§ 4.1 p.m.
§ Debate on Second Reading resumed.
§ LORD SHACKLETON
My Lords, I was explaining to your Lordships the great importance of ensuring that the manufacturing side of industry should get a fair share of the labour that is available. If any of your Lordships should have doubts on this, I can say that there are too many well authenticated cases of young people who have undergone training courses for industry, and then, for one reason or another, have been lured or have chosen to go into the services side of industry. This is no reflection on the value of their part in the community, but only an indication that there is an imbalance, and it is to reduce this imbalance that this Bill has been introduced.
I was about to say something about the individual clauses. The main provisions are, I believe, relatively simple. Clause 1 deals with the payment of premiums; Clauses 2 to 6 deal with the payment of refunds to different kinds of employer; and the remaining clauses deal with the administrative machinery of the Act, including appeals and power to amend the Act. To qualify for premiums under Clause 1 an establishment must be engaged, wholly or partly, on activities coming under a Minimum List Heading in the "manufacturing" Orders in the Standard Industrial Classification, and must have more than half its employees employed in connection with these activities. If noble Lords wish to check this, they will find it listed in the White Paper in Annex II. Premiums will also be payable in respect of establishments engaged on scientific research relating to manufacturing activities, and also, as a result of a Government Amendment made in another place, to establishments engaged on training relating to activities.
1609 Clause 2 provides for payments of refunds of the tax to establishments in a number of sectors which the Government are treating as neutral. The most important of these are agriculture and fishing, mining and quarrying, and transport and communication. For agriculture, horticulture and forestry, refunds will be made by the Minister of Agriculture in England and Wales and by the Secretary of State in Scotland. In the other cases covered by Clause 2, and for the whole of Clause 1, refunds will be made by the Minister of Labour.
Your Lordships, I think, will already be aware of the provisions which apply to both Clause 1 and, with modifications, to Clause 2, and which relate to non-qualifying activities. Briefly, the non-qualifying activities provisions are intended to ensure that establishments which are mainly engaged in office work or in sales do not qualify for premiums or refunds, and that establishments in which a substantial number of the employees are engaged in the transport of the employers' own goods qualify for refunds rather than premiums. These distinctions are consistent with the Bill's general application to the economy, and under this the selling activities, shops, distribution and the like, together with a wide range of office services, will not qualify for premium or refund while the transport sector in general will receive refund of the tax.
I should now like to say a word or two about how these non-qualifying activities provisions apply in the case of any particular establishment. I think it is by now generally understood that there will be what one might call a "50 per cent. rule"; that is to say, in any particular establishment which falls within the provisions of Clause 1 or Clause 2 of the Bill a firm will have to tot up the total number of persons employed in or from that establishment wholly or mainly in non-qualifying activities. If this total comes to more than half the employed persons employed in or from the whole establishment, then the whole establishment fails to qualify. If, however, less than half the total number employed there are employed in non-qualifying activities, then the whole establishment would qualify for premium or for refund according to the main activity carried out there.
1610 It has been suggested that these provisions will often work in an arbitrary or anomalous way. But I think that these fears have been greatly exaggerated. In the case of most manufacturing establishments, the entitlement to premiums will be perfectly clear. Nothing like 50 per cent. of their employees will be engaged on non-qualifying activities. This has been confirmed by the experience of the Ministry of Labour in discussion with several large manufacturing firms who came to the Ministry to seek clarification of their position under the Bill. Moreover, if one examines the analysis of types of worker employed in each of the manufacturing Orders of the Standard Industrial Classification, one finds that in each industry, taken as a whole, the number of workers who will be non-qualifying for the purposes of the Bill falls well below 50 per cent. None the less, the Government recognise that there may sometimes be anomalies between, say, the treatment of similar establishments within a single industry. These may arise from the way in which a particular firm has arranged its activities between a number of establishments or within a single establishment.
I think I should take a few minutes at this stage to explain in a little detail the way in which the Bill uses the term "establishment". For the way in which the term is to be interpreted I would refer the House to subsection (2) of Clause 10. The effect of this subsection is to delimit the premises constituting the site of an establishment, and to delimit the organisation of people within those premises by reference to the business of a single employer. The broad effect is that a set of premises occupied by an employer will be treated as constituting the site of a single establishment if access can be obtained to all parts of the premises without leaving them. These provisions should enable what constitutes a particular establishment to be determined with reasonable certainty. They might, however, operate unfairly in the case of an employer who could claim to be operating two or more businesses, of a quite different nature, from premises to all parts of which (and this is part of the definition) access could be gained without leaving them; and, conversely, in the case of an employer who could 1611 claim to be operating a single business from premises to all parts of which access could not be gained without leaving them.
Discretionary provisions have been written into the Bill to enable the appropriate Minister to deal with situations of this kind where they would otherwise run counter to the Bill's general intentions. To deal with the first of the two cases I have mentioned, Clause 10(3) gives the appropriate Minister power, on the application of an employer, to treat a single set of premises as constituting the site of two or more establishments. The kind of case in which this power might be used would be that of a single establishment in which there was both a manufacturing activity going on and also a selling activity. The employer might apply to have his manufacturing activity treated as a separate establishment. In such cases, the criteria which Ministers are likely to apply in exercising their discretion will be that the two sets of activities are different in kind; that the activities are physically distinct, and that they are separately organised. I hope that will help to illustrate how the Government or the Minister will tackle this matter.
I could go on at further length on other aspects of deciding the establishment, but I do not want to take up too much of your Lordships' time. I have already dealt at some length with Clauses 1 and 2, and the important provisions of Clause 10 will apply to them. I do not propose to spend very long on the remaining clauses of the Bill under which refunds will be paid to certain employers. Clause 3 deals with the nationalised industries. The Government's intent is that these should in general be treated as neutral for purposes of the tax. The major part of their activities will therefore receive refund. Those parts of the nationalised industry which are engaged in manufacturing activities directly comparable to those undertaken in the private sector will attract premiums; and those parts which are engaged in service activities directly comparable to the private sector will not attract either premium or refund. Clause 4 deals with the payment of refund to local authorities and other bodies in this field, and the detailed application of its provisions is 1612 being discussed with local authority associations.
Clause 5 provides for payment of refunds to charities, and I have no doubt that this provision is very acceptable to your Lordships. What constitutes a charity for the purpose of refund is defined in the clause in accordance with existing law in England and Wales. In Scotland, where there is no controlling legislation, the Bill follows rating precedent in defining charities by reference to the Income Tax Acts. Repayment of the tax will be made by the local offices of the Ministry of Labour, and arrangements have been made for the Charity Commissioners, the Department of Education and Science or, in Scotland, the Secretary of State to issue to every charity wishing to claim refund of the tax a certificate which the charity will then be able to present to the local office of the Ministry of Labour as proof that it is entitled to repayment. Charities which are going to have to pay the tax, and will wish to claim refunds, should therefore ask the appropriate certifying body for one of these certificates which will be available from September onwards.
Clause 6 provides for payment of refunds of tax to individuals who employ nursing or domestic help in a household which includes someone who is over seventy, or in one where there is an incapacitated person who needs such help, or where there is a child or children and the only parent or guardian goes out to work. Some details of the refund arrangements were given in another place on August 4. Refunds will be made by the new Ministry of Social Security, normally three months in arrears. Initial claims will be staggered over the period between October and the end of the year, and details of how claims are to be made, and special arrangements for refunds at more frequent intervals in certain cases will be announced by the Ministry as soon as possible.
Clause 7 of the Bill deals with the registration of establishments by employers, the keeping of records of tax paid, and the right of appeal. Both the Ministries concerned will be making available in good time the various forms, which will be of a simple kind, which it will be necessary for people wishing to claim the refund, or the premium, to 1613 use, and there will be full publicity explaining these arrangements.
There is one point I should make on this. If an employer's entitlement to registration is not clear from the details given on the application form, the local office may need to discuss the details with him and to seek further information. If it becomes clear that the application cannot be accepted as fulfilling the requirements of Clauses 1 and 2, the employer will be informed, and the reason for the rejection of the application stated. The employer then has the right to appeal, under Clause 7 of the Bill, to a tribunal appointed under the Industrial Training Act 1964. These tribunals consist of a lawyer as chairman, with an employer and worker as members. They are experienced in hearing appeals against levy assessments under the Industrial Training Act, and they are well qualified, and, indeed, have been doing so, to deal with cases under the Redundancy Payments Act, and, in certain cases, under the Contracts of Employment Act. They will be well qualified to deal also with cases arising under the present Bill.
Clause 7 also provides that employers shall keep records of selective employment tax paid. In debates on the Bill in another place, some concern was expressed that this requirement on employers should be limited to what is reasonable. This had always been the Government's intention, but in order to make it absolutely clear the provision in Clause 7 has been amended. Employers will not be required to keep records in any particular form, but they will have to ensure that adequate records exist to enable any authorised officer of the Ministry of Labour to satisfy himself as to the amount of tax paid for particular categories of worker during each week of the claim period. Here again, the requirement will be fully explained in the Guide for Employers, which is to be issued.
I would finally draw the attention of the House to Clause 9. This clause gives the Minister of Labour the power, with the consent of the Treasury, to make an order changing the categories of employment qualifying for premiums or refunds. The Government have already made it clear that, although they think it right to include this power which will add flexibility to the scheme, they think it important that the selective employment 1614 tax proposals should be given a fair chance to get under way, and that therefore any modifications should take effect from the second year. They have therefore resisted a considerable number of suggestions that concessions should be made, either in respect of particular employments or particular groups of workers, such as the disabled, or that there should be modifications in the tax in regard to particular regions of the country.
The arguments for making exceptions now have been very carefully considered by the Government, and they raise a considerable number of difficulties, quite apart from the major one of principle which I have already mentioned, and my noble friend who will be replying to this debate will be prepared to explain some of these in more detail if noble Lords so desire—and I do not doubt that they will so desire. The Government's view is that it would be unwise to attempt to make modifications to the scheme before it has even been launched. Modifications and refinements of the tax are certainly not ruled out for the future and, indeed, the ability to introduce flexibility in the application of the tax may prove to be one of its most favourable features.
My Lords, the Government regard the Bill as an important part of their programme to strengthen the economic health of this country and it is on that basis that I commend it to this House. I beg to move.
My Lords, before the noble Lord sits down, I should like to ask him whether he has the figure of the number of people, in Government service, and the extra people in private service, who are expected to be required to administer this tax?
§ LORD SHACKLETON
My Lords, I have the figure, but I think it might be better if it could be dealt with by my noble friend. If the noble Lord, Lord Hawke, is going to make a speech he will no doubt be able to give my noble friend notice of his question.
My Lords, surely those figures should be before the House when it is debating the Bill, rather than that we should receive them right at the end.
§ Moved, That the Bill be now read 2a.—(Lord Shackleton.)1615
§ 4.21 p.m.
§ LORD HARLECH
My Lords, I must say that I was much impressed by the cheerfulness with which the noble Lord, Lord Shackleton, introduced this Bill, in view of the manhandling it has received in another place, and indeed in the country at large. I thought it was with some relief that he got off the merits of the Bill and on to a detailed explanation of the clauses, which he did, of course, with commendable clarity. I propose to address myself more to the general principles of the Bill and the scheme of which it forms a part, the selective employment tax and repayment.
We are approaching the end of a Parliamentary Session which will become notable in history for the quantity of foolish and ill-digested legislation that it has had presented to it, and it is just possible that, against very strong competition, this Bill will get the Gold Medal as the most foolish. One of my right honourable friends recently referred to this measure as "inspired lunacy". He is, of course, a particularly benevolent character, and I cannot for the life of me see why he introduced the adjective "inspired". The whole concept of the selective employment tax has had an appalling reception in all sections of the Press, and it has been attacked not simply by the Conservative Party and the Liberal Party but also by large sections of the Labour Party. Indeed, the most virulent attacks have really come from Labour Members of Parliament who have practical experience of the distributive trade; namely, those who represent the Co-operative Movement; and it was not a Conservative, or a member of the Liberal Party, who said that this measure wasbereft of reason and just about as insensitive as it is daft".That is a quotation from Mr. Charles Pannell, who until the Election this year was a Minister of Cabinet rank in the Labour Government.
It has sometimes been argued by Government spokesmen that this tax has not caused great concern among the general public, but I am bound to say that I do not find this a particularly respectable argument, because we know it was precisely because the Prime Minister and the Chancellor of the Exchequer thought that a selective employment tax 1616 would not make a direct impact upon the man in the street that they embraced it so warmly in the first place.
Coming to this Bill, to which we are asked to give a Second Reading, it is quite clear that it is intimately tied up with those clauses in the Finance Bill to which the noble Lord, Lord Shackleton, has referred and which impose the tax. It is not possible to discuss the effects of the premiums paid out without reference to the tax which has first to be paid in. Apparently, the purposes of this tax and repayment system are, first of all (as the noble Lord said), to raise revenue, and no objection in principle can be had to this, in view of the mess our economy is now in. The second purpose was to redeploy labour by treating so-called "service industries" harshly and so-called "manufacturing industries" benevolently. The third purpose was to deflate the economy in some measure, either through higher prices passed on to the customer by the service industries, or by means of a forced loan from the whole of industry which arises owing to the fact that payments-in precede payments-out by five months.
I should like first to say a word about the third purpose. Is it still the intention of Her Majesty's Government that some of the effects of this tax should be passed on to the consumer? This was clearly the intention at the time of the Chancellor's Budget Speech, and we know that one of the grounds for putting up prices is where an increase is unavoidable due to increased taxation. If the Government think that increases should be made, perhaps the noble Lord, Lord Champion, will say so when he comes to wind up; or perhaps they may feel that this rather conflicts with their incomes and prices standstill policy. But if increases are not to be made in consumer prices, then one of the reasons for imposing the selective employment tax is sunk without trace.
As regards the forced loan aspect of the tax, there is no doubt that, on top of the other Government measures that have been announced, it will have, after September, a fierce deflationary effect upon an economy which is already grinding to a standstill. The index of industrial production for May showed that it had fallen a point since April, and that in May this year it was no higher than 1617 it was in the early months of 1965. That is to say, after rather more than eighteen months of a Labour Government there is no expansion in industrial production in this country; and now we are to have further deflation, as a result of the effects of the selective employment tax.
I see the noble Lord, Lord McCorquodale of Newton, sitting in his place. I was listening to his speech the other day in the economic debate, and he kept on referring to "two and a half years of Labour Government". I did not feel like interrupting him at the time, but although I know it feels like two and a half years of Labour Government I do assure him that in fact it is only one and a half years.
§ LORD McCORQUODALE OF NEWTON
My Lords, I apologise. I can assure noble Lords that it does feel like two and a half years.
§ LORD HARLECH
But, my Lords, on re-reading the Chancellor's Budget speech it seems to me very doubtful whether he intended to use this forced loan to deflate the economy in this intensive way. He said:It is true that manufacturers, as well as those employers receiving simple refunds, will have to wait for the premiums for which they are eligible. I have not overlooked this, and, against the background of the general credit restraint which it is necessary to maintain, I shall be considering what steps may be needed to enable the banks to respond to temporary needs for credit in such cases."—[OFFICIAL REPORT, Commons, Vol. 727, (No. 12), col. 1457: 3/5/66.]I am bound to say that those who took this to mean that at least some help from the banks would be forthcoming after September were entirely justified in that assumption. Only two months later, however, the Chancellor of the Exchequer comes along and says:There will be no general arrangements to offset the intended effect of the selective employment tax.I am not surprised that many people in industry and agriculture, and many of those responsible for the great charities in this country, feel that they have been let down by the Chancellor in this respect.
I should like to turn now to that aspect of the selective employment scheme with which we on this side of the House take the strongest issue with Her Majesty's Government. I refer to the Government's intention to discriminate between different 1618 sections of industry in order to bring about, as the noble Lord has said, the redeployment of labour. We object to this aspect of the policy on three main grounds; first, because we do not think it wise or realistic to try to discriminate in this very rough and ready way; secondly, because we do not believe that the scheme will achieve the object of redeploying labour efficiently; and thirdly, because we regard it as a grossly unfair and inequitable tax which is riddled with absurd, and even cruel anomalies.
My Lords, I started by saying that this legislation was ill-digested, and perhaps the clearest proof of this is that the scheme as originally drafted would have imposed the full rigour of the tax upon charities. We were then faced with this fantastic situation: that the Government had the intention to tax charities like Dr. Barnardo's Homes, who would have had to pay £100,000 a year, in order to pay subsidies to I.C.I. and General Motors. Naturally, there were cries of outrage from every part of the country and the Government had to beat a not too hasty retreat. And so the story has continued. Later, they had to give way about agriculture and about forestry, over research establishments, and with regard to employees in certain private households. But thousands of anomalies remain as a witness to the panicky and ill-considered way in which this scheme was introduced by the Government. In this respect the Bill is, I think, a fair example of the Government's actions in what everyone must regard as a perfectly disastrous summer.
I should like to turn for a few moments to examine whether the selective employment scheme is well designed to achieve the efficient redeployment of labour. Here I would note that the whole scheme rests upon two premises, both of which I believe to be totally devoid of firm foundations. One is that manufacturing is, ipso facto, more desirable than the provision of services, and the second is that the service industries are wasteful users of labour while manufacturing industry is an economical user of labour. All the evidence points in exactly the opposite direction. First of all we have the evidence of individual workers themselves, who have stated publicly to the Press that they have been paid £20 and £30 a week at motor car factories only 1619 to spend their time sitting about and playing cards. Then we have the Government's own admissions about the state of affairs in the printing industry, where gross and deliberate over manning is rife. Yet printing firms and newspapers are to get a 7s. 6d. premium for every employee they hang on to. This is the economics of Bedlam. I know that this is territory which really is watched over by my noble friend Lord Conesford, and I may say that I wish him good hunting in this particular territory later on this afternoon.
Coming to more indirect evidence, we have the report of Mr. William Allen, an international business efficiency expert, who in the Sunday Times of June 12 said that his findings led him to the conclusion that the waste of manpower in manufacturing in this country ran into millions. This was followed a month later by an Opinion Poll in the same paper, a poll conducted only among workers; and this poll showed that as many as 32 per cent. in heavy industry believed that fewer people could do the work, while a staggering 85 per cent. thought that there was "a lot of truth" or "some truth" in the statement that, "Our troubles are mainly due to using workers inefficiently". In the light of all this it seems to me that it is only members of the Government who believe that manufacturing industry uses manpower more efficiently than the service industries.
Then, what evidence is there on the other side that the service industries are wasteful of manpower? Surely it is common knowledge that the retail trade, to take one, is one of the most highly competitive in the country to-day. It was made even more competitive, of course, as a result of the work of my right honourable friend Mr. Heath in introducing the Resale Prices Bill; and it is perhaps worth recalling that on that occasion the Labour Party gave him no support. The battle on the High Street is extremely rigorous, as any member of the Co-operative Movement could tell Her Majesty's Government. It is most unlikely that there is hoarding of idle manpower in retail shops.
But let us take another so-called service industry, of a totally different kind—our great insurance industry. This receives no protection, no help, no subsidies from 1620 the Government; yet it competes successfully all over the world and earns for us much-needed foreign exchange. It could not possibly compete internationally in this way if it went in for padded payrolls. Yet the Government intend to discriminate against it in order to pay subsidies to the hoarders of labour in the manufacturing industries. To sum up this part of my argument, I challenge the Government to show that their premise is correct when they claim that what the country needs is an increase in the labour force in manufacturing and a decrease in the service industries.
That brings me to that other unfounded premise, that there is some inherent value in manufacturing which does not attach to distribution or selling. This proposition, I think, is a relic of nineteenth century Marxist Socialism which we all assumed that even the British Labour Party had long since buried. A minimum of research would go to show that all vigorously expanding industrial societies have a much more rapid growth of manpower going into services than into manufacturing.
The noble Lord gave us some figures, but I believe he would find exactly the same figures in the United States of America where their gross national product has been growing at 5 and 6 per cent. a year ever since 1960. Indeed, this is the main characteristic of the modern efficient industrial society, and I am surprised that they do not see that at this stage in our economic development it is an inevitable trend. It is no good delving back into the myths of early Socialist history and then trying to defy more modern trends, like King Canute defying the tides. I recognise I am being rather unfair to King Canute, because he knew that the tide was going to come in; it was his gullible supporters who supposed he had magic powers. But I am afraid that in these circumstances it is the Government who are more like his gullible followers than like King Canute.
Finally, I suggest that the scheme will not be successful in redeploying labour, even if this were desirable in the manner intended by Her Majesty's Government. The employee, the worker, is not directly affected by the tax: he will not pay it; his employer will pay it on his behalf. So there is no incentive for him or for her to move out of his or her present service 1621 job into one in the manufacturing industry—indeed I do not think the Government claim that. Then I think I have shown that there is little evidence of over manning in the service industries, so that there will be little opportunity for sacking anybody, except—and this is an important exception—among those who are the most easily disposed of, and I fear those are the part-time worker and the disabled worker, who are not likely to be reabsorbed into manufacturing industry. They will simply become unemployed as a result of this scheme, and I am bound to say that this is an inevitable consequence of the Government's policy.
As for the manufacturers, the Government can hardly suppose that they will rush to take on extra workers at £20 or £30 a week, or more, because a benevolent Minister has been instructed to pay them a premium of 7s. 6d. a week for each person employed. If the Government believe that is going to be the result, then they will believe anything. Indeed, recently the argument that this scheme will produce any significant redeployment is now much less strenuously advanced by Government spokesmen. The noble Lord, Lord Shackleton, said this afternoon that they hoped only for a long-term effect on the deployment of labour in this country.
More and more, this selective employment tax has got to stand or fall as a system of raising additional revenue, and, judged on this criterion, it is seen to be clumsy, to some extent doctrinaire, and inequitable. A catalogue of the absurdities would take far more of your Lordships' time than I feel justified in giving to anomalies of this kind this afternoon; but no doubt other noble Lords, when they come to speak, will be able to point out some of them. The most valueless and even anti-social products are to be subsidised in their manufacture, while services which make a direct contribution to our balance of payments are to be penalised.
Development areas such as Scotland and Wales will be substantial losers through the operation of this scheme, and the money taken out of Scotland and Wales will be redistributed to the richest manufacturing areas in this country, in the Midlands and in South East England. 1622 The old, the disabled, and the part-time worker doing more than eight hours per week will be effectively discriminated against. Someone who produces milk will get no benefit. Someone who bottles milk will get a premium. If your premises are bisected by a public road you may get no premium, but if you carry on an identical business all on one side of a public road you will draw full benefit. This is likely to produce a substantial redeployment of labour to firms building footbridges; but I doubt whether that is the Government's intention. Many services, such as cleaning, which are now most efficiently carried out by specialist firms, will henceforward be less efficiently carried out by separate businesses themselves. In particular, the scheme will hit severely the arts and the theatre, for which the Government promised they were going to do so much.
And so one could go on. But I think I have said enough to indicate the rich variety of the lunacy which is enshrined in this Bill. No wonder the rest of the world has lost confidence in a Government which can perpetrate such folly; and no wonder its popularity here at home has evaporated at a rate faster than has ever been recorded previously by opinion polls since they came into existence. It seems inevitable that this slide in public support will continue, and that the particular Bill we are discussing today will have the unenviable distinction of having made a major contribution to the wave of disillusionment which is now engulfing Her Majesty's Government.
§ 4.45 p.m.
§ BARONESS ASQUITH OF YARNBURY
My Lords, I feel some diffidence in intervening in this debate, as I am not an economist, an industrialist, a trade unionist or even a banker. So at least I have no interest to declare. I am simply an untutored laywoman seeking enlightenment and some hope from the Government Front Bench. But I regret to say that I have received none from the noble Lord, Lord Shackleton. I was sorry to hear him say that this measure was not going to be modified or corrected in any way before it was "launched". Surely, it is better to make a ship seaworthy before it takes the water; surely, it is better than to launch such a leaking ship as this one.
1623 May I first say, with respect, that my reaction to this measure and to the Government's proposals is one of utter bewilderment. To me, some of them have that quality of—I am afraid I have to use the word "inspired" again—inspired irrelevance and inconsequence only to be found in the pages of Alice in Wonderland. In fact, I myself feel rather like Alice confronted by a Government of Mad Hatters and March Hares and one poor little Doormouse who has been firmly stuffed into the teapot.
May I bring to the Government some of my troubles? First, we have been given to understand that many of our present difficulties in the field of what is called productivity arise from a shortage of manpower: that there are at present, not as there was in the past "too much money chasing too few goods", there are now too many jobs chasing too few men. But the deliberate creation of unemployment on a large scale—a scale running into hundreds and thousands—seems to me to be a curious and paradoxical remedy to apply to a shortage of manpower. And may I say that it is the last remedy that I should ever have expected from a Labour Government? I know that the Prime Minister has explained to us in another place that the object of the exercise is what he calls a "shake-out". I am not sure that I know precisely what a "shake-out" means. To me, it suggests turning a dustbin of rubbish upside-down. But I imagine that it is a new economic term for what we used to call a redeployment of manpower. But redeployment surely demands first and foremost retraining. And we have it straight from the horse's mouth, from Mr. Callaghan himself—and here I quote his words:In the current year there are only 6,000 places in training centres—and that by the end of 1967 the total number of centres in existence will be able to turn out 15,000 trained men a year.Six thousand men this year, 15,000 men next year, to meet the needs of perhaps half a million unemployed? A "shakeout" sounds an easy process. It was spoken of lightheartedly. But how and when, I wonder, do the Government propose to shake them in again. That, surely, is the rub. That is one of the questions to which I should like to have an answer.
1624 Employers may well, as it is said, be employing more men than they need. They may be hoarding labour, for quite natural reasons—through fear that when the time comes to expand production they will be caught short of manpower. This is natural, but it is also contrary to the nation's interest. But it strikes me as utterly incomprehensible, to say the least, that they should then be offered by the Government, not a deterrent but a substantial reward—that they should be offered something amounting to a bribe for every employee they hang on to, of 7s. 6d. a head. At this point we pass on to Alice through the Looking Glass.
But this reward is offered only to those engaged in what is called the manufacturing sectors of industry. Here I agree with the noble Lord, Lord Harlech, for the Government's arbitrary definition of what is and what is not "manufactured" seems to me to be illogical, unfair and sometimes utterly fantastic.
Why should the manufacturer of tangible goods be preferred to what we used to call the "invisibles"—invisibles which used in the past to contribute a giant share to our balance of payments? As a nation we have always prided ourselves on living as much on our wits as on our brawn and muscle. Our target at present is to increase our exports. But exports have not merely to be manufactured; they have also to be exported. To move them, they need transport, insurance, and sometimes even need a spot of credit. All these ancillaries are essential to our export trade; we cannot do without them. Surely they, too, deserve rewards rather than penalties.
Again I ask, what is manufacturing? Take the publishing trade, which is an extremely good instance of a hybrid trade which combines the tangibles with the "invisibles". Why do we buy, why do we export, and why do we read books? We do not read them for the paper and printer's ink that is on them; surely, we read them for their content. The newsprint and the paper are simply the concrete vehicles by which this intangible of thought and words is conveyed to our minds. And yet, according to the S.E.T., unless a publisher prints his own book in his own printing works, he is ineligible, and not only ineligible but heavily fined for every single 1625 employee. On the other hand, those who do their own printing receive a gratuity, although they are employing no fewer men than they have ever done before, and this will no doubt encourage them to employ a few more.
I have not mentioned newspapers, but until the end of last week they were included in this dispensation. They have had a dramatic eleventh hour reprieve, for reasons which I think we can all readily appreciate and understand. There is here no guesswork to be done. No one in the past has cultivated the Press with greater assiduity and ingenuity than the Prime Minister. I am throwing no stones at him. In fact, he also has a good weather eye and weather ear, both always at full cock. He heard the rumble of the approaching storm; he knew the almighty hullabaloo which would be raised in the Press if they were penalised. So he wisely bowed to the storm, which would not have been at all to his liking. So here we have an anomaly within an anomaly. While the publishers of books who are unable to raise a hullabaloo are still divided into sheep and goats, the publishers of newspapers are now all sheep, whether they print or not. They go not only untaxed but rewarded.
Incidentally, as the noble Lord, Lord Harlech, has already reminded us, the printing trade is the Mecca of Restrictive Practices and over-manning, and it hereby receives a further endowment. Here, for once, I am speaking about something of which I have personal experience, for I spent two years serving on the first Royal Commission on the Press. During those years I was invited, together with the Chairman and a colleague, to go to see the Daily Express brought out one night. It was a thrilling and most enlightening experience. We went first into the editorial department, where the pace was fast and furious. Then we were taken into the technical department, where the printing processes were carried on. It was like going into another world—a world not of slow motion, but of still life.
We were taken to a long gallery about one-third or half the length of your Lordships' Chamber, where there stood in a row some eighty to a hundred great printing machines. Beside each machine sat a man, immobile as a statue. He never lifted a finger; I never saw one of them even blink. At last, I said to the 1626 managing director, "Do tell me, what is the function of these men? I have not seen one of them move since I came into this room." He said, "Their function is to prevent these machines from working to full capacity. They could turn out something like 90,000 Expresses an hour, but they are not allowed to turn out more than 60,000." "What!", I said, "Are even machines not allowed to do their duty? Why do you tolerate it?" He said, "We tolerate it for a very simple reason, because if we did not we should have a strike, and for a daily newspaper not to appear on one single day is defeat, disgrace, public humiliation; so we put up with it. And we can quite well afford to do so," he added philosophically, "We are making very good profits."
This complacency, this two-way acquiescence in restriction, appalled me. Surely, it is on this attitude that the Government should concentrate their fire—both on employers and employed; it should be a double-barrelled fire. Surely, this is not the way to use our manpower. Instead of which, this is an industry in which they are seeking quite gratuitously to endow. The anomalies and injustices of the lines of demarcation now drawn by the Government between different industries and occupations seem to me as absurd and as pernicious as those drawn by the restrictive practisers themselves, and they are as numerous as the sands of the sea.
The noble Lord, Lord Harlech, has given some instances and I do not want to bore the House by piling Pelion on Ossa. But there is one example which I cannot resist quoting. A man who makes bricks earns his employer 7s. 6d., while a man who lays bricks costs his boss 25s. I will not insult noble Lords opposite by explaining to them that bricks are only made to be laid, but I would ask them, please, tactfully to convey this fact of life to their colleagues in another place.
There is one other instance in the building industry. A factory which makes the component parts of prefabricated houses and other buildings gets a full rebate or bonus, but a firm which makes the self-same identical parts on the building site gets neither. Premises were mentioned by one noble 1627 Lord, I think by the noble Lord, Lord Shackleton, and there is a good example of an anomaly here. Two leading Dundee jute companies are of almost exactly the same size and have almost identical products. Yet one, because its main office staff is housed in one of the mills, is £19,000 better off than the other. I read that in the Sunday Times and I presume it is correct.
§ LORD SHACKLETON
My Lords, might I interrupt the noble Lady for one moment? She ought not to assume that it necessarily is correct.
§ BARONESS ASQUITH OF YARNBURY
Would the noble Lord please check and find out whether it is true? He will know whether it is plausible, because he knows that premises are one of the vital lines of demarcation. In fact, he mentioned them in his speech. I should be most grateful to the noble Lord if he would check on the facts and, if it is true, I hope he will see that it does not happen again.
§ LORD SHACKLETON
I do not know what the noble Lady is asking. It has not happened yet. Will she give me the details? She has made this statement. I do not know whether this has yet been referred to the Ministry, but I do not see how any decision can yet have been reached. I am sure she will withhold judgment until that decision is made.
§ BARONESS ASQUITH OF YARNBURY
Certainly. I have given the noble Lord my source, which is the Sunday Times—a usually responsible and accurate newspaper, but as we know, possibly not infallible. Would the noble Lord inquire about it? It was last Sunday.
Perhaps the most grotesque and self-defeating result of S.E.T. is that the firm which uses labour wastefully will gain by it, and the modernised firm whose production is automated and whose manpower is therefore reduced will now be penalised; in other words, it subsidises redundancy. Surely, the way to spread and use our scarce, skilled manpower is not by these clumsily distributed rewards and penalties, but by putting more power behind each man and by persuading him to use it; as the noble Viscount, Lord Chandos, said in a speech in this House about a fortnight ago, by capital in- 1628 vestment in the modernisation and re-equipment of industry.
That is a doctrine once preached, as the noble Lord, Lord Shackleton, will remember, in bygone years by his Leader, Mr. Wilson, in a most memorable and most inspiring speech at a Labour Party Conference, in which he spoke of "the white heat of the scientific revolution", and of the harnessing of science and technology to the industry of the future. Has he, I wonder, quite forgotten it? I am told—I do not know whether it is true—that our industry is littered with old machinery and still older machine tools. I have been told by one who should know that some of our machine tools date from the last world war.
We on these Benches oppose these proposals. We oppose this measure root and branch, for reasons which I will give. First, we think that this tax will encourage inefficient industries to hoard labour. Secondly, we believe that it is unjust because it will take money from the poor areas without much industry, and give it to the rich industrialised areas. Thirdly, we believe that it is inhuman because it will penalise the old, the disabled, and many other part-time workers. We believe, in addition—and I think everyone would agree—that, in particular, it will penalise women who should be encouraged to play their part throughout the whole length and breadth of British industry, and who are eager and anxious to do so. Many of them, as we all know, are perforce part-time workers, and those who work whole-time are often obliged to employ home helps to make good their absence, and they will in future very likely be unable to afford them. May I also remind your Lordships that it is among this last class that the women teachers are to be found, of whom the Government, and indeed the nation, are in such dire need?
The Government have themselves admitted that this tax is what they call "a blunt weapon", but they have added, "We will refine it later on". May I appeal to them urgently to refine it now, to bring it into some kind of accord with reason, justice and common sense, before asking us—a thinking body of men and women—to pass it into law?
§ 5.4 p.m.
§ LORD CONESFORD
My Lords, many of us find it rather distressing that 1629 a noble Lord, for whom many of us entertain so much respect as we do for the noble Lord, Lord Shackleton, should have been saddled with the task of commending this absurd measure to the House. In a speech of studied moderation a week ago, I described the selective employment tax as the most morally and intellectually contemptible measure that any of us could remember. There is some reason to think that the Prime Minister perhaps agrees with this description. That may be the meaning of his extraordinary statement which was given great publicity in Washington. He said:We have taken steps which have not been taken by any other democratic Government in the world.How right he is! No other Government, democratic, or even tyrannical, has ever sought to pass a measure of quite the insanity of this measure. It was subjected to an admirable analysis, both by my noble friend Lord Harlech and by the noble Baroness, Lady Asquith of Yarnbury.
It really is tragic that, at this state of the economic emergency in which we find ourselves, a measure should be persisted in which can only injure our economy further and produce the ludicrous results that have been pointed out both in this House and in another place—and not only from the Opposition Benches; they have been pointed out with eloquence and force by Back-Benchers who normally support the Socialist Party in both Houses. While, thanks to Mr. Speaker's Certificate, we have no responsibility whatever for this Bill, and the selective employment tax, the case against it is so overwhelming that to deploy that case at length would be tedious and futile. I agree entirely with the points made by my noble friend Lord Harlech, and with the great majority, if not all, of the points made by the noble Baroness who has just sat down. I think, perhaps, the only point on which I should not completely agree with her—but I shall study her words in Hansard—is what she said on the subject of unemployment, because on that subject I find myself, for the reasons I gave last week, in complete agreement with the noble Lord, Lord Robbins.
The absurdity of this measure results, as has been pointed out by the last two speakers, front its economic idiocy. It is 1630 actually calculated to injure our balance of payments. The whole distinction between manufacturing and service industries, on the footing that the former industry is good and to be favoured, and the latter is questionable and to be penalised, would never occur to anyone capable of the smallest understanding of economics or logic, or even with any knowledge of history or the contemporary world. The noble Baroness, Lady Wootton of Abinger, in a most interesting speech which she contributed to one of our economic debates last week, said how sorry she was that Maynard Keynes was no longer with us. I have never shared the view she then expressed more emphatically than I do to-day, when I think what that master of economics would have said about the Government's economic measures which they are persisting in to-day, and, above all, the Bill which we are considering this afternoon. After all, my Lords, we have had some very great economists in these Islands, from Adam Smith to Maynard Keynes, and we have some to-day. It seems very sad that the Government do not see fit to consult any of them, but seek advice from such very different men.
Consider some of the consequences of this measure. The noble Lord, in introducing the Bill, said that many new entrants into industry entered service industries rather than the manufacturing industries. That may well be. In every advanced economy in the world the tendency is for people to spend a higher proportion of their incomes, as those incomes grow, on services, and a lower proportion of the increment on material objects. Nor is that a bad tendency. To discourage that trend would not prima facie be right. There is no a priori distinction such as is sought to be drawn between the utility of the manufacturing industries and the uselessness of the service industries.
Let us think what the service industries do. The services that these industries perform are often specialist services ancillary to the exporting industries. If all the exporting companies in one particular industry, instead of doing all their services themselves, using men they themselves employ, go to a specialised service industry to have those services performed, is that a bad thing? Has it 1631 not been known to be a good thing ever since Adam Smith, if not before? My Lords, men must now be employed in the manufacturing industry itself in order to attract the premium; and, of course, any of the efficient service firms who carry out specialist services for a number of companies may find it very difficult to carry on with the same efficiency. Manufacturing industries will be able to meet the situation, if necessary, by becoming less efficient and transferring the charwomen, and so on, from outside to within their own works.
What does the selective employment tax itself do? What is its economic effect on prices? Unless it is to tend to increase prices uniformly everywhere—not a very good thing to do, I should have thought—its tendency must be to shift purchasing power from services to goods. It will tend to make the goods cheaper and the services more expensive. But that, of course, will be bad for our balance of payments, since the goods have a higher import content than the services.
Let me call attention again to the excellent example given by my noble friend Lord Harlech, who opened the debate on this side. He mentioned our invisible exports. Of course, our invisible exports are vitally important. He referred to the insurance industry, and he was absolutely right in what he said. But I would add one further consideration to those that he put forward, and that is that our insurance industry makes its enormous earnings, which contribute to our invisible exports, without using imported raw materials. That is the difference between our great service industries and some of the useless manufacturing industries that the Government see fit, indiscriminately, to encourage.
My Lords, when the Prime Minister, some months before he was responsible for introducing this insane series of measures, wanted to call attention to what he thought was a useless industry that might be discouraged, he gave as his example, if my memory is correct, the manufacture of candy floss—a manufacturing industry. He did not choose a service industry: he chose a manufacturing industry—the manufacture of candy floss. All these manufacturing industries, 1632 quite irrespective of their utility to the nation or what they are doing, are to benefit. And, as both my noble friend Lord Harlech and the noble Lady have asked who is it that is wasting labour? Every scandalous example that has been put before either House of Parliament, or has been mentioned in the Press, is a manufacturing industry, which is now going to be paid a bonus for every man it wastes.
When I asked a couple of Questions on the position of the London Press, I did not do it with any hostility to the London Press. I enjoy my Press, I suppose, as much as anybody else. What I wanted to invite the attention of Parliament and the public to was the waste of labour in this industry—the proved waste of labour—and the fact that they were going to be rewarded by receiving a premium from the Government for every man they wasted. May I remind the House of the Question that I put on July 12? I asked an earlier Question on June 21, and I asked another Question on July 12. Any noble Lord interested might well refer to the Questions and the Answers given on both occasions, but part of the Question I asked on the last occasion about the London newspapers was:how many modern printing presses, each needing not more than 3 operators instead of the 14 previously employed, have been installed by proprietors of London newspapers and have been in use for some years; …The next part of my Question was:how many men are now being employed for each of the new presses"?—[OFFICIAL REPORT, Vol. 276 (No. 35), col. 70; 12/7/66.]To these two questions the noble Lord who is to wind up this debate replied:The information asked for in the second and third parts of the Question is not available".There are not so many London newspapers that it would have been beyond the capacity of the Government to find out the answer to that Question if they had wished to. My information is that there are such presses, requiring not more than 3 men and using 14, which for years the trade union chapel concerned has insisted should be manned by the full 14. I believe this House is virtually unanimous in believing that that is the sort of wastage of labour which this country cannot afford at the present juncture. And it is a form of wastage which the Government propose actively to reward.
1633 To this scandalous use of the monies raised by taxation which are to be used to pay the Luddites in order to encourage them further, to this lavish use of taxation, let us contrast the treatment of charities. They have been savagely attacked in a way in which, I think in the whole history of Parliamentary legislation, they have not previously been attacked. It is true that there is now a clause which provides for returning to the charities after some months the money taken from them. Everybody was conscious of the original gap of five months; but there is going to be a subsequent gap, forever, of up to three months during which they will always be in arrear. Meanwhile, they have to make an interest-free loan to the Government—interest-free at a time when bank rate is 7 per cent. and when one can get that return, approximately, from investing in Consols.
I ask again, as I have asked before: Why should the Government be demanding a compulsory loan from charities rather than lending money to charities? Why do the Government not tell us which part of the work of charities they desire the charities to abandon? In the course of my life I have served on some charities; and I still serve on some. I doubt whether the Government have any sense of the outrage and anger with which this attack on charities is regarded by opinion generally. I suppose we shall be told that it is social justice. It certainly is not justice.
There is only one other matter to which I would refer and I do not think this has yet been mentioned by any of those who have spoken. It is the Parliamentary outrage of this Bill. Here I am not referring merely to the speed with which it has been put through or to the use of the guillotine or to the shutting-out of argument or to anything of that kind; I am referring to the provisions of the Bill itself as it now comes before your Lordships' House. It has long been the tradition and practice of this country that the incidence of taxation shall be determined by Act of Parliament and that, if necessary, the subject can have recourse to the law courts if he is wrongly charged with a tax. Now we separate in different Bills the actual raising of the tax from the returning of the money that has been paid and in some cases giving a premium.
1634 The determination of how taxation falls, that is to say what the individual citizen or individual company ultimately has to pay or receive under this measure, will not be determined by Act of Parliament; it will not be determined by anything that can be raised in the House of Commons (except, I think, with great difficulty) or in this House. It will depend upon the discretion of the Minister. The ipse dixit of a Minister will decide whether Company "A" pays and Company "B" does not or vice versa. I am not going to repeat all the points in the Bill in which one can find this discretion, but, for the benefit of those who wish to look, I shall give just a few examples: the power given to the Minister of Labour and the Minister of Technology under Clause 1(2); the power given to the appropriate Minister under Clause 2(2); the power given to the designated Minister under Clause 3; the power given to the appropriate Minister under Clause 4; and the power given to the Minister under Clause 10(3)—which is one of the subsections to which the noble Lord, Lord Shackleton, very rightly referred.
The noble Lord, Lord Shackleton, pointed out, that by using the powers conferred by that subsection the Minister would be able to avoid a lot of absurd results. Quite true; but he need not—and, if he does not, there is nothing one can do about it. And if he treats one company in one way and another in an exactly similar position in another way, nobody will be able to do anything about it. The House of Commons will have abandoned all control by passing this measure over which we can do nothing. I imagine further that the Minister's action will not even be published; there will be no publication of how he has dealt with an individual company under Clause 10(3).
At least, so I believe; and if I am wrong about all this I hope the noble Lord who is to answer will correct me. I say that this action was in absolute contempt of Parliament.
My Lords, I served as a Back-Bencher and as a Minister in Winston Churchill's war-time Administration. This country was sometimes under bombardment, we were fighting for our life; but throughout, whatever the difficulties, Winston Churchill managed to show respect for 1635 Parliament and to consult the House of Commons as much as possible. It does not really help the Government to achieve any worthy object to treat Parliament in the way in which it is now being treated. My noble friend Lord Hawke asked for some figures which—and I agree with him—he thought we might well have had at the beginning of this debate. I wonder if noble Lords, wherever they sit in this House, are quite happy on reading this Bill and the Finance Act about the way we are treating our old canons of taxation: taxation should be simple to administer, clear and certain, and economical in administration. My Lords, none of these things is true about this selective employment tax. To persist in it, as the Government are persisting in it, when Ministers have no answer to the major criticisms that have been made is effectively to prevent our recovery.
§ 5.30 p.m.
§ LORD DARWEN
My Lords, my purpose in intervening in this debate is, quite simply, to invite my noble friend who will reply for the Government to make known the Government's reasons for amending the Bill so that the publishers of newspapers and periodicals are entitled to claim the refund and a premium, while book publishers are entitled to claim neither. So far there does not seem to have been any rational explanation advanced for this discrimination. I am entirely in favour of newspaper and periodical publishers being granted a refund and a premium. In the White Paper which preceded this Bill they are classed as manufacturers, and so indeed are the publishers of books. Both produce a marketable product. The question is, wherein are book publishers different from the publishers of newspapers and magazines?
The effect of the discrimination appears to be, for example, that the publishers of "comics" and the more lurid type of magazines are exempt from the tax, whereas the publishers of textbooks and works of scholarship will be penalised by it. If the reasoning behind this decision is that many newspaper and magazine publishers have their own presses while others have not, and the Government wish to avoid unjust anomalies, then it is equally true that some book publishers 1636 own their own plant and others do not. Size is by no means a criterion. The publishing function in either case is the same and means that the inception, planning and progressing of a book through all its stages is done in a publishers' premises—not to use the apparently offensive word "office". This is true of newspapers and magazines just as much as it is true of books. Quite apart from the cultural and educational value of books, from the point of view of exports—and I am perfectly well aware that this Bill is not, as such, interested in exports—it is true that out of the total of £70 million worth of printed matter exported, £45 million worth is books. Moreover, the publishing industry has a record in that it exports 44 per cent. of its turnover. The Government might bear this fact in mind, and also that some publishers are both magazine and book publishers; an obvious example is Odhams. Is it, then, really the intention of the Government to give certain publishers an advantage over others? I find it difficult to believe that is so.
In a letter dated July 29—a week before the Government Amendment was accepted—which the Chancellor of the Exchequer wrote to me, he gave his reasons for not having allowed either newspaper publishers or book publishers the chance to claim a refund on books, or a premium. He does not appear to me (I say "appear" advisedly, because he may feel that there is a difference) to discriminate in his reply between these two categories of publishers. Certainly both are classified in the White Paper as manufacturers. In his letter the Chancellor does not suggest any line of reasoning which might at any time have led me to discriminate between the two types of publishing. I should, perhaps, rather belatedly, say I have been a publisher, I am still a publisher, and I have worked not only in book publishing but in magazine publishing. For the life of me, I cannot understand why there should be this, to my mind, quite illogical separation, and I look forward very much to the explanation by my noble friend of why the Government have decided to discriminate in the way they have.
§ 5.37 p.m.
§ LORD BARNBY
My Lords, this Bill certainly had a good trouncing from my noble friend Lord Harlech who spoke 1637 from the Opposition Front Bench. He referred to points with which I particularly wish to deal and I will do so in a minute. Incidentally they also have been mentioned by my noble friend Lord Conesford, who always speaks on these industrial matters from much administrative Parliamentary experience; but I should like to take the opportunity to make a few remarks about matters on which I feel strongly regarding the Bill. I should first like to pay a tribute to the lucid and explanatory speech of the noble Lord, Lord Shackleton, who opened the debate on this Bill. My main reasons for adding to the remarks of my noble friends are the misgivings which one feels about the continual addition to bureaucracy, the mass of legal or administrative matters which are imposed on business people, and the tremendous additional burden of dealing with all these regulations. There is a feeling that this, on top of the other Bills, has formed a kind of panic series of measures, obviously imposed at short notice and for that reason made more difficult to explain. I got some consolation from the noble Lord, Lord Shackleton, when he said that modifications and refinements are not ruled out. It is to be hoped that many anomalies and discriminations, which this Bill inevitably must develop, may be corrected. I would refer to the difficulty of defining "establishments". Goodness knows, that must puzzle a great many business men who are anxious about how this Bill will fall when the chips are down.
There has not been much reference to the "early warning" demands made by recent legislation, but they caused me misgivings, as did the National Plan, which has now been thrown overboard. I was among those who felt that it would not have been effective, even though it was agreed to by the then Federation of British Industries, now the Confederation of British Industry. In a free market economy, many of these measures which have been brought forward and passed into law are contrary to the conceptions on which business men have always worked in this country, and inevitably there is going to be a good deal of resentment, although there is no point in repeating the scathing indictments which have been made.
1638 Reverting to the "early warning", I ask how on earth can this be done in the case of services, which must necessarily change their costs because of the changes in the prices of food, edible supplies and raw materials where it is difficult to avoid volatile changes? Then there are the redundancy payments. It is true that many small businesses will find themselves sorely pressed in forthcoming months, and when, on top of all the other anxieties of running a business, there is the difficulty of making these payments, the managements of even medium-sized businesses, themselves assured of their salaries and perhaps of an automobile, will find it profitable to continue to operate at a loss rather than face an immediate decision of shutting down, remembering the burden that redundancy payments will place on them.
I rose particularly to repeat the hope that in winding up the Minister will give some additional interpretation—the noble Lord, Lord Shackleton, skated over it; he hardly referred to it in opening—of how firms who are leaning heavily on their bankers are going to be able to find the money for these payments, which, as my noble friend Lord Conesford emphasised, will be interest-free loans to the Government for five months. How are they going to find this money at a time when the banks themselves are right up to the limit of what they can lend and are saying that they have difficulty in finding enough funds even for exports? This must cause great anxiety throughout industry, apart from the inequity of forcing industry to make an interest-free loan when interest rates are so high. I hope that the Minister will give some more explanation of how this apparent anomaly is to be dealt with.
§ 5.47 p.m.
§ LORD ABERDARE
My Lords, like the noble Baroness, Lady Asquith of Yarnbury, I find myself taking part with a certain amount of diffidence in an economic debate, although the noble Lady certainly showed no diffidence and, indeed, showed a great grasp of economic facts. I can only claim that for a short time whilst at Oxford University, I studied P.P.E. I have a feeling that if I had prepared an essay for my tutor in which I had put forward the suggestion of a selective employment tax such as the present one, he might well 1639 have advised me to take up some other subject.
The general case against this Bill has been put with great clarity and cogency by my noble friend Lord Harlech, and the only reason I venture to take part in this Second Reading debate is that this tax reacts very unfavourably—in fact, it is liable to do a great deal of damage—in the fields in which I am particularly interested. In the last few years since I have been a Member of your Lordships' House I have spoken on subjects such as education, the youth service, the countryside, the arts, broadcasting and sport. And all these worthy objects are going to suffer very much under the selective employment tax.
The common factor that runs through all these subjects is the fact that a large part is played in them by voluntary endeavour and non-profit-making societies. In all of them there are bodies of people who have come together voluntarily to do some service for their fellow human beings, a service which is much appreciated by many Members of your Lordships' House who serve on these very committees and societies. I had hoped that the noble Earl who leads the House might have been here at this moment, because he has taken part in nearly all these debates and not only has shown great wisdom and knowledge of these subjects but has treated them with a great deal of sympathy. However, I am sure that the noble Lord, Lord Champion, whose heart is certainly in the right place, will equally show some sympathy for the causes I have in mind. In a recent exchange at Question Time he described this tax as a "blunt instrument". I am appealing on behalf of some of the innocent victims.
My noble friends Lord Harlech and Lord Conesford have mentioned the inequity of forcing loans out of charities. I cannot believe that there is any real reason for this, and that there could not have been found an administrative way of exempting them from the tax without forcing a loan. For example, surely they could have been provided with a special charitable stamp to put on their cards. This would have been quite simple; and the checking of such cards would, surely, have been no more difficult, from an administrative point of view, than the 1640 organisation required to check their claims for refund and to make payment of them.
But, charities apart, there are many organisations within the fields that I have mentioned which are going to suffer badly. Let me take some examples. Take the arts, mentioned by my noble friend Lord Harlech. Many of us on both sides of the House have been pressing for a long time for more money for the arts. We have been pointing out that private charity was unable to give the support it had given in the past, and that large benefactors no longer existed; and we were appealing for more money for the Arts Council. On both sides of the House, I think, we were much encouraged by the efforts of Miss Jennie Lee when she was appointed by the present Government. I have a great admiration for the work that she has achieved. But now, having got increased grants, the arts are to suffer from this incredible tax, and many struggling theatre companies, orchestras, opera and ballet companies, are going to have to find more money to pay it.
Then, take sport. Much of our sporting activity is provided by voluntary effort. There are innumerable small amateur clubs up and down the country promoting their different types of sport, trying hard to make both ends meet, and whose very existence is threatened by this new tax. Without going into individual details, it is surely sufficient for me to mention the protest that has been made by the Central Council of Physical Recreation, which more than any other body represents the whole of amateur sport. The Government themselves make a substantial contribution in the form of grants to the Central Council of Physical Recreation, and they depend on it very largely when it comes to advice on matters concerning sport. They depend on the local regional secretaries to service their Regional Sports Council.
Now the Central Council have protested against this tax. Perhaps I may refer to a letter which they sent to the Chancellor of the Exchequer expressing deep concern about the effect of the tax on the development of amateur sport and physical recreation in Britain. The letter points out that the application of the tax appears to be inconsistent with the declared policy of the Government to 1641 promote the development of sport through co-operation with the voluntary bodies concerned. These bodies have to struggle to make ends meet, and the tax must inevitably curtail their activities. The letter makes the further point that the tax will affect many local sports clubs which, with the help of grants from the Department of Education and Science, have provided increased facilities, at no cost in most cases, to local authorities. If the Central Council of Physical Recreation can use those words, then I am sure your Lordships will agree that there is a great burden falling on amateur sport. In fact, it has been estimated at a figure of some £500,000 a year.
Education is another example of the inconsistency of this tax. Here there is further discrimination between schools which are charities and schools which are not. In the sector of independent schools, of the 1,545 recognised as efficient by the Department of Education and Science, 758 will get a refund and 787 will pay the tax. Where is the logic in that? Moreover, of the schools that will be taxed and get no refund, 540 are boarding schools, which essentially need more staff than day schools and therefore will have to pay more of the tax. At a time when there is not enough boarding school education provided by the State, it seems wrong that these boarding schools should be penalised. Equally, another need in the field of education not fully met by the State, and which private endeavour is hard at work trying to provide, is that of nursery schools. Here, again, there is a tremendous amount of development work to be done; and here again they are penalised for their efforts. Then there are 91 independent establishments of further education that will pay.
It is surely wrong to expect education of any sort to pay a tax of this character. It struck me that it was an argument very much for use in this House when an Amendment which had been put in by the Opposition to exclude all education from the tax was never even called in another place owing to the guillotine procedure. I thought to myself that here, at least, was an argument for your Lordships' House, where an Amendment of that importance could have been fully considered. But unfortunately the Bill 1642 has been classified as a Money Bill, and we shall not have the opportunity of discussing any such Amendment.
Take broadcasting as another example of the fields where this tax is unworthy and useless. The B.B.C. have for years been seeking more money for providing the services for which responsibility has been laid upon them. After a lot of hesitation, at last the Government raised the licence fee. But the amount it was raised by came too late, and the B.B.C. are still in financial difficulty and having to rely on their borrowing powers. What a time to lay a further burden upon them by making them pay this extraordinary tax! Then, take the Youth Service as a last example. What a service, again, to penalise by discriminatory taxation! Luckily, I imagine that most of the organisations concerned in the Youth Service are charities and will thereby escape some of the burden of tax. But I know from my experience that the Y.M.C.A. are having to find £125,000 a year to meet this tax, and if they have to pay and only reclaim every quarter, they will have a false loan every quarter outstanding to the Government of over £30,000.
I can make no sense of this tax in the fields that I have described. When the Conservative Government were in power it was recognised that there might well be shortages of manpower in British industry. It was a Conservative Government, in 1963, that setup the Ministry of Labour Manpower Research Unit. For this reason we considered an employment tax to dissuade employers from hoarding labour, coupled with incentives to install labour-saving machinery. But this selective tax, as has been ably described by others of your Lordships, encourages manufacturers to hoard labour, and at the same time discriminates against a wide range of non-profit-making organisations and voluntary societies whose work is wholly admirable. Those of us who were used to foretelling the future weather by the barometer were accustomed to the expression "Set fair". I would suggest to your Lordships that we now have something to be known as "Set unfair".
§ 6.0 p.m.
§ LORD DENHAM
My Lords, it is usual in your Lordships' House to declare an interest so that noble Lords may 1643 consider one's speech against the background of any bias that might be influencing it. But, such is the muddle of this Bill, that though I gladly declare my interest, I cannot for the life of me see in which way the financial interest is in danger of influencing me. But for what it is worth, I own a business which consists of two retail shops and one workshop. I rather fancy that my business, on the whole, gets the premium, but in spite of that I agree with my noble friends that this is a thoroughly bad Bill.
At this stage I should like to ask one question, the answer to which I should be most grateful to receive when the noble Lord replies. The noble Lord, Lord Shackleton, dealt with cases where there are two types of business being carried on in the same establishment—say, a workshop and a retail shop—by different people. But what is the position when the same people who manufacture the goods also sell them, such as in a saddler's shop, a tailor's or a shoe maker's? What does that become? Is it a manufacturing industry, or is it a retail shop?
This Bill discriminates between industries, as it is intended to, but it discriminates between a great number of things which it is presumably not intended to. Many of these have been dealt with by my noble friends, and I support all they have said. I should like to deal with the way in which, perhaps not meaningly, the Bill discriminates against the small business as opposed to the big business. In a small business, the selective employment tax will form a much larger percentage of the total payroll than it will in a large business. As such, it will be very much harder to carry. In a small business, even when the firm concerned has the sum repaid, or even gets the premium, carrying the money lost until the sum is repaid will be much harder. Thirdly, a small business stands much less chance of being able to cut down on its staff, and so keep down its labour expenses. Fourthly—and perhaps worst of all—is the amount of book work, which in a small business becomes very great indeed.
Perhaps noble Lords opposite do not realise the amount of book work involved every time a change in taxation 1644 takes place. When the Chancellor of the Exchequer uses the regulator for altering the purchase tax, my particular business has to do 631 different sums before 9 o'clock next morning when the doors open. This tax will create a large amount of book work. In the first place, the people concerned will have to read the explanatory leaflet about which the noble Lord, Lord Shackleton, was talking and which explains how one applies to get into the various categories. Government booklets are not usually very easy to understand. Secondly, they have to apply on a form, in the right way at the right time, in order to decide their category. Thirdly, paying these various payments for the employees in the firm will mean a great deal more book work. Fourthly, they have to keep records which must be produced whenever the inspector of taxes or the Minister requires to see them.
I feel that one of the worst results about a tax of this kind is that we are gradually becoming more and more a nation of tax dodgers; and the more unfair the taxes seem to be, and the more they discriminate, the more we are liable to bend the law whenever we possibly can in order to avoid tax. I am quite certain that this Bill will add to this attitude in this country, for it is a Bill in which justice is not only not done, but is seen not to be done.
§ 6.6 p.m.
§ VISCOUNT MASSEREENE AND FERRARD
My Lords, my first reaction on reading this Bill was to feel speechless. It was then to feel sick, and now I am rather between the two. I am in rather a predicament. Like my noble friend who has just sat down, I have an interest to declare. I am in the fortunate, or unfortunate, position of being on both sides of the fence, because I have an interest in manufacturing and in agriculture. So I am rather like Nathanial Gubbins used to be—I am sitting on the fence.
I think this is a bad Bill. From my point of view the chief objection to it is that it is unfair in its application, and I do not believe that it will drive labour into the manufacturing industries. It will, of course, raise a certain amount of revenue for the Government, but only a small amount. It will also produce 1645 quite a large interest-free loan for the Government. How much more satisfactory if only the Government had had a flat rate, paid by all employers, say of 7s. 6d. per employee, through all branches of industry. The sum of 25s. is really too much. I have tried hard, but I cannot understand the excuse that it is to redress the balance between amounts paid in tax by the services and the manufacturing industries because, so far as my practical experience goes, the service and the manufacturing industries pay the same tax. Purchase tax cannot be counted as a tax on the manufacturing industries; it is a tax, surely, on the consumer.
We are being asked to invest more capital in our manufacturing industries and in agriculture. At the same time, Her Majesty's Government are taking £500 million from employers in the first five months and of course £300 million a quarter after that. But I agree that, provided we are in the right industry, we shall get it back, and a premium. At the same time, it is a great drag on industry to find this extra money for five months.
When it comes to agriculture, I really do feel sick, because here we have an industry which already owes the banks over £500 million. It is an industry that every year reduces its labour force by between 25,000 and 33,000 workers. It increased its productivity last year by 12 per cent. Why on earth should agriculture make this forced interest-free loan to the Government? The excuse of economy of labour cannot apply here, as agriculture is the most economic industry, as regards labour, in the whole country. What, then, is the object? It is only needlessly swelling the Civil Service. There will be a tremendous amount of paper work to be done by the Civil Service and also by private employers in respect of this tax.
Her Majesty's Government talk about economy in the use of labour but they do not practise what they preach; they enlarge the Civil Service. For instance, we are going to have the Land Commission, the National Plan, selective employment tax and so on. All these organisations will require a great increase in the Civil Service. I understand that already under the Labour Government we have had an increase of about 12,000 in the Civil Ser- 1646 vice. I have a very high regard for the Civil Service, but no matter how high our regard one cannot, from the very nature of their occupation, call them a productive section of the economy. This increase in the bureaucracy is a great weakness in Socialist planning.
As to the alleged object of the selecive employment tax, to drive people into productive work, or, as the Government say, into the manufacturing industries, I think the Government are making a great mistake here, because presumably the service industries will dismiss their worst labour and I doubt very much whether the majority of the labour dismissed by the service industries can be incorporated into manufacturing. In any case, as the noble Baroness, Lady Asquith of Yarnbury, said (and I hope I am not misquoting her), before the average person can be incorporated in a new job in a manufacturing industry that person has to be retrained. At the moment the retraining facilities in this country are too small to cope with the great influx of people who will be coming from the service industries and requiring new employment.
The Government are also rather in dined, it seems to me, to overlook the human element, because there will probably be a large number of people from the service industries who will have no desire to work in a factory, and it is surely highly undemocratic to force them into such work. We have to-day a very generous Welfare State, and I think it will be found that quite a number of these people will prefer to be idle rather than go into uncongenial work in a factory, and work to which they are not suited—and, personally, I do not blame them.
Another bad aspect of this tax is that it will adversely affect the housing drive. A builder told me the other day that in his opinion it would add £150 to the cost of a £3,000 house. Moreover, the construction industry which builds the houses will, presumably, dispense with quite a large part of its labour force, so the Government's housing target will not be met. I should also like to take up the question of the Press. It is really extraordinary that the Press have been put in this favourable position of being regarded as a manufacturing industry. As the noble Baroness, Lady Asquith of Yarnbury, also told us, it is universally 1647 known that in the printing trades there is an astounding misuse of labour through restrictive practices.
As I think has been said, the areas of the country which will prosper most from this tax are those which are at present most prosperous; namely, the Midlands and the South-East of England. In one part of the country in which I am interested, the Scottish Highlands, the majority of the workers are employed in agriculture, tourism and afforestation. In fact about 80 per cent. of them are employed in the service industries, and when we have just had a Highlands Development Board appointed to help the Highlands it seems crazy that the Government are now, in effect, going to chop off the Board's right hand. I cannot understand it.
As I have said, this is a thoroughly bad Bill, because it discriminates between various sections of the economy, and, as some noble Lords have already said, discriminates unfairly. Another point that I do not like about it is that, so far as I am aware, there is no appeal to the courts. This is surely a very bad omission from the Bill. There is a right of appeal to a tribunal, but not to the courts. Another bad thing, as I believe has already been mentioned, is that this is a major tax which is being operated other than through the Inland Revenue or the Customs and Excise Department. That is surely a very bad precedent.
What is this tax going to achieve in terms of money? So far as I can discover, it is going to take £1,300 million out of the economy from the employers per year, and after all the refunds have been paid back, and the premiums, the Exchequer will be only £240 million better off. Surely from the point of view of raising money for the Exchequer it would have been far better to have an ordinary payroll tax—because this selective employment tax is going to be a paper chase, a wild-goose chase from the point of view of the economy. It will not help exports because, as we have heard, it is going to be harmful to our banking, insurance, tourism. It is quite obvious why the Chancellor has done it: His attitude is: tax employers; you are all right because they have not got many 1648 votes, but of course do not tax the majority of the electorate. That is why he has done it, in my opinion. I deplore the discrimination and anomalies of this tax—because it is a really unfair tax—and I cannot see its achieving the object for which it has been drawn up.
§ 6.22 p.m.
§ LORD WINDLESHAM
My Lords, I should like the opportunity to intervene very briefly on the principles which lie behind Clauses 5 and 6 of the Bill. They are the ones that concern refunds for charities and for certain households. In doing so, I declare an interest, in that I am associated with one of the major health charities. I listened carefully to the noble Lord, Lord Shackleton, when he introduced the debate and when he ran through the principal clauses of the Bill, and indeed thought of interrupting him after he had dealt with Clauses 5 and 6, but I thought it would be more polite if I waited till the end. I am still not clear about the principles behind these two clauses. This is a question which can legitimately be put to the Government on Second Reading.
I would ask the noble Lord who is to reply whether he can spell out why it is that after charities and certain household employers have established a case to the satisfaction of the Government, after making representations, after discussing those representations with the Government, and having achieved exemption they are still required to pay substantial sums over a period of, I think, thirteen weeks or three months. As some noble Lords opposite may know, this means, in the case of the British Empire Cancer Campaign for Research approximately £5,000 for a thirteen-week period; for the Y.M.C.A. my noble friend Lord Aberdare mentioned a figure of over £30,000 for a thirteen-week period. I should like to ask the noble Lord who is about to reply whether he could give us in more detail the Government's reasoning as to why the charities and special householders are still being required to find these substantial sums of money.
§ 6.25 p.m.
§ LORD ARCHIBALD
My Lords, I intervene for a moment or two on what might be regarded as basically a Committee point, but I think it might be more reasonable to bring it up at this 1649 stage. I apologise for not having been here during the earlier period of the debate—I could not be here—and it may be that the point has been made. I also apologise to my noble friend Lord Champion for not having given him any notice of my intention to raise this point. My excuse for that is that it was rather late that it dawned on me what exactly was the meaning of one provision in the Bill: I refer to Clause 1(2)(a)(ii). Clause 1 refers to the employment or industries which will get the premium repayments, and the paragraph to which I refer says that the clause shall apply to any employment in an establishment engaged in:activities by way of the manufacture from exposed film of cinematograph films for public exhibition …At first sight that would seem to indicate that the production of films would qualify as a manufacturing industry. But I believe, on looking at it more closely, that that is not the case. I hope that my noble friend will be able to tell me whether I am wrong in my interpretation of the matter as it now stands. I believe that under the Bill manufacturers of what is called raw stock are manufacturers for the purpose of the premium payment; that is to say, firms like Kodak and Ilford and Gevaert, which produce the raw material—and I may say, in passing, that raw material, the raw stock, is completely valueless until somebody uses it to make the film. Then the film producer comes along and organises the making of the film, including the building of sets, the organisation of artistes and camera crews and sound experts, and so on, and they, over 10, 12, 15 or more weeks, make the film. Having, as I would put it, manufactured that film, produced that film, they will then have, as the Bill puts it, "exposed" the film. That exposed film goes to the laboratory to be processed. As I understand it, that would then be classified as a manufacturing establishment and, as such, would be entitled to the premium. But the original raw stock is valueless until the producer makes the film, and until the producer makes the film there is nothing to deliver to the laboratory for them to process.
The logic of this completely escapes me. The people who make the raw stock are manufacturers for the purpose of the premium. The people who produce the film at the end are also manufacturers. 1650 But the actual film producer, who turns the raw stock into something valuable, into a commodity which can be handled, which can be seen, which can be weighed, which can be exported, is not a manufacturer. Yet the film studio where he makes the film is classified under the Factories Acts as a manufacturing place, and when the film producer comes to export his film he gets the benefit of the export rebate. Under all sorts of different Government regulations the making of films is accepted as being a manufacturing process. Why not under this Bill? I think the answer is probably that when the classified index (or whatever it is called) was drawn up, films were put into the wrong category, because it was tidier from the point of view of international statistics. But that is not a good enough reason. If films were put into the wrong category because it was tidier for international statistics, they should have been taken out of the wrong category and put into the right one for the purposes of this Bill.
I do not know whether it is possible to put down an Amendment on Committee stage, or whether there will be an effective Committee stage. But I think the point should be made now that this seems to be a complete absurdity, and I hope that it can be reconsidered before it is too late.
§ 6.32 p.m.
§ LORD NUGENT OF GUILDFORD
My Lords, we have had an interesting debate this afternoon which has ranged over many aspects of this Bill. As usual, except for the Government Front Bench the Bill has not won any friends to speak for it, unless the noble Lord, Lord Champion, would count his noble friend Lord Archibald as speaking in its favour. It sounded to me as though it was going to be a fairly difficult ball to stop when he came to deal with it. Not only have noble Lords made critical noises about it, but also the noble Baroness, in a most effective intervention. Although the House is a quiet one, as we move on into what used to be the holiday month of August I would say to the noble Lord who is going to reply that we speak more in sorrow than in anger over a Bill that must be a matter of regret to almost everyone in Parliament outside the Ministerial team.
1651 I would, of course, thank the noble Lord, Lord Shackleton, for explaining the Bill as it is written in its Bill form, although nothing can explain the purposes for which it is supposed to have been designed. This selective employment tax is a complete innovation in this country. The effects are unpredictable. I am sure that noble Lords on the Front Bench opposite would not like to predict what will be the effect of this Bill on the industrial and commercial life of this country in five years' time. It is bound to have a considerable, far-reaching effect, and in my judgment one of serious distortion. Its two objects, of deflation on the one hand, and a brake on service industries on the other, are both unpredictable.
It has already been announced here to-day that the Bill has been certified as a Money Bill, and therefore we have no opportunity to try to improve it in Committee. I feel that with a Bill which is, by its nature, likely to be certified, it was most regrettable that in another place the guillotine procedure should have been used, which has very much shortened the debate on an immensely important, far-reaching Bill which is going to affect so many aspects of our lives. We are now powerless to amend its worst horrors. In fact, I suppose it would be true to say that I am now saying some of the last few words over this Bill. I only wish I could throw in a few handfuls of earth after it, and it would go unwept and unsung as we put the lid on it. It really is a monster.
The other place had only three days in which to discuss 315 Amendments. It is no wonder that we hear from Lord Archibald to-day the comment that he made on the film industry, which of course is one of the many anomalies with which this Bill is simply bristling, because there has not been the opportunity for the full and detailed discussion that there ought to have been for such an innovation into our national life. I say this with all the force I can to the noble Lord, Lord Champion: that I feel it is most regrettable that Parliamentary procedure should have been so truncated for a Bill of such importance. A few of the most glaring anomalies have been removed, it is true, but many still remain. I am warmly with my noble friend Lord Conesford, who made such a forceful speech about contempt of Parliament, be- 1652 cause the procedure here is what I feel has been a contempt of Parliament. It does great harm as a precedent for the future.
It is interesting to note that at the end of the Report stage in another place there were no fewer than seven important Government Amendments which went "on the nod", without ever being discussed at all. One of them was this fascinating Amendment referred to by the noble Baroness, which would extend the benefits of the premium to newspapers, including the journalists themselves. Let me say this to the noble Lord, Lord Darwen. Why it was that the publishers of newspapers should qualify as manufacturers, while the pubishers of books did not, is something which I could not explain. I hoped that noble Lords opposite could. But I suspect that the noble Baroness hit the nail on the head when she said that this might have something to do with its effect on public opinion.
We have had some of the major anomalies brought to our attention, and it is obvious that there could be only one possible justification for the Bill and the great violence that it is going to do to many interests up and down the country; that is, if it could achieve a big increase in manufacturing production. But to date Ministers have produced no evidence of this at all, in another place or indeed here this afternoon. I hope that the noble Lord, Lord Champion, may be able to tell us something which substantiates this claim. But up to date we have not been told anything to give us confidence that it will happen.
It was interesting to see recently, in a Presidential report in the United States, confirmation that highly advanced countries with sophisticated economies like ours, similar to the United States, are moving in exactly the same direction. President Johnson's report forecasts that the labour use in the United States in the five years 1965–70 would show an increase in manufacturing of 5 per cent. and an increase in the service industries of 25 per cent., five times as much. Heaven knows, all of us here would be delighted if our labour productivity and economic strength was comparable to the United States. Indeed, we should also welcome the wage and salary levels that go with it.
1653 But the fact is—noble Lords, I am sure, know this—that in an advanced economy with growing affluence it is natural that the service industries grow and develop all the time, and they are not only growing to serve consumer interests, but also growing equally fast, perhaps even faster, in order to serve industry itself, while all kinds of specialisation grow up. It is this that is going to suffer by the measure that is now before the House. By contrast—if I may repeat the admirable point made by my noble friend Lord Harlech in opening—when we return to the service industries, especially in the wholesale and retail trade, the competition is fierce, to say the least of it, and enormously stimulated by the admirable piece of legislation which was put on the Statute Book by my right honourable friend Mr. Heath. By contrast manufacturing industry—especially the older industries, the nineteenth century industries—are, as we all regrettably know, the homes of restrictive practices and hoarded labour. Management is not exempt from the charge. Inevitably in factories where large numbers of men and women work together, the organisation by trade unions is much closer than it is in service industries, and they are therefore much slower in their response to labour-saving innovations. It is here that the major losses of labour and productivity occur in our country, yet these are the people who are to get the premium. I should have thought that noble Lords opposite would find it very difficult to substantiate their claim that manufacturing industry deserves to have this sharp differential.
The definition by which the sheep and the goats are going to be divided is the major anomaly and is really indefensible. This is by the standard of industrial classification which, believe it or not, comes out of the Offices, Shops and Railway Premises Act 1963, an Act drawn up to determine health and safety standards for people employed in these conditions. This is the classification which is going to determine whether an industry has to pay the full 25s., gets a refund, or gets a premium as well. If the civil servants who drew this up—they were only civil servants who drew this up without consultation with industry—knew what purpose this classification 1654 was going to be put to, they would have had a fit and never completed their work.
§ LORD SHACKLETON
My Lords, the noble Lord is libelling the previous Government. There was full consultation with industry on the definition in the Shops and Offices Act.
§ LORD NUGENT OF GUILDFORD
I should be glad to have details of that. My information is that there was not consultation on this particular classification, and, of course, it was being drawn up for a completely different purpose. It was being drawn up in contra-distinction to the Factory Acts, and to use this classification for this enormously severe fiscal purpose is surely an injustice to all concerned. I am surprised at the noble Lord getting up to defend it.
The kind of anomalies which it produces were admirably referred to by the noble Baroness with her reference to the two Dundee jute factories. For the information of the noble Lord, Lord Shackleton, I am pleased to be able to give him the source of this. It was mentioned by Mr. Doig, who is the Member of Parliament for Dundee and therefore knows the jute factories well, during the Committee stage of the Bill in another place. Therefore, the noble Baroness need not feel in the least discouraged; it is perfectly authenticated. The fact that one of these firms, although they are exactly the same size, will be £19,000 better off as the result of this Bill is just one of hundreds of thousands of examples. The noble Lord, Lord Shackleton, shakes his head. It is going to be £19,000 better off because one firm has its administrative block in one of its mills and the other firm has its administrative block outside it. This was never controverted in Committee; it was stated there and accepted by the Ministers concerned.
There are many other delightful anomalies with which I could tease the noble Lord opposite, but I do not propose to do so. I want to refer to one which is a serious case and I still hope the noble Lord might be able to do something about it. It relates to the electrical contractors. The position under the Bill is that if a private firm of electrical contractors makes an installation in a factory the employer will pay the full rate of tax of 25s. per man whom he employs, 1655 with no refund. If the nationalised industry, that is to say the Area Electricity Board, makes the installation he gets the full refund. If the manufacturing industry carries its own electrical contracting staff, he gets the refund, plus the 7s. 6d. It would be hard to find a more anomalous situation.
Leaving aside that aspect of it, what is serious is the relationship between Area Boards and the electrical contractors. The volume of trade in the electrical contracting industry is some £230 million per annum; £150 million is done by the private electrical contractors, and £80 million by the Area Electricity Boards—in other words, about a third is done by the nationalised industries. Both have co-operated admirably over the years, and I know that the nationalised industry values the good relationship which has been built up, and which was founded on a convention established by the noble Lord, Lord Citrine, when he was Chairman of the Central Electricity Authority. What is happening now is that the electricity Area Boards are being given a completely unfair advantage in competition with the private contractors, which I am sure they would regret just as much as the private contractors do. I sincerely hope that the noble Lord will yet be able to do something to remove such a serious and unfair anomaly.
The part-time worker has been referred to, but I think he stands a further reference by me in winding up this debate. The limit falls at eight hours; the tax has to be paid for anybody doing more than eight hours. This inevitably means that industries employing many part-time workers are going to be hard hit. I recognise that her Majesty's Government have tried to meet this point by halving the tax for women, but, even so, the incidence on some firms with very big staffs of part-time workers is going to be massive. I will give the noble Lord one instance of a big commercial laundry which supplies many hundreds or thousands of offices with roller towels. They employ 10,500 people, most of them part-time. This tax will cost them £446,000 per annum. They cannot possibly carry that, and are bound to pass on most of it. This is a point which I would ask the noble Lord to deal with when he comes to wind up.
1656 The distributive trade, as we well know, will be hard hit. In an earlier debate in your Lordships' House the noble Lord, Lord Sieff, referred to it, as did the noble Lord, Lord Sainsbury, in the recent economic debate. The Chairman of the Co-operative Wholesale Society has delivered some scathing words, which I am sure noble Lords have already read, and I will not wring their withers with them now. The Co-operative Wholesale Society estimated that the price increase as a result of this tax would be something of the order of 4 per cent. The wholesale distributors generally are hard hit because they appear to work on very large turnovers and very small margins. The figures I have been given from such wholesale industries as grocers, pharmacists, textiles, hardware, show that anything from one-sixth to one-half of their profit margins will be cut by this tax (the figure of one half relates to wholesale pharmacists). All of them employ large numbers of part-time workers, and they will therefore feel particularly the incidence of the tax. These traders must increase their prices if they are to survive—this is a point which was very cogently made by my noble friend Lord Barnby—especially in the food trade where markets move very rapidly, especially in the wholesale world where they are related to international movements. How are they going to operate within the terms of the "early warning" and price standstill for which the Government have asked? I hope that the noble Lord, Lord Champion, can give us some enlightenment on this.
In the debate last week on the Industrial Development Bill we touched on hotels. They have warned us that in the light of the selective employment tax their prices will go up by something of the order of 5 per cent. or 10 per cent. What happens about that? Is that to be allowed? Finally, on the question of the part-time worker, the disabled worker deserves special mention from me to reinforce, if reinforcement is necessary, the powerful plea of the noble Baroness, Lady Asquith of Yarnbury, for the part-time worker and the disabled worker; and especially for the part-time woman worker who is so valuable to us to-day. Inevitably, with the squeeze that there will be on the service industries, some 1657 of these part-time workers will be shed, and the part-time disabled worker particularly is going to be in danger of losing his or her job. My noble friend Lord Aberdare made a powerful plea for the world of sport, culture, education and the theatre. Much valuable voluntary work is being done in all these fields, and many of them are going to be hard hit by this tax. My own theatre in Guildford, which some other enthusiasts and myself started a year or so ago, is going to pay about £4,000 under the selective employment tax. It is hard enough to make both ends meet, anyhow, without having this additional burden.
I have mentioned a few of the Bill's worst features and I am sure more than enough to make out the case that it is unfair and distorting. The fact that the Government gave way on the major issues of agriculture, horticulture and charities, after first refusing to do so, confirms my belief that this Bill was ill thought out—a bright idea not thought out to its ultimate conclusions. I welcome any sign of grace from Her Majesty's Ministers in making concessions where concessions ought to be made, but it appeared that they were back-pedalling in deference to the storm; and my noble friend Lord Conesford referred very forcefully to the political storm on the charities.
But if one reads through the Amendments that were put down in another place, one finds there were literally dozens, if not hundreds, of equally good cases, cases with equally good intrinsic merits, which have been completely ignored. I am told that the Chancellor of the Exchequer's wish is for fiscal immortality as a tax innovator. I would say to him that Morton, a famous Chancellor of the past in the reign of Henry VII, was famous for Morton's Fork. This one will be famous for Callaghan's Crook.
It is a miserable tax. More than enough has already been said about the objective of deflation, but this was to be a painless method of deflation and to bring in some £240 million per annum net tax, with this forced loan from industry of something of the order of £400 million or £500 million to start with, later coming down to £300 million. In this particular context, I am sure that 1658 noble Lords would like to know from the noble Lord, Lord Champion, when the Government expect that repayments will be able to start in the new year. Will they really be able to start in January, as I think has been promised in another place? We hear uncomfortable rumours about the difficulties of recruiting staff.
But whether it is £400 million or £500 million which has to be found, it has to be found without help from the banks, as the Chancellor has said. This point was very forcefully made by my noble friend Lord Barnby, and there is great anxiety in many firms, especially the smaller ones, as to how they are going to find their share of this loan. They are going to have, at least, a serious strain on their financial resources, and the handicap to the investment programme over the next twelve months must surely be serious. The investment programme predicted in the National Plan was 25 per cent. in the five-year period, but my impression is that we shall be lucky if we are able to hit even half that now. I hope that the noble Lord, Lord Champion, will be able to say something about the Government's assessment of investment plans in industry and investment programmes in the nationalised industries, in order to maintain the impetus of the investment programme despite the general retrenchment of consumption. All the experience in past checks shows how important it is to maintain the investment programme. One of the features that was particularly welcome to me in the 1961 check was that we were then able to maintain the investment programme in the nationalised industries, particularly in electricity and gas which are of such basic importance.
So we have the very considerable deflationary effect of this Bill, with the £400 million to £500 million loan to start with, plus the £240 million tax, and this has now to be added to the huge sum of £500 million which is to be taken out of the national economy by the "package" which the Prime Minister told us about a couple of weeks ago.
Therefore the total effect of deflation is something of the order of £700 million to £800 million, plus the forced loan. Compare this, my Lords, with Mr. Selwyn Lloyd's "package" of 1961, which took out £250 million, and which 1659 had a voluntary incomes standstill. Within ten months the 7 per cent. bank rate was down to 4½ per cent. That obviously emphasises the danger, and makes one ask: Have the Government not overdone it? May they not have done damage by throwing in this Bill, as well as the very considerable measures which they have announced? My advice to this House is that this Bill is abhorrent in its intrinsic effects on commerce and industry. From that point of view we could well do without it. From the point of view of deflation, I should have thought that what had been done would probably be enough, and my advice would be to abandon the Bill.
May I just add one comment, because I do not wish to seem entirely critical—although inevitably I must be—of this Bill? I myself entirely support the Government's general intention of policy: to take the necessary measures, tough, unpleasant, unpopular and deflationary though they may be, in order to secure the economy and safeguard the value of our money. I would add only this thought to the general thoughts that we have been expressing here in recent weeks, to try to contribute to the cure of our economy. I believe that the measures which the Government have taken are in the right direction to secure the value of our money, to restore solvency, to check the excessive demand; but whether it is the right amount is something only Ministers can tell us.
What will decide the cure in the long-term, however, is the minds of our people, and nothing would help more to-day if all of us, if all noble Lords opposite and all Ministers in another place, would say the same thing and explain what is being done, why it is being done and why it is necessary for the good of the nation, for the solvency and the life of the nation. Nothing would help more to get the minds of our people straight and the resolution of our people strong to take the stiff, difficult path which we must take over the coming year or two to achieve solvency, and to pay back the large sums of money that are owing—and in this respect, alone, I cannot agree with the noble Baroness—than to hear statements of what the Government are doing and why they are doing it. Noth- 1660 ing would help more to lead our people along the path which will put us right.
§ 7 p.m.
§ LORD CHAMPION
My Lords, I have come to the conclusion that in this House this Bill has not many friends. I must admit that in winding up this debate I find some little difficulty—not because, strangely enough, I have found the arguments against this tax compelling (I simply have not), but because I am hoping that the Committee stage will be brief, if not absolutely formal, and this means that, at this Box to-night, I shall be unable to brush off many of the points by saying, "We will deal with that when we get to the Committee stage". Indeed, of course many points which have been raised to-day have been very much Committee points.
The noble Lord, Lord Harlech, started off with the sort of speech that one would expect from him. He carefully and forcefully put many of the points against this Bill. He said that this Bill was "an example of inspired lunacy". This is the sort of remark that has always greeted any departure from the existing system of taxation, no matter when it was made. If the noble Lord looks back over the past, he will find that the sort of remark he made to-day was made in the case of almost every, if not every, departure from the pattern of taxation which has previously been accepted and which appears to have some historical sanction.
§ LORD HARLECH
My Lords, I should like to correct the noble Lord. It was not my phrase. In fact, I said that I would not have used the adjective "inspired".
§ LORD CHAMPION
My Lords, the last thing I want is to be "inspired to lunacy". The noble Lord, whether he was quoting somebody else or not, certainly used the phrase. He rolled it round his tongue. He liked it, and he gave it to the House. As I say, wild statements are not unknown. Indeed, at the time of Lloyd George's Budget the Duke of Beaufort announced:I should like to see Winston Churchill and Lloyd George in the middle of 20 couple of hounds".I am glad that the noble Lord did not threaten me with that this afternoon. I do not know whether he is a master of 1661 foxhounds or not but he certainly did not threaten me with that.
My Lords, we had a powerful, extremely well-constructed and, I thought, witty speech from the noble Baroness, Lady Asquith of Yarnbury, to some of which I hope to reply in the course of my speech to-night. Then, from the noble Lord, Lord Nugent of Guildford, we had a telling speech of the type that, knowing him as I do, I should expect from him. But he ended up, it seemed to me, on a really statesmanlike note. With much of what he said in the concluding part of his speech I of course agree absolutely, and I am grateful to him for some of the remarks he made in that connection, but I would not say that this applies to some of the remarks he made earlier in his speech.
My Lords, judging by the speeches of the noble Viscount, Lord Massereene and Ferrard, and of many noble Lords who spoke in the economic debate, a payroll tax—that is, a straight payroll tax without any selective element such as is contained in this Bill to-day—would have been acceptable to them. A payroll tax levelled over the whole of the service and the manufacturing sectors would do nothing except increase prices, which would be passed on immediately. It would have no differential effect. What we are aiming at in this Bill to-day is the differential effect. But we do not expect, and no one in this House would expect—in fact, no sensible man would expect—that this will have an immediate effect. Of course it will not. What we have to aim at here is the effect on the recruitment into these various industries.
§ LORD ROBBINS
My Lords, may I interrupt the noble Lord? Could he explain why the same differential effect could not have been obtained by a straight payroll tax, using some of the proceeds to reduce purchase tax?
§ LORD CHAMPION
My Lords, I wish the noble Lord were not here. He has put something to me which, frankly, I have not considered, but I can well imagine that it was considered when it was decided to embark upon S.E.T. combined with this S.E.P. Bill. But although that point comes from the source it does, I am not going to suggest for one moment that I am going to withdraw this Bill or 1662 do anything about Section 44 of the Finance Act, as it is now, because if I withdrew this Bill now (or the Government did), all that would be left would be a poll tax of 25s. per head on all the employees in this country. I am sure that the noble Lord would not think that a very wise thing. In any case, I am not going to suggest that we are going to do it.
§ VISCOUNT MASSEREENE AND FERRARD
My Lords, even if there is a payroll tax, it certainly need not be at 25s.
§ LORD CHAMPION
All I am saying is that the Finance Act which this House passed last week contains in it Section 44, so if we do not do something about repayments every employer in this country will be mulcted with a tax of 25s. per employee, and this would be nonsensical.
My Lords, how the changes in the number of employees in the various sectors of our industry have taken place in recent years is, of course, set out in the White Paper on the selective employment tax. The statistics show that manufacturing is at the bottom of the table in the redistribution that has taken place, and we know that manufacturing has been limited to some extent because it has not had available to it the necessary volume of labour. Taking all the international statistics that happen to be available to us, a comparison with countries at a similar stage of development has shown that we are virtually at the bottom of the list as regards the proportion of increase in our manufacturing labour force.
I agree with those who say that as an economy develops then inevitably, in the long run, there is, and must be, an increase in those services which are within what are broadly called the services sector. This is inevitable. If one goes right back to the agricultural economy, in which people did everything for themselves, having produced their food, and so on, one sees clearly that all these services were practically negligible but, as society develops, so all these other services develop. But, my Lords, what I would say about it is that these services must develop only provided that our manufacturing base is right, is big enough—and this, I think, is of tremendous importance.
1663 The noble Lord, Lord Nugent of Guildford, called attention to the speech of President Johnson—and President Johnson is perfectly right in saying that these services will develop at a higher rate than manufactures. But the United States has a manufacturing base from which to work. If we had something similar here, so far as the base is concerned, I should be saying here to-night at this Box that we would be doing exactly the same. Some increase will continue. But, my Lords (and here I get back to the final words of the noble Lord, Lord Nugent of Guildford), we simply must ensure that our economy is such that it can carry these services to which he has paid so much attention.
My Lords, looking at our economy as a whole, and considering what is going on in people's minds, we must recognise that if jobs are available in the services sector in this country there are all sorts of reasons why they will be filled first. There is an educational bias towards them; Mama likes Willie to go into a white-collar job—and I can understand that; but it has its effect. Also, many of these white-collar jobs have some little snob status. This, too, adds to the general tendency of these jobs to cream off labour, to some extent—and understandably so. They say: "In a white-collar job we shall not get our hands dirty; we shall not have to indulge in physical labour". All this is part of the story of the increasing number of employees in the services sector and of its attraction as against manufacturing industry.
In the debate there has been mention of employee-hoarding. There are always seasonal reasons and hoped-for orders which cause employers to hoard labour; and it is understandable in those circumstances where there is an insufficient number of people anxious for jobs in manufacturing or prepared to take one. There are, too, restrictive practices in industry. I have said this time after time from this Box. I deplore restrictive practices wherever they are to be found. It is quite inevitable, I think, that in the manufacturing industries in which nearly 9 million people are employed by a multitude of employers, good, bad and indifferent, one should find wasteful practices. There is no difficulty in finding the mistakes which the trade unions are 1664 making in this connection; there is also no difficulty, looking at the employers of these 9 million employed people, in finding incompetence among employers.
What I did not understand was the suggestion which seemed to me to be embodied in so many speeches to-day that there was waste only in the manufacturing industries. Is anyone going to suggest that there is not a waste of manpower in the services sector? I do not think that anyone would dare suggest that. If you look at some of the things that happen in, for example, the distributive services, you will find a considerable waste of labour there.
§ A NOBLE LORD: And in Government Departments.
§ LORD CHAMPION
A noble Lord said that one could go into any High Street and not find examples of wasted manpower. His experience is different from mine. I find such examples in almost any High Street through which I walk.
§ LORD NUGENT OF GUILDFORD
If the noble Lord will allow me to say so, our argument was not that there was no waste of labour in the service industries, but that, because of the stiff competition in the service industries, there is far less waste of labour there than in the manufacturing industries.
§ LORD CHAMPION
This I do not accept. If you lived in my street you would see, for instance, a shocking waste of people employed by insurance companies. A number of people, each representing a different company, come into that street to pick up a shilling here and two shillings there. Anyone watching the number of milk retailers who come into my street to put bottles at the street doors, would know very well of the considerable waste in the service industries. And so one could go on.
Of course, there are restrictive practices; of course, there are stupid managements; but we do this country no service to point always to our failures and never to our successes. It seems to me that we have spent too much of our time doing this in this debate and in those of the last week. There have been too many headlines screaming about our 1665 failures and not enough about our successes. I do not claim that these are successes achieved by Government—necessarily of either Party; they are the successes of those people who are doing a magnificent job in some of our manufacturing industries. Though some are not doing such a good job, it is right that we should tell the world occasionally that we are not entirely riddled with restrictive practices; that our managements are not entirely incompetent. I think it would be well for us to spend a little more time doing this. I have some experience of leading men. As a very young man in the First World War I was an N.C.O. I have had a long trade union experience, and I am bound to say that I found that to give a little praise and some encouragement is of infinitely more value than to continue to complain about people's shortcomings. Certainly I think we ought to spend a little more time over that and a little less time over the sort of thing I have been hearing over the past few weeks.
The arguments that have been adduced here by the noble Lord, Lord Harlech, by the noble Baroness, Lady Asquith of Yarnbury, and by the noble Lord, Lord Conesford, have been based on the extremes in the field of wasteful and restrictive practices. In this connection, they are about on a level with the pin-table and the one-armed bandit argument. I regard them as weak arguments, entirely suitable for the consumption of weak-minded people and for cheap newspaper "cracks".
§ BARONESS ASQUITH OF YARNBURY
My Lords, would the noble Lord admit that the printing industry is a particularly flagrant instance of a restrictive practice, and that this industry will be endowed by the Government by the conditions they have made in regard both to newspapers and books?
§ LORD CHAMPION
My Lords, I answered this point when the noble Lord, Lord Conesford, put it to me some time ago in connection with Questions that he asked. I said in answer that I deplored those practices as much as anyone; that I deplored the waste of manpower involved in the particular places he mentioned. But I also said that it is impossible to differentiate against 1666 one firm merely on these grounds. What one must do is to try to help the trade unions over this problem and to help the newspapers—incidentally, I am always a little staggered that the newspapers who are so ready to criticise us about these things do not begin by putting their own industry in order. That might not make me very popular with the newspapers to-morrow morning; but—
§ LORD CHAMPION
I hope the noble Lord will realise that I have been asked a great number of questions. But if he is prepared to stay until 11 o'clock then I am also.
§ LORD CONESFORD
What I was wondering was why he thought that the newspapers should put their house in order when the Government pay them not to.
§ LORD CHAMPION
Is the noble Lord suggesting that an additional 7s. 6d. for each man, in the form of a premium, is going to cause them to keep on labour that costs them anything from £30 to £35? It is absolutely nonsensical.
§ LORD CHAMPION
I cannot possibly accept it. It is only too easy always to argue against any tax by drawing attention to the extremes which would flow from its application. I must admit that I was amazed by Lord Harlech's generalised attack on his friends who manage industry. Not many of my friends manage industry, but many of the noble Lord's friends do. He said, looking through industry as a whole (I understood him to say this), there was something like a 30 per cent. waste of manpower. My Lords, each and every one of you who happens to be a director of an undertaking had better leave this place at once and go and have a look at what is happening in your own industry.
§ LORD HARLECH
My Lords, I know that the noble Lord does not wish to be 1667 interrupted, but he makes such inaccurate statements. I quoted from a public opinion poll which said that 32 per cent. of workers in heavy industry thought that there was under-employment in their industry. It was not my calculation: I was quoting the workers in that industry.
§ LORD CHAMPION
My Lords, if the noble Lord comes here and quotes these statements, he is surely giving them his backing at the Box. If not, why does he quote them?
§ LORD CHAMPION
He quotes them against the Government, of course, and I am replying to some of the points he made. I simply do not believe that his friends who manage industry are as inefficient as he made them out to be.
§ SEVERAL NOBLE LORDS: Sit down!
§ LORD BARNBY
My Lords, was it not the noble and learned Lord, Lord Shawcross, who said at the Albert Hall that industry was redundant, or surplus, to the extent, I think, of 25 per cent.?
§ LORD CHAMPION
My Lords, if the noble and learned Lord, Lord Shawcross, were here and saying that, I should reply to it. As it is, I am replying to the noble Lord, Lord Harlech, who quoted something. I do not regard anyone, whoever he may be, and whether or not he has a wonderful legal background, as the last word in pronouncing on economic, industrial and financial matters. But I must press on. I feel like having a good "bash" over this, and I think I am entitled to, considering what I have had to sit and listen to since three o'clock or four o'clock this afternoon.
I am bound to say that there were some wild exaggerations by the noble Lord, Lord Conesford, about the effect of S.E.T. on the services we export. I do not think that what he fears will really happen. I must also point out that, so far as the case based on tourism is concerned, the revenue from foreign tourists represents only about 10 per cent. of the hotel industry's total as derived from tourism.
§ LORD CHAMPION
My Lords, I recognise, and I am not going to underrate, the importance of many of the things that noble Lords have said in this connection. Indeed, I think we have made that clear from time to time. The noble Lord, Lord Nugent of Guildford, asked when repayments will start, and he said that there was some doubt and dubiety about what had been said on this point by Ministers. The answer is that repayments will start in January. We have said this before, and we stick to it. The noble Lord, Lord Harlech, the noble Viscount, Lord Massereene and Ferrard, and the noble Lord, Lord Hawke, asked me how many will be employed in administering this tax and how much will be involved—do I see the noble Lord, Lord Harlech, shaking his head?
§ LORD CHAMPION
Then I beg the noble Lord's pardon. It was the noble Lord, Lord Hawke, and the noble Viscount, Lord Massereene and Ferrard.
We say that this will be an economical tax to administer, both from the point of view of the Government and from the point of view of industry. Central Government will require an additional thousand staff to administer the tax. The total cost of administration will be £1¼ million in a full year, compared with the net yield in a full year of £220 million. I wish we could have the same administrative costs for most of our taxes. The Government have no information about the number of staff that employers will need to employ to claim refunds. In the nature of things, the Government could get this information from the employers only by asking for it, and it does not seem to be particularly valuable at this time to pursue this line of inquiry as to the time, the men and the money involved. It is not the intention of the Government to place any onerous or startling tasks on employers claiming refund and premium. Those who get neither will merely have to pay the tax. Those who pay the tax and do not get any refund will not have to go through all this process. They will buy the stamps and stick them on.
1669 The noble Lord, Lord Harlech, I am fairly sure, and the noble Lord, Lord Nugent of Guildford (this time I am fairly sure), asked: is it the intention that part of the tax should be passed on to the consumer by rising prices? That is a fair question. The employer should first consider whether he can absorb the tax by increased efficiency and from his profits. By these two means he may be able to absorb some, or all, of the increased costs; but to the extent that it is impossible by these means to absorb the whole of the increase it will be inevitable that some of the cost will have to be passed on; and the Government recognise this. It is consistent with what was said in connection with the Prices and Incomes Bill now before your Lordships' House. It was said in the White Paper, and this is what the Government mean here.
My Lords, the noble Lord, Lord Nugent of Guildford, also asked about the electrical contractors. The Government accept the general principle that there should be fair competition between the private sector and the nationalised industries, and intend to discuss with the nationalised industries how it may be applied. It is the fact that the Government have said they will consider any specific examples of unfair competition which may be brought to their notice. We do not want to bolster up the nationalised industries as against the others.
§ LORD NUGENT OF GUILDFORD
My Lords, may I briefly interrupt the noble Lord, and thank him for saying that? I had the impression that in another place the Chief Secretary to the Treasury was not aware of the very big volume of business done by the area electricity boards in this connection. I am very grateful to the noble Lord, Lord Champion.
§ LORD CHAMPION
I am sure that my right honourable friend will consider this point, especially having regard to the source from which it was raised.
I was asked by the noble Baroness, Lady Asquith of Yarnbury—but I see that the noble Lady has now left the Chamber, and so I shall not reply to her. Then the noble Lord, Lord Denham—
§ SEVERAL NOBLE LORDS: He is not here.1670
§ LORD CHAMPION
Yes he is; he has merely stepped up one, or down one, depending on what the Front Bench Opposite stands for. The noble Lord asked about manufacturers who sell their product. It will be considered by relation to the 50 per cent. rule, so that if more than 50 per cent. of the staff are engaged in manufacture, they will qualify. If less than that figure, they will not. I should have thought that was clear from the Bill.
§ LORD DENHAM
My Lords, I am sorry to interrupt the noble Lord but it is a rather important point. Take a tailor's shop where all the workers are selling in the shop part and also work on the clothes. Are they to be considered as shopkeepers or as manufacturers?
§ LORD CHAMPION
My Lords, my noble friend has just said that that would be a very unusual shop, but I know that there are some.
§ LORD CHAMPION
Plainly, I could not answer that point. It has to be considered in relation to the whole matter, and if they feel that they are placed in the wrong category they will, unless I am mistaken, have the right of appeal to the Tribunal.
I was asked about certain disinflationary effects of the tax. I am not going into this in detail. This has been discussed and the answers given in another place, and rather than take up the time of the House in reading out a long brief which I have on it, I think that I could advise noble Lords to read through the appropriate pages in the OFFICIAL REPORT Of another place. The noble Lords, Lord Barnby and Lord Nugent of Guildford, asked how firms were going to finance the interest-free loans. I can only refer them to cols. 1197 and 1199 of Hansard of July 12, to which I have nothing to add.
We have had some interesting points about publishers, and the Amendment that was moved in another place on Thursday last to bring in certain periodical publishers. I do not think there is any point in my discussing this at length, because I gather that my noble friend Lord Darwen is threatening me with an 1671 Amendment, and if he in fact puts one down, of course I shall have to answer it then.
§ LORD DARWEN
My Lords, I was hoping that my noble friend would discuss it and perhaps make an Amendment unnecessary. I certainly do not want to threaten him with an Amendment, if he is going to give me some good explanation of why the Government take this line.
§ LORD CHAMPION
I did not mean "threaten" in any sense other than a friendly one. The Amendment was discussed late on Thursday night. It tried to meet the difficulty that would have arisen in what is known as "the Observer case" and so solve the difficulty in the newspaper publishing world. This, I am sure, my noble friend understands. He has argued that publishers of books are in the same position as publishers of newspapers and should receive similar treatment. The answer is that we feel they are not in the same position. Most book publishers do not do their own printing, so that there is no question of book publishers being treated inequitably one against the other by the operation of non-qualifying activities. We feel that this is the case, but of course we shall listen carefully to any arguments which my noble friend adduces.
My noble friend Lord Archibald raised the point of films and film manufacture. The manufacture of film stock qualifies for premium, as my noble friend said. The making of films is classified, under the standard industrial classification, as a service. The Government think that the making of positive films from negatives in the manufacturing process should get the premiums, and moved the Amendment to which my noble friend referred, but the actual making of films is directly comparable to the production of plays and the Government do not agree that what goes on in the theatres or film studios is manufacturing.
§ LORD ARCHIBALD
My Lords, can my noble friend tell me how it differs from the manufacture of a newspaper?
§ LORD CHAMPION
If the noble Lord is going to press me on this little point, frankly I cannot. Certainly I am not going to do it to tonight.
1672 I have answered a number of points, but I simply dare not leave the point of part-time workers. Any general concession over part-time workers would be difficult. The fears which have been expressed may well be exaggerated. I will briefly explain the reasons. General exemption or refund would be complicated and open to serious risk of evasion and abuse. Second, the tax will not, in any case, be payable in respect of part-time employees working not more than eight hours a week. Third, 90 per cent. of part-time workers are women, and the rate of tax is to be one half that of men. This means that the weekly tax liability for the great majority of employees working between eight and 30 hours a week will be 12s. 6d. and not the full man's rate of 25s. And finally, 47 per cent. of part-timers are in employment which receives either refund or premium.
I should like to make absolutely clear that the Government fully understand the anxieties which have been expressed about the position of part-timers, and have undertaken to keep the matter under review. This applies to the elderly and to the disabled, mentioned by the noble Lord, Lord Harlech. I sympathise very much with the anxieties expressed and I am grateful to noble Lords for raising this point, because it is an important one and I am glad that their sympathies go out to those who are disabled.
My Lords, may I ask a question about part-timers? Is it not a fact that big employers of part-time labour calculate that in order to get a 40-hour week they have to employ three people? In the case of women, the tax on them will amount to 37s. 6d. a week. There are not so many men part-timers but where there are, they will attract a tax of £3 15s.
§ LORD CHAMPION
My Lords, I am not quite sure of the point which my noble friend has made. I can see that in some cases this is going to operate to the detriment of part-timers and to the employers who employ them. I admitted some time ago that this was a blunt instrument, an instrument that remains to be sharpened, and I will certainly look at the point my noble friend has raised in this connection.
1673 What I was going on to say about the disabled was that we shall watch closely for any signs that this tax is having an adverse effect on the employment of the disabled, and if it proves necessary we will take action accordingly
The noble Lord, Lord Aberdare, made the sort of speech to which the House always listens with attention. It had thought in it. He was kind enough to say that my heart was in the right place, and I can only reciprocate by saying that his is equally in the right place. It has been suggested that certain bodies which carry on useful social work and are not charities within the definition of Clause 5 of the Bill should be treated so far as tax is concerned in the same way as charities—friendly societies, industrial and provident societies, housing associations, voluntary hospitals, professional associations, hospital savings organisations, children's and old people's homes and similar institutions. The Government do not for one moment question the value of the work which these bodies undertake, but, as that list which I have just read out indicates, there are large, varied groups.
Charities have been generally recognised on all sides as deserving of special treatment, and as the concept of a charity is a long-standing one, it is practicable to provide refunds for them. It is fairly easy; they are recognised and known, and they spring to mind. They also have a place which has caused them to be accepted as charitable organisations within legislation. To go beyond this point, and to make refunds to non-charitable bodies simply on the basis of the usefulness of their work, would involve a very invidious problem of choice, and wherever the line was finally drawn there would be other bodies which would feel that they had been unjustly and unfairly discriminated against.
The solution which we have adopted is, I think, the right one: that these refunds should be made to bodies which can establish their charitable status. For bodies getting a Government grant—and this was one of the points made by the noble Lord, Lord Aberdare—the Government have decided that, as a general rule, the effect of the tax will be taken into account with all other costs when the level of grant is next reassessed in 1674 the normal course of events. In the exceptional cases of financial difficulty before the end of the current period, the Government will consider requests from such bodies on merit. They will expect the organisations concerned to have reasonable regard for economy.
My Lords, I am going to wind up and your Lordships are probably thankful, as I am. I read in the Financial Times last week an article by William Baumol, Professor of Economics at Princeton University. He was not writing about the selective employment tax or the Selective Employment Payments Bill, but about taxation generally. He said:Any tax unavoidably affects incentives, but normally the relationship between the two is rather haphazard, resulting as it does from a series of fortuitous circumstances that constitute the political history of the tax structure. As a result, many of the taxes in fact provide motives which are the reverse of those required by the circumstances. An economic crisis of serious proportions makes it appropriate, and indeed critical, that the fiscal arrangements be re-examined to see what can be done to impart to them a more rational effect on motives.This, I would assert, is precisely what this poll tax, combined with the selective element contained in this Bill, is trying to do in a somewhat limited field—namely, to impart a rational motive to the circumstances of economy and time. Old established taxes, however great the disincentive to bring about what is needed by the economic circumstances, are continued and accepted almost without a query. New fiscal arrangements cause a squeal to go up to high heaven, and hands are held up in horror by everyone who has accepted the taxes sanctified by history, however far they may be removed from the needs of the time. Had we raised income tax by sixpence, had we raised purchase tax by 8½ per cent. to squeeze the same amount of money out of the economy, such an action by the Chancellor would have been shrugged off in a couple of days, despite the disincentives embodied in such taxes, simply because we have come, as a result of history, to accept them. The selective employment tax, combined with premiums for manufacture, is a new and blunt—but not so blunt as many of our existing taxes—means of trying to inject into our fiscal system a corrective to the imbalance that exists to the amount of manpower in our services and our manufacturing industries.
1675 I end by summarising the main functions of this new tax. They are to raise revenue; to broaden the tax base by making a start towards redressing the balance of taxation between services and manufacturing; to encourage greater efficiency and productivity in manufacturing industry; and to increase labour productivity in the service sector. These objectives could not have been met by simply increasing the incidence of existing taxes. The new tax will soon be launched and, since coming events cast their shadows before, it is no doubt already having its effect as it is taken into account in the calculations of the various industries which it will affect in various ways. The Government—strangely enough for a Government—do not claim perfection for this new instrument, and indeed they have made it clear from the outset that they believe it is capable of further refinement. But we are satisfied that it is right to introduce the tax in its present form this year; and that experience will confirm the wisdom of this decision.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.