New Clause. — (Purchase Tax Relief for Tax-Paid Stocks.)

Part of Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 22nd June 1953.

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Photo of Dr Horace King Dr Horace King , Southampton, Test 12:00 am, 22nd June 1953

I am sure that the traders of the country will be grateful to my hon. Friend the Member for Blackburn, East (Mrs. Castle) for raising this problem again this year, and I count it a privilege to support the new Clause this year, as I did last year, for I am keenly interested in this question; I was even when the Labour Government were in power.

The hon. Member for the Cities of London and Westminster (Sir H. Webbe) stated with superb clarity the difficulties which confront us in this matter; he gave a very frightening description of the complexity of the problem, but he went on with equally superb clarity to state the economic gravity of the problem so far as it affects the trade of this country and the need to do something about it. His speech contained the nub and heart of this matter.

I want to tackle the question from another point of view. This new Clause seeks to remove an injustice, and to me the fact that it is an injustice is one that weighs more than the fact that it is also a hardship. It is an injustice against the little shopkeepers of this country. It is a fact that every society of retailers has consistently protested against the injustice. It is also a fact that every chamber of commerce in the country is unanimous about the need for the Government to do something about it.

I support the claim of my own chamber of commerce and the little shopkeepers in the constituency which I represent, not because I have any hope of winning their votes, for the bulk of the chamber of commerce and the little shopkeepers in my constituency are ill-advised enough to vote Tory with monotonous regularity. I support them in this matter because I think their case is morally right.

The extent to which the retailers of this country are acting as unpaid tax collectors needs emphasising. The Hutton Committee Report shows that about 75 per cent. of the money taken by tobacconists is on behalf of the Government. I think we may dismiss tobacconists and brewers from our consideration because we understand from the Hutton Report that these trades, at any rate, feel that they do not need any special treatment from the Government, although the report underlines that retail tobacconists find themselves faced to some extent with the general retailers' problems.

Of the money that the retailers in this country handle, 25 per cent. is collected on behalf of Her Majesty's Government. I do not want to indulge in mere denunciations of the Hutton Committee or of their report, but I do want to make some serious criticisms of it. It is fair to say, first, that the Hutton Committee claim that the grievances which the retailers feel were more strongly expressed than is really warranted. They say that the advocates of their case stated it too strongly.

Yet the Hutton Committee Report, again reminding me of the weeping of the Walrus and the Carpenter, says in paragraph 204: We have a great deal of sympathy with those who have to tie up large sums of money in heavily tax-laden stocks in order to be able to carry on their business. They are liable to hazards arising out of changes in the rates of tax which are outside their own control, and against which their ability to protect themselves may be limited and uncertain. The Hutton Committee even admit that a trader may be forced out of business through tax reductions.

10.30 p.m.

Surely no stronger moral case can be made out than the Hutton Committee themselves make in that paragraph. They suggest that if a trader is in danger of being forced out of business because he has to meet commitments that he should not morally have to meet, it might be possible to save him by some postponement of Income Tax, but not by foregoing the payments that he has to make for Income Tax purposes. The Hutton Committee also admit that traders who did not profit by Purchase Tax increases but sold their stocks at the old prices were doing what the Government during the war asked them to do, and what was not only their moral duty but their patriotic duty. Yet the Committee suggest in their report that there are compensatory gains; swings and roundabouts.

On the whole, the Hutton Committee tend to minimise the grievances and injustices inflicted on the retailers of this country. They think that a good deal of feeling is due to confusion in the minds of traders over price control and they assume that gains in increased trade on the one hand when Purchase Tax is reduced, and on the other what the traders made—according to their Committee's own argument dishonestly—in selling at high prices when Purchase Tax was imposed, should roughly compensate the traders of this country. The Hutton Committee argue that in equity there ought to be a rebate when Purchase Tax is reduced just as there ought to be a surcharge when Purchase Tax is increased, but because they cannot work out a scheme which will introduce surcharge and rebate, they decide to recommend neither.

This Committee of the House of Commons should remember, and so should the country, that when Purchase Tax was on the increase the decent business community of the country played the game by their customers, on the whole. I speak only of my own experience of little shopkeepers, who sold goods to their customers at the old price after Purchase Tax was increased. I am certain that I am not alone in that experience. Lots of traders have developed their businesses extensively since the war, and all businesses are now conducted in a period when we can expect not a rise in Purchase Tax but a fall. It is generally agreed all over the country to be a period of falling Purchase Tax. Nobody visualises, short of a national crisis, any return to a period in which there would be a dramatic rise in Purchase Tax from which traders might recoup themselves; so that they have no hope whatever of regaining what they are losing by the present Budgetary reductions in Purchase Tax.

In answer to a Question which I put to him earlier this month the Chancellor estimated the loss which traders will suffer because of the reduction of Purchase Tax as about £13 million this year. It is true that that will be offset by various compensatory gains mentioned in the Hutton Report, but the sum must approach the total estimated by the Chancellor. In common justice we are in honour bound to attempt to meet some of these obligations.

We appreciate too little the fact that shopkeepers are unpaid tax collectors, and that the burden of collecting money for the Government means a lot of extra book-keeping. For the little man it means tying up his small capital in highly expensive stock—highly expensive because he carries the expense of the tax that he is hoping to recoup from the customer when he sells. That is service enough, but if, on top of that, we are going to charge British citizens—not pay them but charge them—for carrying out the onerous duties of tax collectors, I say quite seriously that the position becomes fantastically unjust.

The Hutton Committee Report states that, on the whole, manufacturers and wholesalers can safeguard themselves to some extent, although they bear a burden. The real problem is the tax which has been paid by the retailer, which he is waiting to collect and which is on the stock he carries in his shop. The Hutton Committee have certain suggestions which they think might alleviate the burden. I do not wish to remind the Committee of them in detail. Some are suggestions for the business interests—of which I am certain the business interests will take notice—for mutual arrangements between wholesaler and retailer. Some of them are fiscal, such as the recommendation that alterations in Purchase Tax be regular and moderate, but they do not meet the moral case which I am arguing tonight.

The main headache remains so far as the trader is concerned. This year the amount involved is £13 million; next year it may be very much more. I realise the Treasury's difficulty. I realise that this matter has been bandied about between the Treasury and the business interests not merely this year and during the sittings of the Hutton Committee but over quite a number of years, as businessmen and the Treasury have looked forward to a reduction in Purchase Tax. Each side is inclined to place too much responsibility for finding a suitable scheme on the shoulders of the other.

I suggest that if the Treasury cannot devise a scheme which will satisfy the business interests it ought to be able to promise to undertake, in this Finance Bill, to set aside a certain sum of money—inside the Budget—which will be placed at the disposal of the business interests, on the undertaking that they work out a scheme which is satisfactory to the Treasury and themselves. If the Treasury could guarantee the money to the business interests, saying, "You do not get it unless you work out a scheme," the retailers and traders would, I believe, finally produce a workable scheme.

Despite the Hutton Committee's luke-warmness about the views put before them by all the trading associations, I believe that right-minded folk will accept the contention of those associations that what they are asking for is not compensation but the return of their own money. It is money paid in advance for their customers, on the assumption that the taxes were to be a certain amount, and lost because the taxes have been reduced. I admit that this is a complicated and difficult matter, but its complexity should not be used as an excuse to leave this injustice and the mulcting of a small group of citizens where it is today.

I have received a letter from the Pharmaceutical Society, who protest not only against the fact that they cannot recoup themselves for the present reduction in Purchase Tax but also against any reduction of Purchase Tax taking place in future, unless this problem can be solved. They say—as every group of traders say— that it is fantastic to imagine that a position will ever arrive again in which they can recoup themselves for their losses. I would urge the Chancellor to accept this new Clause or, if he cannot, then to indicate to the Committee that, like the Hutton Committee, he is aware of the gravity of the problem, and that he is aware of the injustice suffered by traders; and that, unlike the Hutton Committee, he proposes even now to do something about it.