§ The following question stood upon the Order Paper:
§ 39. Mr. Gerry Neale (Cornwall, North)To ask the Chancellor of the Exchequer whether he has yet decided how to recoup the loss of revenue resulting from the reduction of the duty on derv; and if he will make a statement.
§ The Chancellor of the Exchequer (Sir Geoffrey Howe)The answer is "Yes". When, in Committee on 30 April, I advised the House to accept the reduction of lop per gallon in the taxation on derv, I made it clear that I would have to recoup the revenue lost in some other way. I should like now to inform the House how I propose that this should be done.
Although the Budget increases in tobacco duty were substantial, I have concluded that most of the extra revenue needed should come from that source. I therefore propose duty changes equivalent to an extra 3p on the price of a packet of 20 cigarettes, together with comparable increases on other tobacco products. These changes will raise about £65 million in the current financial year.
When the House considered these matters many hon. Members suggested that additional revenue should be raised from taxes on gambling. I propose three changes, which will together make up the balance of the offsetting measures: increases in the "off-course" rate of general betting duty from 7½ per cent. to 8 per cent. and in the bingo duty from 7½ per cent. to 10 per cent; and various increases in the rate of gaming machine licence duty. These changes will raise about £20 million in the current financial year.
Although I contemplated earlier that these changes would not take effect until after the Finance Bill had become law I have now decided that it would be better to bring them forward. I therefore propose that, subject to the approval of the House, the increases in tobacco duty should take effect on Wednesday 8 July, the increase in general betting duty on Sunday 12 July, and that in bingo duty on Monday 27 July. The changes in gaming machine licence duty must necessarily be delayed for practical reasons and will take effect on 1 October. The necessary resolutions will appear on the Order Paper tomorrow. An amendment will be tabled for the Report stage of the Finance Bill enabling the derv duty change to take effect without delay; I am authorising the necessary extra-statutory treatment until Royal Assent. The duty on derv will thus be reduced by 10p a gallon from 6 pm today.
§ Mr. NealeIs my right hon. and learned Friend aware of the pleasure with which the road transport operators and those dependent on road transport will learn of that reduction? Is he further aware that those of us who supported the proposed reduction did so on the basis that the money would be recouped from elsewhere? We welcome my right hon. and learned Friend's reply and think that it is the fair and right course to take.
§ Sir Geoffrey HoweI am grateful to my hon. Friend for his support and, in particular, for his acknowledgment of the benefit that this change will bring to road transport operators.
§ Mr. Peter Shore (Stepney and Poplar)Will the right hon. and learned Gentleman confirm that he is talking about one-tenth of 1 per cent. of total tax revenue? What 1008 makes him believe, from his past experience, that such fiscal fine tuning is in any way available to a Government who overshot the public sector borrowing requirement by about £4,500 million last year and who are operating in a total statistical fog as a result of their stubbornness and obduracy?
Is not this statement an entirely political gesture on the right hon. and learned Gentleman's part? Is not this measure directed far more to his colleagues in between PESC exercises than to the real economy? Of course, we shall look at these trivial measures when time for debate is provided—as I hope it will be—next week.
§ Sir Geoffrey HoweIt would be quite foolish to view the necessity for changes in the total objective for public sector borrowing or taxation as if every error would work in one way rather than in another. When the changes were debated by the House on 30 April it was made perfectly clear that the resulting loss of revenue would have to be recouped in this way. I am grateful to the right hon. Gentleman for having undertaken to examine the measures.
§ Mr. SpeakerOrder. It is clear from the statement that hon. Members will have an opportunity to debate this matter. I shall therefore call two hon. Members from either side of the House before we move on to the business of the House.
§ Mr. Donald Stewart (Western Isles)Will the right hon. and learned Gentleman give some thought to adopting the suggestion of the Highlands and Islands Development Board that VAT should be removed from petrol and diesel oil in the Scottish Islands? The report of the Scottish Consumer Council shows, for example, that in the island of Barra food is 20 per cent. dearer than in Aberdeen and transport is 31 per cent. dearer. Such a measure could be easily policed.
§ Sir Geoffrey HoweQuestion No. 4 on the Order Paper sought to ask the same thing. Although I understand the point made by the right hon. Gentleman I am afraid that his suggestion would not be a practicable proposition.
§ Mr. T. H. H. Skeet (Bedford)Although I am grateful to my right hon. and learned Friend for having adopted two of the suggestions that I made in Committee, but would it not have been preferable to undertake a reduction in public expenditure? The Civil Service has been cut by only 5.8 per cent. and the number of local government staff has been cut by only 2.2 per cent. since the general election. Should we not retrieve the money that way instead of by other methods, which increase the fiscal burdens?
§ Sir Geoffrey HoweThere are two ways of correcting the balance. One of those ways is by correcting the estimated tax revenue. That is the course that I have taken in my statement. However, the Government remain committed to securing the right balance and to securing the proper pattern of public expenditure as well.
§ Mr. D. N. Campbell-Savours (Workington)Is the Chancellor of the Exchequer aware of the major row that took place in Committee on capital transfer tax concessions in the Budget? Why did he not turn his attention to capital transfer tax and the major concessions that have been made to the better-off in society, instead of picking on cigarette smokers? Millions of working people will now have to pay higher prices.
§ Sir Geoffrey HoweIt is difficult to understand why changes that have been described as "trivial" by the Opposition spokesman on economic affairs should provoke such dramatic wrath from the hon. Gentleman. He should understand that changes in capital transfer tax—reversing some of the measures introduced by the previous Government—form an equally important part of our policies for promoting enterprise and economic activity.
§ Mr. John Bruce-Gardyne (Knutsford)May I congratulate my right hon. and learned Friend on reminding the House that there is no such thing as a free lunch or even a free lorry ride? So that we can effectively judge the proposal to increase tobacco duty, will he tell us whether, to date, the increase in tobacco duty contained in the Budget has generated the revenue that he expected?
§ Sir Geoffrey HoweAs far as we can judge, there is no reason to doubt that the pattern of yield is in line with the yield that we were expecting. There was a period, immediately after the Budget, when demand fell. That followed a large amount of anticipatory purchasing before the Budget.