Clause 26. — (Surcharges on Employers.)

Part of Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 13th June 1961.

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Photo of Mr Stanley McMaster Mr Stanley McMaster , Belfast East 12:00 am, 13th June 1961

I beg to move, in page 21, to leave out lines 10 to 12.

This Amendment in the names of my hon. Friends the Members for Belfast, West (Mrs. McLaughlin), Mid-Ulster (Mr. Forrest) and myself is on a matter which has given a great deal of concern to those of us who represent Northern Ireland in this Parliament.

Clause 26 of the Finance Bill states: If, during the period beginning with the passing of this Act and ending with the thirty-first day of March, nineteen hundred and sixty-two it appears to the Treasury that it is expedient so to do with a view to regulating the balance between demand and resources in the United Kingdom, the Treasury may by order direct that the following subsection shall have effect… As stated in the Clause, its purpose is to regulate the balance "between demand and resources in the United Kingdom." This has been described during the debate on the Budget, and later during the Second Reading of the Finance Bill, as a payroll tax.

The first point I made is that it is not actually a tax; it is a surcharge, and it is so described in the Bill. It is something which is meant to regulate the economy. It has been suggested that this regulator may never be applied. That suggestion is not supported by the leading financial columnists and writers in our newspapers today. Within the past fortnight in a leading article in The Times, another article in the Financial Times and an article by the financal editor in The Times, it was suggested that the regulators are necessary and should be used.

It has also been suggested that because of the balance of payments crisis which may well develop in the autumn with the present trend of the growth in the economy of this country, these regulators should be used, and used promptly, by the Chancellor. I stress that the purpose of this Amendment is not in any way to kill Clause 26. I think the regulators are probably necessary in order to preserve the balance of payments and to preserve sterling.

However, we have put down this Amendment because we are afraid that through causes beyond the control of the Chancellor he may well be faced with a situation in which he has to use these regulators. I am taking the situation at its worst. If the worst comes to the worst the payroll regulator will be invoked. The Chancellor made it quite clear during the Budget debate and put it on record in his speech on the first day of the Budget debate, 17th April, from which I shall quote two brief passages. The first was: My second proposal relates to a special surcharge on employers, analogous to a payroll tax. The use of such a measure as an economic regulator would have the added advantage that when we are faced with a situation of chronic shortage of labour it would act as an incentive to economy in the use of manpower and to investment in labour-saving equipment. I propose to ask for power this year as a temporary expedient to collect such a surcharge, should it be needed, by attaching it to the employers' share of the National Insurance stamp. I draw attention, as was drawn in discussion of the other Amendments, to these purposes. I pick out as the key words, "chronic shortage of labour". The situation of a chronic shortage of labour does not apply in Northern Ireland. The Chancellor said: These two new fiscal powers, which could, of course, be used either together or separately will, in my view, greatly improve the Government's ability to regulate the economy; we shall be much better able to act by quick and flexible fiscal means, in the interval between this and the next Budget."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 808–9.] In the Chancellor's own words during the Budget debate, it appears that if a chronic situation arises he intends to use the payroll tax. As I have said, he has been urged to do so by the leader writer of the Financial Times. I also quote from the speech of my right hon. Friend the President of the Board of Trade on the second day of the Budget debate. On 18th April, he said with respect to the payroll regulator: The right hon. Gentleman keeps asking for more investment. Surely he would agree that to regulate demand in the economy my right hon. and learned Friend was right to take two measures. The first, that concerning indirect taxation, will bear directly on consumption, and the second, the payroll tax, is designed to encourage investment in laboursaving machinery. I should have thought that that was entirely in accordance with the arguments which have been pressed on us by hon. Members opposite. It was stated clearly that the payroll tax is meant to economise in labour.

Later in the debate the President of the Board of Trade said: The argument for the payroll tax, which I think is a very good one, is that we in this country must recognise that labour is our scarcest commodity. We must encourage industry to develop in such a way that the maximum output comes from every man, and that means that we must have the maximum capital equipment behind every man."—[OFFICIAL REPORT, 18th April, 1961; Vol. 638, c. 1006–7.] This is something with which the Ulster Unionist Members in general principle do not quarrel, but I ask the Chancellor very seriously to think of the special conditions in Northern Ireland. Do we in Northern Ireland want to encourage industrialists, where they have art equal choice, to invest in expensive labour-saving equipment and to cut down their labour force when we already have 7½ per cent. unemployed? I should like to quote briefly from a speech by my hon. Friend the Economic Secretary to the Treasury who said, on 19th April: My right hon and teamed Friend has therefore proposed two changes to improve this situation. He had referred to the Radcliffe Committee's proposals with respect to regulating the economy. He continued: The Committee already knows the details of these proposals, and my right hon. Friend the President of the Board of Trade spent some time examining them yesterday. I want to make only four brief points about them.First, whatever views hon. Members may have on the merits of these two proposals it is undeniable that they will go a long way to remedy the difficulties which I have mentioned and to make possible a more rapid and flexible adjustment of economic policy to deal with varying economic conditions.The second point concerns the application of the employer surcharge to Northern Ireland. As hon. Members will have observed from the Financial Statement, the surcharge, if imposed, would apply to Northern Ireland employers. In Northern Ireland, the National Insurance scheme is operated on exactly the same basis as in Great Britain. This is essential if the free mobility of labour between the two parts of the United Kingdom is to be preserved, and my right hon. and learned Friend has been concerned to see that his new proposals do nothing to upset this. But hon. Members will also have seen from the Financial Statement that the proceeds of any surcharge deriving from employers in Northern Ireland will be paid not into the United Kingdom Exchequer, but directly to the Northern Ireland Exchequer."—[OFFICIAL REPORT, 19th April, 1961; Vol. 638, c. 1184.] It appears from this statement that the main objection to exempting Northern Ireland from the payroll tax is one of administrative difficulty. I suggest most seriously, in support of my Amendment, that the Chancellor should consider whether the administrative difficulty is greater than the difficulty which would be faced by those of us who live in Northern Ireland if this charge were applied.

My right hon. and learned Friend has hinted tonight that if this charge were applied in Northern Ireland it would be repaid to those firms concerned. I ask him whether it would not be much wiser administratively, rather than waste the taxpayers' money in collecting money to be returned, to exempt Northern Ireland. Would he consider whether it is possible to use differently coloured stamps or something like that? This surcharge, which is to be applied for this year through the National Insurance Scheme, does not form part of that scheme. Is it not possible to devise a scheme whereby differently coloured stamps were used in Northern Ireland? The basic National Insurance payment is now over £1 per man. Could these stamps be attached to the National Insurance cards of those working in Northern Ireland?