industry will simply suffer from higher administrative costs. The small shopkeeper will suffer especially.

Take the case of the composite village grocer I quoted. The Inland Revenue has agreed that 90 per cent. of the use of his car is chargeable to his business, because he uses it to deliver, but Customs and Excise will not assess petrol for VAT on a mileage basis. Yet it is easy to check on the milometer and to assess the average consumption of that type of car. But, no. He has to complete an invoice separately for every item he is going to claim for tax purposes. It will add greatly to the £60 a year he spends on VAT administration.

The Chancellor has done this without consultation with industry. The same problems will affect travellers and salesmen and designers in the textile trade, for example, who move from home to factory, then to another factory and home again. How are they to allocate their charges of VAT? Even the tax consultant sometimes has to move from client to client, especially in the country districts. He may be visiting farmers or even trying to help my village grocer.

My hon. Friend the Member for Torrington (Mr. Mills) and the hon. Member for Roxburgh, Selkirk and Peebles spoke of the difficulties of those travelling to and from work, especially in the countryside. They also pointed out how the tax impinges on those doing social work, on which so much depends in the countryside. Because this is an order, we cannot even move an amendment to try to exempt doctors, for example, or those who run the meals-on-wheels service, or those who use their cars to take patients to hospital. What about all the voluntary efforts on which, despite the Welfare State, we depend so much?

Again, what about those who use their cars at weekends? Do the Government think they are all rich men, with elegant, highly-furnished and decorated cottages in the country? What about those who use their cars to get to their caravans or chalets in the Isle of Sheppey? A great number of working men go out by car at the weekend. It is all right if one goes to Herne Bay, where there are good bus and train services, but the Isle of Sheppey is different. What about those who use their cars to escape on a Sunday from the industrial Midlands and North into the countryside. Hon and right hon. Gentlemen opposite make great play about people having free access to the countryside after working in towns. Yet now they seek to tax these people further for doing just that.

Mr. Charles Loughlin (Gloucestershire, West)

As all of the arguments the right hon. Member is advancing relate to the principle of VAT, do I now take it that the Opposition are opposed to VAT?

Mr. Macmillan

I am talking about raising the level of tax at the moment— a moment when the Prime Minister, just before the election, was suggesting that motorists should be subsidised because of the high cost of petrol and oil. This order raises the tax rate at a moment when those who can least afford it will have to pay most. The hon. Member for Roxburgh, Selkirk and Peebles suggested that there might be some form of offsetting benefit.

Consider motor vehicle duty. That raises £540 million at £25 a car. That is a heavy charge on those who use their cars only at weekends. The Minister has a lot of questions to answer. The Government have not justified bringing forward this composite order dealing with such large sums. The Minister has to justify, against the valid criticisms of my hon. Friends, the merits of the increased taxation. Has he made any estimate of the effect, if any, of this extra impost on company liquidity? As far as I can estimate, the payment of VAT by companies this year is: April, about £320 million; May, about £100 million; June, £150 million, July, £320 million to £350 million. It will go on month by month in a progression of, roughly, £100 million, £150 million, £350 million, the difference being in the impact on manufacturers and retailers. It is in July, when the impact of VAT is heavy, that corporation tax—£300 million worth of it—comes to be paid. Perhaps the Minister can tell us whether company liquidity ranks among those things that he has neglected to consider. I hope that we can have a slightly less legalistic and more politically justifiable explanation of the order than has so far been presented to us.

11.8 p.m.

The Financial Secretary to the Treasury (Dr. John Gilbert)

I do not know whether, in the 20 minutes left to me, I shall be able to deal with all the points raised. I shall attempt to do so and to clear up some of the muddle which clearly exists in the mind of the right hon. Member for Farnham (Mr. Macmillan) about some of the basic elements of VAT. He might do better to take some instructions from his hon. Friend the Member for Worthing (Mr. Higgins), who does know a little about it, although even he is apparently reduced these days to taking his economic instruction from Mr. Bernard Levin of The Times—which might account for various things he has said today.

The hon. Member raised three principal matters about the tax. He talked about the amount of tax we were seeking to deal with by the order. He questioned the inclusion of two disparate subjects in one order, and in this he was echoed by his hon. Friends. He also taxed us about dealing with these matters by order at all. I propose to deal with those questions one by one.

The hon. Gentleman read out a horrifying list of the amounts involved in the Budgets of the early 1960s and compared them with the amounts involved in the order. He failed to tell the House that there has been such a change in the value of money—a change that accelerated under the administration of which he was a member—that many of these comparisons are totally irrelevant. Another phenomenon has manifested itself in the last couple of years. Under the administration of which he was a member the size of the monetary and fiscal aggregates has expanded to such an extent that we are dealing with numbers that are of totally unprecedented proportions. When we think of an economy that has a net borrowing requirement of £4,250 million in one year and that had a balance of payments deficit long before the problems of the Middle East hit us of about £2,000 million a year, he has very little of which to complain.

The hon. Member for Worthing was joined by the hon. Members for Roxburgh, Selkirk and Peebles (Mr. Steel) and Tiverton (Mr. Maxwell-Hyslop) in complaining vigorously about the taking of these two matters together. I assure the hon. Gentlemen that their comments have been noted and will be borne in mind.

As to the question of dealing with these matters by the order, the hon. Member for Worthing pointed out, quite rightly, that in 1972 we divided the House to deny the then Chancellor the power to abolish zero rating by order. But what the hon. Member for Worthing failed to say was that his right hon. Friend the Member for Altrincham and Sale (Mr. Barber) brought that Division upon himself by repeatedly refusing across the Floor of the House to give assurances that his administration would not impose VAT on essential foodstuffs in the context of the harmonisation requirements that we saw coming in the European Community. That is what we were voting about on that occasion, and all hon. Members who were present in the House at that time well knew it.

Mr. Higgins

If the Financial Secretary will read HANSARD he will see that that is not the case. My right hon. Friend the Member for Altrincham and Sale (Mr. Barber) made absolutely clear that he would use the power only to make minor amendments and not to make changes of this order.

Dr. Gilbert

The hon. Gentleman is well aware of the context in which that Division took place. I repeat, it was as a result of his right hon. Friend's repeated refusal to give a categorical assurance that he would not remove zero rating on a whole range of foodstuffs, as is the pattern in all the countries of the European Community, as the hon. Gentleman well knows.

I will deal with some of the more useful contributions to the debate. The hon. Member for Sutton and Cheam (Mr. Macfarlane) complained of a lack of clarity in certain Customs and Excise documents. I assure him that I will have that matter looked at. If the hon. Gentleman wishes to send me written representations on the matter I shall gladly consider them.

The hon. Member for Basingstoke (Mr. Mitchell) asked whether it might be possible for small traders to make a return estimating their VAT liability on a quarterly basis. I shall be happy to look into that possibility, without giving any commitment.

Before I turn to the details of the order, I should deal briefly with the point raised by my hon. Friend the Member for Watford (Mr. Tuck) and echoed by the hon. Member for Chippenham (Mr. Awdry). I regret to have to say to my hon. Friend that I do not think he was paying the closest attention to my hon. Friend the Chief Secretary, who dealt thoroughly with the question whether or not we were setting a precedent by adding VAT to items that were already bearing Excise duty. This state of affairs was contemplated in the Finance Act of 1972, and the previous Government, quite rightly, in our view, as my hon. Friend said, applied such value added tax to alcoholic drinks and tobacco.

If my hon. Friend the Member for Watford is not satisfied, on philosophical grounds, that that is the right way to approach the matter—

Mr. Raphael Tuck

I am not.

Dr. Gilbert

—he is right to say that it is imposing a tax on a tax—all I can say is that my right hon. Friend the Chancellor had to make a decision as to the total contribution to tax resources which any one commodity should provide, and, if he did not do it in this way, he would have had to increase the tax in some other way, and, quite frankly, the result would have been the same. In fact, this way is administratively far more simple.

I turn now to the problems of taxi drivers. I am aware of the difficulties which the taxi trade is encountering not only in London but elsewhere. I realise also that taxis form a part of public transport, especially outside central London. I have received a deputation of taxi drivers to consider this whole problem with them, and I have had representations from several other quarters. At this stage, all I can say in this connection is that I am considering the representations, and I cannot take the matter further now.

Mr. Burden

Infamous.

Dr. Gilbert

The right hon. Member for Farnham asked some questions about taxi employees and owner-drivers. He wanted to know whether taxi driver employees paid value added tax and owner-drivers did not. I think I have his question the right way round.

Mr. Macmillan

I asked whether companies, as such, could set their inputs against the value added tax which they were charged, and taxi drivers individually could not.

Dr. Gilbert

The right hon. Gentleman is merely adding to his own confusion. The situation is perfectly clear. Either an owner-driver is registered because his turnover is more than £5,000 a year, or, if he has less than £5,000 a year, he may choose voluntarily to register; and in either of those circumstances he may deduct his inputs. If he chooses—it is entirely open to him—not to register though he has a turnover of less than £5,000 a year, he is exempt and he cannot deduct his inputs.

For the taxi driver who is an employee, the position is that the owner would in most cases have a turnover of more than £5,000 a year and therefore be able to deduct the inputs, but no impact whatever would fall on the employee.

Mr. Burden

Does not the hon. Gentleman realise that many taxi drivers in rural areas have turnover of less than £5,000, or even less than £4,000 a year? Why, then, should they not be able to recover the VAT impost which is put upon them?

Dr. Gilbert

I trust that the hon. Gentleman addressed that question to his right hon. and hon. Friends when they introduced the value added tax on taxis. This Government are at least prepared to discuss the matter with the taxi drivers, which is more than his right hon. and hon. Friends were prepared to do. We are doing precisely that.

The right hon. Member for Farnham again asked about the impact of this increase in VAT on company liquidity. He will recall that it was one of the great theme songs of his hon. Friend the Member for Worthing, who understands the tax, that with the exception of the small minority of companies which were net reclaimers of tax, the imposition of tax added to companies' liquidity. Therefore, an increase in it will add to it even further.

Getting away from these smaller questions, I turn to the problems of rural transport. Here, we recognise the force of feeling among Opposition Members, and the Government are not unaware or unsympathetic to the problems of those living in rural areas where public transport systems are in an unfortunately high state of decay.

I pay tribute to the very forceful speech of the hon. Member for Devon, West (Mr. Mills) and to the thoughtful one of the hon. Member for Roxburgh, Selkirk and Peebles. I agree with a great deal of what they said about the difficulties facing people living in rural areas. Some of the suggestions of the hon. Member for Roxburgh, Selkirk and Peebles were very thoughtful ones, but he will recognise that the problem is a very complex one to which neither side of the House has proposed a satisfactory solution.

There is a chicken-and-egg situation here, and one can have two views about it. A car has become a necessity with the withering away of public transport systems. But it is also true that the arrival of the car in rural areas has contributed to the withering away of the public transport systems. The effect has been that the better-off members of the community who used to use public transport do not use it regularly and now use their cars. Revenues, profits and receipts have fallen, and therefore there is less public transport available for the less well-off members of the community. This is a matter with which we are all familiar.

It is the Government's view that the real way to deal with the matter is to assist in the flexible development of those rural transport services. We cannot, unfortunately, zero rate or exempt people living in rural areas from the impact of VAT on petrol. We cannot, for example, give them unlimited free petrol, because then they could be said to be having free joy rides in addition to their essential motoring at the expense of the general body of taxpayers. If we do not give them unlimited free petrol, we have to introduce some sort of rationing system, and then there will be questions arising such as the criteria upon which rations should be allocated, whether it should be done on the basis of the distance that a person lives from a main centre, whether petrol should be given only to cover essential journeys, who would police such a system, and so on. What about those for whom public transport is available, although it runs only at inconvenient times? Should they be given a ration of subsidised petrol? All such questions confirm the complexity of the problems facing anyone trying to provide some sort of relief in this way for people suffering from debilitated public transport systems in rural areas.

Mr. David Steel

Surely none of these complexities applies to the suggestion that the vehicle excise tax itself could be varied regionally.

Dr. Gilbert

There are enormous problems attached to regional variation. I recognise that it is a suggestion made in good faith by the hon. Gentleman, but there are enormous problems about where a car is kept. It would lead to a great many people claiming to register their cars in areas which qualified for preferential duty when they kept them in quite different areas. Such a system would be extremely difficult to police.

I turn to the other main theme of the debate—the desirability of various foodstuffs not being retaxed by the order.

The tenderness of various Opposition spokesmen towards the British diet and the predeliction for confectionery, ice cream and soft drinks has been extremely touching, and right hon. and hon. Members opposite are not alone in the views that they hold. I have heard it said that chocolate biscuits are a highly nutritious low-priced foodstuff. I have heard it said that confectionery forms about 2¼ per cent. of the average United Kingdom diet, but in nutritional terms is primarily an energy food contributing on average nearly 4½ per cent. of the daily intake of calories. I have heard it said that potato crisps are a source of protein, and are therefore of considerable value.

I should merely point out to hon. Members that the first quotation came from the Cocoa, Chocolate and Confectionery Alliance, the second from the Cake and Biscuit Alliance, and the third from the Imperial Tobacco Group Ltd.

Mr. Giles Shaw

Is the hon. Gentleman suggesting that those statements are in some way fallacious?

Dr. Gilbert

I suggest forcefully to the lion. Gentleman that their value should be borne in mind in the context of what I am now about to quote to him which will be a little less to his taste. Sticky sweets and soft drinks are the main cause of tooth decay. It is interesting that hon. Gentlemen opposite should find this funny. The decision that confectionery and soft drinks should be zero-rated with the introduction of value added tax has dismayed the dental profession. The right hon. Member for Farnham stood at the Dispatch Box a few minutes ago and said that no one in his right mind would believe that making soft drinks, ice cream and sweets cheaper would affect dental health. That quotation came from the British Dental Association. I will give him another to put in his pipe and smoke. These are quotations from the time that these foodstuffs were zero-rated in last year's Budget.

Mr. Shaw

Will the hon. Gentleman give way?

Dr. Gilbert

No.

Mr. Shaw

rose—

Dr. Gilbert

I am not giving way.

Mr. Shaw

rose—

Hon. Members

Give way.

Dr. Gilbert

No, I am not giving way to the hon. Gentleman. The Budgetary encouragement of the consumption of confectionery, sweet food and soft drinks was not a deliberate attack on the dental health of the public. Yet this is the effect. That was said at the time of last year's Budget by the British Dental Health Foundation. So much for the argument by the right hon. Member for Farnham.

Mr. Shaw

rose—

Dr. Gilbert

I have given way once. The hon. Gentleman has had his go.

Mr. Fidler

May I ask whether your calculations are based on reduced consumption or on payment of the tax at a continuing level?

Dr. Gilbert

I do not think that Mr. Deputy Speaker has made any calculations. [Interruption.] Right hon. and hon.

Gentlemen should listen. I said that I did not think that Mr. Deputy Speaker had made any calculations. I suggest that right hon. and hon. Gentlemen should listen more carefully.

It is clear that the imposition of a tax of this kind should, and I hope will, cause a reduction in the consumption of these items. Presumably that is why right hon. and hon. Gentlemen opposite are squealing so much about it. If it did not have that effect it would not have brought so much noise from them.

At its conception value added tax was presented to the House and to the country as a comprehensive tax. By the time we had got from conception to parturition it had ceased to be a comprehensive tax and had become a broadly based tax which is a different thing indeed. All mention of freedom from anomalies had disappeared. It is a fact that no tax that is not comprehensive can be free from anomalies. As my hon. Friend the Chief Secretary pointed out in his opening speech, there is only one way to get a tax that is free from anomalies and that is to tax everything. In our view that is not the way to do it. It was the late Sir Gerald Nabarro's way and it is the Common Market way. To their credit, it was not the way of the previous Government. In this respect we endorse the approach that they took—

It being half-past Eleven o'clock, Mr. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted business)

The House divided: Ayes 282, Noes 269.

Division No. 16.]	AYES	[11.30 p.m.
Abse, Leo	Bradley, Tom	Cronin, John
Allaun, Frank	Broughton, Sir Alfred	Crosland, Rt. Hn. Anthony
Archer, Peter (Warley, West)	Brown, Bob(Newcastle upon Tyne,W.)	Cryer, G. R.
Armstrong, Ernest	Brown, Hugh D. (Glasgow, Provan)	Cunningham, G.(Islington,S&F'sb'ry)
Ashley, Jack	Brown, Ronald (H'kney,S.& Sh'ditch)	Cunningham, Dr. John A. (Whiteh'v'n)
Ashton, Joe	Buchan, Norman	Dalyell, Tam
Atkins, Ronald (Preston, N.)	Callaghan, Jim (M'dd'ton & Pr'wich)	Davidson, Arthur
Atkinson, Norman	Campbell, Ian	Davies, Bryan (Enfield, N.)
Bagier, Gordon A. T.	Cant, R. B.	Davies, Denzil (Llanelli)
Barnett, Guy (Greenwich)	Carmichael, Neil	Davies, Ifor (Gower)
Barnett, Joel (Heywood & Royton)	Carter, Ray	Davis, Clinton, (Hackney, C.)
Bates, Alf	Carter-Jones, Lewis	Deakins, Eric
Baxter, William	Castle, Rt. Hn. Barbara	Dean, Joseph (Leeds, W.)
Benn, Rt. Hn. Anthony Wedgwood	Clemitson, Ivor	de Freitas, Rt. Hn. Sir Geoffrey
Bennett, Andrew F. (Stockport, N.)	Cocks, Michael	Delargy, Hugh
Bidwell, Sydney	Cohen, Stanley	Dell, Rt. Hn. Edmund
Bishop, E. S.	Coleman, Donald	Doig, Peter
Blenkinsop, Arthur	Colquhoun, Mrs. M. N.	Dormand, J. D.
Boardman, H. (Leigh)	Concannon, J. D.	Douglas-Mann, Bruce
Booth, Albert	Conlan, Bernard	Duffy, A. E. P.
Boothroyd, Miss Betty	Cook, Robert F. (Edinburgh, C.)	Dunn, James A.
Bottomley, Rt. Hn. Arthur	Craigen, J. M. (G'gow, Maryhill)	Dunnett, Jack
Boyden, James (Bishop Auckland)	Crawshaw, Richard	Dunwoody, Mrs. Gwyneth
Eadie, Alex	Lamond, James	Richardson, Miss Jo
Edelman, Maurice	Latham, Arthur (CityofW'minsteP'ton)	Roberts, Albert (Normanton)
Edge, Geoff	Lawson, George (Motherwell&Wishaw)	Roberts, Gwilym (Cannock)
Edwards, Robert (W'hampton, S.E.)	Leadbitter, Ted	Roderick, Caenwyn E.
Ellis, John (Brigg & Scunthorpe)	Lee, John	Rodgers, George (Chorley)
Ellis, Tom (Wrexham)	Lestor, Miss Joan (Eton & Slough)	Rodgers, William (Teesside,St'[...])
English, Michael	Lever, Rt. Hn. Harold	Rooker, J. W.
Ennals, David	Lewis, Arthur (Newham, N.)	Roper, John
Evans, Fred (Caerphilly)	Lewis, Ron (Carlisle)	Rose, Paul B.
Evans, loan (Aberdare)	Lipton, Marcus	Ross, Rt. Hn. William (Kilmarnock)
Evans, John (Newton)	Lomas, Kenneth	Rowlands, Edward
Ewing, Harry (St'ling,F'kirk&G'm'th)	Loughlin, Charles	Sandelson, Neville
Faulds, Andrew	Loyden, Eddie	Sedgemore, Bryan
Fernyhough, Rt. Hn. E.	Lyon, Alexander W. (York)	Selby, Harry
Fitch, Alan (Wigan)	Lyons, Edward (Bradford, W.)	Shaw, Arnold (Redbridge, Ilford, S.)
Fitt, Gerard (Belfast, W.)	Mabon, Dr. J.Dickson	Sheldon, Robert (Ashton-under-Lyne)
Flannery, Martin	McCartney, Hugh	Shore, Rt. Hn. Peter(S'pney&P'plar)
Fletcher, Ted (Darlington)	McElhone, Frank	Short, Mrs. Renée (W'hamp'n,N.E.)
Foot, Michael, Rt. Hn.	MacFarquhar, Roderick	Silkin, Rt. Hn. John (L'sham,D'ford)
Ford, Ben	McGuire, Michael	Silkin, Rt. Hn. S. C. (S'hwark,Dulwich)
Forrester, John	Mackenzie, Gregor	Sillars, James
Fowler, Gerry (The Wrekin)	MacLennan, Robert	Silverman, Julius
Fraser, John (Lambeth, Norwood)	McMillan, Tom (Glasgow, C.)	Skinner, Dennis
Freeson, Reginald	McNamara, Kevin	Small, William
Galpern, Sir Myer	Madden, M. 0. F.	Smith, John (Lanarkshire, N.)
Garrett, John (Norwich,S.)	Magee, Bryan	Snape, Peter
Garrett, W. E. (Wallsend)	Mahon, Simon	Spriggs, Leslie
George, Bruce	Mallalieu, J. P. W.	Stallard, A. W.
Gilbert, Dr. John	Marks, Kenneth	Stewart, Rt. Hn. M. (H'sth,Fulh'm)
Ginsburg, David	Marquand, David	Stoddart, David (Swindon)
Gourlay, Harry	Marshall, Dr. Edmund (Goole)	Stonehouse, Rt. Hn. John
Graham, Ted	Mason, Rt. Hn. Roy	Stott, Roger
Grant, George (Morpeth)	Mayhew, Christopher(G'wh,W'wch,E)	Strauss, Rt. Hn. G. R.
Grant, John (Islington, C.)	Meacher, Michael	Summerskill, Hn. Dr. Shirley
Griffiths, Eddie (Sheffield, Brightside)	Mellish, Rt. Hn. Robert	Swain, Thomas
Hamilton, James (Bothwell)	Mikardo, Ian	Taverne, Dick
Hamilton, William (Fife, C.)	Millan, Bruce	Thomas, Jeffrey (Abertillery)
Hamling, William	Miller, Dr. M. S. (E. Kilbride)	Thorne, Stan (Preston, S.)
Hardy, Peter	Mitchell, R. C. (S'hampton, lichen)	Tierney, Sydney
Harper, Joseph	Molloy, William	Tinn, James
Harrison, Walter (Wakefield)	Moonman, Eric	Tomlinson, John
Hattersley, Roy	Morris, Alfred (Wythenshawe)	Tomney, Frank
Hatton, Frank	Morris, Charles R. (Openshaw)	Torney, Tom
Heffer, Eric S.	Morris, Rt. Hn. John (Aberavon)	Tuck, Raphael
Hooley, Frank	Moyle, Roland	Urwin, T. W.
Horam, John	Mulley, Rt. Hn. Frederick	Varley, Rt. Hn. Eric G.
Howell, Denis (B'ham, Small Heath)	Murray, Ronald King	Wainwright, Edwin (Dearne Valley)
Huckfleld, Leslie	Newens, Stanley (Harlow)	Walden, Brian (B'm'ham, Ladywood)
Hughes, Rt. Hn. Ctedwyn (Anglesey)	Oakes, Gordon	Walker, Harold (Doncaster)
Hughes, Mark (Durham)	Ogden, Eric	Walker, Terry (Kingswood)
Hughes, Robert (Aberdeen, North)	O'Halloran, Michael	Watkins, David
Hughes, Roy (Newport)	O'Malley, Brian	Weitzman, David
Hunter, Adam	Orbach, Maurice	Wellbeloved, James
Irvine, Rt. Hn. Sir A. (L'p'l,EdgeHill)	Orme, Stanley	White, James
Irving, Rt. Hn. Sydney (Dartford)	Ovenden, John	Whitehead, Phillip
Jackson, Colin	Owen, Dr. David	Whitlock, William
Janner, Greville	Padley, Walter	Willey, Rt. Hn. Frederick
Jenkins, Hugh (W'worth, Putney)	Palmer, Arthur	Williams, Alan (Swansea, W.)
John, Brynmor	Park, George (Coventry, N.E.)	Williams, Alan Lee (Hvrng, Hchurch)
Johnson, James (K'ston uponHull,W.)	Parker, John (Dagenham)	Williams, Rt. Hn. Shirley(H'f'd&St'ge)
Johnson, Walter (Derby, S.)	Parry, Robert	Williams, W. T. (Warrington)
Jones, Barry (Flint, E.)	Pavitt, Laurle	Wilson, Alexander (Hamilton)
Jones, Dan (Burnley)	Pendry, Tom	Wilson, William (Coventry, S.E.)
Jones, Gwynoro (Carmarthen)	Perry, Ernest G.	Wise, Mrs. Audrey
Jones, Alec (Rhondda)	Phipps, Dr. Colin	Woodall, Alec
Judd, Frank	Prentice, Rt. Hn. Reg	Woof, Robert
Kaufman, Gerald	Prescott, John	Wrigglesworth, Ian
Kelley, Richard	Price, Christopher (Lewisham, W.)	Young, David (Bolton, E.)
Kerr, Russell	Price, William (Rugby)
Kilroy-Silk, Robert	Radice, Giles	TELLERS FOR THE AYES
Kinnock, Neil	Rees, Rt. Hn. Merlyn (Leeds, S.)	Mr. Thomas Cox and
Lambie, David	Rhodes, Geoffrey	Mr. John Golding.
Lamborn, Harry
NOES
Adley, Robert	Banks, Robert	Body, Richard
Aitken, Jonathan	Beith, A. J.	Boscawen, Hon. Robert
Allason, James (Hemel Hempstead)	Bennett, Dr. Reginald (Fareham)	Boyson, Dr. Rhodes (Brent, N.)
Amery, Rt. Hn. Julian	Benyon, W.	Braine, Sir Bernard
Ancram, M.	Berry, Hon. Anthony	Bray, Ronald
Archer, Jeffrey (Louth)	Biffen, John	Brittan, Leon
Atkins, Rt. Hn. Humphrey (Spelthorne)	Biggs-Davison, John	Brocklebank-Fowler,Christopher
Awdry, Daniel	Blaker, Peter	Bruce-Gardyne, J.
Bainiel, Rt. Hn. Lord	Boardman, Tom (Leicester, S.)	Bryan,Sir Paul

Buchanan-Smith, Alick	Howe, Rt.Hn. Sir Geoffrey(Surrey,E.)	Price, David (Eastleigh)
Budgen, Nick	Howell, David (Guildford)	Pym, Rt. Hn. Francis
Balmer, Esmond	Howell, Ralph (Norfolk, North)	Quennell, Miss J. M.
Burden, F. A.	Howells, Geraint (Cardigan)	Raison, Timothy
Butler, Adam (Bosworth)	Hunt, John	Rathbone, Tim
Carlisle, Mark	Hurd, Douglas	Rawlinson, Rt. Hn. Sir Peter
Carr, Rt. Hn. Robert	Iremonger, T. L.	Redmond, Robert
Chalker, Mrs. Lynda	Irvine, Bryant Godman (Rye)	Rees, Peter (Dover & Deal)
Channon, Paul	James, David	Rees-Davies, W. R.
Churchill, W. S.	Jessel, Toby	Reid, George
Clark, A. K. M. (Plymouth, Sutton)	Johnson Smith, G. (E. Grinstead)	Renton, Rt. Hn. SirDavid(H't'gd'ns're)
Clark, William (Croydon, S.)	Johnston, Russell (Inverness)	Renton, R. T. (Mid-Sussex)
Clarke, Kenneth (Rushcliffe)	Jones, Arthur (Daventry)	Ridley, Hn. Nicholas
Cockcroft, John	Jopling, Michael	Ridsdale, Julian
Cooke, Robert (Bristol, W.)	Joseph, Rt. Hn. Sir Keith	Rifkind, Malcolm
Cope, John	Kaberry, Sir Donald	Rippon, Rt. Hn. Geoffrey
Cordle, John	Kellett Bowman, Mrs. Elaine	Roberts, Michael (Cardiff, N.-W.)
Cormack, Patrick	Kimball, Marcus	Roberts, Wyn (Conway)
Corrie, John	King, Evelyn (Dorset, S.)	Ross, Stephen (Isle of Wight)
Costain, A. P.	King, Tom (Bridgwater)	Ross, Wm. (Londonderry)
Critchley, Julian	Kirk, Peter	Rossi, Hugh (Hornsey)
Crouch, David	Knight, Mrs. Jill	Sainsbury, Tim
Crowder, F. P.	Knox, David	St. John-Stevas, Norman
Davies, Rt. Hn. John (Knutsford)	Lamont, Norman	Scott-Hopkins, James
d'Avigdor-Goldsmid, Maj.-Gen. James	Lane, David	Shaw, Giles (Pudsey)
Deedes, Rt. Hn. W. F.	Langford-Holt, Sir John	Shaw, Michael (Scarborough)
Dixon, Piers	Latham, Michael (Melton)	Shelton, William (L'mb'th,Streath'm)
Dodds-Parker, Sir Douglas	Lawrence, Ivan	Shersby, Michael
Dodsworth, Geoffrey	Lawson, Nigel (Blaby)	Silvesler, Fred
Drayson, Burnaby	Le Marchant, Spencer	Sims, Roger
du Cann, Rt. Hn. Edward	Lester, John (Beeston)	Sinclair, Sir George
Durant, Tony	Lewis, Kenneth (Rtland & Stmford)	Skeet, T. H. H.
Dykes, Hugh	Lloyd, Ian (Havant & Waterloo)	Smith, Cyril (Rochdale)
Eden, Rt. Hn. Sir John	Loveridge, John	Smith, Dudley (W'wick & L'm'ngton)
Edwards, Nicholas (Pembroke)	Luce, Richard	Spence, John
Elliott, Sir Robert	MacArthur, Ian	Spicer, Jim (Dorset, W.)
Ewing, Mrs. Winifred (Moray&Nairn)	MacCormack, Iain	Spicer, Michael (Worcestershire, S.)
Eyre, Reginald	McCrindle, R. A.	Sproat, Iain
Fairgrieve, Russell	McCusker, H.	Stainton, Keith
Farr, John	Macfarlane, Neil	Stanbrook, Ivor
Fell, Anthony	MacGregor, John	Stanley, John
Fenner, Mrs. Peggy	McLaren, Martin	Steel, David
Fidler, Michael	Macmillan, Rt. Hn. M. (Farnham)	Steen, Anthony (L'pool, Wavertree)
Finsberg, Geoffrey	McNair-Wilson, Michael (Newbury)	Stewart, Donald (Western Isles)
Fisher, Sir Nigel	McNair-Wilson, Patrick (New Forest)	Stewart, Ian (Hitchin)
Fletcher-Cooke, Charles	Marshall, Michael (Arundel)	Stodart, Rt. Hn. A. (Edinburgh, W.)
Fookes, Miss Janet	Marten, Neil	Stokes, John
Fowler, Norman (Sutton Coldfield)	Mather, Carol	Stradling Thomas, J.
Fox, Marcus	Mawby, Ray	Taylor, Robert (Croydon, N.W.)
Freud, Clement	Maxwell-Hyslop, R. J.	Tebbit, Norman
Galbraith, Hn. T. G. D.	Mayhew, Patrick(RoyalT'bridgeWells)	Temple-Morris, Peter
Gardiner, George (Reigate&Banstead)	Meyer, Sir Anthony	Thatcher, Rt. Hn. Mrs. Margaret
Gardner, Edward (S. Fylde)	Miller, Hal (B'grove & R'ditch)	Thomas, D. E. (Merioneth)
Gibson-Watt, Rt. Hon. David	Mills, Peter	Townsend, C. D.
Gilmour, Sir John (Fife, E.)	Miscampbell, Norman	Tugendhat, Christopher
Godber, Rt. Hn. Joseph	Mitchell, David (Basingstoke)	Tyler, Paul
Goodhew, Victor	Moate, Roger	van Straubenzee, W. R.
Goodlad, A.	Money, Ernle	Vaughan, Dr. Gerard
Gow, Ian (Eastbourne)	Monro, Hector	Viggers, Peter
Gower, Sir Raymond (Barry)	Moore, J. E. M. (Croydon, C.)	Waddington, David
Gray, Hamish	More, Jasper (Ludlow)	Wainwright, Richard (Colne Valley)
Grieve, Percy	Morgan, Geraint	Wakeham, John
Griffiths, Eldon (Bury St. Edmunds)	Morgan Giles, Rear-Adm.	Walder, David (Clitheroe)
Grimond, Rt. Hn. J.	Morris, Michael (Northampton, S.)	Walker-Smith, Rt. Hn. Sir Derek
Grist, Ian	Morrison, Charles (Devizes)	Wall, Patrick
Grylls, Michael	Morrison, Peter (City of Chester)	Walters, Dennis
Hall-Davis, A. G. F.	Neave, Alrey	Warren, Kenneth
Hamilton, Michael (Salisbury)	Neubert, Michael	Watt, Hamish
Hampson, Dr. Keith	Newton, Tony (Braintree)	Weatherill, Bernard
Hannam, John	Nicholls, Sir Harmar	Wells, John
Harrison, Col. Sir Harwood (Eye)	Normanton, Tom	Wiggin, Jerry
Hastings, Stephen	Nott, John	Wigley, Dafydd (Caernarvon)
Havers, Sir Michael	Onslow, Cranley	Winstanley, Dr. Michael
Hayhoe, Barney	Oppenheim, Mrs. Sally	Winterton, Nicholas
Henderson, Douglas (Ab'rd'nsh're,E)	Osborn, John	Wood, Rt. Hn. Richard
Henderson, Barry(Dunbartonshire,E.)	Page, Rt. Hn. Graham (Crosby)	Woodhouse, Hn. Christopher
Heseltine, Michael	Page, John (Harrow, W.)	Worsley, Sir Marcus
Higgins, Terence	Pardoe, John	Young, Sir George (Ealing, Acton)
Hill, James A.	Parkinson, Cecil (Enfield, W.)
Holland, Philip	Pattie, Geoffrey	TELLERS FOR THE NOES:
Hooson, Emlyn	Percival, Ian	Mr. Walter Clegg and
Hordern, Peter	Pink, R. Bonner	Mr. Paul Hawkins.

Question accordingly agreed to.

Resoved

That the Value Added Tax (General) (No. 1) Order 1974 (S.I., 1974, No. 542), a copy of which was laid before this House on 26th March, be approved.