FINANCE (No. 2) BILL (Hansard, 16 July 1975)

HC Deb 16 July 1975 vol 895 cc1529-669 1529

§ As amended (in the Committee and in the Standing Committee), considered.

§ 4.32 p.m.

§ Sir Geoffrey Howe (Surrey, East)
On a point of order, Mr. Deputy Speaker. I have given notice to the Chair as well as to Treasury Ministers. My point of order concerns the rather remarkable way in which the Government seek to handle changes which they intend to make in the coverage of the higher rate of value added tax.
You will recollect, Mr. Deputy Speaker, that the Finance Bill, as originally introduced, proposed under Clause 17 and Schedule 7 to impose a 25 per cent. rate of VAT on a wide range of goods, and that that rate should take effect from 1st May. That rate has been charged since then on those goods originally identified by virtue of the Provisional Collection of Taxes Act 1968. Many debates on this subject took place in Standing Committee and many amendments were moved. For example, there were amendments to remove from the proposed coverage of the higher rate of tax such things as navigational equipment and safety equipment for the marine and aviation industries.
The Government gave undertakings to consider many of the points that were raised. Therefore, one would expect the House to have the opportunity of resolving what should or should not be done. How far have the Government met their undertakings by providing the opportunity of considering amendments moved on Report? On Monday and again today the Financial Secretary to the Treasury, in answer to his hon. Friend the Member for Burnley (Mr. Jones), indicated a different way of proceeding. What the Government propose to do is to propose no change in the Finance Bill on Report but to make use of a statutory instrument to be made under Clause 17 of the Bill as it now stands, to take effect from 11th August. From that date onwards, in so far as the Government want to exempt certain goods from the higher rate of VAT, the statutory instrument will be effective. The higher rate will continue to be charged from now until then.
1530 The effect of that procedure will be to leave the trade in a state of limbo in goods which will be dealt with in this way from the time any announcement is made until 11th August. More important from the point of view of the House, this procedure will deprive the House of the opportunity of considering the Government's amendments and of voting upon them. We shall be able to consider the matter only on a negative resolution procedure after the recess.
I understand that the Financial Secretary may be taking some steps further to clarify his intentions this afternoon. I appreciate the difficulties which are said to arise under the Provisional Collection of Taxes Act, but I do not understand how the position is any different from that which arose with purchase tax in 1948 and 1968.
For example, in 1948, when there was a widespread rearrangement of purchase tax, after the proposed rearrangement had been discussed in Committee the then Economic Secretary to the Treasury announced that concessions would be introduced on Report. Those concessions involved reducing the rate of purchase tax on various goods after the new higher rates had been levied from 9th April 1948 onwards. That concession was carried into the Bill on Report. An amendment was carried to the effect that the goods listed, the goods which were to be relieved of the higher rate, were deemed to have been charged on the higher rate from 9th April to 15th June. The concession took effect immediately from 16th June. The amendment had the effect that the Government were not required to repay tax collected at the higher rate. On that occasion the House had the chance of deciding the scope of the changes proposed on Report.
Exactly the same thing happened in 1968 when a small group of items which had not previously been charged with purchase tax were taxed at 50 per cent. from 20th March 1968, the day after the Budget. They were again exempted on second Government thoughts from 1st July 1968 by Section 5 of the Finance Act. In other words, the Finance Act eventually included both the authority to charge the tax and the authority to cease charging it. On that occasion the House 1531 had the opportunity of considering Government amendments that were tabled to fulfil undertakings given in Committee.
Do the Government intend to proceed in the way in which they have indicated—of course, there may be some explanation of which we have no anticipation—and to revise coverage, changing the system by relying on a statutory instrument yet to be made under a power yet to be conferred, thus denying the House the right of considering the precise scope of the tax to remain on the statute book?

§ The Financial Secretary to the Treasury (Mr. Robert Sheldon)
I beg to move, That the Finance (No. 2) Bill, as amended, be considered in the following order, namely, new Clauses, Amendments relating to Clauses 1 to 5, Schedule 1, Clause 6, Schedule 2, Clauses 7 and 8, Schedule 3, Clauses 9 to 14, Schedule 4, Clause 15, Schedule 5, Clause 16, Schedule 6, Clause 17, Schedule 7, Clauses 18 to 33, Schedule 8, Clauses 34 to 37 and 39 to 52, Schedule 9, Clauses 53 to 62, Schedule 10, Clauses 63 and 64, Clause 38, Clauses 65 to 67, Schedule 11, Clause 68, Schedule 12, and Clauses 69 to 72, new Schedules, and Amendments relating to Schedule 13. It may be for the convenience of the House, Mr. Deputy Speaker, if at this point in our proceedings I make a short statement about the consideration which my right hon. and hon. Friends and I have given to the case for amendments to Schedule 7 to the Bill to delete certain items from the scope of the higher rate of VAT.
As I explained in a Written Answer I gave on Monday 14th July to my hon. Friend the Member for Burnley (Mr. Jones), in col. 349–50, certain legal and technical difficulties are likely to arise if further amendments deleting items from Schedule 7 are made during the passage of the Bill through the House. For these reasons we have not tabled on Report any Government amendments which would have the effect of limiting the scope of the schedule. Undertakings were, however, given in Standing Committee to reconsider the coverage of Schedule 7, and I have been able to satisfy myself in the light of further examination that a sufficient case has been made to justify exclusion of certain items from the higher rate.
The items concerned are as follows: in Group 2, radios of a kind used solely on boats and designed to be operated solely on radio frequencies designated for distress calls at sea; and also radio com- 1532 munication and navigation equipment of a kind used solely on aircraft and complying with the requirements of the Civil Aviation Acts. In Group 3, compasses, echo sounders and radar sets for boats; and also the classification and survey of aircraft. In Group 6, goatskin rugs.
I propose to implement these exclusions by using the powers to be conferred on the Treasury by Clause 17(2) of the Bill to make an Order amending the Schedule with effect from Monday 11th August. This date has been chosen because it is the first Monday after the date by which the VAT provisions of the Bill have to become law under the Provisional Collection of Taxes Act procedure, and I think it would be convenient to many traders, particularly retailers, if the exclusions were to take effect on a Monday.
The reliefs I have announced have, of course, still to be the subject of legal drafting and the Treasury order itself will be subject to negative resolution procedure. I recognise that we have not been able to meet every case that was urged on us in Standing Committee, but where we have not been able to do so and hon. Members succeed in catching your eye, Mr. Deputy Speaker, to press their arguments on us again during our consideration of Schedule 7, my hon. Friend the Minister of State and I will be glad to explain our reasons as well as to listen to and consider all the arguments put forward.
Copies of this statement are available to hon. Members in the Vote Office.
Perhaps I could give an idea why the present procedure is necessary and what it means in practice. The provision is necessary because of the complications of the operation of the Provisional Collection of Taxes Act 1968. We intend to examine the situation to see whether the procedure can be made to correspond more closely to what has happened in parliamentary terms in the past.
Let me say to those who may be disappointed that Government amendments have not been set out in the usual way that the statutory instruments are in their own way equivalent to Government amendments. They are set out in a form which is as capable of scrutiny as is an amendment, and when the statutory instrument is put before the House further consideration will be possible.
1533 Nothing I have announced today will prevent Treasury Ministers from listening with great care, and sometimes concessions can be made—if not by legislation, by means of subsequent orders in the House. What is said in the various debates on amendments which we are yet to discuss is capable of influencing the Government and of leading to further discussions with traders and to their being acted upon. Therefore, we are not depriving the House of any close scrutiny which otherwise would have ensued. Hon. Members have available to them the same kind of scrutiny as they have had previously. I regret the change of procedure necessitated by the operation of the 1968 Act, but we hope to put tile situation right on future occasions.

§ Sir G. Howe
Does the Financial Secretary agree that by following this method, we shall have no chance of tabling amendments to provisions introduced by the Government, or indeed of discussing them one by one? Is it not the case that the House will have no opportunity to examine statutory instruments until after the Summer Recess?
Furthermore, will not the new procedure involve delay in producing the relief from tax until 11th August and will not trade in those items be affected between now and then? Can the Minister explain why it is not possible, notwithstanding the original wording of the 1972 Act, to proceed as was done on two occasions in respect of purchase tax by tabling amendments to, say, Clause 17 to the effect that goods listed originally but no longer to be listed should be deemed to have been charged at higher rates from 1st May to tomorrow's date to enable concessions to take effect from then? The procedure was established, on each occasion by a Labour Government, on 22nd June 1948, set out in column 1143 of the Official Report, and 8th May 1968, set out in column 595. Why cannot we proceed in exactly the same way on this occasion?

§ 4.45 p.m.

§ Mr. Sheldon
May 1 reply to the point made about purchase tax? The right hon. and learned Member will be aware that in regard to VAT a large number of taxable traders are involved. This leads to complications, particularly in light of the way in which credit mechan- 1534 isms work. What was possible under the simpler scheme of purchase tax is not possible under VAT.
In regard to the delay in tax terms, there are always problems of this nature when these matters are reconsidered by the House. This is a problem with which we must live. But we accept that it is a way in which we can ensure reconsideration of essential decisions which the House of Commons wishes to take.
As for a close examination of amendments, the right hon. and learned Gentleman will be aware that points made in Committee are the subject of amendments which we shall be discussing a little later. They can be thrashed out again at that stage. If clarification is sought, I hope that I shall be able to assist hon. Members.

§ Mr. Hector Monro (Dumfries)
The Government have introduced into the House a strange situation and few hon. Members will be happy at the outcome. I appreciate that the Government say that amendments will be in order for discussion, but I should like to ask Mr. Deputy Speaker whether the selection of amendments is pointless in view of what has been said by the Financial Secretary. I should not like to feel that we are being told that we cannot go in depth into anomalies and principles in connection with boats and aircraft and other matters about which we are gravely concerned.

§ Mr. Deputy Speaker (Mr. Oscar Murton)
The selection of amendments is a matter for Mr. Speaker.

§ Mr. Jerry Wiggin (Weston-super-Mare)
The House faces a difficult situation. My hon. Friend the Member for Dumfries (Mr. Monro) has mentioned a vitally important point which will materially affect several industries, a large number of people and large sums of money. Although I appreciate that you, Mr. Deputy Speaker, are to some extent in loco parentis in the Chair, I do not see how the House will be able to proceed without some ruling on selection dealing with the item of boats and aircraft.
The Financial Secretary has already said that these are matters on which there will be concessions. However, I am worried on two fronts. When these 1535 orders are debated, presumably after the Summer Recess, the House may reject or accept them but we shall not be able to amend them. Therefore, we cannot in the ordinary way table amendments to Government provisions. Even following Government concessions, there are a number of detailed matters of great importance which arise. It is all very well for the Minister to say that the Government will listen to our arguments. That may be true, but so far the Government have refused to see representatives of the boating and aviation industries. Although the small concessions are valuable, it is strange that we shall not be able to elaborate on arguments which we deployed upstairs in Committee. This is a most unsatisfactory situation of confusion and muddle and the Government have put themselves in this mess. I hope that we shall have a ruling on selection, because that might clarify a murky situation.

§ Mr. Deputy Speaker
This might be a convenient moment to make some comments. The House will appreciate the reason that Mr. Speaker is not in the Chair at this moment, but, on the other hand, the question of selection is a matter for Mr. Speaker. I remind the House that Schedule 7 is some way ahead in the Bill, and selection has not gone as far as that, nor, so far as I know, was any suggestion made that it should.

§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
I should like to ask why the Government have adopted this procedure on this occasion whereas in Committee they made changes to Schedule 7 by moving amendments. Why is it not possible to use the same procedure now as was used on that occasion?
One reason why that should be so has already crossed my mind and it is that in Committee we were unable to move amendments which would have had the effect of increasing taxation. Therefore, we were unable to extend the scope of the Schedule 7 provisions to other items. I have tabled an important amendment which would have suitably and wisely extended the scope of the charge to some other items. The Chairman in his wisdom did not select it because it represented an increase in taxation. Of course, we would have been able to move amend- 1536 ments suggesting increases in taxation if this procedure of tabling an order had been employed, because so far as I know the order procedure would allow the scope of the charge to be extended.
Obviously the Government's trick has been to prevent us from using this device in Committee by seeking to use the amendments procedure but to allow the use of the order procedure as soon as we are out of Committee, when we are not in a position to amend the order.
The Government know that their borrowing requirement is excessive and that Opposition Members have consistently tried to help the Government by suggesting ways of increasing taxation. We were prevented from doing this in Committee and the Government have obviously deliberately used this rather shoddy procedural device to frustrate the Opposition in their attempts to save the Government from the economic morass into which they are sinking due to their own extravagance and incompetence.
The Bill having left Committee, the Government are dealing with the matter in a totally different way. The whole procedure is deplorable and I should like to add my vote of protest.

§ Mr. Wiggin
Further to your ruling Mr. Deputy Speaker. We certainly understand your personal position and precisely the reason why you are in the Chair at present. However, will it be possible to convey a message to Mr. Speaker so that at some time convenient to him, but especially before the House rises today, we can be told that he will look upon the selection of amendments on Schedule 7 with favour, bearing in mind the considerable feeling there is about this matter by the Opposition?

§ Mr. Deputy Speaker
I shall put the hon. Gentleman's mind at rest quickly. I am sure that Mr. Speaker is seized of the point—in any event he always reads Hansard. Therefore, I do not think that I can prejudge Mr. Speaker's decision about Schedule 7.

§ Mr. Wiggin
Further to that matter, Mr. Deputy Speaker. It must be made clear that by the time Hansard is printed it will be far too late if Mr. Speaker's decision were to run contrary to our wishes, because we are to proceed with the Bill tomorrow. Indeed, Mr. Speaker 1537 will be making his selection tomorrow morning. If we are to be deprived of the opportunity to debate this important matter, I suspect that it may take a great deal of time to get through the motion and other matters now.

§ Mr. David Howell (Guildford)
We all appreciate your own position, Mr. Deputy Speaker, and the difficulties of getting an immediate ruling. However, we are placed in a very awkward situation. There is a long list of items in this schedule which we discussed in Committee and which the Minister concerned undertook to look again at. The items range from freezers to secondhand goods, to components for boats, repair jobs, generators, trailers, the classification of aircraft, mobile shops, film splicers, antiques and many more as well. All these are very important matters to hon. Members on both sides of the House and we obviously want to press amendments on them.
If there were any suggestion that, by the procedure that the Government Front Bench is recommending, we might be denied the opportunity to press these amendments because they were considered to be either out of order or unsuitable in view of the way in which the Government are handling the situation, we should be placed in a situation in which we should not be ready to accept the procedure that the Government are putting to us.
If the ruling were to go in an unfavourable way, from the point of view of those who want to put forward the case on these issues, we should be deprived of the opportunity to press amendments on matters of very great interest in tomorrow's debate. Therefore, I think we should, without unduly pressing you in any way, ask you to consider enabling us to have a ruling on this matter very soon so that we may formulate our attitude to these very controversial proposals that the Government are putting forward for handling the mess and chaos that they have made of the matter so far.

Mr. Deputy-Speaker
I have listened to what the hon. Member for Guildford (Mr. Howell) has said. I shall certainly convey his views and the views of other hon. Gentlemen to Mr. Speaker as soon as it is conveniently possible to do so.

§ Question put and agreed to.