Orders of the Day — Finance Bill

Part of the debate – in the House of Commons at 12:00 am on 13th December 1955.

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Photo of Mr Harold Wilson Mr Harold Wilson , Huyton 12:00 am, 13th December 1955

I hope we shall get a rather fuller answer this evening from the Chancellor.

Let me put these questions to him: did he or did he not know about it in April? After all, it was in the taxation journals, and I presume that he reads them in order to maintain what the Minister of Education calls his professional status. If he reads these journals he must have known that the racket had been going on for a considerable time. At any rate, the City community expected legislation to be introduced. If that were expected, why did not the Chancellor introduce it? Do not his officials read these journals? Had they any ideas on the matter? Did they deny that this was going on, or did the Chancellor accept that it was going on and was unwilling to introduce the legislation? If so, why was he unwilling to introduce it? I have put those questions to him and I suggest that, unlike normal Cambridge practice, he is expected to answer all the questions and not the three which suit him best.

I turn to Clause I and the First Schedule. The provisions relating to Purchase Tax have been the main subject of our debates in Committee. What the Government have done is quite simply to increase the 25 per cent. range to 30 per cent., the 50 per cent. to 60 per cent. and the 75 per cent. to 90 per cent. In the 25 per cent. range there is a considerable number of household goods already. The 50 per cent. range, now 60 per cent., includes cars, radio sets, and so on, but there are very many things in it which are of great value to the household. The 75 per cent. range, which was fully debated, deals with more expensive stationery, cosmetics, and so on.

Another thing the Government have done, as we have pointed out to the Chancellor, was their decision to introduce a new range of Purchase Tax items. The Financial Secretary was using extraordinary language a few moments ago when he said that these had been omitted only "by chance." That really is a reflection on this House as the items were omitted by deliberate decisions of this House in Finance Bills from 1946 to 1951. Yet the right hon. Gentleman tells us that they were omitted by chance. It certainly is not by chance that they have been introduced in this Bill.

In what was almost a new argument at a very late stage of our proceedings, the Chancellor said he was widening the basis of taxation and hence started all the speculative talk about sales tax. He even went so far as to say that we on this side of the House will thank him in due course, when we take over the responsibility of Government, for having widened the basis of taxation. May I once again assure him that although we have every intention of taking over the responsibility of Government at the earliest possible moment—we would be doing it right away if there were a General Election now—we certainly do not intend to take advantage of what he has done by widening the basis of taxation, as we consider that his decision on this matter is wrong.

On a number of occasions we have asked why the Government have taken these measures to introduce these items into the tax range. The Chancellor said that it was to strengthen the £, but those of us who have looked at the financial accounts this morning find that the £ is now one-third of an American cent—to be exact 11/32—above the level to which Sir Stafford Cripps devalued it in 1949. Of course, the real test of the Chancellor's economic policy is the effect of these policies on our exports and imports and the latest figures published this morning show no improvement whatever; imports are at the highest level ever. I do not intend to develop that argument further, Mr. Deputy-Speaker, but I hope that we shall have an opportunity at a later stage to go into it because throughout the Committee stage of the Bill there were many boasts by hon. Members opposite that our economic position was improved by the Budget. Once again the export and import figures completely belie that particular boast.

On previous occasions I have referred to the arguments put forward by the Economic Secretary in support of these things—arguments which have been proceeding in ever diminishing circles as the Committee stage went on. By this time I think we are familiar with his and the arguments of the Financial Secretary about Purchase Tax. The arguments of the Financial Secretary are perfectly coherent; we know exactly what they are and what he means by them. On the Report stage, as he reminded us this afternoon, he made a concession about brushes, brooms and mops. On behalf of my hon. and right hon. Friends I wish to say that we sympathise with him that, having got a new item in his tax range, he has to give it away and relinquish his grip upon it. I wish to congratulate him on the manful and courageous way in which he sacrificed his principles on that occasion and parted with them. We recognise that it was not easy for him and, of course, we know it will spoil his Christmas.

We were interested in the argument the right hon. Gentleman used. He commended the views of one of his hon. Friends who said that no one bought brushes, brooms and mops for the sake of "keeping up with the Joneses." That is certainly true, but it has a much wider application. For instance, what about pot scourers, which are in this Bill? Does the right hon. Gentleman think that the Smiths rush out and indulge in a spending orgy because the Joneses have bought a pot scourer, or that the Browns go out and buy a new cinder sifter or chamber pot because the Joneses have one? Do the Robinsons buy a baby's bath from a sudden upsurge of competitive emulation? I would inform the right hon. Gentleman that my hon. Friend the Member for St. Pancras, North bought a new bath because his wife had a baby and that. because of the Budget, it cost him more. In any case, we all thought that this philosophy of "keeping up with the Joneses" was the whole spirit of the new Toryism in the competitive, over-advertised age in which we are living.

Whatever are the arguments of the Government, the plain fact is that Clause 1 and the First Schedule will not restrain inflation, but will intensify inflation, as many hon. Members opposite have said. The Chancellor is, in fact, fighting the rising cost of living by putting it up. He is mending the hole in the purse by enlarging it. On a number of occasions in the debates there has been a reference to the effect on wages. This is a tax on necessities. The Economic Secretary has told us that the idea is not to reduce consumption of necessities, but to nip off a little more purchasing power every time necessities are bought. As we have pointed out, it is an equivalent to a poll tax on every family in the country. Exactly the same argument as the hon. Gentleman used could be used to justify a tax on bread. We may be hearing that argument before long—not, I hope, to justify a tax on bread, but to justify any intention the Chancellor has of reducing the subsidy on bread.

This tax is even more regressive than a poll tax. There are very many poorer taxpayers, and those living in country districts, as was pointed out in the Committee stage, who, under this Bill, will be paying more tax than taxpayers who are better off. Most rich people have a bath built in, and tax free in a flat or a house, whereas many poor people, relying on the use of a tin bath, have to buy a new one when the old one wears out or starts to leak. They will be paying the tax, but no corresponding tax will be paid by the rich.

The same is true of the whole range of items which are used for home washing—the washboards, irons, iron shields, and all the rest. Anyone who can afford to send washing to the laundry will not have to pay this tax, but people who do washing at home will have to pay it. It is doubly regressive as is the abolition of the D Scheme, which the Financial Secretary thought was widely accepted, but which will make dearer clothing cheaper and cheaper clothing cost more.

It is not only the tax on necessities in this Budget which is resented all over the country, but at this Christmas season it is right to recall the words of my hon. Friend the Member for Liverpool, Exchange (Mrs. Braddock) who, during our all-night sitting, three or four weeks ago, made what I thought was one of the most moving and effective speeches in our debates. She referred at that time to the amount available to hospital matrons for expenditure at Christmas time on very small luxuries and pointed out that the money will go less far. She referred to toys and pointed out that under the Bill children's tea sets, which cost 12s. before the tax, will now cost 14s. 5d., a doll costing 25s. 11d. will cost 26s. 8d. and a toy car costing 10s. 11d. will cost I Is. 3d. This is a very serious thing the Chancellor has done at the beginning of the Christmas season. We cannot help remembering that last May the Chancellor was posing as a Father Christmas: in December we find him a Scrooge.

To sum up, the Government have produced this Bill because of the failure of their economic policy, because of their doctrinaire refusal to tackle the real causes of the economic crisis. It is because of their disastrous policies that the country is facing a crisis and they then produce this Bill which, with characteristic irrelevance, throws the greater share of the burden on ordinary families. We on this side of the House, and, I believe, the vast majority of people in the country, reject the Bill as politically unnecessary, as a doctrinaire and irrelevant gamble of a Chancellor whose policies have led the country into an unnecessary economic crisis. We reject it economically as a Bill which does nothing to help exports, which does nothing to bring imports into balance and which, so far from restraining inflation, will intensify it. Finally, we reject it socially and morally in that it places a heavy burden on those least able to bear it, especially upon that wide section of the community who have gained least and suffered most from these four years of Tory Government.