Purchase Tax (Motor Cars)

Part of the debate – in the House of Commons at 12:00 am on 4th December 1962.

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Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham 12:00 am, 4th December 1962

I dare say that is so, but we should at least consider whether that industry can be expected to bear as much of the export load in the years ahead as it has successfully borne in past years. I am not sure, and I want some information from the Chancellor, who is good enough to be present now to help us to understand the Order, as to whether we are not being rather naïve in dropping the Purchase Tax so sharply.

I should like to see a stable level of Purchase Tax—I much deplore the ups and downs that have made long-term planning impossible—but I am not sure what the stable rate should be. Perhaps it should be 100 per cent., or it may be that the present 45 per cent. is right. I am open to be convinced. The Chancellor is fortunate in that he has me at one of my most open-minded moments, and I am ready to be persuaded that the high rate is wrong, that 45 per cent. is right, that the level of production is the right one for us to aim at, and that we should be steering our skilled labour, not back into the motor car industry, but into more permanently hopeful industries. That is not to say that the motor car industry should not know its future, and the level at which it is expected to operate.

I am always puzzled by the economic experts who constantly hold forth to the House—and both sides of the House are very liberally endowed with those economists, professional and amateur, who offer their advice. Unfortunately, most of the advice is contradictory. We used to be told that we should have high Purchase Tax on the motor car and on similar goods because, without a soft home market, the manufacturers were encouraged to find markets abroad. On that basis, and at different times—though not immediately before General Elections—innumerable firms have been wrecked by Conservative Government's stop-go policy.

Another person will say that we cannot have high Purchase Tax on motor cars and similar things, because we then get a thinner home market, and do not get such long runs as we do when the tax is lower. We are told that the home market gives the enormous runs that make production cheaper, and that the goods can be exported because they are competitive. That, of course, is in direct opposition to the argument in favour of the high tax. Both of these theories seem to have had their play in the last 10 years, with not very notable advantages to the industry.

We are also told that when we take off Purchase Tax we increase consumer power, so that the home market eagerly buys cars, and the industry has the eagerly awaited long run which will make it competitive in world markets. We have hardly finished applauding the Ministers and economists concerned before we are told that the country is on the verge of a balance-of-payments crisis, that we have to draw in our horns, that inflation is rampant, that the £ is going down, and that nobody has confidence in us nor have we confidence in ourselves. It is all very bewildering to the simple man who wants to vote on such great issues.

Another problem faces me, as an open-minded Member. The hon. Member for Kidderminster says, and it has also been said in the newspapers, that this cut in Purchase Tax was, as it were, a Common Market cut. I happen to be in favour of us going into the Common Market, on terms that I consider to be suitable, and in the interests of the country—but only on those terms. Naturally, I do not wish us to go in on any worse terms than we can get. But one of the complaints of my less enthusiastic hon. Friends, and not an unjust one, is that the Government, as they put it—though they may be exaggerating—are hell-bent to go into the Common Market on any terms. I am afraid that the argument of the hon. Member for Kidderminster, unless disavowed by the Chancellor, supports the theory that the Government have made up their mind to go in irrespective of the terms.

If that is true, if the Government are already shaping their fiscal legislation on the basis of going into the Common Market, it is quite clear that, even if they do not negotiate an improvement in terms, we shall go in. That, surely, must be deplorable, especially as, if the hon. Member for Kidderminster can see the point, presumably the negotiators in Brussels can see the point, and can say, "This new Chancellor is even doing a sort of autumn Budget, on the assumption that Britain is going into the Common Market. He is structuring the financial and fiscal policies of the Government in advance of the terms being agreed, so it is a certainty that even if we are tough and do not make reasonable concessions, he cannot draw back."

That was intended as a compliment, but it is a very serious charge against the Government if this cut in the Purchase Tax can be said to have been made in anticipation of going into the Common Market. I, as an enthusiast for going into the Common Market, would say that the time to start drafting fiscal policies on the basis of being in the Common Market is after we have agreed the terms and they have been proved to be satisfactory and they have been approved by the House of Commons. It is disastrous if we are to announce to the world that we have already made up our minds to go into the Common Market irrespective of the terms which we get.