§ Viscount MASSEREENE and FERRARDMy Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
§ The Question was as follows:
§ To ask Her Majesty's Government whether they will consider abolishing or reducing value added tax in the production of ornamental silver articles in order to preserve this world-famous British craft.
§ The MINISTER of STATE, TREASURY (Lord Cockfield)My Lords, the Government are conscious that silversmiths and other craftsmen using precious metals face difficulties as a result of the unprecedented rise in the price of these materials. Silver articles which are exported are of course zero rated. So far as the home market is concerned, I do not think the fact that an article is expensive is a good reason for excluding it from tax.
§ Viscount MASSEREENE and FERRARDMy Lords, while thanking my noble friend for that reply, may I ask if he is aware that as the price of silver since Christmas has increased by 400 per cent., this, when added to VAT, is destroying the home trade, a trade which I think my noble friend will agree has been second to none in the world? Is he aware that craftsmen are seriously considering leaving the trade? Does he appreciate that if that were to happen we should never regain our prime position in this industry?
§ Lord COCKFIELDMy Lords, since my noble friend tabled this Question there has been a dramatic fall in the price of silver, which reached a peak of £21 an ounce just after Christmas but which 1322 yesterday closed at £11.70. We do indeed appreciate the very high tradition of craftsmanship in silver in this country, which has existed for many centuries, but as my noble friend will appreciate, VAT is a broadly-based tax falling on the full range of consumer expenditure, subject only to the exemption of items of importance in the expenditure of ordinary families, and I do not think that, however important silver is, it really falls into that category.
§ Lord GORONWY-ROBERTSMy Lords, much as we enjoy the Minister's flippancies on these occasions, is he aware that many of us feel that the noble Viscount, Lord Massereene and Ferrard, has raised a matter of some importance? May I ask whether the Minister would look at this matter in the light of the fact that there arc still some crafts in this country which are unique in a world connection and are uniquely British? Is he aware that it would be a great pity if, through the rather arbitrary operation of a flat rate VAT, certain very precious, very valuable and quite unique crafts, which are equally arts, were gradually to be lost by this country?
§ Lord COCKFIELDThere was nothing flippant in the replies I gave, my Lords, and if the noble Lord, Lord GoronwyRoberts, cares to cast his mind back he may recall that in the days of the Labour Government under the late Mr. Clement Attlee, silver articles were at one time charged at 125 per cent., that even in more recent times they were charged at 25 per cent., and that therefore the 15 per cent. VAT at which they are at present charged represents a very considerable reduction on those figures.
The point of great importance here is that the price of silver has been pushed to quite insupportable levels by speculative forces. The price is now falling back again to more reasonable levels. Without wishing to give noble Lords any advice on these matters, I should be surprised to find that it does not fall further, and it is in that direction, rather than in the direction of relief from VAT, that a solution to the problems of the silver trade will come. Nobody could appreciate more than I do the beauty and elegance of silver produced in this country, in 1323 which we have a tradition extending back many hundreds of years.
§ Viscount ECCLESMy Lords, may I ask the Minister to look at what I think is the real problem here? It is not VAT. The real problem is that smaller craftsmen do not have any working capital. Would the Minister be kind enough to look into the possibility of some form of pool or bank of precious metals and, for that matter, rare woods which have gone up in price almost as much as silver? Without doubt the small craftsman is taken for a ride by the middleman when he buys very small quantities, all he can afford, of gold, silver or rare woods. I believe that if the Minister would look into it, that would be by far the most useful way to help those people.
§ Lord COCKFIELDMy Lords, I entirely appreciate what my noble friend says. There are grants which are made to silversmiths through the Crafts Council. The problem of working capital is one which affects large numbers of small businesses, and the Government's general policies arc designed to help small businesses in this regard.
§ Lord BOOTHBYMy Lords, may I ask the noble Lord whether he realises that the violent fluctuations in the price of gold, of which he complains, would not take place if we went back to the gold standard?
§ Lord COCKFIELDMy Lords, I was not in fact complaining about anything. I was merely drawing attention to what the facts were.
§ Lord WYNNE-JONESMy Lords, will the noble Lord agree that his own answers, and the comments of the noble Viscount, Lord Eccles, both suggest that the real cause of the difficulty is the operation of the market, rather than any form of Government interference?
§ Lord COCKFIELDThe operation of the market, my Lords, is a matter which lies outside the scope of this Question, which refers to VAT.
§ Lord DAVIES of LEEKMy Lords, bearing in mind how commodity prices move, as well as the international game 1324 of cornering commodities when there is a demand, can the noble Lord say whether there was a real effort to discuss with this expert group of jewellers in Birmingham and other places the possible influence of VAT? Was there discussion with the trade (let me put it that way) before either a Labour Government or a Conservative Government arrived at a decision to impose value added tax on these delicious and delightful artefacts?
§ Lord COCKFIELDMy Lords, VAT is not in any way responsible for the violent fluctuations in the price of silver—
§ Lord DAVIES of LEEKThat is elementary;we all know that—
§ Lord COCKFIELDThat is why I am assisting the noble Lord by pointing it out. I do not think that any discussions of the kind that he has in mind would have prevented the occurrence of the situation with which silversmiths are now faced.
§ Lord BROOKS of TREMORFAMy Lords, I am very puzzled by the series of answers that the noble Lord has given. Indeed, whenever the noble Lord, Lord Cockfield, replies to questions, I am never quite sure whether he is giving us good news or bad news. Which is it on this occasion?
§ Lord COCKFIELDMy Lords, the news that I am giving the noble Lord is that the proposition that there should be special relief from VAT for silver articles is not one which is acceptable to Her Majesty's Government.