§ 2.35 p.m.
§ LORD LUCAS OF CHILWORTHMy Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
§ [The Question was as follows:
§ To ask Her Majesty's Government what the estimated loss on stocks held by retail traders would be if the uplift in purchase tax imposed in July, 1961, were removed.]
§ THE MINISTER OF STATE FOR FOREIGN AFFAIRS (THE EARL OF DUNDEE)My Lords, it seems that there is some misapprehension here. The surcharge imposed on a wide range of indirect taxes in July, 1961, was removed as from midnight on Budget Day, April 9 this year. In his Budget the then Chancellor left the standard rate of purchase tax at the level of 25 per cent., to which it had reverted; he reduced the higher rate to 45 per cent. from an effective level of 55 per cent.; and he amalgamated the two reduced rates, effectively 13¾ per cent. and 5½ per cent., at the combined level of 10 per cent. No estimate is possible of the effect of these changes in relation to stocks held by retailers.
§ LORD LUCAS OF CHILWORTHMy Lords, I thank the noble Earl for his kind reply, and at the same time apologise because my Question might have been worded with greater clarity. If I had used the term "regulator" and not "uplift", the noble Earl would not have been in the difficulty in which he finds himself. Would he therefore agree with me, first of all, that the Chancellor of the Exchequer has within his power the regulator of 10 per cent. by which he can increase or decrease the amount 674 of purchase tax without the sanction of Parliament; and, secondly, that the current yield of purchase tax is running at the rate of £550 million a year? The estimate which he cannot give me—and I hope he will forgive me for suggesting it to him—is what is the current amount of purchase tax already paid on goods which are in the pipeline between the producer and the consumer. As the noble Earl knows, purchase tax has to be paid at wholesale sources. That is reliably estimated at anything from £135 million to £185 million, so if his right honourable friend the Chancellor of the Exchequer wishes to stimulate the economy by using his powers under the regulator by decreasing purchase tax by 10 per cent., which is his maximum, the retail trades in this country will have to bear a stock loss of anything from £13½ million to £18½ million.
§ THE EARL OF DUNDEEMy Lords, I think what the noble Lord evidently meant was, what would be the effect on stocks if the regulator were used the other way round—not taken off, having been put on, but used to reduce purchase tax from the standard rate. I am afraid I could not give him an estimate of the effect which he asks for. I could not give him an estimate of the loss on stocks held by retail traders, whether the regulator was used upwards or downwards. I am glad that the noble Lord is able himself to give an estimate, which I should have thought would have taken thousands of civil servants many years to work out. Perhaps he could also give an estimate of the amount which the retail traders will gain by the increase of trade resulting from the reduction of purchase tax.
§ LORD LUCAS OF CHILWORTHMy Lords, the noble Earl will agree that his reply really tempts a rather caustic remark. Something which may take a thousand civil servants to do, a few intelligent men in industry can do. That is the best estimate that is made by the authorities in the retail trade. In regard to the last part of the noble Earl's question, as to how much the retail trades of this country would gain by the Chancellor of the Exchequer reducing purchase tax to stimulate the economy by increased trade, perhaps he would be prepared to underwrite their gains and to offset their losses.
§ THE EARL OF DUNDEEMy Lords, whatever I am prepared to do, I am always glad to hear the views of one intelligent business man, whether they are expressed in the form of an estimate or of a conjecture.
VISCOUNT ALEXANDER OF HILLS-BOROUGHMy Lords, would the noble Earl be willing to confer with the leaders of the retail trades as to what is the practice either way? Most customers expect a reduction of tax to be taken off the price of goods immediately.
§ LORD LUCAS OF CHILWORTHAnd so it is.
VISCOUNT ALEXANDER OF HILLS-BOROUGHOn the other hand, there are many honest traders who do not charge the increase of purchase tax until they have exhausted their pre-increase of tax stocks. It really is not fair for the Government not to come to some arrangement with them so that either one stand or the other is adopted and they may know where they are.
§ THE EARL OF DUNDEEMy Lords, it may or may not be fair, but that was not the Question. The Question was, what is the estimated loss on stocks held by retail traders in certain circumstances, and we cannot give an estimate of that.
§ LORD LUCAS OF CHILWORTHMy Lords, would the noble Earl permit me to say that the noble Viscount the Leader of the Opposition is quite right? It is simply a myth to say that the retail traders of this country can recoup themselves for losses when purchase tax is reduced, when in the event of purchase tax being increased they do not increase their prices. I may tell the noble Earl, if he will allow me to say so, that anybody in the Government who thinks that has not been into retail shops to see the effect of the demands by the public to purchase at pre-increase of tax prices.
VISCOUNT ALEXANDER OF HILLS-BOROUGHMy Lords, I did not get an answer to the question I asked as a supplementary.
§ THE EARL OF DUNDEEThe question which the noble Viscount asked does not arise out of the Question on 676 the Order Paper. The noble Viscount's question is whether traders are being fairly or unfairly treated. The Question on the Order Paper is a question of fact: whether we can estimate certain losses relating to certain physical changes, which we are not able to do.
VISCOUNT ALEXANDER OF HILLS-BOROUGHMy Lords, I think that is an extraordinary answer from a senior Minister. I thought that my question arose out of the one on the Order Paper. There was dubiety between what was on the Paper and the Answer to it. I asked, therefore, whether he would be able to hear from leaders of the trade associations.
§ THE EARL OF DUNDEEMy Lords, if the noble Viscount would put a Question down on the Paper I should be glad to answer it. I cannot answer questions which do not arise out of Questions which are on the Order Paper.