New Clause.; — (Reduction of Purchase Tax from Five or Ten per Cent. to One per Cent.)

Part of Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 3rd July 1957.

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Photo of Mr Victor Collins Mr Victor Collins , Shoreditch and Finsbury 12:00 am, 3rd July 1957

When the Economic Secretary made his brief intervention, earlier in the debate, he told us that the cost of reducing Purchase Tax from 5 per cent. or 10 per cent. to 1 per cent. would be £46 million; from 30 per cent. to 15 per cent., £60 million; and from 15 per cent. to 5 per cent., £16 million. He appeared to think that, having said that there was nothing else to say, we should be flattened on this side of the Committee. He seemed to think that if those amounts were not collected in taxation people would have more money to spend and that would exacerbate the inflationary situation.

I should like to ask the Economic Secretary whether he thinks that when Purchase Tax of 1s. in the £, 5 per cent., is added, that is all the housewife pays. If he does think that, I assure him that it is very far from the truth. The tax which is collected in that way, particularly in the lower ranges, eventually, for reasons which I will try to explain, becomes very much more. Indeed, possibly treble the amount that is collected is actually paid by the public. I can scarcely imagine a more inflationary situation than that and a less satisfactory tax.

The Economic Secretary must surely realise that in the 5 per cent. and 10 per cent. ranges we are talking about things like boots and shoes, gloves, haberdashery and cushions. There are hundreds of items, every single one of which is in daily use in the home or on the person, and, therefore, this 5 per cent. or 10 per cent. is a sales tax and a deliberate and inflationary impost on essentials. If the Government were sincere in their determination to stabilise living costs and to reverse the ascending spiral, there would be no more practical or effective step that they could take than the removal of this tax.

This week, millions of workers whose wages are subject to the cost-of-living index will receive an automatic increase and one of the factors of that increase depends on the cost of the articles which are the subject of these new Clauses. If, in fact, this tax were not collected and these Clauses were accepted, it is not too much to say that these automatic wage increases would not be taking place. Therefore, when a wage increase of that kind takes place, inevitably, if not immediately, it means an increase in prices, and this goes on and on.

My hon. Friend the Member for Clapham (Mr. Gibson) said that the workers will be pressing for increased wages to protect their living standards. We all know, unfortunately, that they do not succeed in doing so, even when they get increases in monetary wages, and that is a tragic position of which the men are well aware. They are well aware that this position has been foisted on them by the Government but there is nothing else they can do. It is extraordinary that we should be asking for relief in this modest range of goods—the 5 per cent. and 10 per cent. Range—which the Economic Secretary said would cost £46 million, and that we should be refused this, when the Budget has already given £34 million to Surtax payers. If that is not inflationary, I should like to know what is.

There are, of course, in these ranges a quite bewildering list of exemptions. I have previously drawn attention to the fact that the list is compiled and issued in such a way as to cause the maximum amount of bewilderment. I do not want to go into that again. That is part of the cost which is added by the manufacturer. He has to maintain a staff to run this Purchase Tax business. He has to receive the very courteous officer from Customs and Excise. Sometimes he is there for days on end and a senior member of the firm has to be with him. All these costs are added, in fact, to the cost of the article.

When the retailer receives his goods he gets an invoice for the goods and the tax is charged on the uplifted price of the article, very often a higher price than the manufacturer has himself charged, because always the tax is levied at the highest retail price. Then the retailer, because he is at risk—if he has paid the tax and the taxation policy is then changed and the tax is reduced he loses money—adds on his bit. So it is not merely 5 per cent. or 10 per cent., or whatever it is; it is at least double that which the housewife eventually has to pay.

This 1s. in the £ which the Government are exacting does not even begin to end the matter. It eventually becomes 3s. in the £ on every pair of boots and shoes, aprons, socks or stockings, gloves, scarves and shawls. The same thing applies to the vast range of household articles on which, in 1955, the Government, for the first time, introduced a tax of 30 per cent. and which, in this Finance Bill, on many of the articles is reduced to 15 per cent. When this tax was introduced the Minister of Housing and Local Government, who was then the Financial Secretary to the Treasury, justified it by saying that this was a step to counter inflation. Will anyone suggest that it has been successful?

In the last two years there has been a further considerable widening of the inflationary situation. These particular taxes, the subject of the three new Clauses under discussion, are, in most cases, on articles which were tax-free under the utility scheme and under the D scheme which followed. So it is a new imposition. We have had the utility scheme and the D scheme applying to articles which were in general and common use and which it was thought to be proper not to subject to tax, This list of articles is, in the main, a newly imposed list of taxes.

Right through the domestic furniture, practically everything we sit on, sit at or lie down on is subject to tax in one form or another. Almost no familiar article in the home escapes this tax. It has caused unemployment and difficulties in the furniture industry, quite apart from the hardship on young people setting up a home. I therefore ask the Economic Secretary to deal with this particular point of the end product of the £46 million, which is the cost, he tells us, of these 5 per cent. or 10 per cent. new Clauses. Will he tell us how much it costs the housewife, where is the real inflation, and take this through the whole range of taxation? I think it is true to say that when we are dealing here with matters affecting industry we seldom fully realise the full extent of the actions we have taken. From the viewpoint of production and living costs, this tax is by every test the worst possible way of raising revenue.

I should like to raise one point of detail with the Economic Secretary concerning the 30 per cent. range. He will recall that at an earlier stage I moved an Amendment in respect of sewing machines, when he replied that the Chancellor had kept sewing machines at 30 per cent. Purchase Tax instead of reducing them to 15 per cent. with the rest of the domestic appliances and apparatus because of the difficulty of distinguishing between hand and treadle-operated sewing machines and those which were electrically driven. The right hon. Gentleman added that it was a very simple matter to put an electrical drive on to a hand-operated sewing machine and, therefore, the tax had to be continued at 30 per cent.

Since 28th May, when I raised the matter, I have been informed by the second largest manufacturers of sewing machines in the country that for the last twelve months they have been making a large hand-operated domestic sewing machine which cannot be converted easily to electrical operation. It could be done only at their factory and at prohibitive cost. If that is the case, I submit that such machines which are incapable of conversion to electrical drive should properly be included in paragraph (a) of Group 12, namely, appliances and apparatus not designed for operation by electricity or gas. If that is the case, these sewing machines, to which one of the new Clauses relates, certainly should be reduced to 15 per cent. with the other articles.

The Economic Secretary might say that that would require merely an administrative change. If so, I shall be glad to have his confirmation of that or, at least, an assurance that he will look into the matter. The point is one of substance, and if it can be met in this way, as it should be, sewing machines ought not to be continued at this high rate of tax.

We have been talking about inflation and savings. It would be much better to encourage people to buy sewing machines, with which they can make their own clothes and do their own repairs, than spend a lot of money in the shops. This is an article of domestic character and it should be possible to make this concession. I hope that the Economic Secretary will reply both to this aspect and to the other and vital point of the cost of the tax and what it costs the housewife in the form of the purchased article.