§ 3.39 p.m.
§ Standing Order No. 41 having been suspended (pursuant to the Resolution of August 1):
§ The MINISTER of DEFENCE for the ROYAL AIR FORCE (LORD SHACKLETON)My Lords, I rise to move the Second Reading of the Selective Employment Payments Bill. I realise that the House is expecting a Statement, and I shall be prepared to interrupt my speech as soon as we hear that it is ready to be made, so that noble Lords will not have to wait too long.
Since the Government's selective employment tax proposals were announced by the Chancellor of the Exchequer in his Budget speech on May 3, they have been the subject of much discussion, indeed of controversy, both in another place and in the country as a whole. Many of these issues which they raise we have already discussed to some degree in the debate on the Finance Bill which has now been enacted. It is Section 44 and Schedule XI of the Finance Act which contain the provisions relating to the levy of the tax they apply, subject to certain special exceptions referred to in the Act, to all employers who have to pay Class I National Insurance contributions. It is the Bill now before the House which makes the tax selective by providing for payment of refunds of the tax, plus in some cases a premium.
A great deal has been said and alleged in many many quarters about the tax and its likely effects, and so I think it may be helpful if I briefly remind the House of the reasons why the Government have decided to bring in a tax of this kind. In the short term, the main purpose of the tax it to raise additional revenue, but to do this in a way which will help to redress the present tax balance between the manufacturing and the Service sectors of the economy. The tax is therefore intended to have a wide effect across the whole field of services and distribution. At the same time—and this is where the Bill will play its part—the tax will operate in such a way as to bring some positive benefit to manufacturing industry in general while being neutral in its effect on the public sector and certain important parts of the 1600 private sector. In the longer term, this selective application of the tax should have the effect of making more manpower available for manufacturing industry by encouraging economy in the use of labour in the services sector. But it is important to emphasise that this is a longer-term aim.
My Lords, critics of the Bill have made much of the point that it is unrealistic to expect workers in the services sector, who may become redundant through the operation of the tax, to switch overnight to jobs in industry. Sometimes it has been pointed out that in a number of cases the workers concerned will be unsuited to industrial work, and in others there may be no such work available in their locality. These would be valid criticisms it this was indeed the intention of the Government, but I think that on any reasonable view of the matter it becomes clear that the improved distribution of labour which the selective employment tax is intended to produce will come about in the main by shifts in the pattern of recruitment of new additions to our labour force. I repeat, this will be a changing pattern in the longer term, and to the extent that it is accompanied by economies in the present use of labour in the sevices sector to the advantage of manufacturing industry the better we shall be pleased.
I need hardly dwell on the shortage of labour, particularly skilled labour which has been throughout practically the whole of the post-war period a constant feature of our economy and a persistent hindrance to its more rapid growth. The Bill before the House therefore seeks, in the context of the situation of labour shortage, to make its contribution to ensuring that more of our existing labour force and a larger proportion of additions to it in future years go to the manufacturing sector which, as the figures show—noble Lords will have seen the White Paper—has had a good deal less than its fair share of the additional manpower which has become available in the past five years. I would remind your Lordships of these figures. They show that between 1960 and 1965 the labour force increased by 907,000, and 423,000 workers were released or became available from sectors of declining employment, mainly from agriculture and the Armed Forces. Of this total of 1601 1,330,000 only 10 per cent. went into manufacturing industry, whereas just over 80 per cent. went into services of all kinds, including distribution and construction.
It has been suggested by some critics that the Bill, even if well-intentioned at the time when it was introduced, has become an irrelevancy in the light of the Government's economic measures announced last month. So far from being inconsistent with these measures, the Bill will play an important part in achieving the end which these measures are intended to produce. In another place, in a debate on these economic measures, and talking of a number of Government measures which are currently before Parliament, or have just passed through Parliament—the Finance Bill, and selective employment provisions, the investment grants and the Industrial Reorganisation Corporation—the Prime Minister pointed out that they are all designed to secure re-deployment of resources in favour of manufacturing industry against services. It is, of course—and I should like to make this clear—no part of the Government's intention to suggest that the services sector, or for that matter the construction industry, which will bear the tax without refund, are in some way second-class sectors of the economy. We fully recognise the contribution which both sectors make to the development of our economy, and also in many cases to our export earnings; but what some critics and opponents of the Bill are a bit slow to recognise is that services, including distribution, have hitherto been lightly taxed as compared with manufactured products, and that the services sector has in recent years been taking the lion's share of the additions to our labour force. It is to redress the balance in both these respects that the Bill before the House this afternoon has been introduced. I think it may now be helpful if I say something about the individual clauses of the Bill. The main provisions of the Bill are relatively simple, but perhaps before I get on to this rather simple matter I should give my noble friend an opportunity to make a Statement.