On a point of order. Sir Eric, on this Clause, you have selected nine Amendments for Division, and 35 Amendments which are to be discussed with them. Do we take it that we may not vote on any of these 35 Amendments?
Secondly, as Amendment No. 34 deals with part-time employees, will it be possible to discuss with it Amendment No. 21, in page 48, line 23, leave out "twelve shillings and sixpence", and insert "eight shillings and fourpence"?
The position is that in addition to the nine Amendments provisionally selected for debate, I have selected two further Amendments for debate, Nos. 231 and 325. When we come to the Amendments which are not selected, but which are to be discussed with the Amendments which have been selected, I am prepared to listen to any representations which may be made from either side of the Committee for separate and specific debates.
In reply to the final point raised by the hon. Gentleman, Amendment No. 21 is not selected.
Further to that point of order. In view of the large number of Amendments which are to be taken with Amendment No. 34, which, I appreciate, goes very wide, perhaps the Chair will consider sympathetically requests from this side of the Committee for separate divisions on some of the Amendments which are to be considered with it?
I beg to move Amendment No. 11, in page 48, line 13, to leave out "5th September 1966" and to insert "6th February 1967".
I propose to speak fairly briefly on this important Amendment, although I hope to catch your eye later in the discussion. The Amendment would move from the first Monday in September to the first Monday in February next year the date set down at the beginning of the Clause.
The first achievement of accepting the Amendment would be to buy time. This Clause is really the heart of the Chancellors Budget, and it seems a long time ago that the Chancellor was discussing hairdressing and the like in his television performance on the evening of Budget day. Since then, these proposals have been riddled. They were shot through on the Budget debate, and on the Second Reading of the Finance Bill, and what was left of them was shot out of the sky by my right hon. Friend the Leader of the Opposition in the debate last Thursday to which, in a very different context, I was just referring.
We know perfectly well that fierce opposition comes from the Chancellor's own side of the House in this matter. There has scarcely been a speech supporting him and even the Minister of Labour found loathing struggling with loyalty as he tried to move the Second Reading of that Bill.
The proposal which we now put will, in a sense, bring the two Bills together—that is, Clause 42 of the Finance Bill and the Bill which is not before the House, but which is in all our minds and in due course will be discussed. A number of concessions of one sort or another are beginning to be made, largely as a result of pressure from this side of the House—on agriculture, on clay mining, on charities, on sand. If we could push back the date it would be possible to argue some of these matters at rather more satisfactory length.
I put forward two main reasons, The first is that unless we do something like this Amendment, then it is quite clear that we are heading for complete confusion. Ministers from the Treasury Bench, including the Minister of Labour, believe that comparatively few companies will be affected by these different provisions. I should like to illustrate the position simply from one letter which I have received from the chairman of the British Oxygen Co. Ltd. The difficulty—and unless we can bring these two dates together and, therefore, the two Bills together we shall not solve it—is that we still do not know what the machinery for assessments or refunds will be. For example, the original White Paper referred to an "establishment." In the Budget debate the Financial Secretary said that it meant "premises" and he went on to quote the statistical reference to premises on which I made some comment. The Blue Book, which gives the different classifications, referred to a "unit" and on Second Reading, last Thursday, the Minister of Labour talked about the "address." We have four different conceptions—the establishment, the premises, the unit and the address. The simple fact is that nobody in industry knows which of these or which interpretation of these is the correct one.
That is the first reason why we should seek, as far as we can, to bring these two Bills together. Let me refer to this letter from the chairman of the British Oxygen Company Ltd. to show the sort of thing that will happen unless we take further time, as we are suggesting, to hammer out some of these points. British Oxygen is a firm, like many others, which is widely scattered and widely diversified, sometimes with its sales and accounting departments concentrated and sometimes, where it is more efficient, with them linked with the manufacturing industry.
The chairman gives four examples which will interest the Chancellor. If the Chancellor has not seen the letter, I should like him to study it afterwards. First of all, under the original White Paper British Oxygen reckoned that it would be in credit £250,000. Under the Bill it reckons that it will be in deficit £150,000. That is a difference of £400,000. The first example concerns one manufacturing site—and we do not know whether "site" is a fifth term of art to add to the four which I have given. On this site the company is planning automation. That will reduce the number of workers and will switch the plant. It would cost £40,000 per annum under the Chancellor's proposals, which can make no sense at all.
Secondly, the company has special need of transport because of the vast number of its customers. Now, the only way in which it can meet the bill is to set up its own transport company and "to make it less efficient"—I am using its own words. If the company makes it less efficient it will gain £54,000. Thirdly, it centralises the accounting work by computer with one of the factories. There is a resultant saving of staff, but, as a result, the company reckons that it will have to pay out £51,000 a year instead of recovering £49,000—a turnover of £100,000 a year.
Lastly, at one works where there is a large percentage of staff the company has precisely 64 staff and 64 workers, and if it adds one worker or discharges one clerk it will gain £10,000 a year. The chairman asks, "Does this make sense?" The answer is that of course it does not; it is absolutely daft. This is just one of the illustrations which have been flooding in to everyone of my hon. Friends and, I have no doubt, to hon. Members opposite.
The first reason I give, then, why we should take time is that we should at least make some more sense of the absurdities of the Bill. At this point I will consider only the industrial absurdities of the Bill which are so manifest that unless the Chancellor is ready to take a little longer and to bring these two key dates together—the collection and the beginning of the refund—only chaos lies ahead for British industry.
On previous Amendments I have been most conscious, in one or two instances almost morbidly conscious, of the cost of the Amendment. On this occasion I am bound to say that I am not. We have put forward from our side of the Committee ideas about a payroll tax linked to the development of the social services and with one eye on Europe. The Liberal Party has put forward, as expounded by the hon. Member for Cheadle (Dr. Winstanley), an extremely detailed plan. I would rather the Chancellor used either of those. I would far rather that he used the regulator than the naked folly of the S.E.T. as it stands before Parliament has had a chance properly to amend it.
I turn briefly to the second main reason. It is the question of the interest-free loan which is implicit in the Chancellor's scheme and which would be eliminated if this proposal were adopted. I am glad to see the Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance present, because we want to know why it is impossible for administrative reasons—if that be the answer given—to collect these sums at a date nearer to the date on which refunds can become payable.
May I quote briefly from a letter in The Times on 25th June which begins:
I find it quite incredible that 'for administrative reasons' the Government think it necessary to take interest-free loans from charities in the form of returnable selective employment tax. The charity has first to find the money out of gifts intended for badly needed relief—already usually inadequate—or else it must borrow, if it can, at interest.
What is true of charities is true for every employer in this country. The charities will get a refund—after considerable pressure has been brought to bear on the Chancellor—but even the charities will have to make this five months' interest-free loan to the Government, and at least for those five months a good deal of work will be held back. We want the most detailed reasons why, administratively, these dates cannot be nearer.
I turn from the situation of charities and allied problems to the much wider problem of industry. The question which we all want answered—and I must press for an answer again this afternoon—is, what will the Chancellor tell the banks about the level of bank advances and overdrafts in order to meet the interest-free loan which he is demanding from employers?
We asked this question in detail when we were debating Clause 15, on the regulator. We asked it again a day or so later, when discussing a Clause in connection with Corporation Tax. My right hon. Friend the Leader of the Opposition stressed the point, as did a number of others, last Thursday on Second Reading of the Ministry of Labour Bill. The Chancellor avoided answering until, at 9.56 p.m., with less than five minutes to go, the Leader of the Opposition interrupted him, and then the Chancellor said that he had nothing to say on the subject. Thus, on three occasions at least—more if one counts the debates on the Budget—the right hon. Gentleman has been invited to answer this question and to make the matter clear.
The Chancellor will recall that I said he had been "charmingly evasive ", but that was two debates ago. We have come to the point now when it is not funny for him just to go on saying nothing about these matters, while industry and the banks have to wait. The point is fundamental to the Chancellor's Budget judgment. It is not possible to understand whether the Budget is inflationary, deflationary or neutral until we know exactly how much of this will be taken up by bank advances in overdrafts or how much will be found out of profits or in some other way.
I appreciate that there are some questions which the Chancellor cannot answer, but he can say when he expects to make known the instructions which he must be intending to give—I am sure that he has already discussed this matter with the Governor and the banks—about the level of advances that will be allowed.
I remind the Committee that, from the Chancellor's point of view, from 5th September the right hon. Gentleman will be taking nearly £100 million a month—perhaps a little under that, but not very much less—out of the economy. As winter rolls on—and, with luck, as we are getting towards the end of it; certainly some time either at the beginning of February or as soon after as practicable—the right hon. Gentleman will have to pay out about £300 million.
I do not know whether it will be paid all at once, in a week or in one day, but the effect of that—of that tremendous punch being dealt in September and the enormous reflation that is planned for some time in February or towards the end of the winter—on the economy is very hard indeed to judge. I am sure that the right hon. Gentleman will agree with me about that.
I therefore press the right hon. Gentleman on this issue. It is intolerable that industry should be treated so casually, because, for a variety of reasons, the Government were not ready with what we may call their Ministry of Labour proposals and, because of that, could not put them in the same Bill, so that the House of Commons has been denied the opportunity of discussing the collection and the refund of S.E.T. in the same set of debates. It would have been a great deal more convenient had that been possible.
I acknowledge that the Chancellor has done what he could in an unsatisfactory position to bring these closer together. But they are in different Bills and although the Chair may oast a blind eye from time to time it would not be in order to go into any detail about what is in the Ministry of Labour Bill or to say what we would wish to do to it today, apart from strangling it. So we must resort to these methods of putting down large-scale Amendments of this sort.
To sum up, we believe that this is a thoroughly bad Clause. We believe that it has begotten a very bad Bill indeed. However, we have given a Second Reading to the Finance Bill and to the other Measure. It is, therefore, the task of the Committee to make this Bill a little less bad. I suggest that the right way to start is to move the two matters together and, by accepting the Amendment, we will have time to iron out some of the absurdities inherent in the scheme and it will also enable the interest free loan part of the Chancellor's scheme to be obliterated.
I hope that the Committee will accept the Amendment.
It might be convenient to the Committee if I were to indicate my reaction to the Amendment now, and then the debate can go on in the knowledge of that.
As the right hon. Member for Enfield, West (Mr. Iain Macleod) said, the effect of the Amendment would be to defer the starting date for collection of the tax from 5th September next to 6th February, 1967. The date 5th September was chosen as the earliest practicable date for the start of the scheme, given the need to pass the necessary legislation and to prepare and adapt the administrative machinery. I understand from the right hon. Gentleman that the Amendment is designed to delay collection of the tax until it is closer to the time when payments of refund or premium can be made.
As the right hon. Member for Enfield, West recognises, the net yield of revenue from the tax would be very much affected by the Amendment. Whereas I anticipate in 1966–67 a net revenue of about £315 million, according to the best calculations that can be made, if the Amendment were accepted the product of the tax would be only about £110 million. That is a very substantial difference. The effect of the Amendment would be to reduce the estimated revenue by about £200 million.
I do not think that I could recommend the Committee to delay the collection of the tax for five months because, as I have indicated, from my Budget speech onwards, it is intended to have a disinflationary effect. I said that in response to the enthusiasms, as I called them, of the hon. Member for Worthing (Mr. Higgins) the other night, and I said it in my Budget speech. It is my understanding of the economic situation that, uncorrected, there would be an upsurge of demand in the autumn, so far as one can judge. And, therefore, I would certainly not want to see the Revenue deprived of about £200 million in the way proposed in the Amendment.
The right hon. Member for Enfield, West said that he would, in those circumstances, use the regulator or, I imagine, would use any other combination to secure his ends. I do not believe that it would be appropriate—and this is a measure of the difference between us—to make a deep incision into particular sections of industry on a narrow front through imposing increased Purchase Tax in this way. It is much better to have a smaller tax over a wider front. The disinflationary effect of this will be spread over a wider sector, but will be very much less deep than would be the operation of the other measures which I might have chosen. I believe that to be right because of the particular nature of the industries upon which a very heavy additional load of tax would bear this year. I would, therefore, prefer not to use the measures put forward by the right hon. Gentleman.
I recognise that there is a difference of view about this. If we were to use the regulator I think that the decline in the yield—not an absolute decline, but a decline in the rate of increase in the yield—from beer, spirits and tobacco might be accentuated. The yield is going up, but it is not nearly as steep as it has been. That is another reason for not, at the moment, hitting that particular group hard.
The right hon. Gentleman said that we could argue at greater length if the time of collection were delayed. I think not, with respect. The Bills are going through now. We are at Clause 42 of this Bill. A number of points which the right hon. Gentleman raised, particularly about British Oxygen, are not concerned so directly with payment of the tax. I agree that it affects its attitude from the point of view of whether or not it will pay. However, it is more concerned with repayment.
I hope that the right hon. Gentleman will not stick to the idea of strangling the Ministry of Labour Bill, because that will look after the refunds. [HON. MEMBERS: "Strangle this one."] I detected that the right hon. Member for Enfield, West was in a murderous mood earlier. Whichever one he wants to strangle, whether it is one or both, discussions are going on. Frankly, it would not give us any longer to argue about them. I have not seen the British Oxygen case; I do not think that I have seen the letter. I saw the article in the Financial Times, and inquired into it, but I cannot say what the results of that inquiry were.
As to interest-free loans——
Before he leaves that point, I wonder whether the Chancellor would consider at a later stage inviting the Parliamentary Secretary to the Ministry of Pensions and National Insurance to intervene, because he will realise that if, for example, either the collecting date could be altered for administrative reasons, or the refunds could be made more quickly, that would be an alternative way of going some distance to meeting the case which I have put to the Committee.
I am sure that if my hon. Friend wishes to intervene he will do so. He is an entirely free agent in this matter. The House is in Committee. But I think that I can tell the right hon. Gentleman that my hon. Friend and I speak as one on this issue. We have been into it very carefully. The 5th September was the earliest date at which we could introduce the machinery. My hon. Friend is not in a position to comment on the repayments. That is for the Ministry of Labour. We have been very carefully into it; I ask the right hon. Gentleman to accept what I said on it.
On interest-free loans collection must precede repayment and there is bound to be an interval. It is rather longer in the first instance than in the succeeding periods of three months. The right hon. Gentleman pressed me, as he said for the fourth time, to say what I am to tell the banks. I have no additional answer to give him than I have given up to the moment. This is a matter of discussion. As the right hon. Gentleman correctly foresaw, discussions are going on about it.
I have taken the temperature of a number of industrial firms concerned. I find that a number of them, in the weeks to come, will be wanting to know what overdrafts they can expect when they are financing themselves some way ahead. It is beginning to be a problem, but it is not yet a problem. That is the best advice I can get——
The hon. Member will have an opportunity of speaking in the debate.
I think that it is far better to take the necessary time and to get as close as possible to the incidence of the tax before we give the guidance which industrial firms, naturally, feel they want to have. Now if the hon. Member for Gillingham (Mr. Burden) wants to intervene, I will give way.
Surely the right hon. Gentleman realises that many firms have to make heavy overdraft arrangements and that any interference with this, although they may plan now, will create difficulty. Will the Chancellor, therefore, give an undertaking that he will certainly not instruct the banks to tighten up on overdrafts during the very difficult first few months of this operation?
I thought that was the point I was dealing with. I am not ready at the moment to give any undertaking on this particular matter. [HON. MEMBERS: "Why?"] Because I want the tax to have a disinflationary effect. I have now said so about six times. I understand that a great many hon. Members opposite think that it should have a disinflationary effect. [HON. MEMBERS: "Not everyone."] I did not say "everyone "; I said "a great many".
As to the future, regular records are kept of bank deposits and advances. We have just had the latest figures. The banks are not pressing quite so hard on the ceiling of advances as they were. Deposits are up, but seasonally corrected there is little difference. It would not be right in the general interests of the economy at this particular moment to say what should be the appropriate level of bank advances given in the month of September or October. It would be defeating part of the object of economic management if I were to do so.
Could the Chancellor say whether, in making this assessment, does he or does he not take account of the fact that an increase in the strain on company liquidity as a result of having to pay the initial stages of the Selective Employment Tax is likely to have some considerable effect on the ability and willingness of companies to continue manfacturing investment? Is not one of the consequences likely to flow from this decision that the restraint will come not on consumption, but on investment?
This, of course, is one of the factors I have very much in mind. The banks have been given instructions—which have been publicised, and the Committee knows about them—for a long period now of the order of priorities in which advances are to be made, because it is, naturally, my strong desire that investment should be kept up. I have consistently taken the line in the matter of advances that consumption comes much lower in the scale of priorities than does investment, and exports come right at the top.
I ask the Committee to accept that as soon as I formulate the advice which I think is reasonable and rational, and based on a proper assessment of the future, that advice will be passed on to the banks. They will be given it. We are not at arm's length. The Committee can take it that there is a movement of opinion between various organs of government and the banking world and that as soon as it is possible to make an assessment of the situation it will be made and the information will be given. But I repeat that there is no intention here to turn on the tap so full that it would offset all the effects of the measures I am trying to take.
I am sure that that is clearly understood. This is part of the object of the exercise and the reason I chose this method rather than to make that deep incision into part of the industrial body which otherwise one would have to make. I hope that the Committee will be willing to accept that as a sensible and proper approach to this problem, knowing that as soon as it is possible to give this guidance it will be given, and recognising that although some individual firms, I have no doubt, already want to know, I am advised on very good authority that this has not so far become an immediately pressing problem for the banks.
I find the right hon. Gentleman's justification of the five months' delay between the imposition of this tax and the first repayments very disquieting indeed. The right hon. Gentleman said bluntly, adopting the argument which Chancellors of the Exchequer have adopted since Goschen, "I must have my money." In this case, he must have £200 million. What he said which alarmed me a great deal more was in reference to the disinflationary effect of this tax and of his wish that bank advances should not be sufficient to improve the liquidity of industry for the purpose of bearing this tax in full. It seems that what the right hon. Gentleman is trying to do is to have a disinflationary effect by a tax aimed not at consumption—it hardly touches consumption—but at the working capital of industry.
This is where the Chancellor has now told the Committee he desires his squeeze to operate. This is the explanation for this timing. I cannot believe that the Chancellor seriously thinks that this, in this country's present economic position, is the right way to proceed. When production is as near stagnant as makes no difference, to apply the squeeze quite deliberately to the working capital of industry is an appalling mismanagement of our affairs. The Chancellor says that it is unfortunate that it is not possible to make these repayments until February, but that it is necessary for the purposes of his economic policy to impose the tax in September.
There is one point which I would be glad if the right hon. Gentleman would correct. It is not true that production is stagnant. The output of engineering and allied industries rose by 4 per cent. between the first quarter of 1965 and the first quarter of 1966.
I am glad to hear any words of comfort from the Chancellor. I do not think that he will dispute that the general index of production has moved about one point. I do not think that he would pretend for one moment that he is satisfied with a state of affairs which compares so adversely with the position which he inherited, when industrial production was rising steadily.
Industrial production went up by 1 per cent. between the fourth quarter of 1965 and the first quarter of 1966 which, if it continues—who knows?—is 4 per cent. per annum. That is the rate at which it is going at the moment.
I am sure that the Committee will have noted the fairly considerable qualification—"if it continues".
It is not my purpose to make out the position as any worse than it is. The facts are bad enough, as the Chancellor knows and as the First Secretary of State is frank enough to admit again and again. In a situation in which the failure of the economy and of production to expand must and does concern every responsible person in this Committee and outside, it is the economics of lunacy to apply the squeeze to the working capital of industry and to do it because the Chancellor has selected for his own choice a particular method of obtaining the yield which does not allow the compensating repayments to be made for five months.
This is what the Chancellor has now told the Committee he is doing. I challenge it, first, on his own basis for it, namely, the way it will help our economy. I suggest to the Committee that it is disastrous for industry to proceed in this way.
The right hon. Gentleman says that he will not say what instructions will be given to the banks. Does he realise the anxiety he is causing those in charge of industry? We are talking about a date only two and a half months away now. Does the Chancellor think that great companies do not worry about their liquidity two and a half months ahead? Does the Chancellor appreciate that, with this additional uncertainty piled on top of all the others which have to be faced by those in charge of industry, there will be a tendency for great enterprises to slow down, a tendency to wait and to hold up development? There must be this tendency if liquidity is to be in an uncertain state at a date which, from the point of view of the management of a great industry, is very close ahead indeed.
This is an unnecessary anxiety. It will not be diminished by what the Chancellor said a few moments ago, in reply to my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod), namely, that, whatever happens, he did not intend the advances to be sufficient to offset the payment of the tax during these five months. Therefore, the need for the Chancellor urgently to let industrialists know how they stand must be increased by what he himself told the Committee this afternoon.
These dates and the five-months' gap involve the grant of an interest-free loan to the Chancellor by almost everybody. It includes those in industry about whom I have been talking and whom this tax is supposed to be designed to help. It includes everybody else. It includes those categories to whom the Chancellor, with a little persuasion from both sides of the Committee, has agreed to grant repayment.
Does the Chancellor realise the difficulty in which he is putting small charities by asking them to make an advance of this kind for five months? I know that from the angle of the Treasury the figures affecting small charities are very small. However, if the Chancellor had had experience of running a small charity which exists from hand to mouth he would realise that asking a small charity to make an interest-free loan of this description is a very serious matter.
The Chancellor has accepted the principle that charities should not suffer. He should apply that principle to this five-month period as well. I do not suppose that this imposition will cause many charities to close, though it will cause some to close, but it will put all of them, big and small alike, in a difficulty. If the Chancellor accepts the principle that charities should not be harmed by this tax, he should apply the principle in this respect, also.
Finally, may I take up the point made by my right hon. Friend and which the Chancellor did not deal with very well, to the effect that the acceptance of the Amendment would give us all more time in which to consider the manifold anomalies of this Bill and of the Ministry of Labour Bill. The Chancellor said—it is true, for obvious and constitutional reasons—that the Finance Bill has to go ahead on the ordinary timetable. The Ministry of Labour Bill has not. If we had a little more time to iron out the anomalies—the right hon. Gentleman does not dispute for a moment that they still exist—as to who should be entitled to repayment, I am sure that we could make this at any rate less of a hash job than it is at present.
The Chancellor prides himself on having invented a new tax—one with which his name will no doubt be associated in the future. Surely he of all people should want to get it—not right; that is impossible—but less blatantly wrong than it is at the moment. If the Chancellor wants this to be a tax which will last, as he claimed during his Budget speech, a few more months spent on trying to get the categories right in the Ministry of Labour Bill would be time well spent from his point of view.
If it is really urgent to get this £200 million this autumn, the regulator lies to the right hon. Gentleman's hand. If the economy is not in so precarious a position that a few months will not make a decisive difference, why not postpone the levying of this tax until February when it can be repaid, save industry from a tax on working capital, save charities from a forced loan, save the industries he is trying to help from a forced loan, and let the House of Commons get on with the business of trying to clear up this mess?
The Chancellor has told us that, in spite of the efforts he has made to take money out of the economy, in spite of a very high rate of taxation, and in spite of historically a very high interest rate, he expects a situation in the autumn when it will be necessary to take even more money out of the economy and that, therefore, he must resist the Amendment.
What the Chancellor is, in fact, doing is taking money out of the economy from the pockets of people who, in the general interest, should not pay it. Therefore, I do not quite follow the right hon. Gentleman's argument that it would be wholly unfair to make what he called a deep incision into certain parts of the economy while leaving others free from it, because he is to make an incision into certain parts of the economy. He is to make an incision into parts of the economy which, in the long run, he admits should not and could not pay the tax.
It is not the fault of the Committee if the Chancellor has had to come to the House of Commons without the full implications of this tax having been fully thought out. He could well have delayed the tax until more work had been done upon it; or he could have considered the many variations of payroll tax which have been constantly discussed by economists and businessmen over the years; or he could have taken up one or two of the concrete suggestions made from this side of the Chamber.
For instance, my party has put forward a variety of payroll tax which would get the Chancellor all his money, but which would avoid many of the most serious defects of this tax and which, in particular, would leave Scotland, Wales and the North and West of England free from the tax altogether.
Further, it must be reiterated that this is a tax which will fall with particular severity on areas like the north of Scotland and Wales, because there is no chance in those areas that there will be a change from service to manufacturing industry. The only change which can take place in that direction is by further depopulation. In general, throughout the discussions on this tax I have been in some doubt as to how the Chancellor expects it to work in the autumn—whether he expects it to work in a deflationary way by putting up prices or by achieving a redistribution of industry, which seems unlikely so soon, although I admit that in the long run it may have that effect. Therefore, we cannot be debarred from disputing these dates merely by the asseveration of the Chancellor that he must have more money in the autumn and not wait till the winter.
I should like to take up two points which have been made. I do not want to go again over the ground which has been covered by the right hon. Member for Enfield, West (Mr. Iain Macleod), about the uncertainty which exists in large industrial companies, as to whether they will be liable for this tax or alternatively to a refund. Doubt does exist, and I believe that most of us have received representations from large companies, and it is a serious matter for the economy.
I want to say a word about the similar uncertainty in many small businesses. There is the position of the local bakehouse. There is the position of the small knitwear or weaving business which also has a shop. None of these know how they will stand under this tax. These are not rich people and they cannot afford to be made guinea-pigs by the Chancellor, because the end of the experiment may well result in their death. Therefore, in supporting the Amendment, I believe that we should be given more time for discussion as to how the tax will work out.
I turn to the forced loan aspect, and here again I do not want to cover the general ground, but I want to say a word or two about farmers and crofters. The Chancellor is well aware that not all farmers have a £60,000 annual turnover. Many farmers are already in debt and credit is tight. They are bound to be in some difficulty in finding even small amounts which they may have to find by way of loan to the Exchequer.
I believe that in his discussions with the banks and in his further consideration of the credit position he should bear seriously in mind that in certain parts of the country there is a large volume of agricultural debt. Further, the right hon. Gentleman has said that this is a simple tax to collect, and from the Revenue point of view this may be true, but simplicity has been partly achieved by throwing a great deal of the burden of collection on to the people who pay the tax. This is a tendency which is growing all the time, and we should not delude ourselves that this way of collecting tax and then paying it back is, whether we take the position of the taxpayer or the Revenue, a simple or desirable matter.
There are certain difficulties which will affect those areas of the country which are particularly hit by the present strike. In my constituency and in other islands off the coast of Scotland people have been forced to run up very large overdrafts because they had not been able to trade. We have been virtually blockaded for some six weeks. The Chancellor is sympathetic to us, I know, but I ask him to consider the case of a motor salesman in my islands who is carrying, on an overdraft, machinery for farmers. He is not able to move this machinery. Take any business which has goods held up in the ports in the South. All this sort of thing means that these traders' overdrafts are mounting.
The farmer is in the same position. Farmers have not been able to sell their beasts. There are 1,000 sheep waiting to leave Orkney. I hope that the right hon. Gentleman will look at this problem sympathetically. I know that he would not like to add to the difficulties of these people who are not rich and who have no great amount of capital behind them. I am certain that in the working out of this tax he does not want to put people in an intolerable position which would endanger small farmers unless some amelioration were given in the form of levy.
We know from the Chancellor's speech that he reckons to get £100 million a month, roughly speaking, from this tax. That means that he is to get between £500 million and £600 million before any repayments begin. The first thing to notice about that figure, which I think is right, is that this is not needed for the Chancellor's housekeeping budget at all. He has a surplus on his Budget as it stands without the Selective Employment Tax. Therefore, the only purpose of this tax is deflation.
The second thing I want to say about this figure is that it is in its immediate impact a very different and much larger measure of deflation than the Chancellor indicated in his Budget speech when he gave a net figure for a full year of something like £200 million to £300 million as the additional taxation that he was taking out of the economy for the year for which he was budgeting. In other words, he is giving the most tremendous sock in the jaw for five to six months between September and March.
It amazes me that the Chancellor is so confident of his assessment of the accuracy of his prophecy that he is prepared to deliver what is really a most damaging blow if he turns out to be wrong. I could understand, though I do not agree with it, the taking out of an additional £200 million to £300 million over the course of 12 months—a gradual and even process of that sort. I say that I do not agree, because when I spoke in the Budget debates I disagreed—I think I was perhaps alone in this—with the overall assessment of what was needed to be taken out of the economy. I have for many years disagreed with what is sometimes referred to as Boyle's law, which previous Governments of all complexions have adopted, because I have always thought that taking taxation for this purpose as opposed to purely budgetary purposes is in the end more inflationary than not.
However, that is something which I do not wish to pursue now; nor would it be in order to do so, though I am glad to have the support of my hon. Friend the Member for Oswestry (Mr. Biffen).
Whether that is right or wrong, what surely must be wrong is if the Chancellor decides for the purposes of Boyle's law that it is necessary to take £200 million or so over 12 months by taxation out of the economy for the purposes of deflation. It must be wrong to put in a withdrawal of purchasing power to the level of £500 million to £600 million in the course of five months. That is a process which cannot be squared with the final objective because during those five months, if the reasoning of the final objective is valid, it must inevitably lead to enormous damage.
Certainly, one can get all sorts of variations of the philosophy of taxation and all sorts of false egalitarianism of the type to which my hon. Friend refers. But that was not the point that I was dealing with. My point was that it seemed to me that the Chancellor's principle and objective of withdrawing £200 million or £250 million by additional taxation from purchasing power is contradicted by the method by which he is doing it, because he is doing far more.
I do not understand why the right hon. Gentleman cannot synchronise the dates between collection and repayment, because that would achieve his objective. Admittedly, it might delay slightly the start of payment. But, if he were to synchronise the dates, or make them not five months but one month apart, he would achieve, a smooth withdrawal at the rate of £200 million to £250 million a year.
I beg the Chancellor to consider the economic aspects as opposed to the administrative aspects of what he is doing. Not only is it economically damaging, but it is quite inequitable to take this loan without paying interest. Nothing I have heard from the Chancellor so far has explained why, if he must do this for administrative reasons, if there must be this enormous gap, he cannot pay some reasonable rate of interest to those whose money he is taking only to pay it back later. Then the whole problem of bank loans, and so on, would be less oppressive than it is now. If people know that they will be paid interest on what they have to pay by way of forced loan, then, when they get their accommodation from the bank, it is not quite so inequitable.
My right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) referred in impassioned terms to the large firms which have to make their decisions way ahead. But, of course, it is the small firms which are much more likely to be hit. In my experience a large firm can always get by; it can always sell an asset of some sort, at a pinch. It does not go out of business as a result. But many small firms may do so as a result of this.
I feel particularly bitter at the moment because I have had an intimation from the laundry which has served me well for five years that it is going out of business next week, partly as a result of this tax. I think that it will be extremely difficult to find another, so the smell in the "No." Lobby as the summer wears on may become rather great. But it is firms of that kind, whether or not they are likely to get the tax back, which will be hit. If the Chancellor insists on the width of the division between payment and repayment—not that the laundry will ever get repayment, though other small firms might be helped—he ought, in justice, to consider some form of interest payment on the money of which he will have the use. He would also help to smooth out the enormous escarpment which the five months' division creates, this enormous gap between the withdrawing of purchasing power of £500 million to £600 million and then starting to pump it back again in February.
It was said in 1915 that there was rejoicing on the Rive Gauche when the French forces were issued with dungarees because it brought the world war within the limited range of Vuillard's colour. I had thought that Clause 42 had finally brought this year's Finance Bill within my limited economic range, until I heard two or three of the speeches to which we have just listened. Of the speech of the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) one could say, as was said of one company report, of the broadcaster, John Tilley, that it was correct in every detail except the figures. It seemed to me that all his figures were wrong, though I do not think that his speech was any the worse for that, and with some of the points he made I have some sympathy.
No one wishes to be discourteous to the Chancellor. He is the most courteous of men. Today, he has even apologised to the House for something which I have done once every three months since I have been here, that is, modifying a little overstatement which I thought, on the whole, would be better so modified. I never knew that there was any objection.
If the hon. and learned Member for Darwen is worried about his laundry, he must have observed that the washing of dirty linen now seems practicable within the precincts of this Chamber.
As I say, I hope that the Chancellor will not think that I am being discourteous. He is the last person I should wish to be thought discourteous to. He is one of the three triumvirs who wears his laurels with conspicuous modesty, one might almost say pudently, like a fig leaf. When I saw him leaving the House in the early hours of the morning a few days ago, bare-headed, taking the long trek to Downing Street on foot, I recalled Gray's "Elegy" with genuine emotion.
I understand the real difficulty of any Chancellor. As "Nye" Bevan used to say, we must first establish the principle. The principle here, of course, is that all taxation is wrong. The principle is that taxation is undesirable, that its end should not be pursued if it can be avoided, and that it can be justified only by the necessity to raise money for some good and useful purpose. Whether the prevention of inflation by the reduction of expenditure at one end and the increase of it at another is really a useful purpose is too wide an economic question for us to develop at this moment.
In introducing a new tax, even if the idea was not new, the Chancellor is under the obvious limitation that, if he makes the full inquiries which are necessary into its incidence the facts will leak out and action may be taken which would be subject to criticism. If he does not make full inquiries, he must produce it, perhaps, without all the detailed information as to its effects which are now becoming apparent and are giving us a certain amount of anxiety.
Yes, Sir Eric. I was anticipating the moment when we would have to face that problem.
May I point out that the Amendment, if carried, would provide that the Oldham Co-operative Society would benefit by £10,000, because the society would be exempted from the rather punitive payment of a tax six months in advance. While I share your desire that we should inhibit ourselves as much as possible, and not go too wide—I had just acknowledged that—there are matters raised by the Amendment which, perhaps, one might just as usefully deal with now instead of by dividing one's speech into half a dozen parts, dealing with the matter on various Amendments and on the Question "That the Clause stand part of the Bill". Indeed, my rising to my feet was almost an unpremeditated act at this stage, prompted by the knowledge that there are other engagements in the course of the day.
I recall very well what my right hon. Friend said in his Budget speech, a speech which was universally applauded. No Budget speech has ever had so astonishing a reception. Some of my hon. Friends came out of the Chamber saying that they had literally seen the serpent emerging from the Dispatch Box and swaying to the cadence of the Chancellor's voice. 1 heard of one Parliamentary Private Secretary who threw up the endless rope and disappeared through the roof in ecstatic admiration. Perhaps I was one of the few at that moment who expressed modest reserve.
But, after all, if the Chancellor, in his friendly converse, had suggested to his auditors that, instead of letting I.C.I. pay for the arts, he would let the arts pay for I.C.I., the whole occasion might have caused a little tepid surprise. One could imagine that, when it became apparent that this was intended as a serious suggestion, the Queen's Messenger might have dropped the dispatch box and dashed down to the harbour to see whether the boat was tied up.
If he had gone one stage further and said, "Let us cream off the" divvy "from the Oldham Industrial Co-operative Society to make a contribution to help Sebastien out of his difficulties", then, I feel, the message would immediately have gone out for "Corkscrew Charlie". It might have been as well. We all know that such a call would receive a response, and might have led to the gentle suggestion that the Chancellor should do some quiet boating downstream on some quiet river, not the Danube or the Potomac, which are evocative, but somewhere limpid like the Limpopo or the Black-water near Macgillicuddy's Reeks. But there it is, the Chancellor has made his proposal, and we face this difficulty.
The Chancellor has won a very great deal of confidence in the country, and I do not suggest that any hon. Gentleman opposite should crack little jokes about the situation left by the Tory Government when my right hon. Friend became Chancellor of the Exchequer. The situation was all the more difficult because it had been left until the time of a General Election. My right hon. Friend had to take traditional measures, and he took strong and forceful traditional measures, because that is the only thing open to any Government immediately after a General Election. That was the first problem that faced my right hon. Friend, and I think that he has earned the confidence of the country.
I should be the last person to try to say anything that would denigrate my right hon. Friend, but I am worried about one thing. It has been said that there is another Amendment to be selected later which deals with a whole variety of exceptions. The main problem, it seems to me, is as follows. One says that there are too many people in service industries and that this is a useful measure in that one important object of it—though this is not its primary object—is to facilitate a redistribution of labour. But this forgets some promises by the Government about equal pay. What happens to the cause of equal pay when we have introduced a tax which, in essence, subsidises the employer of female labour at the expense of the employer of male labour? What happens to the cause of equal pay? How long will that be postponed?
It is said that the levy is one for the period of five months and it will ultimately be repaid. Immediately after the Budget I was discussing it privately with someone intimately connected with nationalised industries who pointed out that the National Coal Board would be levied about £20 million in the five months. I understand that that is a problem which is receiving the Chancellor's attention. Otherwise, we shall have a nationalised industry which has to borrow, and borrow with Government guarantees in order to pay the money to the Government. One can get that in these days of restricted credit in other industries. It is a problem.
The Oldham Industrial Co-operative Society—if I might for a moment talk for the attention of the Chancellor and not for the attention of the Opposition—pledged its full support for me as recently as six or seven weeks ago and gave it during the election campaign. It is a hard reward for it to be told that it is to be faced with having to pay £40,000 a year under this new tax. It is one of the great co-operative societies, with a great record of public service. It provides the public meeting place in Oldham. It provides an excellent cafe at which meals are available at about one-third of the price of other establishments. It has never asked for any special attention, and it is only fair to it to say that I approached it over this matter—it did not approach me—because I was concerned about the way in which the tax would affect it.
There are many other institutions which the Chancellor has tried to meet. I accept that when he introduces a Budget he will have in mind that some exceptions will have to be made and that he does not announce them in the Budget speech. The right hon. Member for Enfield, West (Mr. Iain Macleod) was taking some credit for action about charities, which I have no doubt the Chancellor had in mind. I hope that we shall have an opportunity to consider in some detail in the Committee stage of the Ministry of Labour Bill some of the very specialised cases which will arise. I am thinking of institutions such as the London Library, which do not qualify as charities but do not make any profit and never have made any profit and have rendered massive public service but have been peculiarly the victims of successive legislation by the House of Commons over the last 10 years. They have already been deprived of income, and now are to be deprived of more——
It is kind of you, Mr. Irving, to say that you are reluctant to interrupt me. I was just calling myself to order and saying that these were matters that we could raise later, so I will not raise them now.
We have had the experience of the post-war credits. It was an ingenious idea at the time to say that we would levy money from people and pay it back later. It was a sort of Kathleen Mavour-neen principle—it might be for years and it might be for ever. I cannot complain. I have qualified for mine and have had them. There was not much in it, because I was in the Army at the time, but I got them back, and so I cannot charge the Government with malfeasance. But it has been a hard and long row to hoe, and this may be a hard and long row.
While I congratulate the Chancellor and pledge my support, with some reservations, to the Budget, I thought it appropriate to raise one or two doubts that are in my mind.
I am particularly glad to be able to speak now, because I want to refer to the way in which the Committee was rent with the sobs extracted by the hon. Member for Oldham, West (Mr. Hale) when he told us of the way in which the Oldham Cooperative Society had been severely punished for its very minor offence of having supported him at the recent General Election. There are some hon. Members opposite the support of whom one would regard as a very major offence, but in the case of the hon. Member it is the clearest peccadillo that the Oldham Co-operative Society has been guilty of I am sure that the Chancellor should be deeply ashamed of himself for having imposed such a terrible penalty for so small a crime.
I want to be very bold and go back to a matter as near to the subject under discussions as the Chancellor's speech. The right hon. Gentleman said "We want to get as close as possible to the incidence of the tax before we give advice." There are two points that I want to make. First, this is no way to treat the House of Commons. The Committee is concerned with the business of passing very heavy taxation measures. Here, particularly, we have a new measure, and we are asked to pass it without knowing at all what is in the Government's mind.
For the Government to say that they do not know at this moment what advice they will give to the banks in the operation of the new tax only a few weeks ahead is rather like someone saying "I am going to produce a new motor car, and it will be on the stand at the Motor Show, but I am not yet quite clear in my mind what fuel it will use." In other words, we are being asked to approve a method of tax the real guts of which have not yet been revealed or explained. This is a very important point for industry. Until this great uncertainty is cleared up industry will be in very great difficulty. So the first point that I make is that the Chancellor is treating the House of Commons very badly.
The second point is much more serious, in my view. The Chancellor is treating industry in an experimental fashion. There have been various statements from Treasury spokesmen since the tax was first adumbrated to the effect that over the years the tax will be refined in the light of experience. In other words, industry, charities and a whole lot of small businesses will be used as guinea pigs and will suffer so that the Chancellor and the Government may learn.
I believe that the mere fact that a tax is relatively easy to collect administratively is not necessarily the best yardstick of merit. I support what was said by my right hon. Friend about the merits of postponing the incidence of this taxation until we have had more opportunity for discussion and the Government have had more opportunity for revealing what is in their mind on this subject. I object to the attitude, "We have this crude idea. Let us impose it on industry and see how it works. It will all come out in the wash."
Why does the hon. Gentleman think that the tax has anything to do with the level of bank advances? This is an entirely separate matter that must be judged against the wider economic canvas. It has nothing to do with the tax as a tax. It will depend entirely upon how the economic situation is looking at the time.
The tax is to be levied on the working capital of industry, as my right hon. Friend the Member for King-ston-upon-Thames (Mr. Boyd-Carpenter) has said. I am astonished by the Chancellor's intervention. It is not a point in his favour. However, he has saved me the trouble of extending my speech beyond a certain point and thus saved the Committee the pain of listening to it. The misunderstanding, if there is one, is that of the Government, and the Chancellor has underlined it by his intervention.
This compulsory levy is to be taken out of the working capital of industry. It might be deflationary from one point of view, but what use is to be made of the money? Let there be no mistake; the Government will use the money at full tilt. It will not be put on ice. Private industry will be put during this period at a major disadvantage in providing the resources with which to fulfil its needs and expansion because the Government will be preventing it from doing so.
During my time in the House of Commons I have never received such a volume of protests so widespread over the population. I have received them from industrialists, businessmen, farmers, smallholders, horticulturists, old people and those concerned with charities. All of them are wondering what the Government are at. Do the Government understand what they are doing to them? My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) was abundantly justified in moving the Amendment, costly as he admitted it to be, in order to give the Government a badly needed opportunity for second thoughts—how much needed has been shown by the Chancellor's intervention just now.
We were delighted to hear the speech of the hon. Member for Oldham, West (Mr. Hale) on behalf of the Oldham Industrial Co-operative Society. At the last election, 18 Labour and Co-operative Members were returned to the House. One of them is the hon. Member for Glasgow, Govan (Mr. Rankin). Another is the hon. Member for Willesden, West (Mr. Pavitt). Then there are the hon. and learned Member for Warrington (Mr. W. T. Williams) and the hon. Member for Bilston (Mr. Robert Edwards).
The hon. Member for Oldham, West has a covey of five of them seated in the decimated ranks of the party opposite—decimated because of the failure of the remaining 12 Co-operative Members to be present for this debate. Where are they? [An HON. MEMBER: "In the Government."] Whether they are in the Government or on the back benches, I hope that they will be voting in our Lobby tonight. If they are not, they are traitors to the Co-operative movement.
Of course, the Chancellor of the Exchequer has dealt the industrial cooperative societies a dastardly blow. All the Co-operative Members ought: to register their disapproval in speeches on this Amendment to defer the beginning of the operation of this immoral, iniquitous and inflationary impost on a large section of British industry, trade and commerce.
In the van of the movement and agitation to defer the date of this tax until next February, I expected to find the Co-operative Members. All I perceive, however, is a sepulchral silence broken only by the words of the hon. Member for Oldham, West. It is the duty of my right hon. and hon. Friends and myself to propagate widely in the country the desertion of the Co-operative Party from its true tenets and principles. Six Cooperative Members are present here today; 12 are missing.
I cannot allow that, Mr. Irving. I must protect the Chair. This is one of those unique occasions when I spring to the defence of the Chair.
There are eight Co-operative Members present out of 18, and those eight include yourself, Mr. Irving. Thus, 10 Cooperative Members—the majority—are missing. That represents approximately 56 per cent. of them missing and 44 per cent. of them present. It is disgraceful, Mr. Irving, having regard to their election promises.
Now I must pass to the Amendment. It fascinates me to know how the Treasury has computed its figure of a revenue of £315 million during the current financial year. I quoted this figure in an earlier speech in Committee and was roundly condemned by hon. Members opposite. Later, they went to look it up in the Financial Statement 1966–67, but no one came forward to admit that my figure is correct.
The Chancellor admitted today that it is correct that he expects a net revenue of £315 million from this tax if it is collected from 5th September next. We seek to defer it until the beginning of February, for the reasons so cogently expressed by my right hon. and hon. Friends and myself. I could not go along with the Chancellor when he said that, were the deferment agreed to by the Committee, it would mean a loss of revenue to him of more than £200 million on the budgeted sum. Indeed, no.
The Chancellor seems to have forgotten what the Financial Secretary told us the other day, when he said that a hypothetical loss of revenue would be unavoidable if he accepted an Amendment in connection with fuel oil duty, moved by my hon. Friend the Member for Yeovil (Mr. Peyton) and myself. The right hon. Gentleman had forgotten that this form of taxation, S.E.T., is admitted as chargeable against profits for purposes of computing a company's liabilities to Corporation Tax.
The Treasury itself is, therefore, paying half or more of the net cost to companies of this form of taxation because it is an admitted charge against Corporation Tax. I am glad to see that the Chancellor of the Exchequer assents. I have him on my side at last. What I want him to do at an early date is to justify how he arrives at this figure of £315 million, because we do not know.
The Treasury makes such wildly inaccurate estimates a year ahead, of the yield of taxation, as I pointed out a few days ago on an Amendment to reduce the standard rate of Income Tax. The Treasury was wrong last year by more than £80 million in the yield of Income Tax, and I think that it will be equally wrong with the £315 million which it postulates as being the net yield of the Selective Employment Tax in 1966–67. Therefore, were I to be convinced of the Chancellor's argument that he cannot afford the loss of revenue which deferring the onset of this form of taxation would incur, I would want him to publish a detailed computation of how he arrived at the figure of £315 million, taking into account what I have said.
The estimated interest-free loan to the Government inherent in this form of tax is £100 million a month. We do not know and I do not suppose that the Chancellor knows, or that the Minister of Labour, or Dr. Kaldor, or Dr. Balogh, or the remainder of the bunch knows, how long it will take the Government Departments to repay this tax, with or without the premium. The machinery is complex. I worked out my calculations on the basis that the average time for repayment would be five to six months.
At this point, I fall out with my hon. Friend the Member for Oswestry (Mr. Biffen). In an intervention in the Chancellor's speech, my hon. Friend said that the effect of the tax would be to reduce the liquidity of companies. To put it in the simpler and homelier terms which company directors understand, what he was saying was that its impact would reduce the liquid resources of companies. My hon. Friend went on to say that that would result in a diminution of investment. I doubt it. It might, but that is a guess.
What it is much more likely to result in is prices being put up. There are whole sectors of industry in a position to raise prices and recoup the cost of a tax of this sort, for example, baking, milling, brewing and spirits, and a whole range of consumer industries. The impact of the tax is much less likely to result in a diminution of capital investment, although it might in some measure, and that will depend on the type of company, its business, location, financial circumstances, age and a hundred other factors——
Thank you, Mr. Irving. You or your predecessor may have heard the hon. Member for Oldham, West refer to the fact that there were half-a-dozen ensuing Amendments on the Notice Paper and that he proposed to deal with them all in his speech and make it a "Clause stand part" speech. Before you occupied the Chair, we had this problem of liquidity——
All right, Mr. Irving. I will finish my sentence on liquidity and pass to the next subject.
I do not accept the argument of my hon. Friend the Member for Oswestry that the tax will result in a diminution of capital investment. It might, but it is much more likely to do the opposite of what the Chancellor wants it to do. The Chancellor has said several times that he readily admitted the impact of the tax to be deflationary. I do not think that it will be deflationary. In conditions of over-full employment, when the aggregation of registered unemployed and transfers on the day of registration from job to job are at the ridiculously low level of 261,000, out of a working population of almost 25 million, gross over-employment which is the cause of the severe labour shortage in so many industrial areas, all that will happen when the tax becomes effective is that prices will be marked up to pay for it.
That is why I believe my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) to be right to plead that all the aspects and features of this form of taxation ought to be examined in much greater detail. The balls should be allowed to run along the table for a period of a few months so that we may examine all these complex factors and determine whether my hon. Friend the Member for Oswestry and my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) are correct in their supposition, or whether I am correct in mine.
In any event, I say to the Chancellor—and I have not been unkind to him this afternoon, but merely begged to differ about his assessment; he thinks that this form of taxation, of £315 million extracted from the economy this year, is deflationary—that in the event it will be extremely inflationary, having regard to the conditions of gross over-full employment which we suffer in this country and the acute shortage of labour in most of the industrial areas of Britain.
As I am about to resume my seat in the next few minutes I hope that we shall witness the sensational spectacle of eight Co-operative Members leaping to their feet to oppose their own Chancellor of the Exchequer and to vote with my right hon. Friend the Member for Enfield, West, my hon. Friends and myself, thus demonstrating not only the solidarity of the Co-operative Party, but their faith in their own movement and the fact that they are courageous men prepared to walk through my Lobby with me this evening and not run away from the Chancellor of the Exchequer.
It is not shocking. On the appropriate Amendments later, when I shall be strictly in order and not following the hon. Member for Oldham, West, who was grossly out of order, I shall allude——
I defer at once to your rebuke, Mr. Irving, and I thank you for it.
At a later stage of the Bill I shall allude to private co-operative associations which support my hon. Friends, not the co-operative societies, such as the Oldham Industrial Co-operative Society, which are officially affiliated to the party opposite. I am speaking of private societies which are not officially associated with my colleagues and myself, but who generally support us. We wait to see the interesting spectacle of eight Co-operative hon. Members opposite rising and seeking to catch your eye, Mr. Irving, when I resume my seat.
This is a most important Amendment. The provisions for the collection and the anticipated refund of this tax suffer from two grave defects. First of all, they are ridiculously cumbersome, as my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) has pointed out, and, secondly, and perhaps even more important, they are unjust in their operation. This Opposition Amendment has to be seen in the context of the whole means of collection of this tax.
To collect the tax, which would have a yield of about £240 million, the Revenue has first to gather in more than £1,100 million. It was this feature of the Bill which was derided recently by the Economist as "custard pie economics". The gap between payment and refund will continue throughout the whole period of the levy of the tax and we still do not know, when the tax gets under way, what arrangements will be made for the refund of the levy. We do not know whether there will be a quarterly, a monthly or a weekly gap.
This is typical of the whole, ill-thought-out nature of this tax. It is apparently the Government's strategy——
On a point of order. It might be helpful for the Committee to have a Ruling as to what precisely is "tedious repetition". Does it mean repetition in the same speech or in different speeches?
The hon. Gentleman must allow the Chair to decide, on the issues arising, what is tedious repetition and what is not. I can assure the hon. Gentleman that I will take good care.
After that rather tedious intervention I resume my remarks, and will use a simile which has not, as far as I know, been used earlier in this debate. This whole operation is rather like a game of "Blind Man's Buff", with all the players, including the Chancellor, blindfolded.
What is inexcusable about this approach is that we have seen it all before. This is exactly the same approach which characterised the Finance Bill of last year. The Treasury team, like the Bourbons, have learned nothing from that experience. The initial five-month period, between the imposition of the tax and the return of several parts of it is a forced loan, interest-free to the Government.
It is typical of the Government that they should introduce what is a penal taxation Measure in this indirect and dishonourable way. The Chancellor's defence, which we heard this afternoon, was that this tax is deflationary. He argued that the yield would be effectively reduced, if the Opposition Amendment were accepted, by about £200 million. He should have thought of that before drafting the tax so inadequately that it can only be made effective by perpetrating an injustice upon many companies, large and small, and by unjustly imposing a penalty, not only upon companies but upon charities.
When one considers this combination of imposing penalties on charities, on manufacturing industries and on service industries, one is entitled to ask what has become of the selective nature of this tax, which, we were told, was the essence of it. There is no precedent in modern financial history for such a forced loan.
I have mentioned the Bourbons. May I now refer to another unhappy dynasty, the Stuarts. One has to go back to the Stuarts before one can find a similar tax. Whatever may be said about that unhappy dynasty, financial responsibility was not the most prominent of its virtues. The closest parallel to the operation of this forced loan is the Benevolence which was imposed by Charles I.
Is it not a fact that the wickedness of that was that it was imposed by the King as a way of getting out of Parliamentary control of finance, so the analogy is altogether false?
May I remind the Chancellor, through the Chief Secretary, of the fate of Charles I. He lost his head. Fortunately, or unfortunately, we are more restrained today. By operating the tax in this unfair and inequitable manner the Chancellor is in danger of losing something which is perhaps more important than his head, and that is his reputation.
Companies will clearly have to borrow from the banks to meet their commitments, and they will be borrowing at a time when banks are near to the ceiling of the advances which they can make, because of the other financial policies of the present Government, both in relation to Income Tax, and to the conditions created by Corporation Tax.
My right hon. Friend the Member for Enfield, West pressed the Chancellor to give details of the means which he intended to use to facilitate bank advances. One could bear with a little tedious repetition on that point, because we have had no information of any kind about what steps the Treasury proposes to take to facilitate bank advances and so help companies at a time when they will be very seriously embarrassed by this five-month period of the enforced loan.
The tax will have an effect upon liquidity, and I would support my hon. Friend the Member for Oswestry (Mr. Biffen) in saying that it is also likely to have an effect upon capital investment. This Amendment will improve the tax by eliminating the five-month period of the forced loan. In itself, the existence of the forced loan is a major injustice and, since the Government, through the Chancellor, have declined to modify their stand on this issue, I trust that it will be pressed to a Division later this afternoon, supported by all the members of the Co-operative Party opposite.
I hope that the hon. Member for Chelmsford (Mr. St. John-Stevas) will forgive me if I do not follow him back to the time of Charles I. I wish to set at rest the mind of the hon. Member for Worcestershire, South (Sir G. Nabarro), because I can see that he has a good deal of anxiety about our position. We shall make our own contribution to this debate in our own way, in our own time and as constructively as possible. We have a number of points which we should like to discuss with my right hon. Friend the Chancellor of the Exchequer. We are concerned about the date, but that is not the most important point and for that reason we have tabled a number of Amendments.
In the meantime, in case the hon. Member for Worcester should be concerned——
I always think of the hon. Gentleman as being the Member for Kidderminster. Perhaps it is the "Kidder" part which sticks in my mind.
I assure the hon. Gentleman and other hon. Gentlemen opposite that, however much they seek to incite or discourage us, we shall deal with the matter in our own way, in our time, and to the best of our ability.
It became clear almost immediately after the Budget statement that the Selective Employment Tax had not been thought through. One of the advantages of this Amendment is that it will give the Chancellor of the Exchequer considerably more time to reflect on the many anomalies which he has created and to ensure that people whom he does not mean to tax or penalise are not called upon to pay it even for the limited period of six months. I agree with the speeches made by my hon. Friends that it is wholly wrong for the Chancellor of the Exchequer to call for an interest-free loan in this way and particularly to expect those whom he does not intend to tax to subsidise him.
I wish to emphasise the point raised by the right hon. Member for Orkney and Shetland (Mr. Grimond) and my hon. Friend the Member for Yeovil (Mr. Peyton) about the extent of the impact of this tax on smaller people. I thought that the Chancellor of the Exchequer rather pooh-poohed what they were saying and discounted it completely. It seems to me that he is far removed from the realities of the position of many people engaged in business and industry.
I should like the imposition of this tax to be postponed by at least six months so that the Chancellor has a little longer to carry out some research to enable him to come nearer to the true facts of industrial and commercial life and to find out what is agitating and concerning people. He seems to be wholly unaware of the damage, frustration and concern which his proposals are causing to a great many people.
Smaller people are likely to find themselves in particular difficulty in trying to extend their bank borrowing facilities. It is not particularly well, but reasonably well for the larger undertakings which may have more substantial assets and better opportunities for financing operations. But for smaller people who, apart from any new impost placed on their shoulders, are finding their relationship with their bank managers not particularly enjoyable, this further imposition will make life extremely difficult. I ask the Treasury Bench to bear that point in mind. These people will be harder hit as a result of having to finance this tax in advance of the time when it is necessary for them to pay it.
Another reason why I support the Amendment is the enormous cost which the administration of this tax will involve. It seems to me totally ridiculous, as it does to every hon. Member, that the net yield of the tax—my hon. Friend the Member for Chelmsford (Mr. St. John-Stevas) said, I believe, that it would be £240 million—would involve the collection of £1,100 million or so. It is to be collected, to a great extent, from people whom the Chancellor of the Exchequer does not intend to tax at all. In addition, it will be collected from people to whom it is the Government's intention to pay a premium. If it is their intention that employers in manufacturing industry shall benefit from some special payment contrived by the Government, then let them make that payment. Why should they first require employers to borrow money in order to pay an interest-free loan to the Government for six months? This is not right in equity, and the cost of this operation must be very great indeed.
A very important point which has been touched on but on which I should like further elucidation concerns the position of those engaged in completing a contract for which a fixed price has been negotiated. I realise that the Chancellor has referred to this point, but I should like further clarification of it because I have had many protests and anxious letters about it. In many instances, those engaged in manufacturing industry who will have to pay this levy for six months before receiving any premium will be concerned with the conclusion of a contract for which they have agreed a fixed price during that period.
It may well be argued that in due course they will get some form of benefit and, therefore, they should not take into account the payment they are required to make in the interim. But the fact remains that these employers will have to pay in the interim. Surely some consideration should be given to the position in which they find themselves which distorts the whole basis of the figures on which they have agreed a fixed price for the contract.
Like, I believe, all hon. Members, I thoroughly dislike this proposed tax. I support the Amendment for the important reason that it would give the Chancellor of the Exchequer a further opportunity to consider the many anomalies and problems he has created by introducing the tax. When a tax is imposed, it should be just, simple and fair. This tax is manifestly unjust and, clearly, very complicated. Worse still, the Chancellor has indicated that in many respects he would like advance payment to begin so that he might get experience from the operation of the tax in order that further modifications might be made as they were required. It is wholly wrong to impose a tax in these circumstances.
I beg right hon. and hon. Members opposite who are concerned with this new tax to delay its introduction to give them an opportunity to think it through properly, to remove all its worst aspects before it is introduced and to make certain that when it comes in it is as fair as it can possibly be made to be, and so that due consideration can be given by them to the position of all those who are called upon for six months to pay an interest-free loan to the Government.
I am glad to follow my hon. Friend the Member for Bournemouth, West (Sir J. Eden) at this stage, because I want to pick up one or two new epithets which have been cast around about this tax. Those that I give to it are somewhat different and they develop a different argument.
My first epithet is that, curiously enough, it is a very unclean tax. It is a tax upon our cleanliness. I shall deal with two aspects, the cleaning and the laundry industries, which are most hard hit of all by it. Secondly, it is a very unkind tax, because it is heavily loaded against the old, the disabled and those who work part time. Thirdly, it is uncertain. In so far as it will have any disinflationary effect, that will be because it causes unemployment.
The reason why I want to postpone the tax from 5th September for a while—certainly, February would be ideal, but I would be content with a period of two months—is quite different from the arguments so far addressed to the Committee. I am moving from the general arguments which have been so ably put by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) and by many other hon. Members, by my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) and all of them.
The reason why I believe that 5th September is a quite inhuman date is that during that month the fixed-price contracts which were fixed last year will be in operation. For every holiday contract and for every late holiday, the whole of the hotel and catering industry has made all the arrangements for the autumn. They are all fixed. Take, for example, Butlin's. In September, nearly 9,000 people will be at the camp at Bognor. They have all arranged their prices for their contracts and their holiday, and yet that company will have to pay for over 2,000 staff from 5th September onwards. What will the Government do about that?
The real question, as is well known, is whether as a matter of the common law the companies are entitled—they will not want to do it—to say, "This was not reasonably within the contemplation of the contract and, therefore, we are entitled to make an extra charge for this entirely new issue which has arisen." I do not know whether the Financial Secretary to the Treasury has taken legal advice about this—I have no doubt that he has—but will the answer be that the companies may make an additional charge from the time when this tax comes into force?
From a commercial point of view, it is quite impracticable for all the hoteliers in Margate and Ramsgate and throughout the country to say to those who arrive under arrangements which were made last year and in the winter and spring, "I am terribly sorry. You have come to stay with us from 5th to 12th September, or from the 12th to the 19th. Bad luck on you. You now have to pay another 7 per cent. more because we have to pay this miserable tax, which neither you nor I knew anything about." Therefore, it is quite impractical to hold to the date of 5th September, which must be put off to the back end of the season.
That, however, is the least of my worries. The reason why I say that this tax is extremely unkind is because an effect of it will be creative of unemployment in the one sector where it is least desired. It may well be that in conditions of over-full employment there is a case to try to get flexibility in the Midlands, but this certainly does not apply in the case of Thanet, the seaside resorts or even those other parts of the country where a large number of people who are old-age pensioners and disabled are employed.
It so happens that in my constituency we have a larger number of people on National Assistance than in any other constituency in the United Kingdom, not because they are unemployed or unemployable, but because we have so many elderly people, women over 60 and men over 65. In the summer months and continuing into September and October, they earn a small sum of money, mainly on part-time work, usually working either morning or afternoon. It is a matter altogether of not more than 20 hours a week and for most of them probably not more than about 15 hours a week. They are paid about 5s. an hour for that work.
Normally, September carries on as a good month for the tourist resorts, but October, as hon. Members throughout the Committee know, is a bad month and very often the whole of the premises gradually start to close. What particularly occurs is that the smaller establishments, which do not have the staff and which are not able to get the same class of bookings as the first-class hotel gets, are the ones that close first. They work to a very tight margin.
In the month of October throughout the country, old-age pensioners flow to constituencies such as Bournemouth, Brighton, Blackpool, Thanet and elsewhere, and we take in those old people on the cheap. Those who take them in on the cheap are the smaller and cheaper hotels and guest houses. I see my hon. Friend the Member for Folkestone and Hythe (Mr. Costain) in his place. His constituency makes considerable arrangements, as does mine, for precisely that class of person.
The picture is undoubtedly that the part-time people, who are themselves old-age pensioners and elderly people who provide the part-time labour in these constituencies, working perhaps 12 or 15 hours a week, will get the sack; and instead of continuing for the month of October, these hotels and boarding houses will close that much earlier. Therefore, the old people who come to Folkestone, Thanet, Bournemouth and elsewhere will be deprived of the opportunity, the boarding houses will not be able to pay the costs and unemployment will also be caused to these old people. That is why I call this an unkind tax. It is unkind because it makes and draws no difference.
The Amendment gives an opportunity for the tax to be brought into effect at a later date at the end of the season. Speaking to the argument which I am addressing to the Committee, the earliest date would be two months later, 5th November. For the purposes of the argument I am using—although I entirely accept and adopt everything that has been said to the Amendment generally—I merely ask that there should be a two-months' delay.
The same argument, unfortunately, applies in the case of part-timers. Just as we have the elderly people, so the hotel and catering industry has made extensive arrangements throughout the Metropolis, in the cities and elsewhere to employ very large numbers of part-timers. These people again, in the general nature of their employment, are in many oases the whole of the contract cleaning industry, the army of Mrs. Mopps. The Mrs. Mopps are people we must not upset. They are very difficult to get. Speaking for myself, I think that this is one of the worst features of the tax. Seriously it is. They work for about 5s. an hour for 15 hours a week and the average Mrs. Mopp earns £3 15s. a week.
The horrifying feature of this is that 75 per cent. of the Mrs. Mopps, being married women, of course work part time because they have to look after the kids, they have to do the shopping they have to look after hubby in the evening; but if we want clean hotels and clean catering institutions they must have this domestic staff. Also other women of the country need to have this domestic staff, too, because the domestic staff, the Mrs. Mopps, are today looking after the homes of the women whom the Government want to go out to work in the factories. If we discourage married women from working part time we deprive ourselves of the cleaners who will look after the homes for the women working full time in the factories.
This is where this tax is ill-conceived, and unkempt, and not thought out, because unless we give ourselves time for these arrangements to be made by putting this tax back a month or two—give it, perhaps, to February—people will not be able to work out arrangements which will have to be made by the contract cleaning industry as a whole.
No. I am quite convinced they cannot. I will answer that straightaway. First of all, the women we are talking about, I am sure the hon. Member recognises, are not people who can work in a factory. Many of them are middle-aged people, who work a number of days in the week and, say, two or three hours a day——
I obviously did not put my question clearly enough. I was suggesting that the wife, the lady of the house, who is thus released for employment, and who will be paying the tax, will be able to pay it.
No. I do not think that is true either. The fact of the matter is that the stamp as it stands at the moment—I must not go into the amounts of this at this stage, because that is a question which arises on later Amendments, but the hon. Gentleman will recognise this—means that if we add 12s. 6d. to a matter of £3 a week which one is paying—and it is an extra 12s. 6d.—it represents altogether an impost of something like—what is 12s. 6d. of £3 percentagewise——
—some 22½per cent., a very considerable sum. It is an enormous impost, whereas on the ordinary wage packet of £20 a week it is only 5 per cent. Therefore the impost—the hon. Member follows my point?—upon the employer of a domestic cleaner is four times larger than what one is paying in industry for the normal working man. This, of course, must be quite wrong. It cannot be right to charge four times as much for the woman for her cleaner by way of taxation than what is charged the ordinary employer in industry. I can see, Sir Eric, that you are looking at me as though——
I was drawn away by the intervention which the hon. Member made, but I entirely agree with you and I will pass to the next point. As I say, there will be an opportunity to return to it later.
Having pursued the matter for this aspect of the tourist industry, I respect- fully submit that the Government have not—I repeat, not——
The point I am making, following, as I say, a somewhat different line, on this idea of the postponement—if the Minister would be with me for a moment on it—and the arguments which have been ably developed as to the difficulties of companies being able to obtain overdrafts, is, as the Chancellor admitted with a nod, that of course industry can charge this tax to Corporation Tax. I would point out that the small boarding-houses and the Mrs. Mopps and the old-age pensioners—all these people who will carry the reality of this tax—have no Corporation Tax against which they can pass it on.
This tax in its essence, when we consider one is paying something like £3 to £6 a week to employ the part-time person, the old-age pensioners, is this, that the consideration in the employer's mind will be entirely, "Is it worth paying out at the full rate, to employ a part-timer, an old person or a disabled person, if one is unable to charge against it any Corporation Tax because one is not paying Corporation Tax? "Clearly, one comes back to the extraordinary injustice here of the difference of the rate of the impost for the full industrial earner and that borne in the case of the higgledy-piggledy people, as I say, the old-age pensioner. the Mrs. Mopps, all those who feed this industry with its labour.
I conclude by saying that I really feel that we must put this date back at the earliest towards the end of the tourist season so that arrangements can be made in the hotel and catering industry, which employs so many of these people, because of the contracts with those with late holidays, and so that those in constituencies which are so deeply affected, such as my own, will be able to ensure that we do not have unemployment of the part time and elderly. If we do have that unemployment it means that the Government will sooner be paying more National Assistance, and the impost which they will have to pay soon enough anyway, and which at present they do not have to pay till September whilst these people are in employment. For these reasons, somewhat different, but in support of the others, I, too, hope that we shall have the assistance of a co-operative move to be able to bulldoze the Government on this Amendment.
I have no intention of detaining the Committee for very long, but I should like to make one or two points. We are engaged in this debate today because the Chancellor and the party opposite have taken the view, as the Chancellor explained during the debate on the Budget, that if we look around and find an area in which tax is not being paid, that appears to be unfair to the firms and industries and areas by which tax is being paid; the Government therefore impose this tax.
But this is going beyond that. This is in fact saying to the manufacturers and industry of this country, "We, the Government, want you also to give a tax-free loan". Indeed, it amounts, as has already been said, to a sum of about £100 million a month, and the Government have indicated that there will be no effort to repay that amount till at least five months, and it may be six or seven months, after this monthly sum of £100 million has been levied on the working capital of companies.
Whilst the Chancellor was making his speech, I asked him if he would ensure that, during the five or six months of the operation of the tax before the repayments were made, no measure was taken by the banks to make it more difficult for firms to increase their borrowings or to increase the Bank Rate. It is quite evident that, as a result of having to make this forced loan to the Government, a considerable number of firms both large and small will of necessity have to go to the banks to increase their loans and obtain new loan facilities. That cannot in any way be justified.
The other day, in my presence, the Chancellor said that there was no great opposition to the tax throughout the country. If he believes that, ha is truly living in cloud-cuckoo-land. I am quite sure that he has had far more representations than any other individual hon. Member has. I have had them from the butcher, the baker, the candlestick maker, Uncle Tom Cobley and all, as I think most of us have. The tax is thoroughly disliked, and the method of collecting it and the delay in repaying those firms which are entitled to have it repaid are matters that are causing considerable concern.
I want to turn for a moment to the question of charities. During the earlier stages, the Chancellor was obdurate in saying that there was no intention of repaying the charities, and obviously there could not have been. If it was always the Chancellor's intention to make repayments to the charities, why did he not make that perfectly clear at a very early stage? It caused them considerable concern and apprehension. I am quite sure that most of the people connected with charities and hon. Members of the House believe, as I do, that the relaxation in favour of charities was very largely brought about by criticism in the House, not only from these benches but also the strong criticism from the benches opposite and no doubt representations made behind closed doors by members of the party opposite.
However, despite the fact that the sums are going to be repaid, the charities are being asked to make a forced loan to the Government. Dr. Barnardo's Homes will have to pay £50,000 to the Government before getting one penny back. The same is true of the Church Army. In the case of the R.S.P.C.A., the sum involved is about £20,000. The Chancellor says that he has no desire to hurt the charities, but is he not still hurting them by demanding that they give to the Government a tax-free loan of considerable sums of money? Is that not likely to make it difficult for them to meet their commitments?
I can assure the right hon. Gentleman that most charities run from hand to mouth if they have not got reserves.
I am grateful to my hon. Friend. Would he allow me to point out that the Amendment will be a great advantage to the charities because their funds are low at this time of the year, between September and Christmas? Most of their funds come by way of responses to their Christmas appeals, and the tax will hit them at the worst time.
I agree with my hon. Friend that not only is this the period during which they find it most difficult to raise money, but, correspondingly, it is the period during which most of them have large sums of money to find and when their expenditures are at their highest.
If I can have the ear of the Chief Secretary for a moment, I hope that he will take this matter seriously. It is still a matter of concern for the charities that they will have to provide this tax-free money. What a ridiculous situation will arise if, as a result of having this money taken from them, the charities are forced in turn to go to the banks and borrow and pay bank charges in order to provide money for the Government which ultimately they will have returned to them. That is absolute nonsense and cannot be justified in any circumstances. I hope that the right hon. Gentleman will look at it again.
The two clear points which have emerged during the debates on the Bill and today are the concern about the need for further consideration and more time for reflection, and the issue about the nature of the interest-free forced loan which the Treasury will enjoy.
There has been many reasons adduced by speakers in the Committee why it would be advantageous to the Government for there to be some further time for consideration. The Chancellor himself did not attempt to argue against the case made for further consideration and more time. What he said, in effect, was that he could not consider it because he needed the money to deflate the economy in the autumn; he even named the month of September.
What frightened me about it was the manner in which the Chancellor said it. It was as though he was quite sure that, in this new form of tax, he had an instrument of the most perfect precision the consequences and effects of which were well known to him. The fact is that he has an instrument which is quite untried and unproved, the consequences of which he cannot foretell. It is an instrument which is far reaching in its effects, as has been pointed out today. It will affect all kinds of industry, both large and small companies. It will affect the new and the old, the efficient and the not so efficient. It will affect those which have great resources and those which have not, those whose liquidity permits them to meet immediate calls on their resources and those whose liquidity does not. To say the least, this instrument may have very unpleasant consequences for many firms, particularly those in the smaller categories.
My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) suggested that while the Government took a little more time under the terms of the Amendment to work out the consequences and make provision to minimise the less desirable ones, they could meet the objection of the Chancellor by using the regulator. It seems to me that that was something which should appeal to the Government. With all its limitations, the regulator is a known instrument. It is dealing with a known tax which has been in existence for many years, the approximate consequences of which are known to us. It would not have all the unfortunate and unknown consequences of the new tax for so many of our industries and services. In those respects there is a strong case for taking more time for reflection and consideration.
The second objection was put very well by my hon. Friend the Member for Chelmsford (Mr. St. John-Stevas). The Government are fortunate that today the Executive can get away with things which absolute monarchs could not do. We know what happened when absolute monarchs attempted to get forced loans, but the modern Executive can get away with this sort of thing. What the Government are doing is outrageous. They are to have the use of this money for a considerable period. It is not only an interest-free loan, but a forced one. Had one of the Stuart kings gone as far as this, our modern historians would have been even more surprised.
I start by saying that I have never found any difficulty in reading what the Chief Secretary's face tells us, and that I should like him to consider very carefully the arguments which have been put forward from this side of the Committee for postponing the incidence of this tax.
It is true, as my hon. Friends have said, that when the Chancellor started off on this perilous journey in his Budget speech he little knew what the tax would lead to in regard to the insults and vilification which it has received in the country. I think that my hon. Friends have used very gentle language about it. My hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) described it as unkind and unclean. I could go very much further, but I shall limit myself to drawing attention to the fact, as was so well done by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) that the Chancellor has already benefited to a great extent by the period of time between the Budget and today.
If more time were taken, a more reasonable attitude might be taken by the Chancellor and his advisers about this tax, if it has to be imposed. I should like in particular to draw attention to some of the people who will be hit by this forced loan to the Government. It is difficult to pick out any particular category. Indeed, all small employers will be hit by it. If someone is not in the category to which the Chancellor referred, the farmers who employ six agricultural workers to help them get a turnover of £60,000 a year, and who go to Ascot races, he will be hit by this tax.
I am thinking now of the small employer, and the hill-farmer of West Wales. The Chancellor of the Exchequer is a Welsh Member of Parliament. Does he consider it right that somebody living on the upper slopes of Cardiganshire, or Breconshire, or Radnorshire, or even Carmarthenshire, should be asked to lend money to the Government, free of tax, in this way? Has the Chancellor considered the fact that whereas, 10 years ago, farmers as a whole were well off on the credit side of their bank accounts, many millions of pounds on the right side, today they are many millions in debt? This tax will add to their debts. Does not the right hon. Gentleman agree that this will be an additional burden, particularly on small farmers in these isolated parts of the country?
I do not know what they think of farmers, but anyone who understands the other meaning of the word "bailiff" knows that on the farms about which I am talking farmers cannot afford to employ a bailiff. The sort of farm to which the Chancellor was referring can employ a bailiff, and possibly he is left there when the so-called people to whom the right hon. Gentleman referred go to Ascot Races. There is a case for taking time to think again, and to realise that this enforced loan is very much resented by small employers in these outlandish parts of the country, important as they are.
I conclude by repeating to some extent the sensible words of my hon. Friend the Member for the Isle of Thanet who talked about the tourist industry. It is not only the resorts in the southern half of the country which are affected. The Highlands of Scotland, Western Wales, and other parts of England are also affected, and they will again be hit by this tax.
I shall not indulge in endless repetition of the reasons why I believe that the tourist industry should be helped. I merely ask the Chancellor whether he thinks it is right that these small employers should have to pay this enforced loan, when, as a result of opposition, both outside the House and inside it, he has decided now to take a slightly different view from that which he took in his Budget speech with regard to the agricultural industry?
I do not wish to delay the Committee for long. No doubt we shall be here until the bacon and egg hours of tomorrow morning. I believe that the Amendment should be accepted, because there is a lot of room for further consideration of this tax. I know that many people say that Governments never change their minds, no matter how long the discussions last, or how many words we use.
The Chancellor said earlier today that he thought there would be ample discussion of this tax. I do not think that the accusation that Governments never change their minds can be levelled against this Government. On the contrary, I think that they are in need of the admonition which Adlai Stevenson once gave to President Eisenhower, "Don't just do something, stand there".
This tax was announced about eight weeks ago, since when we have had several major changes. Agriculture has been taken out, mining, quarrying and the extractive industries have been removed, and charities have been exempted. We have also had a considerable new impost with regard to companies with an administrative block on one side of the road, and a manufacturing block on the other.
Those are four major changes which we have had in about eight weeks.
That intervention is not very helpful. This has happened as a result of pressure in the country, and I think it is accepted that Liberals have played a considerable part in this. If we have had these major changes in eight weeks, then, with a little extension of the period for digestion, we could hope for even better changes.
As a new Member, I had hoped that a Government with all the brains they have at their disposal would be able to bring in a tax without having to make all these major changes. One wonders why they employ economists at the Treasury. Is there no advice which they can take before a tax is announced? It is an extraordinary position and gives one no great confidence in the Government's ability either to take or to listen to professional advice.
The hon. Member for Oldham, West (Mr. Hale) quoted a saying by "Nye" Bevan, "Establish your principles". I had always supposed that one principle of Socialism in taxation was, "From each according to his ability to pay". It was certainly a principle of the Socialist Party when I was a member of it, but I am aware that the Socialists have lost many of their principles since I left.
I should like further consideration given to the effect of the tax on the regions. Has the Chancellor considered the effect on the regions?
I stand corrected and I thank you for pulling me back into order, Mr. Steele. Many hon. Members have strayed further from the point than I have strayed, but I will try to relate my remarks to the Amendment.
We need a period of time for consideration, because we wish the Government to look at the effects which this tax will have, and I do not believe that sufficient consideration has yet been given to those effects or will be given to them before 5th September. I related these remarks to the particular effects on the regions. Has the Chancellor been advised of these effects? Did he take advice from the regional councils before announcing the tax? Did they give him advice on what the effects would be in the regions? Much greater consideration must also be given to the so-called selective nature of the tax.
I again stand corrected. I am trying to make the point that this is one of many matters which must be considered during this period and it is one reason why at the outset of my remarks I said that we needed further time to consider the tax.
We have not had very careful consideration of the effects of the tax on particular industries. In my constituency the hotel industry is of major importance. September is an important month in the financial year of the hotel industry and bang in the middle of this period, after having entered into agreements, they will suddenly be forced to pay this additional tax. Hotels make their arrangements 12 months ahead. Christmas is the time for hotel bookings and many agreements which were entered into last Christmas will have to be honoured after the imposition of this tax.
We need further time for consideration, because the tax shows that the Government will continue to introduce new legislation of this sort without sufficient consideration of the demands of industry. It has been accepted, for some unknown reason, ever since Dr. Dalton's time, that a Government must not talk about taxes until they have brought them before the House. In this case, that is a very bad principle of taxation. The Government should have discussed this tax much more fully with industry to see what effect it would have.
Another problem concerns the interest-free loan. The hon. Member for Hereford (Mr. Gibson-Watt) spoke about the problems of hill farmers in Wales and Herefordshire. While he was speaking an hon. Member opposite commented, "Send the bailiffs in." I believe that this is typical of the urban-minded Government that we have and their attitude to rural problems and the farming community. It is well known that legislation already announced is aimed at sending in the bailiffs to many more small farms. Small farmers in my constituency in Cornwall can get nowhere by going to the banks for better credit. They are up to the hilt in overdrafts and it is nonsense to suppose that they should make an interest-free loan to the Chancellor.
It is part of the purpose of the tax to get industries to reinvest in labour-saving equipment, but at the same time, we have a situation in which capital is being taken from industry which could be used for investment in labour-saving equipment. This is a curious way of encouraging labour-saving practices in British industry.
This delay is needed. It is a bad tax now and probably will be a bad tax five months later. Nevertheless, in this case it is better late than now. It is not good enough for the Chancellor to say, in answer to the point made by the right hon. Member for Enfield, West (Mr. Iain Macleod), that he had not heard of the case of the British Oxygen Company, Limited. It is important that cases of this sort should be discussed fully between industry and the Government before such a tax is introduced. That is why I believe that we need this additional period to make the tax a lot better than it is now.
I do not think that any Amendment could do more good to my constituency than this and that is why, in order to attend the debate, I have neglected a call of duty by the Estimates Committee to go to Scotland. If any tax in itself were designed to hit a constituency like that which I have the honour to represent, this is the tax, for the Chancellor has hit the bull's eye.
The hon. Member for Cornwall, North (Mr. Pardoe) said that there had been eight amendments in eight weeks. This Amendment will delay the introduction of the tax by nine months, but it still will not make it a legitimate tax. The delay may give the Chancellor an opportunity to make more sense of it because I believe that the tax was introduced not only without thought, but also for a political purpose.
I expect that when we come to the next General Election, and we are pointing to the increases in taxation which the Socialists have brought in, this tax will be forgotten because it does not fit into other forms of taxation. We should not have had the argument about allowing a contractor to contract out of his contract if it had not been a different form of tax. It is well known that when Purchase Tax has been increased, it has been quite legitimate for the buyer to pay the additional Purchase Tax. By delaying the tax for nine months the Government will have an opportunity to widen the gap, and not so many people will suffer from the tax, arising from claims from one contracting party against another.
The tax has hit the hotel industry very hard—an industry which figures very largely in my constituency and other coastal resorts. There are many hotels, particularly small hotels, where they are at their wits' end to make their business pay, and it is the end of the season which makes the difference between whether their business is profitable or not. They have booked up for a number of functions at the end of the autumn months, for example, for dinners on Fridays and Saturdays—and many hon. Members know that these take place in their constituencies.
For these dinners they employ extra staff for a short time, generally for more than eight hours. Relating the cost of this tax to the extra staff makes the difference between making a reasonable profit and incurring a serious loss. The Amendment, by delaying the operation of the tax, would avoid that injustice to hoteliers.
Exactly the same thing is happening to small shopkeepers in my constituency. It is useless to say that, by introducing this tax, their staff will be transferred to other industries when, in many instances, other industries do not exist. When the Chancellor suggests that he wants to impose this tax to increase the revenue, he should remember that workers who are discharged will go on National Assistance and that many of them are elderly. I had tabled an Amendment to rectify this position but, it not having been selected, I would be out of order if I discussed it. Unless we can get some amelioration, the tax will cause chaos and confusion to small businesses.
When the Chancellor said that he could not make up his mind on the question of bank loans, I was convinced that he had never been faced with the difficulties of trying to convince a bank manager that one needs a loan. The right hon. Gentleman should find out exactly what happens. To begin with, the manager wants to know one's prospects. The Chancellor said that he could not tell the prospects until a later date. Is he not aware that bank managers generally go on holiday in July and August and that future loans are fixed just before or at that time? It is important that the change proposed in the Amendment is made because, by delaying the operation until February, some help will be given to small shopkeepers, hoteliers and others who so obviously deserve it.
Throughout our discussions in the past few weeks we have heard from both sides of the Committee ample reason for delaying the operation of S.E.T. The Government need a great deal more time to think this out and to rectify a few of the appalling anomalies which have been exposed. That should be sufficient reason for the Government to accept the Amendment.
The Chancellor suggested that he could not afford to make the concession called for in the Amendment for reasons of the revenue management of the economy. I suspect that the right hon. Gentleman has had to adjust his judgment on this matter already, on several occasions. He originally indicated that the net yield from this tax would be about £240 million in a full year, but I suspect that that calculation was made before it was decided to draw the different categories for premium and rebate as tightly as they are drawn in the Ministry of Labour Bill, which we will discuss again on another occasion.
I suggest, therefore, that the net yield would have been likely to be appreciably more than £240 million but that there may be a reason why the Chancellor could not take this into account when considering his attitude towards the Amendment. It may be—indeed, I suspect that it is—that the right hon. Gentleman had to tighten the categories and increase the net yield to give himself a margin for error in view of his experience in drafting various pieces of legislation which he has brought forward in the last two years and which have made him realise that he must accept a great many amendments which inevitably reduce the yield from his proposals.
Nevertheless, the calculation which he has made of what he would require to withdraw from the economy this autumn and winter has, I suggest, changed a good many times. When he originally presented us with this tax in his Budget statement there was no indication of his intention to exact this £500 million forced loan between the autumn and next spring. There was an indication that the demand pressures on the economy might be expected to rise during the autumn and winter, but this was because of Government spending. Yet it is not Government spending which the right hon. Gentleman is proposing to cut back but, presumably—as my hon. Friend the Member for Oswestry (Mr. Biffen) and my hon. Friend the Member for Chelmsford (Mr. St. John-Stevas) pointed out—private manufacturing investment.
The Chancellor intervened during the remarks of my hon. Friend the Member for Yeovil (Mr. Peyton) and said that the tax had nothing to do with the level of bank advances. [Interruption.] That was my understanding of the right hon. Gentleman's intervention. He said that the two were separate matters. The inference behind his remark presumably is that the £500 million of forced loan to be extracted this autumn and winter will not need to be financed out of bank advances and will, therefore, be financed by industry in one of three ways; first through prices being increased, but not to the extent that would be required to cover the cost of the net yield from this tax, but to the extent that it would be required to cover the gross cost during the five months before the repayments are made, secondly,—alternatively, or at the same time—that industry should pay off its employees to the extent that might be required to enable it to meet this £500 million forced loan, or, thirdly that industry should reduce manufacturing investment to that extent. But in each case, it would happen to a far greater extent than would be justified by the £240 million which the Chancellor has estimated would be taken out of the economy in a full year.
That is the inference to be gained from what he said. However, I do not believe that that was what he intended. I believe that he was originally calculating that it would be possible for at any rate a substantial part of this forced loan to be financed by increases in bank borrowing. The right hon. Gentleman said that the banks were not quite up against the ceiling. However, two weeks ago he said that they were. When we were debating Clause 15, the right hon. Gentleman said that the banks were right up against the ceiling imposed by the 5 per cent. increase. He said:
At present, there is a limit on advances of 5 per cent. over 1965. … The banks are right up against the ceiling at the moment."—[OFFICIAL REPORT, 16th June, 1966; Vol. 729, c. 1855.]
What has been happening? I suggest that the Bank for International Settlements—the central bankers—have made it clear that the 5 per cent. ceiling must not be breached and that this is the reason why the right hon. Gentleman feels that he must extract this £500 million forced loan from industry and why he can give no undertaking, although he has been pressed time and again to do so, to ease the banks' ability to lend when this forced loan comes into operation.
The Chancellor was rather indignant when my right hon. Friend the Leader of the Opposition accused him the other night of putting the economy into three-monthly convulsions. Taking £500 million out of industry between this autumn and next spring and then paying back £300 million of it is putting the economy into convulsions, and I cannot see, because of that, any good reason why the Committee should not accept the Amendment which was so admirably moved by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod).
I am indeed grateful to the Chair for calling me so early in this very important debate. Plenty of other hon. Members wish to speak and there will be more, because this is a very important matter and it is right that the Committee should probe it right to the roots.
I support this Amendment very strongly. I support it because I have not been able to find in this Committee any hon. Member of the party opposite, any hon. Member of the Liberal Party or of the Conservative Party, who has a good word to say for this tax. The Chancellor had better realise that he has very little support for it his own side of the Committee——[HON. MEMBERS: "NO."]——not for the principle of a tax of this sort, but for the way in which the present tax is expected to operate. That is why it is absolutely vital that in this Committee we should give the Chancellor additional time to think about the tax before it begins to operate.
A great many of my hon. Friends have talked about a forced loan. The way in which the Chancellor is running the tax makes it not only a forced loan but a capital levy, because even on 6th February next year only part of the impost will be repaid to industry, to commerce and to everyone concerned. My best calculations are that the tax will probably be paid back at three-monthly intervals for ease of administration. That means that the Exchequer will have taken from the people the best part of £300 million which will have been taken permanently and which will never come back into their coffers until the tax is repealed. We have to realise that there is a very definite element of capital levy in this tax.
Another reason for accepting the Amendment is that the Chancellor said this afternoon that he was not concerned about bank arrangements. He said that he would try to arrange that the banks would give accommodation for this levy. It is all very well talking about the great tycoons of industry. The hon. Member for Oldham, West (Mr. Hale) said this afternoon that when the Chancellor realised that the tax would cost the National Coal Board £20 million he made arrangements to see that it would not cost the Board £20 million. That was what I understood from the interchange which went on. Probably the National Coal Board can get finance from the Banks, but what about horticulturists in my constituency? What about small traders? These people probably already have overdrafts up to the hilt and have all that the banks are prepared to give them.
The banks certainly will not increase overdrafts simply because it would be nice for the Chancellor to receive his tax, but if these people do not have an overdraft, what is their legal position? If they do not pay this tax they are criminals. If they do not pay this tax they have to go to gaol, but where can they get the money to pay the tax? Do not my horticulturist constituents have to buy seed for next year? September to February is not a period when most people are selling produce but when they are planting their seedcorn, seeds for their tomato crops and their lettuces. It is the time of the year when money is going out, not when money is coming in.
I do not think that the banks will give more facilities, but these people are expected to find extra money to pay to the Treasury, with no loans. When February comes they will not get all the money back. They will always be about three months in arrear. Therefore, these people in a small way will have a smaller amount of capital on which to work their businesses than they had in the past, they will find it more difficult to be efficient. They will find it more difficult to put in labour-saving machinery even if they weather the storm of not being able to get extra bank facilities for this five-months' gap.
Another reason why we should accept the Amendment is that it seems that the Chancellor needs additional time to look at his own tax. The Chancellor says that manufacturing industry is in such a parlous state that it should receive 7s. 6d. a week for every male employee and 3s. 9d. for every female employee to serve as a blood transfusion to get industry on the road to expansion and increased productivity. This is a very funny way of going about it.
Two years ago I was on the other side of the river in St. Thomas's Hospital. At that time the doctors thought that I needed a blood transfusion. For three weeks I hovered between here and there. I shall not say where "there" is because I did not know at the time when they were putting blood into my system to keep me going. That is exactly what the Chancellor says he wants to do to manufacturing industry. What would have been said if a surgeon had come into the ward and said, "Take a couple of pints from him"?
That is exactly what the Chancellor is saying, that every manufacturing employer should get 7s. 6d. for a male employee as a blood transfusion, but for the next five months they will not get the transfusion and instead they will be blood doners. The blood will be taken away and they will not get it back, so they will become corpses.
If the Chancellor believes that anyone can think that this is the sort of proposal which can come from a man supposed to be sane, this is a perfect example of why we need more mental hospitals in the country. It reminds me of the story of the chap who had a puncture and there was another chap sitting on the wall around a lunatic asylum——
I beg pardon, a mental hospital.
The man with the car took off the spare wheel, kicked the hub cap, and all the nuts went down a grid. He scratched his head for a moment, then shrugged his shoulders and set off to walk down the road to the nearest garage. The chap on the wall called, "Hey. What are you doing?" The motorist said, "Didn't you see what happened? All the nuts from this wheel went down the grid." The man on the wall said "I'm supposed to be mad, but I'm not stupid. Why not take one nut from each of the other three wheels and take the car to the garage?" That is what we want from the Chancellor, not this high-falutin' nonsense.
Here is a proposal which, if he thinks about it, he will find has basically something to recommend it. The selective part of the tax is wrong. The way in which the Chancellor is doing this by a forced loan and by a forced capital levy is wrong. He is giving to the banks an increased profit of about £20 million a year for the interest which they will get on increased borrowing which will take place throughout industry and commerce. The proposals made by the Chancellor are so full of anomalies that they are laughable. Case after case will be quoted making absolute nonsense of these proposals. Therefore, I hope—I am serious about this—that the Chancellor will contemplate this matter even now and see that the way in which it is being done is wrong.
We have given him an opportunity by this Amendment to bring sanity back into the proposal. By February he could evolve a system whereby he could still get his money, but not this system of collecting £1,100 million in order to have £200 million left at the end of the day. The Amendment would remove all the anomalies of forced loans, capital levies and bonuses to the banks by increased interest on increased loans. It would give the Chancellor time to remove many of the anomalies in the Bill. In the long run, he would realise that he was a very wise Chancellor to do so.
I promised the Chancellor by signal that I would speak for only two minutes. I intend to keep that promise. The whole burden of this debate has been that there should be a delay, for the simple reason that there are a number of anomalies in connection with this tax which must be sorted out and which in any case will be corrected in time. I am certain that the comment by a Government spokesman to the effect that, as time passes, many of the rough injustices of this part of the Bill will be sorted out was true. However, this is no reason why people should suffer in the meanwhile simply because time was not taken for proper preparation of this part of the Bill.
I call in aid just one example of an injustice which will be created by the Clause. I ask the Chancellor to give this special consideration, because it under-scores the points which have been made by right hon. and hon. Members on this side throughout the afternoon. It is the case of the small baker. A baker who has a bakery removed from his retail premises is treated as a manufacturing unit in regard to his employees in that bakery. However, many small bakers who operate throughout the length and breadth of the land with a bakery at the rear of their shop premises or attached to their retail outlet are treated differently for the purposes of the tax.
If you will allow me, Mr. Steele, I will relate it, as I am in fact doing, to the whole point of the Amendment. My point is that this is a real injustice which will be inflicted on this section of the retail trade and that, if the Chancellor had the time at his disposal, he would correct such injustices. This has been the burden of almost every speech made today. Many examples have been quoted to underline this point.
I do not believe for one moment that the Chancellor wishes this tax to act unfairly or unjustly. I have far too much respect for him, both for his integrity and for his desire to design an equitable tax system, to believe that. If he had the time, many of these anomalies would be corrected. Indeed, he has already corrected anomalies in the case of agriculture, horticulture, and other industries. I ask the Chancellor to look very carefully at this Amendment and see whether, in the interests of our economy as a whole, there would not be great wisdom in allowing this postponement so that the necessary alterations, which cannot and will not be made during our debates on the Bill, can be made.
The arguments in this debate have fallen into two categories. One argument has been that this is a bad tax and that by postponing the date when it comes into operation the Chancellor may improve it. Those who have advanced this argument have verged on being out of order. The other argument, which I conceive to have been well within our rules of order, has been to urge the Chancellor that, if he postpones the introduction of the tax, certain injustices will be made less onerous.
I urge the Chancellor to consider the case of fixed-price contracts, where this extra increase in cost cannot be absorbed. At one end of the scale there are the big engineering contracts, where the profits may be squeezed or even abolished. If it is a labour intensive contract and this tax applies, the whole profit would disappear. There is no method by which the parties can rectify this, unless it is provided for in the contract.
At the other end of the scale there is the case of the landladies. These ladies do not work for any great profit. They may not be paying any Income Tax. They may merely be making a bare living. They make arrangements a long time ahead for people to stay in their boarding houses. This extra tax will wipe out the small amount on which they hoped to live or the small amount which they hoped to save at the end of the season so as to exist through the winter.
This injustice would be made less severe if the date of this tax coming into operation were postponed. On the whole, fixed contracts do not run for a very long period, because people are afraid of rising costs. A rising cost brought about by a tax which nobody could foresee is unlikely to be taken care of in a fixed price contract. It is not the same as an increase in Income Tax, Profits Tax, or Corporation Tax. That type of tax takes away something which somebody has made; it reduces the profits. The Selective Employment Tax increases the costs.
I ask the Chancellor to bear this very much in mind. He could deal with it by tabling an Amendment later. However, there seems to be no hope of his doing so. He should consider helping the considerable number of people who depend on the profits they make at least to remain profits and not to be wiped out by the imposition of the Selective Employment Tax.
I rise to ask the Committee if it thinks that it would be reasonable to proceed to a Division now? We have had a debate lasting more than three hours on the Amendment. I readily accept that this is an important Amendment. I hope that we have now reached the time when we can vote on what is the proper date. It has been a little difficult for hon. Members to separate the question of repayment from the question of payment. I admire the ingenuity with which it has been done on some occasions. I will try to steer clear of the difficulty and keep in order, but I recognise that the questions of repayment and payment are clearly related and that a person's attitude to the question of payment will depend upon whether he is to be repaid.
The right hon. Member for Orkney and Shetland (Mr. Grimond) referred to many of his constituents who have been beleagured by a strike for the last six weeks. He asked what their position would be in the matter of bank advances. Perhaps I should say now that it is the general rule, as the right hon. Member for Enfield, West (Mr. Iain Macleod) will know, that the Government give general guidance through the Bank of England to the joint stock banks, and it is for the banks to interpret the detail of that guidance.
Therefore, it would not be proper for me to express a complete view on this, but 1 am sure, from my close contacts with the banks, that there would be every expectation that they would clearly give special consideration to the people of the Orkneys and Shetlands in this matter, in view of their experiences over the last few weeks. The right hon. Gentleman will understand that I cannot take unto myself the responsibility for saying that, except to say that from my general experience I am sure this will be true. I think that it would be the desire of the Committee that it should be so in the case of the approach of the banks.
The hon. and learned Member for Darwen (Mr. Fletcher-Cooke) said that people are being asked to make an interest-free loan to the Government and that it is reasonable that, if they are to get their money back, they should receive interest on it. Manufacturers will receive a premium of varying descriptions. One of the reasons for the premium was to avoid loading manufacturers with any additional costs. It has been one of my strong desires in the course of the Budget to avoid loading manufacturing industry as far as possible. On any normal analysis of a company's liquidity, it will be found if its borrowing requirements are set against the manufacturing premium it will receive that the company will be very much on the right side in this matter.
Therefore, although I would not acknowledge the principle that people should get interest in respect of their loan, nevertheless I think that in the case of those who will get the premium there is no doubt that they will be able to put one calculation against the other and find that they are still in on the result. I hope that this premium will, therefore, cover any element of interest payments.
My hon. Friend the Member for Oldham, West (Mr. Hale) raised the matter of the position of co-operatives, as did other hon. Members. I am sorry that I was not in the Committee when my hon. Friend spoke, but I had to leave for a few minutes. I agree that delay would help them put off the evil day. That would be true for any taxation at any time—the longer we can put it off, the less we have to pay. But I cannot regard that as an overwhelming reason for deferring the introduction of the date.
The hon. Member for Worcestershire, South (Sir G. Nabarro) expressed the view that this was an inflationary and not a disinflationary tax. I thought that his views about the attitude of manufacturers was very interesting. I would not like to say whether he is right or wrong—time will show—but I have always reckoned that there would be an element of higher prices in this and, indeed, I have said so right from the beginning. It would not be completely so because a number of people intend to absorb the price increases as far as they can, and in so far as that yields an extra degree of efficiency, we should all be grateful for it.
As to the basis of calculations which the hon. Member asked me about—he is not here, but I can put it on record now—I am estimating roughly on a gross yield for 1966–67 of about £600 million and repayments of about £300 million or so, which gives the £315 million. I am not giving it precisely here because it is not possible to do so.
The hon. Member for South Angus (Mr. Bruce-Gardyne), I thought, made my case for me on this question of giving guidance to the banks. He said, "The Chancellor told us a fortnight or so ago that the banks were right up against their ceiling. Now the Chancellor has said that they are not up against the ceiling. What is happening?" I can tell him that that is the way bank advances tend to go and that is one reason why it would not be very sensible at this stage to say what release of pressure would be needed on the banks in September.
I suppose it could be said in one way that I have not made up my mind. It would be rather foolish to make up one's mind in advance of the event when the pressure of bank advances and of deposits—I watch the situation very carefully—varies so rapidly. This is the reason why I am saying that we must wait and see how the situation develops, while remembering that it is important for a number of companies to know as soon as they can what the position is.
I have made specific inquiries about this, and I give this assurance to the Committee. I am told that there are some companies which will soon begin to want to know. The pressure is not yet on the banks to know. Therefore, I would think it sensible to defer a final decision on this until the pressure is there and until people really do want to know what the position will be.
The hon. Member went into a great many fantasies about the Bank for International Settlements. I will not pursue his line of thought. I know that frequently he has to produce 1,000 words, which I read carefully and with great profit from week to week, and no doubt it will be pursued there. When one has to do that, one has to spin one's fine-spun webs, but it does not particularly relate to the truth.
The hon. Members for Bodmin (Mr. Bessell) and for Cornwall, North (Mr. Pardoe) both made the same point from the Liberal benches. But deferring the date of introduction, with respect, does not defer the time for consideration. We are considering the matter now and deciding at this moment when these dates of introduction should be.
Without getting out of order, Mr. Steele, I should like to trench on the ground for half a second as to the making of changes. As the hon. Gentleman knows, a Bill which we are shortly about to consider makes provision for changes to be made by order, and that is the moment at which we can consider that matter. I have no doubt that the Minister of Labour and the Treasury will want to consider what changes should be made. But that is the moment when we do that, and not here and now, in relation to the coming into force of the tax, for the reasons which I gave when I followed the right hon. Gentleman at the beginning of the debate.
Does the right hon. Gentleman then take the view that it is open to him with his colleagues to con- sider whether, under the other Bill, one would be able by order to delay the introduction or operation of the tax in part, if not in whole, in relation to the whole of the hotel and catering industry that is profoundly affected by introducing this tax on 5th September rather than at the end of the season?
I would not have thought so for a moment. I would have thought that, once the Clause has been passed, that is the date of the operation of the tax for all industries and all services, and that whatever happens under the other Bill is a matter for providing for repayment and not for delaying the introduction of the tax. That would be my understanding of the situation.
The hon. and learned Member for Northwich (Sir J. Foster) referred to some points about fixed contracts. He may remember that I made a statement about that in winding up another debate last Thursday in relation to the attitude of the Government towards their contractors, and I hoped that local authorities would follow the same line. As to contracts between private individuals, it would not be within my power to intervene in a matter of that sort. But at least we have given the lead.
Does the right hon. Gentleman realise that this is a great injustice where there is a contract between two individuals? One cannot absorb the tax by greater efficiency. One cannot absorb it because it wipes out the profits. Therefore, the person will suffer loss through no fault of his own. Will the right hon. Gentleman say that he recognises it is an injustice?
Yes, because of the special elements of the Selective Employment Tax. It is for that reason that the Government have given the lead they have given in this direction. Normally, one does not expect to make allowances for increased taxation, but in this case we have exceptionally done so in the matter of renegotiating contracts.
I do not think that I can go further on private contracts. I will not speculate further on the matter. I know the right hon. Member for Enfield, West wishes to make some comments now, and I will, therefore, resume my seat, expressing the hope, if I may, that we should now reach a decision on this Amendment.
Before the Chancellor resumes his seat, may I point out that he has not said a word about one immensely important question. Here comes this tax on 5th September which affects the whole of the tourist industry. Why cannot this be put back a month or two? All of these contracts have been fixed price contracts throughout. We have this picture today in which nothing is done and in which everybody who has paid for his holidays this summer will expect to get them at the same rate. We have this picture in which they do not know where they are and industry itself does not know where it is. The Chancellor has not dealt with this problem at all.
I fear that I have not. I did not hear the hon. Gentleman's speech. I really would not find it possible, with regret, to defer the operation of the tax for the hotel industry. It is based upon the National Insurance stamp. This is the basis of the administration. Because it is based like that, nobody in the Ministry of National Insurance can say who is putting the stamp on. So it would mean deferring the date of the introduction of the tax for all sectors of industry—[Interruption.] I know that that is the view of the Opposition; they say, "Why not defer it?" For the reasons that I gave when I made my initial speech, I cannot entertain that argument.
In two or three minutes, I shall advise my right hon. and hon. Friends to divide on this Amendment. The Chancellor's soothing manner hides the fact that he has been utterly inflexible in his attitude to the case which we have put. It has been powerfully supported by my hon. Friends and from the Liberal benches. The Liberal and Conservative Parties have any amount of things to differ about, but we can say that, although there may be certain differences on some Amendments, in our attitude towards the Selective Employment Tax the Liberal and Conservative Parties have been taking, and, I presume, will continue to take, much the same mind.
The Chancellor knows, also—I do not want to comment, because we are more interested to see what they do rather than what they say—what the Co-operative Members of the Committee feel about this Amendment. I think that no single body in this country would gain more from the Amendment than would the various co-operative societies in all our constituencies. The time for brave words is over. The time for action has come. If we are to believe what they have said—it is up to them—the time for action from Co-operative Members has come.
I moved the Amendment on two grounds. First, I said—everyone agrees that this is so—that we need more time. This is why I suggested that the two Bills should come more closely together in time so that many of the absurdities which have been highlighted in previous debates and today by my hon. Friends and by Liberal Members could at least to some extent be put right. The Chancellor yielded nothing in this. Nor did he attempt to explain why either it could not be started later than 5th September, or why refunds could not begin earlier than an unknown date in February.
On the second point, the question of liquidity generally and bank advances, we have over and over again impressed on the Chancellor the necessity of knowing at the earliest possible date where one is. I think that he agrees with this in his heart of hearts. I cannot understand why he is taking so long to make up his mind. It is essential to let industry know where it stands in relation to this tax. Every company and countless individual employers have calculations to make which depend on how their banks will treat the approaches which they will have to make to them. It is almost frivolous of the Chancellor to let us approach July in this matter without having given any indication whatever.
On these two grounds, which have been reinforced by a considerable number of speeches to which we have had no response whatever, we must divide the Committee on this most important Amendment.
It was not my intention to speak in this debate. [HON. MEMBERS: "Oh."] What I have to say I shall say in a few sentences. The Co-operative Party and the Co-operative Union are not playing politics in this matter. It is a matter concerning our own consciences as to how we respond to the challenge made and the difficulties with which the Co-operative movement is faced by this tax.
The Chancellor knows, and the Government know, that the Co-operative movement and the Co-operative Members in the House regard aspects of this tax unfavourably. He knows, and the Government know, that the situation in which the Co-operative movement has been placed by the tax is exceedingly difficult. They know also that we have no intention of being used by the Opposition in order to play politics. [HON. MEMBERS: "Oh."] I have to face this mindless barracking, but I shall say what I have to say.
We have no intention of being used by the Opposition, who, during all the years when they were in Government, were the implacable enemy of the "co-ops" and who did nothing but disservice to the movement until it suited their political purposes.
On the other hand, it is right that not only the Committee but the country should know exactly what it is the "co-ops" intend in this matter. We have made representations to the Government, and we have impressed upon the Government our opposition to aspects of this tax in its incidence not only upon the Co-operative movement but, for we had not asked for specific or special consideration, upon the distributive movement generally. We shall continue to press the Government for consideration of the matters which seem to us to be proper. In these circumstances, it is our intention not to assist the Opposition in their politics.
|Division No. 59.]||AYES||[7.36 p.m.|
|Archer, Peter||Eadie, Alex||Lyon, Alexander W. (York)|
|Armstrong, Ernest||Faulds, Andrew||Lyons, Edward (Bradford, E.)|
|Atkinson, Norman (Tottenham)||Fernyhough, E.||McBride, Neil|
|Bacon, Rt Hn. Alice||Fitt, Gerard (Belfast, W.)||McCann, John|
|Bagier, Gordon A. T.||Foley, Maurice||MacDermot, Niall|
|Barnes, Michael||Ford, Ben||Macdonald, A. H.|
|Barnett, Joel||Fraser, John (Norwood)||McGuire, Michael|
|Benn, Rt. Hn. Anthony Wedgwood||Gardner, A. J.||Mackenzie, Gregor (Rutherglen)|
|Bennett, James (G'gow, Bridgeton)||Garrett, W. E.||Mackie, John|
|Binns, John||Gordon Walker, Rt. Hn. P. C.||Mackintosh, John P.|
|Bishop, E. S.||Gourlay, Harry||Maclennan, Robert|
|Blackburn, F.||Gregory, Arnold||McNamara, J. Kevin|
|Boardman, H.||Grey, Charles (Durham)||Manuel, Archie|
|Booth, Albert||Griffiths, David (Rother Valley)||Mapp, Charles|
|Bowden, Rt. Hn. Herbert||Griffiths, Will (Exchange)||Mason, Roy|
|Braddock, Mrs. E. M.||Hale, Leslie (Oldham, W.)||Mendelson, J. J.|
|Braine, Bernard||Hamilton, James (Bothwell)||Mikardo, Ian|
|Bray, Dr. Jeremy||Hamilton, William (Fife, W.)||Miller, Dr. M. S.|
|Brooks, Edwin||Hannan, William||Molloy, William|
|Broughton, Dr. A. D. D.||Hattersley, Roy||Moonman, Erie|
|Brown, Rt Hn. George (Belper)||Hazell, Bert||Morgan, Elystan (Cardiganshire)|
|Brown, Hugh D. (G'gow, Provan)||Henig, Stanley||Morris, Charles R. (Openshaw)|
|Buchan, Norman||Harbison, Rt. Hn. Margaret||Moyle, Roland|
|Buchanan, Richard (G'gow, Sp'burn)||Hooley, Frank||Mulley, Rt. Hn. Frederick|
|Butler, Herbert (Hackney, C.)||Horner, John||Noel-Baker,Rt.Hn.Philip(Derby,S.)|
|Callaghan Rt. Hn. James||Houghton, Rt. Hn. Douglas||Oakes, Gordon|
|Castle, Rt. Hn. Barbara||Howarth, Harry (Wellingborough)||Ogden, Eric|
|Coe, Denis||Hoy, James||O'Malley, Brian|
|Coleman, Donald||Hughes, Rt. Hn. Cledwyn (Anglesey)||Orme, Stanley|
|Conian, Bernard||Hughes, Emrys (Ayrshire, S.)||Owen, Dr. David (Plymouth, S'tn)|
|Corbet, Mrs. Freda||Hunter, Adam||Paget, R. T.|
|Craddock, George (Bradford, S.)||Hynd, John||Pannell, Rt. Hn. Charles|
|Cronin, John||Jackson, Colin (B'h'se & Spenb'gh)||Parker, John (Dagenham)|
|Cullen, Mrs. Alice||Jay, Rt. Hn. Douglas||Pearson, Arthur (Pontypridd)|
|Dalyell, Tarn||Jenkins, Hugh (Putney)||Pentland, Norman|
|Davidson, Arthur (Accrington)||Jones, Dan (Burnley)||Perry, Ernest G. (Battersea, S.)|
|Davies, Dr Ernest (Stretford)||Jones,Rt.Hn.SirElwyn(W.Ham,S.)||Perry, George H. (Nottingham, S.)|
|Davies, G. Elfed (Rhondda, E.)||Jones, J. Idwal (Wrexham)||Prentise, Rt. Hn. R. E.|
|Davies, Harold (Leek)||Judd, Frank||Price, Christopher (Perry Barr)|
|Davies, Ifor (Gower)||Kelley, Richard||Price, Thomas (Westhoughton)|
|Dell, Edmund||Kerr, Dr. David (W'worth, Central)||Randall, Harry|
|Dempsey, James||Lawson, George||Redhead, Edward|
|Dewar, Donald||Lee, Rt. Hn. Frederick (Newton)||Roberts, Albert (Normanton)|
|Diamond, Rt. Hn. John||Lever, L. M. (Ardwick)||Roberts, Gwilym (Bedfordshire, S.)|
|Dickens, James||Lewis, Arthur (West Ham, N.)||Robertson, John (Paisley)|
|Doig, Peter||Lewis, Ron (Carlisle)||Robinson, Rt.Hn.Kenneth (St.P'c'as)|
|Dunnett, Jack||Lomas, Kenneth||Robinson, W. O. J. (Walth'stow, E.)|
|Dunwoody, Mrs. Gwyneth (Exeter)||Loughtin, Charles||Roebuck, Roy|
|Dunwoody, Dr. John (F'th & C'b'e)||Luard, Evan||Rogers, George|
|Rose, Paul||Summerskill, Hn. Dr. Shirley||Whitlock, William|
|Rowland, Christopher (Meriden)||Swain, Thomas||Williams, Alan Lee (Hornchurch)|
|Ryan, John||Symonds, J. B.||Williams, Clifford (Abertillery)|
|Shaw, Arnold (Ilford, S.)||Thomas, lorwerth (Rhondda, W.)||Wilson, Rt. Hn. Harold (Huyton)|
|Sheldon, Robert||Tinn, James||Wilson, William (Coventry, S.)|
|Shore, Peter (Stepney)||Urwin, T. W.||Winnick, David|
|Short,Rt.Hn.Edward(N'c'tle-u-Tyne)||Walden, Brian (All Saints)||Winterbottom, R. E.|
|Short, Mrs. Renée (W'hampton,N.E.)||Walker, Harold (Doncaster)||Woof, Robert|
|Silkin, John (Deptford)||Watkins, David (Consett)||Zilliacus, K.|
|Silkin, S. C. (Dulwich)||Wellbeloved, James|
|Silverman, Julius (Aston)||Wells, William (Walsall, N.)||TELLERS FOR THE AYES:|
|Small, William||Whitaker, Ben||Mr. Joseph Harper and|
|Spriggs, Leslie||White, Mrs. Eirene||Mr. Walter Harrison.|
|Allason, James (Hemel Hempstead)||Gurden, Harold||Murton, Oscar|
|Astor, John||Hamilton, Marquess of (Fermanagh)||Nabarro, Sir Gerald|
|Baker, W. H. K.||Harris, Frederic (Croydon, N.W.)||Neave, Airey|
|Balniel, Lord||Harrison, Brian (Maldon)||Nott, John|
|Batsford, Brian||Harvey, Sir Arthur Vere||Onslow, Cranley|
|Bell, Ronald||Hastings, Stephen||Osborne, Sir Cyril (Louth)|
|Bessell, Peter||Higgins, Terence L.||Page, Graham (Crosby)|
|Biggs-Davison, John||Hirst, Geoffrey||Page, John (Harrow, W.)|
|Birch, Rt. Hn. Nigel||Hogg, Rt. Hn. Quintin||Pardoe, John|
|Boyd-Carpenter, Rt. Hn. John||Holland, Philip||Peel, John|
|Boyle, Rt. Hn. Sir Edward||Hooson, Emlyn||Peyton, John|
|Braine, Bernard||Hordern, Peter||Pink, R. Bonner|
|Brown, Sir Edward (Bath)||Howell, David (Guildford)||Pounder, Rafton|
|Bruce-Gardyne, J.||Hunt, John||Powell, Rt. Hn. J. Enoch|
|Burden, F. A.||Iremonger, T. L.||Price, David (Eastleigh)|
|Campbell, Gordon||Jenkin, Patrick (Woodford)||Pym, Francis|
|Carlisle, Mark||Jennings, J. C. (Burton)||Ramsden, Rt. Hn. James|
|Channon, H. P. G.||Kimball, Marcus||Rees-Davies, W. R.|
|Chichester-Clark, R.||King, Evelyn (Dorset, S.)||Ridley, Hn. Nicholas|
|Clark, Henry||Kirk, Peter||Ridsdale, Julian|
|Clegg, Walter||Knight, Mrs. Jill||Roots, William|
|Cooke, Robert||Lambton, Viscount||St. John-Stevas, Norman|
|Costain, A. P.||Lancaster, Col. C. G.||Sharples, Richard|
|Craddock, Sir Beresford (Spelthorne)||Langford-Holt, Sir John||Smith, John|
|Cunningham, Sir Knox||Longden, Gilbert||Steel, David (Roxburgh)|
|Dance, James||Loveys, W. H.||Tapsell, Peter|
|Davidson,James(Aberdeenshire, W.)||Lubbock, Eric||Taylor, Sir Charles (Eastbourne)|
|Deedes, Rt. Hn. W. F. (Ashford)||McAdden, Sir Stephen||Temple, John M.|
|Dodds-Parker, Douglas||MacArthur, Ian||Thatcher, Mrs. Margaret|
|Eden, Sir John||Mackenzie, Alasdair(Ross&Cromarty)||Turton, Rt. Hn. R. H.|
|Elliot, Capt. Walter (Carshalton)||Maclean, Sir Fitzroy||Wainwright, Richard (Colne Valley)|
|Elliott, R.W.(N'c'tle-upon-Tyne,N.)||Macleod, Rt, Hn. Iain||Walker, Peter (Worcester)|
|Fisher, Nigel||McMaster, Stanley||Walker-Smith, Rt. Hn. Sir Derek|
|Fortescue, Tim||Maddan, Martin||Ward, Dame Irene|
|Gibson-Watt, David||Mathew, Robert||Weatherill, Bernard|
|Glover, Sir Douglas||Maude, Angus||Webster, David|
|Goodhart, Philip||Mawby, Ray||Whitelaw, William|
|Goodhew, Victor||Maxwell-Hyslop, R. J.||Wills, Sir Gerald (Bridgwater)|
|Cower, Raymond||Mills, Peter (Torrington)||Winstanley, Dr. M. P.|
|Grant, Anthony||Mills, Stratton (Belfast, N.)||Younger, Hn. George|
|Grieve, Percy||Miscampbell, Norman||TELLERS FOR THE NOES:|
|Griffiths, Eldon (Bury St. Edmunds)||Mitchell, David (Basingstoke)||Mr. Peter Blaker and|
|Grimond, Rt. Hn. J.||More, Jasper||Mr. Reginald Eyre.|
|Munro-Lucas-Tooth, Sir Hugh|
I think that it will be convenient for the Committee if we take at the same time Amendment No. 19, in line 20, leave out "twenty-five shillings" and insert "seven-pence", Amendment No. 22, in line 23, leave out "twelve shillings and sixpence" and insert "fourpence", Amendment No. 25, in line 24, leave out "twelve shillings and sixpence" and insert "fourpence", and Amendment No. 28, in line 26, leave out "eight shillings" and insert "three-pence".
It is fortunate indeed, Mr. Steele, that you have decided in your wisdom that these Amendments should be taken together, because they are all part of a whole. Amendment No. 17 seeks to convert the tax from one levied in respect of each week of employment to one levied in respect of each hour of employment. The other Amendments are consequential. If Amendment No. 17 is carried and the tax is converted as I have described, one would hope that the other Amendments would be carried, because they are an essential part of it, but if Amendment No. 17 were not carried, it would be wrong for the others to follow.
I hope that this is clear. I notice that one or two hon. Gentlemen and an hon. Lady opposite have added their names to one or two of the later Amendments but not to Amendment No. 17. The consequence of accepting those Amendments but not No. 17 would be strange, because it would reduce the tax to 7d. a week instead of 7d. an hour, and it is far from my purpose to reduce it to such an absurdity. If the first Amendment ware not carried, the later Amendments would be purely of a wrecking character, and it is conceivable that this is not entirely unknown to the hon. Lady and hon. Gentlemen opposite who have put their names to the later Amendments. I assure the Committee and my right hon. Friends that that is far from my purpose. Indeed, I supported the Government on the Amendment which has just been carried because I am not opposed to the tax in principle. What I am opposed to is the manner in which the tax is being levied. My Amendment is tabled to improve the tax and make it more sensitive.
In what I shall say briefly in support of the Amendment, I want to say precisely why I believe that my proposal would result in a substantial improvement in the tax, and why I believe that my hon. Friends, after they have listened to my arguments and the debate, will decide to accept the Amendment and change the nature of the tax.
The object of the Amendments is not in any way to reduce the revenue that my right hon. Friend hopes to raise. Indeed, in certain circumstances, a firm employing a number of people for more than 40 hours a week each would pay a larger and not a smaller amount of tax. This would, incidentally, discourage overtime, because the rough division I have made, to the nearest penny, would provide that the tax would become payable on an hourly payment relating to a 40-hour week. Thus, in respect of any employee working more than 40 hours, the employer would pay a larger sum whereas in respect of an employee working less than 40 hours he would pay a smaller sum.
Let us consider the advantages of this degree of flexibility. The problem of the part-time worker would be solved because his employer would pay in respect of the number of hours in which he was engaged. I have not attempted to change the fundamental nature of the tax. I have preserved the same relationship through the hourly sums that the Government have created in their weekly sums. In Amendment No. 19 the sum of 7d., which is the hourly pro rata rate, is introduced. In Amendment No. 22 the pro rata sum of 4d. is proposed in place of the 12s. 6d. in the Clause and the same applies to Amendment No. 25. In Amendment No. 28, the sum of 3d.—the nearest we could get—is substituted for the sum of 8s. These substitutions are as near pro rata as one can get in substituting hourly for weekly payments. They would not change the amount paid in respect of each week of employment. The employer engaging a man or a woman for a 40-hour week would still pay precisely the same under the hourly rate as under the weekly rate of 25s. or 12s. 6d.
Although we are not attempting to alter the amount of revenue, the Amendments would do so incidentally because the amount paid by an employer would be on the basis of hours instead of the week. The advantage as far as part-time employees are concerned is surely immediately apparent. The great objection to the tax in respect of part-time employees has been the amount to be paid. However, it has been claimed that most of them are women and that in their case only half the tax will be payable. That does not deal with the many male part-time workers. A part-time worker is very often the man who badly needs employment. He is often a man who is not in full health or who is getting on in years and who, for one reason or another, cannot do full-time work.
Under our proposals he would continue to be employed on an hourly basis whereas his services might well be dispensed with if the tax is levied on a weekly basis. The same applies, of course, to women as part-time employees. This would make the tax more flexible and reduce many objections to it.
One might ask why the Government introduced this tax in its present form in the first place and I will anticipate one or two points my right hon. Friend the Chief Secretary may make in reply. It is conceivable—and hon. Members opposite probably think this—that the Government did not think of doing it in the way I suggest. But that is probably not the case. They may have thought of it but dismissed it, and, as I say, I want to anticipate their reasons so that I can spike my right hon. Friend's guns before he turns them on us.
Our proposal would be flexible and have certain advantages, but I think that my right hon. Friend will say that the problem of collection could be extremely difficult. I wonder whether this is really so. Indeed, I can see some advantages. The method of collection is to be through the National Insurance stamp. Perhaps this is because the Ministry of Labour felt able to shoulder the burden whereas the Treasury was a little fussy. But if it is no more than an administrative convenience of that kind it is a pity that the decision was made on that basis.
Another point which might have been made is that the collection on the stamp basis is rather complex. Certainly, collection on the basis of a weekly payment to the Government by each employer would be much simpler. Under my system, all that the employer would have to do at the end of the week would be to write out a cheque covering the.total number of hours worked in his establishment and send it to the Chancellor. If the Chancellor prefers it done through the Ministry of Labour, the employer could send the cheque to the Minister of Labour who could then send on a cheque to the Chancellor or make a book transaction, as we know will be done on the basis proposed by the Government. All we are doing here is to remove a certain amount of purchasing power indirectly, and exactly how we set about the process does not really matter very much.
One of the concerns which moved me to look into this matter—others were drawn to my attention by constituents—is the problem created by theatrical employment in which there is a great deal of part-time work. People work in the evenings in order to keep theatres open and the amount of work and the size of their pay are really quite small.
I am not talking so much of actors as of people who work backstage or in the box office or at the front of the theatre. Putting them on an hourly basis for the purpose of this tax would make it possible to continue their employment and, indeed, for some theatres to remain open which would find it difficult to do so if the tax were levied in full on the basis of a weekly payment of 25s. for a man and 12s. 6d. for a woman. It was this aspect which first drew my attention to the benefit of an hourly payment, but there are other reasons.
Now I want to return to the question of collection. I see no reason why the employer should not pay in the way I have suggested. It would save a great deal of work in each establishment. Imagine the saving in a factory. Instead of having to stick on a stamp for every employee at the same time as he puts on the National Insurance stamp, which would be a great deal of extra work, under my method the employer would be able to write a cheque at the end of the week, making one simple operation in the accounting department.
My right hon. Friend might ask how we could make sure that the tax was paid. I am not sure that that objection is valid. With the National Insurance stamp, the individual needs to be identified so that he can know what his own personal record is, but the individual need not be identified for the purposes of the collection of this tax. If I am right in saying that there is no necessity to preserve the individual contribution basis for the tax, that argument is destroyed. There is not the same case as there is with the National Insurance stamp. If the tax is to be collected by stamp, that is merely because that happens to be a convenient way of collecting it. It may be convenient for the Government, but I doubt whether it will be convenient for employers.
The other possibility is the danger of people not paying the tax, of employers fiddling the amount by returning smaller numbers of employees. It might be said that the Revenue might lose a certain amount if we were to rely on my suggested method, and if it was not to do so, that might require the establishment of some sort of inspectorate. I am not sure how much there is in that argument. If it is made and if the Government say that they are wedded to the stamp system, there is no reason why they should not use the stamp system even on the basis of an hourly tax. There is no need to have only stamps representing a 40-hour week. There could be a 40-hour stamp and an eight-hour stamp and some one-hour stamps. The card could then be made out quite simply for the number of hours worked by the employee concerned. If the Government are wedded to the stamp system, they could introduce this hourly basis, with all its advantages, and still stick to the stamp method of collection.
For all those reasons, I feel it desirable to urge this Amendment on my right hon. Friends. It would have the effect of making what is basically a sound tax more acceptable. That is the object of the Amendment, not, as with some other Amendments, to bring the tax into disrepute. That is no part of my feeling in the matter. I believe that the tax deserves to have a fair start. If it were to be imposed on the hourly basis which I suggest, it would become much more popular, which would give the tax a much fairer start than it would if my right hon. Friends decided to stick to the weekly method of calculation with all the anomalies which that of necessity would involve.
Though I cannot agree with everything said by the hon. Member for Putney (Mr. Hugh Jenkins), I cannot deny myself the honour of following him into the Lobby against the Government on this Amendment. The reason is that he has touched on one of the most dangerous points of the tax economically and from the point of view of humanity. It is the question of what will happen to part-time workers.
The hon. Gentleman was perfectly right to say that not all part-time workers are women. No doubt a great body of them are married women who can spare a few odd hours on some days of the week and who are very largely responsible for keeping the hotel industry and the retail trade going. But there are also those who are handicapped, ill, disabled or old, as the hon. Gentleman said, and not capable of working full hours. So far, the Chancellor has said that he cannot do anything about them, but unless he can, not only will costs go up very much, but a great part of the retail and hotel in- dustries will be badly damaged, because either their costs will go up astronomically, or they will not be able to employ these people and their business will go downhill.
I cannot say precisely whether the hon. Gentleman's scheme will work. When the Chief Secretary replies, he will probably think of some more ingenious reasons than the hon. Gentleman himself put against the Amendment. Of course it is not the Treasury which collects the tax but the Inland Revenue, and the Inland Revenue is absolutely delighted to shuffle it off to the Ministry of Labour. It knows that the Ministry of Labour is capable of doing it, while the Inland Revenue is not and that is why it has come about in this extraordinary way.
I support the hon. Gentleman because it must be wrong economically to bring in a measure which discriminates against part-time workers when, as has so often been said, one of the main efforts of the Ministry of Labour over the years has been to get more part-time workers, more old and disabled workers, into employment. The problem could have been solved, but one needs to spend the best part of the year working on a tax like this and no work has been done on this. That is why we have these endless anomalies. If it is any consolation to the hon. Gentleman, I shall vote for the Amendment.
Like the right hon. Member for Flint, West (Mr. Birch), I support the Amendment and on very similar grounds, although I do not want to deploy most of the arguments about part-timers. This is a consideration which runs right through the Clause, but we shall have an opportunity to discuss it on a later occasion and I do not wish to develop the complete case until the time comes.
There is no doubt that my hon. Friend the Member for Putney (Mr. Hugh Jenkins) has found an ingenious way of revising the tax which both those who support and those who oppose it would like to be more selective. One of the difficulties in any form of taxation is that there are borderline cases and that just over the boundary there is always a difficult case. That must result from the rough and ready way in which our taxation measures are often drawn.
My hon. Friend's ingenious way of using stamps of various lands might result in something similar to the trading stamps which one gets when one purchases petrol, so that, instead of having stamp cards, people will have to have stamp books. I understand that even for the present range of part-time workers there are about 30 different varieties of stamps.
This tax is to collected by an attachment to the insurance stamp. If the Chief Secretary can find a practical way of working what my hon. Friend proposes, the person working nine or 10 hours a week—the person working eight hours a week is now excepted—would be more equitably treated. For a person working nine hours a week, usually a female worker, the incidence of the tax at 12s. 6d. a week will represent an increase of 1s. 6d. an hour. This is a heavy impost if one is employing many people doing nine, 10 or 11 hours a week. The whole point of the Amendment is that it just brings in this very small number of those just on the borderline, doing nine, 10, 11, or 12 hours a week. For that reason, 1 would support the Amendment.
Let us assume for the purposes of this debate that it would be a good thing if we could allow the employment of part-time people, the disabled and elderly. Let us assume that the Financial Secretary agrees with that. I foresee that the debate will turn upon whether it is administratively possible to do this. As a result, suggestions should be made, from all sides of the Chamber, in order to enable the Chancellor to bring this about. I cannot believe that the Government Front Bench will say, "No, our object is to prevent the employment of part-time, disabled or elderly people", or, "We do not care if they are not employed".
Starting on this basis I would suggest a slight amendment to the way in which the hon. Gentleman the Member for Putney (Mr. Hugh Jenkins) envisages his scheme would work. I would tie it in with the calculations made on P.A.Y.E. Take the case of a factory employee. One knows what his hourly wage is because the hours of work are 42 or 44 hours a week or something of that sort. One knows his basic wage and it is quite easy to divide that by the number of hours worked and reach his hourly wage. In the pay slips made at the end of the week one has to add his entitlement to overtime and one has to set down the number of overtime hours worked.
I suggest that instead of relating it to a fixed 40-hour week, the accounts department of the factory, which would have to do the same sum in any event for overtime purposes, could perform the task. There could be some stamps of the main values and where there is a stamp of unusual value, for a person employed for two hours a week or four hours or seven, the stamp should have a tick put upon it by the factory showing that a separate cheque has been sent at the same time.
There could be said to be the possibility of cheating, but the payee's slip must agree with the amount sent in and one has only to look at the payee's slip to see the hourly rate which would be paid. This would help the Ministry of Labour in checking. One would find that the 40 hours a week multiplied by 7d. was a little more expensive in certain cases. But the right hon. Gentleman's calculation is not quite right, as 40 times seven is a little less than 25s.—actually 23s. 4d. I do not believe that the Government Front Bench will say that they are glad that part-time, disabled and elderly people cannot be employed or that they do not care whether they are employed. They will have to say, "If only we could do it, we wish someone would show us how." The hon. Gentleman for Putney has shown us.
I support the Amendment in principle because it will help to iron out some of the anomalies affecting the part-time worker. I am aware that in the sort of business which I practised before I came here it was possible to employ someone who comes to work for eight or nine hours a week, to make the tea in place of the secretary. By doing that one pays a fairly small but remunerative wage and is able to save the time of skilled staff. There are chemists in my constituency who employ people part-time in the evenings to dispense prescriptions and by doing this they are able to save the time of full-time staff.
It is a pity—and this is why I support my hon. Friend's Amendment in principle—that no provision has been made for part-time workers. One would have thought that the deployment of labour would have required the encouragement of part-time workers, rather than having everyone pay the stamp at the same rate. I suspect that the reason for not being able to exempt these people is because of the limitation of the type of insurance card. I am convinced that if men and women had the same colour insurance card they would both be paying the same amount of Selective Employment Tax.
It is only because there is a convenient distinction between one kind of card and another that one can draw the distinction between the various amounts to be paid. I know that the arguments against having some special provision for the part-time worker is that in some large industries the thing tends to iron itself out. This applies when there are full and part-time workers, but it is not true of some firms employing almost exclusively part-time workers. Thus one has the anomalous situation, if one takes the cleaning industry employing the Mrs. Mopps, about whom we have heard, in which, if the industry is a service industry, employing mainly part-time people, when the tax is very much a poll tax on labour costs, the industry will be paying a fairly high rate of tax in proportion to the amount of wages which the cleaning women receive.
On the other hand if a large factory in a manufacturing group employs its own cleaning labour, it will receive a premium and, by extending some concession to the part-time worker, it is not going to cost anything—because some money will be lost by manufacturing industry in that it will lose some premium for its part-time workers and something may go to the service industries because it will not have to pay quite so much.
I said that I was in favour of the Amendment in principle, but I am against it in practice because it would be unworkable. Let us assume that hon. Members were classed as employed persons liable to pay the tax. It would be an extremely difficult thing for the Paymaster-General to be running round this House in the early hours of the morning working out how many hours each Member had worked. I mention hon. Members as an illustration of the difficulty in working out the number of hours everyone has worked in order to calculate the rates. I know that my hon. Friend the Member for Putney (Mr. Hugh Jenkins) is interested in the theatre. It might provide some incentive to various playwrights to write plays of an hour in length so as to save the amount of tax payable upon those working in theatres.
There is a very real practical objection to working to an hourly basis. I would like to suggest a method capable of being able to deal with a part-time worker, which, at the same time, does not create the enormous administrative difficulties which would arise in the case of the Amendment proposed by the hon. Member for Putney. It is proposed by the Treasury that the tax should be collected by an extra payment of the National Insurance stamp. I cannot see why it has not been possible to use the graduated pension system. When sending graduated pension contributions one would add on the employer's side 25s. per week for a male and 12s. 6d. for a female.
It would be just as easy to calculate the tax in this way, but one could make exemptions and say that where someone earned less than £4 or £5 a week the amount to be paid on the employer's side of the graduated contribution section of the P.A.Y.E. card would only be one shilling a week. Operated in that fashion one would be able to cope with the part-time workers, with people working 16 or 20 hours a week without creating administrative difficulties suggested by my hon. Friend's Amendment. It would get round the problem in a perfectly simple fashion and I hope that this suggestion might commend itself to my right hon. Friend and lead to a middle way between the points of view expressed.
I support what the hon. Member for Putney (Mr. Hugh Jenkins) has said. I do not believe that his proposals are such that the Treasury could accept them in their entirety, but they are another argument why the Government should have accepted the previous Amendment which proposed that this tax should be postponed until February. I am sure that the Government have not given nearly enough thought to the problem of part-time workers. I was impressed by what the hon. Member for Norwood (Mr. John Fraser) said. I realise that there are many difficulties about the proposals of the hon. Member for Putney, but the Government should do something, not in the distant future, but now, about the problem of part-time workers.
The hon. Member for Norwood mentioned the question of firms which employed Mrs. Mopps. Under the Government's proposal, a firm in Liverpool employing a lot of Mrs. Mopps on contract in cleaning the Ford factory at Halewood will form them up on parade outside the factory and have to pay 12s. 6d. for each one, although the ladies who work in that factory probably do not work more than 15 or 20 hours a week. The employer then says, "Ladies, I am very sorry, but owing to the Government's stupidity I am now going to give you the sack."
The ladies will then walk through the doors of the Ford factory where they will be signed on by the Ford company, which will get a premium of 3s. 9d. for each of them. They use the same mops, the same buckets, the same taps; they clean the same floors and the same windows. They do exactly the same job they have been doing for years. The difference to the State is this. If they are employed by an outside contractor, the State gets 12s. 6d. a week for each. If they are employed by Ford's, the State pays 16s. 3d. to Ford's for each, a difference of 28s. 9d.
The Government must realise that any system which produces that sort of anomaly is crazy. It is not the economics of Socialism; it is the economics of Bedlam.
Take the retail distribution trade. An enormous number of shops employ women part-time on Friday afternoons, which is the busy time of the week, and Saturday. They may do 12 hours a week, for which the firm has to pay an on-cost of 12s. 6d. on their pay. If the woman is getting a little old, or has become less efficient, she gets the sack. Yet the Ministry of Labour has been working for years to try to get exactly that sort of person into employment. It cannot be right that the State should ask the firm to pay the same amount in tax in respect of a girl or woman working 12 hours a week as it pays in respect of full-time staff working 40 hours or more a week.
The hon. Member for Putney probably accepts that the Government would not accept his Amendment in its entirety. What he is disturbed about is the anomalies. He wants to bring more common sense and a more practical approach to the Bill. The hon. Member for Norwood wants to do exactly the same thing. We must ask the Government to consider this problem again. Although the tax will operate from September, it is not too late for the Government to say, "We have been impressed by the arguments about part-time workers. We have heard what our hon. Friends the Members for Putney and Norwood have said. We realise that there is a problem and we will introduce an Amendment on Report which, even if it does not go the whole way, will go a long way in removing anxiety."
This Amendment, oddly enough, is an all-party Amendment. It will not bring down the Government if it is accepted. Since the Government's proposals on part-time workers are complete and utter nonsense, I hope that the hon. Member will press his Amendment to a Division. I will support him, not in trying to bring down the Government, but in trying to introduce a little common sense into this tax in dealing with the segment of the population with which the hon. Member is concerned.
Timeo Danaos et dona ferentes. When hon. Members opposite say that they will follow us into the Lobby on the principle of a Clause and not because of their objection to the principle of this tax, then I for one am very wary. I support my hon. Friend the Member for Putney (Mr. Hugh Jenkins), first, because I always support him; secondly, because I think his arguments are irrefutable; and, thirdly, because I notice that my name is on the Amendment Paper along with his.
There are those of us who approve of this tax because it is a correct measure, a Socialist measure. Perhaps the hon. Member for Ormskirk (Sir D. Glover) does not agree, but basically it is a Socialist measure. However, it suffers from the gross defect of a lack of selectivity because it is far too blunt. My hon. Friend's Amendment is an attempt to refine the instrument, to make it more selective. In this year and age, we cannot leave merely a division between service and manufacturing industries. We must look at things a little more closely. The trouble with the tax, and indeed with all taxation, is that it is considered in the light of the efficiency of the country and of raising revenue and not also in terms of the graces of life.
The arts, theatre and music, will be affected by the tax. It is true, as my hon. Friend the Member for Putney said, that with the full-time actor working 40 hours a week, or whatever he does, there will not be much variation. But we think of all the services which are necessary not only to make the theatre function, but to make it function in a comfortable and graceful fashion. Many of the services are given on a part-time basis. The same is true in the field of music. This tax will have the tendency of reducing the number of part-time musicians who help to add grace—and fulfil a necessity—to our lives.
An hon. Member opposite referred to the mentally handicapped. But there is another serious issue with me because, as hon. Members will know, the Erskine Hospital for War Disabled is in my constituency. One of the tasks which frequently faces me at my "surgeries" is to see how one can bring some aim and purpose into the lives of people disabled in various ways, and one of them is to try to get them part-time jobs. Anything that we can do in this direction through taxation or any other method will be useful. For this reason, too, I support the Amendment.
Along with this is the question of the retired. Again, we should be giving more and more attention to the "graces" of life. This has nothing to do with efficiency, but concerns, perhaps, the nature and quality of the life we lead. One of our jobs with so many people is to fit them into part-time work, where they can be useful and where they feel that they are useful, so that they can spend their days with some kind of dignity partly because they feel that they are being useful. My hon. Friend's proposal would help in this way.
I am too long in the tooth to think that a discussion based upon the graces and the quality of life brings much conviction to bear upon the Treasury. The argument of efficiency is the rock on which we always falter. My hon. Friend the Member for Putney pointed out, however, that far from losing revenue the Treasury would, by his proposal, gain productive revenue in the sense not only that overtime payment would make a bigger contribution to the revenue but because efficiency would also begin to be sharpened.
For far too long, many of our workers have been looking at their wages based upon their assessment of their basic wage plus overtime. It is conceivable that the low standard of wages in this country, together with the question of overtime, has been the crux in the seamen's struggle. I certainly want overtime—we are trying to boost exports—but I want it to be efficient and not inefficient overtime. I believe that the workers want the same. Therefore, my hon. Friend's proposal would tend to cut down the unproductive and inefficient overtime by making employers look at it twice.
I did not imagine when I began to speak that I have so many arguments in favour of this Amendment to put forward. We seem now, in this Amendment to be moving towards the much fairer method of a payroll tax plus an added selectivity by bringing in the basic division between services and manufacturing industry. I ask my right hon. and hon. Friends at the Treasury to go down in history by adding yet another grace and bringing in the extra refinement proposed by my hon. Friend.
I agree that the form of the tax is deliberately simple. We are using an existing classification which bears the stamp of the Ministry of Labour. It should not, however, be beyond the ingenuity of my right hon. Friend the First Secretary and the Chancellor to devise a scheme on the lines put forward by my hon. Friend the Member for Putney. The Government Front Bench will not be so modest as to imagine that they cannot bring forward such a scheme. The solution could follow the totalling of hours each week and the payment of money in relation to that number of hours. This would solve the problem. I urge the Government Front Bench not to put my hon. Friend the Member for Putney in the embarrassing position of having to accompany the hon. Member for Ormskirk through one of the exits of this Chamber, but to accept the Amendment.
There must surely be something wrong with a Bill which treats a full-time employee for the purpose of this tax in virtually the same way as a part-time employee or a partially disabled person—one, for example, who is blind. The Chief Secretary and the Government generally must be disturbed at the obvious deep misgivings, which are shared on both sides of the Committee and outside Parliament, about the consequences of the Bill in its present form on the future employment of persons in part-time employment, and the disabled in particular.
I listened with care and sympathy to the hon. Member for Putney (Mr. Hugh Jenkins), because he was suggesting a possible partial solution. I agree with the hon. Member for Norwood (Mr. John Fraser) that it obviously would not cover all persons in employment, some of whom are paid by other methods. Obviously, however, it would cover the classification of people who are employed on an hourly basis, who represent a quite large proportion of those who are employed. In that way the Amendment would go a considerable way to meet that difficulty.
The Chief Secretary will have some fairly powerful technical objections to the Amendment in its present form, but unless he can deal with the arguments of principle I, like a lot of other hon. Members, will have to follow the hon. Member for Putney into the Lobby. I am sure that he will divide the Committee unless the Chief Secretary can give us an assurance on the matter of principle.
There is anxiety. It could not be otherwise. Reference has been made to the employment of Mrs. Mopps, the people in the cleaning industry. The only consequence of the Government's proposal can be that either these people will not be employed in such numbers or that the cost of the work they do will be considerably greater. If I were getting work done by cleaners and they were affected by this tax, as they must be, I should not expect to have the cleaning done at the same price. It would not be feasible.
In the long run, the person having to pay such a high—almost a poll—tax for each person in that category would be obliged to employ people who were able to do full-time work. I hope, therefore, that the Chief Secretary will be able to give a satisfactory answer on the argument of principle. I certainly would not expect him to accept the Amendment in detail. An interesting variation to it was suggested by my hon. and learned Friend the Member for Northwich (Sir J. Foster). Obviously there is ample scope for further variation and the Chief Secretary must surely respond to us on the argument of principle. Otherwise we must divide against the Government.
I, too, shall have pleasure in following the hon. Member for Putney (Mr. Hugh Jenkins) into the Lobby, though whether he will lead us from in front or behind, like the Duke of Plaza Toro, remains to be seen, but I will be in his army if he goes there.
The Amendment he has proposed certainly deals to some extent with the problem of the part-timer, one of the most glaring examples of injustice in this Bill, and I, indeed, have many constituents who would greatly benefit. I am thinking particularly of home helps and the part-time agricultural workers, whose employers would pay a small amount of tax if the Amendment were carried as it now is, rather than the full 25s., and this, I think, is the very great advantage of the Amendment.
But in some senses it does not go as far as it should. I do not believe that it is a simple way of basing the tax. I think pence per £ is a rather complicated way to work it out and a difficult way to levy it. With respect to my hon. and learned Friend the Member for Northwich (Sir John Foster), when he tried to explain the method of collection I found myself at times not entirely following him, I must say. I do not think it could be called simple or easy to collect.
The hon. Member for Renfrew, West (Mr. Buchan) called this a Socialist tax. What an extraordinary idea. It seems to me that this is a flat-rate tax. It is not Socialist at all. It is not progressive at all. One pays the same 25s. if one employs a labourer for eight hours and if one employs the top financial brain in this country for a whole week; it makes no difference; it is not progressive. Surely, the whole point of this tax ought to be that for the use of scarce and skilled people one should pay more tax; but if one uses unskilled people for a few hours a week one should pay very little tax. It should be an incentive to economy in the use of labour and skill of all sorts, not just a flat-rate, blanket tax as proposed by the hon. Member.
Lastly, the other objection to this tax, I think, is that it is not inflation proof. Seven pence an hour may be a derisory sum of money after this Government have been office a few more years—hardly worth paying: if one has to go to get one's wages in sacks as a result of prolonged and uncontrolled inflation 7d. an hour will be so insignificant it will not be worth paying. Of course, it should be a percentage of wages or earnings paid, and this, in my opinion, is the only conceivable and sensible way of collecting a tax of this sort.
I should like to see the tax developed and added to along the lines of the hon. Member's Amendment and along the lines I have suggested. I should like to see it replace Income Tax in the lower ranges of income altogether—below, shall we say, £1,500 a year or something of that sort? I am shocked, if I may say so, at the enormously small percentage of our tax revenue collected by means of employment taxes, through the stamp and now through this tax which is proposed. We in this country collected by this means only 13·8 per cent. of total revenue, whereas in Germany it is 28 per cent. and in France it is 35·5 per cent. These figures show how much greater reliance we place on direct taxation, and how far too little reliance is placed on the other forms of taxation.
It is interesting that in France, tax is 50 per cent. on labour and in Holland it is 23 per cent. on labour, whereas at the present time, on an average wage of over £18, one only pays 7½ per cent. in this country. If the Clause goes through as it is proposed, that will rise to 14 per cent. when the Selective Employment Tax has been paid; but, for those who receive the premium, it will fall back again to 5·3 per cent. on labour. I suggest that the figure of 5·3 per cent. on labour shows that the Government are attempting to collect their tax on an entirely wrong basis.
I would like to try to solve the difficulties of collection which hon. Members have referred to and to which the Chief Secretary will doubtless refer when he catches your eye, Mr. Irving. Of course, it is difficult to collect either the 7d. per hour tax, a percentage tax or any other form of tax than the flat-rate tax which the Government have put forward. But that is an argument for not putting forward the tax until the system of collection has been arranged.
It is ridiculous to bring in the wrong tax just because one has not thought far enough ahead to arrange a system of collection which is viable, fair and sensible. In my opinion, the insurance stamp itself should not be on a flat rate. We should go to a percentage basis of collection for all taxes on labour, whether they be to cover unemployment, health, pensions or straightforward tax as we are discussing in this case.
The Government have made a fatal mistake in trying to bring in a tax, which is in some ways not ill-conceived, before bringing into being the machinery which would be required to collect it on a fair, sensible and equitable basis. The anomalies which have been mentioned by my right hon. and hon. Friends will become more and more of a nightmare to the Chief Secretary during the coming months.
This Bill and the Ministry of Labour one which we are to discuss will take many weeks to get through the House, and he will rue the day when he supported the Chancellor in bringing forward a tax which had not been thought out, for which the machinery for collection was not in existence and for which the machinery for paying back the premiums was not in existence, either.
The anomalies are so frightful that the only way we can salvage the principle, for which the whole Committee has some sympathy, is for the Chancellor to withdraw the tax now, get his machinery right and bring it in again next year on the basis of what the Opposition have been suggesting.
Mr. Irving, is it in order for hon. Members to refer to each other's facial characteristics? If so, I shall refer to the hon. Member for Tiverton (Mr. Maxwell-Hyslop) as "the hon. and unbearded Gentleman".
We can settle for that difference, though I hope that we shall have in common support for the Amendment.
In part, it removes from the tax its regressive element. It is not a flat-rate tax, as has been suggested by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). It is a regressive tax, because the rate of tax charged per hour increases with the small number of hours worked per week by each employee. It is an example of regressive taxation brought in by a Labour Government, and I hope that the Chief Secretary will not endeavour to persuade us to accept it as being, in some way, a progressive measure.
It is not incumbent upon the sponsors of the Amendment to detail to the Government the mechanics under which they can collect their own tax. That is the proper function of Treasury Ministers and their professional advisers. When an Amendment is put before the Committee to get rid of anomalies, injustices, and follies in a tax introduced by the Government, it is not on the plate of the sponsors of the Amendment to determine the mechanism by which that can be done, and I imagine that this is what the Chief Secretary would say if he were sponsoring an Amendment to get rid of anomalies and injustices in a Finance Bill.
What are the characteristics of the people who are engaged in part-time work? Why are they working part-time instead of full-time? Broadly speaking, there are two reasons for this, either because the employment potentialities in the area are inadequate to provide them with full-time work, in other words their employment is marginal, or because there is something in their personal circum- stances—they are not fully physically or mentally fit, or they have family commitments, or elderly relatives or friends to look after—which prevents them from enjoying the higher standard of living which they would enjoy if they were able to work full time. Yet these are the people who are singled out—unless of course the Amendment is accepted—for an effective rate of taxation which may well prove punitive, which may well result in them losing that part-time employment.
As well as resulting in considerable hardship to the individual, in many cases it will not result in any significant saving to the Treasury, because the persons concerned, instead of earning income on which, in many cases, an element of tax is paid, as here, will go on to National Assistance or whatever it is called when the Bill dealing with this has been considered by both Houses.
The loss to the Treasury as a result of accepting the Amendment would be considerably less than its face value, and the reason for this must be borne in mind. One hon. Gentleman talked about a mental hospital in his constituency. There are three in mine, and one of the major problems is that of rehabilitating people who are temporarily mentally sick, and of rendering sufficiently self-confident to stand, at least partially, on their own feet people who are born mentally subnormal and are incorrigibly mentally subnormal. Very often this starts with a form of contract labour where they go out to work under supervision. For instance, in the south end of my constituency they go out in teams to pull swedes on farms at certain times of the year. By working under supervision it is hoped that with the passage of time they will gain sufficient skill and sufficient self-confidence to be released to look after themselves without permanent supervision. This is the most marginal type of labour of all. These are the people who are most vulnerable to an unamended Selective Employment Tax of this kind.
The Amendment would apply also to people who have no mental or physical disabilities, but who live in areas of the country where there are not sufficient opportunities for full employment. Unashamedly I admit that the West Country is one of these. Surely it is not seriously imagined by the Treasury Bench that people will work part time in the West Country in the morning, and in Macclesfield or Birmingham in the afternoon? Nor, I take it, is it imagined that as a result of the tax they will move to Coventry or to Birmingham where houses are not available.
The effect of the tax will be to render it unprofitable in many cases to employ part-time labour, or, alternatively, to employ it for a certain period of the year as is done at the moment. A considerable amount of part-time labour is employed in the holiday industry, in the licensed distributive trades, and the catering trades in general. In so far as the results of the tax is to restrict activities to which the Chancellor has paid tribute as a massive earner of foreign currency—and, incidentally, a saver of currency which would otherwise be spent by British people on holiday abroad—this is contrary to another aspect of the Chancellor's policy.
Moreover, even if the individual businesses continue to offer facilities which involve employing part-time labour, the decreasing margin of profitability will effectively reduce the proportion of the year in which it is possible to employ those people, which is neither to the benefit of the economy nor to the benefit of the individual. The benefit to the Treasury is both speculative and small. It was said by the hon. Member for Putney, with excessive charity, that he was quite sure that his right hon. Friends on the Treasury Front Bench had thought of all this before they introduced the Selective Employment Tax in the first place. Charity obviously begins at home. I do not believe that they had. This was a crudely drafted proposal.
The hon. Member was referring to his own Front Bench. He thought that they had in mind—but were deterred by difficulties—the problems envisaged in the Amendment. I do not believe that they had them in mind at all. The entire Finance Bill, like that of last year, is riddled with incompetence. It was not clearly thought out before it was introduced. Neither the mechanics of carrying it out nor the purpose were properly defined when the Bill was drafted in the first place. Nor was it competently drafted. As we progress further through the Bill, further through the night, further through the week and further through the month, the hon. Member will find that out with a superior degree of conviction to that which he has at the moment.
We do not yet know what will be the response of the Treasury Bench to the Amendment or what will be the response of those who have given lip-service to its aims. We observed them supporting a previous Amendment with their voices and then scuttling into the Lobby to support the Government. I have something less than confidence that those who have advanced on the benches opposite good concrete reasons in favour of the Amendment, supported by adequate evidence, will have the courage of their convictions and will vote for it if it comes to a Division.
Let us still permit the flame of hope to burn within us. Let us hope that the Treasury Bench will reply that the Amendment is reasonable, because it turns a regressive tax into an effective flat-rate tax, because it does not go to the heart of the objectives of the Selective Employment Tax, ill-warranted as those objections are, and because it does not ruin the financial forecast on which the Budget was based. The results are nothing like as heavy as that.
The best reason of all is the positive reason for accepting the Amendment: it will not turn a foolish tax into a good tax, but it will reduce the sum total of anomalies and injustices introduced by the Clause. Unless the Government can see their way to accept the Amendment and its consequential Amendments or be persuaded to do so by the voting of the Committee, this will be a worse Finance Bill than it need otherwise have been.
As was expected, this debate has dealt with the principle of part-time workers and with the mechanical details of the collection of the tax. It was inevitable that the principle should be debated, because it is to meet the fears and anxieties which my hon. Friend the Member for Putney (Mr. Hugh Jenkins) has about part-time workers, or certain categories of them that he was seeking to propose a method by which there would no longer be a disproportionately heavy tax on those who worked a disproportionately short time a week, by having a flat-rate tax. It was, therefore, right and proper—and, indeed, inevitable—that the principle should have been brought in.
The Chair has been good enough to let the Committee debate several Amendments dealing with the principle of the part-time worker, and I am sure that it is right that the arguments for and against part-time workers in this connection should be fully deployed when we come to the Amendments which have been selected. Suffice it to say, meantime, that the debate we will have will, I am sure, satisfy the Committee that the anxieties expressed about part-time workers are somewhat exaggerated.
My hon. Friend the Member for Putney moved an Amendment which is attractive. It is not aimed at destroying the tax, it is not aimed at postponing it for an unconscionable time and it is not aimed at withdrawing revenue. It is aimed, in a practical way, at overcoming a difficulty which we all recognise. It therefore has many attractions.
My hon. Friend was right in saying that this is a difficulty, and we recognise that it is. There is no point in having a disproportionate tax if one does not have to have one, and we would have been only too glad to have provided a method of avoiding a disproportion which was consistent with the need to introduce a tax of this kind at this time with the machinery that is available and which would be capable of being collected in an economic fashion.
My right hon. Friend is right in saying that we would have introduced something to meet his point had it been possible to do so. But the Committee will have noticed that, whereas the debate on the principle showed a great deal of unanimity about the anxieties concerning the effect of S.E.T. on part-time workers—be they disabled or other part-time workers; we all wish to pay particular attention to them—it showed anything but unanimity on the method by which the tax could be collected.
My hon. Friend the Member for Putney put forward his very interesting method, with which I will deal shortly. He was supported by the hon. and learned Member for Northwich (Sir J. Foster) who said he recognised that the proposal of my hon Friend would not work but who also said that he had a proposal based on P.A.Y.E. which would work.
I do not want to put words into the hon. and Learned Gentleman's mouth. He speaks with great care, and I withdraw any words which I inadvertently attributed to him. He said that he had an improvement on my hon. Friend's method. His improvement was to make the payment of the tax depend on the machinery of P.A.Y.E., but he was overlooking the fact that there are many people—I do not have the exact number—to whom P.A.Y.E. does not apply but where this tax would apply.
The hon. Member for Norwood (Mr. John Fraser) said he recognised that the proposal of my hon. Friend the Member for Putney was not a practicable one, but that he had a better suggestion, which was to relate it to the graduated pensions scheme, although he omitted for the moment—and I am sure that it was only for the moment—to recollect that there are vast numbers who are contracted out of that scheme, vast numbers in respect of whom the tax should be paid. When we look at it from the point of view of either of the two methods suggested we find immediate and very evident difficulties which my hon. Friend the Member for Putney would hope are not associated with his scheme.
I come back to my hon. Friend's scheme, which is the only one before us at the moment. I have dealt with the others because it was obviously courteous to do so and because, in the Committee, there is recognition that there are great difficulties about the scheme of my hon. Friend the Member for Putney which hon. Members would like to meet if they can. The Government very much sympathise with this and would like to have a scheme which would not result in a disproportionate tax if this were possible.
The tax has been described as a flat-rate tax by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), and as a regressive tax by the hon. Member for Tiverton (Mr. Maxwell-Hyslop), but I say that this tax is, in fact, a progressive tax. The tax is a tax on services. If both hon. Members will be good enough to direct their minds to services and the relation which services bear to standards of income, they will recognise immediately—it is not denied in any quarter—that this is a progressive tax. I am not talking about a particular Amendment, but about the fact that the tax as a whole is a progressive tax.
It is not true on that basis alone. I do not want to divert the debate on this issue, but I do both hon. Members the courtesy of responding to their comments. And I wish to make quite clear that the Government do not accept that this is not a progressive tax.
I come next to the proposal of my hon. Friend the Member for Putney, having made clear that there are difficulties associated with the many alternative proposals. I must also ask the Committee to recognise that there are difficulties associated with his. First, I deal with the question: should there be stamps or can we manage without stamps? If one is reduced to stamps one is faced immediately with difficulties. There have been many similar occasions where an additional tax has been put forward, not by this Government but by previous Governments, where methods of collection have been considered and it has been decided that by far the most simple and reliable method is to have a stamp, or to add it to the existing National Insurance stamp.
I need only remind the Committee about the Industrial Injuries Scheme payments which are collected in the same way, and, more recently, payments under the redundancy scheme. I can assure my hon. Friend, from vast experience, that this is the only economic, reliable, and fair way of collecting taxes of this nature. Other methods have been fully considered on every occasion. It simply would not be practicable to adopt a different kind of system. It would not be fair to other taxpayers. It would not be administratively possible to adopt a system other than that of relying on stamps. If we rely on stamps we are brought up against a very major difficulty of having all the different categories of stamps which one would require to satisfy the detailed proposals of my hon. Friend. We would need a book as big as a blackboard to provide space for every different kind of stamp and it would be administratively far too difficult to cope with.
My hon. Friend has assumed that in all cases the hours of work are known, but that is very far from being the case—very far indeed. There are all the salaried employees who work a variety of hours. Their hours are not known. There are vast numbers of factory workers and others who are paid not by reference to hours who work different hours. There is a whole host of employees in services of one kind or another whose hours of work are not known. It would be an enormous burden to put on the employer to find the hours of work and to pay stamps accordingly. The difficulties associated with this are of such an order that it is just not a practicable scheme, as my hon. Friend the Member for Norwood pointed out. The other schemes proposed also have their glaring difficulties.
We have thought about this very carefully. We do not think that the difficulties associated with part-time workers are anything like as great as some hon. Members on both sides fear, although we recognise that these are difficulties to be taken very seriously into account. The debate which we shall have when you, Sir Eric, are good enough to call that series of Amendments, will give an opportunity for expounding these arguments in full. I am bound to tell my hon. Friend that, attractive as his proposal is, constructive as it is, and constructive as was the method by which he put it forward to the Committee, I cannot recommend the Amendment to the Committee.
Can I read into what my right hon. Friend has just said that, when the matter of part-time work comes up for discussion at a later date, the Government's approach to the problem will be sympathetic and possibly constructive?
I must not in any way mislead my hon. Friend. The Government will, as ever, be sympathetic and constructive, but I do not want by that to mislead my hon. Friend into thinking that we have any particular proposals for machinery which would meet the difficulties relating to part-time workers.
The debate will, I think, satisfy my hon. Friend that many of his anxieties about part-time workers are without foundation. I think that the debate will satisfy my hon. Friend that we are most anxious to ensure that in no circumstances are part-timers lost to the total labour force. It is along those lines that the arguments will develop.
My right hon. Friend the Chancellor is not proposing, in connection with part-timers, to alter the method of payment of the tax at this stage. My right hon. Friend has made it clear throughout that there is nothing in the tax to prevent us from considering, after we have seen it working for an appropriate time, whether it is necessary to introduce further refinements at a later date.
I do not rise with the intention of curbing the debate in any way, because I recognise that there are a number of my hon. Friends and hon. Members opposite who may still wish to speak. I want to register a protest now at the Chief Secretary's reply to the debate. If the hon. Member for Putney (Mr. Hugh Jenkins) is satisfied with that reply, he will be satisfied with anything.
The Chief Secretary always has a lot of sympathy, but it never extends to his pocket. What we are asking for is some fiscal change with regard to part-time workers. All the argument has shown the unwisdom of using the National Insurance system as a means of raising general revenue. The whole National Insurance system was designed to give specific insurance cover to individuals, and the amount they receive is related to their own contributions.
I agree that certain things have been drafted on to the system. However, Industrial Injury benefits, which the Chief Secretary mentioned, are also designed to give specific insurance cover. Redundancy payments are designed to give specific cover in certain events. The National Health Service contribution is a revenue earmarked for a specific purpose. There has been no example yet of using this system designed for individual insurance cover as a means of raising large sums for general revenue purposes. I think a lot of the trouble would not have arisen had this been a very small impost. It is the general level of 25s. for a man and 12s. 6d. for a woman which has led to a great deal of the argument. It was a staggering amount to impose. It is this which has given rise to this debate.
I say to the hon. Member for Putney that if we could have knocked this tax out completely, we would have done. But all Oppositions recognise that if they cannot do that, they must concentrate their case on mitigating the effect of the tax upon deserving cases, and that is the spirit in which we approach this Amendment. I accept that, once the Chief Secretary had decided to use the flat-rate National Insurance system, he was bound to be in difficulties. But in deciding to use that system, what he was saying was that he preferred simplicity of collection to all reasons of an equitable distribution of the burden and to all reasons of social justice.
What he should have done was to have said, "This is the amount of tax we want to raise. Now we must consider how best that burden should be distributed and what are the economic side-effects of the decisions we take." What he has done has been to say, "We want so much tax. We must use the National Insurance poll tax system of collection. Therefore, we must ignore equity. Therefore, we must disregard the economic side-effects. Therefore, we must turn our back on social cases."
I cannot accept any of that at all. My hon. Friends and hon. Members opposite have given very cogent detailed accounts of the effects of this particular poll tax on various part-time workers and on various social cases. They have made out their case excellently. It is quite wrong that a woman who works for nine hours a week should attract the same amount of tax liability on her employer as a woman who works 42 hours a week. It is quite wrong that a woman aged 22 who works for 48 hours a week should attract the same tax liability as an old-age pensioner who works perhaps for two days a week. Clearly the old-age pensioner should attract very much less, and the woman who works for a much shorter time also should attract a lesser tax liability.
One of the difficulties of the Chief Secretary is because of the eight-hour rule in the National Insurance scheme. When we tried to deal with this, the Chancellor said the other day, "That would mean that a number of people who had insurance cover would not get it if we raised that limit to 20 hours." That shows the unwisdom of using this system of collection, because it was never designed for this purpose.
On the method of collection, a number of alternative suggestions have been proposed. The hon. Member for Norwood (Mr. John Fraser) suggested not, I thought, P.A.Y.E. but an extension of the graduated pension contribution. The Chief Secretary said that a large number of persons contracted out. Of course they did, but in September when wage-related earnings contributions come in, everyone will be paying graduated contributions for graduated sickness or unemployment benefit, provided they earn above £9 a week. Everyone will be in it.
It would be a very good thing if people who earned less than £9 a week did not attract any tax liability. It would be a different equitable way of achieving what the hon. Gentleman wants to achieve. All those above £9 a week will be paying graduated contributions of one sort or another. Therefore, the Chief Secretary does not have to be bound by the flat-rate system. He could have chosen the other way.
He could have achieved the purpose of the Amendment even under the flat-rate National Insurance system. He has chosen to make the tax follow the employer's contribution. Had he made it follow cases in which both employer's and employee's contributions are paid, a lot of the people we want to help would have been out of the purview of the tax. For example, retirement pensioners who work do not pay the employee's contribution. Those drawing widow's pension do not pay the employee's contribution. Married women who opt out of National Insurance, the vast majority of part-timers, do not pay the employee's contribution. Had the right hon. Gentleman made it dependent upon employer's plus employee's contribution, many of the anomalies which he has now brought in would automatically have been out.
I do not accept his reasoning or that he has exhausted the possibilities under either the flat-rate National Insurance system or under the graduated system. Perhaps he has not lived with the system as long as I have, or perhaps he has not been tough enough with the Department. There are some very good people with some very good ideas on this subject, and it is an insult to say that they have not some method to offer for overcoming the difficulties.
The case on merit is very strong. I understand that it was said in the debate on the Selective Employment Tax that one of the reasons why the tax in respect of women was 12s. 6d. per head was that so many women were part-time workers. This was never part of the White Paper or of the Chancellor's original speech. The original reason given for the tax in respect of a woman being 12s. 6d. as against 25s. for a man was that average earnings for a woman working full time were less than half the average earnings of a man working full time. For example, in the Monthly Digest of Statistics for May the average earnings of a man in manufacturing industry were given as £20 3s. 3d. and the average for a woman working full time were given as £8 11s. 11d. a week.
That was the reason for the difference in the tax, and it has no part-time element in it at all. The average women working part time works 21·9 hours for £5 2s. 11d. a week. If one is to say that the reduction of the tax for women should take into account that a large number work part time, it should be only a quarter of the tax for men, not a half. I cannot accept that, therefore. It would be a great help for women working part time if the tax were only 6s. 3d., but the Chief Secretary would then have gone half way to meet us.
The case in respect of retirement pensioners who put in a couple of days and for the handicapped is even stronger. There are many who employ such people for social reasons. It is often better for a retirement pensioner to go out to work even though, perhaps, he cannot put as much into the hours, one pays him for doing certain odd jobs. To add 25s. a week to the cost of employing a retirement pensioner for a couple of days in the garden may mean that he has to be stood off altogether and has to go to National Assistance. Most of us who employ such people for what I call social reasons will, naturally, do our level best not to stand them off, but there will be a number who have to be.
There will also be a number of employers in the retail trade who stand off part-timers and see whether they can find one skilled full-timer because of the imposition of the Selective Employment Tax. The effect of this will be quite the reverse of what the Chief Secretary wants. Instead of employing labour which could not be used elsewhere, they will draw off skilled labour which could be used elsewhere.
The right hon. Gentleman has given one of the weakest replies on the whole Budget. This is a strong case on merit for mitigating the effects of the tax on part-timers and on the mentally and physically handicapped. We agree with the purpose behind the Amendment. We hope that the hon. Gentleman will press it to a Division, and we shall support him in order to give as much help as we can to these people.
I shall not delay for long the opportunity of the hon. Member for Putney (Mr. Hugh Jenkins), who moved Amendment No. 17, to vote with us. We have had a thoroughly disappointing reply from the Chief Secretary. There is no reason why we should cease to urge upon him better ways. After all, he will have plenty of opportunities, if he does not accept them here and now, to think better of the decision that he has made this evening.
The right hon. Gentleman says that he thinks that the difficulties of part-timers are greatly exaggerated. I wonder whether it would be possible to exaggerate them in the case of certain industries which depend almost entirely on part-timers. The right hon. Gentleman says, as every Minister does, that there are technical difficulties why these people cannot be excepted, why Amendment No. 17 cannot be accepted, and why he does not even wish to accept the spirit of the Amendment. The answer is that all these difficulties are wished upon a Government who have imposed such a high rate of taxation—25s. or 12s. 6d.—on a selected pattern of the employed population. I can see that, once that decision was taken, exceptions would be difficult.
Let us consider whether we have been exaggerating in any way. Let us look at the difficulties of certain industries in which part-time workers are a common feature. I will take two examples of different social importance, or, at any rate, ones which we may view differently.
First, it is perhaps not often realised that those who provide holiday accommodation for, often, the lower-paid workers all round our coasts—I am not thinking just of Blackpool, but my constituency cannot be far from one's mind in this—rely almost exclusively on part-time workers. A typical hotel or boarding house has the proprietor and his family and a squad of part-time workers to help. It is difficult to get people who will work the whole time because of the long hours which have to be worked in the season, so one has to rely on part-time workers.
Some come in to do the breakfasts and the washing-up, some come in for lunch, and others come in later. The burden upon an industry which has to rely almost exclusively on part-time workers is in many cases even greater than if it had full-time workers able to work all through the day.
Does not the hon. Gentleman think that the Government are encouraging tax evasion, that people in this position will be encouraged to say that their employees are doing less than eight hours?
I have not the slightest doubt that that will be the circumstance in many places, though I hesitate to suggest that it is likely to happen in Blackpool. But I suppose one can envisage a situation where it may happen there. Certainly, common sense indicates that this will be the type of thing that will happen. In any establishment where people are just coming in and going out all day, it is all too easy for that type of thing to happen.
As the Committee may feel that that is a particular constituency point, I turn from it to something else of which I am well aware because of the constituency that I represent. There must be scores of other hon. Members who have exactly the same problem. Anyone who represents a constituency which contains a high proportion of old-age pensioners will find that a common feature of their constituencies is a number of nursing homes which provide care and help for the old and for those in post-operative conditions who must be looked after.
These are people for whom the National Health Service and the hospitals have no place—people who are too old and too ill to stay at home, but there is no place for them in the hospitals. They are not being looked after by full-time nurses, who are in too short supply, but by part-timers who come in to help the old, the sick and the geriatric and post-operative cases.
Only two months ago, during the election campaign, all of us went round such establishments to see the old folk. The problem was put before us and one could not turn away. I am thinking particularly of one place where there are usually about 18 or 19 patients and 12 part-time workers who come in every day to look after them. This is not an expensive establishment. It is as modest in its fees as such a place can be—a scale of 12, 13, or 14 guineas a week. That is the minimum possible for people to be looked after in these conditions.
Yet the Government have decided that it is impossible to leave such establishments out of an impost which will amount to about £350 to £400 a year. Such a selection has no social merit. If such places are not exempted it will be quite shameful. I have instanced these examples, but I remind the Committee that part-time workers are the basis of many industries and social services.
I think that it is necessary for me to speak again. Hon. Members who have just come into the Chamber are not aware that what is being debated is an Amendment in my name. Most of the debate has been directed to two main questions: first, whether the position of part-time workers in principle is one which the Government need to ameliorate; and, secondly, whether my proposal is the right and practicable way of dealing with it.
On the question of principle, most of the Committee seems to agree that it is desirable to do something special for part-time workers. That is a wide range of agreement. I have not been convinced by my right hon. Friend on the question of practicability. He holds out to us the prospect that he will say something later about the position of part-time workers which will make us feel that the position is not as grave as we think. Unfortunately, he has not told us now.
In effect, he says, "Do not press the Amendment, because, later, I shall tell you something which will make it unnecessary for you to do so." If I had to rely on that alone, I would not be able to agree with my right hon. Friend, but what has convinced me is the arguments put forward by hon. Members opposite. One after another they said that this was a good proposal in principal, but that for one reason or another it would not work, and then they suggested this, that or the other alternative. With one or two exceptions, practically every hon. Member opposite who has spoken has said that the principle of the Amendment is right, but that it would not work. The hon. Member for Blackpool, North (Mr. Miscampbell), however, agreed that it was right and was practicable, but there is still a great deal of difference between us, because I am in favour of the tax in principle whereas he is not.
In these circumstances, the question arises what action the Committee ought to take and, in particular, what action I should take. For me to pursue an Amendment which, I am convinced by hon. Members opposite, would be impracticable of working would be entirely wrong. Therefore, because hon. Members opposite are apparently only too keen to go through the Lobby in support of my Amendment, which they believe to be hopelessly wrong in order to assist me to defeat my own Government, which is a proposition I could not be expected to accept, I beg to ask leave to withdraw the Amendment. [HON. MEMBERS: "No."] In doing so, I must tell my right hon. Friend that we shall want to hear some stronger arguments from him about the
|Division No. 60.]||AYES||[9.32 p.m.|
|Allason, James (Hemel Hempstead)||Griffiths, Eldon (Bury St. Edmunds)||More, Jasper|
|Astor, John||Grimond, Rt. Hn. J.||Munro-Lucas-Tooth, Sir Hugh|
|Baker, W. H. K.||Gurden, Harold||Murton, Oscar|
|Balniel, Lord||Hamilton, Marquess of (Fermanagh)||Nabarro, Sir Gerald|
|Batsford, Brian||Harris, Frederic (Croydon, N.W.)||Neave, Airey|
|Bell, Ronald||Harrison, Brian (Maldon)||Nott, John|
|Bessell, Peter||Harvey, Sir Arthur Vere||Onslow, Cranley|
|Biffen, John||Hastings, Stephen||Orr-Ewing, Sir Ian|
|Biggs-Davison, John||Heald, Rt. Hn. Sir Lionel||Osborne, Sir Cyril (Louth)|
|Birch, Rt. Hn. Nigel||Higgins, Terence L.||Page, Graham (Crosby)|
|Black, Sir Cyril||Hiley, Joseph||Page, John (Harrow, W.)|
|Blaker, Peter||Hirst, Geoffrey||Pardoe, John|
|Boyd-Carpenter, Rt. Hn. John||Hogg, Rt. Hn. Quintin||Peel, John|
|Boyle, Rt. Hn. Sir Edward||Holland, Philip||Percival, Ian|
|Brinton, Sir Tatton||Hooson, Emlyn||Peyton, John|
|Brown, Sir Edward (Bath)||Hordern, Peter||Pink, R. Bonner|
|Bruce-Gardyne, J.||Howell, David (Guildford)||Pounder, Rafton|
|Burden, F. A.||Hunt, John||Powell, Rt. Hn. J. Enoch|
|Campbell, Gordon||Iremonger, T. L.||Price, David (Eastleigh)|
|Carlisle, Mark||Jenkin, Patrick (Woodford)||Pym, Francis|
|Channon, H. P. G.||Jennings, J. C. (Burton)||Ramsden, Rt. Hn. James|
|Chichester-Clark, R.||Kimball, Marcus||Rees-Davies, W. R.|
|Clark, Henry||King, Evelyn (Dorset, S.)||Ridley, Hn. Nicholas|
|Clegg, Walter||Kirk, Peter||Ridsdate, Julian|
|Cooke, Robert||Knight, Mrs. Jill||Roots, William|
|Costain, A. P.||Lambton, Viscount||Sharples, Richard|
|Craddock, Sir Beresford (Spelthorne)||Lancaster, Col. C. G.||Smith, John|
|Cunningham, Sir Knox||Langford-Holt, Sir John||Steel, David (Roxburgh)|
|Dance, James||Longden, Gilbert||Taylor, Sir Charles (Eastbourne)|
|Davidson, James (Aberdeenshire, W.)||Loveys, W. H.||Temple, John M.|
|Deedes, Rt. Hn. W. F. (Ashford)||Lubbock, Eric||Thatcher, Mrs. Margaret|
|Dodds-Parker, Douglas||McAdden, Sir Stephen||Thorpe, Jeremy|
|Doughty, Charles||Mac Arthur, Ian||Turton, Rt. Hn. R. H.|
|Elliot, Capt. Waller (Carshalton)||Mackenzie, Alasdair (Ross&Crom'ty)||Wainwright, Richard (Colne Valley)|
|Elliott, R.W.(N'c'tle-upon-Tyne,N.)||Maclean, Sir Fitzroy||Walker, Peter (Worcester)|
|Eyre, Reginald||Macleod, Rt. Hn. Iain||Walker-Smith, Rt. Hn. Sir Derek|
|Fisher, Nigel||McMaster, Stanley||Ward, Dame Irene|
|Fortescue, Tim||Maddan, Martin||Weatherill, Bernard|
|Foster, Sir John||Mathew, Robert||Webster, David|
|Gibson-Watt, David||Maude, Angus||Whitelaw, William|
|Glover, Sir Douglas||Mawby, Ray||Wills, Sir Gerald (Bridgwater)|
|Goodhart, Philip||Maxwell-Hyslop, R. J.||Winstanley, Dr. M. P.|
|Goodhew, victor||Mills, Peter (Torrington)|
|Gower, Raymond||Mills, Stratton (Belfast, N.)||TELLERS FOR THE AYES|
|Grant-Ferris, R.||Miscampbell, Norman||Mr. Anthony Grant and|
|Grieve, Percy||Mitchell, David (Basingstoke)||Mr. George Younger.|
|Allen, Scholefield||Callaghan, Rt. Hn. James||Doig, Peter|
|Archer, Peter||Carmichael, Neil||Dunnett, Jack|
|Armstrong, Ernest||Castle, Rt. Hn. Barbara||Dunwoody, Mrs. Gwyneth (Exeter)|
|Atkinson, Norman (Tottenham)||Coe, Denis||Dunwoody, Dr. John (F'th & C'We)|
|Barnes, Michael||Coleman, Donald||Eadie, Alex|
|Barnett, Joel||Conlan, Bernard||Faulds, Andrew|
|Benn, Rt. Hn. Anthony Wedgwood||Corbet, Mrs. Freda||Fernyhough, E.|
|Binns, John||Craddock, George (Bradford, S.)||Finch, Harold|
|Bishop, E. S.||Crawshaw, Richard||Foley, Maurice|
|Blackburn, F.||Cronin, John||Ford, Ben|
|Boardman, H.||Dalyell, Tam||Fraser, John (Norwood)|
|Booth, Albert||Davidson, Arthur (Accrington)||Garrett, W. E.|
|Bowden, Rt. Hn. Herbert||Davies, Dr. Ernest (Stratford)||Gordon Walker, Rt. Hn. P. C.|
|Braddock, Mrs. E. M.||Davies, G. Elfed (Rhondda, E.)||Gourlay, Harry|
|Bray, Dr. Jeremy||Davies, Ifor (Gower)||Gregory, Arnold|
|Brooks, Edwin||Davies, Robert (Cambridge)||Griffiths, David (Rother Valley)|
|Broughton, Dr. A. D. D.||Dell, Edmund||Griffiths, Will (Exchange)|
|Brown, Rt. Hn. George (Belper)||Dempsey, James||Hale, Leslie (Oldham, W.)|
|Brown, Hugh D. (G'gow, Provan)||Dewar, Donald||Hamilton, James (Bothwell)|
|Brown, R. W. (Shoreditch & F'bury)||Diamond, Rt. Hn. John||Hamilton, William (Fife, W.)|
|Buchanan, Richard (G'gow, 8p'bum)||Hannan, William||Dickens, James|
|Harper, Joseph||Mackintosh, John P.||Rose, Paul|
|Harrison, Walter (Wakefield)||McNamara, J. Kevin||Ryan, John|
|Hattersley, Roy||Manuel, Archie||Shaw, Arnold (Ilford, S.)|
|Hazell, Bert||Mapp, Charles||Sheldon, Robert|
|Heffer, Eric S.||Mason, Roy||Shore, Peter (Stepney)|
|Henig, Stanley||Mendelson, J. J.||Short,Rt.Hn.Edward(N'c'tle-u-Tyne)|
|Herbison, Rt. Hn. Margaret||Mikardo, Ian||Short, Mrs. Rente (W'hampton,N.E.)|
|Hooley, Frank||Miller, Dr. M. S.||Silkin, John (Deptford)|
|Houghton, Rt. Hn. Douglas||Molloy, William||Silkin, S. C. (Dulwich)|
|Howarth, Harry (Wellingborough)||Moonman, Eric||Small, William|
|Hoy, James||Morgan, Elystan (Cardiganshire)||Spriggs, Leslie|
|Hughes, Rt. Hn. Cledwyn (Anglesey)||Morris, Charles R. (Openshaw)||Summerskill, Hn. Dr. Shirley|
|Hunter, Adam||Moyle, Roland||Swain, Thomas|
|Hynd, John||Mulley, Rt. Hn. Frederick||Symonds, J. B.|
|Jackson, Colin (B'h'se & Spenb'gh)||Noel-Baker,Rt.Hn.Philip(Derby,S.)||Taverne, Dick|
|Jay, Rt. Hn. Douglas||Oakes, Gordon||Thomas, Iorwerth (Rhondda, W.)|
|Jones, Dan (Burnley)||Ogden, Eric||Tinn, James|
|Jones, Rt.Hn.SirElwyn(W.Ham,S.)||O'Malley, Brian||Urwin, T. W.|
|Jones, J. Idwal (Wrexham)||Orme, Stanley||Walden, Brian (All Saints)|
|Judd, Frank||Owen, Dr. David (Plymouth, S'tn)||Walker, Harold (Doncaster)|
|Kelley, Richard||Paget, R. T.||Watkins, David (Consett)|
|Kerr, Dr. David (W'worth, Central)||Panned, Rt. Hn. Charles||Weltzman, David|
|Lever, Harold (Cheetham)||Parker, John (Dagenham)||Wells, William (Walsall, N.)|
|Lever, L. M. (Ardwick)||Pearson, Arthur (Pontypridd)||Whitaker, Ben|
|Lewis, Arthur (W. Ham, N.)||Pentland, Norman||White, Mrs. Eirene|
|Lewis, Ron (Carlisle)||Perry, George H. (Nottingham, S.)||Whitlock, William|
|Lomas, Kenneth||Prentice, Rt. Hn. R. E.||Williams, Alan Lee (Hornchurch)|
|Loughlin, Charles||Price, Christopher (Perry Barr)||Williams, Clifford (Abertillery)|
|Luard, Evan||Price, Thomas (Westhoughton)||Wilson, Rt. Hn. Harold (Huyton)|
|Lyon, Alexander W. (York)||Randall, Harry||Wilson, William (Coventry, S.)|
|Lyons, Edward (Bradford, E.)||Redhead, Edward||Winnick, David|
|McBride, Neill||Reynolds, G. W.||Winterbottom, R. E.|
|McCann, John||Roberts, Albert (Normanton)||Woof, Robert|
|MacDermot, Niall||Roberts, Gwilym (Bedfordshire, S.)||Zilllacus, K.|
|Macdonald, A. H.||Robertson, John (Paisley)|
|McGuire, Michael||Robinson, Rt.Hn. Kenneth(St.P'c'as)||TELLERS FOR THE NOES:|
|McKay, Mrs. Margaret||Robinson, W. O. J. (Walth'stow E.)||Mr. Charles Grey|
|Mackenzie, Cregor (Rutherglen)||Roebuck, Roy||Mr. George Lawson.|
|Mackie, John||Rogers, George|
The effect of the Amendment is to leave out from the incidence of the tax the first person employed by each employer. The other Amendments are consequential on the first.
The Selective Employment Tax lays a considerable burden on people liable to it. For a man it is £65 a year, and for a women £32 10s. a year. These are considerable sums for those in a small way of business or life, and the purpose of the Amendments is to mitigate the burden suffered by such people.
There are two ways in which the burden of the tax can, in some cases, be mitigated. One is by passing the tax to the community at large by making an appropriate increase in the price of the goods or services sold. The other is by charging the tax as a trading expense. It may be contended that there are two other ways, which are by increasing productivity so that the tax is offset by a higher gross profit, or by making fewer employees do the same work, which is another way of expressing the same thing. These last two are not really ways of mitigating the burden of the tax, but in relation to this Amendment I shall be broad minded and will consider all four.
The Amendment would give complete relief to someone who employs only one person. It would give half relief to someone who employs only two people. Then there is a rapidly diminishing degree of relief becoming negligible quite soon as the scale of employment rises. It is, therefore, designed to soften the blow for the smallest employer.
My reason for proposing the Amendment is that the smallest employers are the hardest hit by this tax, in the following ways. First, the smallest employer of all is often not in trade or business at all and, therefore, cannot pass on the tax to an ultimate consumer and must carry it all himself or herself. In the same way, the tax does not rank as an expense against Income Tax or Corporation Tax where there is no business. In this category come domestic helps for the old, which the Financial Secretary to the Treasury will no doubt tell me—if he can make his voice heard through the conversation which comes from the Front Bench below the Gangway; although I do not hear it so much now—is covered by Clause 6 of the Selective Employment Payments Bill, which we shall be considering more particularly next week.
Clause 6 of the Selective Employment Payments Bill covers part-time employment, about which we have heard a good deal this evening, people who have large families—and again, I expect, I shall be told that Clause 6 of the Selective Employment Payments Bill looks after them; wives who have remained in employment or who have gone back to it—
We have, of course, debated the Payments Bill on Second Reading, when Clause 6 was in it. I agree that we cannot foretell the course of the examination of the Bill which I forecast for next week, but we know that Clause 6 is in it. I realise that the Financial Secretary to the Treasury is in a position to tell me that some of the categories that I have mentioned are covered by Clause 6 as it starts its life; but I shall have some comment to make about that presently.
Into this category come widowers, who are not covered by Clause 6 of the Payments Bill; nurses for sick children, who, I suppose, in some degree are covered; and all the various kinds of direct help that one comes across. We had an interesting debate just now on the position of one kind of direct personal employee, because that is what pensioners most commonly are, and the Chief Secretary was in great difficulty because he wanted desperately to do something but could not do it, or so he told us. I am providing a mechanism which may tome to his aid in this terrible dilemma in which we from this side have such keen sympathy with the right hon. Gentleman.
We all know that some hard cases are not covered by Clause 6 of the Payments Bill. In Clause 6 of that Bill, to be old one has to be 70. Some people are old before they reach that age, and yet they might not fall into the second category in Clause 6 of those who are incapacitated by reason of illness or ill health. The Government have conceded the principle by Clause 6 of the Payments Bill that they ought not to have levied this tax on household employees and now they have set up a series of exemptions, which are somewhat closely defined and leave some of the most obvious cases unprovided for, in particular the very one which we have been debating for an hour and a half, the part-time employee.
When we were discussing the Redundancy Payments Bill in Committee I drew attention repeatedly to that category of small employers called the domestic employers whom it was convenient to summarise as the "vicar's wife". That sort of person is going to be struck at by the provisions of this Clause and of Clause 6 of the Payments Bill. As one hon. Member—the hon. Member for Norwood (Mr. John Fraser), I think it was—said on the last Amendment, it is quite wrong of the Government to be so interested in gathering taxes that they forget the graces of life—a rather surprising sentiment from that side of the Committee, but it was uttered, and I ask the Financial Secretary to remember it.
If he will work this out and consider the person—and there will be many—who in respect of domestic employment falls through the various subsections of Clause 6 of the Payments Bill, let us take the vicar's wife. She needs domestic help. She cannot very much afford it. She is now to be taxed at 12s. 6d. on it. She may decide that she cannot on that basis carry on with the single domestic help she has. After all, this may be someone who works for three or two days a week, but she has to pay 12s. 6d., an unnecessarily high overhead.
Therefore, she may decide that she will have to dispense with her employee. At once comes along the Redundancy Payments Act and she has to make a redundancy payment, because although that person may go—I greatly doubt it, but she may go—at once to make Morris motor cars—highly unlikely, but it could happen—and may go the following Monday, it makes no difference: redundancy payment is still to be payable. This sort of unthinking accumulation of taxes on small people can create great hardship.
My hon. Friends were referring to the same class of employment in connection with the problems of the tourist industry. There again is something which is very much covered by this Amendment. While there are big hotels—we all know the Metropole at Brighton, and so on—there are also many smaller establishments in the tourist industry, most of them small seaside hotels and boarding-houses and so on, which, as my hon. Friends were saying just now, depend to a large extent on part-time employees, and to which it would be a not inconsiderable relief—though it would not solve their problems, it would be a mitigation of their problems—if these employees were exempt from the application of this tax.
I should like to turn to the small trading and other services employers who are particularly covered by the Amendment which I am moving. Of course, they have the possibility of raising the prices which they charge, and so of passing on the tax. to the consumer, though it is a limited possibility; but though they can charge the amount of tax they, too, will find the tax especially onerous. They, too, are usually people of small resources. Sometimes they render their services to the community with a profit margin which would not be considered an income at all by someone in manufacturing employment. They do it because they like to be their own masters and they value the independence of running a shop or whatever it is. For them, this tax may be quite crippling. The smallest employers have also this characteristic that they enjoy no elbow room for manœuvre, to make the best out of the distinctions which are made in the Bill: they cannot separate the manufacturing and the selling into two curtilages so that at least half their employees earn the premium which can be recovered by skilful arrangement under the Bill.
The village baker who does the baking himself, possibly with one paid assistant, and who has two paid assistants in the shop will pay the tax on all his employees and thereby will help to pay for the premium which will be collected by the factory bakery which is his rival, with its standardised, lightly singed, crustless cotton wool which the Treasury proposes now to make the beneficiary of an express grant at the expense of the village baker.
I mentioned that there were two other possible methods which would be urged against me as ways in which the incidence of the tax might be mitigated—increased turnover or higher productivity and the economy of labour by better deployment. Those are the prizes which the Chancellor of the Exchequer has intermittently and with fluctuating enthusiasm dangled before our noses as the prizes of his policy. The Chief Secretary has been rather more consistent about that, possibly because of his better understanding of Hungarian.
This is certainly set out in the White Paper and was in the Chancellor's Budget speech as one of the objectives. As I indicated just now, neither is a valid escape, since both are just as desirable and advantageous, whether the tax is applied or not. If one gets increased productivity or deploys one's labour better, one has not offset the tax; one has suffered exactly the same, one has gained the same advantage and will lose just as much by paying the tax.
However, the Chancellor's point, excuse, hope or whatever it was, was that the tax might stimulate economy and efficiency in the use of labour. Let us pretend that it might. Let us assume that taxing newspapers which do not print their own papers in order that they may contribute to a premium per head for the London printing houses may do something to reduce the 30 per cent. over-staffing of the London printing houses which was referred to in the Report of the Royal Commission.
It seems a little unlikely, but, in moving this simple Amendment, I feel that I ought not to particularise my scepticism too far. Let us accept the assumption upon which the Chancellor bases the operation of his tax in general. Those savings in labour, which might be the objection to what I am proposing, must surely be achieved where there is large-scale employment of labour. Making 19 do the job that 20 did before is sometimes possible, but making one person do the job that two did before or dispensing with the services of one's sole employee is quite a different proposition. In my experience, at any rate, those who employ only one or two people calculate the cost and the need very closely. They do not hoard labour or waste it. Commonly, they have the greatest difficulty in getting it, because they cannot compete with manufacturing industry and often the rate of pay which in the end they are forced to offer to get anyone at all is a severe burden upon them.
I would ask the Financial Secretary what social and industrial policy the Chancellor thinks that he is furthering at this bottom end of the employment scale. I think that he is in danger of doing enduring damage and of causing real hardship.
I said earlier that I would deal with Clause 6 of the Selective Employment Payments Bill. It leaves out certain categories, but the point that I want to make is that even those whom it covers have to reclaim the benefit by going through this machinery of the Supplementary Benefits Commission. It is a very cumbersome process. It does not do the job. It is very tiresome for the applicant, and of course it increases the administrative burden of the tax. There is for these people no scope whatever for economy in the use of labour, nor for deployment or higher productivity.
The Financial Secretary may perhaps declare, as the Chief Secretary did on the previous Amendment, the keenest sympathy with some or all the classes of people whom I have mentioned in moving the Amendment. He may say that some of them can be looked at again during the Committee stage of the Selective Employment Payments Bill, and that some of the personal cases can be brought within the scope of National Assistance.
I would regard both of those as thoroughly unsatisfactory answers. I would not think it right that a Selective Employment Tax should be imposed on people to bring them within the scope of National Assistance, and I would not repose much confidence in any remedy for those troubles being sought by amendment of the Selective Employment Payments Bill, because when we come to that next week, if we do not now get what we want, Clause 42 will be just water under the bridge. It will not be much good saying that we ought to do this by not collecting the tax. We have to pursue our remedies here and now, by amendment of this Clause, rather than hope that there will be pie in the sky next week, more especially when we have a shrewd suspicion that there will not be any pie in the sky.
When we come to consider the mitigation of this hardship by repayment, I have no doubt that we shall hear a good deal about the difficulties of providing for hard cases in that way, beyond what is done in Clause 6, about the problems of definition and evasion, and about the complexity and expenses in administration. I shall add one more to the future objections for the benefit of the Financial Secretary, that the reduction of hardship by particular exemptions can easily increase hardship by anomaly.
I am offering a single, simple, remedy to the Financial Secretary which, while it leaves the main folly rampant, takes the sting out of the criticisms throughout one sector of the community, and that perhaps the most hard-pressed sector of all, and a sector which can contribute nothing to the Chancellor's labour objectives.
Lastly—I think that this one is probably beneath the Financial Secretary, but I had better anticipate it in case he does—the right hon. Gentleman may make the point about another denomination of the insurance stamp. If the Government were to accept the Amendment, no doubt they would delete the 1d. at some future stage, and then the payment made in respect of the first employee of each employer would be the same as that for an employed person. There would be no different stamp. In any case, if the Government are in difficulty about another denomination of stamp they can always turn to the Postmaster-General, who will probably produce 20 more if they wish—and a postage stamp in commemoration of the event, too.
There is no practical difficulty in distinguishing between the first and subsequent employees. If a person who is nominated as a first employee in respect of one employer changes his job for another employment in which he is not first employee but a subsequent employee, then from the relevant week his employer will put the appropriate stamp on for him. Since this extra payment on the stamp in respect of the Selective Employment Tax affects neither insurance benefit nor status, no complication arises from the movement of a person from one occupation to another.
There is remarkably little risk of evasion by sub-division of enterprises because the prize at stake for a large concern is negligible. It would be a most welcome alleviation of a problem which for many small people is as harsh as it is unexpected, and the relief would easily and naturally be confined to those for whom it was intended.
I have strong if superficial confidence that the Financial Secretary will not allow his better nature, which has been somewhat eclipsed during the Bill—he was quite kind on the last occasion I moved an Amendment—to be crabbed again by the advice which appears to have prevailed with the Chief Secretary so often during the course of the Bill. I hope that he will start a new era in the story of this Bill. It is not too late, for we have all the new Clauses and all the night ahead of us. I hope that he will start by accepting the Amendment. The Chancellor is by his side and he can seek the Chancellor's authority. I see that the Chancellor wishes him to do so. This Amendment will solve many of the minor difficulties. The folly of the principle is beyond cure here, and we will deal with it later, but the Financial Secre- tary can deal with these immediate problems now and earn the gratitude of the Committee and the country.
There is one word used by the hon. and learned Member for Buckinghamshire, South (Mr. Ronald Bell) with which I agree—the word "evasion". My fear about this proposal and the reason I appose it is that the scope for evasion in the proposal for S.E.T. is already far too wide. The opportunity for evasion could lead to a disastrous effect throughout industry, and I hope to be able to say something about that in my speech.
There is already an exclusion for self-employed people. I had an Amendment down on that subject which was ruled out of order, but I hope to be able to deal with some of the points in relation to this Amendment which I believe is designed not only to relieve the self-employed person of the tax, but also to give him another addition.
When it is said that large-scale enterprises will not find it advantageous to indulge in evasion, it should be made clear that the construction industry, the largest single employer of male labour in the country, will find it extremely advantageous to indulge in the kind of evasion the Amendment would allow. In that industry today there are about 45,000 gangs of labour-only sub-contractors, each containing perhaps four, five, or six men. If one excluded the originator of the labour only sub-contractor gang, and in addition one of his own men from the tax, one would encourage this example of what some people might loosely call enterprise.
Does the hon. Gentleman realise that to do that it would be necessary to constitute separate employers, that a company, to get tax relief on the burden of one male employee, which is £32 10s. a year, it would cost more than that to float a separate company? Is he aware that a company doing that would lose on the deal?
That reveals the hon. and learned Gentleman's ignorance of what is taking place in the construction industry today. Will he accept from me that there are already a quarter of a million people in the construction industry doing this, that some of his hon. Friends, including the hon. Member for Folkestone and Hythe (Mr. Costain), is very apprehensive about this proposal, that there is no question of floating a company where labour-only sub-contractors are concerned and that, therefore, there is no cost?
I am not raising the question of evasion simply to score a point. I am concerned that the industry should become highly industrialised. However, it cannot become so if it becomes more and more subject to fragmentation, which is what I believe the Amendment would achieve. My hon. Friend the Member for Sheffield, Brightside (Mr. Winterbottom) made a speech the other day in which——
My hon. Friend the Member for Brightside pointed out in that speech the dangers of the sort of suggestion we are considering. He expressed fear about what would happen in the retail distributive sphere and in services generally. He said that one would find this sort of thing happening in barbers' shops and that 80 per cent. of them would be exempt already because they would come in the self-employed category. He was under the impression that some barbers' shops, with two or three chairs, would be paying the tax. However, I have discovered that a new system, rent-a-chair, is now coming into being. By this system barbers rent individual chairs to people, who become self-employed thereby, and thus avoid the tax.
As a Labour-Co-operative Movement Member—[Interruption.] I do not know what hon. Gentlemen opposite are complaining about. Long after the proposal of my right hon. Friend the Chancellor in regard to S.E.T. has been forgotten, the Bill will be remembered as resulting in Conservative Members becoming the most fiery supporters of the Co-operative movement.
The Amendment, from the point of view of evasion, has not been thoroughly thought out by the hon. and learned Member for Buckinghamshire, South (Mr. Ronald Bell) and his hon. Friends. If, for instance, we find this leading to greater evasion in the retail industrial sphere, it is not only a question of a loss to my right hon. Friend from the revenue point of view, but, as a Labour-Co-operative Member, I must look at the effect it will have on my movement, which cannot resort to this type of evasion. If one finds the Co-operative movement is unable to evade the tax through a proposal of this kind, but that its competitors are able to evade it, then a certain section of the retail trade—a section which is a social service—is being put at a very great disadvantage because some other people have been able to avoid the consequences of a tax which it must pay in full.
Would the hon. Member not agree that if his arguments apply they would apply to every retail store, everyone engaged in the retail business? Why apply the arguments only to the co-operative societies? Presumably the hon. Member does so because they have the support of some hon. Members opposite.
That is not so. The retail co-operative societies are governed by a democracy of people who will not tolerate the kind of practices which private enterprise is likely to get up to.
Another point about evasion to which I direct the attention of my right hon. Friends is that it is not simply a question of evasion of this tax. If more and more fragmentation takes place in the construction industry, or other major industries, it will not be merely a question of losing extra revenue but evasion of the industrial training levy will take place. That is very important to the future training of people in industry and to the industrial training legislation as a whole.
The same applies in relation to redundancy payments. I point out to hon. Members opposite, who do not believe that this proposal would lead to evasion on a large scale, that when the Redundancy Payments Act came into operation there was evasion in some industries in order to avoid the provisions of the Act, which did not bite for two years. This tax will bite immediately. That is why I fear there will be greater evasion.
I am grateful to the hon. Member for giving way. If I am fortunate enough to catch the eye of the Chair, I will be able to show why I agree with a great deal of what the hon. Member has said about evasion. I want the Committee to accept the Amendment, because people will be forced to evasion unless the proposed law is altered before we make it.
May I be allowed to point out that, although the hon. Member suggested that the Redundancy Payments Act was not taking effect for two years, it took effect at once. He is confusing that with the qualifying period of two years.
I am not confusing anything. I am saying that in the construction industry certain builders knew that they would not be liable for payment unless men served in the industry for two years and they used evasion to get rid of their obligation. I already have very grave misgivings about the exclusion of one class of person from this tax because of the effect that will have on industry generally. I have even greater reservations on an Amendment which would allow evasion to take place on a larger scale and which might accelerate the evasion which is taking place already.
I do not believe that legislation which encourages evasion is good. That is why I am not particularly in agreement with this Amendment and why I hope that my right hon. Friends will take into consideration not only the points I have made, but the points I was unable to make on my own Amendment.
The fallacy of the argument of the hon. Member for Bethnal Green (Mr. Hilton)—if he is right in saying that there will be a great deal of evasion of the Selective Employment Tax, as I am sure there will be—is that it is not worthwhile people using this method of evasion. All they have to do is to break up their establishment and make all their employees self-employed.
I like this Amendment, because I think one of the most grievous hardships which will be caused by the tax will be to small income groups. The household with elderly people, the household with a disabled person in it, those who are getting old and have just enough money to take one employee, will be hit extremely hard. The idea that we should allow them one employee as a nominal addition to their establishment has very much to be said for it.
Is it administratively possible? I would say that it is, because at the moment the Ministry of Pensions and National Insurance periodically circulates all employees asking for the number of cards they hold in their establishments. Those who are in the small income group and who have only one employee are returning regularly one card. Administratively, the Ministry of Pensions and. National Insurance could check this. I agree with my hon. and learned Friend the Member for Buckinghamshire, South (Mr. Ronald Bell) that it would mean one extra stamp, but this would not be a very great burden on the Ministry.
This would deal with the hardship which arises to those who are covered by Clause 6 of the Selective Employment Payments Bill. These are the cases which are causing worry to hon. Members on both sides—the over-70 households, the disabled households—who will have to make a free loan to the Chancellor out of their exiguous resources, although they will later get their money back. If my hon. and learned Friend's suggestion were adopted, these people would pay a nominal sum per week, which would not be a burden to them. The effect of the Bill as drafted will be to throw many of these households on the National Assistance Board. It would be regrettable if any Measure passed in the House of Commons had that effect on disabled and old people.
If the Amendment were accepted, it would cut down the cost of administering Clause 6 of the Selective Employment Payments Bill. On Thursday the Chancellor told me that 950 more civil servants would be employed in four Departments. He could not judge how many more civil servants would be employed in the other Departments to be designated under the Selective Payments Employment Bill but he did not think it would be very many.
This will be a difficult tax to administer. If my hon. and learned Friend's suggestion were adopted in respect of cases covered by Clause 6 of the Selective Employment Payments Bill, where there is only one employee in the household, the administrative task of the Ministry of Pensions and National Insurance and of the Supplementary Pensions Board would be cut down.
If the Government were to say that they accept the principle behind the Amendment and that they will make a concession in respect of the small income group household with one employee, I hope that my hon. and learned Friend will accept the substitution of "first and only" for "first or only". The purpose of the Amendment is to deal with the case where there is genuinely only one employee. I do not see any merit in applying this to a large establishment with thousands of employees; there would be no value in having a preferential rate for the first employee. A special rate should be available for the first and only employee.
I beg the Government to realise that this aspect of the tax is causing real worry. We may all hold violent views about the general principle of the tax, but all hon. Members will be very worried about the effect that the Bill as at present drafted will have on people on small incomes, the old people, and especially disabled households, who are having great difficulty at present in managing to live in this affluent society in Britain.
I do not think that the right hon. Member for Thirsk and Malton (Mr. Turton) is as naive and simple as he sounds. He knows far more about this than to think that his speech touched the reality of the situation.
After hearing what I have to say, hon. Members can judge that question for themselves. Hon. Members know my point of view about this tax. I believe it is directed to the wrong people in distribution. I believe that the people who ought to be touched in distribution are amongst those who are called self-employed. They ought to be brought within the framework of a proper payroll tax, as much as those people who are in the larger distributive establishments.
When I consider this Amendment I think of the mover who is a lawyer. If any body of persons stands to be shot at, it is the lawyers of this country, with great respect to them. If any section of the country has taken people out of industry in order to seek a living that has no relationship to an incomes and prices policy, it is the lawyers—make no mistake about it. Here we have a prominent lawyer. If we want to compare the figures, in terms of relativity, of those people who have gone into the service industries, we find that a greater proportion have gone into the professional classes, and into the legal class in particular, than any other section of the service industries.
It is very nice to come here, apparently so innocent, and try to get away with a story like this, but bear in mind that the hon. and learned Member is defending his own profession. How many lawyers are there with just one solicitor's clerk and a girl who gets a wage of goodness knows how much, and goodness knows why sometimes? Indeed, there is no more obvious case for seeking the avoidance of the Selective Employment Tax than that of the legal profession. I do not like this tax at all. Hon. Members know that.
I am not so sure. I believe that Members of Parliament themselves should be brought within the framework of this tax as self-employed people. If one is to argue, as I argue, that self-employed people should be brought within the framework of this tax, I see no reason why I should be excluded. From a logical point of view I am self-employed. If we call this a profession—I do not know whether it is or not—then, like the other professions, Members of Parliament should be brought within the framework of a payroll tax.
I am very sorry to interrupt the hon. Member for Sheffield, Brightside (Mr. Winterbottom), but I would ask him to bear in mind that this Amendment deals particularly with the employer and the one or only employee that he may have. I hope the hon. Gentleman will make his remarks relevant to that matter.
Yes, Sir Harry. All that I have said is the background. Now I will come on to the particular.
In the sphere of distribution there are between 500,000 and 600,000 distributive units. Over 500,000 are in the hands of self-employed people. Taking those with one employee only, there are over 520,000 establishments which, if the Amendment were accepted, would completely escape the tax.
I regard this as a wrecking Amendment. [HON. MEMBERS: "No."] It is a wrecking Amendment because it increases the anomalous exclusions of those who are avoiding the tax already because they have not been brought within its framework, and it would put them in a better position in relation to others competing in the market against them. That is why I say that the Amendment goes the wrong way. It should be an Amendment to include the self-employed man, and it ought not to take the exceptions further.
I have been rather surprised by the Opposition today. They have failed to seize the chances that the Bill presents. If any case which they have presented is worth calling a case at all, they have taken it the wrong way by their argument. They have missed the strong part of their case. Resolutions of this kind show their weakness in terms of argument. I am no grocer, but I know the saying that a small receptacle full is better than a large one half empty, and it is always better to put the good things to the front. Yet the Opposition have been showing all the bad apples and the rotten stuff. This is another example of it. If they really want to criticise the tax, they should criticise it with reference to those who should be covered by it and who are excluded. They should not try to take the exceptions further still.
Very well, Sir Harry. There is reason in what I am saying even though I have made a mistake in saying it. I withdraw it willingly, but I have said it once, and you know what I mean. If I can get what I believe ought to come out of this tax, I shall not mind making a mistake in terms of order for which I have humbly to apologise. I shall probably continue to make mistakes right till the end of my days when I am given a wooden overcoat.
What I am pointing out is that hon. and right hon. Members opposite are making mistakes, and the mistake they make on this Amendment is in trying to take the exclusions from the tax too far. Hon. Members opposite are making it impossible for the Government to concede the things which we believe will make the tax operative. Amendments of this kind only waste the time of the Committee, however much we have the opportunity of discussing them, and are out of keeping with the purposes of the Bill.
I object to the Bill. I am not trying to defend the Government. I am only trying to put the Opposition on the straight and narrow path.
This is a commendable Amendment proposed by my hon. and learned Friend the Member for Buckinghamshire, South (Mr. Ronald Bell) to help the small man or small unit. The hon. Member for Sheffield, Brightside (Mr. Winterbottom) has a bias against the small unit or small man. We on this side have certainly in the past always taken the view that the smaller unit or smaller man should be preferred, though not always in purely economic terms, to the larger unit or larger man. For social reasons, for the good of the community, the small units and small men should be supported. As has been pointed out, it is not to these very small units about which we are speaking that we can look for any significant economies in the use of labour.
Perhaps I should refer to "smaller persons". It cannot be expected that economies in labour will enable the small decorator to dispense with the services of one of his employees. Reference has also been made to the tourist and holiday industry, which is pertinent in respect of the very small hotel or boarding house.
I am particularly concerned about this subject because it relates very closely to the problems of the development areas and the areas of depopulation in Scotland, Wales and elsewhere. The hon. Member for Bethnal Green (Mr. Hilton) was referring predominantly to the prosperous areas with a great upsurge in the demands for labour.
I am referring to another aspect. In a small town in the north of Scotland or the north of Wales the employment given by a small builder, small decorator or small shopkeeper is vital to the community. The hon. Gentleman has no conception how vital it is. It is all very well to talk in terms of London, Birmingham or other great cities. What about small communities where the outlets for young people are so limited? It is astonishing that the Labour Party, which has always professed such great concern about these areas, should now be so indifferent to their plight.
I am not indifferent to the plight of the small shopkeeper. I have probably dealt with more problems for small shopkeepers throughout this country than the hon. Gentleman has ever known about. I understand the small shopkeeper. I understand the self-employed man. I know precisely what the position is in every part of the country.
That may well be the case. I do not dispute the hon. Member's knowledge of the problems of the small shopkeeper. I am more concerned about the vital importance of the employment provided not only by the small shopkeeper but by the very small factory and other small units.
I know places in Wales where the units of employment even in industry may be very small. No doubt the position in parts of Scotland is similar. The Government have made a great song and dance about their development area policy and there is a case for considering this tax's relevance to that policy. Sometimes these areas are places which for a generation have suffered a decline in population. I am thinking particularly of Mid-Wales, but again the position is no doubt similar in parts of Scotland.
In such areas, the avenues of employment are few and we should sustain these smaller units. In a very small village the only place available to a young man may be the local garage, perhaps employing two fitters. How can the proprietor of such a place make such economies as to enable him to dispense with one of his fitters? The Amendment would give valuable assistance to these smaller units—or, since my hon. Friend the Member for Tynemouth (Dame Irene Ward) does not like that term, perhaps I should say, smaller employers.
The hon. Member for Bethnal Green (Mr. Hilton) tried to wring our hearts by saying that the Amendment, which was so ably moved by my hon. and learned Friend the Member for Buckinghamshire, South (Mr. Ronald Bell), might lead to evasion in the building industry. That is not likely to produce many tears on this side of the Committee. Later, we shall seek to exempt the whole industry from the tax, thus making the evasion 100 per cent.
I think that most of us would agree that, in recent years, there has been a strong tide against the small manufacturer and trader in our economy. Increased mechanisation and automation, the increasing price of machinery and the system of wholesale rebates we hear so much about in the retail trade are all putting the small man under pressure.
Successive Governments, I must admit, have accelerated the process. The Resale Prices Act has done an enormous amount for the consumer, but there is no doubt that it has pressed more heavily on the small trader than on the large merchant concerns. Any small shopkeeper who turned away from the Conservative Party, however, because of the Act, thinking that he would get better protection from the Labour Party, had better think again. The extended credit squeeze has borne far more heavily on the small trader than on the large. Anyone who looks at the satisfies of bankruptcies can see this only too well. Even such an Act as the Offices, Shops and Railway Premises Act, 1965, bears more heavily upon the small shopkeeper and the small manufacturer than it does upon the large business. When it comes to increases in taxation, the burden on the small man is infinitely greater than it is on the large man.
In his television speech, after the Budget, the Chancellor talked about a large grocer, or a grocer with a large turnover. He explained how this man's business was going to be remarkably little affected by this tax. The grocer certainly seemed to have a substantial turnover and no doubt was the sort of person who could afford to go to Ascot and lose a certain amount of money each day. I met a small grocer in my constituency who withdrew £700 out of his business last year in order to live. This tax is going to mean an extra £700 to him in the coming year.
While this tax may mean a check in the profits of Marks and Spencer and Sainsbury's, for the small trader it will mean, not a check in profits, but the complete destruction of his livelihood. My hon. and learned Friend the Member for Buckinghamshire, South referred to the small employer who cannot pass the tax on, the domestic employer, and to the arrangements that have been made in Clause 6 of the Selective Employment Payments Bill.
In the case of the grocer who had to withdraw £700 from his business, can the hon. Gentleman tell us how many employees he had and his turnover per year?
I do not wish to do so, as I do not have his permission. The reason why the tax is so heavy on this man is that, like so many other people in the retail trade, he depends very heavily on part-time staff, and this Amendment would be a help to him. If we can get a concession, as we certainly ought, on part-time staff, then his position will be improved. I hope that the hon. Gentleman, with his knowledge of the retail trade, will support Amendments in favour of removing the tax on part-time workers.
If the hon. Gentleman would do me the honour of reading my speech last Thursday he will find that I used a logical argument about part-time workers which he seems to be avoiding. I advocated a reduction in the tax as it applied to part-time workers.
As I was saying, Sir Harry, before I was interrupted, one of the groups most affected by this Amendment is the group which cannot pass on the tax in increased prices or increased anything else—the domestic household which is employing one person in a part-time or full-time capacity to help with the household, perhaps to help to look after the children. Some concession on this point has been given in Clause 6 of the Selective Employment Payments Bill. No doubt we will get to Clause 6 of that Bill at some time in the fairly distant future. But even when we get there we shall find that the relief offered is complex, vague and unsatisfactory.
Let us consider the position of two women whom I met in my constituency over the week end. Both of them employ part-time domestic help. Under the Government's proposals they would not be entitled to any relief in respect of their domestic staff. One of them suffers from migraine and the other suffers from hay fever. Under the Government's proposals, if one is sick or infirm, one is entitled to relief. Presumably if a person has migraine one week he or she is entitled not to pay the Selective Employment Tax for the domestic help that week. If one suffers from hay fever and the pollen count rises and one begin to sneeze, one is entitled not to pay the Selective Employment Tax for the domestic help that week. A thousand sneezes in a week and one gets one's part-time help free.
There are a number of ludicrous lines of division which will have to be drawn because of the complicated machinery which the Government propose to introduce. But the simple effective way of dealing with all the anomalies which arise, not only for the small trader, but for those who employ domestic help, can be dealt with by accepting the Amendment so ably moved by my hon. and learned Friend the Member for Buckinghamshire, South.
I am very grateful for the opportunity of supporting the Amendment of my hon. and learned Friend the Member for Buckinghamshire, South (Mr. Ronald Bell). I base my support for it on the narrow but important ground of the relief which it will give, if accepted, to domestic employers of labour and to those who are so employed.
The vast majority of people who have any help at home these days are those who are able to have daily help for one, two, three or more days a week. Many such people are desperately in need of this help. Mothers and wives who go out to work need it so that they may make their contribution to the family budget. There are those who will not be catered for by the measure of relief which the Government propose in Clause 6 of the Selective Employment Payments Bill who, for one reason or another, must have help at home. Such people, often managing on a narrow budget, will be gravely hurt and harmed by having to pay this tax on the help which they have at home.
Perhaps even worse will be the lot of those whom they employ, because many of them, faced by the necessity of having to pay this tax, will have to tell those whom they employ that they can employ them no longer. Many elderly women employed in this capacity as important helps at home will be put out of employment and they will have no other employment to which to go.
It is ludicrous to pretend, as the Treasury Bench pretended on Second Reading of the Finance Bill, that the tax will drive this kind of person into industry. Such people are quite unfitted to give their labour in industry. The only place where they know how to give their labour and where they are able to give it is in the home. Such people should not be victimised, as these people will be victimised if the Clause goes through in its present form.
If we in this Committee stand for anything, surely we must stand for those who are weak and unable to look after themselves. Such are the daily women who give their assistance in the homes throughout the country. For this reason, and I put this in the forefront of my argument, the Committee should support my hon. and learned Friend and should pass the Amendment.
I add a word to my hon. Friends who have cited the case of the small employer of labour in village shops, garages and the like. It is ludicrous to pretend that the assistant to the grocer, to the tobacconist or to the confectioner, or the garage mechanic, will find employment elsewhere. Indeed, the garage mechanic's labour cannot be dispensed with. This is a blow aimed deliberately, as I see it, at the small employer of labour. For these reasons, I support my hon. and learned Friend in his Amendment.
Implicit in most of our tax law is a respect for the irreducible minimum. We do not, for instance, levy Income Tax upon the minimum income required for subsistence. For Estate Duty, we exempt the modest competence which most people wish to leave to their families. In the Amendment, we are dealing with an irreducible minimum. I believe that at least the spirit of the Amendment is right in seeking to exempt the only, or the first, employee.
I think also that consideration should be given to the fact that those employing only one person, or a small number of people, are likely to gain least advantage from the fact which was announced in the White Paper, that this tax is to be a charge for Income Tax and Corporation Tax purposes. Large employers will in effect bear only about half of the gross cost of this tax, because they will set it against their other—profit—taxes. It is most unlikely that the small employer—leaving aside Members of Parliament and other affluent subjects—will be able to get the benefit of the full set-off against Profits Tax.
Another advantage of the irreducible minimum, if it is respected, as I hope it will be, in this tax as in existing taxes, is to spare the poor bureaucrat. I hope that the Treasury Ministers have already consulted their collectors of taxes. It is not only the poor inspectors for whom our prayers should go up at the present time, but the collectors. I understand that the collectors of taxes' agonies of collecting Pay-As-You-Earn from small employers are already indescribable, and in witness of that fact they have had to introduce a complete, separate scheme for administering Pay-As-You-Earn in respect of the domestic employers. There is an entirely separate administration for trying to collect Pay-As-You-Earn in all those small cases. The difficulties of collecting S.E.T. from small employers will be no less, and on plain administrative grounds, as well as on grounds of respect for the irreducible minimum, I hope that this Amendment will have the support of the Committee.
I should like to return to the point which was at least touched on by my hon. Friend the Member for Barry (Mr. Gower) when he called attention to the effect which this tax in its present form would have on the remoter parts of Britain. I have in mind particularly the Highlands of Scotland, and the more remote country districts generally. The impact on those districts will be particularly severe. I believe that it would be eased considerably if the Amendment moved by my hon. and learned Friend the Member for Buckinghamshire, South (Mr. Ronald Bell) were accepted, or at least if the spirit of it were accepted, in view of the easement which that would bring to the small concern with a single employee.
It is the small concern with a single employee that provides a large part of the employment in those far-flung places. It is the small concern with a single employee which provides a large part of the services without which life in those remoter parts simply could not continue. And these are the very districts where the Government wish to build up employment, and where, they have maintained, over and over again, that the maintenance of the service industries, and, indeed, their development, will help us attract the manufacturing industry which we wish to see grow there.
Indeed, this was illustrated not long ago when the Government set up the Highland Development Board with the object of bringing extra employment to the Highlands in service industries and in other industries, too, and it is curious to note now, after all the trumpet blaring there was at the time when the Highland Development Board, which has an annual budget of something like £1 million, was set up, that it will be struggling in the face of a Selective Employment Tax which will take something over £2 million a year out of the very region covered by the Board. This Amendment would remove many of the anomalies which will exist otherwise, by freeing this very important and deserving section of the service industries from the impact of the tax.
I have in mind the service rendered to those remoter parts of Britain by the small plumber, the small electrician, the small joiner and the like—many of them very small concerns, each with one employee only. The impact on their costs of this tax will be very large. They do not have the same large turnover of the larger concern. They will bear the full impact of the tax, and inevitably it will be reflected in the charges that they make to their customers in the country districts, where living costs already are higher than elsewhere, and in districts where we want to see the population increase.
It is not only that, because, very often, these small tradesmen are the only employers in the locality. If they are obliged by the tax to squeeze out their single employees, where then will the young lad go for a job? Where will he find his trade?—[Interruption.]—I hear an hon. Member opposite say "Birmingham", and that is just the tragedy of it. One effect of the tax in the Highlands and the remoter districts will be to force people out of the depopulating areas into the crowded Midlands and the South. If the hon. Gentleman believes that that is the right policy, he is flying in the face of his own party. Month after month in the House, members of the party opposite have proclaimed their determination to reverse that process and do everything in their power to increase employment in the Highlands and other remote areas.
It has been happening for a long time, but that is no reason for making it happen faster now. We want to reverse the process as quickly as possible.
If a young man cannot find a job in a local tradesman's shop, he joins the march south, never to return. That is the prospect which the Government are building up by the way in which the tax will affect the small remote places.
I have in mind also the small shopkeeper in a village. In the Highlands, very often the small village shop is operated by a man and his wife, with one employee to drive the shop's van. I live in a remote part by the Highlands myself, and I see the importance of the van to the community in which I live. Since the fuel tax went up, many such vans have left the road. The tax added £9 million to costs in Scotland. The provision of a van is an expensive service; there is very little profit to a small village shop is running a van, sending a man up the glens to sell very small quantities of groceries to a few farmhouses.
That is the sort of man who would be the first to go if the tax affected the small shopkeeper in these remote places. That shopkeeper faces all the other burdens resulting from such things as increased rates. He depends on the wholesaler, and he will carry the full burden of the cumulative effects of the tax through the process of distribution. He will have to look for economies, and the first one will be in the part-time girl behind the counter or the lad who drives his van.
There is another category in these remote districts, and perhaps it is one of the most pressing. I have in mind the small farmer whose operation is just large enough to support one employee. There are many such farms in Scotland and, I have no doubt, in England and Wales, too. In order to continue, the farmer has to have one man on whom he can rely. It applies particularly to the small dairy farm, where the farmer must have someone to carry on the work with him.
The impact of the tax on that small operator will be very severe. The small farmer is already suffering, with increased costs, falling returns and restricted credit. Now he is to be called upon to make an interest-free loan for a period of months at a time when his returns are desperately low. It will come at the worst time of the year for him to find extra money. The pressure on him to cut his costs by taking the last step of getting rid of his sole employee will be, alas, economically tempting.
I believe that, by accepting the spirit of the Amendment, the Government have a real opportunity to assist themselves in carrying through policies for the remoter parts of Britain which they have proclaimed constantly and which, just as constantly, they have overturned by their actions.
I should, however, like to comment on two of the speeches made from the benches opposite. First, that of the hon. Member for Sheffield, Brightside (Mr. Winterbottom), for whose experience I have great respect. His thesis was that those who have been left out of this tax ought in all honesty to be brought in. It seems to me that this is rather a new doctrine of taxation, namely, that he who is not eligible to pay tax under the law is a tax evader. I find this a most extraordinary doctrine, but that is what the hon. Gentleman said.
The point is that the tax is for service industries. By far the largest section of the distributive section of service industry is not paying the tax. It is, therefore, avoiding the tax, and that is the position that we have to face. I am saying that the whole industry should pay the tax if equity is to be established.
I fear that the hon. Gentleman has failed to meet the point that I was on. He has said that those who are not caught up within the Government's tax legislation are evaders; but they are the fortunate people. Surely the right answer to tax evasion is not more tax, as the hon. Gentleman proposes, but less tax. That is the view taken by this side of the Committee.
The hon. Gentleman then had a go at the lawyers. I am glad that he did, because, being made aware of it, they will be able to meet his point in their law journals.
The hon. Member for Bethnal Green (Mr. Hilton) had previously had a go at the builders. As I understood the hon. Gentleman's case, he painted a picture of the people in the building industry as a race of tax evaders. I find this very odd at a time when the Minister of Housing and Local Government says that he is trying to restore to the building industry the confidence which he has just knocked out of it. The hon. Gentleman has not helped his right hon. Friend by suggesting this evening that the whole race of builders in this country is conspiring to evade taxes. I regard that as a slur, and I hope that the hon. Member for Bethnal Green will withdraw it.
I think that the hon. Member for Bethnal Green can withdraw it himself.
The case that I have to make on behalf of the Amendment is on compassionate grounds, and for the people in remote rural villages. I am concerned about the effect of this tax on the elderly person who earns a few pounds as a gardener and thereby keeps his pride and his health long after he has reached the age of retirement, but who will find himself put out of a job by the application of this tax.
I am concerned about the effect on a disabled person, and I am thinking here of one man who is a gardener. He is 68, and he has one leg. It has not been possible to provide him with an artificial limb. He hops about the garden, and he does a tremendous job looking after the flower beds and the vegetable garden. He can hardly be justified as an economic proposition. He is kept in his job because of a quality which I am sure the Chancellor would not wish to exclude from our society, namely, kindness, and there is no fiscal sum that one can place on the quality of kindness.
I suggest that the application of this tax at 25s. will make it impossible for this man, who lost a leg in the First World War, to be kept on in that garden which he loves, and where he has his pride. He will be sacked. He will be thrown on to the rubbish heap. I believe that as a human being the Chancellor does not intend this, but, nevertheless, this is what he will achieve.
I am concerned, too, about the effect of the tax on the working wife who employs an older woman to look after her children while she goes to work. Under the Amendment she will be able to continue to do this. If the Amendment is not accepted, it will not be possible for an able-bodied woman to go out to work, because it will no longer be possible for her to pay an older woman to look after her children while she is at work. The net result will be a loss to industry of one able-bodied woman.
I would like to quote two specific examples from my own constituency. One is from the very remote Suffolk village of Ashington Green. There it is extremely difficult to get milk delivered to the remote Suffolk cottages, particularly in the winter time. The reason is very simple. The distances are long and the costs are high and with the petrol tax recently it has become uneconomic for the Co-operative Wholesale Society in particular to deliver that milk. Delivery now depends, or it did until recently, on one man with one employee. If this Amendment is accepted it will be possible to deliver milk to people of 80 and 90 in these villages. If this Amendment is refused it will be impossible to deliver that milk, and again I wonder if the Chancellor really intends this.
I turn to another specific example of a man of 80 in the village of Exning who wrote to me and said that he had had working for him as companion, close friend and nurse for 42 years an elderly woman. He is like so many others, a member of the group that I would call the "new poor", the people who live on small fixed incomes who have no trade unions to protect them and who have had inflation biting away at their incomes as well as having their rates go up, higher food prices, fuel costs and the rest. Here is a man who is suddenly asked to pay from his tiny income 25s. a week, which he cannot possibly afford, to keep in his home to look after him a woman who has been with him for 42 years. He will have to sack her. It is not just economics. He will have to sack her and something will go from that man when he throws that woman out of the home she has loved for 42 years. He does not want to do so and she does not want to go but he has not got the 25s. to pay the tax.
What will happen in this case? Almost certainly if he loses his companion of a lifetime, he will have to go into an old people's home and the State will have to find labour and money to look after him. The net result will be to add to the labour bill of the nation as a whole. He will be a charge upon the public whereas, at the moment, he is independent and happily so.
What is to happen to the elderly woman who has looked after him for 42 years and has been discharged? What will she do and where will she go? It is no use saying that in a remote Suffolk village a woman who has looked after an elderly man for 42 years will go into a factory. There is no factory for her to go into. She has no training. The one thing she can do is look after a man who was her employer and her friend. The Chancellor will cause this couple, who have lived together, one helping the other for years, to split up. Is that what he intends in the name of economics? I believe he has achieved the precise opposite of what he intends.
For these reasons, as a Member for a country constituency, I support the Amendment. I hope that the Chancellor will recognise that those who employ a single person working in their homes, in their gardens and in their businesses are doing something far more important than is represented by the miserable sum that the Chancellor may be able to extract in the name of these perverse economics.
In this Amendment we seek to exclude the sole employee. I want to take one or two, I hope, fairly new points. They have been trespassed upon in part in the country areas by the hon. Member for Bury St. Edmunds (Mr. Eldon Griffiths).
The hon. Member for Sheffield, Bright-side (Mr. Winterbottom), who has sat here through practically the whole of this debate, made, if I may say so, an able contribution on the Second Reading of the Selective Employment Payments Bill which I listened to with great interest. The hon. Member has not been entirely accurately represented. He shares my view that basically we ought to have had a poll tax—certainly a tax applying to everybody. Had there been a tax at a low level on everyone, self-employed included, we should not have had the troubles of this debate. It is the selectivity of this tax which has aroused the opposition, and a very good example is contained in the Amendment.
No one has dealt with the astonishing situation about home helps. In my constituency several thousand people are dependent on domestic home helps. Partly they are paid for by the individual concerned, who pays 5s. an hour, probably 50s. for 10 hours a week. Those who employ home helps are elderly people who simply must have these home helps in order to operate their household, otherwise their health would suffer severely. Under this tax, if the home help is male they must pay an extra 25s. a week, which is ridiculous. If the home help is female, they must pay an extra 12s. 6d. a week, which means that they will have to reduce the number of hours assistance by the equivalent of 12s. 6d., which is 2½ hours. If the number of hours is not reduced, the Kent County Council or the Greater London Council or the Government will have to make up the difference to the home helps through National Assistance or the agencies of the councils, because they are being subsidised in part by the Government and in part by the county.
This is another illustration of the Treasury's miserable incompetence, their lack of humanity, and the appalling incompetence of the agencies advising the Government in this case. The civil servants and those who have been advising the Chancellor have not applied their minds, until now, to the ordinary simple facts of human life. It is not good enough that Dr. Balogh and this other bunch of foreigners who have been advising the Chancellor should take over this country, too.
It has hit the tourist industry from top to bottom—from the top, where they are running major associations, down to those responsible for the agencies at county level; the Co-operative movement, on the one hand, and the small traders, on the other hand; and the local councillors who have to provide the home helps. They are all sick to death with the Government and with this tax.
I have had opportunities to meet those associated with every aspect of this industry. There is not one who is not highly critical of the way in which the tax has been dealt with. Widows and widowers, peers of the realm who guide the industry in its upper echelon—at all levels they would be content to pay a poll tax or a turnover tax, whether placed on the employer or on the individual. What infuriates one and all in this country—and it will be borne in upon civil servants and the Government sooner or later—is that the Government go on hitting the old and the poor with an unkind tax and go on hitting the tourist industry in every possible way, by taking away investment allowances, by imposing a Selective Employment Tax, by charging it on their part-time labour, and by refusing to make any concessions. The Government are acting in a shameful way and, sooner or later, the country will rise and tell them so. I am saying now what will soon be said by hundreds of thousands of people.
If right hon. Gentlemen opposite will listen to those who are concerned with the distribution industry and industry generally they might apply their minds to this matter. If one has a tax which is to be equitable, the first thing one must look at is the method by which the tax will be imposed on one citizen as compared with another. Leaving companies out of the argument for a moment, one must ensure that the tax is equitable as between citizens. How can the Government argue that a tax the impost of which is exactly the same on an elderly person—who must pay, out of a very small income, for a home help, domestic or nurse—as on industry generally is equitable? In the first case, a much higher percentage of the elderly person's income goes in the tax compared with industry, which pays on the basis of an average level of earnings of £20 a week. An old-age pensioner who must pay 50s. a week for a home help is obviously paying a higher percentage of his or her income than industry in respect of the average earnings of a labourer at £20 a week.
This is a simple matter of arithmetic. As has been pointed out from the Liberal bench, when considering Income Tax, Surtax or any other tax, one must bear in mind the relative burden on the individual. My hon. and learned Friend the Member for Buckinghamshire, South (Mr. Ronald Bell) was absolutely right when he said that one way of dealing with this issue would be to exclude from the impost of this tax the employer who employs only one person.
Many hon. Members have spoken on this subject. I have dealt with another aspect of it. I beg the Government—remembering that they did not even bother to reply to my earlier remarks on the tourist industry; the Chancellor was not here and the Treasury Minister present apparently did not bother to report my remarks to him—to give serious attention to this matter now. I speak with anger and sincerity. I speak this way because I have taken the trouble in the last few weeks to learn the case being put by the tourist industry from one end of the industry to the other. I tell the Government here and now that if they do not wake up to these problems soon they will have the whole tourist industry howling around them like a pack of wolves. It is about time hon. and right hon. Gentlemen opposite woke up and listened.