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(1) The enactments relating to purchase tax shall have effect as if in Part I of the Eighth Schedule to the Finance Act, 1948 (as amended by Treasury orders under section twenty-one of that Act and in particular by the Purchase Tax (Consolidation) Order, 1956), a rate of tax of thirty per cent. were substituted for any rate of fifty per cent.
I believe that it would be for the convenience of the Committee to discuss with this new Clause the following one in the name of the hon. Lady the Member for Flint, East (Mrs. White), "Reduction of purchase tax from sixty per cent. to fifty per cent.", and that in the name of the hon. Member for Shore-ditch and Finsbury (Mr. Collins), "Reduction of purchase tax from ninety per cent. to seventy-five per cent."
So far as we on this side of the Committee are concerned, the suggestion you make, Mr. Thomas is one with which we agree.
When the right hon. and learned Member for Montgomery (Mr. C. Davies) spoke on the Clause with which we have just dealt, he reminded us of the fact that the Purchase Tax was introduced in 1940 by the then Chancellor of the Exchequer, the late Sir Kingsley Wood, and that it was a war-time measure. I suppose that the number of hon. Members who heard the tax introduced by Sir Kingsley Wood must now be a dwindling number in this House. I was there, and like almost everybody else who heard that speech, I certainly never dreamed for a moment that, twelve years after the war had ended, the Purchase Tax would not only still be levied, but levied more generally and at a much higher rate than it then was.
In introducing it, Sir Kingsley Wood did so on the grounds that it was
the urgent and imperative need both to limit civilian consumption and also to obtain a new source of revenue.
These objectives do not altogether marry. The more we limit consumption, the less, of course, we raise in revenue, and I think there is no doubt that when Sir Kingsley Wood introduced this tax, seventeen years ago, he had particularly in mind the hope that it would limit consumption. The raising of revenue was secondary to that purpose.
This object, and a very necessary one in wartime, was borne out by what he went on to say. He continued:
…there will be a high rate of tax on the purchase of goods which are either luxuries or goods which in the hard circumstances of war we can either do without or of which we can at least postpone the replacement."—[OFFICIAL REPORT, 23rd July, 1940; Vol. 363, c. 650–2.]
It is interesting to note, in the light of some of the rates which are applied today, that he went on to say that the high rate he had in mind—and I emphasise the word "high"—on luxuries and things unessential in the midst of an all-out war, would be 33⅓ per cent. of the wholesale value. The series of new Clauses with which the Committee is about to deal concentrates on these higher rates, some of them well above the 33⅓ per cent. mentioned by Sir Kingsley Wood. We want, if we can, to extract from the Economic Secretary to the Treasury a statement as to whether, in the light of what has been said already on an earlier Clause, the Government will persist in imposing these very high and, in some cases, ruthless scales.
I believe that my hon. Friend the Member for Birmingham, Ladywood (Mr. V. Yates), in which city jewellery is a staple industry, will, if he is fortunate enough to catch your eye, Mr. Thomas, have something to say later. As we know, the rate of Purchase Tax thereon is 100 per cent., and that is as high as Purchase Tax goes.
I stand corrected; it is only 90 per cent. but I believe that at one time it was 100 per cent.
This tax, as most of us agree, is a bad tax, because it offends against at least one of the canons of taxation. The amount taken from the taxpayer and received by the Exchequer should normally and as nearly as possible be the same, but, as my hon. Friend the Member for Shoreditch and Finsbury (Mr. Collins) pointed out, the actual amount taken by way of tax is nothing like as much, and, in some cases, well below, that which the consumer actually pays. The reason for that, of course, is that the tax is levied at the wholesale stage, and from then onwards everybody dealing with the goods on which it is imposed seeks, not unnaturally, to get some recoupment of the extra outlay to which he or she has been subjected.
It may well be that some kind of tax of this sort is essential. In my lifetime public opinion has greatly changed on the question of indirect taxation. There was a time when the Liberal Party—now a dwindling party in the House of Commons—was wedded to a policy of direct taxation and anything in the shape of indirect taxes, particularly on food, met with its disapproval. Taxation is now so high that I assume that there is no party in the country that would not agree that some indirect tax on certain commodities or luxuries is necessary.
We on this side of the Committee take the view that Purchase Tax as it stands is not a good tax, and I should like the Economic Secretary, when he replies, to tell the Committee just how long Purchase Tax in its present form is to continue. It is exacted at the wrong time, the scales are full of anomalies and injustices, they are unfair, to traders who never know where they are. We had a good example of this in the autumn of 1955, when traders and others who had got out their Christmas catalogues suddenly found themselves faced with increases in Purchase Tax. Whenever there is a change in the tax, particularly a change downwards, many traders lose money. That is grossly unfair, and it is time that something was done about it.
One of our reasons for initiating this debate is to draw from the Government, if we can—I know that it is a very difficult thing to do—a statement as to what their future Purchase Tax policy is to be. Ever since the war ended, that is, for the past twelve years, we have had long debates on Purchase Tax on every Finance Bill. We have gone hour after hour, and sometimes all through the night, discussing the incidence of this tax on commodities or classes of goods.
At one time, we yearly had a sort of Dutch auction, when Members put down Amendments for the reduction or the abolition of the tax on this or that class of goods. The Chancellor of the day had to weigh up which he would grant and which he would refuse. It is only this year, owing to the wording of the Money Resolution by the Government which—I hesitate to say this—might be considered by some to be a little sharp in the way of Parliamentary practice, that we are unable to put down, as many of us on both sides of the Committee would desire, Amendments to reduce Purchase Tax on many items.
Though I accept, of course, that that is so, it does not alter the fact that the Government have done it this year. Now would have been the time to have had a wider latitude, after three or four years, of the kind we used to have in the years immediately following the war. This present procedure cramps and hampers hon. Members who desire to ventilate grievances concerning Purchase Tax. All parties feel that hon. Members should be given the opportunity, at least once a year if not more often, to discuss in detail the various scales of Purchase Tax and their incidence on certain classes of goods.
May I mention, purely as an example, the kind of thing which we should like discussed and on which we should like to move Amendments if that were within the rules of order? I refer particularly to musical instruments which, at present, bear a tax of 60 per cent. The right hon. and learned Member for Montgomery mentioned this matter as an example of the kind of thing about which many of us are worried. I know that my hon. Friend the Member for Maryhill (Mr. Hannan), if he is fortunate enough to catch your eye, Mr. Thomas, would also like to deal with the matter. My hon. Friend has spent a good deal of time, these last few years, trying to awaken public opinion to the iniquity of Purchase Tax on musical instruments. It certainly defeats the objects laid down by the Chancellor of the Exchequer in 1940 as his reasons for imposing the tax.
Musical instruments are not luxuries and things which, at any rate in peacetime, we do not want people to buy or to refrain from using. The tax on musical instruments is, as I think the right hon. and learned Member for Montgomery said, a tax on the tools of trade. I think he ventured to say that musical instruments were the only tools of trade which were still subject to Purchase Tax. I should like the Economic Secretary to say whether that is so. I am inclined to think that that is not entirely true, but, even if it is only partially or even largely true, it is something, I think, of which the Government should take note in considering this Tax.
In 1940, the beginning of the worst period of the war, the then Chancellor of the Exchequer imposed Purchase Tax on musical instruments at the rate of 33⅓ per cent. Since then the rate has been altered eight times. At one time it went up to 100 per cent., and it redounds to the credit of the Labour Government that, in 1946, they reduced the rate to 33⅓ per cent. At a later date it went up again, and now, as the Committee knows, musical instruments pay Purchase Tax at the rate of 60 per cent. This bears very hardly on many well-deserving people who are musically inclined. Many who would like to purchase an instrument of their own are prevented from doing so because they cannot afford to pay the tax.
The tax on an accordion ranges from about £7 to £105 12s. 0d. On a cornet, from £5 to £13 5s. 0d. For a trombone the amounts vary from £5 to £51 11s. 0d. These are very startling figures. The figures for violins are from £1 10s. 0d. for a cheap one to about £12 6s. 0d. for a better class type of instrument. The tax on a saxophone varies from £16 to £43 8s. 0d. and on the bagpipes—some English hon. Members may think this a good reason for keeping on the tax—it runs from £7 11s. 0d. to £35 4s. 0d. I am sorry that I have no figures for the trumpet—
I will mention the flute in a moment.
I have no figures for the trumpet, an instrument someone said Members of Parliament should be keen on possessing so that they may blow it on their own account. But, joking apart, these figures are startling and I call the attention of the right hon. Gentleman to them in the hope that before we part with this Bill he may be able to give an indication that the Government have taken note of them. I hope that he will also remember that here we are dealing with the tools of trade of many professional people.
I have received representations as, no doubt, have other hon. Members, from local bands in my constituency. These bands fulfil a useful function. They appear on all sorts of festive occasions. Three times within the last two or three months I have been approached by bandleaders and bandsmen and asked whether something can be done about taking off the tax on the instruments which they require. Today, as we all know, musicians are struggling against the competition of canned recorded music and it is an additional hardship that they should have to pay Purchase Tax on their instruments of amounts which I have mentioned.
This is too a tax on education. There has been an enormous development of musical appreciation in the United Kingdom during the last quarter of a century. Music is greatly encouraged in schools and the Government pay money to the Arts Council to enable that body to assist those who are anxious to learn music. Not long ago I attended a meeting where someone speaking for the London County Council gave figures of the expenditure of that authority on musical instruments, a great proportion of which is reflected in Purchase Tax.
The hon. Member for Belfast, East (Mr. McKibbin) mentioned the flute. I know of a small boy who is learning the flute but whose widowed mother is quite unable to afford to buy him one. He has the loan of one while he is at school, but when he leaves he will have to go without, unless he has saved up sufficient money to buy one. I am sure that the possession of a flute would give him much pleasure.
It is, of course, pure coincidence that I happen to be giving musical instruments as an illustration of the kind of tax which should be reduced. It comes within the ambit of the second of the three Clauses which we are now discussing together. I am sure, Mr. Thomas, that you will be aware that we are asking the Government to reduce Purchase Tax on items where at present, it runs to 60 per cent.
Of course, Mr. Thomas, I must bow to your Ruling. But perhaps you would be good enough to permit me to say that before you occupied the Chair your predecessor allowed quite a lot to be said on this point and, so far, I do not think that I have gone beyond what has been said on the subject. Perhaps you would permit me—I will go no further than this—to say that to buy a flute now costs about £47, of which £14 is tax, and that I consider that a great imposition.
I remember that when Purchase Tax was introduced, in 1940, I was one of a small deputation which waited on the then Chancellor of the Exchequer and invited him not to include hooks among those items on which it was intended to impose Purchase Tax. The then Chancellor had that in mind and I am glad to think that the Publishers' Association and hon. Members were able to persuade him that to tax books was to tax culture.
To tax musical instruments is also wrong and another way of taxing culture.
The Economic Secretary indicated earlier that to accept these Clauses, or even some of them, would cost many millions of pounds. I think he mentioned the figure of £150 million. That is a lot of money, but, as has been pointed out, the concessions already given regarding Income Tax relief in a full year would amount to £102 million, which is two-thirds of what he says the Government cannot now afford. If, quite properly, the Chancellor has in a full year given relief amounting to £20 million for child allowances and allowances for the aged, and that is not considered inflationary, I cannot see why relief on many articles which are now so heavily taxed would be.
Even if the right hon. Gentleman cannot afford, as, I gather, he is adamant in declaring, the general reductions which we ask for because they would be too expensive to the Treasury, that cannot apply, for example, to musical instruments. The total income accruing from Purchase Tax on musical instruments must be below £500,000. It is difficult to get the exact figure but I understand that 40 dealers were invited to send particulars of what they paid, to an eminent firm of accountants in the City, and that is I gather approximately what the total came to.
The right hon. Gentleman will probably say that professional people can get a rebate from Income Tax on any instrument they buy. I should like to know whether that covers the first instrument, or whether one gets the rebate only when the first instrument is replaced, as is the case with law books and robes and other such equipment. I ask the right hon. Gentleman to treat these Clauses seriously. I should like him to say that at least he can make some concession as a result of the long discussions which have been held, and that a case has been made out. It would be an act of statesmanship to accede to the requests which have been made.
Before I sit down, I should like to remind hon. Members opposite that last night, when we were dealing with a Clause relating to the Profits Tax paid by building societies, the whole Committee joined together and insisted on the Government taking notice of what had been said. I should like to feel that this evening, in like manner, all of us could unite, regardless of party, in the cause of those who are keen on making this nation a music loving people. One way of doing that is to reduce the price of musical instruments.
I hope that the Economic Secretary will not do what he did earlier and what the Financial Secretary has done almost without exception since we began these debates—make an off-hand reply lasting three or four minutes. I find it difficult to charge my memory with the order of debates when the Labour Government were in office, but I think that I shall be well within the recollection of those hon. Members who were present at that time when I say that the Labour Government spokesmen treated Amendments and proposed new Clauses moved from this side of the Committee much more seriously than Ministers opposite have done on this occasion.
We are not here for fun. The Amendments that we move mean a great deal to thousands of people, and we think it only right and proper that the Government should treat them seriously. I hope that on this occasion, at any rate, they will do so.
have listened with great interest to what the right hon. Member for Colne Valley (Mr. Glenvil Hall) has said about musical instruments. I shall not take as long as he has done to say what I wish to say, because I said almost everything that I can say in the Second Reading debate in an attempt to get Purchase Tax removed from musical instruments for amateur bands in Northern Ireland.
Since then, I have had a request from a well-known firm manufacturing band and orchestral instruments to raise the question of Purchase Tax on those instruments which are used for the education of children. This firm has often sought ways and means to assist schools which have expressed the desire to start a band and has considered the loan of a complete set of instruments for a month or two, or as long as may be necessary, to prove to parents and school authorities that children, if properly taught, can make music very easily. This service will also include suitable teachers for as long as might be necessary.
Surely, this very worthy effort on behalf of culture and discipline for children deserves every encouragement, but it has been rendered impossible because the firm has discovered that, assuming the value of the equipment to be in the region of £1,000, the Purchase Tax would be rated at approximately £500 and would have to be paid to the Treasury by the firm before it was permitted to proceed with the experiment, thus denying the unfortunate children, for the moment at any rate, the chance of receiving a musical education.
I have no more to say because the unfairness of the situation speaks for itself, but I should like to ask my right hon. Friend, if he cannot see his way to reduce or abolish the tax on musical instruments at the moment, to consider making the tax entirely refundable to a firm supplying free for a period of less than a year, musical instruments to schools or youth organisations, such as the three Service units, the Army Cadet Force, the Sea Cadets and the Air Training Corps. I do not think this concession would cost the Government very much.
I hope the hon. Member for Belfast, East (Mr. McKibben) will have the courage of his convictions to take himself and his hon. Friends into the Lobby if there is a Division, and I trust that the eloquent plea that he has made on behalf of musical instruments will be effective.
I am making a claim on behalf of what, in my view, and no doubt in the view of most people, is Britain's finest product. I refer to the Rolls-Royce motor car and the Bentley motor car which are manufactured in Crewe, a constituency which I am very proud to represent. Those motor cars depend—I am told they depend absolutely—upon a strong and continuing market in this country in order to survive. On the smaller car, Purchase Tax is paid in hundreds of pounds, but on the Rolls-Royce and Bentley it is paid in thousands. A tax of that magnitude is a strong deterrent, particularly on the home market.
I am happy to be able to tell the Committee that Messrs. Rolls-Royce are exporting more motor cars to the United States of America than they have ever done in their history, but they cannot survive on the export market alone; they are dependent upon some help from the Government in order to carry out work at Crewe.
The recent wage award to engineers, so I am informed, can only be absorbed by an increased output, and this means an increased home market. Merely to stay at the present level will not do, let alone to suffer a reduction in output if the tax continues. The market for Rolls-Royce products is inevitably small, and unless they can get some help it will have a very damaging effect upon what I believe to be our finest product.
The management says that motor cars of this type will not stand a 60 per cent. Purchase Tax, and that the trouble with the present Government—although this is a criticism not only of this Government but, perhaps, of any Government—is that no action is ever taken until an industry is actually in difficulties. I appeal to the Economic Secretary to do something on behalf of the motor car on which Purchase Tax is paid at the rate of 60 per cent.
It is no use closing the door when the horse has escaped, and if this very fine product is to continue, some help must come, if not today, in the very near future. The motor car industry, and particularly Rolls-Royce at Crewe, depends absolutely upon an early reduction in Purchase Tax. I am happy to say that at present, at Rolls-Royce, the industry is working overtime, but only a few months ago in the winter, partly as a result of the Suez crisis, Rolls-Royce was working a four-day week.
The firm has taken steps to diversify its products, but it is entirely dependent upon the vagaries of the motor trade, and I appeal, therefore, to the Economic Secretary to reconsider the incidence of tax upon a very valuable product amounting, as it does, to thousands of pounds. I hope he will pay some attention to this plea which is made on behalf of those who make this very fine motor car.
I only wish to observe that it may at least be said in reply to what the hon. and learned Member for Crewe (Mr. Scholefield Allen) says—though it would be an answer I should not care to make—that this sometimes so-called wicked rich man's Government has, of course, done something to help Rolls-Royce by reducing the Surtax. Therefore, there will be many more possible Rolls-Royce purchasers. That is one way of looking at it.
I am not nearly so ambitious as my hon. and learned Friend the Member for Crewe (Mr. Scholefield Allen), and I do not want to deal with anything so expensive. Nor do I intend to follow my right hon. Friend the Member for Colne Valley (Mr. Genvil Hall) in the argument about musical instruments. While supporting to the full the new Clauses we are discussing, particularly that to reduce the 60 per cent. rate of tax, there are two items, or, rather, an item and a class of items, in the consideration of which I would ask the Committee to occupy a few moments. They are both important.
The first is domestic refrigerators. I do not think very much has been said about them in this Committee when we have discussed previous Finance Bills. In the past, domestic refrigerators were regarded as luxuries, but I submit to the Committee, and in particular to the Economic Secretary, that they are no longer luxuries but have become necessities in the lives of our people. My hon. Friend the Member for Shoreditch and Finsbury (Mr. Collins) tells me, for instance, that in every one of 3,000 flats built since the war by his municipal borough a domestic refrigerator has been installed. That is a fine example of municipal enterprise, and it also shows that refrigerators are among the things housewives need.
I submit that no longer is the domestic refrigerator a luxury, and that it has now become a necessity, and I could not do so at a more appropriate time than now, with the weather we are enjoying, which proves that domestic refrigerators are real necessities. A housewife when doing her shopping can purchase a greater amount of food on one shopping expedition if she has at home a refrigerator in which the food will keep, and surely the Government should help her by accepting the new Clause in these days when the Ministry of Agriculture, Fisheries and Food and the Ministry of Health are taking so deep an interest in food hygiene.
Our overseas trade has been mentioned in the debate. Up to the end of 1955 the United Kingdom was second only to the United States of America as an exporter of domestic refrigerators. Since 1948 the United Kingdom's industry has exported 1 million domestic refrigerators. That trade has brought in foreign exchange amounting to £67 million, and represents 60 per cent. of the industry's output. In 1955, the industry exported from this country £5½ million worth of refrigerators. In 1956, unfortunately, there was a decrease of 5·. per cent. I feel sure that this tax is an attack on the industry, and I am sure that if the domestic output were increased that would tend very largely to increase the exports of these important commodities.
I do not want to take any more of the time of the Committee upon this matter, because I know many other hon. Members want to speak and the time factor is important today. Therefore, without pursuing the argument in favour of the domestic refrigerator, I simply appeal to the Economic Secretary and, through him, also to the Chancellor to accept these new Clauses, or, if they are not prepared to do anything about them at the moment, favourably to consider this policy for next year. I hope I have said enough to draw their attention to a great need.
The other item or class of items I want briefly to mention is in Group 23. I had the temerity to put down an Amendment, which. Sir Norman, you were not kind enough to call, to reduce from 60 per cent. to 30 per cent. the tax on trunks and other leather receptacles. I have always been interested in leather goods. I think the British nation likes them, and it has always been proud of British leather goods, and I am one of those who can rarely pass a leather goods shop without going into it to see the goods, especially if I think there may be some new design or development.
There are in this country 27,000 people engaged in the production of leather goods, apart from those employed in the tanning and other basic leather trade industries. What I said about the export trade in refrigerators undoubtedly applies to the export trade in leather goods.
This tax was imposed on trunks and other leather receptacles during the war when leather was a very important commodity indeed. The tax was put upon these receptacles to check the purchase of them so that our leather might be used for important war-time purposes. That need has now gone, and this tax has now become purely and simply a revenue raiser, to the detriment of the people who produce these goods.
Many anomalies arise from the incidence of this tax on these goods, and I would point out some of them. If the firm's turnover is less than £500 per annum there is exemption from Purchase Tax on the goods. The result of that is that the members of a family set up business each one separately, so that while in toto they are doing an enormous trade, each member of the family has a trade worth £500 or less and so has the exemption from tax. I do not think this is quite fair. I think the people who are producing more than £500 worth per annum ought to have the same opportunities.
—but not now in the debate. I am sure the right hon. Gentleman will understand.
A document case without a zip fastener has no tax. If it has a zip fastener there is tax at the 60 per cent. rate. A folio brief case with a zip fastener is free of Purchase tax but a music case, which looks exactly the same, except that it is fastened with a metal rod, bears 60 per cent. Purchase Tax. Dog leads have no Purchase Tax, but children's safety reins attract 30 per cent. tax. A single photograph frame is taxed at 30 per cent., a double photograph frame at 60 per cent. I suppose that works out aright, though I do not know. A wide open shopping basket, from which any pickpocket can pick things out, is free of tax, but a sensible kind of shopping bag, which closes and is fastened at the top, bears tax at 60 per cent. Golf clubs bear no tax, but a golf bag which contains golf clubs, if it is made of leather, bears 60 per cent. tax.
These are ridiculous anomalies, and the Government really ought seriously to consider them with a view to reducing the tax, and I hope that they will also favourably consider all these new Clauses.
I should like to support my hon. Friends who have spoken on the new Clauses calling for a reduction in Purchase Tax on various articles, but I want to refer particularly to jewellery. My hon. and learned Friend the Member for Crewe (Mr. Scholefield Allen) spoke about increased exports of Rolls-Royce motor cars. I have to report with much regret that in many cases the jewellery industry is experiencing a considerable reduction in the export trade, which must have a serious effect upon the industry.
I have warned the Chancellor on previous occasions about the effects of high Purchase Tax on jewellery, some of which carries 60 per cent. tax and some 90 per cent. I mentioned this fact recently, but the Chancellor did not say anything about it. Therefore, I propose to submit more details in the hope that the Economic Secretary will closely examine what I believe to be the very serious effect of Purchase Tax, and especially of the higher rate, on the jewellery trade.
I cannot do better than quote a letter which was sent to me by the British Jewellers' Association, which I am sure is a very responsible body. I am assured that many firms in Birmingham have experienced a considerable reduction in their export trade. They deal with jewellery carrying 60 per cent. Purchase Tax. If I asked for export figures I am quite sure that the Government would not be able to calculate correctly the reduction in the amount exported by registered post, but I am assured by those who manage the industry that Purchase Tax has had most adverse effects upon it.
The Association, in its letter to me, asked:
…would it not be possible to effect a reduction of tax for real jewellery, to give a much needed stimulus to the craftsman? The nature of his work and the materials in which he works price his product fairly high from the point of view of manufacturing costs, and consequently a 60 per cent, tax on top of this makes it much more difficult to sell than the lower priced imitation jewellery, even bearing that rate of tax.
There is in this industry a craft of stone seal engraving. Only two people in the country row practise it, one in Birmingham and one in London. Jewellers in Birmingham are obliged to send a considerable amount of jewellery to Germany to be engraved and then returned to this country. The Government recognised that there was a case to be made for the craftsman in silverware. I submit that equally there is a case to be made for the craftsman in real jewels, which we want to export to America and elsewhere.
In the course of my personal investigation I was informed by one firm in Birmingham that its export trade has been reduced from 60 per cent. to 40 per cent. of its output. When the Economic Secretary speaks about the cost of reducing Purchase Tax, he must also calculate what is being lost in export trade. I am told by a director of one of these firms that its financial position has been so impaired that it cannot afford to finance export tours to the United States and the West Indies where it could sell its products.
I cannot understand why the Treasury does not appreciate the importance of dealing with anomalies and with other points which I am about to mention. In fine jewellery, diamonds are tax-free. Anyone can purchase or import them. It is only when the diamond is mounted that it becomes taxable. Therefore, the diamond is much more valuable than the precious metal. When it is mounted, the full tax of 60 per cent. is payable on the diamond as well as on the metal. If fashion should change and someone wanted to convert a diamond brooch into diamond earrings, no jeweller could carry out such a request without again charging Purchase Tax on the diamonds. How is the industry to carry on successfully with this kind of restriction placed upon it?
The letter from the Association refers also to the compact trade which carries a 90 per cent. Purchase Tax. Referring to the manufacturer of compacts, flapjacks, vanity cases, lipstick holders, powder bowls and boxes—in general, containers for cosmetics—the Secretary of the Association says:
The trade has repeatedly made representations for a reduction of the tax on these articles, but it is understood that the Treasury have been unwilling to do so because of the association of these articles with the cosmetics
themselves. It is suggested that there is no valid reason why cosmetic containers—such as those mentioned above—should not be taxable when supplied empty in the same way as snuff boxes, cachoo boxes, pill boxes and other receptacles of a personal nature…
A snuff box carries 60 per cent. tax but a powder box carries 90 per cent.
The letter adds:
This particular branch of the trade is being extremely hard hit by this very high rate of tax, and in point of fact in recent months three firms engaged in their manufacture have gone into liquidation, and three others have discontinued these articles from amongst their lines.
I am prepared to submit to the Economic Secretary the details which are in the possession of the British Jewellers' Association. I cannot think that the Government will not take full notice of such an adverse effect on an industry that firms have to close down.
To give an example, I have here in my possession two identical cases made in Birmingham. One case carries 90 per cent. Purchase Tax and the other 60 per cent. Purchase Tax. The only difference between them is that inside one case there is a container for cigarettes, which we understand are now very harmful to people, and inside the other a powder container which all women regard as a necessity. The case for carrying cigarettes bears a 60 per cent. tax and the case for carrying face powder hears a 90 per cent. tax. How can the manufacturer compete in the export market with a case bearing a 90 per cent. tax? He has to confine himself to the production of the lower taxed case. That is the reason why firms have gone out of existence.
I will not go into details of the articles in the list before us, some of which carry the 60 per cent. tax and others the 90 per cent. tax. What are luxuries and what are necessities? For instance, snuff boxes are taxed at 60 per cent. Is snuff more desirable than powder? The anomalies in Purchase Tax ought to be considered seriously.
On several occasions in this House I have spoken for unpopular causes. It seems that the case for the lady's flapjack or the powder bowl is unpopular in present circumstances—[HON. MEMBERS: "Why?"] I am glad to know that it is not so unpopular, from those interruptions. I have taken an interest in prison reform, and I am pleased to know that the prison reformers themselves now consider cosmetics to be essential to the ladies who have been put in prison, and that cosmetics are considered as almost a biological necessity.
At any rate it has been an interesting innovation in recent times for cosmetics to be allowed in our prisons. I think there is a case to be made out for the women of the country, and I think that this continued policy of a tax upon women—[Laughter.]—I speak as a bachelor. It is a war on women, and it is about time something was done. I hope that we shall get something vastly different from the Economic Secretary than we were given earlier. I call his attention to the previous debate. Why I am asking for a straight answer is because my hon. Friend the Member for Hammersmith, North (Mr. Tomney) raised this point in the debate on the Finance Bill last year, and he used the phrase "a tax upon women". He put this point forcefully and was congratulated by the then Economic Secretary, who said:
I can assure the hon. Member for Hammersmith, North that we shall take very careful note of what he said on the subject of compacts. I have taken a full note of the points which he raised tonight, and, in particular, of those about exports. I cannot go further than that. The hon. Member made, as he always does, a helpful and thoughtful speech on this matter, and we on this side of the Committee are very grateful to him." —[OFFICIAL REPORT, 26th June, 1956; Vol. 555, c. 415.]
My hon. Friend the Member for Hammersmith, North made out the case for a reduction of Purchase Tax, because he pointed out that there was unemployment in certain firms. I have proved also by what I have said today that this is so. I want to know tonight from the Economic Secretary whether the Chancellor will consider this matter seriously, because it has had adverse effects not only upon the jewellery industry of Birmingham but of the country. I hope the Chancellor will consider this again so that we can stop the nonsense of differentiating between luxuries and necessities. I hope the right hon. Gentleman will consider it from the point of view of what is necessary for the trade of the country, what will help our export trade, what will help our balance of payments. I hope that every disadvan-
tage from which these firms are suffering today will be removed in a very short time.
I support the proposed Clauses, particularly the one in the name of my right hon. Friend the Member for Huyton (Mr. H. Wilson). When we are discussing Purchase Tax we are talking about one of the principal money raisers for the nation. Indeed it was the Financial Secretary himself who, in earlier stages of our debates, admitted that Purchase Tax was a revenue winner.
My hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith), in an intervention or an aside earlier this afternoon, rightly said that Purchase Tax has now ceased to be used as an instrument of policy and is one of the primary revenue raisers in the country. In 1951 the total income from the tax was £290 million whereas this year the Government are expecting about £460 million to come from that source. When the late Sir Kingsley Wood introduced the tax in 1940 he said that the urgent and imperative need, both to limit civilian consumption and to obtain a new source of revenue, was the reason for its introduction.
Since that time the purposes have become somewhat distorted, and my hon. Friends the Members for Salford, West (Mr. Royle) and Ladywood (Mr. V. Yates) have described some of the anomalies arising from the tax. It has an unfair incidence. It is the purpose of my remarks to show how unfair it is that the tax is not being used with discrimination to encourage that which is desirable in the country and to discourage other features which the Government should try to discourage as a matter of policy.
For example, when my hon. Friend the Member for Salford, West was describing the various kinds of receptacles which are subject to various rates of tax, he was describing that which is very true. If I may return to the topic of musical instruments, it is ridiculous to impose a flat rate on them irrespective of any embellishment or of any type, so that the violin with which the child is provided at a cost of £4 10s. has Purchase Tax levied on it of between £2 5s. and £2 10s. Surely we as a nation should encourage our young people in the arts. We should not merely encourage them to earn a living, but to live a decent, happy and interesting life. I submit that Purchase Tax on musical instruments is unfair because they are not luxuries. I am not trying to be facetious in pointing out that if it is said, for example, that members of the Salvation Army are indulging in luxuries, it is the height of fantasy. If it is to be said that colliery bands, boys' brigades, boy scouts and, above all, schools are spending money profligately, then we ought to have another look at the whole matter.
A 60 per cent. tax is levied on watches and clocks on which a craftsman has carried out some special work, as described by my hon. Friend the Member for Ladywood. There are lower levels of tax for ordinary watches and clocks. There is a 60 per cent. tax on certain types of cameras, but not on others. However, a 60 per cent. tax is levied upon all musical instruments whether or not they have embellishments, and this represents a penal tax upon educational facilities.
To say that the tax affects only those engaged in the musical profession and musical industry for their living is wrong. The London County Council has, at the moment, more than 100 orchestras in its schools catering for 10,000 young people who are keen to learn to play instruments. These young people are participating in a social life which would otherwise be denied them. The parents simply cannot afford the instruments because of the 60 per cent. tax, and it is the London County Council which is providing the instruments and loaning them to the children. Since 1945 the London County Council has spent £75,000 on musical instruments, and it should be borne in mind that a large proportion of that represents tax.
The point I want to emphasise is that 95 per cent. of those children will remain amateur musicians throughout their lives, and only a small number will join the musical profession. We cannot have cream without milk. These young people are encouraged to join evening institutes where they participate in social life which would otherwise be denied them, but they have to leave their instruments at school. If the enthusiasm of the children is diminished or killed, one wonders where in future we shall find recruits to join the ranks of professional musicians.
I ask the Economic Secretary to bear in mind the fact that the 60 per cent. rate of tax applies to certain articles which have a much greater and broader value to the community than many others. In the case of musical instruments, we should encourage young people to develop their talents, for in the years to come the country will need the talents and culture that they possess.
On a point of order, Sir Norman. I am a little confused about the scope of the debate. Some of us have been kept rather strictly confined in our remarks. I certainly was. I was under the impression that the proposed new Clause dealing with musical instruments had not been called, and I am a little puzzled to determine whether references to musical instruments are in order.
Further to the point of order, Sir Norman. It has been the custom for a number of years for Amendments to be tabled dealing generally with the rates of Purchase Tax and for us, in the course of our debates, to have a reasonably wide discussion on the specific goods concerned. If that were not the case, I do not think the House of Commons could rest content with the present method of dealing with Purchase Tax on the Finance Bill.
I said, Sir Norman, that I was trying to suggest that in connection with the imposition of the 60 per cent rate of tax, there should be some discrimination in order to select less necessary and desirable goods or goods which are real luxuries as against articles which are of great value to the community and that we should encourage the good and discourage the mean and sordid.
With regard to the purchasing of musical instruments, the warning should be uttered that it is most desirable that our young people should have the best available and not have to resort to secondhand instruments which may have faults developing and from which they may not obtain the best advantage. The tax on musical instruments is indefensible. It is a tax on tools. It is a tax of the worst sort on culture because it is a tax on creative culture. It is a tax on self-expression.
If Parliament is serious about doing all it can to encourage our people to work for a better life, and if we really mean that the standard of living shall be doubled in twenty-five years, this being achieved in a material sense by modern means of production, let us at the same time provide the opportunities for the better employment of leisure which will be part of that higher standard.
I urge the Economic Secretary seriously to consider the matter before Report and to let us know something of what the Government mean to do in the future. What is involved here is a very small part of the total income. It is perhaps less than £1 million of the £460 million which the Government seek to obtain by Purchase Tax, and thus it may be said to be an insignificant part of our total income.
In opening the debate, the right hon. Member for Colne Valley (Mr. Glenvil Hall) pointed out that over the years there had been many very long debates upon Purchase Tax. He proceeded to denounce the tax root and branch, but those of us who were in the 1945 Parliament will remember that no one then defended it with greater force and eloquence than the right hon. Gentleman. He thundered at the Dispatch Box night after night in defence of it.
The right hon. Gentleman added that he would welcome a return to what was described as the "Dutch auction" at the time when the right hon. Member for Bishop Auckland (Mr. Dalton) was Chancellor of the Exchequer, but the right hon. Gentleman certainly did not welcome it in those days.
I am sorry to interrupt the right hon. Gentleman, but he is misrepresenting me, not that it matters very much, for this is all good fun. I said that the present system was bad and we wanted an indication from the Government of what they proposed to put in its place. I also said that some tax of the kind was undoubtedly necessary, but what kind I did not indicate.
If I misunderstood the right hon. Gentleman, I am very sorry. I thought that the present system was not too bad. It certainly appears to provide hon. Members with considerable latitude in making the case for any industry. The right hon. Gentleman asked how long Purchase Tax would last. I can give a very simple answer. I do not know, and if I did, I could not tell him. I am afraid that the matter will have to rest there for the moment.
The right hon. Gentleman and a number of other hon. Members spoke about musical instruments. The right hon. and learned Member for Montgomery (Mr. C. Davies), with his usual skill succeeded in making a speech on the same subject on a previous new Clause. On the "tools of the trade" argument, of course, a number of tools of the trade are taxed. We rehearsed them last night crockery for hotels, stationery, commercial goods and so on. It is not unique in that respect and as a matter of fact the tax is slightly lower than it was when right hon. Gentlemen opposite left office.
Certainly a powerful case has been made. The trouble with all the different types is that it is dangerous for any trade to give an indication of the Chancellor's views, because that upsets the trade. All I can do is to promise hon. Members, as I promised the right hon. and learned Member for Montgomery, that I will faithfully report to the Chancellor the feelings expressed on this subject.
We had a most enjoyable interlude about Bentleys and diamonds. It was very pleasant and it was heralded by a very robust contribution from the hon. Member for Ladywood (Mr. V. Yates) who said that we should have no more of "this nonsense" about the difference between luxuries and necessities. That is a sentiment not always put forward by the Opposition. As the speech of the hon. and learned Member for Crewe (Mr. Scholefield Allen) indicated, Bentleys are not doing too badly at the moment and I cannot think of any very good case for making Purchase Tax on Bentleys lower than it is on, say, Austins. It was a case of special pleading for the luxury car and although there may be something in the case—it is not usual—it would take a certain amount of justifying, especially in view of the present state of the motor car trade.
The hon. Member for Ladywood spoke about jewellery. He has a constituency interest and he spoke with very great knowledge. All I can say about that is that we have done something for the jewellery trade. We have reduced the tax from 100 per cent. to 60 per cent. which is still a heavy tax, but something has been done and I cannot promise at the moment that more will be done.
The main part of the hon. Member's speech was devoted to compacts and lipstick holders and what not. The argument of the Treasury, as he knows, is that it is difficult to distinguish the lipstick from the lipstick holder and it is very difficult indeed to have different taxes on the two. Cosmetics are taxed at 90 per cent. which is the highest rate. The hon. Member said that that amounted to a tax on women and he said that the Government were against women. Personally, I have always been in favour of cosmetics. I remember the words of the greatest living American poet:
A girl whose face is covered with paint, Has an advantage with me over one whose ain't.
That is a sentiment I share, but ladies, even those in prison, as the hon. Member pointed out, manage to cover their faces with paint in spite of the tax. We should be getting into very great difficulties if we tried to distinguish the lipstick holder from the lipstick itself.
The hon. Member quoted the example of snuff boxes, but a lipstick or powder cannot be put into a snuff box. I agree that the difficulties of drawing precise lines in Purchase Tax are appalling and one is always bound to have a certain number of anomalies, but the general principle on which the tax is worked is right.
The Treasury distinguishes between the cigarette case and its contents. An empty cigarette case is taxed at 60 per cent. Why cannot similar consideration be given to a case which contains lipstick? It is a matter of valuing the metal.
This group of new Clauses has covered a great array of cases from Rolls-Royces to flutes and trombones. As was intended, many hon. Members were enabled to raise topics affecting one or other of these cases. As the case for relief varies in strength among the different varieties of things which we have discussed, I do not advise my hon. Friends to carry all this omnibus proposition to a vote. I hope that the Economic Secretary will, as he has promised, look carefully at the issues which have been raised, bearing in mind in particular that he has legal power to adjust rates of Purchase Tax by Order in the course of the year, without waiting for the Budget.
If we set about the task of calling the Economic Secretary's attention to every Purchase Tax anomaly, we shall be here until Christmas. That has been shown by speeches made from this side of the Committee and the speech made from the Government side. I shall content myself with referring to one glaring anomaly, the anomaly of Purchase Tax on miners' safety lamps. Miners' safety lamps are exempt from Purchase Tax on two conditions, first, if they are approved in pursuance of Section 33 of the Coal Mines Act, 1911, and, secondly, if they are approved under the Board of Trade Regulations (Lighting Regulations), 1934.
There are two main kinds of lamp. One is the hand lamp which the miner carries to his work and which is operated by a battery. The shell and the battery together weigh 11 1b. and are exempt from tax. The other type is the cap lamp. The miner wears a cap lamp in front of his safety helmet and coupled to it is a battery which is strapped to his body. The cap lamp and the battery are exempt from tax, but the belt which the miner fastens around him is subject to tax, because it is made of leather.
The Economic Secretary said that it was impossible to distinguish a lipstick from a lipstick holder. How does the Treasury distinguish the belt from the lamp? Here is a glaring anomaly which ought to be rectified. The strap is made of leather and does two things. It helps the miner to support the battery on his back while he works, and it also keeps up his trousers. A civil servant's brief case is exempt from tax as are the braces which he buys to keep up his trousers, but the miner in his daily work has to pay tax on a leather belt which helps him to do his work.
The Economic Secretary cannot justify that, however hard he tries to justify the tax on a lipstick holder and lipstick. I ask him seriously and sincerely to consider this and to see whether he can remove the anomaly.
I understand that the belts which are being discussed by the hon. Member are in fact taxed at only 30 per cent., and so would not come within the scope of the Clause.
It is extremely difficult for me to reply to that at the moment. There is that anomaly, however, about which we feel very keenly, and I shall have to look up the point about the tax. It is an anomaly which I wish could be removed, and I plead with the Economic Secretary to try to remove it.
I should like to make a few observations upon the proposed new Clause which stands in my name, relative to the reduction in Purchase Tax from 90 per cent. to 75 per cent. I hope that the Economic Secretary will add the one or two points that I want to make to those which he has already promised to consider. In regard to his answer to my hon. Friend the Member for Ladywood (Mr. V. Yates), there is no difficulty in differentiating between a case and its contents. I can quote legion examples to this effect. One is the picnic basket, which bears a tax of 60 per cent., while its contents are taxed at 15 per cent. for cutlery and nothing for hollow ware. There are many such examples and I hope that the Economic Secretary will bear this fact in mind when considering these obvious injustices.
Generally speaking, whenever an Amendment on these lines is moved it seems to be dismissed on two grounds—first, that it deals only with articles of excessive luxury and, secondly, that it is particularly concerned with cosmetics. I submit that both grounds are quite fallacious. In the first place, the tax affects a wide list of goods, covering about six different groups. It covers calendars, postcards, letter-cards, greetings cards, articles for dyeing, tinting, waving, curling or generally messing about with the hair, toilet requisites and perfumery. I might say, in short, that it covers cards, cosmetics and craftsmen.
I should like the Economic Secretary to look particularly at some of the chief absurdities. If calendars are modern designs they must pay a tax of 90 per cent., but if they are reproductions of works of art more than 100 years old they bear a lower rate of tax. That seems stupid to me. If the greetings cards are in three or more colours, and therefore presumably beautiful objects, they bear a 90 per cent. rate of tax. The net result is that many of these articles are not produced at all, so that the Treasury does not reap the advantage of the higher rate of Purchase Tax.
In the case of cosmetics we have only to examine the list in page 72 of the Customs and Excise Notice to see how absurd is the idea that this tax of 90 per cent. is charged only upon items of extreme luxury. The list includes blackhead removers, chin straps for correcting double chins, shaving mugs, strop oils, toothbrush holders and similar requisites. It is right to ask the Economic Secretary to look at the matter so that we can have some of these stupidities removed before we have another edition of this Customs and Excise Notice.
Broadly speaking, the 90 per cent. tax is a tax upon cards, cosmetics and craftsmen. It is a penal tax upon beauty and gullibility. It does not bring in very much. In 1955, when the tax was increased from 75 to 95 per cent. we were told that the extra revenue amounted to £2 million. It would appear that the Economic Secretary could regard it as a bargain concession because it now brings in less than £2 million, but it strikes blindly and indiscriminately. Those horrible things, curling papers, are charged at 90 per cent., presumably because the Chancellor thinks that any woman who wears them should at least be fined.
There are so many inconsistencies here. The woman who wants a home perm has to pay a tax of 90 per cent., but similar instruments used by the hairdresser are charged at only 30 per cent. If this 90 per cent. tax can be justified at all it can be justified only as a tax upon extreme luxury goods. But what about the factory girl's half-crown lipstick, which costs about 4d. to produce? Half the selling price is tax. I do not think that we can possibly agree that things like that are luxuries. Nor can we agree that there should be a 90 per cent. tax on a corn rasp or upon nail clippers. I do not know, but it may be that the idea is that when a person uses a corn rasp it is such an exquisite relief that he does not mind paying an excessive rate of tax for it, or it may he that these anomalies remain after all these years simply because the authorities just cannot be bothered to remove them.
The Chancellor is obviously cashing in on a racket here. The profits are fabulous, and enormous prices are being charged for utterly worthless things which are sold only because people are gullible. Makers of these products can afford to pay £1,000 a minute to advertise on television, and the public think that they must have these goods.
I think that I am making clear my views about the matter. I think that the tax should he reduced and the whole section, with its anomalies, cleared up. It is all so obviously unfair to tax the articles of high quality to which my hon. Friend the Member for Ladywood has referred, putting decent craftsmen out of business and injuring the export trade simply because the right hon. Gentleman has not had sufficient energy to say more than, "That 2s. worth of powder puff and powder cannot be separated from the compact which contains it and which cost £10; therefore the powder puff and the powder must be charged at a rate of 90 per cent." I ask the Economic Secretary to look into these matters and to agree that these provisions are not worthy of any Government and that the impositions should be discontinued as soon as possible.