Clause 10. — (Interpretation, etc.)

Part of Orders of the Day — Selective Employment Payments Bill – in the House of Commons at 12:00 am on 1st August 1966.

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Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford 12:00 am, 1st August 1966

With this Amendment, we are taking a number of others, including Amendment No. 324, in particular.

I do not believe that the Government have begun to appreciate the way in which the Bill will operate even in respect of manufacturing enterprises. Amendment No. 324 deals, among other things, with activities by way of erection of plant and machinery within an establishment. I do not know whether the Government have appreciated that the effect of this tax is going to put up the capital cost of erecting new plant and machinery which will be nowhere near offset by the premiums returned to the firm which operates that plant and machinery.

If I may give the Committee one or two figures on this, they are very revealing. I might say that the figures are based on an accurate calculation of how this will work out in practice. To take a large chemical plant which is to be erected at a cost of £4 million, it has been calculated that because the contractor putting up that plant comes into the building industry and does not get the premium or refunds, the additional capital cost that will be incurred will be about £40,000. That covers the contractor's own staff, his fees, and also any costs incurred by the chemical manufacturer himself in design procurement, because they will not qualify either. If one takes an opportunity rate of roughly 10 per cent., one gets an extra cost applicable to the capital of £4,000 a year.

Assuming that the plant could operate with about 40 men who qualify for both the refund and the premium, the premium would come to £16 each, or a total of about £640 per annum. In other words, one has a capital intensive activity—a new plant of this sort obviously will increase enormously the productivity of the firm and the whole nation—and the effect of the Selective Employment Tax, as at present drawn up in the Bill, is to impose on that firm an extra annual cost of about £4,000, only to be offset with a benefit of about £640.

I would ask the right hon. Gentleman to address his mind to this, because that will happen to firms which erect large-scale capital plant up and down the country. The whole thing has been presented to the Committee, to the House and to the whole country as if it is going to confer benefits to manufacturing industry. However, unless Amendment No. 324 is accepted, it will make such firms infinitely worse off.

The truth is, as was pointed out in the Chemical Trade Journal, that this is taxation gone made. How many times must the Minister of Labour, as he enjoyed his rest and recuperation in the Stilly Isles, have been wishing that his right hon. Friend the Chancellor of the Exchequer had not listened to the Hungarian rhapsody and had resisted the temptation to go in for the sort of gimmicky stunt of a tax of this sort which will add complication to complication and, in the case of the instance that I have quoted, will add substantially to industrial costs.